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Mega mergers continue in US unconventionals sector
5/6/2024
US energy giant ConocoPhillips has bought Marathon Oil in a deal valued at $22bn, including $5.4bn in debt.
The deal is the latest in a series of acquisitions in the US oil sector, following ExxonMobil’s takeover of Pioneer Natural Resources announced in October 2023 and Chevron’s tie-up with Hess just a few weeks later.
According to Ryan Lance, ConocoPhillips Chairman and CEO, the deal will enable ConocoPhillips to strengthen its position in US unconventionals, adding over 2bn barrels of resource. Marathon Oil owns assets across the Anadarko, Bakken, Eagle Ford and Permian basins.
The deal ends months of speculation around the fate of both companies in the mergers and acquisitions (M&A) market, including talk of a potential tie-up between Marathon and fellow public independent Devon Energy, another company with assets in multiple core tight [shale] oil regions.
Matthew Bernstein, Senior Analyst at Rystad Energy says that with the deal, ‘ConocoPhillips chose to look outside the already heavily consolidated basin and pursue a tie-up with Marathon that will elevate [the company] into second position in terms of total inventory in the Lower 48 core tight oil plays, just behind ExxonMobil, for a relatively less expensive EBITDA [earnings before interest, taxes, depreciation and amortisation] multiple than it likely would have needed to pay for a core Permian player.’
According to Rystad Energy’s analysis, six firms – ExxonMobil, Chevron, Diamondback (including Endeavor), ConocoPhillips (even before the Marathon merger), Occidental (including CrownRock) and EOG – control about 62% of remaining net tight oil resources in the Permian Basin.
This is the second significant Eagle Ford acquisition in recent months, following Crescent Energy’s purchase of SilverBow, as operators look to pursue less expensive options outside of an already crowded Permian.
Like other recent deals, the ExxonMobil-Marathon acquisition could invite antitrust scrutiny from the US Federal Trade Commission (FTC).
