ConocoPhillips has made a significant move in the oil and gas industry by agreeing to acquire Marathon Oil Corp. in an all-stock transaction valuing Marathon at approximately $17 billion. This acquisition continues the trend of major mergers and acquisitions among the largest players in the U.S. oil and gas sector, reflecting a strategic push to secure prime drilling locations and reserves in anticipation of sustained demand for fossil fuels.
The deal significantly broadens ConocoPhillips’ presence in domestic shale fields, extending its reach from Texas’ Permian Basin to North Dakota’s Bakken Shale. Additionally, it grants ConocoPhillips access to international reserves, including assets in Equatorial Guinea. This acquisition is part of a broader wave of megadeals as oil producers jockey for position, betting on the continued robustness of oil and gas demand in the foreseeable future. Marathon shareholders are set to receive a 14.7% premium on their shares based on the last closing price, as disclosed in a joint statement by the companies on Wednesday. The transaction’s enterprise value, which includes debt, stands at $22.5 billion.
ConocoPhillips is not the only major player pursuing growth through acquisitions. Recently, Exxon Mobil Corp. made headlines with its $62 billion acquisition of Pioneer Natural Resources Co., a move that further consolidates its hold on the prolific Permian Basin. Similarly, Chevron Corp. announced a $53 billion deal to acquire Hess Corp., underscoring the industry’s shift towards large-scale mergers to secure long-term production capabilities. ConocoPhillips itself has been active in expanding its portfolio. In recent years, the company acquired Concho Resources Inc. for $13 billion and purchased Shell Plc’s Permian assets for $9.5 billion. These deals have significantly bolstered ConocoPhillips’ position in one of the world’s most productive shale regions.
While many recent acquisitions have focused on future drilling potential, ConocoPhillips’ acquisition of Marathon is distinguished by its emphasis on cost reduction in mature shale basins such as the Eagle Ford in Texas and the Bakken in North Dakota. According to analysts from Citigroup, this strategic focus aims to optimize operations in these aging fields, ensuring they remain profitable as production costs rise. Following the announcement of the deal, ConocoPhillips shares saw a 2.3% decline in early trading in New York, while Marathon’s stock experienced an 11% surge, reflecting investor sentiment towards the acquisition.
Despite being smaller than Exxon’s and Chevron’s recent megadeals, ConocoPhillips’ acquisition of Marathon is expected to attract scrutiny from the U.S. Federal Trade Commission (FTC). Under the leadership of Chair Lina Khan, the FTC has taken a more aggressive stance on corporate mergers, aiming to prevent market monopolies. While the FTC did not challenge Exxon’s acquisition of Pioneer, it imposed conditions to mitigate anti-competitive concerns, such as excluding Pioneer’s co-founder Scott Sheffield from Exxon’s board.
In the past, Marathon Oil has been the subject of acquisition interest. Devon Energy Corp. reportedly engaged in discussions with Marathon about a potential merger last year, according to sources familiar with the matter. ConocoPhillips anticipates that the Marathon acquisition will add approximately 2 billion barrels of resources to its inventory. The company expects the deal to close in the fourth quarter of this year, pending regulatory approvals. Post-acquisition, ConocoPhillips plans to ramp up its share buyback program, targeting more than $20 billion in repurchases over the next three years, with over $7 billion slated for the first full year, contingent on current commodity prices. Additionally, ConocoPhillips intends to increase its ordinary base dividend by 34%, raising it to 78 cents per share starting in the fourth quarter. These moves are aimed at enhancing shareholder value and reflecting confidence in the company’s future profitability and cash flow generation.
The acquisition deal was facilitated by a team of financial and legal advisers. Evercore served as the financial adviser to ConocoPhillips, while legal advice was provided by Wachtell, Lipton, Rosen & Katz. Marathon Oil was advised by Morgan Stanley on the financial front and Kirkland & Ellis on legal matters. ConocoPhillips’ acquisition of Marathon Oil represents a significant consolidation move in the U.S. oil and gas industry, underscoring the strategic imperatives driving major players to secure valuable resources and optimize operations. As the industry navigates a landscape marked by fluctuating demand and regulatory challenges, such megadeals highlight the importance of scale and efficiency in maintaining competitive advantage. With this acquisition, ConocoPhillips is well-positioned to strengthen its production capabilities and enhance shareholder returns in the years to come.
