U.S. oil producer APA APA-Q said on Thursday it would buy Permian Basin producer Callon Petroleum CPE-N in a $4.5-billion all-stock transaction, including debt, as deal making accelerates in the largest U.S. oil field.
Callon’s assets will add heft to APA’s operations in the Permian Basin, increasing its acreage by 50 per cent.
Permian has become a prime target for producers looking to increase their 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-billion in 2023.
Some of the blockbuster deals last year included Exxon Mobil’s $60-billion proposed acquisition of Pioneer Natural Resources and Chevron’s $53-billion agreement for Hess.
Shares of Callon, which has a market value of $2.28-billion as of last closing, rose 4.4 per cent, while APA fell 4.22 per cent in premarket trading.
Energy firms have been taking advantage of a surge in their stock price for acquisitions, avoiding big cash outlays that would jeopardize buyers’ balance sheets.
Under the deal, each outstanding share of Callon will be exchanged for 1.0425 shares of APA, representing an implied value to each Callon share of $38.31 per share, the companies said. The implied share value represents a nearly 14 per cent premium to Callon’s last close.
Callon entered the Permian Basin in 2009 with the acquisition of about 8,800 net acres for $16-million.
The deal is expected to close during the second quarter of 2024, with existing APA shareholders owning about 81 per cent of the combined company and existing Callon shareholders owning nearly 19 per cent.
After the deal’s closing, APA’s worldwide pro forma production mix would be about 64 per cent U.S. and 36 per cent international.