ConocoPhillips splits in two

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ConocoPhillips splits in two

Post by ToddS on Fri Jul 15, 2011 12:08 pm



July 15, 2011 4:45 pm

ConocoPhillips splits in two

By David Blair, Energy Correspondent

ConocoPhillips decided in principle to split in two on Thursday, announcing a plan to divide its refining business and exploration and production assets into separate corporations.

Less than a decade after the original merger between Conoco and Phillips Petroleum produced the third biggest oil company in the US, the company’s board decided to break up their creation.

Jim Mulva, the chief executive who will retire when the formal separation takes place next year, said the rationale was to unlock shareholder value in an intensely competitive industry. The best way of achieving this, he said, was by dividing the two halves of the business and allowing each to focus exclusively on its own priorities and investment ambitions.

But analysts said that the downstream arm of ConocoPhillips had underperformed its counterparts in exploration and production. The company’s name will continue to attach to the new upstream company, meaning that Mr Mulva has in effect chosen to hive off the refining side of the business, which was shaping up to become a significant drag.

Michael Hill, co-head of natural resources at Nomura, pointed out that the new exploration and production company would be relieved of the capital burden of upgrading old refineries.

The market rewarded Mr Mulva by sending ConocoPhillips shares up by 1.6 per cent after his announcement. But his successor will face the challenge of running a company much reduced in size, while also achieving growth against the fierce competition of its bigger peers.

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