ConocoPhillips' Stock Dips Amid Marathon Merger Approval and Shareholder Legal Battle

ConocoPhillips (COP) has experienced a notable decline of 3.46% over the past two days, marking a 3.95% decrease overall.

On August 29, ConocoPhillips announced that its impending merger with Marathon Petroleum Corp has secured the requisite shareholder approvals. The $22.5 billion acquisition is scheduled to close by the end of the fourth quarter in 2024. Under the terms of this all-stock transaction, Marathon Petroleum shareholders will receive 0.255 shares of ConocoPhillips common stock for each share of Marathon Petroleum they hold.

ConocoPhillips, established in 1875, is a major integrated multinational energy corporation and one of the largest independent oil producers globally, with over 20 billion barrels of oil equivalent in resource reserves. By market capitalization, it is the third-largest oil and gas giant in the U.S., trailing only ExxonMobil and Chevron.

Post-transaction, ConocoPhillips will gain Marathon Petroleum's daily production of 390,000 barrels of oil equivalent, increasing its global output to 2.3 million barrels of oil equivalent per day. This significant boost in production could potentially place ConocoPhillips ahead of TotalEnergies.

Marathon Petroleum, founded in 1887, was formerly one of the "Seven Sisters" oil companies that dominated the global oil market post-World War II. It is currently a mid-sized American petroleum company with operations primarily in crude oil and natural gas exploration, production, and transportation, focusing on the Middle East and North America.

Since initiating its acquisition offer, ConocoPhillips has navigated several challenges. In July, the company received a second request from the U.S. Federal Trade Commission for additional information regarding the acquisition. Moreover, in mid-August, a Marathon Petroleum shareholder filed a lawsuit to block the acquisition, claiming that the offered $17 billion undervalued Marathon Petroleum.

Despite these hurdles, the acquisition will enhance ConocoPhillips' onshore U.S. portfolio by adding over 2 billion barrels of resources. Additionally, the company anticipates achieving $500 million in cost and capital synergies within the first full year post-acquisition.

Overall, this merger signifies a broader trend of increased M&A activity in the U.S. oil and gas sector, particularly driven by the low development costs in the Permian Basin. Initially skeptical, major oil companies now recognize the potential of the Basin’s shale wells for rapid production increases and substantial profits, revolutionizing the traditional approach of expensive, long-term offshore projects.