ConocoPhilips (NYSE:COP) has announced an all-stock deal to acquire Marathon Oil (NYSE:MRO.
Marathon shareholders to get 0.255 of a ConocoPhilips share for each Marathon share. This is a 14.7% premium to Marathon’s May 28 closing price.
ConocoPhilips was trading near $117 on May 29. That would make the price of the deal $29.84 for each Marathon share. Marathon Oil stock was trading early on May 29 at $29.07.
Last Dance for Oil
Oil companies have been buying each another for the last few years to lower costs and drive the last dollar of profit from their shale assets.
American oil companies spent $234 billion buying one another in 2023, the biggest merger year since 2012. Refiners and transporters of oil also saw record merger activity last year.
During the 2010s, dying drilling firms had their assets acquired by larger companies to consolidate debt. Now most deals are mergers, with successful players combining to raise dividends. ConocoPhilips stock currently has a 2% yield, Marathon a dividend yield of 1.5%.
Exxon Mobil (NYSE:XOM) recently finalized its $60 billion purchase of Pioneer Natural Resources. Chevron (NYSE:CVX) got shareholder approval for its $53 billion buyout of Hess (NYSE:HES).
Analysts think this may be the last big deal in the oil patch, as all the major players now have partners.
While President Joe Biden’s administration has been fighting mergers in other areas, it has been quiet regarding oil mergers. The U.S. oil industry is currently enjoying record production and exports.
The industry still has complaints, however. The Biden administration has paused approval on natural gas export projects and pushed through new rules on drilling federal lands. Former President Donald Trump reportedly offered to cut the industry’s taxes if it gave him $1 billion.
The Bottom Line on Marathon Oil Stock
All that matters to oil investors these days are the dividends and sustainability of production. Mergers like this mean to assure both.
On the date of publication, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
