(Bloomberg) — ConocoPhillips agreed to buy Marathon Oil Corp. in an all-stock deal valuing the company at about $17 billion, extending a major buying spree among the biggest players in the U.S. oil and gas industry.
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The move will expand ConocoPhillips’ footprint in domestic shale fields from Texas to North Dakota and give the company reserves as far away as Equatorial Guinea. It adds to a wave of recent megadeals as producers look for new drilling sites in the hope that oil and gas demand will remain robust in coming years.
The acquisition deal represents a 14.7% premium to Marathon’s last closing price, the companies said in a statement on Wednesday. The deal has an enterprise value of $22.5 billion.
ConocoPhillips joins the ranks of major drillers pursuing production growth through recent acquisitions. In October, Exxon Mobil Corp. accelerated. the pace of Permian Basin consolidation with a $62 billion deal for Pioneer Natural Resources Co. That was followed later that month by Chevron Corp.’s deal. to Hess Corp. for approximately $53 billion.
ConocoPhillips had already expanded in the Permian in recent years through an acquisition of Concho Resources Inc. worth $13 billion and a $9.5 billion purchase of Shell Plc’s assets in the region.
Devon Energy Corp. held talks with Marathon last year about a possible combination, people familiar with the matter told Bloomberg News at the time.
Shares of ConocoPhillips fell 2.5% before the start of regular trading in New York. Marathon won 6.3%.
ConocoPhillips expects the acquisition to add resources totaling 2 billion barrels to its inventory.
The company expects the deal to close in the fourth quarter, pending regulatory approval. After that point, ConocoPhillips says share buybacks will exceed $20 billion over the next three years, with more than $7 billion in the first full year, based on recent commodity prices.
The company also plans to increase its basic regular dividend by 34% to 78 cents per share starting in the fourth quarter.
Evercore served as financial advisor to ConocoPhillips on the deal, and Wachtell, Lipton, Rosen & Katz is the company’s legal advisor. Morgan Stanley and Kirkland & Ellis advised Marathon.
(Updates with deal stock value in headline and first paragraph, stock prices in seventh.)
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