According to Zhītōng Cáijīng, a Marathon Oil Corporation (MRO.US) shareholder filed a lawsuit to block ConocoPhillips Corporation (COP.US) acquisition plan, claiming that the $17 billion transaction "seriously undervalued" Marathon Oil Corporation's worth. Shareholder Martin Siegel filed the lawsuit in New York state court on Monday, saying ConocoPhillips' acquisition offer could cost investors in Marathon Oil more than $6 billion in value. He further accused Marathon Oil, its directors and financial advisers Morgan Stanley of distorting the transaction in a letter encouraging shareholders to support it. Siegel is asking the judge to halt investor voting until a hearing or corrective information is issued by both parties.

Siegel alleges in the lawsuit that Marathon Oil's management and advisers had conflicts of interest in completing the trade. He said Marathon Oil Chief Executive Officer Lee Tillman will cash in stocks worth over $70 million, and if the transaction is completed, Morgan Stanley will receive a commission of $42 million.

This all-stock trade is part of the merger wave in the US oil and gas industry and will give ConocoPhillips control of assets in Texas, North Dakota and the Permian Basin.

M&A activity has been busy in the US oil and gas industry, which started in 2023 and has persisted this year. In October last year, ExxonMobil (XOM.US) announced a $59.5 billion acquisition of Pioneer Natural Resources (PXD.US), which was approved by US regulators earlier this month. It is reported that post-merger, the company has over 1.4 million net acres of oil fields in Delaware and the Midland Basin in the US, estimated to have 16 billion barrels of oil equivalent resources.

Also in October last year, Chevron (CVX.US) spent $53 billion to acquire the fourth-largest oil company in the US, Hess (HES.US). After the acquisition, Chevron will own a 30% stake in the Stabroek block in Guyana.

In December last year, Occidental Petroleum (OXY.US) announced plans to acquire CrownRock and its significant assets in the Permian Basin for about $12 billion. Prior to this, ConocoPhillips and Devon Energy were potential bidders. CrownRock is reportedly worth $10 to $15 billion and has approximately 0.086 million net surface area assets in the northern Midland Basin of Texas, which is part of the Permian Basin.

The reason for the merger frenzy is the low cost of developing shale oil in the Permian Basin. Large oil companies initially avoided the Permian Basin, as they were skeptical whether the oil wells there could produce enough crude oil in a long enough time to generate huge profits. Now it is clear that low-cost, easy-to-drill shale wells enable oil companies to quickly increase production when needed. It marks a revolutionary change from large offshore projects that typically cost billions of dollars and take a decade to plan. The Permian Basin later became the most productive oil field in the western hemisphere, making the United States the world's largest oil-producing country.