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ConocoPhillips To Buy Marathon Oil For $17 Billion All-Stock Deal

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ConocoPhillips headquarters in Houston, Texas, US, on Tuesday, Oct. 31, 2023. Callaghan O’Hare | Bloomberg | Getty Images

(CTN News) – On Wednesday, ConocoPhillips and Marathon Oil reached a deal for Marathon Oil to be purchased by ConocoPhillips for a whopping $17 billion in stock.

This deal, which occurs at a time when the oil and gas sector as a whole is going through significant consolidation, will enhance its shale assets. Under the agreement, ConocoPhillips will have two billion more barrels of resources in the United States. This will enable the company to expand its presence in North Dakota, Texas, and New Mexico’s shale formations.

The acquisition of Marathon Oil “further deepens our portfolio and fits within our financial framework,” as stated in a statement issued by ConocoPhillips CEO Ryan Lance, “by adding high-quality, low-cost of supply inventory next to our leading unconventional position in the United States.”

According to analysts at Truist Securities, ConocoPhillips would be positioned as one of the biggest asset owners in the Bakken shale play in North Dakota and the Eagle Ford play in Texas as a result of the transaction. The settings of these two plays are in the American Southwest.

The acquisition will cause Conoco’s market capitalization to increase to above $150 billion, according to Andrew Dittmar, an Enverus M&A analyst. Conoco will be able to align itself with several majors and solidify its position as the biggest independent producer thanks to this. He believes that although Conoco will surpass BP in size, it will still be smaller than Shell.

On a Wednesday conference call, Andy O’Brien, senior vice president of strategy, commercial, sustainability, and technology at ConocoPhillips, announced that the company will add about 1,000 new locations and boost its production in Eagle Ford to nearly 400,000 barrels per day. According to O’Brien, the new body will boost output in the Bakken region by more than 200,000 barrels per day.

Permian Basin production will exceed 400 units for ConocoPhillips.

Furthermore, the company intends to increase Equatorial Guinea’s net liquid natural gas capacity by a total of two million metric tons annually. Equatorial Guinea is located on Africa’s western coast.

Moreover, Dittmar states that a thorough inquiry of the acquisition is expected to be conducted by the Federal Trade Commission. Having said that, the fact that Marathon’s assets are dispersed throughout numerous basins could facilitate regulatory approval.

ConocoPhillips is going to overtake EOG Resources to become the largest operator, which means that the Energy and Transportation Commission’s top priority and area of attention will be the Eagle Ford.

The consolidation wave ConocoPhillips is the last of the major three oil companies in the US to successfully finish a significant purchase. In the autumn of last year, when the sector was going through a wave of consolidation that was changing the business, its two bigger competitors, Exxon Mobil and Chevron, announced blockbuster partnerships.

In order to increase shareholder profits, American oil corporations are growing even more by acquiring lucrative oil fields. Governments are trying to expedite the shift away from fossil fuels in an effort to mitigate the effects of climate change, but this is still taking place.

After the agreement is finalized in the fourth quarter, ConocoPhillips’ profitability, capital flow, and shareholder returns will all increase as a result of the transaction including Marathon Oil, according to Lance.

Buybacks will ConocoPhillips reach $7 billion and $20 billion within three years.

It is anticipated that the merger will save $500 million in the first year due to the near proximity of the firms’ assets. Reducing the amount of money spent on operating and administrative costs will result in these reductions.

Following the news, ConocoPhillips’ stock saw a decline of more than three percent in the afternoon trading session, while Marathon Oil’s shares saw an increase of more than eight percent. With a market valuation of $137 billion, ConocoPhillips is the third-biggest energy company in the US, while Marathon Energy is valued at $14.4 billion.

At a cost of sixty billion dollars, Exxon finalized the acquisition of Pioneer Natural Resources after getting approval from the Federal Trade Commission. The merger between Hess Corporation and Chevron, which is valued at approximately $53 billion, was approved by the company’s shareholders on Tuesday.

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Salman Ahmad is a seasoned writer for CTN News, bringing a wealth of experience and expertise to the platform. With a knack for concise yet impactful storytelling, he crafts articles that captivate readers and provide valuable insights. Ahmad's writing style strikes a balance between casual and professional, making complex topics accessible without compromising depth.

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