NEW YORK: US energy giant ConocoPhillips announced Wednesday that it will acquire competitor Marathon Oil in an all-stock transaction valued at $22.5 billion, including $5.4 billion in debt, a major expansion despite pressure to move away from fossil fuels.
The deal is the latest in a series of acquisitions in the US oil sector which run counter to calls to begin their energy transition as climate change takes hold.
It will enable ConocoPhillips to strengthen its position in shale oil and gas-rich regions such as the Bakken Basin in the northern United States and the Permian Basin in the south.
The acquisition “further deepens our portfolio and fits within our financial framework, adding high-quality, low cost of supply inventory,” ConocoPhillips chairman and chief executive officer Ryan Lance said in a company statement.
He said the company sees “significant synergy potential” in the merger.
Marathon Oil chief Lee Tillman said it was a “proud moment to look back on what we achieved,” and that ConocoPhillips was “the right home to build on that legacy.”
The deal, which is expected to close in the fourth quarter of this year, gives Marathon Oil shareholders 0.255 shares of ConocoPhillips common stock for each share of Marathon Oil common stock.
That represents a 14.7 percent premium over Marathon Oil’s closing price on Tuesday.
The deal should see ConocoPhillips achieve savings of $500 million in the year after, according to the statement, largely due to reduced administrative and production costs.
It plans to continue rewarding shareholders with buybacks worth more than $20 billion in the three years following the takeover, including $7 billion in the first year, according to the press release.
In October, another US oil giant, ExxonMobil, announced that it was to buy its compatriot Pioneer Natural Resources for around $60 billion.
The aim was also to strengthen its position in the coveted Permian Basin, a key US shale region.
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