Saturday, July 20

ConocoPhillips will acquire Marathon Oil in a $22.5 billion all-stock deal

The oil industry in the United States, the world’s largest producer of crude oil, is made up of many small and medium-sized oil companies, ranging from family businesses with a few wells in one state to global giants like Exxon Mobil. Wall Street values ​​ConocoPhillips at about $140 billion, or about 10 times larger than Marathon Oil but about a quarter of Exxon.

Oil companies have completed some of the largest acquisitions in the past year despite regulatory scrutiny from the Biden administration and oil market volatility. U.S. giants have capitalized on record profits, giving them the firepower to acquire smaller companies with operations in oil-rich regions such as the Permian Basin in New Mexico and Texas and the Gulf of Mexico.

Among the drivers of consolidation is that companies have captured many of the U.S. oil and gas fields deemed most attractive for horizontal drilling and hydraulic fracturing, techniques that have opened up vast shale deposits to drilling in places like Texas and New Mexico. Now they are joining forces in an effort to reduce costs and increase profits.

According to Reuters, there was $250 billion in deal-making activity in the oil and gas sector last year, including Exxon Mobil’s $60 billion acquisition of Pioneer Natural Resources and the deal from Chevron’s $53 billion deal with Hess, approved by Hess shareholders on Tuesday.

The boom in oil deals is largely due to the robust recovery in energy prices since the early days of the pandemic, when oil prices plummeted.