APA to acquire rival Callon Petroleum in $4.5-B deal
(Reuters) - U.S. oil producer APA announced on Thursday it was buying rival Callon Petroleum in an all-stock transaction valued at $4.5 B including debt, following on the heels of a record year for dealmaking in the largest U.S. shale field.
Callon's assets will add heft to APA's operations in the Permian shale basin of West Texas and New Mexico, with about 145,000 drilling acres that puts more of APA production in the United States.
The Permian has become a prime target for oil and gas producers looking to increase their drilling inventory due to its robust infrastructure, high productivity and large undeveloped reserves.
The value of U.S. oil and gas mergers and acquisitions in the basin reached a record of more than $100 B in 2023.
Some of the blockbuster U.S. shale deals last year included Exxon Mobil's $60-B proposed acquisition of Pioneer Natural Resources and Chevron's $53-B agreement for Hess.
Callon and APA's boards unanimously approved the deal, the companies said in statements announcing the merger, which is expected to close in the second quarter. Callon's shares jumped 7% in premarket trading while APA shares were down 3.7%.
The drop in APA's share price reflects limited synergies and questions about the extent of the quality drilling acreage being acquired, wrote Jefferies market strategist William Atcheson.
Energy firms have been taking advantage of a surge in their share prices to launch all-stock acquisitions, avoiding big cash outlays that would jeopardize buyers' balance sheets.
Under the deal, each share of Callon will be exchanged for 1.0425 shares of APA, an about 14% premium to Callon's prior close and which values each Callon share at $38.31, the companies said.
Callon entered the Permian Basin in 2009 with the acquisition of about 8,800 net acres for $16 MM.
Once the deal closes, existing APA shareholders will own about 81% of the combined company and existing Callon shareholders will hold nearly 19%.
After the merger, APA's worldwide pro forma production mix would be about 64% U.S. and 36% international.
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