ConocoPhillips has maintained that its $22.5 billion acquisition of Marathon Oil Corp. can be completed by the fourth quarter (Q4) despite facing an extended anti-trust review by the United States competition regulator.The Federal Trade Commission (FTC) issued a so-called “second request” to each of the Houston, Texas-based oil and gas exploration and production companies asking for further transaction details, Marathon Oil and ConocoPhillips said in separate regulatory filings.
The Hart-Scott-Rodino (HSR) Antitrust Improvements Act requires parties in certain business combinations to notify the Department of Justice (DOJ) and the FTC of such a transaction. The two enforcement agencies then review the transaction for a period usually 30 days — called a waiting period — before it can be completed, the FTC says on its website.
If during the waiting period either the FTC or the DOJ deems a further audit is warranted, the determining agency can ask the transaction parties for additional information and documents. This action called a second request extends the waiting period usually also by 30 days, according to the FTC. Federal reviewers can initiate a request a court injunction if they find a possible anti-trust breach.
“ConocoPhillips and Marathon continue to work constructively with the FTC in its review of the Merger and continue to expect that the Merger will be completed in the fourth quarter of 2024, subject to the fulfillment of the closing conditions in the Merger Agreement, including receipt of required regulatory approvals and approval of Marathon’s stockholders”, ConocoPhillips told the U.S. Securities and Exchange Commission. Marathon Oil shareholders have yet to vote on the merger.
Under the merger deal, announced May 29, Marathon Oil shareholders receive 0.255 ConocoPhillips common shares for each common share they hold at Marathon Oil. The total transaction value of $22.5 billion includes $5.4 million of Marathon Oil debt. Marathon Oil survives as a subsidiary if the agreement is completed.
“This acquisition of Marathon Oil further deepens our portfolio and fits within our financial framework, adding high quality, low cost of supply inventory adjacent to our leading U.S. unconventional position”, ConocoPhillips chair and chief executive Ryan Lance said in a company statement then.
ConocoPhillips derives most of its production from the Lower 48, including the Delaware and Midland basins and the Bakken and Eagle Ford shales. The Lower 48, or the contiguous United States, contributes over one million barrels of oil equivalent per day (boepd) to ConocoPhillips’ output, according to the company. ConocoPhillips has proven reserves of 3.1 billion boe in the Lower 48.
Marathon Oil also owns assets in Bakken, which accounted for 105,000 boepd of its Q1 production; the Delaware Basin, which contributed 48,000 boepd; and Eagle Ford, which produced 127,000 boepd for Marathon Oil.
“This acquisition will add highly complementary acreage to ConocoPhillips’ existing U.S. onshore portfolio, adding over 2 billion barrels of resource with an estimated average point forward cost of supply of less than $30 per barrel WTI [West Texas Intermediate]”, ConocoPhillips said in the announcement of the agreement.
“Given the adjacent nature of the acquired assets and a common operating philosophy, ConocoPhillips expects to achieve the full $500 million of cost and capital synergy run rate within the first full year following the closing of the transaction”, it said at the time. “The identified savings will come from reduced general and administrative costs, lower operating costs and improved capital efficiencies”.Marathon Oil chair Lee Tillman said at the time “ConocoPhillips is the right home” to bolster Marathon Oil’s peer-leading operational results and attractive investor returns.
ConocoPhillips plans to repurchase over $7 billion worth of shares in the first year after it has absorbed Marathon Oil. That would be an adjustment from more than $5 billion pre-acquisition. In the first three years of the expanded company, the buyback program would total $20 billion.“… we intend to prioritize share repurchases following the close of the transaction, with a plan to retire the equivalent amount of newly issued equity in the transaction in two to three years at recent commodity prices”, Lance said at the time.
“We remain committed to our differentiated cash from operations distribution framework of returning greater than 30 percent to our shareholders, with a track record of returning over 40 percent since our 2016 strategy reset”, the chief executive said.Regardless of the outcome of the merger transaction, ConocoPhillips plans to raise its ordinary dividend base by 34 percent to 78 cents per share starting in Q4.
Source:https://www.rigzone.com