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Phillips plans to focus on exploration, production; next year’s spending up $ 1 billion Company expects to raise $3 billion with divestitures of natural gas gathering marketing, processing subsidiary; chemical, refining, marketing operations may go next year by The Associated Press
Phillips Petroleum Co. wants to close a deal on its natural gas gathering, marketing and processing subsidiary by the end of the year and hopes for more sales and joint ventures as it concentrates on exploration and production.
Chief Executive Officer Jim Mulva outlined the energy company’s five-year plan and shift in strategic operations in a meeting with analysts Sept. 23. Mulva said the company will speed up its growth in exploration and seek joint ventures and sales of its chemicals and refining and marketing operations.
Other restructuring is possible.
Mulva said any strategic transactions involving the chemical and refining and marketing operations will come after the company closes on the natural gas gathering, marketing and processing subsidiary.
Phillips expects to raise up to $3 billion with the divestitures and will use some of that money for investment in exploration and production.
Phillips’ exploration and production business makes up 44 percent of the company’s total assets.
Focus on Timor Sea, China, North Sea, North America Phillips, the eighth largest oil company in the country, wants to concentrate on developing discoveries made recently in the Timor Sea and in China and on its assets in the North Sea, North America and Canada.
The company wants to double its reserves in five years from its existing 2 billion barrel level. Much of the growth this year will come from the Hamaca project in Venezuela.
$1 billion slated for acquisitions Phillips is increasing its spending on exploration and production for next year to $2.2 billion from $1.2 billion. The company plans to spend about $1 billion for acquisitions and may focus on growth in the Permian Basin in New Mexico and Texas and in Alaska.
Phillips has looked at joint venture efforts in the past with the gas marketing, gathering and processing unit. Phillips and Ultramar Diamond Shamrock Corp. tried unsuccessfully earlier this year to forge a joint venture that would have created the largest independent refining, marketing and transportation company in North America.
The companies couldn’t work out details and negotiations ended in March.
An attempt at a similar joint venture with Conoco failed in 1996.
The strategic plan marks a new strategy for the company’s chemical operation, which includes assets worth $2.9 billion. The chemical unit includes the production of petrochemicals, specialty chemicals and plastics.
Paul Ting, an analyst with Salomon Smith Barney, said in a summary on the plan that there were positive changes in the company’s strategies. He said investors may be impressed with Phillips’ determination to create value with restructuring but may be concerned about the company’s debt level.
Phillips said it is comfortable with a 48 percent debt/capital ratio, Ting said in his report.
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