Marathon Oil Corporation (NYSE:MRO) and ConocoPhillips (NYSE:COP) shares are moving in opposite directions Wednesday after announcing a definitive deal in which ConocoPhillips will acquire Marathon Oil in an all-stock transaction with an enterprise value of $22.5 billion.
Under the agreement, Marathon Oil shareholders will receive 0.2550 ConocoPhillips shares for each share of Marathon Oil they own.
The acquisition price represents a premium of 14.7% compared to the closing share price of Marathon Oil on May 28, 2024, and a premium of 16.0% compared to the volume-weighted average price over a ten-day period.
The acquisition agreement is expected to close in the fourth quarter of 2024, subject to Marathon Oil shareholder approval and other customary closing conditions.
SynergiesThis acquisition is expected to add over 2 billion barrels of feedstock, with an estimated average point-forward delivery cost of less than $30 per barrel WTI, to ConocoPhillips’ existing U.S. onshore portfolio.
The buyout is expected to be immediately accretive to earnings, cash flow from operations, free cash flow and return of capital per share to ConocoPhillips shareholders.
In addition, ConocoPhillips expects to realize full cost and capital synergies of $500 million within the first full year after the deal closes.
Boost for dividends and share buybacksConocoPhillips announced that it expects to increase its basic regular dividend per share by 34% to $0.78 starting in the fourth quarter of 2024.
Following the closing of the deal, and based on recent commodity prices, ConocoPhillips aims to repurchase more than $7 billion of shares in the first full year (versus more than $5 billion on its own) and more than $20 billion of shares in the first three years.
Ryan Lance, Chairman and CEO of ConocoPhillips, said: “This acquisition of Marathon Oil further deepens our portfolio and fits within our financial framework, adding high-quality, low-cost delivery capabilities in addition to our leading unconventional position in the US.”
“We remain committed to our differentiated cash-from-operations distribution framework to return more than 30% to our shareholders, with a track record of more than 40% since our strategy reset in 2016.”
ConocoPhillips ended the quarter with $6.3 billion in cash and short-term investments and $1.1 billion in long-term investments.
Investors can gain exposure to COP via IShares US Oil and Gas Exploration and Production ETF (BATS:IEO) and Westwood Salient Enhanced Energy Income ETF (NASDAQ:WEEI).
Investors can gain exposure to MRO through Invesco S&P 500 Equal Weight Energy ETF (NYSE:RSPG) and First Trust Energy AlphaDEX fund (NYSE:FXN).
Price promotion: COP shares are down 2.80% to $115.63, while MRO shares are up 8.32% to $28.65 premarket at last check on Wednesday.
Photo via Shutterstock
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This article ConocoPhillips Buys Marathon Oil in All-Stock Deal at 14.7% Premium: Details originally appeared on Benzinga.com
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