Conoco Phillips to Acquire Marathon Oil Corporation

22.5 Billion Dollar Deal Conoco Phillips to Acquire Marathon Oil Corporation

2024-05-31 Source: Press release Conoco Phillips 3 min Reading Time

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Under a definitive agreement between both the parties, Conoco Phillips will acquire Marathon Oil in an all-stock transaction with an enterprise value of 22.5 billion dollars, inclusive of 5.4 billion dollars of net debt.

Conoco Phillips and Marathon Oil Corporation have entered into a definitive agreement pursuant to which Conoco Phillips will acquire Marathon Oil in an all-stock transaction. (Source: Pixabay) — Conoco Phillips and Marathon Oil Corporation have entered into a definitive agreement pursuant to which Conoco Phillips will acquire Marathon Oil in an all-stock transaction.
(Source: Pixabay)

Houston/USA – Conoco Phillips and Marathon Oil Corporation have entered into a definitive agreement pursuant to which Conoco Phillips will acquire Marathon Oil in an all-stock transaction with an enterprise value of 22.5 billion dollars, inclusive of 5.4 billion dollars of net debt. Under the terms of the agreement, Marathon Oil shareholders will receive 0.2550 shares of Conoco Phillips common stock for each share of Marathon Oil common stock, representing a 14.7 % premium to the closing share price of Marathon Oil on May 28, 2024, and a 16.0 % premium to the prior 10-day volume-weighted average price.

“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 U.S. unconventional position,” said Ryan Lance, Conoco Phillips chairman and chief executive officer. “Importantly, we share similar values and cultures with a focus on operating safely and responsibly to create long-term value for our shareholders. The transaction is immediately accretive to earnings, cash flows and distributions per share, and we see significant synergy potential.”

“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 - all while holding true to our core values of safety and environmental excellence. Conoco Phillips is the right home to build on that legacy, offering a truly unique combination of added scale, resilience and long-term durability. With its premier global asset base, strong balance sheet and laser focus on operational excellence, Conoco Phillips’ track record of long-term investments, differentiated shareholder distributions and active portfolio management are unmatched. When combined with the global Conoco Phillips portfolio, I’m confident our assets and people will deliver significant shareholder value over the long term,” said Lee Tillman, Marathon Oil chairman, president and chief executive officer.

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Transaction benefits

Immediately accretive: This acquisition is immediately accretive to Conoco Phillips on earnings, cash from operations, free cash flow and return of capital per share to shareholders.

Delivers significant cost and capital synergies: Given the adjacent nature of the acquired assets and a common operating philosophy, Conoco Phillips expects to achieve the full 500 million dollars of cost and capital synergy run rate within the first full year following the closing of the transaction. The identified savings will come from reduced general and administrative costs, lower operating costs and improved capital efficiencies.

Further enhances premier Lower 48 portfolio: This acquisition will add highly complementary acreage to Conoco Phillips’ existing U.S. onshore portfolio, adding over 2 billion barrels of resource with an estimated average point forward cost of supply of less than 30 dollars per barrel WTI.

Return of capital update

Independent of the transaction, Conoco Phillips expects to increase its ordinary base dividend by 34 % to 78 cents per share starting in the fourth quarter of 2024. Upon closing of the transaction and assuming recent commodity prices, Conoco Phillips plans to:

Repurchase over 7 billion dollars in shares in the first full year, up from over 5 billion dollars standalone.

Repurchase over 20 billion dollars in shares in the first three years.

“We remain committed to our differentiated cash from operations distribution framework of returning greater than 30 % to our shareholders, with a track record of returning over 40 % since our 2016 strategy reset,” added Lance. “We plan to raise our ordinary dividend by 34 % in the fourth quarter and we will continue to target top-quartile dividend growth relative to the S&P 500 going forward. Additionally, we intend to prioritize share repurchases following the close of the transaction, with a plan to retire the equivalent amount of newly issued equity in the transaction in two to three years at recent commodity prices.”

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