- Acquisition of Marathon Oil Corporation is expected to be
immediately accretive to earnings, cash flows and return of capital
per share.
- ConocoPhillips expects to achieve at least $500 million of run
rate cost and capital savings within the first full year following
the closing of the transaction.
- Independent of the transaction, ConocoPhillips expects to
increase its ordinary base dividend by 34% to 78 cents per share
starting in the fourth quarter of 2024.
- Upon closing of the transaction, ConocoPhillips expects share
buybacks to be over $20 billion in the first three years, with over
$7 billion in the first full year, at recent commodity prices.
ConocoPhillips (NYSE: COP) and Marathon Oil Corporation (NYSE:
MRO) announced today that they have entered into a definitive
agreement pursuant to which ConocoPhillips will acquire Marathon
Oil in an all-stock transaction with an enterprise value of $22.5
billion, inclusive of $5.4 billion of net debt. Under the terms of
the agreement, Marathon Oil shareholders will receive 0.2550 shares
of ConocoPhillips common stock for each share of Marathon Oil
common stock, representing a 14.7% premium to the closing share
price of Marathon Oil on May 28, 2024, and a 16.0% premium to the
prior 10-day volume-weighted average price.
“This acquisition of Marathon Oil further deepens our portfolio
and fits within our financial framework, adding high-quality, low
cost of supply inventory adjacent to our leading U.S.
unconventional position,” said Ryan Lance, ConocoPhillips chairman
and chief executive officer. “Importantly, we share similar values
and cultures with a focus on operating safely and responsibly to
create long-term value for our shareholders. The transaction is
immediately accretive to earnings, cash flows and distributions per
share, and we see significant synergy potential.”
“This is a proud moment to look back on what we achieved at
Marathon Oil. 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
compelling return of capital to our shareholders - all while
holding true to our core values of safety and environmental
excellence. ConocoPhillips is the right home to build on that
legacy, offering a truly unique combination of added scale,
resilience and long-term durability. 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. When combined with the global
ConocoPhillips portfolio, I’m confident our assets and people will
deliver significant shareholder value over the long term,” said Lee
Tillman, Marathon Oil chairman, president and chief executive
officer.
Transaction benefits
- Immediately accretive: This acquisition is immediately
accretive to ConocoPhillips on earnings, cash from operations, free
cash flow and return of capital per share to shareholders.
- Delivers significant cost and capital synergies: Given
the adjacent nature of the acquired assets and a common operating
philosophy, ConocoPhillips expects to achieve the full $500 million
of cost and capital synergy run rate within the first full year
following the closing of the transaction. The identified savings
will come from reduced general and administrative costs, lower
operating costs and improved capital efficiencies.
- Further enhances premier Lower 48 portfolio: This
acquisition will add highly complementary acreage to
ConocoPhillips’ existing U.S. onshore portfolio, adding over 2
billion barrels of resource with an estimated average point forward
cost of supply of less than $30 per barrel WTI.
Return of capital update
Independent of the transaction, ConocoPhillips expects to
increase its ordinary base dividend by 34% to 78 cents per share
starting in the fourth quarter of 2024. Upon closing of the
transaction and assuming recent commodity prices, ConocoPhillips
plans to:
- Repurchase over $7 billion in shares in the first full year, up
from over $5 billion standalone.
- Repurchase over $20 billion in shares in the first three
years.
“We remain committed to our differentiated cash from operations
distribution framework of returning greater than 30% to our
shareholders, with a track record of returning over 40% since our
2016 strategy reset,” added Lance. “We plan to raise our ordinary
dividend by 34% in the fourth quarter and we will continue to
target top-quartile dividend growth relative to the S&P 500
going forward. Additionally, we intend to prioritize share
repurchases following the close of the transaction, with a plan to
retire the equivalent amount of newly issued equity in the
transaction in two to three years at recent commodity prices.”
Transaction details
The transaction is subject to the approval of Marathon Oil
stockholders, regulatory clearance and other customary closing
conditions. The transaction is expected to close in the fourth
quarter of 2024.
ConocoPhillips will host a conference call today at 10 a.m.
Eastern time to discuss this announcement. To listen to the call
and view related presentation materials, go to
www.conocophillips.com/investor.
Advisors
Evercore is serving as ConocoPhillips’ financial advisor and
Wachtell, Lipton, Rosen & Katz is serving as ConocoPhillips’
legal advisor for the transaction. Morgan Stanley & Co. LLC is
serving as Marathon Oil’s financial advisor and Kirkland &
Ellis LLP is serving as Marathon Oil’s legal advisor for the
transaction.
--- # # # ---
About ConocoPhillips
ConocoPhillips is one of the world’s leading exploration and
production companies based on both production and reserves, with a
globally diversified asset portfolio. Headquartered in Houston,
Texas, ConocoPhillips had operations and activities in 13
countries, $95 billion of total assets, and approximately 10,000
employees at March 31, 2024. Production averaged 1,902 MBOED for
the three months ended March 31, 2024, and proved reserves were 6.8
BBOE as of Dec. 31, 2023. For more information, go to
www.conocophillips.com.
About Marathon Oil
Marathon Oil (NYSE: MRO) is an independent oil and gas
exploration and production (E&P) company focused on four of the
most competitive resource plays in the U.S. - Eagle Ford, Texas;
Bakken, North Dakota; Permian in New Mexico and Texas, and STACK
and SCOOP in Oklahoma, complemented by a world-class integrated gas
business in Equatorial Guinea. The Company's Framework for Success
is founded in a strong balance sheet, ESG excellence and the
competitive advantages of a high-quality multi-basin portfolio. For
more information, please visit www.marathonoil.com.
Forward-Looking Statements
This news release includes “forward-looking statements” as
defined under the federal securities laws. All statements other
than statements of historical fact included or incorporated by
reference in this news release, including, among other things,
statements regarding the proposed business combination transaction
between ConocoPhillips (“ConocoPhillips”) and Marathon Oil
Corporation (“Marathon”), future events, plans and anticipated
results of operations, business strategies, the anticipated
benefits of the proposed transaction, the anticipated impact of the
proposed transaction on the combined company’s business and future
financial and operating results, the expected amount and timing of
synergies from the proposed transaction, the anticipated closing
date for the proposed transaction and other aspects of
ConocoPhillips’ or Marathon’s operations or operating results are
forward-looking statements. Words and phrases such as “ambition,”
“anticipate,” “estimate,” “believe,” “budget,” “continue,” “could,”
“intend,” “may,” “plan,” “potential,” “predict,” “seek,” “should,”
“will,” “would,” “expect,” “objective,” “projection,” “forecast,”
“goal,” “guidance,” “outlook,” “effort,” “target” and other similar
words can be used to identify forward-looking statements. However,
the absence of these words does not mean that the statements are
not forward-looking. Where, in any forward-looking statement,
ConocoPhillips or Marathon expresses an expectation or belief as to
future results, such expectation or belief is expressed in good
faith and believed to be reasonable at the time such
forward-looking statement is made. However, these statements are
not guarantees of future performance and involve certain risks,
uncertainties and other factors beyond ConocoPhillips’ or
Marathon’s control. Therefore, actual outcomes and results may
differ materially from what is expressed or forecast in the
forward-looking statements.
The following important factors and uncertainties, among others,
could cause actual results or events to differ materially from
those described in forward-looking statements: ConocoPhillips’
ability to successfully integrate Marathon’s businesses and
technologies, which may result in the combined company not
operating as effectively and efficiently as expected; the risk that
the expected benefits and synergies of the proposed transaction may
not be fully achieved in a timely manner, or at all; the risk that
ConocoPhillips or Marathon will be unable to retain and hire key
personnel; the risk associated with Marathon’s ability to obtain
the approval of its stockholders required to consummate the
proposed transaction and the timing of the closing of the proposed
transaction, including the risk that the conditions to the
transaction are not satisfied on a timely basis or at all or the
failure of the transaction to close for any other reason or to
close on the anticipated terms, including the anticipated tax
treatment (and with respect to increases in ConocoPhillips’ share
repurchase program, such increases are not intended to exceed
shares issued in the transaction); the risk that any regulatory
approval, consent or authorization that may be required for the
proposed transaction is not obtained or is obtained subject to
conditions that are not anticipated; the occurrence of any event,
change or other circumstance that could give rise to the
termination of the proposed transaction; unanticipated
difficulties, liabilities or expenditures relating to the
transaction; the effect of the announcement, pendency or completion
of the proposed transaction on the parties’ business relationships
and business operations generally; the effect of the announcement
or pendency of the proposed transaction on the parties’ common
stock prices and uncertainty as to the long-term value of
ConocoPhillips’ or Marathon’s common stock; risks that the proposed
transaction disrupts current plans and operations of ConocoPhillips
or Marathon and their respective management teams and potential
difficulties in hiring or retaining employees as a result of the
proposed transaction; rating agency actions and ConocoPhillips’ and
Marathon’s ability to access short- and long-term debt markets on a
timely and affordable basis; changes in commodity prices, including
a prolonged decline in these prices relative to historical or
future expected levels; global and regional changes in the demand,
supply, prices, differentials or other market conditions affecting
oil and gas, including changes resulting from any ongoing military
conflict, including the conflicts in Ukraine and the Middle East,
and the global response to such conflict, security threats on
facilities and infrastructure, or from a public health crisis or
from the imposition or lifting of crude oil production quotas or
other actions that might be imposed by Organization of Petroleum
Exporting Countries and other producing countries and the resulting
company or third-party actions in response to such changes;
insufficient liquidity or other factors that could impact
ConocoPhillips’ ability to repurchase shares and declare and pay
dividends such that ConocoPhillips suspends its share repurchase
program and reduces, suspends or totally eliminates dividend
payments in the future, whether variable or fixed; changes in
expected levels of oil and gas reserves or production; potential
failures or delays in achieving expected reserve or production
levels from existing and future oil and gas developments, including
due to operating hazards, drilling risks or unsuccessful
exploratory activities; unexpected cost increases, inflationary
pressures or technical difficulties in constructing, maintaining or
modifying company facilities; legislative and regulatory
initiatives addressing global climate change or other environmental
concerns; public health crises, including pandemics (such as
COVID-19) and epidemics and any impacts or related company or
government policies or actions; investment in and development of
competing or alternative energy sources; potential failures or
delays in delivering on ConocoPhillips’ current or future
low-carbon strategy, including ConocoPhillips’ inability to develop
new technologies; disruptions or interruptions impacting the
transportation for ConocoPhillips’ or Marathon’s oil and gas
production; international monetary conditions and exchange rate
fluctuations; changes in international trade relationships or
governmental policies, including the imposition of price caps, or
the imposition of trade restrictions or tariffs on any materials or
products (such as aluminum and steel) used in the operation of
ConocoPhillips’ or Marathon’s business, including any sanctions
imposed as a result of any ongoing military conflict, including the
conflicts in Ukraine and the Middle East; ConocoPhillips’ ability
to collect payments when due, including ConocoPhillips’ ability to
collect payments from the government of Venezuela or PDVSA;
ConocoPhillips’ ability to complete any other announced or any
other future dispositions or acquisitions on time, if at all; the
possibility that regulatory approvals for any other announced or
any future dispositions or any other acquisitions will not be
received on a timely basis, if at all, or that such approvals may
require modification to the terms of those transactions or
ConocoPhillips’ remaining business; business disruptions following
any announced or future dispositions or other acquisitions,
including the diversion of management time and attention; the
ability to deploy net proceeds from ConocoPhillips’ announced or
any future dispositions in the manner and timeframe anticipated, if
at all; potential liability for remedial actions under existing or
future environmental regulations; potential liability resulting
from pending or future litigation; the impact of competition and
consolidation in the oil and gas industry; limited access to
capital or insurance or significantly higher cost of capital or
insurance related to illiquidity or uncertainty in the domestic or
international financial markets or investor sentiment; general
domestic and international economic and political conditions or
developments, including as a result of any ongoing military
conflict, including the conflicts in Ukraine and the Middle East;
changes in fiscal regime or tax, environmental and other laws
applicable to ConocoPhillips’ or Marathon’s businesses; disruptions
resulting from accidents, extraordinary weather events, civil
unrest, political events, war, terrorism, cybersecurity threats or
information technology failures, constraints or disruptions; and
other economic, business, competitive and/or regulatory factors
affecting ConocoPhillips’ or Marathon’s businesses generally as set
forth in their filings with the Securities and Exchange Commission
(the “SEC”). The registration statement on Form S-4 and proxy
statement/prospectus that will be filed with the SEC will describe
additional risks in connection with the proposed transaction. While
the list of factors presented here is, and the list of factors to
be presented in the registration statement on Form S-4 and proxy
statement/prospectus are considered representative, no such list
should be considered to be a complete statement of all potential
risks and uncertainties. For additional information about other
factors that could cause actual results to differ materially from
those described in the forward-looking statements, please refer to
ConocoPhillips’ and Marathon’s respective periodic reports and
other filings with the SEC, including the risk factors contained in
ConocoPhillips’ and Marathon’s most recent Quarterly Reports on
Form 10-Q and Annual Reports on Form 10-K. Forward-looking
statements represent current expectations and are inherently
uncertain and are made only as of the date hereof (or, if
applicable, the dates indicated in such statement). Except as
required by law, neither ConocoPhillips nor Marathon undertakes or
assumes any obligation to update any forward-looking statements,
whether as a result of new information or to reflect subsequent
events or circumstances or otherwise.
No Offer or Solicitation
This news release is not intended to and shall not constitute an
offer to buy or sell or the solicitation of an offer to buy or sell
any securities, or a solicitation of any vote or approval, nor
shall there be any sale of securities in any jurisdiction in which
such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such
jurisdiction. No offering of securities shall be made, except by
means of a prospectus meeting the requirements of Section 10 of the
U.S. Securities Act of 1933, as amended.
Additional Information about the Merger and Where to Find
It
In connection with the proposed transaction, ConocoPhillips
intends to file with the SEC a registration statement on Form S-4,
which will include a proxy statement of Marathon that also
constitutes a prospectus of ConocoPhillips common shares to be
offered in the proposed transaction. Each of ConocoPhillips and
Marathon may also file other relevant documents with the SEC
regarding the proposed transaction. This news release is not a
substitute for the proxy statement/prospectus or registration
statement or any other document that ConocoPhillips or Marathon may
file with the SEC. The definitive proxy statement/prospectus (if
and when available) will be mailed to stockholders of Marathon.
INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE REGISTRATION
STATEMENT, PROXY STATEMENT/PROSPECTUS AND ANY OTHER RELEVANT
DOCUMENTS THAT MAY BE FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS
OR SUPPLEMENTS TO THESE DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY
IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY CONTAIN OR WILL
CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION.
Investors and security holders will be able to obtain free copies
of the registration statement and proxy statement/prospectus (if
and when available) and other documents containing important
information about ConocoPhillips, Marathon and the proposed
transaction, once such documents are filed with the SEC through the
website maintained by the SEC at www.sec.gov. Copies of the
documents filed with the SEC by ConocoPhillips will be available
free of charge on ConocoPhillips’ website at www.conocophillips.com
or by contacting ConocoPhillips’ Investor Relations Department by
email at investor.relations@conocophillips.com or by phone at
281-293-5000. Copies of the documents filed with the SEC by
Marathon will be available free of charge on Marathon’s website at
ir.marathonoil.com or by contacting Marathon at 713-629-6600.
Participants in the Solicitation
ConocoPhillips, Marathon and certain of their respective
directors and executive officers may be deemed to be participants
in the solicitation of proxies in respect of the proposed
transaction. Information about the directors and executive officers
of ConocoPhillips is set forth in (i) ConocoPhillips’ proxy
statement for its 2024 annual meeting of stockholders under the
headings “Executive Compensation”, “Item 1: Election of Directors
and Director Biographies” (including “Related Party Transactions”
and “Director Compensation”), “Compensation Discussion and
Analysis”, “Executive Compensation Tables” and “Stock Ownership”,
which was filed with the SEC on April 1, 2024 and is available at
https://www.sec.gov/ix?doc=/Archives/edgar/data/1163165/000130817924000384/cop4258041-def14a.htm,
(ii) ConocoPhillips’ Annual Report on Form 10-K for the fiscal year
ended December 31, 2023, including under the headings “Item 10.
Directors, Executive Officers and Corporate Governance”, “Item 11.
Executive Compensation”, “Item 12. Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters”
and “Item 13. Certain Relationships and Related Transactions, and
Director Independence”, which was filed with the SEC on February
15, 2024 and is available at
https://www.sec.gov/ix?doc=/Archives/edgar/data/1163165/000116316524000010/cop-20231231.htm
and (iii) to the extent holdings of ConocoPhillips securities by
its directors or executive officers have changed since the amounts
set forth in ConocoPhillips’ proxy statement for its 2024 annual
meeting of stockholders, such changes have been or will be
reflected on Initial Statement of Beneficial Ownership of
Securities on Form 3, Statement of Changes in Beneficial Ownership
on Form 4 or Annual Statement of Changes in Beneficial Ownership of
Securities on Form 5, filed with the SEC (which are available at
EDGAR Search Results
https://www.sec.gov/edgar/search/#/category=form-cat2&ciks=0001163165&entityName=CONOCOPHILLIPS%2520(COP)%2520(CIK%25200001163165)).
Information about the directors and executive officers of Marathon
is set forth in (i) Marathon’s proxy statement for its 2024 annual
meeting of stockholders under the headings “Proposal 1: Election of
Directors”, “Director Compensation”, “Security Ownership of Certain
Beneficial Owners and Management”, “Compensation Discussion and
Analysis”, “Executive Compensation” and “Transactions with Related
Persons”, which was filed with the SEC on April 10, 2024 and is
available at
https://www.sec.gov/ix?doc=/Archives/edgar/data/101778/000010177824000082/mro-20240405.htm,
(ii) Marathon’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2023, including under the headings “Item 10.
Directors, Executive Officers and Corporate Governance”, “Item 11.
Executive Compensation”, “Item 12. Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters”
and “Item 13. Certain Relationships and Related Transactions, and
Director Independence”, which was filed with the SEC on February
22, 2024 and is available at
https://www.sec.gov/ix?doc=/Archives/edgar/data/101778/000010177824000023/mro-20231231.htm
and (iii) to the extent holdings of Marathon securities by its
directors or executive officers have changed since the amounts set
forth in Marathon’s proxy statement for its 2024 annual meeting of
stockholders, such changes have been or will be reflected on
Initial Statement of Beneficial Ownership of Securities on Form 3,
Statement of Changes in Beneficial Ownership on Form 4, or Annual
Statement of Changes in Beneficial Ownership of Securities on Form
5, filed with the SEC (which are available at EDGAR Search Results
https://www.sec.gov/edgar/search/#/category=form-cat2&ciks=0000101778&entityName=MARATHON%2520OIL%2520CORP%2520(MRO)%2520(CIK%25200000101778)).
Other information regarding the participants in the proxy
solicitations and a description of their direct and indirect
interests, by security holdings or otherwise, will be contained in
the proxy statement/prospectus and other relevant materials to be
filed with the SEC regarding the proposed transaction when such
materials become available. Investors should read the proxy
statement/prospectus carefully when it becomes available before
making any voting or investment decisions. Copies of the documents
filed with the SEC by ConocoPhillips and Marathon will be available
free of charge through the website maintained by the SEC at
www.sec.gov. Additionally, copies of documents filed with the SEC
by ConocoPhillips will be available free of charge on
ConocoPhillips’ website at www.conocophillips.com/ and those filed
by Marathon will be available free of charge on Marathon’s website
at ir.marathonoil.com/.
Use of Non-GAAP Financial Information and Other Terms –
This news release contains certain financial measures that are not
prepared in accordance with GAAP, including cash from operations
(CFO), free cash flow and net debt. CFO is calculated by removing
the impact from operating working capital from cash provided by
operating activities. Free cash flow is CFO net of capital
expenditures and investments. Net debt is total balance sheet debt
less cash, cash equivalents and short-term investments. This news
release also contains the terms enterprise value, cost of supply
and return of capital. Enterprise value included in this release is
calculated based on the sum of net debt as of March 31, 2024, and
anticipated shares to be issued at the fixed exchange ratio of
0.2550 measured at ConocoPhillips' closing share price on May 28,
2024. Cost of supply is the WTI equivalent price that generates a
10 percent after-tax return on a point-forward and fully burdened
basis. Fully burdened includes capital infrastructure, foreign
exchange, price-related inflation, G&A and carbon tax (if
currently assessed). If no carbon tax exists for the asset, carbon
pricing aligned with internal energy scenarios are applied. All
barrels of resource are discounted at 10 percent. Return of capital
is defined as the total of the ordinary dividend, share repurchases
and variable return of cash (VROC).
Cautionary Note to U.S. Investors – The SEC permits oil
and gas companies, in their filings with the SEC, to disclose only
proved, probable and possible reserves. We may use the term
“resource” in this release that the SEC’s guidelines prohibit us
from including in filings with the SEC. U.S. investors are urged to
consider closely the oil and gas disclosures in our Form 10-K and
other reports and filings with the SEC. Copies are available from
the SEC and from the ConocoPhillips website.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240529051958/en/
ConocoPhillips Dennis Nuss (media) 281-293-1149
dennis.nuss@conocophillips.com
Investor Relations 281-293-5000
investor.relations@conocophillips.com
Marathon Oil Karina Brooks (media) 713-296-2191
Investor Relations Guy Baber: 713-296-1892 John Reid:
713-296-4380
ConocoPhillips (NYSE:COP)
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