01—Abstract
Summary
Summary of the 8-K filed December 3, 2024. Cited figures are marked; the original filing is the authoritative source.
On December 3, 2024, APA Corporation filed this Form 8-K under Item 8.01 (Other Events) and Item 9.01 to provide financial statements and pro forma information required by Rule 3-05 and Article 11 of Regulation S-X.
The filing relates to APA's April 1, 2024 completion of its acquisition of Callon Petroleum Company, which was carried out through a merger in which Callon became a wholly owned subsidiary of APA. The filing states that the pro forma information is for informational purposes only and does not represent actual results or project future results. Exhibit 99.1 contains Callon's unaudited consolidated balance sheet as of March 31, 2024 and its statements of operations, stockholders' equity, and cash flows for the three months ended March 31, 2024 and 2023.
Callon reported net income of $14.9 milliona for the first quarter of 2024, compared with $220.6 million in the prior-year period, and total operating revenues of $563.6 million. Merger, integration and transaction expenses were $54.5 million. Callon's long-term debt was $2.02 billion at March 31, 2024, and the filing states that all Callon indebtedness was repaid at or after the merger closing.
Exhibit 99.2 presents APA's unaudited pro forma combined statement of operations for the nine months ended September 30, 2024, as if the merger had closed on January 1, 2023. On that basis, pro forma net income attributable to common stock is $563 millionb, or $1.52 per basic and diluted share, compared with APA's historical $450 million, or $1.29 per diluted share. The filing states that 69 million APA shares were issued as merger consideration, valued at $2.39 billion, and that the exchange ratio was 1.0425 APA shares per Callon share.
02—Key points
Key Highlights
- Merger closed April 1, 2024: Callon Petroleum Company became a wholly owned subsidiary of APA, with each eligible Callon share converted into 1.0425 shares of APA common stock.
- Total consideration transferred was $2.44 billion, including $2.39 billion of APA common stock fair value based on a closing price of $34.53 per share on April 1, 2024.
- Callon's Q1 2024 net income was $14.9 million, versus $220.6 million in Q1 2023, with merger, integration and transaction expenses of $54.5 million.
- Callon's debt was retired at closing: the $472 million credit facility balance and $321 million of 2026 notes were repaid, and the 2028 and 2030 notes were tendered for or redeemed, with the final notes redeemed on May 6, 2024.
- Pro forma nine-month 2024 net income attributable to common stock is $563 million ($1.52 per share), compared with APA's historical $450 million ($1.29 per diluted share).
- Pro forma adjustments include a new $1.5 billion senior unsecured delayed-draw term loan with a weighted average interest rate of 7.1%, and approximately $114 million of nonrecurring transaction costs reclassified.
- The purchase price allocation is preliminary, with APA stating it expects to finalize it no later than one year from April 1, 2024.
03—Questions
Frequently Asked Questions
What does this 8-K filing report?
The filing supplies the financial statements and pro forma financial information required in connection with APA's completed acquisition of Callon Petroleum Company. It includes Callon's unaudited Q1 2024 financial statements (Exhibit 99.1) and APA's unaudited pro forma combined statement of operations for the nine months ended September 30, 2024 (Exhibit 99.2).
How was Callon acquired and what did Callon shareholders receive?
Astro Comet Merger Sub Corp., a wholly owned APA subsidiary, merged into Callon under a January 3, 2024 merger agreement, with Callon surviving as a wholly owned subsidiary of APA. Each eligible Callon common share was converted into 1.0425 shares of APA common stock, with cash paid in lieu of fractional shares. Callon shareholders approved the merger on March 27, 2024.
How did Callon perform in the first quarter of 2024?
Callon reported total operating revenues of $563.6 million and net income of $14.9 million, or $0.22 per diluted share, for the three months ended March 31, 2024. This compares with net income of $220.6 million, or $3.57 per diluted share, in the first quarter of 2023. The 2024 results include $54.5 million of merger, integration and transaction expenses.
What does the pro forma information show and what are its limitations?
The pro forma statement combines APA's historical nine-month 2024 results with Callon's Q1 2024 results as if the merger had occurred on January 1, 2023. It shows pro forma net income attributable to common stock of $563 million, or $1.52 per share, with 370 million weighted average shares. The filing states this information is illustrative only, is not a projection of future results, and does not include expected cost savings or synergies.
How was Callon's debt handled at closing?
At closing, the Callon credit facility and the 2026 notes were repaid, and the 2028 and 2030 notes were tendered for or redeemed. The filing states that Callon's indebtedness was fully repaid after closing, and that the remaining 2028 and 2030 notes were redeemed on May 6, 2024. For pro forma purposes, APA assumed a new $1.5 billion delayed-draw term loan at a 7.1% weighted average rate.
04—Continue