ConocoPhillips To Buy Marathon Oil: What To Know
If ConocoPhillips' bid for Marathon Oil goes through, it will bring together two of the world's largest exploration and production companies.
Another big M&A announcement in the oil patch is making news after ConocoPhillips (COP) said it will buy Marathon Oil (MRO) for $17.1 billion in stock. The deal includes $5.4 billion in debt, bringing the enterprise value of the transaction to approximately $22.5 billion.
The purchase price represents a roughly 15% premium to Marathon stock's May 28 close at $26.45, sending its share price up by more than 9% Wednesday. COP stock, meanwhile, is down about 3%.
Under the agreement, Marathon shareholders will receive 0.255 shares of ConocoPhillips common stock for every share of MRO they currently own.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
"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 U.S. unconventional position," said Ryan Lance, chairman and CEO of ConocoPhillips, in a statement.
COP said that the transaction will be immediately accretive to its earnings, cash from operations, free cash flow and return of capital per share to shareholders. It expects to achieve a $500 million in cost and capital synergy run rate within the first full year of the close of the transaction, primarily due to reduced general and administrative costs, lower operating costs and improved capital efficiencies.
Following completion of the transaction, ConocoPhillips said it expects stock buybacks to exceed $7 billion in the first full year and over $20 billion in the first three years.
Separately, ConocoPhillips said it anticipates a 34% increase to its quarterly dividend, beginning in Q4 2024. This will bring its quarterly payout to 78 cents per share.
"We plan to raise our ordinary dividend by 34% in the fourth quarter and we will continue to target top-quartile dividend growth relative to the S&P 500 going forward," Lance said. "Additionally, we intend to prioritize share repurchases following the close of the transaction, with a plan to retire the equivalent amount of newly issued equity in the transaction in two to three years at recent commodity prices."
The transaction is subject to approval by Marathon shareholders, regulatory clearance and other closing conditions, ConocoPhillips said. If all goes as planned, the transaction is expected to close in the fourth quarter of this year.
Is ConocoPhillips stock a buy, sell or hold?
Analysts are mostly upbeat toward the oil stock, which isn't unsurprising considering its averaged a total annual return (price change plus dividends) of nearly 34% over the past three years.
According to S&P Global Market Intelligence, the consensus analyst target price for COP stock is $142.81, representing implied upside of more than 24% to current levels. Meanwhile, the consensus recommendation is a Buy.
Related Content
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
Joey Solitro is a freelance financial journalist at Kiplinger with more than a decade of experience. A longtime equity analyst, Joey has covered a range of industries for media outlets including The Motley Fool, Seeking Alpha, Market Realist, and TipRanks. Joey holds a bachelor's degree in business administration.
-
Harris or Trump: Whose Tax Plans Are More Popular with Voters?
Election 2024 A new poll is shedding light on what voters think about election tax policy.
By Kelley R. Taylor Published
-
How This Vanguard Emerging Markets Bond Fund Outperforms Its Peers
The Vanguard Emerging Markets Bond Fund took a cautious positioning at the start of the year, which has helped it beat the majority of its peers.
By Nellie S. Huang Published
-
How This Vanguard Emerging Markets Bond Fund Outperforms Its Peers
The Vanguard Emerging Markets Bond Fund took a cautious positioning at the start of the year, which has helped it beat the majority of its peers.
By Nellie S. Huang Published
-
Five Windows of Opportunity for Roth Conversions
When you convert a traditional IRA to a Roth IRA matters if you want to limit how much you pay in taxes.
By Aaron Argiso, CFP® Published
-
Stock Market Today: Stocks Rise After Strong September Jobs Report
Stocks were choppy Thursday as investors took in a higher-than-expected rise in jobless claims and strong growth in the services sector.
By Karee Venema Published
-
Strong September Jobs Report Puts Soft Landing in Sight: What the Experts Are Saying
Jobs Report A blowout reading on nonfarm payrolls takes another jumbo-sized cut to interest rates off the table.
By Dan Burrows Published
-
Spirit Airlines Stock Plunges on Bankruptcy Buzz: What to Know
Spirit Airlines is one of the worst stocks Friday as reports swirl that the discount airline could file for bankruptcy.
By Joey Solitro Published
-
Rivian Stock Sinks on Deliveries Miss, Production Outlook
Rivian stock is spiraling Friday after the EV maker reported dismal Q3 deliveries and cut its production outlook for the year. Here's what you need to know.
By Joey Solitro Published
-
Tesla's Robotaxi Event: What Wall Street Expects
Tesla’s robotaxi event kicks off next week. Here’s what Wall Street expects to see and how analysts feel about the stock heading into the event.
By Joey Solitro Published
-
Election 2024: Politics and Your Portfolio
Who wins the White House matters — but only at the margins when it comes to your investment portfolio.
By Anne Kates Smith Published