APA Corp (US) (NASDAQ:APA, ETR:2S3) has announced a definitive agreement to acquire Callon Petroleum Company in an all-stock transaction valued at around $4.5 billion, including Callon's net debt.
The companies said the combination strategically adds scale and balance to APA's operations in the Permian Basin, particularly in the Delaware Basin, where Callon holds nearly 120,000 acres.
"This transaction is aligned with APA's overall portfolio strategy and fits all the criteria of our disciplined approach to evaluating external growth opportunities. Callon has built a strong portfolio in the Permian Basin that is complementary to our existing Permian assets and rounds out our opportunity set in the Delaware," APA president and CEO John Christmann commented in a statement.
"The acquisition is accretive and unlocks value for both shareholder bases, as increased scale will enable us to realize significant overhead and cost-of-capital synergies. The pro forma footprint in the Permian will also create opportunities to capture meaningful operating synergies," Christmann added.
Key highlights of the deal include a 50% increase in APA's oil-prone acreage in the Midland and Delaware Basin, exceeding 500,000 BOE per day in total company production on a pro forma basis, and estimated synergies of over $150 million annually.
"This combination with APA now provides for an enhanced value proposition for our shareholders built on their depth of experience and strong execution in the Permian Basin, flexibility for increased capital allocation, and ongoing delineation and optimization efforts," said Callon president and CEO Joe Gatto.
The deal, expected to close in the second quarter of 2024, involves exchanging each share of Callon common stock for a fixed ratio of 1.0425 shares of APA common stock.
Post-closing, APA shareholders are expected to own approximately 81% of the combined company, and Callon shareholders are expected to own about 19%. APA plans to retire Callon's existing debt and replace it with $2 billion in APA term loan facilities. The transaction has received unanimous approval from the boards of both companies and is subject to customary closing conditions and regulatory approvals.
The combined company, led by APA's executive management team, will retain its headquarters in Houston, Texas.