ConocoPhillips To Acquire Marathon Oil In $22.5 Billion Deal

(CTN News) – In a significant move in the oil and gas industry, ConocoPhillips has announced its plans to acquire Marathon Oil in an all-stock transaction valued at $22.5 billion.

This acquisition marks the latest in a series of large-scale mergers within the sector, driven by a desire to strengthen reserves amidst a backdrop of robust stock market performance and record-breaking U.S. oil production.

ConocoPhillips’ offer of $30.33 per Marathon share represents a premium of nearly 15% based on Marathon’s closing price on Tuesday, according to Reuters calculations. The deal, inclusive of $5.4 billion of Marathon’s debt, is anticipated to close in the fourth quarter of 2024.

Shares of Marathon Oil saw an 8.7% increase following the announcement, while ConocoPhillips experienced a 3% decline in early trading. ConocoPhillips expects to achieve cost savings of $500 million within the first year after closing the transaction.

Furthermore, the acquisition will add over 2 billion barrels of reserves to ConocoPhillips’ existing portfolio.

Marathon Oil’s Strategic Assests

Marathon Oil’s strategic assets include operations in key U.S. oil basins such as the Bakken in North Dakota, the Permian in West Texas, and the Eagle Ford in South Texas. These regions are highly sought-after by producers aiming to enhance their resource inventory.

“This acquisition of Marathon Oil further deepens our portfolio and fits within our financial framework, adding high-quality, low cost of supply inventory adjacent to our leading U.S. unconventional position,” stated ConocoPhillips CEO Ryan Lance.

ConocoPhillips currently ranks as the third-largest oil and gas producer in the Permian basin by volume as of the first quarter of 2024, following Exxon Mobil and Chevron.

This transaction follows similar consolidation moves in the industry, including Exxon’s acquisition of Pioneer Natural Resources and Chevron’s proposed merger with Hess, which was recently approved by shareholders.

The surge in consolidation activities has attracted heightened antitrust scrutiny, with the Federal Trade Commission reviewing multi-billion dollar deals involving major players such as Chevron, Diamondback Energy, Occidental Petroleum, and Chesapeake Energy.

“Following the merger, Conoco’s production out of Eagle Ford is set to surpass the company’s legacy assets in the Delaware basin,” noted Viktor Katona, head of oil analysis at Kpler.

ConocoPhillips Broader Industry Context

ConocoPhillips also disclosed plans to divest nearly $2 billion worth of assets and increase its share buyback program.

The company intends to ramp up share buybacks to $7 billion next year from this year’s projected $5 billion, and commit to buying back $20 billion of its shares over the three years following the deal’s closing.

The acquisition of Marathon Oil by ConocoPhillips underscores the ongoing trend of consolidation in the oil and gas sector, aimed at bolstering reserves and optimizing operations amidst a rapidly evolving market landscape.