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Tosco acquisition will boost Phillip’s Alaska exploration spending
Steve Sutherlin PNA Managing Editor
The purchase of refiner/marketer Tosco Corp. by Phillips Petroleum Co. will result in greater spending for Alaska exploration, a company official told PNA Sept. 23.
The $7 billion stock transaction, completed Sept. 14, vaulted Phillips into the top five of gasoline marketers in the United States, and made it the country’s second largest refiner.
Good for upstream business “This deal will be good for the upstream business in the long run,” said Rich Johnson, a spokesman at the company’s Bartlesville, Okla., headquarters.
The company will be more confident in making exploration expenditures due to diversification provided by the acquisitions of Tosco and ARCO Alaska Inc., Johnson said.
A 50/50 strategic joint venture in chemicals with Chevron Corp. and a 30 percent interest in a gas processing and marketing joint venture with Duke Energy pared the company’s debt-to-capital ratio from 45 percent to approximately 31 percent, the company said when the Chevron deal was announced in February 2000.
The Tosco transaction received regulatory clearance from the U.S. Federal Trade Commission with no requirements for divestiture of assets. The company is well integrated, and it plans to aggressively pursue exploration, Johnson said, adding, “To grow exploration, you have all of the businesses grow.”
Synergies, strength, $250 million yearly savings Following the transaction, each share of Tosco common stock was converted into the right to receive 0.8 of a share of Phillips common stock.
“We have combined two strong complementary companies into a significant refining and marketing competitor in the United States,” said Jim Mulva, Phillips’ chairman and chief executive officer. “Acquiring Tosco is the fourth integral piece of a strategic growth plan we set for ourselves two years ago. We have successfully positioned our four business lines to compete more effectively and, in doing so, have set the foundation for further profitable growth. Moving forward, our focus will be on integrating and developing synergies in our refining, marketing and transportation business, and further growing our worldwide exploration and production position.”
Effective with the close of the transaction M. J. Panatier became chief operating officer of Phillips’ refining, marketing and transportation business, Phillips 66 Co.
“Looking ahead, we intend to use our intellectual capital to become a more efficient and cost-effective refiner, rationalize our marketing operations, and optimize our supply chain,” Panatier said.
No workforce reductions now According to Mulva, Phillips has no immediate plans to reduce its workforce due to the acquisition.
“I am confident that we will realize efficiencies through this transaction. In fact, we expect to achieve or exceed synergies of $250 million in 2002,” he said. “At this point, we don’t know what the final effect will be on the combined workforce. As with any major change, a close look is being taken at how things are done today and how they might be done more efficiently in the future.”
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