ConocoPhillips announced Wednesday it has agreed to purchase Marathon Oil in an all-stock transaction valued at $22.5 billion, including $5.4 billion in debt. Marathon Oil stock jumped while COP shares angled lower Wednesday.
Marathon Oil shareholders will receive 0.2550 shares of COP stock for each share of MRO. This represents a 14.7% premium on the Marathon Oil stock closing price Tuesday of 26.45 and a 16% premium to the prior 10-day volume-weighted average price. ConocoPhillips and Marathon Oil expect the deal to close in the fourth quarter.
The deal will bolster Conoco's shale assets.
"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," ConocoPhillips Chief Executive Ryan Lance said Wednesday in the press release.
ConocoPhillips added Wednesday that it remains focused on returning cash to shareholders. The company said it plans to increase its ordinary base dividend by 34% to 78 cents per share in Q4. COP added that when the deal for Marathon Oil is closed it plans to repurchase more than $7 billion in shares in the first full year, up from $5 billion, and repurchase more $20 billion in shares in the first three years.
Marathon Oil stock jumped 8.5% to 28.69 during market action on Wednesday. Meanwhile, ConocoPhillips stock fell 3% to 115.29.
On Tuesday, MRO shares advanced 3.5% to 26.45 and COP added 1.5% to 118.96.
ConocoPhillips is among the top U.S. oil producers that is now looking at adding production growth through industry consolidation. Exxon Mobil and Chevron have led the way, both stepping up acquisition efforts recently.
The Financial Times reported ahead of the deal that ConocoPhillips and rival Devon Energy had been battling out to acquire Marathon Oil for several weeks.
Andrew Dittmar, principal analyst at Enverus Intelligence Research, noted the deal will boost COP's market capitalization to more than $150 billion, extending its lead as the largest independent producer and placing it broadly in the same scale as the oil majors.
Dittmar added the transaction "represents a pivot in U.S. shale M&A from deals focused on increasing exposure in a single key basin or play to acquiring a multi-basin operator."
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