APA Corp. acquiring Callon Petroleum in all-stock transaction for $4.5B

APA Corporation (APA) and Callon Petroleum (CPE) have entered into a definitive agreement under which APA will acquire Callon in an all-stock transaction valued at approximately $4.5B, inclusive of Callon’s net debt. On a pro forma basis, total company production exceeds 500K BOE per day and enterprise value increases to more than $21B. APA’s oil-prone acreage in the Midland and Delaware Basin combined will increase by more than 50% following the transaction; the operation is expected to be accretive on key financial and value metrics; estimated overhead, operational and cost-of-capital synergies are expected to exceed $150M annually; pro forma balance sheet with leverage at 1.1x net debt / adjusted EBITDAX. Pro forma average daily Permian Basin production was 311 Mboe/d in 3Q 2023, which represents a 48% increase from APA’s Permian Basin production on a standalone basis. APA’s oil production as a percentage of BOE’s in the Permian increases from approximately 37% to 43% in 3Q 2023, on a pro forma basis. 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. APA is expected to issue approximately 70 million shares of common stock in the transaction. After closing, existing APA shareholders are expected to own approximately 81% of the combined company and existing Callon shareholders are expected to own approximately 19% of the combined company. APA expects to retire the existing debt at Callon and replace it with APA term loan facilities totaling $2.0B. JPMorgan Chase Bank, Citigroup Global Markets and Wells Fargo Bank, National Association, have jointly provided $2.0B of committed financing for the deal. The transaction has been unanimously approved by the Boards of Directors of both APA and Callon and is expected to close during Q2. Upon the closing of the transaction, a representative from Callon will join the APA board. APA’s executive management team will lead the combined company with the headquarters remaining in Houston, Texas. Following the closing, the company’s worldwide pro forma production mix will be approximately 64% U.S. / 36% international.