ConocoPhillips announced on Friday that the Federal Trade Commission (FTC) has issued a second request regarding its late May agreement to acquire Marathon Oil for $22.5 billion. This development is the latest indication that the rapid consolidation within the oil and gas industry is under significant regulatory scrutiny.

Details of the FTC's Second Request

Both ConocoPhillips, a leading U.S. independent oil producer, and Marathon Oil received the FTC’s request for additional information and documentary materials on Thursday. According to ConocoPhillips’ regulatory filing, the second request extends the waiting period imposed by the Hart-Scott-Rodino Antitrust Improvements Act of 1976 until 30 days after each party has "substantially complied" with the request, unless the FTC drops it sooner.

The filing also noted that ConocoPhillips and Marathon are cooperating constructively with the FTC and expect to finalize the merger in the fourth quarter of 2024, pending all required regulatory approvals and approval by Marathon's stockholders.

FTC Eyes $23B ConocoPhillips Deal  : Surge in Oil and Gas Industry Deals

The FTC's review of the ConocoPhillips deal comes amid a wave of mergers and acquisitions in the oil and gas sector over the past nine months. This activity has positioned the oil and gas industry as one of the top sectors for M&A activity in the first half of the year, outpacing traditionally dominant industries like finance and real estate.

Data from a Law360 analysis of Dealogic figures shows that the oil and gas sector ranked third globally in total deal value announced through June, surpassed only by the technology and healthcare sectors. The sector accounted for 7.9% of total deal values during the first half of the year, a significant increase from the 5.5% and 3% shares in the latter and first halves of 2022, respectively.

Major Deals and Increased Regulatory Scrutiny

The ConocoPhillips and Marathon Oil agreement, valued at $22.5 billion and inclusive of $5.4 billion in debt, is one of the largest deals in the recent consolidation wave. Marathon Oil shareholders will receive 0.2550 shares of ConocoPhillips common stock for each share of Marathon Oil common stock.

This deal is among several large transactions, such as Exxon's $60 billion purchase of Pioneer Natural Resources announced in October, which has attracted considerable scrutiny from lawmakers and regulators. The FTC has also issued second requests for other major deals, including Chevron's attempt to acquire Hess, Diamondback Energy's $26 billion deal with Endeavor Energy Resources, and Chesapeake Energy's planned $7.4 billion merger with Southwestern Energy.

Increased Investigations Under the Biden Administration

Larger transactions have faced heightened scrutiny under the Biden administration. Deals valued at over $1 billion are three times more likely to be investigated and six times more likely to receive a second request from the FTC or the Department of Justice compared to those valued below $300 million, according to a Morgan Lewis & Bockius LLP report based on 2022 fiscal year data.

The FTC’s recent second requests have also included CoStar Group's $1.6 billion merger with Matterport and Novo Holdings' planned $16.5 billion acquisition of Catalent. Some companies have sought to extend the review period to avoid a second request, as IBM did for its planned $6.4 billion purchase of HashiCorp.

FTC Eyes $23B ConocoPhillips Deal  : About Marathon Oil

Marathon Oil is an independent oil and gas exploration and production company with operations in four of the most competitive resource reserves in the U.S.: the Eagle Ford in Texas, the Bakken in North Dakota, the Permian Basin in New Mexico and Texas, and the STACK and SCOOP plays in Oklahoma.