ExxonMobil Acquires Chevron in a $25 Billion Merger
Major players in the oil industry continue to make significant acquisitions.
Big Oil keeps doing big deals.
ConocoPhillips said Wednesday it had agreed to buy Marathon Oil in an all-stock deal worth $22.5 billion, including about $5.4 billion of debt.
Marathon Oil shareholders will be given 0.255 shares of ConocoPhillips for each Marathon share they have, which is 14.7% higher than the closing price on Tuesday.
In premarket trading, Marathon's shares (MRO) saw an increase of over 10%, while Conoco's stock (COP) dropped by approximately 2%.
Oil giants like ExxonMobil and Chevron have recently made significant acquisitions in the energy sector. ExxonMobil purchased Pioneer for $60 billion, while Chevron agreed to take over Hess for $53 billion. Other mergers include Occidental buying CrownRock and Diamondback Energy acquiring Endeavor Energy Partners in multibillion-dollar deals.
These companies are benefiting from years of high oil prices, leading to substantial profits and cash reserves. They are using these funds to acquire assets in the Permian basin, a key oil field that has contributed to the US becoming the world's leading oil and gas producer. This strategy not only boosts returns for shareholders but also helps the companies stay competitive in the evolving energy market, where there is growing pressure to invest in renewable energy sources.
"This acquisition of Marathon Oil expands our portfolio and aligns with our financial goals," stated Ryan Lance, CEO of ConocoPhillips.
Gas prices are displayed on a gas pump at an Exxon gas station in Washington, DC, on May 24, 2022.
Gas prices are displayed on a gas pump at an Exxon gas station in Washington, DC, on May 24, 2022.
Stefani Reynolds/AFP/Getty Images
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Earlier on Wednesday, the Financial Times reported that a deal between Conoco, Devon Energy, and Marathon was nearing completion. The two companies had been competing for weeks to acquire Marathon.
Marathon Oil, originally known as The Ohio Oil Company, was established in 1887. It was purchased by John D. Rockefeller's Standard Oil just two years later. The company retained its original name until 1962.
CEO Lee Tillman expressed his excitement about Wednesday's deal, describing it as a proud moment for ConocoPhillips. He believes that the company is the perfect place to continue their legacy of operational excellence and strong earnings.
Tillman stated that he is confident in the potential for significant shareholder value over the long term when their assets and people are combined with the global ConocoPhillips portfolio.
ConocoPhillips aims to achieve $500 million in savings within the first full year after the transaction closes, which is anticipated in the fourth quarter of 2024 pending approval from Marathon shareholders and regulators.
In addition, the company plans to buy back more than $7 billion in shares within the first full year, and over $20 billion within the first three years.
This story has been updated with additional information.
Editor's P/S:
The recent spate of mergers and acquisitions in the oil industry underscores the industry's resilience and its commitment to growth. Despite the growing pressure to transition to renewable energy sources, oil companies continue to see value in traditional fossil fuels, particularly in the Permian basin, which has emerged as a key driver of US oil production. The deals reflect the companies' confidence in the long-term viability of oil and their willingness to invest heavily to secure their future in the energy market.
The ConocoPhillips-Marathon Oil deal is particularly noteworthy given Marathon's long history and its role in the early development of the oil industry. The acquisition not only expands ConocoPhillips' portfolio but also aligns with its financial goals and its commitment to shareholder value. The deal highlights the increasing consolidation in the oil industry, as larger companies seek to gain market share and economies of scale. It also reflects the industry's focus on efficiency and cost-cutting, as companies look to maximize their profits in the face of rising competition and regulatory challenges.
