NEWS BULLETIN

November 18, 2001 --- Vol. 7, No. 145November 2001

Conoco and Phillips agree to merger of equals, Mackenzie gasline priority for Conoco Chairman Archie Dunham prior to merger

Conoco Inc. and Phillips Petroleum Co. said Nov. 18 that their boards of directors have unanimously approved a merger of equals. The companies said they have signed a definitive merger agreement.

The merged company will be named ConocoPhillips. The companies said it will be the third-largest integrated U.S. energy company based on market capitalization and oil and gas reserves and production. Worldwide, it will be the sixth-largest energy company based on hydrocarbon reserves and the fifth-largest global refiner.

Phillips shareholders will receive one share of new ConocoPhillips common stock for each share of Phillips they own and Conoco shareholders will receive 0.4677 shares of new ConocoPhillips common stock for each share of Conoco they own. Based on the closing market prices for the shares of both companies on Nov. 16 and their debt levels as of Sept. 30, the new company would have an enterprise value of $53.5 billion ($34.9 billion of equity; $18.6 billion of debt and preferred securities). At inception, Phillips shareholders will own about 56.6 percent and Conoco shareholders will own about 43.4 percent of the new company. The transaction is structured to be tax-free to the shareholders of each company.

Upon completion of the merger, Archie W. Dunham, Conoco chairman and chief executive officer, will serve as chairman of ConocoPhillips and will delay his scheduled retirement to 2004. James J. Mulva, Phillips chairman and chief executive officer, will be president and chief executive officer of the combined company, and also become chairman upon Dunham's retirement.

Conoco Canada Ltd. is one of four major leaseholders in Canada’s Mackenzie Delta and is part of the Mackenzie Delta Producer Group, which includes ExxonMobil Canada Ltd., Imperial Oil Ltd. (69 percent owned by Exxon) and Shell Canada Ltd. The group wants to build a gas pipeline from the Mackenzie Delta south to the United States.

In August, Dunham spoke to former Gulf Canada Resources' employees who would work for Conoco after Conoco's C$9.8 billion take over of Gulf Canada. He said a gas pipeline from the Mackenzie Delta is “very, very important to us — priority No. 1 for (Conoco Canada).” He set an ambitious target of slashing “at least two years” from the current timetable of five to eight years for delivering Delta gas to market.

In addition to being a key fundraiser for President George Bush and a long-time friend of Vice President Dick Cheney, Dunham claims strong ties with Canada’s federal and provincial leaders and with Alaska Gov. Tony Knowles. He said he would use those connections to push for an “over-the-top” route from Alaska to the Mackenzie Delta. He said he supports an Alaska Highway gasline, but wants the Mackenzie line to be built first.

Conoco, which developed the North Slope’s Milne Point field, pulled out of Alaska in 1993 after filing suit against the trans-Alaska pipeline owners for their tariff policies. Conoco traded its interest in Milne Point to BP for part interest in a Gulf of Mexico platform. Dunham was number two man at Conoco at that time. A former high level Conoco employee told PNA in August that without a major stake in the trans-Alaska oil pipeline, Conoco’s fixed costs on the North Slope were too high to operate a field in the region.


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