ConocoPhillips buys Marathon Oil for $17.1 billion in all-stock deal as energy prices surge

ConocoPhillips is buying Marathon Oil in an all-stock deal worth about $17.1 billion as energy prices surge and big oil companies make huge profits.

The deal is valued at $22.5 billion, including $5.4 billion in debt.

Oil prices are up more than 12% this year, with the cost of a barrel rising above $80 this week. Oil majors posted record profits following Russia’s invasion of Ukraine in 2022, and while numbers have declined, there has been a surge in energy company mergers while securing cash.

Last year, Chevron said it was buying Hess in a $53 billion acquisition, though the deal has faced difficulties. The company warned that the buyout could be at risk because it would require approval from Exxon Mobil and China’s national oil company, which hold rights to develop an oil field off the coast of the South American nation of Guyana, where Hess is a big player.

Last July, Exxon Mobil said it would pay $4.9 billion to Denbury Resources, an oil and gas producer that has begun carbon capture and storage operations and could benefit from changes in U.S. climate policy. Three months later, Exxon announced its proposed $60 billion acquisition of shale operator Pioneer Natural Resources.

All proposed acquisitions could face resistance from the United States, which has stepped up antitrust scrutiny of energy companies and other sectors such as technology under the Biden administration.

The Federal Trade Commission, which enforces federal antitrust laws, asked Exxon and Pioneer for additional information about their proposed deal. The filing is a step the agency takes to determine whether a merger may be anticompetitive under U.S. law. Pioneer revealed the proposal in January.

As part of the ConocoPhillips transaction, Marathon Oil shareholders will receive 0.2550 shares of ConocoPhillips common stock for each share of Marathon Oil common stock they hold, the companies said.

ConocoPhillips said Wednesday that the deal will add highly desirable space to its existing U.S. onshore investment portfolio.

“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 the U.S. in unconventional products,” said Ryan Lance, president and CEO of ConocoPhillips in prepared statement.

The transaction is expected to close in the fourth quarter. This still requires the consent of Marathon Oil’s shareholders.

Separate from the deal, ConocoPhillips said it expects to increase its regular dividend by 34% to 78 cents per share starting in the fourth quarter. The company said that once the Marathon Oil transaction is completed and assuming recent commodity prices, ConocoPhillips plans to repurchase more than $7 billion of stock in the first full year. It plans to buy back more than $20 billion of stock in the first three years.

Shares of ConocoPhillips fell 3.3% pre-market, while shares of Marathon Oil Corp. increased by over 7%.