ConocoPhillips to Acquire Marathon Oil in $17 Billion Deal

(Bloomberg) — ConocoPhillips agreed to acquire Marathon Oil Corp. in an all-stock deal valuing the company at about $17 billion, extending a major buying spree among the largest players in the US oil and gas industry.

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The move expands ConocoPhillips’ footprint in domestic shale fields from Texas to North Dakota and hands the company reserves as far afield as Equatorial Guinea. It adds to a wave of recent megadeals as producers seek new drilling sites on a bet that oil and gas demand will remain robust for years to come.

The takeover agreement represents a 14.7% premium to the last closing share price for Marathon, the companies said in a statement Wednesday. The deal has an enterprise value of $22.5 billion.

ConocoPhillips joins the ranks of major drillers pursuing production growth via recent acquisitions. In October, Exxon Mobil Corp. accelerated the pace of Permian Basin consolidation with a $62 billion deal for Pioneer Natural Resources Co. That was followed later that month by Chevron Corp.’s agreement to buy Hess Corp. for about $53 billion.

ConocoPhillips had already expanded in the Permian in recent years through a $13 billion takeover of Concho Resources Inc. and a $9.5 billion purchase of Shell Plc’s assets in the region.

Devon Energy Corp. held talks with Marathon last year over a potential combination, people familiar with the matter told Bloomberg News at the time.

ConocoPhillips shares declined 2.5% before the start of regular trading in New York. Marathon gained 6.3%.

ConocoPhillips expects the takeover will add resources totaling 2 billion barrels to its inventory.

The company sees the deal closing in the fourth quarter, pending regulatory approvals. After that point, ConocoPhillips says its share buybacks will top $20 billion for the next three years, with more than $7 billion in the first full year, assuming recent commodity prices.

The company also plans to increase its ordinary base dividend by 34% to 78 cents per share starting in the fourth quarter.

Evercore was ConocoPhillips’ financial adviser on the deal, and Wachtell, Lipton, Rosen & Katz is the company’s legal adviser. Morgan Stanley and Kirkland & Ellis advised Marathon.

(Updates with equity value of the deal in the headline and first paragraph, share prices in seventh.)

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