CONOCOPHILLIPS, THE third-biggest integrated US oil company, is going to hive off its refining assets – including Whitegate refinery in Co Cork – to focus exclusively on exploration and production.
The split into two standalone, publicly traded corporations, announced yesterday, will be effected through a tax-free spin-off of the refining and marketing business. ConocoPhillips plans to complete the split in the first half of 2012.
ConocoPhillips acquired the Irish refinery in 2001 following its acquisition of another US oil company, Tosco. Whitegate was originally owned by the Irish National Petroleum, a State company.
No value has been put on it at this stage, but according to the ConocoPhillips website it can process 75,000 tonnes of oil a day and meet about 40 per cent of the Republic’s fuel needs. The most recent accounts for ConocoPhillips Whitegate Refinery Ltd filed in the companies officer are for 2009 and report a loss of almost $12 million. It had 156 employees.
The ConocoPhillips decision follows one by Marathon Oil, which split two weeks ago and has seen its share price surge. It marks the second attempt by Jim Mulva, chief executive, to restructure the company after the economic crisis revealed in early 2009 flaws in the acquisition spree he had been pursuing for years to put the company in the big league. ConocoPhillips is the smallest of the six majors.
Breaking the company up will make it a “super-independent”, with what Barclays Capital estimates will be more than twice the proved reserves of Occidental Petroleum and Apache, its new peers. Its refining operations will be slightly smaller than Valero Energy’s, in terms of throughput capacity, Barclays said, making it the US’s second-biggest independent refiner.
“The downstream business is really struggling as an industry and the model is all about taking out costs and finding efficiencies,” said Jim DeNaut, Nomura’s head of investment banking for the Americas. “That is very different from the . . . growth that is going on in the upstream part of the business.”
Yet analysts say ConocoPhillips will remain in a difficult position. Until now, it has struggled to keep up with the majors; now, it will struggle to grow as fast as the smaller refiners.
The formal separation of ConocoPhillips is expected to take place in the first half of next year, after which Mr Mulva will retire. Under the terms of the present plan, no shareholder vote would be needed for the division to go ahead.
Instead, it would be subject to regulatory approvals and a final decision by the board. ConocoPhillips, based in Houston, has a global portfolio of upstream and downstream assets, including a joint venture in the Britannia oilfield in the North Sea. – Copyright The Financial Times Limited 2011
