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ConocoPhillips has agreed to buy US rival Marathon Oil in an all-stock deal that values the Houston-based company at $22.5bn, including debt.
Under the agreement, Marathon shareholders will receive 0.255 shares of Conoco for each Marathon share they own, representing a 14.7 per cent premium to the target’s closing share price on May 28. That gives Marathon an enterprise value of $22.5bn, including $5.4bn of net debt, the companies announced on Wednesday.
The talks between the companies were first reported by the Financial Times. The transaction would be the latest in a series of mega deals that have reshaped the US energy sector over the past eight months, as large oil companies seek to snap up the country’s best remaining shale resources and consolidate a once-fragmented sector.
ExxonMobil and Chevron last October both agreed massive acquisitions, with price tags of $60bn and $53bn respectively, sparking a wave of transactions across the sector, with companies including Occidental Petroleum and Diamondback Energy following suit.
Conoco — the biggest independent producer globally with a market capitalisation of about $139bn — had been vying with its smaller rival Devon Energy to acquire Marathon for several weeks, three people briefed on the matter said.
Shares in Marathon climbed more than 8 per cent in pre-market trading. Conoco shares fell 2.9 per cent.
Earlier this year, Conoco lost out to Diamondback in a race to snap up Endeavor Energy Resources, one of the most sought-after private producers in the prolific Permian Basin of Texas and New Mexico.
Diamondback agreed a $26bn deal to buy Endeavor in February after a last-ditch bid that left Conoco smarting, according to people close to that deal.
The acquisition of Marathon, which is expected to close in the fourth quarter of 2024, would be Conoco’s biggest since it acquired Concho Resources for $10bn in 2021, taking advantage of the Covid-induced downturn.
Conoco said the deal would be immediately accretive to earnings. Independent of the transaction, the company announced it would increase its ordinary dividend by 34 per cent starting in the fourth quarter of 2024 and that it planned to repurchase $20bn of its shares in the first three years of the deal closing.
“This acquisition of Marathon Oil further deepens our portfolio and fits within our financial framework, adding high-quality, low cost of supply inventory,” Conoco chief executive Ryan Lance said in a statement on Wednesday.
Lance said in March that consolidation was “the right thing to be doing for our industry”.
“Our industry needs to consolidate. There’s too many players. Scale matters, diversity matters in the business,” he said in an interview on CNBC.
Marathon owns assets ranging from North Dakota’s Bakken oilfield to Oklahoma, Texas and the New Mexico side of the Permian. It also holds an integrated gas business in Equatorial Guinea.
The company dates back to 1887, starting out as the Ohio Oil Company before being subsumed by JD Rockefeller’s Standard Oil. After almost a century as an integrated oil company it spun off its refining arm, Marathon Petroleum, in 2011.
Marathon is being advised on the transaction by Morgan Stanley and Kirkland & Ellis. Conoco is being advised by Evercore and Wachtell, Lipton, Rosen & Katz.
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