ConocoPhillips recently agreed to acquire Marathon Oil Corporation in an all-stock transaction with an enterprise value of $22.5 billion, inclusive of $5.4 billion of net debt.
Under the terms of the agreement, Marathon shareholders will receive 0.2550 shares of ConocoPhillips common stock for each share of Marathon common stock, representing a 14.7% premium to the closing share price of Marathon Oil on May 28, and a 16.0% premium to the prior 10-day volume-weighted average price, the companies reported.
“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,” Ryan Lance, ConocoPhillips chairman and CEO, said in a news release. “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.”
The transaction is subject to the approval of Marathon stockholders, regulatory clearance, and other customary closing conditions.
It is expected to close in the fourth quarter of this year.
“This is a proud moment to look back on what we achieved at Marathon Oil,” said Lee Tillman, Marathon chairman, president, and CEO. “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.
“ConocoPhillips 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, ConocoPhillips’ track record of long-term investments, differentiated shareholder distributions, and active portfolio management are unmatched.”
The transaction includes the following benefits, according to the companies:
- Delivers cost and capital synergies: Given the adjacent nature of the acquired assets and a common operating philosophy, ConocoPhillips expects to achieve the full $500 million 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 Lower 48 portfolio: This acquisition will add complementary acreage to ConocoPhillips’ 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 per barrel WTI.
Independent of the transaction, ConocoPhillips expects to increase its ordinary base dividend by 34% to 78 cents per share starting in the fourth quarter of 2024.
“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,” Lance added. “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.”