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ConocoPhillips has announced that it will be separating its upstream exploration and production business and its downstream refining and marketing business into two independent publicly traded corporations. The breakup will be effected through a tax-free spin of the refining and marketing business to ConocoPhillips shareholders and is expected to be completed in the first half of 2012.
Conoco Chairman and CEO Jim Mulva commented that he expected the two independent companies to be better able to focus on their respective businesses by following separate business strategies. ConocoPhillips competes with other vertically oil majors such as BP,Exxon Mobil, Chevron and Royal Dutch Shell.
We have a $75.20 price estimate for ConocoPhillips, which is roughly in-line with its market price.
Refinery Spinoff Lets Conoco Focus on E&P
Taking a step away from the vertically integrated strategy of oil supermajors, Marathon oil announced a similar split in January this year. The company’s stock price has jumped over 40% since the event.
Vertically integrated oil majors combine drilling, transportation, refining and marketing functions of the petroleum supply chain. Refining is seen as being more cyclical than exploration and production (E&P) activity and the industry is presently in an upswing. According to Bloomberg, the ‘crack spread’ – the difference between the cost of crude oil and the selling price its derivatives, is now at its highest point in at least 25 years.
While obvious synergies exist between upstream and downstream activities, the two businesses are driven by different factors. Generally, higher oil prices boost the upstream business while making it difficult for refineries to push their end products to customers. Splitting up the two businesses is expected to help ConocoPhillips focus on better capital allocation for its E&P activity which generates more consistent returns. The stock market has already reacted to the news of the split positively.
We estimate that upstream activity of the company including its crude oil and natural gas liquids business, oil and natural gas trading and other operations, natural gas business and synthetic oil and bitumen business to contribute to around 43% of the company’s current market price. Equity affiliates and chemicals and emerging businesses contribute to just under 5% of the stock price, and the company earns the rest of its value from its downstream operations.
Will other oil majors follow ConocoPhillips?
Despite other players taking the lead in spinning off the refining business and the emergence of independent players in refining, storage and transportation, Exxon Mobil and Chevron maintain that their downstream operations are an integral part of their business proposition. In contrast, BP exited 10 refineries in the past 10 years and plans to sell a couple more in the future. Royal Dutch Shell has also sold assets in the refining business in Europe because of overcapacity in the industry and plans to close another such facility in Australia
Source: forbes.com
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WILD ALASKAN SALMON ,COD AND HALIBUT!
Monday, July 11, 2011wild Alaska salmon , cod and Halibut
hey whats new? My names Casey Kalmakoff Well I'm looking to get some help from as many people as I can . I'm looking to buy a boat and am asking the publics help in geting contributions for the cause. I trying word of mouth cause that usaully works best. The boat that I'm looking to get is being leased right now until the end of the summer so I have about 2 or 3 moths to come up with the money for it. They are asking 650,000 for it but its suppost to go down. I;m askin for the help of getting the message out to everyone that I posiibly can in get the help finacially. Any contributions are appreciated. But for $40.00 I'll send out one pound of salmon , cod or halibut your choice? Vacuum paked and shipped to you,$5.00 contributions I'll send out a Smoked salmon strip, depending on the amount of time I need to get the money together? also the time of season when I can actually go out and catch the fish. I'm going to put a youtube video out and ask the publics help in raising money if they want to contribute even a dollar. I'll ask the public for 500,000.00 people to contribute a dollar and that enough right there. But offering a incentive to those whom wish to contribute more to my cause. My numbers (907)727-1936 sure be nice to hear from you and being able to discuss this with as many people as possible I have a few pics on Facebook of fishing bak home and would really appreciate the help in my effort s I'm sure you understand and wanting to be our own bosses on your own boat. Thanks alot . so please if you may I'm asking anyone who will help me get the word out to people like I said my numbers (907)727-1936 my address is 660 e. 48th ave. anchorage alaska 99503 anyone who wants to contribute anything I would greattly apprecite it and feel free to share my info with any one who will listen thank you I appreciate it agian . Casey K My facebooks casey kalmakoff. feel free to email or add me on face book I have alot of fishing pictures on face book so add me and lets work something out I appreciate your help in making this a reality . Thank you so much CaseyK.
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