HOUSTON - ConocoPhillips (NYSE: NYSE:COP) has announced its definitive agreement to acquire Marathon Oil Corporation (NYSE: NYSE:MRO) in an all-stock transaction valued at $22.5 billion, including $5.4 billion of Marathon's net debt. The terms of the transaction will provide Marathon Oil shareholders with 0.2550 shares of ConocoPhillips stock for each Marathon Oil share.
The acquisition is anticipated to be immediately accretive to ConocoPhillips' earnings, cash flows, and return of capital per share. ConocoPhillips Chairman and CEO Ryan Lance remarked on the complementary nature of Marathon's assets and the shared commitment to safety and value creation. Similarly, Marathon Oil's Chairman, President, and CEO Lee Tillman highlighted the company's legacy and the future value expected from joining forces with ConocoPhillips.
ConocoPhillips has outlined significant financial benefits following the transaction's close, expected in the fourth quarter of 2024. The company foresees at least $500 million in cost and capital savings within the first year and plans to increase its ordinary base dividend by 34% to 78 cents per share in the fourth quarter of 2024.
Moreover, ConocoPhillips expects to repurchase over $7 billion of shares in the first year and more than $20 billion over the first three years after the transaction, contingent on recent commodity prices.
The acquisition aims to bolster ConocoPhillips' U.S. onshore portfolio by adding over 2 billion barrels of resource with a cost of supply under $30 per barrel WTI. The transaction remains subject to Marathon Oil shareholder approval, regulatory clearances, and customary closing conditions.
The move is part of ConocoPhillips' strategy to enhance its financial framework and deliver on its commitment to return over 30% of cash from operations to shareholders. ConocoPhillips maintains a focus on shareholder distributions, emphasizing its track record of returning over 40% since its 2016 strategy reset.
This news report is based on a press release statement and does not constitute an endorsement of the companies or their strategies. The completion of the transaction is not guaranteed and is subject to various factors, including regulatory and shareholder approvals.
InvestingPro Insights
As ConocoPhillips (NYSE: COP) makes a strategic move to acquire Marathon Oil Corporation, investors and stakeholders are keen on understanding the financial health and future prospects of the company. ConocoPhillips, a prominent player in the Oil, Gas & Consumable Fuels industry, is currently operating with a market capitalization of $139.13 billion USD.
With a Price-to-Earnings (P/E) ratio of 13.43, the company presents a value proposition in line with industry standards. The adjusted P/E ratio as of the last twelve months ending Q1 2024 stands at 13.37, indicating consistency in the company's earnings valuation over time.
InvestingPro Data highlights that ConocoPhillips has maintained a solid gross profit margin of 48.79% in the last twelve months as of Q1 2024, with a gross profit of $27.72 billion USD. This profitability is further underscored by the company's ability to generate strong cash flows, which can sufficiently cover interest payments, an InvestingPro Tip that reassures investors of financial stability.
Moreover, ConocoPhillips has demonstrated a robust return on assets of 11.34% during the same period, reflecting efficient use of its asset base.
Investors may also find solace in the company's dividend reliability, as ConocoPhillips has maintained dividend payments for 54 consecutive years, a testament to its commitment to shareholder returns. The current dividend yield stands at 3.8%, with an ex-date for the last dividend recorded on May 10, 2024.
For those seeking further insights and tips, there are additional InvestingPro Tips available for ConocoPhillips, which can be accessed through the InvestingPro platform. To enrich your investment decision-making, consider using coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
As the company looks forward to integrating Marathon Oil's assets, these metrics and insights from InvestingPro may provide a deeper understanding of ConocoPhillips' financial position and its potential for sustained growth and value creation post-acquisition.
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