APA Corporation (formerly known as Apache) has agreed to acquire Callon Petroleum in an all-stock transaction that values Callon at $4.5 billion. The proforma ownership will be 81% APA and 19% Callon. Both companies have their corporate offices in Houston.
Callon is a Permian pure-play with 119,000 net acres in the Delaware Basin and 26,000 acres in the Midland Basin. That dovetails nicely with APA’s Permian basin assets. APA has 84,000 acres in the Delaware Basin and 197,000 in the Midland Basin. The company also has producing assets in Egypt and the North Sea.
APA estimates that they can save $55 million from eliminating duplicate general and administrative expenses and $55 million from operating efficiencies in the Permian. In addition, they believe that they can save $40 million in interest costs from having a lower interest on debt.
Assuming the employment of the Callon executive officers is terminated after the deal goes through, they will be entitled to large compensation payments. According to the last annual proxy, CEO Joe Gatto will receive compensation worth $16.9 million (3x base salary and target bonus). The other four officers will receive a combined $22 million (2x base salary and target bonus for each named officer).
The transaction is expected to close in the second quarter of 2024.