Big oil companies are poised to continue growing even larger

Oil-patch consolidation continues to make headlines as ConocoPhillips announces its agreement to acquire Marathon Oil in a deal worth $22.5 billion. This move comes after Exxon Mobil and Chevron made their own strategic acquisitions last year, solidifying their positions in the market.

The deal between ConocoPhillips and Marathon Oil is significant, as it will bring Conoco’s market value closer to that of TotalEnergies, a French oil major. While the price tag represents a 15% premium to Marathon’s closing share price, it is seen as a strategic move rather than an overly generous offer.

What sets this deal apart is that it doesn’t drastically change Conoco’s portfolio. Unlike Exxon’s acquisition of Pioneer Natural Resources or Chevron’s deal with Hess, acquiring Marathon Oil doesn’t provide Conoco with exposure to new frontiers. However, it does offer a more mature asset base, which is expected to boost Conoco’s free cash flow and earnings per share.

One potential area of concern is the companies’ combined position in the Eagle Ford basin, which could attract antitrust scrutiny. Despite this, the deal is seen as a positive move for Conoco and a missed opportunity for Devon Energy, which has now lost both Marathon Oil and CrownRock as potential acquisition targets.

As the oil and gas industry continues to consolidate, larger companies like Exxon and Chevron may set their sights on new targets in the future. This ongoing game of musical chairs in the oil patch shows that the industry is far from reaching a standstill.