ConocoPhillips and Marathon Oil Corp. have entered into a definitive agreement, through which ConocoPhillips will acquire Marathon Oil in an all-stock transaction valued at $17.1 billion, or $22.5 billion including debt.
“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 CEO. “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.”
The deal is expected to close in the fourth quarter of this year, and is still subject to approval Marathon Oil stockholders.
ConocoPhillips also noted in a statement that, independent of the acquisition, it expects to increase its ordinary base dividend by 34% to 78 cents per share starting in Q4 2024. Upon closing of the transaction and assuming recent commodity prices, ConocoPhillips plans to:
- Repurchase over $7 billion in shares in the first full year, up from over $5 billion standalone.
- Repurchase over $20 billion in shares in the first three years.
“We remain committed to our differentiated cash from operations distribution framework of returning greater than 30% to our shareholders, with a track record of returning over 40% since our 2016 strategy reset,” added Lance. “We plan to raise our ordinary dividend by 34% in the fourth quarter and we will continue to target top-quartile dividend growth relative to the S&P 500 going forward. Additionally, 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.”
Marathon Oil became an independent exploration and production (E&P) company in July 2011. Based in Houston, Texas, the company focuses on four of the most competitive resource plays in the U.S., complemented by an integrated gas business in Equatorial Guinea.
Marathon Oil boasts competitive advantages through its multi-basin portfolio, including the Eagle Ford in Texas, the Bakken in North Dakota, the STACK and SCOOP in Oklahoma and the Permian in New Mexico.
The company noted that its diverse portfolio is oil weighted, but balanced with an approximate 50% oil and 50% gas/NGL production mix.
ConocoPhillips, as one of the world’s largest E&P companies, operates in 13 countries and employs more than 10,000 people. According to the New York Times, Wall Street values the company at about $140 billion, making it around 10 times bigger than Marathon Oil.
A statement from Marathon Oil Chairman, President and CEO Lee Tillman:
“This is a proud moment to look back on what we achieved at Marathon Oil. Powered by our dedicated employees and contractors, we built a top performing portfolio with a multi-year track record of peer-leading operational execution, strong financial results and compelling return of capital to our shareholders — all while holding true to our core values of safety and environmental excellence. ConocoPhillips is the right home to build on that legacy, offering a truly unique combination of added scale, resilience and long-term durability. With its premier global asset base, strong balance sheet and laser focus on operational excellence, ConocoPhillips’ track record of long-term investments, differentiated shareholder distributions and active portfolio management are unmatched. When combined with the global ConocoPhillips portfolio, I’m confident our assets and people will deliver significant shareholder value over the long term.”
