ConocoPhillips to acquire Marathon Oil in US$17 billion deal

ConocoPhillips agreed to acquire Marathon Oil Corp. in an all-stock deal valuing the company at about US$17 billion، extending a major buying spree among the largest players in the U.S. oil and gas industry.

The move expands ConocoPhillips’ footprint in domestic shale fields from Texas to North Dakota and hands the company reserves as far afield as Equatorial Guinea. It adds to a wave of recent megadeals as producers seek new drilling sites on a bet that oil and gas demand will remain robust for years to come. 

The takeover agreement represents a 14.7 per cent premium to the last closing share price for Marathon، the companies said in a statement Wednesday. The deal has an enterprise value of $22.5 billion.

The Permian Basin consolidation

ConocoPhillips joins the ranks of major drillers pursuing production growth via recent acquisitions. In October، Exxon Mobil Corp. accelerated the pace of Permian Basin consolidation with a $62 billion deal for Pioneer Natural Resources Co. That was followed later that month by Chevron Corp.’s agreement to buy Hess Corp. for about $53 billion.

ConocoPhillips had already expanded in the Permian in recent years through a $13 billion takeover of Concho Resources Inc. and a $9.5 billion purchase of Shell Plc’s assets in the region.

Devon Energy Corp. held talks with Marathon last year over a potential combination، people familiar with the matter told Bloomberg News at the time.

ConocoPhillips shares declined 2.5 per cent before the start of regular trading in New York. Marathon gained 6.3 per cent.

ConocoPhillips expects the takeover will add resources totaling 2 billion barrels to its inventory. 

The company sees the deal closing in the fourth quarter، pending regulatory approvals. After that point، ConocoPhillips says its share buybacks will top $20 billion for the next three years، with more than $7 billion in the first full year، assuming recent commodity prices.

The company also plans to increase its ordinary base dividend by 34 per cent to 78 cents per share starting in the fourth quarter.

Evercore was ConocoPhillips’ financial adviser on the deal، and Wachtell، Lipton، Rosen & Katz is the company’s legal adviser. Morgan Stanley and Kirkland & Ellis advised Marathon.