Market Shrugs Off APA Corporation's Acqusition of Callon Petroleum Co.

By Bobby Samwell • Friday, January 05 10:04 • Permanent Link

APA Corporation (NASDAQ: APA) has announced its plans to acquire Callon Petroleum Company (NYSE: CPE) in an all-stock transaction. The acquisition, valued at approximately $4.5 billion, inclusive of Callon's net debt, is expected to enhance APA's asset base in the Permian Basin and be accretive to key financial metrics.

Following the news, APA's stock moved 0.4%, reaching a trading price of $34.17 per share.

APA's CEO and President, John J. Christmann IV, expressed enthusiasm about the transaction, stating, "This transaction is aligned with APA's overall portfolio strategy and fits all the criteria of our disciplined approach to evaluating external growth opportunities. 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 transaction is expected to be accretive on key financial and value metrics, with estimated overhead, operational, and cost-of-capital synergies to exceed $150 million annually. Additionally, the combined company's pro forma balance sheet is anticipated to remain strong with leverage at 1.1x net debt/adjusted EBITDAX.

Joe Gatto, President and CEO of Callon Petroleum, expressed pride in the company's achievements and the enhanced value proposition for shareholders as a result of the acquisition, stating, "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."

Upon closing, existing APA shareholders are expected to own approximately 81% of the combined company, while existing Callon shareholders are expected to own approximately 19%. The transaction is 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. It is expected to close during the second quarter of 2024.

APA and Callon will host a joint conference call on January 4, 2024, to discuss the transaction at 7:30 a.m. Central Time (8:30 a.m. Eastern Time). The conference call will be webcast from APA's website at www.apacorp.com.

The company's full 8-K submission is available here.

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