BY Fraser Tennant
In the latest in a wave of deals reshaping the US oil landscape, oil and natural gas company APA Corporation is to acquire its rival Callon Petroleum Company in an all-stock transaction valued at approximately $4.5bn.
Under the terms of the definitive agreement, each outstanding share of Callon common stock will be exchanged for 1.0425 shares of APA common stock, representing an implied value to each Callon share of $38.31 per share based on the closing price of APA common stock on 3 January 2024.
The transaction has been unanimously approved by the boards of directors of both APA and Callon.
“This deal is aligned with APA’s overall portfolio strategy and fits all the criteria of our disciplined approach to evaluating external growth opportunities,” said John J. Christmann IV, chief executive and president of APA. “It is also accretive and unlocks value for both shareholder bases, as increased scale will enable us to realise significant overhead and cost-of-capital synergies.”
Callon’s assets provide additional scale to APA’s operations across the Permian Basin, most notably in the Delaware Basin, where Callon has nearly 120,000 acres. On a pro forma basis, total company production exceeds 500,000 barrels of oil per day and enterprise value increases to more than $21bn.
“We are very proud of the significant steps we have taken to enhance Callon’s asset base, operational performance and balance sheet over the past several years,” said Joe Gatto, president and chief executive of Callon. “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 optimisation efforts.”
The transaction is expected to close during the second quarter of 2024, subject to customary closing conditions, termination or expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and approval of the transaction by shareholders of both APA and Callon.
Upon closing, a representative from Callon will join the APA board. APA’s executive management team will lead the combined company with headquarters remaining in Houston, Texas.
Mr Christmann concluded: “This transaction is aligned with our strategy of maintaining and growing a diversified portfolio, underpinned by large-scale core areas of operation while continuing to build a portfolio of medium and longer-term exploration-driven development opportunities.”
News: APA to acquire rival Callon Petroleum in $4.5 billion deal