Key Takeaways
- Marathon Oil stock is surging Wednesday following the announcement that ConocoPhillips will acquire it for $22.5 billion including debt.
- Marathon shareholders will receive 0.255 shares of ConocoPhillips for each share of Marathon they own, with the deal expected to close in the fourth quarter of 2024.
- ConocoPhillips is also raising its dividend starting in the fourth quarter, and plans to boost its buyback program once the acquisition closes.
Marathon Oil (MRO) stock jumped at the opening bell Wednesday after ConocoPhillips (COP) announced that it will acquire its fellow Houston-based energy firm in an all-stock deal valued at $22.5 billion, inclusive of $5.4 billion of net debt.
Marathon shareholders will receive 0.255 shares of ConocoPhillips stock for each share of Marathon they own, a premium of nearly 15% to Marathon’s Tuesday closing price of $26.45.
“This acquisition of Marathon Oil further deepens our portfolio and fits within our financial framework, adding high-quality, low cost of supply inventory adjacent to our leading U.S. unconventional position,” ConocoPhillips Chief Executive Officer (CEO) Ryan Lance said.
ConocoPhillips said the acquisition will be “immediately accretive” to its earnings and cash flow, and expects to generate “at least $500 million of run rate cost and capital savings within the first full year following the closing of the transaction,” which it believes will occur in the fourth quarter of 2024.
ConocoPhillips Also Boosting Dividend, Buybacks
Separately, ConocoPhillips also said it plans to increase its dividend to 78 cents per share starting in the fourth quarter, up from the payout of 58 cents per share that it is set to distribute next week.
Once the Marathon acquisition closes, ConocoPhillips said it plans to buy back at least $7 billion in its own shares over the first full year, up from over $5 billion last year. The company also plans to buy back at least $20 billion in its own stock over the first three years after the acquisition closes.
“We remain committed to our differentiated cash from operations distribution framework of returning greater than 30% to our shareholders, with a track record of returning over 40% since our 2016 strategy reset,” Lance said.
At market open, Marathon shares jumped 10.6% to $29.23, while ConocoPhillips shares fell 1.3% to $117.42.