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On May 1, 2012, ConocoPhillips (COP) completed the spin-off of its downstream business Phillips 66 (PSX). This corporate split reverses the mega-merger trend in the 1990's where bigger was better. Now, the drive for margins, growth and optimization rule. In North America, the capital intensity of shale development certainly gives larger companies with focus a competitive advantage. ConocoPhillips' splits comes on the heels of other recent reorganizations, notably Marathon and Williams.
As a stand-alone E&P Independent ConocoPhillips (NYSE: COP) has vaulted to the #1 position for the largest independent E&P company. In North America, COP's production in 2011 of over 800,000 BOED is a substantial lead over #2 Devon. For investors, not only does COP provide scale, diversity and 3-5% growth over the next five years, COP also provides the largest dividend among Independent E&P's -- an impressive 4.5% (as of April 11, 2012)!
On the downstream end, Phillps 66 (NYSE: PSX), touts itself as "The Advantaged Downstream Energy Company" with impressive earnings growth since 2009. In terms of the macro outlook that impacts its business, Phillips 66 sees Global 3-2-1 spreads decreasing, Ethylene Cash Margins increasing, Brent/WTI differentials decreasing and HH gas recovering in 2013.
Phillips 66's strategic priorities include:
1).Enhancing ROCE through portfolio optimization and margin improvement
2.)Delivering Profitable Growth through chemicals expansion, midstream growth and specialties/transportation
3.)Growing Shareholder distributions through regular dividends and share repurchases.
Update from other Splits : Marathon and Williams
Shown below are the latest presentations from two other large corporate reorganizations. On June 30, 2011, Marathon Oil spun-off its refining, marketing and transportation company -- Marathon Petroleum. On January 03, 2012, Williams Companies spun-off its E&P unit -- WPX Energy.
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