ConocoPhillips has agreed to acquire Marathon Oil in an all-stock deal valued at $17.1 billion in a bid to catch up with rivals as drillers race to secure new oil and gas wells.Under the terms of the agreement, Marathon Oil stockholders will exchange each share for 0.255 shares of ConocoPhillips, representing a nearly 15% premium based on Marathon Oil’s closing share price on Tuesday. The deal allows ConocoPhillips to expand its presence in several key U.S. shale basins including in Texas and North Dakota.
Marathon Oil shares jumped 8.4% on Wednesday to close at $28.68. Shares of ConocoPhillips shares slid 3.1% to close at $115.25.Houston-based ConocoPhillips in recent months saw competitors Exxon Mobil, Chevron, Occidental Petroleum and Diamondback Energy beef up their oil and gas properties with deals totaling about $150 billion. Most of these deals were focused on the prolific Permian Basin of West Texas and New Mexico.
With Marathon Oil, ConocoPhillips is picking a company with assets adjacent to its properties in Texas’ Eagle Ford, North Dakota’s Bakken and the Permian. The deal also strengthens ConocoPhillips’ international presence with Marathon Oil’s offshore assets in Equatorial Guinea.
ConocoPhillips CEO Ryan Lance told analysts that the opportunity to acquire Marathon Oil came on ConocoPhillips’ radar a few weeks ago. He said the company saw a significant overlap with Marathon and that it was hoping to use technology and efficiencies to extend Marathon’s shale inventory in the Eagle Ford and the Bakken.“We think we’re heading into a period of what I’d call kind of shale 2.0” he said.The transaction is expected to close in the fourth quarter, subject to approval from regulators and Marathon Oil stockholders. The deal has an enterprise value of $22.5 billion that includes $5.4 billion of debt.
ConocoPhillips in recent months had hoped to augment its presence in the Permian. It considered acquiring private producer Endeavor Energy Resources, according to people familiar with the matter. Endeavor ended up selling to Diamondback Energy for $26 billion in February. ConocoPhillips also considered buying CrownRock, which sold itself to Occidental for nearly $11 billion in December, the people said.Some investors have taken the view that Marathon Oil suffers from a meager catalog of wells mostly in mature basins, and the company’s stock has been trading at a discount to some of its rivals.
Gabriele Sorbara, an analyst at financial-services firm Siebert Williams Shank & Co, said the deal likely augurs a new phase of consolidation where large companies buy less desirable shale producers now that the crown jewels have been snagged. “You’re gonna see these large companies move down a rung,” he said.ConocoPhillips said it is expecting to achieve cost and capital synergies of $500 million within the first full year following the closing of the transaction.
The deal marks ConocoPhillips’ largest U.S. acquisition since its purchase of Shell’s Permian assets for $9.5 billion in 2021. The deal came a year after ConocoPhillips bought Permian producer Concho Resources for $9.7 billion as the Covid-19 pandemic lockdown caused oil prices to crash.In recent years, ConocoPhillips also bolstered its gas assets by taking stakes in Sempra’s Port Arthur LNG terminal in Southeast Texas, as well as in QatarEnergy’s sprawling North Field LNG project. Lance earlier this month signaled ConocoPhillips was open to selling its stake in Port Arthur LNG.
The company recently doubled down on long-term oil assets in Alaska. ConocoPhillips last year received the Biden administration’s greenlight to build the $7 billion Willow project in the state’s North Slope, a controversial enterprise that is expected to yield about 180,000 barrels of oil a day at its peak—equivalent to about 40% of Alaska’s current crude production.
Marathon Oil’s sale marks the end of a company whose roots trace back to 1887 when the Ohio Oil Company was formed in that state. It expanded into refining, becoming Marathon Oil in 1962, with operations in Libya, Nigeria and Europe.It had talks with rival Devon Energy in recent months about a potential tie-up, according to people familiar with the matter.
Marathon Oil entered the Bakken in 2006, its first significant foray into shale drilling. In 2011, the company spun off its refining and sales operations into Marathon Petroleum. Later that year, it bought Hilcorp’s properties in the Eagle Ford formation in Texas in a $3.5 billion deal.Marathon Oil’s production averaged 326,000 net barrels of oil equivalent a day during the first quarter of the year, according to the company.
Source:https://www.msn.com