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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. oil patch.
The acquisition would give Conoco — one of the world’s largest independent oil and gas producers — a string of assets from North Dakota to Texas as it seeks to strengthen its position in America’s abundant shale fields.
The Financial Times was the first to report on the talks between the companies.
Conoco CEO Ryan Lance said Wednesday that the deal “further deepens our portfolio” and adds “high-quality, low-cost supply adjacent to our leading unconventional position in the US.”
The deal, expected to close in the fourth quarter, would be the latest in a series of megadeals announced over the past eight months that are reshaping the U.S. energy sector as oil majors seek to acquire the nation’s best remaining shale resources. and consolidate a once fragmented sector.
ExxonMobil and Chevron agreed to massive acquisitions last October with price tags of $60 billion and $53 billion, sparking a wave of transactions across the sector, with companies including Occidental Petroleum and Diamondback Energy following suit.
Conoco, which has a market capitalization of about $139 billion, has been looking for a deal in recent months and has been competing for weeks with smaller rival Devon Energy to acquire Marathon, three people briefed on the matter said.
Under the deal announced Wednesday, Marathon shareholders will receive 0.255 of a Conoco share for each Marathon share they own, representing a 14.7% premium to the target’s May 28 closing stock price. That gives Marathon an enterprise value of $22.5 billion, including $5.4 billion in net debt, the companies said.
Shares in Marathon rose more than 9 percent shortly after the Wall Street open on Wednesday. Conoco shares fell 2.8 percent.
The Marathon deal is a boost for Conoco after it lost out to Diamondback earlier this year in the race to acquire Endeavor Energy Resources, one of the most sought-after private producers in the prolific Permian Basin in Texas and New Mexico.
Diamondback agreed to a $26 billion deal to buy Endeavor in February after the latest bid left Conoco smarting, according to people close to the deal.
Lance has made no secret of the company’s desire to expand, saying in March that consolidation was “the right thing to do for our industry.”
“Our industry needs to consolidate. There are too many players. In business, scale matters, diversity matters,” 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 slump.
Marathon owns assets in basins including North Dakota’s Bakken oil field, Oklahoma’s Scoop Stack, Texas’ Eagle Ford and on the Permian side of New Mexico. It also has 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’s history dates back to 1887, beginning as the Ohio Oil Company before being absorbed into JD Rockefeller’s Standard Oil. After nearly a century as an integrated oil company, it spun off its refining arm Marathon Petroleum in 2011.
Morgan Stanley and Kirkland & Ellis are advising Marathon on the transaction. Conoco is advised by Evercore and Wachtell, Lipton, Rosen & Katz.