Top United States independent oil and gas producer ConocoPhillips has agreed to buy Marathon Oil for $22.5 billion.

This is the latest in a series of mega-deals in the energy industry.

The U.S. oil and gas industry has been riding a consolidation wave over the last two years as companies look to bolster reserves and create economies of scale.

Last year was one of the most active, with some $250 billion in deals struck. The momentum has carried over into this year as the stock market continues to boom and as U.S. shale oil production scales new records.

“We’re heading into a period of kind of Shale 2.0, which is more about using technology and efficiencies, data analytics and some of the refrack potential that allows us to extend some tier one inventory,” ConocoPhillips CEO Ryan Lance said on Wednesday.

The all-stock offer equates to $30.33 per Marathon share, a premium of nearly 15 per cent to the stock’s Tuesday close, according to Reuters calculations. The transaction, which includes $5.4 billion of Marathon’s debt, is expected to close in the fourth quarter of 2024.

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Shares of Marathon Oil rose 9 per cent to $28.85, while ConocoPhillips fell 3.8 per cent to $115.10 in morning trading.

“The deal makes sense operationally given the asset overlap most meaningfully in the Eagle Ford and Bakken in L48,” Tudor, Pickering and Holt analyst Jeoffrey Lambujon said.

Marathon Oil’s international gas assets fit well with Conoco’s global gas footprint, he added.

ConocoPhillips expects cost savings of $500 million within the first full year after the closing of the transaction. The acquisition adds over two billion barrels of reserves to its portfolio.

Marathon Oil has operations in the Bakken basin in North Dakota, the Permian basin in West Texas and South Texas’ Eagle Ford basin – regions that are prime targets for producers looking to increase their inventory.

ConocoPhillips last quarter was the third largest oil and gas producer by volume in the Permian, the top U.S. shale oil field.

The deal follows Exxon Mobil’s $60 billion acquisition of Pioneer Natural Resources that was announced in October, and Chevron’s proposed $53 billion merger with Hess that was approved by the latter’s shareholders on Tuesday.

The consolidation activity in the industry has, however, attracted increased antitrust scrutiny.

The Star