ConocoPhillips agrees to buy Marathon Oil in a $22.5 billion deal

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ConocoPhillips has agreed to buy rival Marathon Oil in an all-stock deal that values ​​the Houston-based company at $22.5 billion, including debt, as a wave of consolidation continues to sweep through the U.S. oil patch.

The acquisition would give Conoco – one of the world’s largest independent oil and gas producers – control of a string of assets stretching from North Dakota to Texas as the company looks to strengthen its position in America’s prolific shale fields.

Discussions between the companies were first reported by the Financial Times.

Conoco CEO Ryan Lance said Wednesday that the deal “further deepens our portfolio” and adds “high quality and low delivery costs, adjacent to our leading unconventional position in the US.”

The transaction, expected to close in the fourth quarter, would be the latest in a series of megadeals announced over the past eight months that are reshaping the U.S. energy sector as major oil companies seek to grab the country’s best remaining shale reserves to get. and consolidate a once fragmented sector.

ExxonMobil and Chevron both agreed to major acquisitions last October, with price tags of $60 billion and $53 billion respectively, sparking a wave of transactions across the industry, with companies like Occidental Petroleum and Diamondback Energy following suit.

Conoco, which has a market capitalization of about $139 billion, had been hunting for a deal in recent months and had been vying with its smaller rival Devon Energy to acquire Marathon for several weeks, three people briefed on the matter said.

Under the deal announced Wednesday, Marathon shareholders will receive 0.255 Conoco shares for each Marathon share they own, representing a 14.7 percent premium to the target’s May 28 closing price. That gives Marathon an enterprise value of $22.5 billion, including $5.4 billion. billion in net debt, the companies said.

Shares of Marathon rose more than 9 percent shortly after Wall Street’s opening bell on Wednesday. Conoco shares fell 2.8 percent.

The deal for Marathon is a boost for Conoco after it lost to Diamondback earlier this year in a race to acquire Endeavor Energy Resources, one of the most sought-after private producers in the fertile Permian Basin of Texas and New Mexico.

Diamondback closed a $26 billion deal to buy Endeavor in February after a final bid that Conoco abandoned, according to people close to that transaction.

Lance has made no secret of the company’s desire to expand, saying in March that consolidation was “the right thing for our industry.”

“Our sector needs to consolidate. There are too many players. Scale is important, diversity is important in the company,” he said in an interview on CNBC.

Marathon’s acquisition would be Conoco’s largest since acquiring Concho Resources for $10 billion in 2021, taking advantage of the Covid-19-induced recession.

Marathon owns assets in basins including the Bakken oil field in North Dakota, the Scoop Stack in Oklahoma, the Eagle Ford in Texas and the New Mexico side of the Permian. It also has an integrated gas company in Equatorial Guinea.

Marathon CEO Lee Tillman said the deal was a “proud moment” for the company. “Combined with the global ConocoPhillips portfolio, I am confident that our assets and people will deliver significant shareholder value over the long term,” he said.

The company dates back to 1887 and began as the Ohio Oil Company before being incorporated into J.D. Rockefeller’s Standard Oil. After nearly a century as an integrated oil company, it spun off its refining arm, Marathon Petroleum, in 2011.

Marathon is advised on the transaction by Morgan Stanley and Kirkland & Ellis. Conoco is advised by Evercore and Wachtell, Lipton, Rosen & Katz.

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