APA Corporation (NASDAQ: APA) has announced its plan to acquire Callon Petroleum Company (NYSE: CPE) in an all-stock transaction valued at approximately $4.5 billion, including Callon's net debt. The acquisition is expected to complement and enhance APA's asset base in the Permian Basin and is projected to be accretive to key financial metrics.
John J. Christmann IV, APA's CEO and President, commented on 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. 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. 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."
Joe Gatto, Callon's President and CEO, expressed his pride in the company's achievements, stating, "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. 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."
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 the closing of the transaction, a representative from Callon will join the APA board, and APA's executive management team will lead the combined company with the headquarters remaining in Houston, Texas.
APA Corporation owns consolidated subsidiaries that explore for and produce oil and natural gas in the United States, Egypt, and the United Kingdom, as well as offshore Suriname. The company's worldwide pro forma production mix will be approximately 64% U.S. and 36% international following the acquisition.
The full 8-K submission is available here.
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $588 | $672 | $1,033 | $2,045 | $3,231 | $2,446 |
| Revenue Growth | n/a | 14.29% | 53.84% | 97.94% | 57.99% | -24.3% |
| Operating Margins | 44% | 26% | -237% | 51% | 52% | 23% |
| Net Margins | 51% | 10% | -245% | 18% | 37% | 26% |
| Net Income (MM) | $300 | $68 | -$2,534 | $365 | $1,210 | $644 |
| Net Interest Expense (MM) | $2 | $3 | $94 | $102 | $80 | $75 |
| Depreciation & Amort. (MM) | $183 | $241 | $481 | $357 | $467 | $499 |
| Earnings Per Share | $13.8 | $2.91 | -$63.79 | $7.26 | $19.54 | $9.47 |
| Diluted Shares (MM) | 22 | 23 | 40 | 50 | 62 | 68 |
| Free Cash Flow (MM) | -$144 | -$164 | -$117 | $396 | $509 | $1,274 |
| Current Ratio | 0.71 | 0.41 | 0.36 | 0.34 | 0.42 | 0.4 |
| Total Debt (MM) | $1,189 | $3,186 | $2,969 | $2,694 | $2,241 | $1,949 |
| Net Debt / EBITDA | 2.65 | 7.68 | -1.5 | 1.92 | 1.04 | 1.82 |
Callon Petroleum Company has growing revenues and no capital expenditures, irregular cash flows, and healthy leverage. However, the firm suffers from consistently negative margins with a negative growth trend and negative expected EPS Growth.
