Unlock the Editor’s Digest without cost
Roula Khalaf, Editor of the FT, selects her favorite tales in this weekly e-newsletter.
ConocoPhillips has agreed to buy rival Marathon Oil in an all-stock deal that values the Houston-based firm at $22.5bn, together with debt, as a wave of consolidation continues to wash throughout the US oil patch.
The acquisition would hand Conoco — one of many world’s largest impartial oil and gasoline producers — a collection of property stretching from North Dakota to Texas because it seeks to bolster its place in America’s prolific shale fields.
Talks between the businesses have been first reported by the Financial Times.
Conoco’s chief govt Ryan Lance stated on Wednesday that the deal “further deepens our portfolio” and provides “high-quality, low cost of supply inventory adjacent to our leading US unconventional position”.
The transaction, which is anticipated to shut in the fourth quarter, can be the most recent in a collection of megadeals introduced over the previous eight months which can be reshaping the US power sector, as massive oil firms search to snap up the nation’s greatest remaining shale sources and consolidate a once-fragmented sector.
ExxonMobil and Chevron final October each agreed large acquisitions, with value tags of $60bn and $53bn, respectively, sparking a wave of transactions throughout the sector, with firms together with Occidental Petroleum and Diamondback Energy following go well with.
Conoco, which boasts a market capitalisation of greater than $130bn, had been on the hunt for a deal in current months and vied for a number of weeks with its smaller rival Devon Energy to purchase Marathon, three individuals briefed on the matter stated.
Under the settlement introduced on Wednesday, Marathon shareholders will obtain 0.255 shares of Conoco for every Marathon share they personal, representing a 14.7 per cent premium to the goal’s closing share value on May 28. That provides Marathon an enterprise worth of $22.5bn, together with $5.4bn of web debt, the businesses stated.
Shares in Marathon closed 8.4 per cent larger in New York on Wednesday. Conoco shares dropped 3.1 per cent.
The deal for Marathon is a lift for Conoco after it misplaced out to Diamondback earlier this yr in a race to snap up Endeavor Energy Resources, one of the sought-after non-public producers in the prolific Permian Basin of Texas and New Mexico.
Diamondback agreed a $26bn deal to buy Endeavor in February after a last-ditch bid that left Conoco smarting, in accordance to individuals shut to that transaction.
Lance has made no secret of the corporate’s need to increase, saying in March that consolidation was “the right thing to be doing for our industry”.
“Our industry needs to consolidate. There’s too many players. Scale matters, diversity matters in the business,” he stated in an interview on CNBC.
The Marathon acquisition can be Conoco’s largest because it acquired Concho Resources for $10bn in 2021, making the most of the Covid-induced downturn.
Marathon owns property in basins together with North Dakota’s Bakken oilfield, the Scoop Stack in Oklahoma, Texas’s Eagle Ford and the New Mexico facet of the Permian. It additionally holds an built-in gasoline enterprise in Equatorial Guinea.
Marathon’s chief govt Lee Tillman stated the deal was a “proud moment” for the corporate. “When combined with the global ConocoPhillips portfolio, I’m confident our assets and people will deliver significant shareholder value over the long term,” he stated.
The firm dates again to 1887, beginning out because the Ohio Oil Company earlier than being subsumed by JD Rockefeller’s Standard Oil. After nearly a century as an built-in oil firm it spun off its refining arm, Marathon Petroleum, in 2011.
Marathon is being suggested on the transaction by Morgan Stanley and Kirkland & Ellis. Conoco is being suggested by Evercore and Wachtell, Lipton, Rosen & Katz.
