|
Conoco, Phillips merge as equals ConocoPhillips will be third largest U.S. energy company, sixth largest worldwide; business as usual in Alaska, company says Kristen Nelson PNA Editor-in-Chief
It's a big shakeup in Bartlesville but business as usual in Anchorage following the Nov. 18 announcement by Conoco Inc. and Phillips Petroleum Co. that their boards of directors had unanimously approved a merger of equals.
The new company, ConocoPhillips, will be headquartered in Houston — and part of the $750 million in synergies the companies have targeted includes a single headquarters — costing Bartlesville, Okla., home of Phillips, an unknown number of jobs.
But in Anchorage, headquarters of Phillips Petroleum subsidiary Phillips Alaska Inc., “it's business as usual for us,” spokeswoman Natalie Knox told PNA Nov. 21. “We don't expect any plans to change — for development, exploration or capital spending — as a result of the merger.” Phillips Alaska has not yet announced exploration plans for the 2001-2002 season; the budget doesn't come up for board approval until early December.
Knox said Phillips Alaska doesn't “expect a significant impact on headcount because Conoco has no operations in Alaska and there's no local staff overlap between the companies.” (See related story on page 5.)
ConocoPhillips will be the third-largest integrated U.S. energy company based on market capitalization and oil and gas reserves and production, the companies said. 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 and Conoco shareholders will receive 0.4677 shares of new ConocoPhillips common stock for each share of Conoco. The new company will have an estimated enterprise value of $53.5 billion ($34.9 billion of equity; $18.6 billion of debt and preferred securities), with Phillips shareholders owning about 56.6 percent and Conoco shareholders owning about 43.4 percent of the new company.
Archie Dunham, Conoco chairman and chief executive officer, will serve as chairman of ConocoPhillips and will delay his scheduled retirement to 2004. Jim Mulva, Phillips chairman and chief executive officer, will be president and chief executive officer of the combined company and will become chairman upon Dunham's retirement.
Each company will designate eight members of a 16-member board of directors. Dunham told analysts Nov. 19 that the target board size is 12.
Initial regulatory filings will be made in December; shareholder approvals are expected in February; regulatory approvals and closing are expected in the second half of 2002.
The stars were aligned Mulva said in a Nov. 18 press briefing that the companies have known each other for a long time, but that the merger came together “in the last few weeks.”
“The stars were aligned in the last six weeks,” said Dunham. The exchange ratio over the last few weeks allowed us to make this a merger of equals, he told analysts Nov. 19.
Mulva said the companies have been “very strong competitors” and that “both have strong growth programs going forward” and Dunham said the goal of the merger is to take two strong companies and make one stronger companies. It will be good for the shareholders — and, he said, it will also be good for the country to have a third strong integrated oil company.
ConocoPhillips sees a minimum of $750 million in recurring synergies: $250 million from upstream operating efficiencies; $150 million from exploration; $150 million from downstream operating efficiencies; $50 million from supply chain; and $150 million from corporate.
Conoco has major Canadian holdings 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 ExxonMobil) 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 takeover 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. “I think if we could do it in four to six years, that would be good.”
On the subject of an over-the-top route versus a highway route, Dunham said: “Our sole interest right now is going to be Canada and the Mackenzie Delta, so we have no potential conflict of interest around choosing this route versus another route.”
Phillips Alaska's Knox told PNA that nothing has changed about Phillips Alaska's position on commercializing North Slope gas: “We've always believed that both North Slope and Mackenzie Delta gas will be needed to satisfy future demand in the American marketplace,” Knox said. “And our continued belief is that it is going to take two pipelines to bring those resources to market.”
The Alaska Public Interest Research Group, one of the groups which opposed BP's acquisition of ARCO's Alaska assets, said Nov. 19 that Gov. Knowles should condition his support of the merger on a continuing commitment to Alaska North Slope natural gas development and an Alaska natural gas pipeline and should also revisit “the Valdez all-Alaska route” under these new circumstances.
The Alaska connection 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 field. 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 develop a field in the region.
—PNA Publisher Kay Cashman contributed to this story
| 