Wachtell Lipton Rosen & Katz and Kirkland & Ellis are guiding the $22.5bn acquisition of Marathon Oil by top US independent oil and gas producer ConocoPhillips. 

The deal, among the 10 largest announced so far this year, continues a wave of consolidation in the US oil and gas industry as companies move to build economies of scale and boost reserves. That consolidation has provided a rich seam of work for Big Law firms amid a downturn in global M&A activity in 2023, with $250bn of deals struck last year. That momentum has continued into 2024, with a record $51bn of deals in the first quarter. 

The all-stock Marathon deal has an enterprise value of $22.5bn, including $5.4bn of net debt. The offer equates to $30.33 per Marathon share, a premium of almost 15% to the stock’s Tuesday close, according to Reuters. 

A Wachtell team led by New York corporate partners Gregory Ostling and Zachary Podolsky is counselling ConocoPhillips on the deal. Meantime, Kirkland is acting for Marathon, with the effort led by corporate partners Sean Wheeler, Debbie Yee and Camille Walker. The trio work out of the Houston office the firm opened a decade ago to take advantage of a frothy oil and gas M&A market and private equity investing big bucks, particularly in the Permian, the leading US shale oil field. 

Marathon Oil has operations in the Permian basin in West Texas, South Texas’s Eagle Ford basin and the Bakken basin in North Dakota – all prime targets for producers looking to grow their inventory.

Ryan Lance, ConocoPhillips chairman and CEO, said the Marathon acquisition would deepen the company’s portfolio and “fits within our financial framework, adding high-quality, low cost of supply inventory adjacent to our leading US unconventional position”.

Last quarter, ConocoPhillips was the third biggest oil and gas producer by volume in the Permian after US majors ExxonMobil and Chevron. 

The company said it expects $500m of cost savings within the first full year after the closing of the Marathon deal, which will add two billion barrels of reserves to its portfolio. 

Evercore is serving as ConocoPhillips’s financial advisor on the deal, while Morgan Stanley is acting as Marathon’s financial advisor. The deal is expected to close in the fourth quarter of 2024. 

For Wachtell, Ostling has advised ConocoPhillips in multibillion-dollar transactions over more than 15 years, including its $15bn joint venture with EnCana back in 2007 and the $20bn spin-off of its refining and marketing businesses. Alongside Podolsky, he also guided its $13bn acquisition of Permian basin oil and gas company Concho Resources in 2021. 

For his part Podolsky is among the Wachtell partners guiding Hess on its $53bn sale to Chevron, the second-largest deal announced in 2023 after ExxonMobil’s $60bn acquisition of Pioneer Natural Resources, which saw Davis Polk and Gibson Dunn called in to advise the respective parties. 

Alongside Steven Green, Podolsky is also leading the Wachtell team counselling Diamondback Energy on its $26bn acquisition of rival Endeavor Energy Partners. The deal – another among the 10 largest to be announced this year – saw Diamondback beat ConocoPhillips to buy Endeavor, which is being counselled on the matter by Paul Weiss and Vinson & Elkins. 

Wachtell partners advising ConocoPhillips in the Marathon deal also include Nelson Fitts (antitrust), Michael Schobel (executive compensation), Emily Johnson (finance) and Deborah Paul (tax).

For Kirkland, Wheeler, Yee and Walker have led other energy deals including Callon Petroleum’s $4.5bn sale to APA and ONEOK in its $18.8bn acquisition of Magellan Midstream Partners. 

Kirkland’s team for the Marathon deal also includes partners Rachael Lichman (debt finance), Julian Seiguer and Atma Kabad (both capital markets), David Wheat and Bill Dong (both tax), Ian John, Chuck Boyars, Thomas Sebastian Wilson and Athina Van Melkebeke (all antitrust and competition), and Rob Fowler and Stephanie Jeane (both executive compensation). 

News of the acquisition comes amid a surge in global M&A after dealmaking slumped to a 10-year low in 2023. Global M&A volumes jumped 38% in the first quarter compared to the same period last year to nearly $800bn, according to LSEG, though deals are taking longer to complete amid increased regulatory scrutiny.

Wachtell placed second in the global M&A legal advisor rankings by deal value in the opening three months of the year, working on deals worth just short of $148bn. The firm had placed fifth in the rankings for 2023 after working on deals worth just over $310bn, while Kirkland’s work on deals worth nearly $400bn saw it earn top billing. The Chicago giant had fallen to eighth spot at the end of this year’s opening quarter after advising on $80bn of deals.