This visionary move, announced on Wednesday (29), marks a new phase of consolidation in the energy sector.
Under the terms of the agreement, Marathon Oil shareholders will receive 0.255 shares of ConocoPhillips for each Marathon share they own, reflecting a 14.7% premium over Tuesday’s (28) closing price. This transaction not only strengthens ConocoPhillips’ market position but also creates significant value for Marathon Oil shareholders.
The consolidation of the two Houston-based oil giants underscores a recent trend of mergers and acquisitions in the sector, following ExxonMobil’s $60 billion acquisition of Pioneer and Chevron’s $53 billion purchase of Hess. These moves signal a drive for synergies and operational efficiencies amid a challenging and shifting global energy market.
With this merger, ConocoPhillips aims not only to expand its presence and capacity but also to achieve significant cost savings of $500 million in the first year after the transaction’s closure. This strategic move reflects the company’s commitment to driving growth and maximizing shareholder returns in a competitive and dynamic landscape.
The surge in oil market activity also includes Occidental’s acquisition of CrownRock and Diamondback Energy’s purchase of Endeavor Energy Partners, in multi-billion-dollar deals involving cash and stock.
With a robust treasury and generous profits accumulated after years of high prices, oil giants are capitalizing on these windfalls to expand their reach in the Permian Basin – the epicenter of oil and gas production that has propelled the United States to become the world’s largest producer.
This is a dual strategy: it not only boosts shareholder returns but also strengthens their presence in a highly competitive and ever-evolving sector. Meanwhile, there is growing pressure for these companies to invest more in renewable energy, adding a new dimension to their investment outlook.
“This acquisition of Marathon Oil further deepens our portfolio and fits within our financial framework, adding a high-quality, low-cost supply inventory,” said Ryan Lance, CEO of ConocoPhillips, in a statement.
The Financial Times reported on Wednesday that the deal had been finalized and that ConocoPhillips and Devon Energy had competed intensively for weeks to acquire Marathon Oil.
Founded in 1887 as The Ohio Oil Company and acquired two years later by John D. Rockefeller’s Standard Oil, Marathon Oil adopted its current name in 1962. Over more than a century of history, the company has solidified itself as a leading operator in the energy sector.
Lee Tillman, CEO of Marathon Oil, described the deal as “a proud moment” and praised ConocoPhillips, highlighting it as “the right home” to continue building a legacy of operational excellence and strong profits.
This acquisition, along with other strategic moves in the sector such as Occidental’s purchase of CrownRock and Diamondback Energy’s acquisition of Endeavor Energy Partners, reflects a growing trend of consolidation.
Major oil companies, equipped with abundant cash and high profits after years of elevated prices, are using these resources to acquire valuable assets in the Permian Basin. This oil field, crucial to the United States’ position as the largest global producer of oil and gas, continues to be a central focus of investment.
These companies are focused on maximizing shareholder returns while facing increasing pressure to ramp up investments in renewable energy, balancing their short- and long-term strategies in a rapidly transforming market.
“When combined with ConocoPhillips’ global portfolio, I am confident that our assets and people will deliver significant value to shareholders in the long term,” Tillman said in a statement.
Additionally, ConocoPhillips has set a target of saving $500 million in the first full year after the transaction closes, expected in the fourth quarter of 2024, subject to Marathon shareholders’ and regulators’ approval.
The company also announced robust share repurchase plans, committing to repurchase over $7 billion in shares in the first full year after the deal’s conclusion and more than $20 billion in the first three years. These measures aim not only to optimize the company’s capital structure but also to demonstrate its commitment to maximizing shareholder value amid a dynamic and challenging market environment.
The acquisition of Marathon Oil by ConocoPhillips stands out as a significant strategic move in the energy sector. With this merger, ConocoPhillips not only expands its global portfolio but also strengthens its competitive position, pursuing synergies and operational efficiency. The goal of saving $500 million in the first year post-deal and the share repurchase plans reflect a disciplined financial approach and a commitment to generating shareholder value.
This consolidation trend in the oil sector, driven by major acquisitions such as ExxonMobil’s purchase of Pioneer and Chevron’s acquisition of Hess, highlights companies’ strategies to utilize robust profits to acquire strategic assets, especially in the Permian Basin. This oil field is vital for maintaining the United States’ position as the largest global producer of oil and gas.
At the same time, oil giants face growing pressure to invest in renewable energy, balancing their growth strategies for the short and long term. The acquisition of Marathon Oil by ConocoPhillips not only strengthens its presence in the traditional energy market but also paves the way for future opportunities in innovation and sustainability.
In summary, this acquisition represents a milestone in ConocoPhillips’ evolution, promising a future of sustainable growth and continued value for shareholders while navigating the complexities and opportunities of a transforming energy sector.
