ConocoPhillips (NYSE: COP) and Marathon Oil Corporation (NYSE: MRO) have entered into a definitive agreement for ConocoPhillips to acquire Marathon Oil in an all-stock transaction valued at $22.5 billion, including $5.4 billion of net debt.
Oil & Gas Data Download
ConocoPhillips & Marathon Oil Wells Drilled US Since 2023
ConocoPhillips
Marathon Oil
The deal offers Marathon Oil shareholders 0.2550 shares of ConocoPhillips common stock per Marathon share, a 14.7% premium on the May 28, 2024 closing price, and a 16.0% premium on the 10-day volume-weighted average price.
Key Highlights:
- Immediate Financial Benefits:
- The acquisition is expected to be immediately accretive to ConocoPhillips’ earnings, cash flows, and return of capital per share.
- ConocoPhillips anticipates achieving at least $500 million in annual cost and capital savings within the first year post-transaction.
- Dividend and Share Buybacks:
- ConocoPhillips plans to increase its ordinary base dividend by 34% to 78 cents per share starting in the fourth quarter of 2024.
- Post-transaction, ConocoPhillips aims for over $7 billion in share buybacks in the first year and over $20 billion within three years, assuming current commodity prices.
- Synergy and Portfolio Enhancement:
- The acquisition will integrate highly complementary acreage into ConocoPhillips’ U.S. onshore portfolio, adding over 2 billion barrels of resource with a cost of supply below $30 per barrel WTI.
- Cost and capital synergies will come from reduced general and administrative costs, lower operating costs, and improved capital efficiencies.
Statements from Leadership:
- Ryan Lance, Chairman and CEO of ConocoPhillips:
- Highlighted the acquisition’s strategic fit within ConocoPhillips’ financial framework, emphasizing shared values and a focus on safety and responsibility.
- Stressed the transaction’s potential to generate significant shareholder value through synergy and portfolio enhancement.
- Lee Tillman, Chairman, President, and CEO of Marathon Oil:
- Celebrated Marathon Oil’s achievements and expressed confidence in ConocoPhillips’ ability to build on this legacy.
- Praised ConocoPhillips’ strong balance sheet, operational excellence, and commitment to shareholder returns, foreseeing long-term shareholder value.
Return of Capital Strategy:
- ConocoPhillips commits to a cash from operations distribution framework, targeting over 30% return to shareholders, and raising the ordinary dividend by 34% in the fourth quarter.
- Plans to prioritize share repurchases post-transaction to retire newly issued equity within two to three years.
This strategic acquisition positions ConocoPhillips for enhanced operational efficiency, expanded resource base, and robust shareholder returns, reinforcing its leadership in the U.S. unconventional oil and gas sector.
