ConocoPhillips to acquire Marathon Oil in $22.5 Billion all-stock transaction

ConocoPhillips announced on Wednesday the acquisition of Marathon Oil in an all-stock deal valued at US $22.5 billion, according to their press statement.

Marathon Oil shareholders will receive 0.2550 shares of ConocoPhillips common stock for each share of Marathon Oil common stock.

This exchange represents a 14.7% premium to Marathon Oil's closing share price on May 28, 2024, and a 16.0% premium to the prior 10-day volume-weighted average price.

The merger requires approval from Marathon Oil stockholders, regulatory clearance, and other customary closing conditions. The transaction is expected to close in Q4 2024.

Strategic fit and synergies

This strategic move aims to further strengthen ConocoPhillips’ position in the U.S. onshore oil and gas market.

Ryan Lance, Chairman and CEO of ConocoPhillips, emphasised the strategic fit of the acquisition, stating, “This acquisition of Marathon Oil further deepens our portfolio and fits within our financial framework, adding high-quality, low cost of supply inventory adjacent to our leading U.S. unconventional position.”

The acquisition is expected to be immediately accretive to ConocoPhillips' earnings, cash flow, and return of capital per share.

Moreover, ConocoPhillips anticipates achieving $500 million in cost and capital synergies within the first-year post-closing, through reduced general and administrative costs, lower operating costs, and improved capital efficiencies.

The acquisition adds over 2 billion barrels of resource to ConocoPhillips' U.S. onshore portfolio, with an estimated average cost of supply under $30 per barrel WTI.

ConocoPhillips plans to increase its ordinary base dividend by 34% to 78 cents per share starting in Q4 2024.

Post-transaction, the company aims to repurchase over $7 billion in shares in the first full year and over $20 billion in the first three years.