10:05 AM EDT, 05/29/2024 (MT Newswires) -- ConocoPhillips ( COP ) agreed to acquire fellow energy company Marathon Oil ( MRO ) in an all-stock deal worth roughly $22.5 billion, including $5.4 billion of debt.

Under the terms, investors of Marathon Oil ( MRO ) will receive 0.2550 of ConocoPhillips' ( COP ) stock for each share owned. The consideration reflects an almost 15% premium to the Marathon Oil's ( MRO ) closing price on Tuesday, the companies said in a joint statement on Wednesday.

The deal, which requires approval from regulators as well as Marathon Oil's ( MRO ) stockholders, is expected to complete in the fourth quarter. Shares of Marathon Oil ( MRO ) jumped 8.2% in Wednesday trading, while ConocoPhillips ( COP ) declined 3.6%.

"This acquisition of Marathon Oil ( MRO ) further deepens our portfolio and fits within our financial framework, adding high-quality, low cost of supply inventory adjacent to our leading US unconventional position," ConocoPhillips ( COP ) Chief Executive Ryan Lance said in the statement.

ConocoPhillips ( COP ) estimates the acquisition to be immediately accretive to its earnings, free cash flow and capital returns. The oil and gas exploration and production company anticipates generating at least $500 million of cost and capital synergies within the first full year of the transaction's completion. The deal is projected to add acreage to ConocoPhillips' ( COP ) existing US onshore portfolio.

"When combined with the global ConocoPhillips ( COP ) portfolio, I'm confident our assets and people will deliver significant shareholder value over the long term," according to Marathon Oil ( MRO ) CEO Lee Tillman.

ConocoPhillips ( COP ) plans to increase its base dividend by 34% to $0.78 per share beginning in the fourth quarter, independent of the transaction. Once the deal completes and based on recent commodity prices, ConocoPhillips ( COP ) aims to repurchase more than $7 billion of shares in the first year and above $20 billion in the first three years.

"We view the proposed deal positively given the immediate accretion on all metrics given (Marathon Oil ( MRO ))'s shares have continued to trade at a notable discount to (ConocoPhillips' ( COP )) shares for several quarters," Truist Securities said in a client note. "We anticipate (ConocoPhillips ( COP )) potentially slowing combined activity, though likely maintaining total production."

Price: 115.70, Change: -3.26, Percent Change: -2.74