US energy firm ConocoPhillips has entered into a definitive deal to buy compatriot Marathon Oil in an all-stock transaction with an enterprise value of $22.5 billion.
The deal includes $5.4 billion of net debt, ConocoPhillips said in a statement on Wednesday.
Under the terms of the agreement, Marathon Oil shareholders will receive 0.2550 shares of ConocoPhillips common stock for each share of Marathon Oil common stock.
This represents a 14.7 percent premium to the closing share price of Marathon Oil on May 28, 2024, and a 16 premium to the prior 10-day volume-weighted average price, ConocoPhillips said.
The transaction remains subject to the approval of Marathon Oil stockholders, regulatory clearance and other customary closing conditions.
ConocoPhillips expects the deal to close in the fourth quarter of 2024.
Boosting US onshore portfolio
Ryan Lance, ConocoPhillips chairman and CEO said this acquisition “deepens our portfolio and fits within our financial framework, adding high-quality, low cost of supply inventory adjacent to our leading US unconventional position.”
“The transaction is immediately accretive to earnings, cash flows and distributions per share, and we see significant synergy potential,” he said.
Given the adjacent nature of the acquired assets and a “common operating philosophy”, ConocoPhillips expects to achieve the full $500 million 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.
Also, this acquisition will add “highly complementary acreage to ConocoPhillips’ existing US onshore portfolio, adding over 2 billion barrels of resource with an estimated average point forward cost of supply of less than $30 per barrel WTI,” the firm said.
LNG capacity
ConocoPhilips said in a presentation announcing the deal that the acquisition includes about 2 mtpa net LNG capacity with supply optimization opportunities in Equatorial Guinea.
Marathon Oil owns a 56 percent interest in the 3.4 mtpa Equatorial Guinea LNG plant that has one train.
Besides operator Marathon Oil, other shareholders in the Punta Europa LNG plant include Sonagas and Marubeni. The facility started producing LNG back in 2007.
ConocoPhillips recently said it is looking to sign more LNG offtake deals and to secure additional regasification capacities, as it continues to expand its LNG portfolio.
In 2022, the firm increased its stake in the Australia Pacific LNG export project back in 2022, and it purchased stakes in both QatarEnergy’s giant North Field East (NFE) project and the North Field South (NFS) project.
On the Gulf Coast, ConocoPhillips secured 5 mtpa of offtake from the first phase of Sempra Infrastructure’s Port Arthur LNG project in Texas, and it also took a 30 percent equity interest in the project.
Last year, ConocoPhillips also signed a deal with Mexico Pacific, the developer of the planned Saguaro Energia LNG export project, to buy 2.2 mtpa of LNG from the latter but this deal is pending FID.
It also has 0.2 mtpa of offtake for five years starting in 2025 from Sempra Infrastructure’s ECA Phase 1 in Mexico.