ConocoPhillips snaps up Marathon for $22.5bn

Marathon Oil has operations in the Bakken basin in North Dakota, the Permian basin in West Texas and South Texas’ Eagle Ford basin — regions that are prime targets for producers looking to increase their inventory.

Marathon Oil shares were up 10.8%, while Conoco shares were down about 1.4% in premarket trading.

“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 US unconventional position,” ConocoPhillips CEO Ryan Lance said.

The deal follows US majors ExxonMobil’s acquisition of Pioneer Natural Resources that was announced in October, and Chevron’s proposed $53bn merger with Hess that was approved by the latter’s shareholders on Tuesday.

The consolidation activity in the industry has, however, attracted increased antitrust scrutiny, with the FTC reviewing multibillion-dollar deals, including those involving Chevron, Diamondback Energy, Occidental Petroleum and Chesapeake Energy.

“Following the merger, Conoco’s production out of Eagle Ford is set to surpass the company’s legacy assets in the Delaware basin,” said Viktor Katona, head of oil analysis at Kpler.

ConocoPhillips also added that it would dispose of nearly $2bn worth of assets.

The company also signalled it would ramp up share buybacks to $7bn in 2025 from 2024’s projected $5bn and commit to buying $20bn of its shares over the three years following the deal’s closing.

“We believe this transaction is a positive read-through to the E&P [exploration and production] sector overall, particularly the diversified, underappreciated mid caps trading at discount valuations with strong capital returns,” said Gabriele Sorbara, the MD of equity research at Siebert Williams Shank & Co.

Reuters