APA Corp. agreed to acquire shale explorer Callon Petroleum for $4.5 billion including debt, the latest in a wave of buyouts that’s reshaping the landscape of US oil producers.
The all-stock transaction equates to $38.31 per share of Callon and has been unanimously approved by both boards of directors, the companies said in a statement on Thursday. It is expected to close during the second quarter.
APA (NASDAQ:APA) is the Houston-headquartered holding company for Apache Corporation.
“Callon has built a strong portfolio in the Permian Basin that is complementary to our existing Permian assets,” APA’s President and Chief Executive Officer John J. Christmann said in the statement.
“Increased scale will enable us to realize significant overhead and cost-of-capital synergies.”
APA plans to retire Callon’s roughly $1.9 billion in debt, giving the deal an enterprise value of $4.5 billion.
APA indicated it has no plans to idle any drilling rigs after the transaction closes, a divergence from the consolidate-and-cut strategy some shale drillers followed in 2023.
The takeover comes as investors are pushing oil producers to maintain generous buybacks and dividends even as output growth slows in US shale basins. With the number of top-tier production sites dwindling, companies are increasingly buying rivals to secure new places to drill.
Bloomberg News reported in December that Callon was considering a potential sale amid takeover interest from rival oil and gas players.
The deal for Callon follows three blockbuster acquisitions that have driven the value of mergers and acquisitions in the global energy sector to a record.
In October, Exxon Mobil Corp. reached a $60 billion deal to buy Pioneer Natural Resources Co. Chevron Corp. followed up with a $53 billion agreement for Hess Corp. And in December, Occidental Petroleum Corp. agreed to acquire CrownRock LP for $10.8 billion.
Headquartered in Houston, Callon is an independent explorer primarily focused in the Permian Basin of West Texas, with 26,000 net acres in the Midland Basin and 119,000 acres in the Delaware Basin. It also has assets in the Eagle Ford Shale of South Texas.
Aside from the US, APA has operations in Suriname, Egypt and the UK. Once the Callon deal closes, about 64% of APA’s global production will come from the US.
JPMorgan Chase Bank, Citigroup Global Markets Inc. and Wells Fargo & Co. provided $2 billion of financing for the deal. APA plans to retire Callon’s existing debt and replace it with term loan facilities totaling $2 billion.
APA’s financial advisers on the deal are Citi and Wells Fargo Securities. Morgan Stanley is Callon’s lead adviser, while RBC Capital Markets is the company’s financial adviser.