ConocoPhillips to acquire Marathon Oil Corporation in all-stock transaction; provides shareholder distribution update
ConocoPhillips (NYSE: COP) announced its acquisition of Marathon Oil (NYSE: MRO) in an all-stock deal valued at $22.5 billion, including $5.4 billion of net debt. Marathon Oil shareholders will receive 0.2550 shares of ConocoPhillips stock per share, representing a 14.7% premium to Marathon Oil's closing price on May 28, 2024. The transaction is expected to close in Q4 2024, delivering $500 million in cost and capital savings within the first year. ConocoPhillips plans a 34% increase in its base dividend to 78 cents per share in Q4 2024. It also projects over $20 billion in share buybacks within three years, with $7 billion in the first year. The acquisition is set to enhance ConocoPhillips' U.S. portfolio by adding over 2 billion barrels with a supply cost of less than $30 per barrel WTI.
- Acquisition immediately accretive to earnings, cash flows, and return of capital per share.
- Expected $500 million in cost and capital savings within the first year.
- 34% increase in ordinary base dividend to 78 cents per share starting Q4 2024.
- Over $20 billion in share repurchases within three years, with $7 billion in the first year.
- Addition of over 2 billion barrels of resource with a cost supply of less than $30 per barrel WTI.
- Acquisition includes $5.4 billion of net debt.
- Potential regulatory and stockholder approval risks.
- Possible dilution of ConocoPhillips' shares due to stock-based transaction.
The acquisition of Marathon Oil by ConocoPhillips brings significant potential for earnings and cash flow growth, especially given the $500 million in anticipated cost and capital savings in the first year. This type of savings often comes from streamlining overlapping operations and reducing general and administrative expenses. Additionally, the substantial increase in dividends by 34% underscores the company's confidence in its future cash flow.
For retail investors, the immediate accretion to earnings and cash flows is a positive indicator. The all-stock nature of the transaction means that Marathon Oil shareholders will benefit from the future growth of ConocoPhillips. Overall, the deal enhances ConocoPhillips' portfolio with additional low-cost supply, potentially leading to improved margins.
Moreover, the planned share buybacks worth
In the short term, investors should monitor how quickly these synergies are realized and whether the commodity price environment remains favorable. Long-term benefits include enhanced scalability and a stronger competitive position in the U.S. energy market.
This acquisition likely reflects broader industry trends of consolidation in the oil and gas sector, driven by the pursuit of operational efficiencies and cost savings. By acquiring Marathon Oil, ConocoPhillips is gaining access to significant assets in key U.S. resource plays like Eagle Ford and Permian Basin.
The market's immediate reaction will depend on the perceived synergistic benefits and the strategic fit of Marathon's assets within ConocoPhillips' existing portfolio. The
Retail investors should consider the potential for increased market share and resource base, which can provide a competitive edge. The commitment to enhancing shareholder value through dividends and buybacks may also bolster market sentiment.
However, the integration risks and market volatility in oil prices remain critical factors to watch. The success of this acquisition will hinge on effective execution and the ability to navigate commodity price fluctuations.
From an industry perspective, this acquisition signifies a strategic move for ConocoPhillips to strengthen its U.S. operations. Adding over 2 billion barrels of resource with an estimated cost of supply under
The emphasis on cost and capital synergies suggests a rigorous approach to achieving higher operational efficiency. This acquisition could set a precedent for other companies in the sector to pursue similar consolidation strategies to optimize resources and reduce costs.
For retail investors, understanding the implications of such large-scale acquisitions is essential. The enhanced portfolio and potential for significant cost reductions can translate into better profitability, especially during periods of fluctuating oil prices. It is also worth noting the environmental considerations and operational philosophies that both companies share, which may appeal to investors focused on sustainable and responsible investing.
In the long run, this strategic move could position ConocoPhillips as a more robust player in the energy sector, capable of weathering market cycles and sustaining shareholder value.
- Acquisition of Marathon Oil Corporation is expected to be immediately accretive to earnings, cash flows and return of capital per share.
-
ConocoPhillips expects to achieve at least
of run rate cost and capital savings within the first full year following the closing of the transaction.$500 million -
Independent of the transaction, ConocoPhillips expects to increase its ordinary base dividend by
34% to78 cents per share starting in the fourth quarter of 2024. -
Upon closing of the transaction, ConocoPhillips expects share buybacks to be over
in the first three years, with over$20 billion in the first full year, at recent commodity prices.$7 billion
“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
“This is a proud moment to look back on what we achieved at Marathon Oil. 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. When combined with the global ConocoPhillips portfolio, I’m confident our assets and people will deliver significant shareholder value over the long term,” said Lee Tillman, Marathon Oil chairman, president and chief executive officer.
Transaction benefits
- Immediately accretive: This acquisition is immediately accretive to ConocoPhillips on earnings, cash from operations, free cash flow and return of capital per share to shareholders.
-
Delivers significant cost and capital synergies: Given the adjacent nature of the acquired assets and a common operating philosophy, ConocoPhillips expects to achieve the full
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.$500 million -
Further enhances premier Lower 48 portfolio: This acquisition will add highly 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 per barrel WTI.$30
Return of capital update
Independent of the transaction, ConocoPhillips expects to increase its ordinary base dividend by
-
Repurchase over
in shares in the first full year, up from over$7 billion standalone.$5 billion -
Repurchase over
in shares in the first three years.$20 billion
“We remain committed to our differentiated cash from operations distribution framework of returning greater than
Transaction details
The transaction is subject to the approval of Marathon Oil stockholders, regulatory clearance and other customary closing conditions. The transaction is expected to close in the fourth quarter of 2024.
ConocoPhillips will host a conference call today at 10 a.m. Eastern time to discuss this announcement. To listen to the call and view related presentation materials, go to www.conocophillips.com/investor.
Advisors
Evercore is serving as ConocoPhillips’ financial advisor and Wachtell, Lipton, Rosen & Katz is serving as ConocoPhillips’ legal advisor for the transaction. Morgan Stanley & Co. LLC is serving as Marathon Oil’s financial advisor and Kirkland & Ellis LLP is serving as Marathon Oil’s legal advisor for the transaction.
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About ConocoPhillips
ConocoPhillips is one of the world’s leading exploration and production companies based on both production and reserves, with a globally diversified asset portfolio. Headquartered in
About Marathon Oil
Marathon Oil (NYSE: MRO) is an independent oil and gas exploration and production (E&P) company focused on four of the most competitive resource plays in the
Forward-Looking Statements
This news release includes “forward-looking statements” as defined under the federal securities laws. All statements other than statements of historical fact included or incorporated by reference in this news release, including, among other things, statements regarding the proposed business combination transaction between ConocoPhillips (“ConocoPhillips”) and Marathon Oil Corporation (“Marathon”), future events, plans and anticipated results of operations, business strategies, the anticipated benefits of the proposed transaction, the anticipated impact of the proposed transaction on the combined company’s business and future financial and operating results, the expected amount and timing of synergies from the proposed transaction, the anticipated closing date for the proposed transaction and other aspects of ConocoPhillips’ or Marathon’s operations or operating results are forward-looking statements. Words and phrases such as “ambition,” “anticipate,” “estimate,” “believe,” “budget,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “seek,” “should,” “will,” “would,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target” and other similar words can be used to identify forward-looking statements. However, the absence of these words does not mean that the statements are not forward-looking. Where, in any forward-looking statement, ConocoPhillips or Marathon expresses an expectation or belief as to future results, such expectation or belief is expressed in good faith and believed to be reasonable at the time such forward-looking statement is made. However, these statements are not guarantees of future performance and involve certain risks, uncertainties and other factors beyond ConocoPhillips’ or Marathon’s control. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in the forward-looking statements.
The following important factors and uncertainties, among others, could cause actual results or events to differ materially from those described in forward-looking statements: ConocoPhillips’ ability to successfully integrate Marathon’s businesses and technologies, which may result in the combined company not operating as effectively and efficiently as expected; the risk that the expected benefits and synergies of the proposed transaction may not be fully achieved in a timely manner, or at all; the risk that ConocoPhillips or Marathon will be unable to retain and hire key personnel; the risk associated with Marathon’s ability to obtain the approval of its stockholders required to consummate the proposed transaction and the timing of the closing of the proposed transaction, including the risk that the conditions to the transaction are not satisfied on a timely basis or at all or the failure of the transaction to close for any other reason or to close on the anticipated terms, including the anticipated tax treatment (and with respect to increases in ConocoPhillips’ share repurchase program, such increases are not intended to exceed shares issued in the transaction); the risk that any regulatory approval, consent or authorization that may be required for the proposed transaction is not obtained or is obtained subject to conditions that are not anticipated; the occurrence of any event, change or other circumstance that could give rise to the termination of the proposed transaction; unanticipated difficulties, liabilities or expenditures relating to the transaction; the effect of the announcement, pendency or completion of the proposed transaction on the parties’ business relationships and business operations generally; the effect of the announcement or pendency of the proposed transaction on the parties’ common stock prices and uncertainty as to the long-term value of ConocoPhillips’ or Marathon’s common stock; risks that the proposed transaction disrupts current plans and operations of ConocoPhillips or Marathon and their respective management teams and potential difficulties in hiring or retaining employees as a result of the proposed transaction; rating agency actions and ConocoPhillips’ and Marathon’s ability to access short- and long-term debt markets on a timely and affordable basis; changes in commodity prices, including a prolonged decline in these prices relative to historical or future expected levels; global and regional changes in the demand, supply, prices, differentials or other market conditions affecting oil and gas, including changes resulting from any ongoing military conflict, including the conflicts in
No Offer or Solicitation
This news release is not intended to and shall not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any securities, or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made, except by means of a prospectus meeting the requirements of Section 10 of the
Additional Information about the Merger and Where to Find It
In connection with the proposed transaction, ConocoPhillips intends to file with the SEC a registration statement on Form S-4, which will include a proxy statement of Marathon that also constitutes a prospectus of ConocoPhillips common shares to be offered in the proposed transaction. Each of ConocoPhillips and Marathon may also file other relevant documents with the SEC regarding the proposed transaction. This news release is not a substitute for the proxy statement/prospectus or registration statement or any other document that ConocoPhillips or Marathon may file with the SEC. The definitive proxy statement/prospectus (if and when available) will be mailed to stockholders of Marathon. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT, PROXY STATEMENT/PROSPECTUS AND ANY OTHER RELEVANT DOCUMENTS THAT MAY BE FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors and security holders will be able to obtain free copies of the registration statement and proxy statement/prospectus (if and when available) and other documents containing important information about ConocoPhillips, Marathon and the proposed transaction, once such documents are filed with the SEC through the website maintained by the SEC at www.sec.gov. Copies of the documents filed with the SEC by ConocoPhillips will be available free of charge on ConocoPhillips’ website at www.conocophillips.com or by contacting ConocoPhillips’ Investor Relations Department by email at investor.relations@conocophillips.com or by phone at 281-293-5000. Copies of the documents filed with the SEC by Marathon will be available free of charge on Marathon’s website at ir.marathonoil.com or by contacting Marathon at 713-629-6600.
Participants in the Solicitation
ConocoPhillips, Marathon and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction. Information about the directors and executive officers of ConocoPhillips is set forth in (i) ConocoPhillips’ proxy statement for its 2024 annual meeting of stockholders under the headings “Executive Compensation”, “Item 1: Election of Directors and Director Biographies” (including “Related Party Transactions” and “Director Compensation”), “Compensation Discussion and Analysis”, “Executive Compensation Tables” and “Stock Ownership”, which was filed with the SEC on April 1, 2024 and is available at https://www.sec.gov/ix?doc=/Archives/edgar/data/1163165/000130817924000384/
Other information regarding the participants in the proxy solicitations and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the proxy statement/prospectus and other relevant materials to be filed with the SEC regarding the proposed transaction when such materials become available. Investors should read the proxy statement/prospectus carefully when it becomes available before making any voting or investment decisions. Copies of the documents filed with the SEC by ConocoPhillips and Marathon will be available free of charge through the website maintained by the SEC at www.sec.gov. Additionally, copies of documents filed with the SEC by ConocoPhillips will be available free of charge on ConocoPhillips’ website at www.conocophillips.com/ and those filed by Marathon will be available free of charge on Marathon’s website at ir.marathonoil.com/.
Use of Non-GAAP Financial Information and Other Terms – This news release contains certain financial measures that are not prepared in accordance with GAAP, including cash from operations (CFO), free cash flow and net debt. CFO is calculated by removing the impact from operating working capital from cash provided by operating activities. Free cash flow is CFO net of capital expenditures and investments. Net debt is total balance sheet debt less cash, cash equivalents and short-term investments. This news release also contains the terms enterprise value, cost of supply and return of capital. Enterprise value included in this release is calculated based on the sum of net debt as of March 31, 2024, and anticipated shares to be issued at the fixed exchange ratio of 0.2550 measured at ConocoPhillips' closing share price on May 28, 2024. Cost of supply is the WTI equivalent price that generates a 10 percent after-tax return on a point-forward and fully burdened basis. Fully burdened includes capital infrastructure, foreign exchange, price-related inflation, G&A and carbon tax (if currently assessed). If no carbon tax exists for the asset, carbon pricing aligned with internal energy scenarios are applied. All barrels of resource are discounted at 10 percent. Return of capital is defined as the total of the ordinary dividend, share repurchases and variable return of cash (VROC).
Cautionary Note to U.S. Investors – The SEC permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable and possible reserves. We may use the term “resource” in this release that the SEC’s guidelines prohibit us from including in filings with the SEC. U.S. investors are urged to consider closely the oil and gas disclosures in our Form 10-K and other reports and filings with the SEC. Copies are available from the SEC and from the ConocoPhillips website.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240529051958/en/
ConocoPhillips
Dennis Nuss (media)
281-293-1149
dennis.nuss@conocophillips.com
Investor Relations
281-293-5000
investor.relations@conocophillips.com
Marathon Oil
Karina Brooks (media)
713-296-2191
Investor Relations
Guy Baber: 713-296-1892
John Reid: 713-296-4380
Source: ConocoPhillips
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