ConocoPhillips to acquire Marathon Oil for $22.5 billion
29 May 2024
ConocoPhillips agreed to buy Marathon Oil in a $22.5 billion all-stock deal, inclusive of $5.4 billion of net debt. Marathon Oil shareholders will receive 0.2550 shares of ConocoPhillips common stock for each share of Marathon Oil common stock, representing a 14.7% premium to the last closing share price for Marathon.
This acquisition will add “highly complementary” acreage to ConocoPhillips’ existing US onshore portfolio, adding over 2 billion barrels of resource with an estimated average point forward cost of supply of less than $30 per barrel WTI, according to the company.
ConocoPhillips expects to achieve at least $500 million of cost and capital savings within the first year following the closing of the transaction. The savings would come from reduced general and administrative costs, lower operating costs and improved capital efficiencies.
Upon closing of the transaction, ConocoPhillips expects share buybacks to be over $20 billion in the first three years, with over $7 billion in the first year, at recent commodity prices. Independent of the transaction, ConocoPhillips said it expects to increase dividend by 34% to 78 cents per share starting in the fourth quarter of 2024.
The Marathon Oil acquisition is the latest in a series of mega-deals in the US oil and gas industry, following the purchase of Pioneer Resources by ExxonMobil, Hess Corporation by Chevron, Endeavor Energy by Diamondback, and others. ConocoPhillips had already expanded in the Permian through a $13 billion takeover of Concho Resources in 2020 and a $9.5 billion purchase of Shell’s assets in 2021.
As new oil and gas discoveries fall to record low levels and US oil output growth is expected to flatten, larger public companies seek to reduce costs and drilling activity, maximize returning cash to shareholders, and bolster reserves by cannibalizing smaller private operations. Last year was one of the most active, where merger and acquisition deals worth $250 billion were struck by companies.
The consolidation activity is attracting increased antitrust scrutiny, according to Reuters, with the US Federal Trade Commission (FTC) reviewing multi-billion dollar deals, including those involving Chevron, Diamondback Energy, Occidental Petroleum, and Chesapeake Energy.
ConocoPhillips is a major exploration and production (E&P) company with operations in 13 countries, $95 billion of total assets, and approximately 10,000 employees. Production averaged 1.9 million barrels of oil equivalent per day for the three months ended March 31, 2024.
Marathon Oil is an independent oil and gas E&P company with resources in four plays in the USA, including Eagle Ford, Texas; Bakken, North Dakota; Permian in New Mexico and Texas, and STACK and SCOOP in Oklahoma, complemented by an integrated gas business in Equatorial Guinea.
Source: ConocoPhillips