ConocoPhillips Plans to Split in Two, Mulva to Retire

ConocoPhillips (COP) said it would spin off its refining and marketing arm into a new business, two weeks after Marathon Oil Corp. (MRO) split itself up to increase returns for investors.

ConocoPhillips, based in Houston, will divide into two stand-alone, publicly traded operations. The division is expected to be completed in the first half of 2012, the company said in a statement today.

Marathon Petroleum Corp., Marathon’s former refining business, debuted on the New York Stock Exchange this month. Marathon rose as much as 11 percent on the day the split was announced.

“I love it!” said Fadel Gheit, a New York-based analyst for Oppenheimer & Co., who rates the shares “outperform” and owns none. “It worked for Marathon and it will work even better for ConocoPhillips. ConocoPhillips is a much better company.”

ConocoPhillips made the announcement before regular trading opened on U.S. markets. ConocoPhillips rose $4.61, or 6.2 percent, to $79.01 in New York at 7:16 a.m. Before today, the shares had risen 9.25 percent this year. The shares have 11 buys, 10 holds and three sell ratings from analysts.

ConocoPhillips is the second-largest U.S. oil refiner with capacity of 2 million barrels per day, according to its website. It owns 12 U.S. refineries, and has a two-refinery joint venture with Alberta-based oil producer Cenovus Corp. The plants account for about 10 percent of U.S. refining capacity, according to data compiled by Bloomberg.

Largest Independent Refiner

Following the split, ConocoPhillips’ refining arm will be the largest U.S. independent refiner, with more capacity than Valero Energy Corp., according to data compiled by Bloomberg.

ConocoPhillips also owns five refineries outside the U.S.

“Their refining assets are certainly more geographically diversified than Marathon’s,” said Ann Kohler, an analyst at CRT Capital Group LLC in Stamford, Connecticut. “Marathon benefits from its high integration in the Mid-Continent.”

The announcement comes as the crack spread, a measure of the difference between the cost of crude oil and the price of products derived from it, exceeded $35 a barrel, the widest in at least 25 years, according to data compiled by Bloomberg.

After the split is completed Chief Executive Officer Jim Mulva will retire, according to the statement.

ConocoPhillips was formed in 2002 from the $25 billion merger of Phillips Petroleum Co. and Conoco Inc., which created the third-largest U.S. oil company. Phillips’s Mulva became the new company’s chief executive officer and continued to expand ConocoPhillips with the 2006 purchase of Burlington Resources Inc.

Photographer: F. Carter Smith/Bloomberg

James "Jim" Mulva, chairman and chief executive officer of ConocoPhillips, speaks at the 2010 CERAWEEK conference in Houston. Close

James "Jim" Mulva, chairman and chief executive officer of ConocoPhillips, speaks at... Read More

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Photographer: F. Carter Smith/Bloomberg

James "Jim" Mulva, chairman and chief executive officer of ConocoPhillips, speaks at the 2010 CERAWEEK conference in Houston.

Prior to the ConocoPhillips merger, Phillips acquired independent refiner Tosco Corp. in 2001, adding eight refineries to its portfolio.

To contact the reporters on this story: Jim Polson in New York at jpolson@bloomberg.net; Edward Klump in Houston at eklump@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net

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