US energy sector ConocoPhillips has stated it has reached an agreement to acquire Marathon Oil in a blockbuster deal valued at $22.5 billion.
The strategic all-stock acquisition, which includes the assumption of $5.4 billion of Marathon’s debt, is set to further solidify ConocoPhillips’ portfolio and fits within our financial framework, adding high-quality, low cost of supply inventory adjacent to our leading US unconventional position, the company said in a press release.
“We’re heading into a period of kind of Shale 2.0, which is more about using technology and efficiencies, data analytics and some of the refrack potential that allows us to extend some tier one inventory,” said ConocoPhillips CEO Ryan Lance.
The all-stock offer equates to $30.33 per Marathon share, a premium of nearly 15% to the stock’s Tuesday close, according to Reuters calculations. The transaction, which includes $5.4 billion of Marathon’s debt, is expected to close in the fourth quarter of 2024.
Shares of Marathon Oil rose 9% to $28.85, while ConocoPhillips fell 3.8% to $115.10 in morning trading.
“The deal makes sense operationally given the asset overlap most meaningfully in the Eagle Ford and Bakken in L48,” Tudor, Pickering and Holt analyst Jeoffrey Lambujon said. Marathon Oil’s international gas assets fit well with the Conoco’s global gas footprint, he added.
with ConocoPhillips projects annual cost savings of $500 million within the first-year post-acquisition. The deal is also set to boost ConocoPhillips’ reserves by over 2 billion barrels.
Besides the acquisition, ConocoPhillips has revealed its intention to divest nearly $2 billion worth of assets and to increase its share buyback program to $7 billion next year, up from this year’s projected $5 billion.
The company has also committed to repurchasing $20 billion of its shares over the three years following the deal’s closing, underscoring its commitment to enhancing shareholder value.
The deal follows other mergers in the industry, such as Exxon Mobil’s $60 billion acquisition of Pioneer Natural Resources and Chevron’s proposed $53 billion merger with Hess, which was recently approved by Hess’s shareholders.
