The two companies announced on Monday that they have entered a definitive agreement to collaborate in an all-stock transaction.

Under the terms of the transaction, each share of Concho Resources common stock will be exchanged for a fixed ratio of 1.46 shares of ConocoPhillips common stock, representing a 15% premium to closing share prices on 13 October.

ConocoPhillips and Concho Resources create a combined resource base of approximately 23 billion barrels of oil equivalent and will join forces as part of a unified company with an approximately $60bn enterprise value.

ConocoPhillips chairman and CEO Ryan Lance said: “The leadership and boards of both companies believe today’s transaction is an affirmation of our commitment to lead a structural change for our vital industry.”

He added: “Together, ConocoPhillips and Concho will have unmatched scale and quality across the important value drivers in our business: an enviable low cost of supply asset base, a strong balance sheet, a disciplined capital allocation approach, ESG excellence, and great people.”

The two operators expect $500m of annual cost and capital savings by 2022, following a financial framework that delivers more than 30% of cash from operations via dividends and additional distributions.

Concho Resources chairman and CEO Tim Leach said: “Through consolidation, we will apply our assets, capabilities, and superior performance to the business model of the future, creating a better-capitalised company with enhanced capital discipline, more flexibility, and an unwavering commitment to sustainability.”

This collaboration is also expected to create a platform to lead the sector into the energy transition and a low-carbon future. The combined entity is set to be the first US-based oil and gas company to adopt a Paris-aligned climate risk strategy to meet operational Scope 1 and Scope 2 net-zero emissions by 2050.