APA will acquire Callon in an all-stock deal, where each share of Callon is exchanged for 1.0425 shares of APA stock, worth $38.31.
This is nearly a 14 percent premium over Callon's closing price on Wednesday.
The transaction comes after several high-profile agreements in the energy industry, such as ExxonMobil's megadeal to acquire Pioneer Natural Resources for about $60 billion and Chevron's $53 billion acquisition of Hess.
"Callon's assets provide additional scale to APA's operations across the Permian Basin, most notably in the Delaware Basin, where Callon has nearly 120,000 acres," said APA in a statement.
As a result, it expects the combined company's daily production to exceed 500,000 barrels of oil equivalent.
Existing APA shareholders are anticipated to own about 81 percent of the combined company, while current Callon shareholders are to own approximately 19 percent.
APA is expected to issue some 70 million shares of common stock in the transaction.
The deal is anticipated to close in the second quarter of 2024, and has been given the green light by both APA and Callon's boards of directors.
APA shares slipped 6.3 percent in trading on Thursday morning, while Callon jumped 4.2 percent.
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