01—Abstract
Summary
Summary of the 8-K filed November 22, 2024. Cited figures are marked; the original filing is the authoritative source.
On November 22, 2024, ConocoPhillips (NYSE: COP) completed its acquisition of Marathon Oil Corporation (NYSE: MRO) through the merger of a wholly owned subsidiary into Marathon, with Marathon surviving as a ConocoPhillips subsidiary.
Each Marathon share was converted into the right to receive 0.255 COP shares plus cash in lieu of fractional shares. The filing's pro forma data indicates roughly 143 million new COP shares were issued, at a preliminary estimated merger consideration of about $16.6 billiona, which includes $450 million of cash used to repay Marathon's commercial paper. The closing followed the expiration of the HSR Act waiting period on November 20, 2024, after the FTC's Second Request and both companies' certifications of substantial compliance.
The Second Request was the main regulatory hurdle, and its resolution removes that uncertainty. Management expects more than $1 billionb of run-rate cost and capital synergies within 12 months of closing, largely from eliminating overlapping costs and consolidating field operations. The pro forma figures show Marathon's net properties, plants and equipment being marked to fair value at roughly $24.4 billion, and the combined company's total assets rising to about $122.9 billion from $96.7 billion.
Pro forma 2023 net income would have been about $12.8 billionc, and 9M 2024 net income about $8.1 billion. Combined proved reserves were about 8.1 billion BOE at year-end 2023 on a pro forma basis, with Marathon adding roughly 1.3 billion BOE. Investors should note that the purchase price allocation is preliminary and may change materially, and that about $445 million of post-combination costs, mostly severance and retention compensation, will be expensed within 12 months.
The filing also discloses that ConocoPhillips agreed to unconditionally guarantee $1 billiond of Marathon's Louisiana Parish revenue refunding bonds, with ConocoPhillips Company assuming those obligations around July 1, 2026. Pro forma GAAP results include a non-recurring $424 million deferred tax benefit from using previously reserved foreign tax credits. The deal also expands the company's Lower 48 unconditional shale position and adds Equatorial Guinea assets in Africa.
02—Key points
Key Highlights
- Closed the Marathon Oil acquisition on November 22, 2024; each MRO share converted into 0.255 COP shares plus cash in lieu of fractional shares.
- Preliminary total merger consideration of about $16.6 billion, including roughly 143 million newly issued COP shares valued at about $16.0 billion and $450 million in cash to repay Marathon commercial paper.
- HSR Act waiting period expired November 20, 2024, after the FTC's Second Request and both parties certified substantial compliance, removing the principal regulatory hurdle.
- Management targets more than $1 billion in run-rate cost and capital synergies within 12 months of closing, versus the two companies operating separately.
- About $445 million of non-recurring post-combination expenses (roughly $415 million severance and retention, $30 million transaction fees) expected within 12 months of closing.
- Pro forma combined total assets of about $122.9 billion (vs. $96.7 billion for COP alone) and pro forma 9M 2024 net income of about $8.1 billion; combined proved reserves of roughly 8.1 billion BOE at year-end 2023.
- ConocoPhillips guaranteed $1 billion of Marathon's Parish of St. John the Baptist, Louisiana revenue refunding bonds, with assumption by ConocoPhillips Company effective around July 1, 2026.
03—Questions
Frequently Asked Questions
What did ConocoPhillips shareholders and Marathon shareholders receive in the deal?
Marathon Oil shareholders received 0.255 ConocoPhillips common shares for each Marathon share they held, plus cash in lieu of any fractional shares. The filing does not say how COP shareholders were affected beyond the dilution from roughly 143 million new shares, which increases the basic weighted-average share count from about 1.17 billion to about 1.31 billion on a pro forma 9M 2024 basis.
Is the acquisition price final, and could the accounting change?
The purchase price allocation is preliminary and based on September 30, 2024 balances. ConocoPhillips said the valuation is ongoing and expects to finalize it within 12 months of closing. Fair value adjustments, especially the roughly $7.2 billion step-up in Marathon's PP&E, and the resulting deferred taxes and goodwill (if any) could change materially.
What regulatory approval issues did the deal face, and are they resolved?
The FTC issued a Second Request on July 11, 2024, which extended the HSR waiting period until 30 days after both companies certified substantial compliance. The waiting period expired on November 20, 2024, so the HSR condition is satisfied and the deal closed two days later.
What synergies are expected, and what does it cost to achieve them?
Management expects more than $1 billion in run-rate cost and capital synergies within 12 months, primarily from removing duplicate costs and consolidating field operations. The pro forma statements show only about $113 million (9M 2024) and $150 million (2023) of production and operating savings and $188 million and $250 million of SG&A savings, so the bulk of the synergy is not reflected in the pro forma numbers. Achieving them is expected to require about $445 million of one-time costs, mostly severance and retention.
What new debt or contingent obligations does ConocoPhillips take on?
ConocoPhillips unconditionally guaranteed $1 billion of Marathon's 2017 Louisiana revenue refunding bonds. ConocoPhillips Company will assume Marathon's obligations under those bonds effective around July 1, 2026. Pro forma short- and long-term debt rise to about $1.3 billion and $21.8 billion, respectively, after the cancellation and fair valuation of Marathon's commercial paper and finance leases.
04—Continue