Wednesday, June 19, 2024

ConocoPhillips Acquires Marathon Oil in $17.1 Billion All-Stock Deal Amid Rising Energy Prices

by BIZ Magazine

Houston, TX — ConocoPhillips has announced its acquisition of Marathon Oil through an all-stock transaction valued at approximately $17.1 billion, reflecting the current surge in energy prices and the significant profits seen by major oil companies.

When factoring in Marathon Oil’s debt of $5.4 billion, the total value of the deal climbs to $22.5 billion.

This acquisition comes at a time when crude oil prices have surged over 12% this year, recently surpassing $80 per barrel. While record profits from the aftermath of Russia’s 2022 invasion of Ukraine have declined, the trend of mergers among well-capitalized energy firms continues to accelerate.

Among recent industry moves, Chevron announced its intention to purchase Hess for $53 billion, a deal that faces potential obstacles due to the need for approval from Exxon Mobil and a Chinese national oil company, both of which have stakes in an oil field development off the coast of Guyana, where Hess is significantly involved.

Last July, Exxon Mobil revealed plans to acquire Denbury Resources for $4.9 billion, a company notable for its carbon capture and storage operations. Additionally, Exxon proposed a $60 billion acquisition of shale operator Pioneer Natural Resources three months later.

These proposed mergers, including ConocoPhillips’ latest deal, could encounter scrutiny from U.S. regulators. The Biden administration has intensified antitrust reviews, focusing not only on energy companies but also other sectors such as technology.

The Federal Trade Commission (FTC), responsible for enforcing antitrust laws, has requested further details from Exxon and Pioneer about their proposed merger, indicating a thorough review process to assess potential anti-competitive concerns. Pioneer disclosed this request in a January filing.

In the ConocoPhillips and Marathon Oil agreement, Marathon Oil shareholders will receive 0.2550 shares of ConocoPhillips common stock for each share they hold, the companies confirmed on Wednesday.

ConocoPhillips emphasized that this acquisition would enhance its U.S. onshore portfolio by adding valuable acreage. “This acquisition of Marathon Oil further deepens our portfolio and fits within our financial framework, adding high-quality, low-cost supply inventory adjacent to our leading U.S. unconventional position,” stated ConocoPhillips Chairman and CEO Ryan Lance.

The transaction is projected to close in the fourth quarter, pending approval from Marathon Oil shareholders.

ConocoPhillips also announced plans to increase its ordinary dividend by 34% to 78 cents per share starting in the fourth quarter. Following the closure of the Marathon Oil deal and assuming stable commodity prices, ConocoPhillips plans to repurchase over $7 billion in shares during the first full year and more than $20 billion in shares within the first three years.

Following the announcement, ConocoPhillips shares dropped by 3.3% in pre-market trading, while Marathon Oil’s stock saw a rise of over 7%.

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