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$22.5 Billion Shake-Up: ConocoPhillips Acquires Marathon Oil and Gains Major Influence in the Eagle Ford

The purchase of Marathon Oil adds 2,600 new drilling spots to ConocoPhillips' operations, boosting their total to over 13,000 across the U.S.

After the deal, ConocoPhillips is set to significantly increase its production in the Eagle Ford region, potentially exceeding its current output in the Delaware basin.

ConocoPhillips announced the acquisition of Marathon Oil for $22.5 billion. This deal comes in a period where the U.S. oil industry has seen massive consolidation, with last year alone witnessing mergers and acquisitions totaling $250 billion. The transaction is slated for completion in the fourth quarter of 2024.

The Houston-based company is poised to become the top producer in the Eagle Ford Shale, targeting an output of 400,000 barrels of oil equivalent per day and planning to upgrade 1,000 wells. Currently, EOG leads the region with 300,000 barrels per day of production.

"We’ve refined our techniques for enhancing old wells in Eagle Ford to match the economics of our top drilling sites, and we'll apply these methods to the Marathon properties."

Andy O’Brien, senior vice president at ConocoPhillips

ConocoPhillips will rank as the third-largest oil producer in the Permian region, just behind industry giants Exxon Mobil and Chevron. This acquisition follows closely behind significant industry deals such as Exxon's purchase of Pioneer Natural Resources and Chevron's $53 billion merger with Hess.

Following the announcement, Marathon Oil’s stock climbed by 8.7%, whereas ConocoPhillips saw a 3% dip. The merger is expected to generate $500 million in cost savings in the first year and augment ConocoPhillips' reserves by over 2 billion barrels.

Marathon Oil brings valuable assets from North Dakota’s Bakken basin, the Permian basin in West Texas, and the Eagle Ford basin in South Texas, enhancing ConocoPhillips’ already strong U.S. presence.

Additionally, ConocoPhillips intends to divest about $2 billion in assets and enhance its share repurchase program. The plan is to increase buybacks to $7 billion next year from the $5 billion scheduled for this year, aiming to buy back $20 billion of its shares in the three years following the merger.

This approach mirrors Devon Energy’s 2022 strategy when it acquired Validus Energy for $1.8 billion, securing 350 new drilling locations and up to 150 high-potential wells for enhancement.

With oil prices staying high, big oil companies are making huge profits. They're using this money to buy more assets in the Permian Basin, which has made the U.S. a top oil and gas producer.

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Bakken's Tipping Point: Grayson Mill's Potential Fall After Chevron-Hess

The Permian Basin, a big oil area, is not seeing as many deals as before because lots of companies have already joined together. Now, experts think these companies might start looking for new places to invest in the U.S. One area getting attention is the Bakken play. Chevron Corp. has just made a big step there by buying Hess Corp. for $60 billion. Another company, Grayson Mill Energy, which got some help from a Houston investment firm EnCap Investments LP, might also be up for sale soon, worth about $5 billion.

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