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ConocoPhillips to acquire Marathon Oil Corp.

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LNG Industry,

ConocoPhillips and Marathon Oil Corp. have entered into a definitive agreement pursuant to which ConocoPhillips will acquire Marathon Oil in an all-stock transaction with an enterprise value of US$22.5 billion, inclusive of US$5.4 billion of net debt. Under the terms of the agreement, Marathon Oil shareholders will receive 0.2550 shares of ConocoPhillips common stock for each share of Marathon Oil common stock, representing a 14.7% premium to the closing share price of Marathon Oil on 28 May 2024, and a 16% premium to the prior 10-day volume-weighted average price.

“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 US unconventional position,” said Ryan Lance, ConocoPhillips Chairman and CEO. “Importantly, we share similar values and cultures with a focus on operating safely and responsibly to create long-term value for our shareholders. The transaction is immediately accretive to earnings, cash flows and distributions per share, and we see significant synergy potential.”

“This is a proud moment to look back on what we achieved at Marathon Oil. Powered by our dedicated employees and contractors, we built a top performing portfolio with a multi-year track record of peer-leading operational execution, strong financial results and compelling return of capital to our shareholders – all while holding true to our core values of safety and environmental excellence. ConocoPhillips is the right home to build on that legacy, offering a truly unique combination of added scale, resilience and long-term durability. With its premier global asset base, strong balance sheet, and laser focus on operational excellence, ConocoPhillips’ track record of long-term investments, differentiated shareholder distributions, and active portfolio management are unmatched. When combined with the global ConocoPhillips portfolio, I’m confident our assets and people will deliver significant shareholder value over the long term,” said Lee Tillman, Marathon Oil chairman, President and CEO.

Transaction benefits

  • Immediately accretive: This acquisition is immediately accretive to ConocoPhillips on earnings, cash from operations, free cash flow, and return of capital per share to shareholders.
  • Delivers significant cost and capital synergies: Given the adjacent nature of the acquired assets and a common operating philosophy, ConocoPhillips expects to achieve the full US$500 million of cost and capital synergy run rate within the first full year following the closing of the transaction. The identified savings will come from reduced general and administrative costs, lower operating costs and improved capital efficiencies.
  • Further enhances premier Lower 48 portfolio: This acquisition will add highly complementary acreage to ConocoPhillips’ existing US onshore portfolio, adding over 2 billion bbl of resource with an estimated average point forward cost of supply of less than US$30/bbl WTI.

Return of capital update

Independent of the transaction, ConocoPhillips expects to increase its ordinary base dividend by 34% to 78 cents per share starting in 4Q024. Upon closing of the transaction and assuming recent commodity prices, ConocoPhillips plans to:

  • Repurchase over US$7 billion in shares in the first full year, up from over US$5 billion standalone.
  • Repurchase over US$20 billion in shares in the first three years.

“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,” added Lance. “We plan to raise our ordinary dividend by 34% in 4Q24 and we will continue to target top-quartile dividend growth relative to the S&P 500 going forward. Additionally, we intend to prioritise share repurchases following the close of the transaction, with a plan to retire the equivalent amount of newly issued equity in the transaction in 2 – 3 years at recent commodity prices.”

Transaction details

The transaction is subject to the approval of Marathon Oil stockholders, regulatory clearance and other customary closing conditions. The transaction is expected to close in 4Q24.

Evercore is serving as ConocoPhillips’ financial advisor and Wachtell, Lipton, Rosen & Katz is serving as ConocoPhillips’ legal advisor for the transaction. Morgan Stanley & Co. LLC is serving as Marathon Oil’s financial advisor and Kirkland & Ellis LLP is serving as Marathon Oil’s legal advisor for the transaction.

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