ConocoPhillips has agreed to acquire rival American oil and gas exploration and production company (E&P) Marathon Oil in an all-stock deal valued at $22.5bn.

The valuation includes the assumption of $5.4bn in net debt.

Listed on the New York Stock Exchange (NYSE), Marathon Oil concentrates its operations in various prolific regions including the Eagle Ford in Texas, Bakken in North Dakota, Permian in New Mexico and Texas, and STACK and SCOOP in Oklahoma. Additionally, the company has an integrated gas business in Equatorial Guinea.

ConocoPhillips, on the other hand, had operations and activities across 13 countries as of 31 March 2024, with total assets worth $95bn and a workforce of nearly 10,000 employees. The company is also listed on the NYSE.

According to ConocoPhillips, the acquisition will promptly boost its earnings, cash flow from operations, free cash flow, and return of capital per share for shareholders.

With the acquired assets aligning closely and sharing a common operating philosophy, ConocoPhillips anticipates realising $500m synergy run rate in costs and capital within the first year after finalising the deal.

Furthermore, the acquisition will enhance ConocoPhillips’ US onshore portfolio by integrating highly complementary acreage, adding over two billion barrels of resources with an estimated average point forward cost of supply below $30 per barrel West Texas Intermediate (WTI).

ConocoPhillips chairman and CEO Ryan Lance said: “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.

“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.”

As per the agreement terms, Marathon Oil shareholders will receive 0.255 shares of ConocoPhillips common stock for each of the shares they own in the former. This exchange represents a 14.7% premium over Marathon Oil’s closing share price on 28 May 2024, and a 16.0% premium over the prior 10-day volume-weighted average price.

Marathon Oil chairman, president, and CEO Lee Tillman said: “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.”

The completion of the transaction is contingent upon approval from Marathon Oil stockholders, regulatory clearance, and fulfilment of other standard closing conditions. It is anticipated that the deal will be finalised in Q4 2024.

Earlier this month, ConocoPhillips alongside its partners achieved the first oil production from the Eldfisk North project in the Norwegian North Sea.