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Week of May 7, 2012Volume 2, No. 20

From one legacy:  ConocoPhillips Split Official May 1, 2012

Plus Updates from others:  Marathon, Williams


ConocoPhillips (COP)

Independent Upstream

April 25, 2012

Full Presentation


Phillips 66 (PSX)

Independent Downstream

March 28, 2012

Full Presentation


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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    featured.slides from docFinder

    Slide Slide Slide Slide

    Marathon Oil (MRO)


    April 17, 2012

    Marathon Pet. (MPC)


    March 26, 2012

    Williams Cos. (WMB)


    March 27, 2012


    WPX Energy (WPX)


    March 28, 2012

    Independent E&P Marathon Oil, since spinning off its downstream & midstream assets in June 2011, has been focusing on high growth, capital efficient projects, notably the Eagle Ford plus impact exploration. MRO lauds itself as having the lowest costs per BOE when compared to its peer group. MRO is focused on liquids growth as well as improving shareholder returns (raised dividend 13% in Q1 2012).  


    As a stand-alone, MPC is a leader in the R&M space, ranking as the 2nd independent when measuring U.S. refining capacity. The company is heavily focused on its Detroit Heavy Oil Upgrade Project (DHOUP), which began in June 2008 and is scheduled to be completed in Q3 2012. MPC is currently evaluating strategic alternatives for its midstream operations and aims to focus on favorable crude economics in 2012.


    The Williams Companies spun-off its E&P unit, WPX Energy on  01/03/12. WMB has been a value machine in recent years with total 3-year shareholder return of 250%.  WMB's energy infrastructure business, midstream and gas pipelines, are rapidly growing and well-positioned.  WMB touts itself as having transformed to deliver shareholders high-growth and high-dividend growth (20% t0 30% annually in each of 2013 and 2014).


    WPX Energy began trading as a standalone in January 2012. In 2011, WPX's proved reserves grew 9% to 5.3 Tcfe and 3P reserves grew 7% to 18.5 Tcfe. Oil/NGL production grew 35% to 41 Mbbls/d. 68% of 2012 CAPEX is devoted to continuing this oil/NGL growth. More specifically, the three top plays (Bakken, $370MM; Piceance, $365MM; and Marcellus $315MM) will command a full 90% of the $1.2B 2012 budget. 

    WPX has ~ $2B in liquidity.


    Full Presentation

    Full Presentation

    Full Presentation

    Full Presentation

    featured.transactions from PLS global M&A database

    5/03/12Crescent Point acquires Cutpick Energy : Canada$431 MM
    5/02/12Pioneer divests South African assets to PetroSA$52 MM
    4/18/12Denbury acquires Thompson oilfield in Fort Bend County, TX $360 MM
    4/16/12NiMin divests San Joaquin basin assets in southern California$27 MM

    Source: PLS M&A Database