Liam Denning is a Bloomberg Gadfly columnist covering energy, mining and commodities. He previously was the editor of the Wall Street Journal's "Heard on the Street" column. Before that, he wrote for the Financial Times' Lex column. He has also worked as an investment banker and consultant.

Schadenfreude is the bitter topping that makes humble pie almost tolerable. A little was served up on Thursday when ConocoPhillips reported its 2015 results and slashed its dividend by two-thirds.

But who was really eating it?

Conoco used to be an integrated oil company, meaning that when low oil prices hurt its exploration and production business, lower costs in the downstream refining and marketing business provided an offset. In 2012, Conoco split itself into an upstream business that kept the name and a separately listed downstream business, Phillips 66. In that way it broke from its former, and still very much integrated, peers, Exxon Mobil and Chevron.

The latter aren't exactly thriving right now. Both have slashed capital expenditure budgets, and Exxon has suspended its long-standing buyback program. Still, they have maintained their dividends. And their businesses outside of the upstream have done much of the heavy lifting, accounting for 60 percent of Exxon's earnings last year and more than 100 percent of Chevron's. Conoco's shares fell more than 3 percent in early trading on Thursday, and Phillips 66 was down slightly, too.

So who's laughing now? Well, maybe not who you think:

Severance Package
Market capitalization of U.S. oil majors, indexed to 100
Source: Bloomberg

Today, the combined Conoco and Phillips 66 is worth roughly $89 billion, which is only about 2 percent below the value of the old, combined business the day before it split in May 2012 -- when Brent crude was still trading at almost $120 a barrel. Meanwhile, the market capitalizations of Exxon and Chevron have both dropped by about a fifth.

Individually, the elements of the former Conoco are now more exposed to swings in commodity prices: Shares in the upstream business display the highest correlation to movements in oil prices of any of the old supermajors.

Yet, as the chart shows, investors have overall been more enamored with the company's separation strategy than the traditional one pursued by the integrated firms. When Conoco split, it also took the opportunity to streamline its asset base, cutting in half the number of countries where it had upstream operations and refocusing toward more stable, transparent OECD jurisdictions.

One emerging concern in the current oil slump is that the integrated model's traditional strengths of scale and diversity aren't proving as attractive, or necessarily safe, as they used to be. Billions spent on growing already gargantuan businesses have generated poor returns on capital, and canceled or delayed projects have raised questions about the efficacy of managing portfolios spanning dozens of countries. That Conoco's stock dropped by just a few percentage points despite eviscerating its payout is telling indeed.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Liam Denning in San Francisco at

To contact the editor responsible for this story:
Mark Gongloff at