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ConocoPhillips Announces Plans to Split

Written By Brianna Panzica

Posted July 14, 2011

On Thursday, U.S. oil giant ConocoPhillips (NYSE: COP), the country’s third largest oil company, announced its plan to split.

Conoco was created in 1911 when the U.S. Supreme Court ruled to split Rockefeller’s Standard Oil.  Companies such as ExxonMobil (NYSE: XOM) and Chevron Corporation (NYSE: CVX) came out of this as well.

In 2002, Conoco merged with Jim Mulva’s company, Phillips Petroleum, to form what is today ConocoPhillips.

But now, CEO Jim Mulva is making plans to split into two separate companies: an oil refinery company and an oil exploration and production company.

Both companies will be public. Mulva believes it will provide an opportunity for each sector to grow and for investors to profit.

ConocoPhillips, though ranked up high with big dogs Exxon and Chevron, had made poor decisions in the past, making acquisitions and mergers at all the wrong times and acquiring debt.

The split should give each company created from it a chance to grow and focus more on specifics, Mulva believes.

Not to mention, once created, the refinery company will be the largest in the U.S., and the exploration and production company will reach this height as well, each with an average output of 2 million barrels a day.

Mulva told Reuters in an interview that he believes “more value is created in the formation of two very clear stand-alone companies”.

The separation is projected for completion by 2012.

Reuters reported speculations about the new company leaders, including Willie Chiang for the refinery company, as he currently owns that arm of ConocoPhillips.

The report also suggested that Alan Hirshberg, former Exxon employee, or Greg Garland, who owned a section of Conoco, could be in line to take over Mulva’s position, as Mulva plans to retire by the year’s end.

No decision has been made on what to do with ConocoPhillips’ 50% of Chevron Phillips Chemical Co LLC, a joint venture with Chevron.

ConocoPhillips’ decision is following a similar one made by Marathon Oil (NYSE: MRO), who just completed their spin-off, Marathon Petroleum, this past June.

And other smaller companies, like Williams Cos (NYSE: WMB), Questar (NYSE: STR) and El Paso (NYSE: EP), have completed splits.

But ConocoPhillips is the largest by far to do so.

Mulva has announced plans to sell around $5 billion to $10 billion in assets and buy back $10 billion in stocks, Forbes reported.

According to Reuters, ConocoPhillips was up as high as 7.5% after this announcement was made on Thursday.

That’s all for now,


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