ConocoPhillips (NYSE:COP) said Wednesday it has entered a definitive agreement to acquire Marathon Oil (NYSE:MRO) in an all-stock deal valued at $22.5 billion, including $5.4 billion of net debt.
Shares in Marathon Oil jumped more than 9% following the market open.
Under the terms of the agreement, MRO shareholders will receive 0.2550 shares of ConocoPhillips common stock for each share of Marathon Oil common stock they own.
This represents a 14.7% premium over Marathon Oil's closing share price on May 28, 2024, and a 16.0% premium over 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, ConocoPhillips chairman and CEO.
“The transaction is immediately accretive to earnings, cash flows and distributions per share, and we see significant synergy potential.”
Commenting on the development, RBC Capital Markets analysts said the asset mix stemming from the deal "fits very well and strengthens" Conoco's L48 assets, while also expanding its global LNG presence.
"The two other important factors include enhancing COP's FCF generation to increase shareholder returns and reducing the combined corporate B/E," analysts wrote,
"We think the 16% premium is a fair price given the larger disconnect that MRO had relative to peers and the significant synergy opportunities," they added.
The U.S. oil and gas sector, which saw $250 billion in acquisitions in 2023, continues to consolidate despite increasing antitrust scrutiny.
Recently, regulators approved Exxon Mobil 's (NYSE:XOM) $60 billion acquisition of Pioneer Natural Resources but prohibited Pioneer's former CEO from joining Exxon's board due to allegations of collusion with OPEC to raise oil prices.
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