ConocoPhillips to buy Marathon Oil in $22.5-B deal as energy mergers roll on
(Reuters)—ConocoPhillips has agreed to buy Marathon Oil in a $22.5-B, the latest in a series of mega-mergers in the oil and gas industry as companies look to bolster reserves.
The U.S. oil and gas industry has been riding a consolidation wave over the last two years. Last year was one of the most active, where M&A deals worth $250 B were struck. The momentum has carried over into this year as the stock market continues to boom and as U.S. oil production scales new records.
Conoco's all-stock offer equates to $30.33 per Marathon share, representing a premium of nearly 15% as of the stock's Tuesday close, according to Reuters calculations. The transaction, which includes $5.4 B of Marathon's debt, is expected to close in 4Q 2024.
Shares of Marathon Oil rose 8.7%, while those of Conoco fell 3% in early trading.
It expects cost savings of $500 MM within the first full year after the closing of the transaction. The acquisition adds over 2 Bbbl of reserves to ConocoPhillips' portfolio.
Marathon Oil has operations in the Bakken basin in North Dakota, the Permian basin in West Texas and South Texas' Eagle Ford basin—regions that are prime targets for producers looking to increase their 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," ConocoPhillips CEO Ryan Lance said.
ConocoPhillips was the third largest oil and gas producer by volume in the Permian in 1Q 2024 after U.S. majors ExxonMobil and Chevron.
The deal follows Exxon's acquisition of Pioneer Natural Resources that was announced in October, and Chevron's proposed $53-B merger with Hess that was approved by the latter's shareholders on Tuesday.
The consolidation activity in the industry has, however, attracted increased antitrust scrutiny, with the FTC reviewing multi-billion dollar deals, including those involving 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," said Viktor Katona, head of oil analysis at Kpler.
ConocoPhillips also added that it would dispose of nearly $2 B worth of assets.
The company also signaled it would ramp up share buybacks to $7 B next year from this year's projected $5 B and commit to buying $20 B of its shares over the three years following the deal's closing.
(Reporting by Seher Dareen and Gnaneshwar Rajan, additional reporting by Arpan Varghese in Bengaluru; Editing by Anil D'Silva)
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