Leading Suriname oil explorer strikes US$4.5 billion deal to acquire Permian energy company

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APA Corporation, a US energy firm, has announced a definitive agreement to acquire Callon Petroleum Company in an all-stock transaction valued at approximately US$4.5 billion. This amount includes Callon’s net debt. The strategic move will see each share of Callon common stock exchanged for 1.0425 shares of APA common stock. This acquisition is poised to enhance APA’s financial metrics and add to its inventory of high-quality, short-cycle opportunities.

This deal follows a trend of strategic acquisitions in the industry, such as ExxonMobil’s acquisition of Pioneer, and Chevron’s deal with Hess.

Following the acquisition of Callon, APA’s worldwide pro forma production mix will be approximately 64% U.S. / 36% international. APA’s global portfolio includes ongoing developments in the U.S. and Egypt, and a front-end engineering design (FEED) process for a large-scale floating production, storage and offloading (FPSO) development offshore Suriname. APA is partnered with TotalEnergies for the Suriname project, the first of its kind for the South American nation. The company also maintains a differentiated exploration portfolio, including newly acquired blocks offshore Uruguay and onshore state-land leases in Alaska.

This acquisition is a significant step for APA, combining Callon’s Delaware-focused assets with APA’s Midland-focused footprint in the Permian Basin. This will provide both scale and balance in the region. Post-transaction, APA’s oil-prone acreage in both the Midland and Delaware Basin is expected to increase by more than 50%. The deal is anticipated to be beneficial across key financial and value metrics. The combined entity is estimated to save over US$150 million annually in overhead, operational, and cost-of-capital synergies. The additional scale is also expected to enhance the credit profile of the company, with a pro forma balance sheet showcasing a strong leverage position of 1.1x net debt / adjusted EBITDAX (earnings before interest, taxes, depreciation (or depletion), amortization, and exploration expense).

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APA’s Chief Executive Officer (CEO), John J. Christmann IV, emphasized the alignment of this transaction with APA’s portfolio strategy. “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.”

On a pro forma basis, the total company production exceeds 500,000 barrels of oil equivalent per day (boepd), and the enterprise value increases to more than US$21 billion. The combined daily production in the Permian Basin was 311,000 boepd in the third quarter of 2023, marking a 48% increase from APA’s standalone basis in the region. The oil production, as a percentage of BOE’s in the Permian, is projected to rise from approximately 37% to 43% in the third quarter of 2023.

The transaction will result in APA issuing approximately 70 million shares of common stock. Upon closing, APA shareholders are expected to own about 81% of the combined company, with Callon shareholders owning around 19%. APA plans to retire Callon’s existing debt and replace it with US$2 billion of APA term loan facilities. The deal, unanimously approved by both companies’ Boards of Directors, is slated to close in the second quarter of 2024, pending customary closing conditions and shareholder approvals.


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