Posted: Jul 14, 2011 9:32 AM by Lauren Wilson & AP
NEW YORK (AP) - ConocoPhillips, the nation's third-largest oil company, said Thursday that it will split itself into two separate publicly traded companies and its CEO and Chairman Jim Mulva plans to retire once the transaction is complete.
The breakup would create the largest independent refiner in the world, a prominent analyst said.
Its shares jumped $4.35, or 5.9 percent, to $78.75 in morning trading.
"We have concluded that two independent companies focused on their respective industries will be better positioned to pursue their individually focused business strategies," Mulva said in a statement.
Conoco said its board has approved separating its refining and marketing and exploration and production businesses by spinning off the refining and marketing segment to shareholders in a tax-free transaction.
Conoco's refineries produced 2.3 million barrels per day of gasoline, diesel and other petroleum products in the first three months of the year. As a stand-alone business, it will be the largest independent refiner in the world, Oppenheimer & Co. analyst Fadel Gheit said.
"This is so positive for them," Gheit said. "Everyone should stick to one business."
Instead of selling the refining assets, a spin-off creates a new business that will attract a different class of investors that will be better suited for the ups and downs that come with refining crude, Gheit said.
Refineries, which must buy oil to make gasoline, diesel and jet fuel, routinely struggle to pass on high crude costs to consumers. The industry was hammered by thin profit margins following record high oil prices in 2008, and many companies were forced to idle or sell underperforming refineries.
Conoco has said for the past few years that it plans to scale back its refining business, but until now it had balked at a spin off. Gheit said that company officials likely changed their mind after noticing how much a refinery spinoff was benefiting their Houston neighbor, Marathon Oil. Marathon's stock jumped 30 percent after it announced the split in January.
On July 1, Marathon Petroleum Corp., the refining company, began trading on the New York Stock Exchange under the "MPC" ticker symbol. Marathon Oil Corp. kept its ticker symbol of "MRO."
The Conoco split, which is expected to be completed during the first half of next year, will leave Conoco as an exploration and production company.
Mulva, 64, will lead the separation efforts, but plans to retire once the split is complete.
Conoco said its separation plans do not require a shareholder vote. It expects to provide further details on the transaction "as they are determined over the next several months."
The Houston-based company has about 29,600 employees. Conoco had $160 billion of assets and $226 billion of annualized revenue as of March 31.