By Dean Seal


ConocoPhillips has agreed to acquire Marathon Oil in an all-stock deal valued at $17.1 billion that would combine two of America's most recognizable energy companies.

The transaction comes after five consecutive quarters of falling profits at Marathon Oil and marks the latest major consolidation in an energy sector that has seen a flurry of M&A activity this year. Last week, Hess shareholders voted to sell the company to Chevron for $53 billion.

Under the terms of the agreement, Marathon Oil stockholders will exchange each share for 0.255 shares of ConocoPhillips, representing a nearly 15% premium based on Marathon Oil's closing share price on Tuesday.

Marathon Oil shares jumped 7.5% to $28.44 in premarket trading. Shares of ConocoPhillips meanwhile slid 3.4% to $114.90.

The transaction is expected to close in the fourth quarter, subject to approval from regulators and Marathon Oil stockholders. The deal has an enterprise value of $22.5 billion that includes $5.4 billion of debt.

ConocoPhillips is looking for the tie-up to be immediately accretive to its earnings, cash flows and return of capital.

The Houston-based company is eying a $500 million cost and capital synergy run rate within the first full year of the transaction closing, driven by lower overhead costs, lower operating costs and improved capital efficiencies.

ConocoPhillips said the deal adds complementary acreage to its existing U.S. onshore portfolio. The company adds that independent of the transaction, it expects to lift its base dividend by a third to 78 cents a share starting in the fourth quarter. It also now plans to buy back $7 billion in shares in the first full year after the deal closes, rather than $5 billion, and more than $20 billion during the first three years.


Write to Dean Seal at dean.seal@wsj.com


(END) Dow Jones Newswires

05-29-24 0757ET