APA Corp. (APA) will acquire Callon Petroleum (CPE) for $4.5B. The deal is likely to result in rig cuts, continuing the consolidation trend underway in the Permian Basin.
The companies announced the all-stock deal on January 4. East Daley Analytics tracks APA and CPE rigs by G&P system in Energy Data Studio, as well as the producers’ historical processing volumes by G&P system. Callon holds ~145,000 acres and produces ~100 Mb/d of crude oil exclusively in the Permian. The producer currently runs 3 rigs in the Delaware and 1 rig in the Midland.
During an investor call, CEO John Christmann said APA will evaluate rig counts for the combined assets after closing. No near-term rigs reductions are planned for the CPE assets, APA executives guided.
APA and CPE currently run 9 rigs combined in the Permian: 6 rigs in the Delaware and 3 in the Midland, according to allocations in Energy Data Studio.
Kinetik (KNTK) and the company’s Raptor system has the most exposure to CPE and APA in the Delaware. KNTK gathers ~70% of Callon’s volumes in the Delaware, with TRGP, Salt Creek, and Brazos Midstream servicing the rest of the producer’s volumes. In the Midland, West Texas Gas’ North Texas and Targa Resource’s (TRGP) West Texas systems are the primary gathers for CPE and APA.
The APA-CPE deal continues a consolidation trend that has caused Permian drilling to slow. East Daley’s tracking of operators involved in recent Permian M&A finds a 37% decline in combined rigs through November 2023 (see figure). Acquiring companies, mostly public operators, are primarily focused on building scale and backfilling inventory, and do not need the rigs of the acquired operators.
CPE operated 5 rigs on average in the Delaware in 2023, including 2 rigs on KNTK - Raptor. CPE’s rig count on Raptor reached a high of 4 rigs in the first half of the year. If the company reduces activity on the CPE assets by 1 rig in 2024, it would lower KNTK’s total EBITDA by $82MM (2%) through 2027, according to the KNTK Financial Blueprint. – James Taylor Tickers: APA, CPE, KNTK, TRGP
Dirty Little Secrets is Now Available
Dirty Little Secrets is now available. East Daley held our Dirty Little Secrets annual webinar on Wednesday, December 13. In “Volatility Will Continue Until Morale Improves,” we reviewed the factors likely to drive volatility ahead in oil, natural gas and NGL markets. We review the outlook for these markets and the midstream sector. Review the Dirty Little Secrets webinar here.
East Daley, Hart Bring NEW Gas & Midstream Weekly
East Daley is teaming up with Hart Energy on the NEW Gas & Midstream Weekly newsletter. This new report combines the strengths of Hart Energy's journalistic reporting and analysis on natural gas, LNG, midstream energy and deal-making with EDA's deep research and intelligence of hydrocarbons, storage and transportation.
Published every Thursday morning, this new powerhouse newsletter is an interactive and enlightening read highlighting breaking news, exclusive interviews, videos, charts, maps and more. The newsletter utilizes East Daley's Energy Data Studio tools for natural gas predictive analytics with Hart Energy's Rextag mapping tools to present a holistic view of pricing triggers, infrastructure growth, pipeline and processing bottlenecks, regulatory and legal hurdles, and the inevitable solutions. Subscribe Here
Energy Data Studio
East Daley Analytics has launched Energy Data Studio, a platform for our industry-leading midstream data and commodity production forecasts. All clients have access to the new client portal. If you have not yet logged in, please fill out the form to request a registration email be resent.
Energy Data Studio leverages our G&P data set for insights into midstream assets across every major oil and gas basin in North America. Users can navigate detailed visual dashboards by region, pipeline, or individual asset to understand crude oil, natural gas and NGL supply at the most granular level.
Energy Data Studio is available through data downloads from the visual interface, in Excel files, or as a direct feed delivered into subscribers’ workflow via secure file transfer. To learn more about Energy Data Studio, please contact insight@eastdaley.com.
The Daley Note
Subscribe to The Daley Note (TDN) for midstream insights delivered daily to your inbox. The Daley Note covers news, commodity prices, security prices and EDA research likely to affect markets in the short term.
.
