Is COP's Marathon Oil Acquisition Driving Profitability and Growth?

ConocoPhillips COP, a leading exploration and production firm in the United States, acquired Marathon Oil in November 2024 and has completed the integration of the latter’s assets into its portfolio. The acquisition significantly expands COP’s low-cost resource base, particularly in the U.S. Lower 48, where the company already holds a significant acreage position.

The Marathon Oil takeover has already surpassed the initial acquisition targets. COP noted an increase in low-cost supply of nearly 25%, with a significant contribution from Marathon Oil’s Permian Basin resources. Furthermore, ConocoPhillips had originally estimated $500 million in annual synergies from the acquisition. However, in its recent earnings call, the company mentioned that it is on track to realize over $1 billion in run-rate synergies by the end of 2025. COP has also implemented a steady-state drilling and completions program across its combined portfolio of assets, which supports an increase in production, while cutting down on the number of rigs and frac crews by almost 30%. This approach enables production optimization while reducing costs.

The Marathon Oil transaction strengthened ConocoPhillips' position as a premier shale operator in the United States by expanding its deep inventory in the Lower 48 region, unlocking significant run-rate synergies and improving production prospects. The acquisition positions COP to deliver higher profits in the future and enhance its cash flow profile.

XOM & VNOM Expand U.S. Shale Footprint

Exxon Mobil Corporation XOM and Viper Energy, Inc. VNOM have recently expanded their footprint in the shale basins of the United States.

ExxonMobil’s acquisition of Pioneer Natural Resources has expanded its Permian footprint, enabling efficient, lower-cost drilling and increased profitability. Meanwhile, in Guyana, ExxonMobil remains the leading operator of the Stabroek Block, with the largest share in the oilfield. These assets are expected to deliver significant returns and support the energy major’s production for decades.

Viper Energy’s $4.1 billion acquisition of Sitio Royalties strengthens its position in the Permian Basin. Sitio Royalties has roughly 25,300 net royalty acres in the Permian, bringing the combined firm’s presence in the most prolific basin to 85,700 net royalty acres. This acquisition underscores the attractiveness of U.S. shale basins, which can support low-cost production and make operations highly profitable.

COP’s Price Performance, Valuation & Estimates

Shares of COP have plunged 5.4% over the past year compared with the 10.8% decline of the industry.

From a valuation standpoint, COP trades at a trailing 12-month enterprise value to EBITDA (EV/EBITDA) of 5.43x. This is below the broader industry average of 11.22x.

The Zacks Consensus Estimate for COP’s 2025 earnings has been revised downward over the past 30 days.

COP, XOM and VNOM each currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research