ConocoPhillips announced on Wednesday its agreement to acquire Marathon Oil in an all-stock transaction valued at $17.1 billion. This acquisition marks a significant move in the ongoing consolidation wave within the oil and gas industry, enhancing ConocoPhillips' position in key U.S. shale fields.
"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," said ConocoPhillips CEO Ryan Lance in a statement. The deal will add approximately 2 billion barrels of resources to ConocoPhillips' portfolio, extending its reach across prolific shale regions in Texas, New Mexico, and North Dakota.
The acquisition is expected to close in the fourth quarter and will immediately boost ConocoPhillips' earnings, cash flow, and shareholder returns. The company anticipates share buybacks worth $7 billion in the first year after the deal is completed and $20 billion over the next three years.
ConocoPhillips' stock dropped by 3.3% following the announcement, while Marathon Oil shares surged by 7.3%. As of the announcement, ConocoPhillips is the third-largest U.S. oil company with a market capitalization of $137 billion, whereas Marathon Oil has a market cap of $14.4 billion.
This acquisition makes ConocoPhillips the last of the top three U.S. oil companies to engage in major acquisition activities during this wave of consolidation. Recently, Exxon Mobil's acquisition of Pioneer Natural Resources for $60 billion received approval from the Federal Trade Commission, and Hess Corporation shareholders advanced a $53 billion merger with Chevron.
The deal comes amid a broader trend of consolidation within the U.S. oil and gas industry. An announcement regarding the acquisition was expected early Wednesday, as reported by the Financial Times, which also highlighted that the all-stock proposal would slightly exceed Marathon Oil's market capitalization of about $15 billion.
Adding Marathon Oil to its assets, ConocoPhillips will significantly broaden its footprint in domestic shale fields. This strategic move aims to drive down costs and capitalize on the robust demand for oil and gas anticipated in the coming years.
ConocoPhillips has been active in expanding its portfolio in recent years. The company previously bolstered its presence in the Permian Basin through a $13 billion acquisition of Concho Resources Inc. and a smaller purchase of Shell Plc assets in the region. This latest acquisition of Marathon Oil is part of ConocoPhillips' strategy to secure a more dominant position in the U.S. shale market.
The announcement also underscores the competitive landscape among major drillers. ConocoPhillips has been vying with smaller rival Devon Energy Corp. to acquire Marathon Oil. Devon Energy had previously engaged in talks about a potential combination last year, according to sources familiar with the matter.
