ConocoPhillips buys Marathon Oil for US$17.1 billion in shares

ConocoPhillips buys Marathon Oil for US$17.1 billion in shares
ConocoPhillips buys Marathon Oil for US$17.1 billion in shares

ConocoPhillips is buying Marathon Oil in a stock deal valued at about US$17.1 billion, as energy prices rise and big oil companies reap huge profits.

The operation is valued at US$22.5 billion if we include US$5.4 billion in debt.

Crude oil prices have risen more than 12% this year and the cost of a barrel exceeded US$80 this week. Major oil companies posted record profits following Russia’s invasion of Ukraine in 2022, and while those numbers have fallen, there is a surge in consolidation among cash-rich energy companies.

Chevron announced last year that it was buying Hess for US$53 billion, although that deal faced headwinds. The company warned that the buyout could be jeopardized because it will require approval from Exxon Mobil and a Chinese national oil company, both of which have rights to exploit an offshore oil field. coasts of Guyana, a South American country where Hess plays an important role.

In July last year, Exxon Mobil announced it would pay US$4.9 billion for Denbury Resources, an oil and gas producer that has ventured into carbon capture and storage and is expected to benefit changes in American climate policy. Three months later, Exxon announced plans to acquire shale operator Pioneer Natural Resources for US$60 billion.

All these acquisition plans could face resistance from the United States, which under the Biden administration has stepped up antitrust controls for companies in the energy sector and other sectors, such as technology.

The Federal Trade Commission, which enforces federal antitrust laws, has requested additional information from Exxon and Pioneer about their proposed acquisition. This request is a step the agency takes when considering whether a combination could be anticompetitive under U.S. law. Pioneer made the request in a document filed in January.

As part of the transaction with ConocoPhillips, Marathon Oil shareholders will receive 0.2550 shares of ConocoPhillips common stock for each share of Marathon Oil common stock they own, the two companies said Wednesday.

ConocoPhillips explained Wednesday that the transaction will add highly sought-after land to its existing onshore portfolio in the United States.

“This acquisition of Marathon Oil deepens our portfolio and fits within our financial framework, adding high quality, low cost of supply inventory adjacent to our core unconventional position in the United States,” said Ryan Lance , chairman and CEO of ConocoPhillips, in a prepared statement.

The transaction should be finalized during the fourth quarter. It must still be approved by Marathon Oil shareholders.

Separate from the transaction, ConocoPhillips said it plans to increase its ordinary dividend by 34% to 78 US cents per share starting in the fourth quarter. The company explained that once the Marathon Oil transaction closes and based on recent commodity prices, ConocoPhillips plans to repurchase more than US$7 billion worth of shares during the first full year. It plans to repurchase more than US$20 billion worth of shares over the first three years.

Shares of ConocoPhillips were down 3.3% before the market opened, while those of Marathon Oil Corp. increased by more than 7%.

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