ConocoPhillips Agrees To Acquire Marathon Oil in $22.5 Billion Deal

In a significant move in the energy sector, ConocoPhillips has announced its acquisition of Marathon Oil in an all-stock transaction valued at $22.5 billion, inclusive of approximately $5.4 billion in debt. This acquisition marks another major consolidation in the oil industry, following recent high-profile mergers and acquisitions.

This merger of the two Houston-based companies aligns with a broader trend of consolidation in the oil industry, exemplified by ExxonMobil’s $60 billion acquisition of Pioneer and Chevron’s $53 billion deal to take over Hess. Other notable transactions include Occidental’s purchase of CrownRock and Diamondback Energy’s acquisition of Endeavor Energy Partners.

The deal concludes a competitive period during which ConocoPhillips and Devon Energy were reportedly vying for the purchase of Marathon Oil. Under the terms of the agreement, Marathon Oil shareholders will receive 0.255 ConocoPhillips shares for each Marathon share they own, representing a 14.7% premium over Marathon’s closing price on Tuesday. Following the announcement, Marathon’s shares surged by over 10% in premarket trading, while ConocoPhillips’ shares dipped by around 2%.

ConocoPhillips’ CEO Ryan Lance highlighted the strategic fit of Marathon Oil’s assets within ConocoPhillips’ financial framework, emphasizing the addition of high-quality, low-cost supply inventory to their portfolio. The acquisition is expected to generate savings of $500 million within the first year post-transaction and will likely close in the fourth quarter of 2024, pending regulatory approvals and the consent of Marathon shareholders.

These deals are driven by the substantial cash reserves and high profits that oil giants have accumulated in recent years, thanks to elevated oil prices. Companies are leveraging these windfalls to acquire valuable assets in the Permian Basin, a key oil field that has cemented the United States’ position as the leading global producer of oil and gas. This strategic focus allows them to enhance shareholder returns even as they face increasing pressure to invest in renewable energy sources.

In conjunction with the merger, ConocoPhillips plans to initiate a substantial share repurchase program, targeting over $7 billion in buybacks within the first year and exceeding $20 billion in the first three years. This move is aimed at maximizing shareholder value and reflects the company’s robust financial position and commitment to delivering long-term returns.

Marathon Oil, originally founded as The Ohio Oil Company in 1887 and acquired by John D. Rockefeller’s Standard Oil two years later, has a rich history of operational excellence. CEO Lee Tillman expressed pride in the merger, describing ConocoPhillips as the right partner to build on Marathon’s legacy. “When combined with the global ConocoPhillips portfolio, I’m confident our assets and people will deliver significant shareholder value over the long term,” Tillman stated.