Big Oil Consolidation: Chevron Acquiring Hess - ConocoPhillips Acquiring Marathon Oil

Mergers and Acquisitions

Image Source: Nick Youngson CC BY-SA 3.0 Alpha Stock Images

Consolidation among the oil and energy sector continues as Chevron (CVX - Free Report) will be acquiring Hess (HES - Free Report) in a deal valued at $53 billion while ConocoPhillips (COP - Free Report) is set to acquire Marathon Oil (MRO - Free Report) for $22.5 billion when including debt.

This comes as crude prices are still up 10% for the year at just under $80 a barrel with big oil companies reaping massive profits.

Yahoo Finance

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Consolidation Overview

Acquiring Hess will further expand and diversify Chevron’s massive energy portfolio by giving the oil giant access to the Stabroek Block in Guyana with the large offshore oil reservoir known for its industry-leading cash margins and low carbon intensity.  

While Hess shareholders approved the buyout on Tuesday, the deal still faces challenges including the final approval by the FTC and the Guyana government along with complications from Exxon Mobil's (XOM - Free Report) 45% stake in the Stabroek Block with Hess controlling a 30% interest. The proposed acquisition stock price of $171 a share currently offers a 14% premium for Hess stock and shareholders would receive 1.025 shares of Chevron for each Hess share they own.

As for ConocoPhillips, today’s announcement of its acquisition of Marathon Oil aligns with the company’s financial framework of adding high-quality, low-cost supply inventory to its leading U.S. unconventional position. The deal is expected to be completed by the end of the year and values Marathon Oil’s stock at just over $30 and 7% above current levels with MRO spiking more than +7% on Wednesday to around $28 a share. As part of the agreement, Marathon Oil shareholders would receive 0.255 shares of ConocoPhillips for every Marthanon Oil share.   

Growth Potential

Based on their fiscal 2024 top-line projections, acquiring Hess would bring in an additional $13.07 billion in sales for Chevron bringing its total sales to $220.82 billion. This would be a 10% spike from sales of $200.94 billion in 2023 and represent 133% growth over the last five years with 2020 sales at $94.69 billion.

Zacks Investment Research

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Theoretically, Marathon Oil would boost ConocoPhillips’ sales by $6.96 billion based on FY24 estimates bringing the company’s total sales to $68.17 billion which would be a 16% increase from $58.57 billion last year. More impressive, this would expand ConocoPhillips’ top line by 254% over the last five years with 2020 sales at $19.25 billion.   

Zacks Investment Research

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Takeaway

Historically, large mergers in the oil and energy sector have created value for shareholders through cost reductions, and for now Chevron, ConocoPhillips, Hess, and Marathon Oil’s stock all land a Zacks Rank #3 (Hold).


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