APA Cashes In: $950M Deal Fuels Debt Reduction, Portfolio High-Grading

Permian this and Permian that. For several years now, acreage and production in that sprawling, crude-oil-focused shale play in West Texas and southeastern New Mexico have been at the center of so much M&A activity. And the deals keep coming! Just last week, APA Corp. — the international E&P formerly known as Apache — announced that it will be acquiring Callon Petroleum, which in recent years has become a Permian pure play with significant holdings in both the Delaware and Midland basins. In today’s RBN blog, we discuss the APA/Callon deal, the drivers behind it, and why the acquisition makes sense for both companies. 

The fact is, many major E&P acquisitions include at least some production assets that don’t align with the acquiring company’s long-term strategic plans. Also, it’s often true that big-dollar M&A increases the buyer’s debt level — and it’s typical in such cases that the company commits to quickly reducing its debt through the divestiture of non-core assets. As we discuss in today’s RBN blog, there’s a lot of that going on now, and in many cases smaller, private-equity-backed producers are scooping up the acreage and production being sold. 

The headwinds facing producers in the Permian, the Eagle Ford and other shale plays are trimming the valuations of oil and gas assets and making it easier for deep-pocketed acquirers and private-equity-backed sellers to reach deals. For proof, look no further than the ongoing frenzy of M&A activity in South and West Texas, where large and medium-size E&Ps alike continue to gobble up smaller producers with complementary assets. Their goals are one and the same: increase scale, improve efficiency, cut costs and build inventory in highly productive plays with easy access to Gulf Coast refineries, fractionation plants, and export docks for oil, LNG and NGLs. In today’s RBN blog, we discuss the most significant deals in the Lone Star State so far this spring and what they mean for the acquiring companies.