- Complements and enhances APA's asset base in the Permian
Basin; expected to be accretive to key financial metrics;
- Adds to APA's high-quality, short-cycle development
inventory and increases oil mix; and
- Strengthens APA's position as a leading, diversified
independent E&P with pro forma production of more than 500,000
barrels of oil equivalent (BOE) per day and pro forma enterprise
value in excess of $21
billion.*
HOUSTON, Jan. 4, 2024
/PRNewswire/ -- APA Corporation ("APA" or the "Company")
(NASDAQ: APA) and Callon Petroleum Company ("Callon") (NYSE: CPE)
have entered into a definitive agreement under which APA will
acquire Callon in an all-stock transaction valued at approximately
$4.5 billion, inclusive of Callon's
net debt. Under the terms of the transaction, each share of Callon
common stock will be exchanged for a fixed ratio of 1.0425 shares
of APA common stock. The transaction is expected to be accretive to
all key financial metrics and add to APA's inventory of high
quality, short-cycle opportunities. Callon's assets provide
additional scale to APA's operations across the Permian Basin, most
notably in the Delaware Basin,
where Callon has nearly 120,000 acres. On a pro forma basis, total
company production exceeds 500,000 BOE per day and enterprise value
increases to more than $21
billion.*
Key Highlights
- Combination of Callon's Delaware-focused footprint with APA's
Midland-focused footprint provides scale and balance in the Permian
Basin;
- APA's oil-prone acreage in the Midland and Delaware Basin combined will increase by more
than 50% following the transaction;
- Expected to be accretive on key financial and value
metrics;
- Estimated overhead, operational and cost-of-capital synergies
to exceed $150 million annually;
and
- Additional scale anticipated to improve credit profile; pro
forma balance sheet will remain strong with leverage at 1.1x net
debt / adjusted EBITDAX.**
Management Commentary
"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."
"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," said Joe Gatto, Callon's president and CEO. "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.
Importantly, I would like to personally thank each and every Callon
employee for their role in building this company. I am very proud
of this team and what we have achieved together."
Combined Permian Asset Position and Preliminary 2024 Planned
Activity
Pro forma average daily Permian Basin production was 311 Mboe/d
in 3Q 2023, which represents a 48% increase from APA's Permian
Basin production on a standalone basis. APA's oil production as a
percentage of BOE's in the Permian increases from approximately 37%
to 43% in 3Q 2023, on a pro forma basis.
APA will provide additional activity plans and details post
closing.
Transaction Details
In this all-stock transaction, each outstanding share of Callon
common stock will be exchanged 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,
2024. APA is expected to issue approximately 70 million
shares of common stock in the transaction. After closing, existing
APA shareholders are expected to own approximately 81% of the
combined company and existing Callon shareholders are expected to
own approximately 19% of the combined company. APA expects to
retire the existing debt at Callon and replace it with APA term
loan facilities totaling $2.0
billion. The term loan facilities are expected to offer
improved optionality for near-term debt reduction. JPMorgan Chase
Bank, N.A., Citigroup Global Markets Inc. and Wells Fargo Bank,
National Association, LLC have jointly provided $2.0 billion of committed financing for the
deal.
The transaction has been unanimously approved by the Boards of
Directors of both APA and Callon and 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. APA's executive management team will lead
the combined company with the headquarters remaining in
Houston, Texas.
Pro Forma APA Positioning
"APA has a proven ability to deliver strong results from its
unconventional assets in the Permian Basin, and we look forward to
building on the progress that the team at Callon has made within
its asset base. This transaction is aligned with our strategy of
maintaining and growing a diversified portfolio, underpinned by
large-scale core areas of operation while continuing to build a
portfolio of medium and longer-term exploration-driven development
opportunities," Christmann said.
Following the closing, the company's worldwide pro forma
production mix will be approximately 64% U.S. / 36%
international.
APA's global portfolio includes ongoing development on
large-scale legacy assets in the U.S. and Egypt. The company is also advancing a FEED
process for a large-scale FPSO development offshore Suriname. In
addition to current production and development activities across
the globe, APA maintains a differentiated exploration portfolio,
which includes newly acquired large-scale blocks offshore
Uruguay and onshore state-land
leases in Alaska.
Advisors
Citi and Wells Fargo Securities LLC are acting as financial
advisors to APA, and Wachtell, Lipton, Rosen & Katz is serving
as legal advisor to APA. Morgan Stanley & Co. LLC is acting as
lead advisor to Callon, and RBC Capital Markets, LLC is also acting
as financial advisor to Callon. Kirkland & Ellis LLP is serving
as legal advisor to Callon.
Conference Call
APA and Callon will host a joint conference call on Thursday Jan. 4, 2024, to discuss the transaction
at 7:30 a.m. Central (8:30 a.m. Eastern). The conference call will be
webcast from APA's website at www.apacorp.com.
About APA
APA Corporation owns consolidated subsidiaries that explore for
and produce oil and natural gas in the
United States, Egypt and
the United Kingdom and that
explore for oil and natural gas offshore Suriname. APA posts
announcements, operational updates, investor information and press
releases on its website, www.apacorp.com. Additional details
regarding Suriname, ESG performance and other investor-related
topics are posted at investor.apacorp.com.
About Callon Petroleum
Callon Petroleum Company is an independent oil and natural gas
company focused on the acquisition, exploration and sustainable
development of high-quality assets in the Permian Basin in
West Texas.
* Pro forma enterprise value is derived from the addition of
each company's market capitalization based on closing stock prices
on 1/3/24, plus the net debt of each company as of 9/30/23.
** Net debt is as of 9/30/23, and adjusted EBITDAX is measured
over the four quarters ended 9/30/23.
Forward-Looking Statements
This press release relates to a proposed business combination
transaction between APA and Callon and contains
"forward-looking statements" within the meaning of the federal
securities laws, including Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended. Forward-looking statements relate to future
events and anticipated results of operations, business strategies,
the anticipated benefits of the proposed transaction, the
anticipated impact of the proposed transaction on the combined
company's business and future financial and operating results, the
expected amount and timing of synergies from the proposed
transaction, the anticipated closing date for the proposed
transaction, and other aspects of our operations or operating
results. Words and phrases such as "anticipate," "estimate,"
"believe," "budget," "continue," "could," "intend," "may," "might,"
"plan," "potential," "possibly," "predict," "seek," "should,"
"will," "would," "expect," "objective," "projection," "prospect,"
"forecast," "goal," "guidance," "outlook," "effort," "target," and
other similar words can be used to identify forward-looking
statements. However, the absence of these words does not mean that
the statements are not forward-looking. All such forward-looking
statements are based upon current plans, estimates, expectations,
and ambitions that are subject to risks, uncertainties, and
assumptions, many of which are beyond the control of APA and
Callon, that could cause actual results to differ materially from
those expressed or forecast in such forward-looking
statements.
The following important factors and uncertainties, among others,
could cause actual results or events to differ materially from
those described in these forward-looking statements: the risk that
the approval under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 is not obtained or is obtained subject to conditions that
are not anticipated by APA and Callon; uncertainties as to whether
the potential transaction will be consummated on the expected time
period or at all, or if consummated, will achieve its anticipated
benefits and projected synergies within the expected time period or
at all; APA's ability to integrate Callon's operations in a
successful manner and in the expected time period; the occurrence
of any event, change, or other circumstance that could give rise to
the termination of the transaction, including receipt a competing
acquisition proposal; risks that the anticipated tax treatment of
the potential transaction is not obtained; unforeseen or unknown
liabilities; customer, shareholder, regulatory, and other
stakeholder approvals and support; unexpected future capital
expenditures; potential litigation relating to the potential
transaction that could be instituted against APA and Callon or
their respective directors; the possibility that the transaction
may be more expensive to complete than anticipated, including as a
result of unexpected factors or events; the effect of the
announcement, pendency, or completion of the potential transaction
on the parties' business relationships and business generally;
risks that the potential transaction disrupts current plans and
operations of APA or Callon and their respective management teams
and potential difficulties in Callon's ability to retain employees
as a result of the transaction; negative effects of this
announcement and the pendency or completion of the proposed
acquisition on the market price of APA's or Callon's common stock
and/or operating results; rating agency actions and APA's and
Callon's ability to access short- and long-term debt markets on a
timely and affordable basis; various events that could disrupt
operations, including severe weather, such as droughts, floods,
avalanches, and earthquakes, and cybersecurity attacks, as well as
security threats and governmental response to them, and
technological changes; labor disputes; changes in labor costs and
labor difficulties; the effects of industry, market, economic,
political, or regulatory conditions outside of APA's or Callon's
control; legislative, regulatory, and economic developments
targeting public companies in the oil and gas industry; and the
risks described in APA's and Callon's respective periodic and other
filings with the U.S. Securities and Exchange Commission ("SEC"),
including their most recent Quarterly Reports on Form 10-Q and
Annual Reports on Form 10-K.
Forward-looking statements represent management's current
expectations and are inherently uncertain and are made only as of
the date hereof. Except as required by law, neither APA nor Callon
undertakes or assumes any obligation to update any forward-looking
statements, whether as a result of new information or to reflect
subsequent events or circumstances or otherwise.
Cautionary note to investors
The SEC permits oil and gas companies, in their filings with the
SEC, to disclose only proved, probable, and possible reserves that
meet the SEC's definitions for such terms. This press release may
use certain terms, such as "resources," "potential resources,"
"resource potential," "estimated net reserves," "recoverable
reserves," and other similar terms that the SEC guidelines strictly
prohibit oil and gas companies from including in filings with the
SEC. Such terms do not take into account the certainty of resource
recovery, which is contingent on exploration success, technical
improvements in drilling access, commerciality, and other factors,
and are therefore not indicative of expected future resource
recovery and should not be relied upon. Investors are urged to
consider carefully the disclosure in APA's Annual Report on Form
10-K for the fiscal year ended December 31,
2022, and Callon's Annual Report on Form 10-K for the fiscal
year ended December 31, 2022. A copy
of APA's Annual Report on Form 10-K is available free of charge on
APA's website at https://investor.apacorp.com. A copy of Callon's
Annual Report on Form 10-K is available free of charge on Callon's
website at https://callon.com/investors. You may also obtain these
reports from the SEC by calling 1-800-SEC-0330 or from the SEC's
website at www.sec.gov.
Non-GAAP Financial Measures
This press release
includes information not prepared in conformity with generally
accepted accounting principles (GAAP). Net debt and adjusted
EBITDAX are non-GAAP measures. The non-GAAP information should be
considered by the reader in addition to, but not instead of,
financial information prepared in accordance with GAAP. A
reconciliation of the differences between these non-GAAP financial
measures and the most directly comparable GAAP financial measures
can be found in the companies' quarterly results posted on APA's
website at https://investor.apacorp.com and on Callon's website at
https://callon.com/investors.
No Offer or Solicitation
This communication is not
intended to and shall not constitute an offer to buy or sell or the
solicitation of an offer to buy or sell any securities, or a
solicitation of any vote or approval, nor shall there be any sale
of securities in any jurisdiction in which such offer,
solicitation, or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction.
No offering of securities shall be made, except by means of a
prospectus meeting the requirements of Section 10 of the Securities
Act of 1933, as amended.
Additional Information about the Merger and Where to Find
It
In connection with the proposed transaction, APA intends
to file with the SEC a registration statement on Form S-4 that will
include a joint proxy statement of APA and Callon and that also
constitutes a prospectus of APA common stock. Each of APA and
Callon may also file other relevant documents with the SEC
regarding the proposed transaction. This document is not a
substitute for the joint proxy statement/prospectus or registration
statement or any other document that APA or Callon may file with
the SEC. The definitive joint proxy statement/prospectus (if and
when available) will be mailed to shareholders of APA and Callon.
INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE REGISTRATION
STATEMENT, JOINT PROXY STATEMENT/PROSPECTUS, AND ANY OTHER RELEVANT
DOCUMENTS THAT MAY BE FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS
OR SUPPLEMENTS TO THESE DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY
IF AND WHEN THEY BECOME AVAILABLE, BECAUSE THEY CONTAIN OR WILL
CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION.
Investors and security holders will be able to obtain free copies
of the registration statement and joint proxy statement/prospectus
(if and when available) and other documents containing important
information about APA, Callon, and the proposed transaction, once
such documents are filed with the SEC through the website
maintained by the SEC at http://www.sec.gov. Copies of the
documents filed with the SEC by APA will be available free of
charge on APA's website at https://investor.apacorp.com. Copies of
the documents filed with the SEC by Callon will be available free
of charge on Callon's website at https://callon.com/investors.
Participants in the Solicitation
APA, Callon, and
certain of their respective directors, executive officers, and
other members of management and employees may be deemed to be
participants in the solicitation of proxies in respect of the
proposed transaction. Information about the directors and executive
officers of APA, including a description of their direct or
indirect interests, by security holdings or otherwise, is set forth
in APA's proxy statement for its 2023 Annual Meeting of
Shareholders, which was filed with the SEC on April 11, 2023, and APA's Annual Report on Form
10-K for the fiscal year ended December 31,
2022, which was filed with the SEC on February 23, 2023. Information about the
directors and executive officers of Callon, including a description
of their direct or indirect interests, by security holdings or
otherwise, is set forth in Callon's proxy statement for its 2023
Annual Meeting of Shareholders, which was filed with the SEC on
March 13, 2023, and Callon's Annual
Report on Form 10-K for the fiscal year ended December 31, 2022, which was filed with the SEC
on February 23, 2023. Other
information regarding the participants in the proxy solicitations
and a description of their direct and indirect interests, by
security holdings or otherwise, will be contained in the joint
proxy statement/prospectus and other relevant materials to be filed
with the SEC regarding the proposed transaction when such materials
become available. Investors should read the joint proxy
statement/prospectus carefully when it becomes available before
making any voting or investment decisions. You may obtain free
copies of these documents from APA or Callon using the sources
indicated above.
APA Contacts
Investor: (281)
302-2286 Gary Clark
Media: (713)
296-7276 Alexandra Franceschi
Website: www.apacorp.com
Callon Contacts:
Investor: (281) 589-5200; IR@callon.com
Website: www.callon.com
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SOURCE Callon Petroleum Company