MattGush Last summer I called ConocoPhillips ( NYSE: COP ) steady, simple steady. Forwarding nearly a year further, we see the business participating in industry consolidation, after many of its major peers have embarked on significant M&A in recent times. With the purchase of Marathon Oil ( MRO ) , ConocoPhillips adds scale while it is aggressively increasing payouts to investors, although they are not convinced just yet despite a higher dividend and relatively small premium offered.
Adding Marathon ConocoPhillips announced an all-stock deal to acquire Marathon Oil in a deal valued at $22.5 billion if net debt is included. Terms of the deal dictated that investors in Marathon will obtain 0.
2550 shares of ConocoPhillips for every share they own, implying a relatively modest 15% premium over the prevailing share price. The deal adds high-quality and low-cost of supply, adjacent to existing US unconventional position of Conoco in key areas like the Eagle Ford, Bakken and Delaware basin, with real potential for synergies, as commented on by CEO Ryan Lance. He furthermore claims that the deal is immediately accretive to earnings, cash flow and distribution per share, with synergies having the potential to create value over time.
In fact, the full $500 million in cost and capital synergies are expected to be reached in year one after closing. Addressing Capital Returns Alongside the deal announcement, Conoco announced aggressive capital allocation practices. The quarterly dividend.
