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After Marathon Deal, Conoco has Bakken in Crosshairs

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ConocoPhillips (COP) will acquire Marathon Oil (MRO) for $17.1B, creating a ‘super-independent’ with operations across leading US basins. COP said it is evaluating cuts to the Bakken drilling program after the two producers combine, creating potential downside risk for several midstream systems in North Dakota.

COP and MRO announced the all-stock deal last Wednesday (May 29). With an enterprise value of $22.5B (including $5.4B in debt), a COP/MRO tie-up would have overlapping operations in the Permian, Bakken, Eagle Ford and Anadarko basins. The companies expect to close the deal in 4Q24.

tdn image 6.5.24

In an investor update, COP highlighted potential synergies from MRO’s assets in the Bakken, Delaware and Eagle Ford. Marathon will add a total of ~2,000 new drilling locations and >1,000 well refrac opportunities, COP said, making it possible to increase production by streamlining the portfolio. COP singled out the Bakken operations as an opportunity to lower rig counts and crews from the combo.

East Daley Analytics tracks COP and MRO rig activity from a midstream perspective in Energy Data Studio. The figure from the “Producer-to-System Analysis” dashboard in EDS shows COP/MRO rigs and volumes by G&P system in the Williston Basin.

The two producers have each run 3 rigs (6 total) in the basin since 2023. Marathon has mainly drilled on ONEOK’s (OKE) Bakken system in 2024. COP has moved 3 rigs between the OKE – Bakken, Hess Midstream (HESM) - Tioga, and Crestwood (CEQP) - Wild Basin systems, according to rig allocations in Energy Data Studio (see figure).

OKE processes the most natural gas for a COP/MRO combo in the Bakken, about 180 MMcf/d. Targa Resources (TRGP), CEQP, Kinder Morgan (KMI) and MPLX also service the two producers in the basin.

On the oil side of the business, five operators predominantly drive Bakken activity and produce over 50% of the basin’s light, sweet crude: Chord Energy/Enerplus, Continental Resources, Hess (merging with Chevron (CVX)), MRO and ExxonMobil (XOM). Other than Continental, which took itself private, these are all large, publicly traded operators. Chevron’s pending merger with Hess will change producer dynamics as well.

According to East Daley’s Production Scenario Tools, the transaction will make COP the third-largest oil producer in the Bakken behind Chord Energy/Enerplus and Continental. Based on the location of assets, East Daley believes oil produced from COP/MRO likely feeds egress pipelines such as Enbridge North Dakota and Dakota Access Pipeline. – Gage Dwan and Andrew Ware Tickers: CEQP, COP, CVX, KMI, MPLX, MRO, TRGP, XOM.


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