ConocoPhillips to acquire Marathon Oil in US$17.1bn deal

CONOCOPHILLIPS has agreed to acquire exploration and production company Marathon Oil in an all-stock deal worth US$17.1bn, enhancing its leading position in unconventional resource production. It marks the latest in a series of consolidating transactions in the prospering oil and gas sector.

Marathon Oil’s operations are focused on competitive resource plays in the US: Eagle Ford in Texas, Bakken in North Dakota, the Permian basin across New Mexico and Texas, and STACK and SCOOP in Oklahoma. It also operates an integrated gas business in Equatorial Guinea.

Ryan Lance, CEO of ConocoPhillips, said the acquisition adds “high-quality, low cost of supply inventory adjacent to our leading US unconventional position”.

As of 31 March 2024, ConocoPhillips averaged 1.9m boe/d for the year and had operations and activities in 13 countries, including the US. Proved reserves totalled 6.8bn at the end of 2023.

With this deal, it is gaining 390,000 boe/d in production and 940,000 unconventional net acres. It is adding 2bn bbl of resources to its portfolio, with an estimated cost of supply of less than US$30/bbl of West Texas Intermediate grade crude oil.

The acquisition includes highly complementary acreage that will boost its production from unconventional resources in areas including Eagle Ford (to around 380,000 boe/d) and Bakken (to around 220,000 boe/d). In Equatorial Guinea, the company will gain 2m t/y in net liquid natural gas capacity.

As well as boosting its assets and supply, ConocoPhillips expects the merger will yield US$500m in savings from lower operating, improved capital efficiencies, and reduced general and administrative costs.

The transaction is expected to close in Q4. It will see Marathon shareholders receive 0.2550 shares of ConocoPhillips common stock for each share of Marathon Oil common stock. Including Marathon's US$5.4bn net debt, the deal is expected to rise to US$22.5bn.

 “This is a proud moment to look back on what we achieved at Marathon Oil. Powered by our dedicated employees and contractors, we built a top-performing portfolio with a multi-year track record of peer-leading operational execution, strong financial results, and compelling return of capital to our shareholders,” said Lee Tillman, CEO of Marathon Oil. “ConocoPhillips is the right home to build on that legacy, offering a truly unique combination of added scale, resilience, and long-term durability.”

ConocoPhillips’ acquisition comes amid a wave of agreements in the energy industry spanning several months, including ExxonMobil’s US$60bn purchase of Pioneer Natural Resources. Chesapeake’s US$7.4bn acquisition of Southwestern Energy, and Occidental Petroleum’s takeover of CrownRock for US$12bn.

Meanwhile, Chevron’s US$53bn acquisition of Hess is being held up by a legal dispute with ExxonMobil. Hess shareholders recently voted in favour of the deal. 

ConocoPhillips has previously made its own moves for consolidation and reportedly lost out on the sale of CrownRock, as it sought to increase its presence in the Permian basin. It also attempted to acquire Endeavour, which in February announced a merger with Diamondback Energy to form a leading Permian oil and gas producer.

ConocoPhillips acquired Permian assets from Shell in 2021.