The royalty company, which was spun off from Encana Corp. (TSX:ECA) earlier this year, said it will also increase its annual dividend rate to $1.30 per share from $1.27 once the deal closes.
PrairieSky, which pays its dividend on a monthly basis, said it expects to make the first payment at the new rate in February to shareholders of record on Jan. 30.
Under the deal for Range Royalty, PrairieSky has agreed to issue 19.33 million shares for the company which has about 3,000 barrels of oil equivalent of production per day.
PrairieSky says the Range Royalty acquisition will add about four per cent to free cash flow per share and six per cent to production per share.
The company says the deal also gives PrairieSky a significant land position in the Viking light oil region of Saskatchewan and expands its position in the Alberta Deep Basin.
"With the acquisition of Range, PrairieSky has consolidated a leading private oil and gas royalty company in Western Canada" PrairieSky president and chief executive Andrew Phillips said.
"Our expanded footprint provides PrairieSky shareholders with significant exposure to the highly economic Viking light oil play in Saskatchewan, which we expect will provide strong oil production growth in the coming years."