ConocoPhillips and Marathon Oil just jumped on the merry-go-round of mergers that the energy industry has seen in recent months with ConocoPhillips having been the last of the major oil companies that hadn’t gotten in on that action.
Announced Wednesday in Houston, headquarters for both corporations, it was an all-stock transaction with an enterprise value of $22.5 billion inclusive of $5.4 billion of net debt, they said.
ExxonMobil merged with Pioneer Natural Resources for $60 billion, Chevron had bought the Hess Corp. for $53 billion, Diamondback Energy had acquired Endeavor Energy Resources for $26 billion and Occidental Petroleum had obtained CrownRock Operating for $12 billion.
Marathon Petroleum split from Marathon Oil in 2011 with Marathon Petroleum taking control of the corporation’s refineries. They’re separate companies.
State Rep. Brooks Landgraf, R-Odessa, said last week that the deals by no means meant the independent side of the industry was disappearing.
“Despite the trend toward consolidation there will always be a place for independents in Texas,” said Landgraf, who chairs the Texas House Environmental Regulation Committee in Austin. “They are the pioneers who push boundaries and keep the spirit of exploration alive.”
ConocoPhillips Chairman-CEO Ryan Lance said the merger “further deepens our portfolio and fits within our financial framework, adding the high-quality, low-cost of supply inventory adjacent to our leading U.S. unconventional position.
“Importantly, we share similar values and cultures with a focus on operating safely and responsibly to create long-term value for our shareholders,” Lance said. “The transaction is immediately accretive to earnings, cash flows and distributions per share and we see significant synergy potential.”
Unconventional production may entail developing oil sands, directional drilling and-or hydraulic fracturing.
“This is a proud moment to look back on what we achieved at Marathon Oil,” said Chairman-CEO Lee Tillman. “Powered by our dedicated employees and contractors we built a top-performing portfolio with a multi-year track record of peer-leading operational execution, strong financial results and a compelling return of capital to our shareholders.
“ConocoPhillips is the right home to build on that legacy, offering a truly unique combination of added scale, resilience and long-term durability,” Tillman said. “With its premier global asset base, strong balance sheet and laser focus on operational excellence, ConocoPhillips’ track record of long-term investments, differentiated shareholder distributions and active portfolio management are unmatched.”
With the deal, ConocoPhillips Senior Vice President of Strategy Andy O’Brien said, production in the Eagle Ford Shale formation will increase to about 400,000 barrels per day with some 1,000 new locations.
O’Brien said production will double to over 200,000 barrels per day in the Bakken Shale formation and that ConocoPhillips will add more than 400 locations in the Permian Basin.
It will also add 2 million metric tons per year of net liquid natural gas capacity from Equatorial Guinea on Africa’s west coast.
Lying under 26 Texas counties, the Eagle Ford Shale formation reaches from the U.S.-Mexico border between Laredo and Eagle Pass to east of Temple and Waco.
The Bakken is under Eastern Montana and Western North Dakota and parts of the Canadian provinces of Saskatchewan and Manitoba.
