Marathon Oil shares are skyrocketing after being acquired by ConocoPhillips for $22.5 billion

Shares of Marathon Oil ( MRO ) rose in early trading Wednesday after ConocoPhillips ( COP ) announced it would acquire another Houston-based energy company in an all-stock deal valued at $22.5 billion, including $5.4 billion dollars of net debt.

Marathon shareholders will receive 0.255 shares of ConocoPhillips for each share of Marathon they own, representing a premium of almost 15% over Marathon’s Tuesday closing price of $26.45.

“This acquisition of Marathon Oil further deepens our portfolio and fits our financial framework by adding high-quality, low-cost inventory combined with our leadership in unconventional products in the U.S.,” said Ryan Lance, ConocoPhillips Chief Executive Officer (CEO). .

ConocoPhillips said the acquisition will be “immediately accretive” to its earnings and cash flow and expects to generate “at least $500 million in operating costs and capital savings during the first full year after the closing of the transaction,” which it said would result in the fourth quarter of 2024 year.

ConocoPhillips is also increasing dividends and buybacks

Moreover, ConocoPhillips also said it plans to increase its dividend to 78 cents per share starting in the fourth quarter, up from the 58 cents per share it is scheduled to pay next week.

After completing its acquisition of Marathon, ConocoPhillips said it plans to repurchase at least $7 billion of stock in the first full year, up from more than $5 billion last year. The company also plans to repurchase at least $20 billion of its own stock in the first three years after the acquisition closes.

“We remain committed to our differentiated operating cash distribution framework of returning over 30% to our shareholders, and since resetting our strategy in 2016, we have a track record of returning over 40%,” Lance said.

At the market open, Marathon shares jumped 10.6% to $29.23, while ConocoPhillips shares fell 1.3% to $117.42.