ConocoPhillips agreed on Wednesday to acquire its smaller rival, Marathon Oil, the latest deal in a wave of consolidation sweeping the oil industry.
The all-stock deal values Marathon at $22.5 billion, including debt. The acquisition “further deepens our portfolio and fits within our financial framework, adding high-quality, low cost-of-supply inventory,” Ryan Lance, Conoco’s chief executive, said in a statement.
Marathon’s operations are in some of the most sought-after oil fields in New Mexico, North Dakota and Texas; it also drills offshore of Equatorial Guinea.
Marathon traces its roots to the 19th century, and like ConocoPhillips, its predecessors were once part of John D. Rockefeller’s Standard Oil empire. In 2011, Marathon Oil spun out its refinery business, which now operates as Marathon Petroleum.
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The oil industry in the United States, the world’s largest producer of crude, is made up of many small and medium-sized oil companies, ranging from family operations with a few wells in one state to global giants like Exxon Mobil. Wall Street values ConocoPhillips at about $140 billion, making it about 10 times as big as Marathon Oil but around a quarter the size of Exxon.
Oil companies have pulled off some of the biggest acquisitions of the past year despite regulatory scrutiny from the Biden administration and volatility in the oil market. The U.S. giants have been harnessing record profits, giving them the firepower to acquire smaller players with operations in oil-rich regions like the Permian Basin in New Mexico and Texas and in the Gulf of Mexico.
There was $250 billion in deal-making activity in the oil and gas industry last year, according to Reuters, including Exxon Mobil’s $60 billion acquisition of Pioneer Natural Resources and Chevron’s $53 billion takeover of Hess, which was approved by Hess’s shareholders on Tuesday.
The boom in oil deals is due in large part to the robust recovery in commodity prices since the early days of the pandemic, when oil prices plummeted.
The U.S. benchmark crude oil price is now trading at around $80 a barrel. While prices are about a third lower than the peaks that prevailed in 2022 after Russia invaded Ukraine, they are high enough to allow Western oil companies to make robust profits and buy other producers. Conoco said that the purchase of Marathon would add over two billion barrels to its portfolio, with an average cost of less than $30 per barrel to supply.
Conoco was in the running to buy Endeavor Energy Resources earlier this year, but lost out to Diamondback Energy, which announced an agreement in February to buy the company for $26 billion.
Conoco’s agreement with Marathon is subject to regulatory clearance and a vote by shareholders. The companies said they expected to close the deal in the fourth quarter.
In the year after the deal is closed, Conoco said it expects to cut at least $500 million in costs at the combined company. Conoco also said that it was planning to raise its dividend by 34 percent at the end of this year and buy back more than $20 billion of its shares in the three years after it takes over Marathon.
The all-stock deal values Marathon at $22.5 billion, including debt. The acquisition “further deepens our portfolio and fits within our financial framework, adding high-quality, low cost-of-supply inventory,” Ryan Lance, Conoco’s chief executive, said in a statement.
Marathon’s operations are in some of the most sought-after oil fields in New Mexico, North Dakota and Texas; it also drills offshore of Equatorial Guinea.
Marathon traces its roots to the 19th century, and like ConocoPhillips, its predecessors were once part of John D. Rockefeller’s Standard Oil empire. In 2011, Marathon Oil spun out its refinery business, which now operates as Marathon Petroleum.
Advertisement
SKIP ADVERTISEMENT
The oil industry in the United States, the world’s largest producer of crude, is made up of many small and medium-sized oil companies, ranging from family operations with a few wells in one state to global giants like Exxon Mobil. Wall Street values ConocoPhillips at about $140 billion, making it about 10 times as big as Marathon Oil but around a quarter the size of Exxon.
Oil companies have pulled off some of the biggest acquisitions of the past year despite regulatory scrutiny from the Biden administration and volatility in the oil market. The U.S. giants have been harnessing record profits, giving them the firepower to acquire smaller players with operations in oil-rich regions like the Permian Basin in New Mexico and Texas and in the Gulf of Mexico.
There was $250 billion in deal-making activity in the oil and gas industry last year, according to Reuters, including Exxon Mobil’s $60 billion acquisition of Pioneer Natural Resources and Chevron’s $53 billion takeover of Hess, which was approved by Hess’s shareholders on Tuesday.
The boom in oil deals is due in large part to the robust recovery in commodity prices since the early days of the pandemic, when oil prices plummeted.
The U.S. benchmark crude oil price is now trading at around $80 a barrel. While prices are about a third lower than the peaks that prevailed in 2022 after Russia invaded Ukraine, they are high enough to allow Western oil companies to make robust profits and buy other producers. Conoco said that the purchase of Marathon would add over two billion barrels to its portfolio, with an average cost of less than $30 per barrel to supply.
Conoco was in the running to buy Endeavor Energy Resources earlier this year, but lost out to Diamondback Energy, which announced an agreement in February to buy the company for $26 billion.
Conoco’s agreement with Marathon is subject to regulatory clearance and a vote by shareholders. The companies said they expected to close the deal in the fourth quarter.
In the year after the deal is closed, Conoco said it expects to cut at least $500 million in costs at the combined company. Conoco also said that it was planning to raise its dividend by 34 percent at the end of this year and buy back more than $20 billion of its shares in the three years after it takes over Marathon.
