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ConocoPhillips Acquires Marathon Oil for $22.5 Billion in Major Energy Sector Consolidation

 |  May 29, 2024

ConocoPhillips, the largest independent oil and gas producer in the United States, announced on Wednesday its agreement to acquire Marathon Oil for $22.5 billion.

The all-stock transaction values Marathon Oil at $30.33 per share, marking a 15% premium over the company’s closing price on Tuesday, as per Finance Yahoo calculations. The acquisition, which includes assuming $5.4 billion of Marathon’s debt, is set to close in the fourth quarter of 2024.

ConocoPhillips CEO Ryan Lance highlighted the strategic importance of the deal, stating, “We’re heading into a period of kind of Shale 2.0, which is more about using technology and efficiencies, data analytics, and some of the refrack potential that allows us to extend some tier one inventory.”

The merger is expected to generate significant cost synergies, with ConocoPhillips projecting $500 million in annual savings within the first year post-closing. Furthermore, the acquisition will bolster ConocoPhillips’ portfolio by adding over 2 billion barrels of reserves.

Market reactions to the announcement were mixed. Marathon Oil shares climbed 9% to $28.85, reflecting investor optimism about the premium offer. Conversely, ConocoPhillips’ stock dropped 3.8% to $115.10, indicating some market caution.

Analysts have generally viewed the deal favorably, noting the operational benefits. “The deal makes sense operationally given the asset overlap, most meaningfully in the Eagle Ford and Bakken in L48,” said Jeoffrey Lambujon, an analyst at Tudor, Pickering, and Holt. He also pointed out that Marathon Oil’s international gas assets would complement ConocoPhillips’ existing global gas operations.

Over the past two years, the oil industry has seen a surge in merger activities, with approximately $250 billion worth of deals executed last year alone.

Source: Finance Yahoo