ConocoPhillips has agreed to buy rival Marathon Oil in an all-stock deal that values the Houston-based company at $22.5 billion, including debt, as a wave of consolidation continues to sweep the U.S. oil patch.
The acquisition would give Conoc, one of the world’s largest independent oil and gas producers, a string of assets stretching from North Dakota to Texas as it seeks to strengthen its position in America’s rich shale fields.
Talks between the companies were first reported by the Financial Times.
Conoco CEO Ryan Lance said Wednesday the deal “further deepens our portfolio” and adds “high quality, low cost supply to our leading unconventional position in the US.”
The transaction, expected to close in the fourth quarter, would be the latest in a string of megadeals announced over the past eight months that are reshaping the US energy sector as oil majors seek to snap up the country’s best remaining shale resources and consolidate the once-fragmented sector.
ExxonMobil and Chevron last October agreed to huge acquisitions, with price tags of $60 billion and $53 billion respectively, sparking a wave of transactions across the sector, with companies including Occidental Petroleum and Diamondback Energy following suit.
Conoco, which boasts a market capitalization of more than $130 billion, has been on the hunt for the deal in recent months and had been competing for several weeks with smaller rival Devon Energy to take over Marathon, three people familiar with the matter said.
Under the deal announced Wednesday, Marathon shareholders will receive 0.255 Conoc shares for each Marathon share they own, representing a 14.7 percent premium to the stock’s May 28 closing price target. That gives Marathon an enterprise value of $22.5 billion, including $5.4 billion in net debt, the companies said.
Marathon shares rose 8.4 percent in New York on Wednesday. Conoc shares fell by 3.1 percent.
The Marathon deal is a boost for Conoco after it lost out to Diamondback earlier this year in the race to take over Endeavor Energy Resources, one of the most sought-after private producers in the prolific Permian Basin in Texas and New Mexico.
Diamondback struck a $26 billion deal to buy Endeavor in February after a last-ditch bid left Conoco unhappy, according to people close to the transaction.
Lance has made no secret of the company’s desire to expand, saying in March that consolidation was “the right thing for our industry.”
“Our industry must consolidate. There are too many players. Scale matters, diversity matters in business,” he said in an interview with CNBC.
The Marathon acquisition would be Conoco’s biggest acquisition since it bought Concho Resources for $10 billion in 2021, taking advantage of the Covid-induced downturn.
Marathon owns assets in basins including North Dakota’s Bakken oil field, Oklahoma’s Scoop Stack, Texas’ Eagle Ford and the Permian side of New Mexico. It also holds an integrated gas business in Equatorial Guinea.
Marathon CEO Lee Tillman said the deal was a “proud moment” for the company. “Combined with ConocoPhillips’ global portfolio, I am confident that our assets and people will provide significant shareholder value over the long term,” he said.
The company dates back to 1887, starting as the Ohio Oil Company before being acquired by JD Rockefeller’s Standard Oil. After almost a century as an integrated oil company, in 2011 it was spun off from its refining subsidiary, Marathon Petroleum.
Marathon is being advised on the transaction by Morgan Stanley and Kirkland & Ellis. Conoco is advised by Evercore and Wachtell, Lipton, Rosen & Katz.
