(NYSE:COP) has decided to take over Marathon Oil (NYSE:MRO) for $22.5 billion, marking another significant merger in the oil and gas field as businesses work to expand their repositories.
Over the last two years, the U.S. oil and gas sector has witnessed a jump in consolidation. In the past year, merger and acquisition (M&A) ventures reached $250 billion, a trend that proceeds as the share market flourishes and U.S. oil output hits fresh high points. ConocoPhillips’ all-stock offer values Marathon Oil at $30.33 per share, roughly 15% over Marathon’s closing price on Tuesday. The sale, which contains $5.4 billion of Marathon’s debt, is expected to close in the fourth quarter of 2024.
The buy is estimated to create $500 million in cost savings within the first year post-closure and will bring in over 2 billion barrels of reserves to ConocoPhillips’ portfolio.
Marathon Oil operates in major areas including the Bakken basin in North Dakota, the Permian basin in West Texas, and South Texas’ Eagle Ford basin—regions that are excellent objectives for enhancing stock.
Following the revelation, Marathon Oil’s shares rose by 10.8%, while ConocoPhillips’ shares dropped by about 1.4% in premarket dealing.
“This purchase strengthens our portfolio and conforms to our fiscal structure, adding quality and low-priced supply stock adjacent to our leading U.S. unconventional stance,” said Ryan Lance, CEO of ConocoPhillips.
This merger follows additional major ventures in the business, including Exxon Mobil’s (NYSE:XOM) acquisition of Pioneer Natural Resources declared in October and Chevron’s (NYSE:CVX) proposed $53 billion merger with Hess (NYSE:HES), which accepted shareholder approval on Tuesday.
The upswing in consolidation has drawn antitrust scrutiny, with the FTC examining multi-billion dollar ventures including Chevron, Diamondback Energy (NASDAQ:FANG), Occidental Petroleum (NYSE:OXY), and Chesapeake Energy (NASDAQ:CHK).
“Conoco’s output from Eagle Ford is poised to surpass its heritage assets in the Delaware basin post-merger,” said Viktor Katona, head of oil analysis at Kpler.
ConocoPhillips similarly stated plans to sell off close to $2 billion worth of assets and intends to raise share buybacks to $7 billion next year from this year’s projected $5
billion. The company promises to repurchase $20 billion of its shares over the three years following the deal’s closure.
“We view this venture as a beneficial indicator for the E&P sector, particularly for diversified, underappreciated mid-caps trading at discount evaluations with solid capital returns,” remarked Gabriele Sorbara, governing director of equity research at Siebert Williams Shank & Co.