By the OGJ Online Staff
HOUSTON, Nov. 19 -- Conoco Inc. and Phillips Petroleum Co. said their boards have approved a "merger of equals" creating a $35 billion ConocoPhillips.
They said the merged company would be the third-largest integrated US energy company based on market capitalization and oil and gas reserves and production. Worldwide, it will be the sixth-largest energy company based on hydrocarbon reserves and the fifth-largest global refiner.
Conoco and Phillips said the merged firm would have an expected debt-to-capitalization ratio of approximately 35%, improved capital efficiency, and an efficient cost structure.
Phillips shareholders will receive one share of ConocoPhillips common for each share of Phillips. Conoco shareholders will receive 0.4677 shares of ConocoPhillips common for each share of Conoco.
Based on the closing market prices for the shares of both companies Nov. 16, and their debt levels as of Sept. 30, the new company would have an enterprise value of $53.5 billion ($34.9 billion of equity; $18.6 billion of debt and preferred securities).
Initially, Phillips shareholders will own 56.6% and Conoco shareholders 43.4% of the new company. The transaction is structured to be tax-free to the shareholders of each company.
The companies expect to complete the merger in the second half of 2002. They anticipate cost savings of $750 million/year by merging. Those savings would begin within a year.
Archie Dunham, Conoco chairman and CEO, will delay a planned retirement until 2004 in order to be ConocoPhillips chairman. James Mulva, Phillips chairman and CEO, will be president and CEO of the combined company and will become chairman when Dunahm retires.
The ConocoPhillips board will consist of 16 directors, eight from each of the two companies, including Dunham and Mulva. ConocoPhillips will be headquartered at Conoco's Houston offices with a continuing presence at Phillips's Bartlesville headquarters.
Dunham said, "This merger of equals represents an excellent strategic fit for both Conoco and Phillips. It will position ConocoPhillips as a stronger US-based, global energy producer by significantly enhancing its capability and growth prospects on five continents in both current and prospective ventures, while generating major synergies. With a very strong balance sheet, more capital for upstream investment, and greater operational efficiency downstream, ConocoPhillips will be a tough new competitor to the larger global majors."
Mulva said, "Our compatible cultures, similar values and determined focus will facilitate a smooth integration and enable ConocoPhillips to get off to a fast and successful start."
ConocoPhillips is expected to have pro forma year 2000 hydrocarbon reserves of 8.7 billion boe and production of 1.7 million boe/d, based on the companies' estimates for 2001 yearend production.
The company will have operations in Alaska, Canada, the Lower 48, the North Sea, Venezuela, China, the Timor Sea, Indonesia, Viet Nam, the Middle East, Russia, and the Caspian area.
In the refining and marketing segment, ConocoPhillips will operate or have equity interests in 19 refineries in the US, the UK, Ireland, Germany, the Czech Republic, and Malaysia, with a refining capacity of 2.6 million b/d. It will also have a strong marketing presence in the US.
ConocoPhillips will continue Phillips' equity participation in the natural gas gathering and processing joint venture, Duke Energy Field Service, and in the chemicals and plastics joint venture, Chevron Phillips Chemicals.
