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    ConocoPhillips to Acquire Marathon Oil for $22.5 Billion in Major Energy Industry Consolidation

    nephilaBy Updated: Business And Money 4 Mins Read

    ConocoPhillips, the top independent oil and gas producer in the U.S., announced on Wednesday that it has entered into an agreement to acquire Marathon Oil for $22.5 billion. This deal is part of a broader trend of consolidation in the energy industry, which has seen a significant increase in mega-deals over the past two years. Notably, the industry experienced around $250 billion in transactions last year, a trend that continues to accelerate with the ongoing boom in the stock market and record-breaking U.S. shale oil production.

    ConocoPhillips’ CEO, Ryan Lance, highlighted the transition into what he referred to as “Shale 2.0.” This new phase focuses on leveraging technology and efficiencies, including data analytics and refracking techniques, to enhance the extraction and productivity of top-tier reserves.

    The acquisition is structured as an all-stock transaction, offering $30.33 per share for Marathon, which represents a nearly 15% premium over its closing price on the previous day. The deal also encompasses $5.4 billion of Marathon’s debt and is expected to be finalized in the fourth quarter of 2024.

    Following the announcement, Marathon Oil’s stock saw a rise of 9% to $28.85, whereas ConocoPhillips’ shares experienced a drop of 3.8% to $115.10. Analysts have pointed out that the operational synergies, especially in significant overlapping assets like the Eagle Ford and Bakken regions, justify the acquisition. Additionally, Marathon’s international gas assets are expected to complement ConocoPhillips’ global gas operations well.

    The merger is set to bring substantial benefits, including a projected $500 million in cost savings in the first year post-closure. It also adds more than 2 billion barrels of reserves to ConocoPhillips’ holdings. Marathon’s strategic locations in the Bakken, Permian, and Eagle Ford basins make it an attractive asset for ConocoPhillips, which was already the third-largest producer in the Permian basin.

    This acquisition follows other large-scale transactions in the industry, such as Exxon Mobil’s $60 billion purchase of Pioneer Natural Resources and Chevron’s $53 billion merger with Hess, which was recently approved by Hess shareholders.

    While the consolidation trend has led to increased antitrust scrutiny, the Federal Trade Commission (FTC) has indicated a recognition of oil as a global market, where even large deals like this one represent only a small fraction. ConocoPhillips has stated that regulatory approval is anticipated, based on precedents set by recent similar transactions.

    In addition to the merger, ConocoPhillips plans to sell off nearly $2 billion in assets. The company also aims to increase its share buyback program from $5 billion this year to $7 billion next year, with a commitment to purchasing $20 billion of its shares over the next three years following the deal’s closure.

    Major Points

    • ConocoPhillips announced a $22.5 billion all-stock deal to acquire Marathon Oil, including $5.4 billion of Marathon’s debt.
    • The acquisition is part of an ongoing consolidation trend in the energy industry, highlighted by significant deals over the past two years.
    • The deal offers a nearly 15% premium on Marathon’s last closing price and is expected to close in the fourth quarter of 2024.
    • ConocoPhillips expects to achieve $500 million in cost savings in the first year post-merger and plans to integrate Marathon’s key assets in the Bakken, Permian, and Eagle Ford basins.
    • The transaction has raised antitrust concerns, but ConocoPhillips anticipates approval, citing previous similar deals cleared by regulators.

    Lap Fu Ip – Reprinted with permission of Whatfinger News

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