Streetview: APA expands Permian position at a low price

Callon Petroleum Co

05/01/2024 13:58

** U.S. oil producer APA Corp  APA.O  said on Thursday it
will buy Permian-based producer Callon Petroleum  CPE.N  in an
all-stock $4.5 bln deal including debt
    ** APA shares closed 7.35% lower on Thursday; last up 0.7%
premarket tracking oil prices
    
    AN ACCRETIVE DEAL FOR A LOW PRICE
    ** Morningstar ("fair value") says CPE assets are very low
quality, but the acquisition comes at an extremely cheap price,
offsetting the value lost by offering its shares
    ** Roth MKM ("buy") expects to see some selling pressure on
APA shares given the 14% premium paid for CPE, a slight increase
in leverage after the deal and market perception that CPE's
Permian assets are not as high in quality as other public peers
    ** Gerdes ("buy") says while the deal is slightly accretive,
it is more than offset by ~$2/share net present value (NPV)
decrease related to a lower composite LNG price outlook for 2024
    ** Raymond James ("strong buy") says the deal boosts APA's
Permian position, further enabling the co to methodically boost
oil production moving forward
    ** Truist Securities ("buy") believes the deal is positive
for APA as it should be able to quickly lower operational costs
and drill the best CPE acreage

 (Reporting by Vallari Srivastava)
 ((Srivastava.Vallari@thomsonreuters.com;))