Canada (Commonwealth) _ A formal agreement between ConocoPhillips and Marathon Oil Corp affirmed that ConocoPhillips would purchase Marathon Oil in an all-stock deal with an enterprise value of US$22.5 billion, including US$5.4 billion in net debt. As per the agreement, shareholders of Marathon Oil will receive 0.2550 shares of ConocoPhillips common stock for every share of Marathon Oil common stock. This represents a premium of 16% over the previous 10-day volume-weighted average price and 14.7% over the closing share price of Marathon Oil on May 28, 2024.
According to Ryan Lance, Chairman and CEO of ConocoPhillips, “this purchase of Marathon Oil further expands the company’s assets and fits within the financial framework, providing high-quality, low cost of supply inventory next to leading US unconventional position.” Crucially, our cultures and beliefs are similar in that we prioritize operating properly and safely in order to generate long-term value for our shareholders. He went on to say, “We see significant synergy potential and the transaction is immediately accretive to earnings, cash flows, and distributions per share.”
It gives me great pride to reflect on our accomplishments at Marathon Oil. We developed a top-performing portfolio with a multi-year track record of peer-leading operational execution, solid financial outcomes and an alluring return on capital for our investors—all the while adhering to our basic principles of environmental excellence and safety. ConocoPhillips is the ideal place to carry on that heritage because it provides a genuinely exceptional blend of increased size, robustness, and long-term durability.
ConocoPhillips has an unrivaled track record of long-term investments, unique shareholder payouts, and active portfolio management thanks to its outstanding global asset base, solid financial sheet, and laser-like focus on operational efficiency. I’m convinced that our resources and workforce, when paired with the ConocoPhillips portfolio on a global scale, will provide substantial shareholder value in the long run, Stated Lee Tillman, the chairman, president, and CEO of Marathon Oil.
Benefits of transactions
ConocoPhillips will benefit from this purchase right away in terms of profitability, cash from operations, free cash flow, and return of capital per share to shareholders.
Provides significant cost and capital synergies: ConocoPhillips anticipates realizing the entire US$500 million cost and capital synergy run rate in the first full year after the acquisition closes, owing to the adjacent nature of the acquired assets and a shared operational philosophy. Reductions in operational, capital, and general and administrative expenses will account for the identified savings.
Improves upon the first Lower 48 portfolio: ConocoPhillips’ current US onshore portfolio will gain highly complementary land with this transaction, adding over 2 billion barrels of resource with an estimated average point forward cost of supply.
Capital Returns
ConocoPhillips anticipates raising its regular base dividend by 34% to 78 cents per share beginning in 4Q024 regardless of the deal. ConocoPhillips intends to do the following upon transaction closure, assuming current commodity prices:
Repurchase shares valued at more over US$7 billion in the first full year, up from US$5 billion in isolation. In the first three years, repurchase more than $20 billion worth of shares.
Lance said, “We are still dedicated to our unique cash from operations distribution framework, which aims to return more than 30% to our shareholders. Since our 2016 strategy reset, we have consistently returned more than 40% to our shareholders.” “We aim to achieve top-quartile dividend growth in comparison to the S&P 500, and we intend to increase our regular dividend by 34% in 4Q24.”
After the deal closes, we also want to prioritize share repurchases. At the current price of commodities, we want to retire the same amount of newly issued shares in the transaction in two to three years.
Transaction information
The deal is contingent to regulatory clearance, other standard closing conditions, and the approval of Marathon Oil stockholders. It is anticipated that the deal would finalize in 4Q24.
ConocoPhillips is receiving financial advice from Evercore and legal advice from Wachtell, Lipton, Rosen & Katz over the deal. For this transaction, Marathon Oil’s financial advisor is Morgan Stanley & Co. LLC, and its legal advisor is Kirkland & Ellis LLP.
At year’s end in 2022, ConocoPhillips held the majority of exploration leases and was the state’s leading producer of crude oil, with around 1.2 million net unexplored acres. ConocoPhillips said on May 29, 2024, that it will be purchasing Marathon for $22.5 billion. The American hydrocarbon exploration firm Marathon Oil Corporation was founded in Ohio and has its main office at 990 Town and Country Boulevard in Houston, Texas. It is a direct offspring of Standard Oil and manages global gas activities with a concentration on the offshore regions of Central Africa’s Equatorial Guinea. The business is placed 1900th on Forbes Global 2000 and 534th on the Fortune 500.
