Breaking: ConocoPhillips to acquire Marathon Oil

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Kuparuk. Photo credit: ConocoPhillips

ConocoPhillips and Marathon Oil Corporation announced Wednesday the companies have entered into a definitive agreement in which ConocoPhillips will acquire Marathon Oil in an all-stock transaction, with an enterprise value of $22.5 billion, to include $5.4 billion of net debt.

ConocoPhillips, one of the world’s largest energy companies, is Alaska’s largest oil producer and has been a leader in oil and gas exploration and development in the state for more than 50 years.

Marathon Oil Corporation is an independent energy company specializing in exploration and production, which had a refinery on the Kenai Peninsula until 2011, when it was spun off as Marathon Petroleum, and operates in 12 states.

“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,” said Ryan Lance, ConocoPhillips chairman and chief executive officer. “Importantly, we share similar values and cultures with a focus on operating safely and responsibly to create long-term value for our shareholders. The transaction is immediately accretive to earnings, cash flows and distributions per share, and we see significant synergy potential.”

Under the terms of the agreement, Marathon Oil shareholders will receive 0.2550 shares of ConocoPhillips common stock for each share of Marathon Oil common stock, representing a 14.7% premium to the closing share price of Marathon Oil on May 28, 2024, and a 16.0% premium to the prior 10-day volume-weighted average price.

Key points:

  • Acquisition of Marathon Oil Corporation is expected to be immediately accretive to earnings, cash flows and return of capital per share.
  • ConocoPhillips expects to achieve at least $500 million of run rate cost and capital savings within the first full year following the closing of the transaction.
  • Independent of the transaction, ConocoPhillips expects to increase its ordinary base dividend by 34% to 78 cents per share starting in the fourth quarter of 2024.
  • Upon closing of the transaction, ConocoPhillips expects share buybacks to be over $20 billion in the first three years, with over $7 billion in the first full year, at recent commodity prices.

5 COMMENTS

  1. You are confusing Marathon Petroleum with Marathon Oil – two different companies. Marathon Oil is a downstream company and is not being purchased by COP.

  2. I meant that Marathon Petroleum is the downstream company and not being purchased. It’s too early. Haha oops!

  3. This summary might be helpful:

    Marathon Oil and Marathon Petroleum, despite their similar names and shared heritage, operate in different sectors of the oil and gas industry and do not have overlapping operations.

    1. Marathon Oil Corporation (MRO) – acquisition target:
    • Primary Focus: Exploration and Production (E&P)
    • Operations: Marathon Oil is engaged in the exploration, production, and sale of crude oil, natural gas, and natural gas liquids. Their operations are primarily focused on upstream activities, meaning they are involved in finding and extracting oil and gas resources.
    • Geographic Presence: They have operations in North America, primarily in the United States, with significant activities in the Eagle Ford, Bakken, Oklahoma, and Northern Delaware basins. They also have international operations, but to a lesser extent.

    2. Marathon Petroleum Corporation (MPC):
    • Primary Focus: Refining, Marketing, and Transportation
    • Operations: Marathon Petroleum is involved in the downstream segment of the industry. This includes refining crude oil into petroleum products, marketing those products, and transporting them via pipelines, terminals, and a retail network (which includes gas stations under the Marathon and Speedway brands).
    • Geographic Presence: Their refining and marketing operations are primarily in the United States, with extensive infrastructure including refineries, pipelines, and retail locations.

    Historical Context:
    • Shared Heritage: Both companies originated from the same parent company, Marathon Oil Company. However, they became separate entities in 2011 when Marathon Oil Corporation spun off its downstream operations to form Marathon Petroleum Corporation. This separation created two independent companies with distinct operational focuses.

    Summary:
    • Marathon Oil is focused on upstream activities (exploration and production).
    • Marathon Petroleum is focused on downstream activities (refining, marketing, and transportation).

    No operational overlap between the two companies as they operate in different segments of the oil and gas value chain.

  4. “Breaking news and huge for Alaska”? I read your article, and while I greatly support ConocoPhillips and their successes, I am not sure what this means to being “huge for Alaska”? I don’t see anything that allows more drilling for ConocoPhillips in Alaska? Can you enlighten me?

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