Conoco’s Marathon deal is cheap and cheerful
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Robert Cyran
NEW YORK, May 29 (Reuters Breakingviews) -While rivals are going big and risky, ConocoPhillips COP.N is taking a cheerful boogie board ride on oil’s merger wave. The $139 billion oil driller said on Wednesday that it has agreed to buy rival Marathon Oil MRO.N for $23 billion, including the target’s net debt. Compared with some of its peers’ recent acquisitions, Conoco’s deal is pedestrian in all the right ways.
Marathon is not a bet on growth. Its production in the first quarter was down 7% from the same period a year ago. The company spits out cash, however. Its production also sits near existing Conoco wells in the Bakken and Eagle Ford basins. Combining operations may cut $500 million of costs in just one year. Add this to projected operating profit of $2.4 billion this year, according to estimates compiled by LSEG, and that’s a 10% return on Conoco’s investment.
Compare that with the bigger, racier acquisition of Hess HES.N by Chevron CVX.N. That $53 billion merger, based on numbers disclosed by the companies and consensus estimates of Hess’s 2025 operating profit, will have a return of around 8.5%. And Chevron may not even clinch its prize, since Exxon Mobil XOM.N, its co-investor in a coveted Guyana oil field, has challenged the sale.
A good deal for Conoco might imply Marathon has the short end of the stick. The premium on the all-stock deal is just under 15%. That’s less than the 18% Pioneer Natural Resources snagged in its deal with Exxon. But it’s bigger than the 5% premium that Hess shareholders voted to accept on Tuesday. Most possible U.S. acquirers are already busy with other deals. Besides, Conoco’s shares have outperformed Marathon, Exxon and Chevron over the past five years.
While this will leave the three biggest U.S. oil drillers digesting acquisitions, the drivers of the consolidation wave remain. Oil demand is probably peaking soon, and combining allows costs to be cut, and capital channeled to the best opportunities. Once these deals have bedded down, it will be time for the next round of acquisitions – which might include Conoco again, only this time as a target.
Follow @rob_cyran on X
CONTEXT NEWS
ConocoPhillips said on May 29 it had agreed to buy Marathon Oil in a $17.1 billion all-stock transaction, valued at $23 billion including the target’s net debt. Marathon shareholders will receive 0.255 shares of Conoco common stock for each of their own shares, equivalent to a 14.7% premium, based on closing prices on May 28.
Conoco also said the company will increase its dividend by 34% starting in the fourth quarter, and that after closing the deal the company would repurchase over $7 billion of stock in the first year and over $20 billion within three years, based on recent commodity prices.
Editing by John Foley and Sharon Lam
Aloqador aktivlar
Eng oxirgi yangiliklar
Javobgarlikdan voz kechish: XM Group korxonalari har biri faqat ijro xizmatlarini koʻrsatadi va onlayn savdo platformamizdan foydalanish huquqini beradi, bu odamga veb-saytda yoki veb-sayt orqali mavjud boʻlgan kontentni koʻrish va/yoki undan foydalanishga ruxsat beradi hamda uni oʻzgartirishga moʻljallanmagan va uni oʻzgartirmaydi yoki kengaytirmaydi. Bunday kirish va foydalanish huquqi doimo quyidagilarga boʻysunadi: (i) Shartlar va qoidalar; (ii) Risklar haqida ogohlantirish; va (iii) Javobgarlikni toʻliq rad etish. Shuning uchun bunday kontent umumiy maʼlumot sifatida taqdim etiladi. Xususan, shuni esda tutingki, bizning onlayn savdo platformamiz mazmuni moliyaviy bozorlarda biror bitimni amalga oshirishga oid maslahat yoki taklif emas. Har qanday moliyaviy bozorda savdo qilish sizning kapitalingiz uchun jiddiy risk darajasini oʻz ichiga oladi.
Onlayn savdo platformamizda chop etilgan barcha materiallar faqat taʼlim/axborot maqsadlari uchun moʻljallangan va unda moliyaviy, investitsiya soligʻi yoki savdo maslahatlari va tavsiyalar; yoki bizning savdo narxlarimizning qaydlari; yoki har qanday moliyaviy vositalar bilan bitim tuzish maslahati yoki taklifi; yoki sizga kerak boʻlmagan moliyaviy reklama aksiyalari hisoblanmaydi
Har qanday uchinchi tomon kontenti, shuningdek XM tomonidan tayyorlangan kontent, masalan: fikrlar, yangiliklar, tadqiqotlar, tahlillar, narxlar va boshqa maʼlumotlar yoki bu veb-saytda joylashgan uchinchi tomon saytlariga havolalar umumiy bozor sharhi sifatida "boricha" taqdim etiladi va investitsiya maslahatini tashkil etmaydi. Har qanday kontent investitsiya tadqiqoti sifatida talqin qilinsa, siz bunday kontentni investitsiya tadqiqotlarining mustaqilligini ragʻbatlantirish uchun moʻljallangan qonun talablariga muvofiq moʻljallanmagan va tayyorlanmaganligini eʼtiborga olishingiz va qabul qilishingiz kerak, shuning uchun unga tegishli qonunlar va qoidalarga muvofiq marketing kommunikatsiyasi sifatida qaraladi. Mustaqil boʻlmagan investitsiya tadqiqoti va yuqoridagi maʼlumotlarga oid risk haqida ogohlantirishimizni oʻqib chiqqaningizga va tushunganingizga ishonch hosil qiling, unga bu yerdan kirish mumkin.
