425: ConocoPhillips and Marathon Oil Receive Second Request from FTC, Merger Timeline Remains on Track

ConocoPhillips and Marathon Oil received a second request for additional information from the FTC regarding their merger, but still anticipate closing the deal in the fourth quarter of 2024.

Summary

• ConocoPhillips and Marathon Oil received a second request from the Federal Trade Commission (FTC) on July 11, 2024, regarding their proposed merger.
• This request extends the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 until 30 days after both companies substantially comply with the request, unless the FTC terminates the period sooner.
• Despite the second request, both companies are cooperating with the FTC and still expect the merger to be completed in the fourth quarter of 2024.
• The completion of the merger is contingent upon the expiration or termination of the waiting period under the HSR Act, as well as the satisfaction or waiver of other closing conditions outlined in the Merger Agreement, including regulatory approvals and approval from Marathon's stockholders.

Sentiment

Score: 6

Explanation: The sentiment is neutral. While the second request from the FTC introduces a potential delay, the companies are cooperating and still expect the merger to close within the previously stated timeframe. There are risks associated with the merger, but the overall tone is cautiously optimistic.

Positives

• ConocoPhillips and Marathon are cooperating with the FTC.
• The companies still expect the merger to close in the fourth quarter of 2024.

Negatives

• The second request from the FTC introduces a potential delay due to the extended HSR Act waiting period.

Risks

• The merger is subject to regulatory approvals, which may or may not be granted.
• Marathon's stockholders need to approve the merger.
• Unforeseen events or changes could lead to the termination of the proposed transaction.
• The integration of Marathon's businesses and technologies may not be successful.
• Expected benefits and synergies of the merger may not be fully achieved or realized in a timely manner.
• Key personnel may not be retained or hired.
• Regulatory approval may be subject to unanticipated conditions.
• The announcement, pendency, or completion of the proposed transaction could affect business relationships and operations.
• The announcement or pendency of the proposed transaction could affect the parties' common stock prices.
• The proposed transaction could disrupt current plans and operations.
• Rating agency actions could affect ConocoPhillips' and Marathon's ability to access debt markets.
• Changes in commodity prices could affect the combined company's financial performance.
• Global and regional changes in the demand, supply, prices, differentials or other market conditions affecting oil and gas could affect the combined company's financial performance.
• Insufficient liquidity or other factors could impact ConocoPhillips' ability to repurchase shares and declare and pay dividends.
• Changes in expected levels of oil and gas reserves or production could affect the combined company's financial performance.
• Potential failures or delays in achieving expected reserve or production levels from existing and future oil and gas developments could affect the combined company's financial performance.
• Unexpected cost increases, inflationary pressures or technical difficulties in constructing, maintaining or modifying company facilities could affect the combined company's financial performance.
• Legislative and regulatory initiatives addressing global climate change or other environmental concerns could affect the combined company's financial performance.
• Public health crises, including pandemics (such as COVID-19) and epidemics and any impacts or related company or government policies or actions could affect the combined company's financial performance.
• Investment in and development of competing or alternative energy sources could affect the combined company's financial performance.
• Potential failures or delays in delivering on ConocoPhillips' current or future low-carbon strategy, including ConocoPhillips' inability to develop new technologies could affect the combined company's financial performance.
• Disruptions or interruptions impacting the transportation for ConocoPhillips' or Marathon's oil and gas production could affect the combined company's financial performance.
• International monetary conditions and exchange rate fluctuations could affect the combined company's financial performance.
• Changes in international trade relationships or governmental policies, including the imposition of price caps, or the imposition of trade restrictions or tariffs on any materials or products (such as aluminum and steel) used in the operation of ConocoPhillips' or Marathon's business, including any sanctions imposed as a result of any ongoing military conflict, including the conflicts in Ukraine and the Middle East could affect the combined company's financial performance.
• ConocoPhillips' ability to collect payments when due, including ConocoPhillips' ability to collect payments from the government of Venezuela or PDVSA could affect the combined company's financial performance.
• ConocoPhillips' ability to complete any other announced or any other future dispositions or acquisitions on time, if at all could affect the combined company's financial performance.
• The possibility that regulatory approvals for any other announced or any future dispositions or any other acquisitions will not be received on a timely basis, if at all, or that such approvals may require modification to the terms of those transactions or ConocoPhillips' remaining business could affect the combined company's financial performance.
• Business disruptions following any announced or future dispositions or other acquisitions, including the diversion of management time and attention could affect the combined company's financial performance.
• The ability to deploy net proceeds from ConocoPhillips' announced or any future dispositions in the manner and timeframe anticipated, if at all could affect the combined company's financial performance.
• Potential liability for remedial actions under existing or future environmental regulations could affect the combined company's financial performance.
• Potential liability resulting from pending or future litigation could affect the combined company's financial performance.
• The impact of competition and consolidation in the oil and gas industry could affect the combined company's financial performance.
• Limited access to capital or insurance or significantly higher cost of capital or insurance related to illiquidity or uncertainty in the domestic or international financial markets or investor sentiment could affect the combined company's financial performance.
• General domestic and international economic and political conditions or developments, including as a result of any ongoing military conflict, including the conflicts in Ukraine and the Middle East could affect the combined company's financial performance.
• Changes in fiscal regime or tax, environmental and other laws applicable to ConocoPhillips' or Marathon's businesses could affect the combined company's financial performance.
• Disruptions resulting from accidents, extraordinary weather events, civil unrest, political events, war, terrorism, cybersecurity threats or information technology failures, constraints or disruptions could affect the combined company's financial performance.
• Other economic, business, competitive and/or regulatory factors affecting ConocoPhillips' or Marathon's businesses generally as set forth in their filings with the Securities and Exchange Commission (the SEC) could affect the combined company's financial performance.

Future Outlook

ConocoPhillips and Marathon Oil continue to expect that the Merger will be completed in the fourth quarter of 2024, subject to the fulfillment of the closing conditions in the Merger Agreement, including receipt of required regulatory approvals and approval of Marathon's stockholders.

Management Comments

• ConocoPhillips and Marathon continue to work constructively with the FTC in its review of the Merger.

Industry Context

The oil and gas industry is currently experiencing a wave of consolidation, driven by factors such as the desire to achieve economies of scale, increase market share, and access new reserves. This merger is part of that trend.

Comparison to Industry Standards

• Other recent large mergers in the oil and gas industry include ExxonMobil's acquisition of Pioneer Natural Resources and Chevron's acquisition of Hess Corporation.
• These mergers, like the ConocoPhillips-Marathon deal, are subject to regulatory review and scrutiny.

Stakeholder Impact

• Shareholders of Marathon will need to vote on the merger.
• Employees of both companies may experience uncertainty during the integration process.
• Customers and suppliers of both companies may be affected by the merger.

Next Steps

• ConocoPhillips and Marathon must substantially comply with the FTC's second request.
• The FTC will review the additional information and documentary materials.
• Marathon's stockholders must approve the merger.
• The companies must satisfy or waive all other closing conditions specified in the Merger Agreement.
• The waiting period under the HSR Act must expire or be terminated.

Key Dates