the audited consolidated financial statements of APA included in its Annual Report on Form 10-K for the year ended December 31, 2023;

the audited consolidated financial statements of Callon included in its Annual Report on Form 10-K for the year ended December 31, 2023;

Callon’s Current Report on Form 8-K filed on July 7, 2023 (the “July 2023 8-K”), to present the effects of the Percussion acquisition and Eagle Ford divestiture; and

other information relating to APA and Callon contained in or incorporated by reference into this filing.

the merger is accounted for as a business combination using the acquisition method of accounting, with APA identified as the acquirer, and the issuance of shares of APA common stock as merger consideration;

each eligible share of Callon common stock and each Callon equity award converted or settled as part of the merger was converted automatically into the right to receive 1.0425 shares of APA common stock, in accordance with the terms of the Merger Agreement;

Callon’s acquisition of Percussion;

Callon’s disposition of its Eagle Ford assets;

the assumption of liabilities for merger-related expenses;

the reclassification of certain of Callon’s historical amounts to conform to APA’s financial statement presentation;

the recognition of the estimated tax impact of the pro forma adjustments; and

the extinguishment of Callon’s senior notes and credit facility and subsequent refinancing by APA.

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

Receivables, net

Other current assets

PROPERTY AND EQUIPMENT:

Oil and gas properties, on the basis of successful efforts accounting

Gathering, processing, and transmission facilities

Other

Less: Accumulated depreciation, depletion, and amortization

OTHER ASSETS:

Equity method interests

Decommissioning security for sold Gulf of Mexico properties

Deferred tax asset

Deferred charges and other

LIABILITIES, NONCONTROLLING INTERESTS, AND EQUITY

CURRENT LIABILITIES:

Accounts payable

Current debt

Other current liabilities

LONG-TERM DEBT

DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES:

Income taxes

Asset retirement obligation

Decommissioning contingency for sold Gulf of Mexico properties

Other

EQUITY:

Common stock

Paid-in capital

Accumulated deficit

Treasury stock, at cost

Accumulated other comprehensive income

APA SHAREHOLDERS’ EQUITY

Noncontrolling interest – Egypt

TOTAL EQUITY

REVENUES AND OTHER:

Oil, natural gas, and natural gas liquids production revenues

Purchased oil and gas sales

Total revenues

Derivative instrument gains, net

Gain on divestitures, net

Loss on previously sold Gulf of Mexico properties

Other, net

OPERATING EXPENSES:

Lease operating expenses

Gathering, processing, and transmission

Purchased oil and gas costs

Taxes other than income

Exploration

General and administrative

Transaction, reorganization, and separation

Depreciation, depletion, and amortization

Asset retirement obligation accretion

Impairments

Financing costs, net

NET INCOME BEFORE INCOME TAXES

Current income tax provision (benefit)

Deferred income tax provision (benefit)

NET INCOME INCLUDING NONCONTROLLING INTERESTS

Net income attributable to noncontrolling interest – Egypt

NET INCOME ATTRIBUTABLE TO COMMON STOCK

NET INCOME PER COMMON SHARE:

Basic

Diluted

WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:

Basic

Diluted

changes in the estimated fair value of Callon’s identifiable assets acquired and liabilities assumed as of the closing of the merger, which could result from APA’s additional valuation analysis, reserve estimates, discount rates and other factors; and

changes in the recognized tax impact of the Transactions, including the presentation and measurement of related deferred tax assets and liabilities, as of the closing of the Transactions, which could result from changes in reserve estimates and other assumptions.

Consideration transferred:

Callon common stock outstanding on April 1, 2024, prior to completion of the merger

Exchange ratio

Shares of APA common stock issued

Closing price per share of APA common stock (a)

Fair value of APA common stock to be issued as consideration

Fair value of APA equity-based awards issued in exchange for Callon equity-based awards (b)

Other consideration transferred

Total consideration transferred

Cash and cash equivalents

Accounts receivable, net

Other current assets

Oil and gas properties

Deferred tax asset

Deferred charges and other

Total assets acquired

Fair value of liabilities assumed:

Accounts payable

Other current liabilities

Long-term debt

Asset retirement obligations

Other long-term liabilities

Total liabilities assumed

Assets acquired and liabilities assumed

Represents the market price of APA Common Stock on April 1, 2024.

Additional consideration represents the fair value of APA shares that replaced Callon equity awards that are attributable to pre-merger services provided.

Reflects immaterial purchase price allocation adjustment to record the estimated fair value of various assets and liabilities assumed from Callon based on the estimated fair value determined as of the date the merger was completed.

Reflects a purchase price allocation adjustment resulting in (i) a decrease in Callon’s proved oil and gas properties to record the properties at their estimated fair value, (ii) the elimination of Callon’s Historical, As Adjusted accumulated depletion, depreciation and amortization (“DD&A”) balances, and (iii) a decrease in Callon’s unproved oil and gas properties to their estimated fair value. The resulting estimated fair value of oil and gas properties acquired was allocated approximately $3.6 billion to proved properties and $929 million to unproved properties.

Reflects transaction accounting adjustments to record APA’s estimated fair value of other property and equipment.

Reflects an adjustment to deferred income taxes to record the estimated deferred income tax effects of combining APA’s and Callon’s operations. For pro forma purposes, it is assumed that in 2023, the combined group released a signification portion of its U.S. valuation allowance. Approximately $369 million of this adjustment reflects an increase Callon’s deferred tax asset assumed in the transaction and associated release of valuation allowance recorded through continuing operations. In addition, an estimated deferred income tax benefit of $24 million was recorded for the transaction accounting adjustments using APA’s statutory rate in effect for the period ending December 31, 2023.

Reflects the adjustment of $194 million related to the Callon Historical, As Adjusted debt due to the re-measurement of debt at fair value and the adjustment of $13 million to write off Callon’s deferred financing fees included within the Callon Historical, As Adjusted Deferred charges and other financial statement line. The pro forma interest expense includes the impact of the write off of deferred financing fees.

Reflects transaction accounting adjustments to record APA’s estimated fair value adjustment related to right-of-use assets and lease liabilities.

Reflects transaction accounting adjustments to record nonrecurring transaction costs of approximately $114 million that were incurred by APA and Callon, including advisory, legal, regulatory, accounting, valuation and other professional fees that are not capitalized as part of the Transactions.

Reflects a transaction accounting adjustment to record the estimated fair value of the assumed Callon asset retirement obligations, which increased by $93 million. The pro forma income statement includes a corresponding adjustment to accretion expense in relation to the fair value of the asset retirement obligations.

Reflects a $26 million adjustment to eliminate the Callon Historical, As Adjusted cash settled awards and record the impact of the issuance of new APA awards and the transfer of other consideration upon closing of the merger.

Reflects adjustments to eliminate Callon Historical, As Adjusted equity balances in accordance with the acquisition method of accounting and record the impact of the issuance of consideration in connection with the merger. The impact of pro forma merger adjustments on total equity are summarized below (shown in millions):

Common stock

Additional paid-in capital

Accumulated deficit

Total equity

Reflects the pro forma adjustment for DD&A expense based on an assumed DD&A rate applied to the purchase price allocation for proved properties. DD&A for oil and gas properties was calculated in accordance with the successful efforts method of accounting for oil and gas properties using the combined companies estimated proved reserves.

The adjustments on APA Common Stock and basic and diluted earnings per share are summarized below:

Numerator

Basic and diluted combined pro forma net income attributable to APA common stockholders

Denominator

Basic:

Historical basic weighted average APA shares outstanding

Shares of APA common stock to be issued

Pro forma basic weighted average APA shares outstanding

Pro forma basic net income per share attributable to common APA stockholders

Diluted:

Historical diluted weighted average APA shares outstanding

Shares of APA common stock to be issued

Pro forma diluted weighted average APA shares outstanding

Pro forma diluted net income per share attributable to common APA stockholders

Reflects the pro forma adjustment related to the extinguishment of the historical Callon debt and the issuance of a new $1.5 billion senior unsecured delayed-draw term loan by APA, cash, and the use of APA’s existing credit facility. For the purposes of the pro forma financial statements, it was assumed that the remaining debt was repaid using APA’s existing credit facility and cash available as of December 31, 2023. The unsecured delayed-draw term loan will mature in three years. Pro forma interest expense includes estimates for the new term loan, including the impact of changes to amortization of debt issuance costs and from purchase accounting adjustments. The pro forma interest expense is based on a weighted average interest rate of 7.1%. The actual interest rate will be based on market and other conditions. For each 1/8% (12.5 basis points) change in the estimated weighted average interest rate for the new term loan, interest expense would increase or decrease by approximately $2 million per year. The pro forma interest expense associated with APA’s existing credit facility is based on a weighted average interest rate of 6.6%. In addition, an estimated deferred income tax benefit of $8 million was recorded for the financing accounting adjustments using APA’s statutory rate in effect for the period ending December 31, 2023.

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

Receivables, net

Fair value of derivatives

Other current assets

PROPERTY AND EQUIPMENT:

Oil and gas properties

Proved properties, net

Unproved properties

Other

Less: Accumulated depreciation, depletion, and amortization

Deferred income taxes

OTHER ASSETS:

Deferred tax asset

Deferred charges and other

LIABILITIES, NONCONTROLLING INTERESTS, AND EQUITY

CURRENT LIABILITIES:

Accounts payable

Accounts payable and accrued liabilities

Fair value of derivatives

Other current liabilities

LONG-TERM DEBT

DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES:

Asset retirement obligation

Fair value of derivatives

Other

EQUITY:

Common stock

Paid-in capital

Accumulated deficit

TOTAL SHAREHOLDERS’ EQUITY

REVENUES AND OTHER:

Oil, natural gas, and natural gas liquids production revenues

Oil

Natural gas

Oil and gas revenue

Natural gas liquids

Purchased oil and gas sales

Total revenues

Derivative instrument gains, net

Realized loss on oil and gas derivatives

Gain on divestitures, net

Other, net

OPERATING EXPENSES:

Lease operating expenses

Gathering, processing, and transmission

Purchased oil and gas costs

Taxes other than income

Production and ad valorem taxes

Exploration

Gain on sale of oil and gas properties

General and administrative

Transaction, reorganization, and separation

Depreciation, depletion, and amortization

Impairment of oil and gas properties

Minimum volume commitment deficiency fees

Asset retirement obligation accretion

Financing costs, net

OTHER (INCOME) EXPENSES

Interest expense, net of capitalized amounts

Net unrealized gain on oil and gas derivatives

(Gain) loss on derivative contracts

(Gain) loss on extinguishment of debt

Other (income) expense

NET INCOME BEFORE INCOME TAXES

Deferred income tax provision (benefit)

Income tax expense (benefit)

NET INCOME ATTRIBUTABLE TO COMMON STOCK