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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. oilfield.
The acquisition will give Conoco – one of the world’s largest independent oil and gas producers – a range of assets stretching from North Dakota to Texas as it seeks to strengthen its position in America’s prolific shale fields.
The talks between the companies were first reported by the Financial Times.
Conoco CEO Ryan Lance said Wednesday that the deal “further deepens our portfolio” and adds “high-quality, low-cost supply inventory near our leading U.S. unconventional position.”
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 U.S. energy sector as oil majors seek to grab the nation’s best remaining shale resources and consolidating a once fragmented sector.
ExxonMobil and Chevron last October agreed to massive acquisitions with price tags of $60 billion and $53 billion respectively, sparking a wave of transactions in the sector, with companies including Occidental Petroleum and Diamondback Energy following suit.
Conoco, which boasts a market capitalization of about $139 billion, has been on the hunt for a deal in recent months and had been competing for several weeks with smaller rival Devon Energy to acquire Marathon, three people briefed on the matter said.
Under the agreement announced Wednesday, Marathon shareholders will receive 0.255 Conoco shares for each Marathon share they own, representing a 14.7 percent premium to the stock’s May 28 closing price. That gives Marathon an enterprise value of $22.5 billion, including $5.4 billion in net debt, the companies said.
Marathon shares rose more than 9 percent shortly after the open on Wall Street on Wednesday. Conoco shares fell 2.8%.
The Marathon deal is a boost for Conoco after it lost out to Diamondback earlier this year in a race to acquire Endeavor Energy Resources, one of the most sought-after private producers in the prolific Permian Basin of Texas and New Mexico.
Diamondback agreed to a $26 billion deal to buy Endeavor in February after a last-ditch bid left Conoco frustrated, according to people close to the deal.
Lance has made no secret of the company’s desire to expand, saying in March that the consolidation was “the right thing to do for our industry.”
“Our industry needs to 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 since it acquired Concho Resources for $10 billion in 2021, taking advantage of the Covid-induced downturn.
Marathon owns assets in basins including the Bakken oil field in North Dakota, the Scoop Stack in Oklahoma, the Eagle Ford in Texas and the Permian country in New Mexico. It also owns 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 deliver significant shareholder value over the long term,” he said.
The company dates back to 1887, starting as the Ohio Oil Company before being absorbed by JD Rockefeller’s Standard Oil. After nearly a century as an integrated oil company, it spun off its refining arm Marathon Petroleum in 2011.
Marathon was advised on the transaction by Morgan Stanley and Kirkland & Ellis. Conoco is being advised by Evercore and Wachtell, Lipton, Rosen & Katz.