Editor’s note: This is a developing story. Check back for updates.

APA Corp. will acquire Callon Petroleum Co. in an all-stock transaction for approximately $4.5 billion, including Callon’s debt, the companies said on Jan. 4. The deal picks up where 2023 left off: consolidation in the Permian Basin in which majors, large independent E&Ps and private companies combined.

Callon’s assets provide additional scale to APA’s operations across the Permian, most notably in the Delaware Basin, where Callon holds nearly 120,000 acres. On a pro forma basis, total company production will exceed 500,000 boe/d. APA said its enterprise value would increase to more than $21 billion after the deal closes.

Pro forma average daily Permian Basin production was 311,000 boe/d in third-quarter 2023, which represents a 48% increase from APA’s Permian Basin production on a standalone basis. APA's oil production as a percentage of barrels of oil equivalent in the Permian will increase from approximately to 43% from  37% in 3Q 2023, on a pro forma basis.

APA Corp. to Acquire Callon Petroleum for $4.5B
(Source: APA Corp. investor presentation)

The deal will exchange each share of Callon common stock for 1.0425 shares of APA common stock, representing an implied value to each Callon share of $38.31 per share based on the closing price of APA common stock on Jan. 3.

APA expects to issue approximately 70 million shares of common stock for the transaction. After closing, existing APA shareholders will own approximately 81% of the combined company and Callon shareholders 19%.

APA expects to retire the existing debt at Callon and replace it with APA term loan facilities totaling $2.0 billion.

“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,” said John J. Christmann IV, APA’s CEO and president. “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.”

After the deal closes, APA’s worldwide pro forma production mix will be approximately 64% U.S. and 36% international.

APA’s global portfolio includes ongoing development in large-scale legacy assets in the U.S. and Egypt. The company is also developing a large-scale FPSO development offshore Suriname.