APA Launches Exchange, Redemption Offers for $4.78 Billion Apache Bonds

APA Corp. has initiated an offer to cancel Apache Corp. notes with a combined principal amount of $4.78 billion in exchange for new unsecured bonds to be issued by APA.

Concurrently the oil and gas exploration and production company commenced an aggregate offer of $1 billion to, alternatively, purchase in cash some of the debt securities.

The exchange offer is for notes due between 2026 and 2096 and with interest rates of 4.25 percent to 7.95 percent.

Meanwhile the notes eligible for the cash offer are maturing between 2037 and 2044 with interest rates of 4.25 percent to six percent.

“Each APA Note issued in exchange for an Apache Note pursuant to an Exchange Offer will have an interest rate and maturity date that are identical to the interest rate and maturity date of such tendered Apache Note, as well as identical interest payment dates and identical optional redemption prices, if applicable”, Houston, Texas-based APA said in an online statement.

“The APA Notes will be unsecured general obligations of APA and will rank equally with all other unsecured and unsubordinated indebtedness of APA from time to time outstanding”, it added. “The APA Notes offered will also be structurally subordinated to all existing and future liabilities of any of APA’s subsidiaries and any subsidiaries that APA may in the future acquire or establish”.

The offers expire January 2, 2025. Apache is soliciting consent from noteholders to amend the terms of the notes. It is proposing to eliminate substantially all restrictive covenants and certain events of default, among other things.

Acting as lead dealer managers are BofA Securities Inc., HSBC Securities (USA) Inc., Mizuho Securities USA LLC and RBC Capital Markets LLC.

Dealer managers are Barclays Capital Inc., Citigroup Global Markets Inc., Goldman Sachs & Co. LLC, JP Morgan Securities LLC, Morgan Stanley & Co. LLC, MUFG Securities Americas Inc., PNC Capital Markets LLC, Scotia Capital (USA) Inc., TD Securities (USA) LLC, Truist Securities Inc. and Wells Fargo Securities LLC.

APA has also enlisted DF King & Co. Inc. as tender agent and information agent.

APA had $2.93 billion in current liabilities as of the end of the third quarter, including $2 million in current debt. Meanwhile its current assets stood at $3.62 billion including $64 million in cash and cash equivalents.

APA has assumed Callon Petroleum Co.’s debt as part of its $4.5 billion acquisition of the Permian Basin competitor.

APA expects the Callon acquisition to raise its production to about 500,000 boed, according to its April 1 announcement of the completion of the transaction. The Permian is expected to account for around two-thirds of APA’s post-acquisition production.

APA has entered agreements post-acquisition to divest non-core assets to reduce debt.

In September it signed an agreement to sell Permian properties to an undisclosed buyer for $950 million, giving up 21,000 barrels of oil equivalent a day (boed) in net production.

The sale involves APA assets in the Central Basin Platform, the Texas and New Mexico Shelf and the Northwest Shelf. Fifty-seven percent of APA’s share of output in these areas is oil, according to APA.

“Through multiple transactions completed this year, we have high-graded and focused our U.S. asset base”, chief executive John J. Christmann IV said in a company statement about the sale. “Our remaining Permian position has scale and balance in the unconventional Midland and Delaware Basins.

“The net impact of our acquisition of Callon Petroleum and the follow-on asset sales is that APA has increased its onshore U.S. production by approximately 66,000 boed in 2024 and continued to add economic unconventional inventory, with no material change in net debt levels compared to year-end 2023”.

“The company’s more focused unconventional Permian asset base and advantageous transport and marketing positions compare favorably with like-sized, pure-play peers in the region, while APA’s conventional global portfolio also provides geologic, geographic and price diversification as well as differential exploration upside”, Christmann added.

Earlier APA announced two agreements divesting non-core producing assets in the Eagle Ford shale, East Texas Austin Chalk and Midland basin to undisclosed entities for aggregate proceeds of over $700 million.

The assets, owned by Apache, had a combined average production of 13,000 boed in the first quarter of 2024, just over one-third of which was petroleum, APA said in a press release May 20.

To contact the author, email jov.onsat@rigzone.com