Conoco Refinery Spinoff Leads $7.7 Billion in Energy Bond Sales

Phillips 66, the refining business that’s being spun off by ConocoPhillips (COP), led energy companies selling $7.7 billion of bonds today.

The company issued $5.8 billion of three-, five-, 10- and 30-year notes, according to data compiled by Bloomberg. Kinder Morgan Energy Partners LP, the Houston-based pipeline company, CMS Energy Corp. (CMS) and Concho Resources also sold bonds.

ConocoPhillips is in the midst of a three-year plan to sell $15 billion to $20 billion of assets by the end of 2012, which has helped its stock return 65 percent in the past two years. The Houston-based oil company plans to complete the Phillips 66 spinoff in the second quarter, possibly as soon as May, Chief Financial Officer Jeff Sheets said on a January conference call.

“Phillips 66 is well-positioned as a leading independent refining and marketing company, despite a challenging industry environment,” Thomas Coleman, an analyst at Moody’s Investors Service, said today in a statement.

Phillips 66 sold $800 million of three-year, 1.95 percent notes that priced to yield 155 basis points more than similar- maturity Treasuries, $1.5 billion of five-year, 2.95 percent debt at a spread of 210 basis points, $2 billion of 10-year, 4.3 percent bonds at 235 basis points and $1.5 billion of 30-year, 5.875 percent securities at 275.

Term Loan

The new company will also arrange a $2.8 billion term loan, according to Moody’s, which rates the notes three levels above junk at Baa1. High-yield, or junk-rated, bonds are graded below Baa3 by Moody’s and lower than BBB- at Standard & Poor’s.

Kinder Morgan (KMP) sold $1 billion of 3.95 percent debt due in September 2022 that priced to yield 200 basis points more than Treasuries, Bloomberg data show. CMS Energy, an electricity and natural-gas provider operating primarily in Michigan, sold $300 million of 10-year, 5.05 percent notes at a spread of 312.5 basis points.

Concho Resources, an oil company in Midland, Texas, issued $600 million of 10.5-year notes that priced to yield 5.5 percent.

Hewlett-Packard Co. (HPQ), based in Palo Alto, California, also issued bonds, raising $2 billion. The company sold $1.5 billion of 5.5-year, 2.6 percent notes that priced at a 175-point spread and $500 million of 10.5-year, 4.05 percent debt at 210 basis points. A basis point is 0.01 percentage point.

To contact the reporter on this story: Zeke Faux in New York at zfaux@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net

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