01—Abstract
Summary
Summary of the 8-K filed April 1, 2024. Cited figures are marked; the original filing is the authoritative source.
On April 1, 2024, APA Corporation completed its previously announced acquisition of Callon Petroleum Company through the merger of a wholly owned APA subsidiary with and into Callon.
Each Callon common share was converted into the right to receive 1.0425 shares of APA common stock, and the press release states APA issued approximately 70 million shares in the transaction. The press release says the acquisition brings APA's daily reported production to approximately 500,000 barrels of oil equivalent, about two-thirds from the Permian Basin, and adds approximately 120,000 net acres in the Delaware Basin and 25,000 net acres in the Midland Basin. APA's CEO stated that the company expects improved capital productivity, well performance and significant cost synergies.
To fund the deal, APA borrowed $1.5 billiona in senior unsecured term loans maturing April 1, 2027, under a credit agreement dated January 30, 2024. The proceeds were used to refinance Callon's Credit Agreement debt and its 2026 Notes, and to pay fees and expenses. Callon's 2028 and 2030 Senior Notes were reduced to an aggregate $23.9 million outstanding, so no Callon guarantee of APA's obligations is required.
The lenders' $500 millionb 364-day delayed-draw tranche was allowed to expire unused. As part of the closing, APA issued warrants to purchase 501,708 shares of APA common stock at $88.15 per share, exercisable until August 10, 2027 on a net share settlement basis. APA also expanded its Board from 10 to 12 members, adding Matthew R.
Bob, Callon's former board chair, and Anya Weaving, with both expected to serve on the Audit Committee and the Corporate Responsibility, Governance, and Nominating Committee. The financial statements and pro forma information for Callon will be filed by amendment.
02—Key points
Key Highlights
- Acquisition of Callon Petroleum Company completed April 1, 2024; each Callon share converted into 1.0425 shares of APA common stock, with approximately 70 million APA shares issued per the press release.
- Post-merger daily reported production is stated at approximately 500,000 BOE, roughly two-thirds from the Permian Basin.
- Acquired assets include approximately 120,000 net acres in the Delaware Basin and 25,000 net acres in the Midland Basin; Callon's fourth-quarter production was 103,000 BOE per day.
- APA borrowed $1.5 billion of senior unsecured term loans maturing April 1, 2027, used to refinance Callon debt and pay fees; the $500 million 364-day tranche was not drawn.
- Callon's 2028 and 2030 Senior Notes were reduced to an aggregate $23.9 million outstanding, and Callon's credit agreement and 2026 Notes were fully repaid.
- Warrants issued to purchase 501,708 APA shares at $88.15 per share, exercisable through August 10, 2027 on a net share settlement basis.
- Board expanded from 10 to 12 members with the appointment of Matthew R. Bob and Anya Weaving, effective at the Effective Time.
03—Questions
Frequently Asked Questions
How much APA stock did Callon shareholders receive?
Each share of Callon common stock was converted into the right to receive 1.0425 shares of APA common stock, with cash paid in lieu of fractional shares. The press release states APA issued approximately 70 million shares of common stock related to the transaction.
How was the acquisition financed?
APA borrowed an aggregate $1.5 billion in senior unsecured term loans maturing April 1, 2027, under its January 30, 2024 Credit Agreement. The proceeds refinanced Callon's indebtedness and paid related fees and expenses. APA elected not to borrow the $500 million 364-day delayed-draw tranche, which was allowed to expire.
What assets did APA acquire?
According to the press release, the acquired assets include approximately 120,000 net acres in the Delaware Basin and 25,000 net acres in the Midland Basin. Callon's fourth-quarter production was 103,000 BOE per day, comprising 58% oil and 80% liquids. APA expects the combined company's daily reported production to be approximately 500,000 BOE.
Does the transaction create new dilutive securities?
Yes. Under the Callon warrants assumed by APA, warrants to purchase 501,708 shares of APA common stock at an exercise price of $88.15 per share became outstanding, exercisable until August 10, 2027 and only on a net share settlement basis. Callon equity awards were also converted into APA restricted stock units, cash-settled stock appreciation rights, or cash payments.
What governance changes occurred?
APA's Board increased from 10 to 12 members. Matthew R. Bob, former chair of Callon's board, and Anya Weaving were appointed effective immediately after the Effective Time. Both are expected to serve on the Audit Committee and the Corporate Responsibility, Governance, and Nominating Committee.
04—Continue