APA Corporation (NASDAQ: APA) and Callon Petroleum Company (NYSE: CPE) have announced a definitive agreement that marks a significant shift in the energy industry. In an all-stock transaction valued at approximately $4.5 billion, including Callon’s net debt, APA Corporation is set to acquire Callon Petroleum. This strategic move is expected to bring about a transformative change in the landscape of the Permian Basin’s oil and gas sector.

Under the terms of the agreement, each share of Callon common stock will be exchanged for 1.0425 shares of APA common stock. This transaction stands out not only for its substantial valuation but also for the expected positive impact on APA’s financial metrics. The deal is anticipated to be accretive to all key financial metrics and is set to enhance APA’s inventory of high-quality, short-cycle opportunities.

APA’s acquisition of Callon is seen as a strategic expansion in the Permian Basin, particularly in the Delaware Basin, where Callon holds nearly 120,000 acres. The combined operations are expected to produce over 500,000 barrels of oil equivalent (BOE) per day, with a total enterprise value surging to more than $21 billion.

John J. Christmann IV, CEO and president of APA, emphasized the alignment of this transaction with APA’s portfolio strategy, highlighting the complementary nature of Callon’s assets to APA’s existing Permian holdings. The acquisition, as per Christmann, is set to unlock value for both companies’ shareholders through increased scale and significant overhead and cost-of-capital synergies.

Callon’s president and CEO, Joe Gatto, expressed pride in the enhancement of Callon’s asset base and operational performance over recent years. The merger with APA, according to Gatto, will lead to an enhanced value proposition for Callon’s shareholders, underpinned by APA’s depth of experience and strong execution in the Permian Basin.

The transaction details reveal that APA is expected to issue approximately 70 million shares of common stock, with existing APA shareholders owning about 81% of the combined company post-transaction. Callon shareholders will own approximately 19%. Additionally, APA plans to retire Callon’s existing debt and replace it with term loan facilities totaling $2.0 billion.

The Boards of Directors of both APA and Callon have unanimously approved the transaction, which is expected to close in the second quarter of 2024. This merger is subject to customary closing conditions and approvals from both companies’ shareholders.

Post-merger, APA Corporation’s pro forma production mix will be approximately 64% U.S. and 36% international. The company’s global portfolio includes ongoing development in the U.S., Egypt, and offshore Suriname, alongside a diversified exploration portfolio.

As this landmark merger unfolds, the energy sector eyes APA Corporation’s strategic move, poised to reshape the dynamics within the Permian Basin and beyond.

  APA Corporation, Callon Petroleum, Joe Gatto, John J. Christmann IV, Permian Basin