Consolidation in the Oil Patch: ConocoPhillips Acquires Marathon Oil

Oil-patch consolidation continues to make headlines as ConocoPhillips recently announced its agreement to acquire Marathon Oil in a deal valued at $22.5 billion. This move comes after Exxon Mobil and Chevron made their own strategic acquisitions last year, solidifying their positions as major players in the industry.

The deal between ConocoPhillips and Marathon Oil is significant, as it will bring Conoco’s market value closer to that of TotalEnergies, a French oil major. While the price tag represents a 15% premium to Marathon’s closing share price, it is seen as a fair deal compared to other recent acquisitions in the sector.

What sets this deal apart is that it may not be as transformative for Conoco as other acquisitions have been for their respective buyers. While it will provide a boost to Conoco’s free cash flow and earnings per share, it does not significantly expand their inventory life or exposure to new frontiers.

One potential area of concern is the companies’ combined position in the Eagle Ford basin, which could attract antitrust scrutiny. However, both Conoco and Marathon have previously spun off their refining businesses, which may mitigate some regulatory concerns.

The deal is a setback for Devon Energy, as it has now lost both Marathon Oil and CrownRock as potential acquisition targets to competitors. This trend of consolidation in the oil and gas industry is expected to continue, with larger companies potentially targeting companies with higher production costs.

Overall, the game of musical chairs in the oil-patch consolidation is far from over, with more deals and acquisitions likely on the horizon. Investors in the energy sector will need to stay vigilant and strategic as the landscape continues to evolve.