ConocoPhillips (NYSE:COP) announced on Wednesday its agreement to acquire Marathon Oil (NYSE:MRO) for $22.5 billion, marking another significant merger in the oil and gas industry as companies aim to enhance their reserves.
The U.S. oil and gas sector has experienced a wave of consolidation over the past two years, with last year witnessing M&A deals worth $250 billion. This trend continues as the stock market thrives and U.S. oil production hits new records. ConocoPhillips’ all-stock offer values Marathon Oil at $30.33 per share, a nearly 15% premium over Marathon’s closing price on Tuesday. The transaction, which includes $5.4 billion of Marathon’s debt, is expected to close in the fourth quarter of 2024.
Following the announcement, Marathon Oil’s shares increased by 8.7%, while ConocoPhillips’ shares fell by 3% in early trading.
ConocoPhillips anticipates $500 million in cost savings within the first year after the deal closes. The acquisition will add over 2 billion barrels of reserves to ConocoPhillips’ portfolio.
Marathon Oil operates in key regions such as the Bakken basin in North Dakota, the Permian basin in West Texas, and South Texas’ Eagle Ford basin—areas targeted by producers to boost inventory.
“This acquisition of Marathon Oil deepens our portfolio and fits within our financial framework, adding high-quality, low-cost supply inventory adjacent to our leading U.S. unconventional position,” said ConocoPhillips CEO Ryan Lance.
In the first quarter of 2024, ConocoPhillips was the third-largest oil and gas producer by volume in the Permian, following Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX).
This deal follows Exxon’s acquisition of Pioneer Natural Resources announced in October and Chevron’s proposed $53 billion merger with Hess (NYSE:HES), which received shareholder approval on Tuesday.
The industry’s consolidation has attracted increased antitrust scrutiny, with the FTC reviewing multi-billion dollar deals involving Chevron, Diamondback Energy (NASDAQ:FANG), Occidental Petroleum (NYSE:OXY), and Chesapeake Energy (NASDAQ:CHK).
“Post-merger, Conoco’s production from Eagle Ford is set to surpass its legacy assets in the Delaware basin,” said Viktor Katona, head of oil analysis at Kpler.
ConocoPhillips also announced plans to divest nearly $2 billion worth of assets and indicated it would increase share buybacks to $7 billion next year from this year’s projected $5 billion, committing to repurchase $20 billion of its shares over the three years following the deal’s closure.
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