ConocoPhillips To Acquire Marathon Oil In All-Stock Deal At 14.7% Premium: Details

Zinger Key Points
  • ConocoPhillips to acquire Marathon Oil in an all-stock deal valued at $22.5 billion, closing in Q4 2024.
  • MRO shareholders receive 0.2550 COP shares per MRO share, representing a 14.7% premium to May 28 closing price.

Marathon Oil Corporation MRO and ConocoPhillips COP stocks are moving in opposite directions on Wednesday after they disclosed a definitive deal in which ConocoPhillips will acquire Marathon Oil in an all-stock transaction with an enterprise value of $22.5 billion.

As per the agreement, Marathon Oil shareholders will receive 0.2550 ConocoPhillips shares for each share of Marathon Oil they hold.

The acquisition price represents 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.

The acquisition deal is projected to close in the fourth quarter of 2024, subject to the approval of Marathon Oil stockholders and other customary closing conditions.

Synergies: This acquisition is anticipated to add over 2 billion barrels of resource with an estimated average point forward cost of supply of less than $30 per barrel WTI to ConocoPhillips’ existing U.S. onshore portfolio.

The buyout is expected to be immediately accretive to ConocoPhillips on earnings, cash from operations, free cash flow, and return of capital per share to shareholders.

Also, ConocoPhillips expects to achieve the full $500 million worth of cost and capital synergy run rate within the first full year following deal closure.

Dividend & Share Buyback Boost: ConocoPhillips disclosed that it expects to increase its ordinary base dividend per share by 34% to $0.78 starting in the fourth quarter of 2024.

Post-deal closure and assuming recent commodity prices, ConocoPhillips targets repurchasing over $7 billion in shares in the first full year (up from over $5 billion standalone) and over $20 billion in shares in the first three years.

Ryan Lance, ConocoPhillips chairman and chief executive officer, said, “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,”

“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,”

ConocoPhillips ended the quarter with $6.3 billion in cash and short-term investments and $1.1 billion in long-term investments.

Investors can gain exposure to COP via IShares U.S. Oil & Gas Exploration & Production ETF IEO and Westwood Salient Enhanced Energy Income ETF WEEI.

Investors can gain exposure to MRO via Invesco S&P 500 Equal Weight Energy ETF RSPG and First Trust Energy AlphaDEX Fund FXN.

Price Action: COP shares are down 2.80% at $115.63, while MRO shares are up 8.32% at $28.65 premarket at the last check on Wednesday.

Photo via Shutterstock

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