ConocoPhillips to buy Marathon Oil in $17.1 billion all-stock deal that bolsters shale assets

ConocoPhillips agreed on Wednesday to buy Marathon Oil in an all-stock transaction worth $17.1 billion that would bolster the company’s shale assets as the broader oil and gas industry undergoes a major wave of consolidation.

The deal will add 2 billion barrels of resources to ConocoPhillips’ inventory in the U.S., extending the company’s reach across shale fields in Texas, New Mexico and North Dakota.

“This acquisition of Marathon Oil further deepens our portfolio and fits within our financial framework, adding high-quality, low cost of supply inventory adjacent to our leading U.S. unconventional position,” ConocoPhillips CEO Ryan Lance said in a statement.

Lance said the transaction would grow ConocoPhillips’ earnings, cash flow and shareholder returns after the deal closes in the fourth quarter. ConocoPhillips expects share buybacks worth $7 billion in the first year after the deal is completed and $20 billion after the first three years.

ConocoPhillips’ stock was down 3.3% in early trading following the announcement as Marathon Oil shares surged 7.3%. ConocoPhillips is the third-largest U.S. oil company with a market capitalization of $137 billion, while Marathon Oil has a market cap of $14.4 billion.

ConocoPhillips is the last of the top three U.S. oil companies to pull the trigger on a big acquisition as the industry undergoes a transformational wave of consolidation.

Exxon Mobil‘s acquisition of Pioneer Natural Resources for $60 billion recently received the greenlight from the Federal Trade Commission. Hess Corporation shareholders voted on Tuesday to advance the company’s $53 billion merger with Chevron.