Will ConocoPhillips New Strategy Affect the Oil and Gas Industry?
ConocoPhillips (NYSE:COP) has announced its plan to split into two separate publicly traded companies, a refining company and an exploration and production business. While most companies in the industry are working to consolidate production and refining, ConocoPhillips is the first to purposefully separate the two.
The third largest oil firm in the U.S., ConocoPhillips believes the split will allow both branches to better pursue their individual strategies. Analysts agree with the logic of the split. “This is so positive for them,” said Fadel Gheit, an analyst at Oppenheimer. “Everyone should stick to one business.” Apparently investors agree, sending ConocoPhillips shares up 4.54% so far today. The separate is expected to be complete within the first half of 2012.
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The other two oil companies in the top three in the U.S. are Chevron (NYSE:CVX) and Exxon Mobil (NYSE:XOM). Exxon currently owns the entire cycle of oil through its many divisions and affiliates, from exploration and drilling to refining and transportation, and helms its business model as the most cost efficient. But lately Exxon has been divesting itself of its gas stations because of weak margins. And while it has its own oil production business, the company ultimately has to purchase more expensive oil on the market to meet high U.S. demand, which would be one reason for divesting itself of its refining unit. Still, it remains to be seen whether other oil leaders will take their cue from ConocoPhillips (NYSE:COP).