The U.S. oil and gas industry has been riding a consolidation wave over the last two years. Last year was one of the most active, where M&A deals worth $250 billion were struck by companies. The momentum has carried over into this year as the stock market continues to boom and as U.S. oil production scales new records.

The deal follows the announced purchase by U.S. majors Exxon Mobil of Pioneer Natural Resources in October, and Chevron's proposed $53 billion merger with Hess that was approved by the latter's shareholders on Tuesday.

Marathon Oil has operations in the Bakken basin in North Dakota, Permian basin in North Delaware and South Texas' Eagle Ford basin - regions that are prime targets for producers looking to increase their inventory.

Marathon Oil shares were up 7% at $28.39, while Conoco shares were down about 3% in premarket trading.

"This acquisition of Marathon Oil further deepens our portfolio and fits within our financial framework, adding high-quality, low cost of supply inventory adjacent to our leading U.S. unconventional position," ConocoPhillips CEO Ryan Lance said.

The consolidation activity is attracting increased antitrust scrutiny, with the FTC reviewing multi-billion dollar deals, including those involving Chevron, Diamondback Energy, Occidental Petroleum and Chesapeake Energy.

Marathon shareholders will receive 0.2550 shares of ConocoPhillips stock for each share they hold. That translates to an offer of $30.33 per Marathon share, representing a premium of nearly 15% as of the stock's Tuesday close, according to Reuters calculations.

The transaction, which includes $5.4 billion of Marathon's debt, is expected to close in the fourth quarter of 2024.

ConocoPhillips said it was expecting to achieve the full $500 million of cost and capital synergy run rate within the first full year following the closing of the transaction.

Advanced deal talks between the two companies were first reported by the Financial Times late on Tuesday.