Analysts: Phillips-Conoco merger a matter of survival
by The Associated Press
While executives promoted their $15.6 billion deal to unite Phillips Petroleum Co. and Conoco Inc. as a merger of equals, analysts described it as a simple matter of survival.
If Phillips and Conoco hadn’t decided to join forces, they risked losing market share to competitors in a business climate that’s increasingly unhealthy for all but the largest petroleum companies, the analysts said.
“This is absolutely a matter of survival — not necessarily to thrive, but to guarantee they will survive,” said Fadel Gheit, an analyst at Fahnestock & Co. “If oil and gas prices collapse, smaller companies will be swept away.”
Oil prices recently have plunged to their lowest level in more than two years, with gasoline averaging $1.23 a gallon at stations nationwide, according to the Lundberg Survey. Prices at the pump could drop further if OPEC fails in its efforts to stop the free-fall.
In a conference call Nov. 19, top Phillips and Conoco officials said the merger will allow them to save at least $750 million annually, in part through elimination of jobs from the combined company’s roster of 58,000 employees.
Phillips chairman James Mulva said it’s too soon to say how many positions will be cut. Gheit predicted about 10 percent of the work force would be eliminated.
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