Oil giant in strategy shift as it prepares to split

ConocoPhillips is the first of the so-called ‘super majors’ to shift away from the strategy that led the industry to consolidate into a few players with global reach in the oil and gas businesses.

The move comes just two weeks after smaller firm Marathon Oil Co spun off its refining arm into Marathon Petroleum Corp, and analysts said it could help to close a valuation gap with other energy companies.

The “logic of the split makes sense”, analysts at Houston energy investment bank Tudor, Pickering, Holt & Co said in a note to investors.

ConocoPhillips operates two sites in North Lincolnshire – the Humber Refinery in South Killingholme and Immingham Combined Heat and Power plant.

The Humber Refinery is one of the most complex in the UK – it covers 480 acres and employs more than 750 people.

Over the past two years, ConocoPhillips has embarked on a massive portfolio shift to sell assets and reduce its debt load. It is the third-largest integrated US oil company.

Conoco’s 2002 purchase of rival Phillips was among the last of the megamergers that began in 1998 when BP bought Amoco.

Houston-based ConocoPhillips said it expected to complete the separation in the first half of 2012.

“We have concluded that two independent companies focused on their respective industries will be better positioned to pursue their individually focused business strategies,” said chief executive Jim Mulva, who will retire upon completion of the separation.

The decision to split comes amid rising confidence that global oil prices will remain strong for years to come as rising demand from countries such as China and India soaks up supplies.

Benchmark Brent crude oil prices averaged $117 a barrel in the second quarter, and forward prices show the market currently expects prices of about $106 by the end of the decade.

Work on the separation will begin immediately, ConocoPhillips said, adding that the transaction does not need a shareholder vote.

The spinoff is subject to market conditions, regulatory approvals and the receipt of a US Internal Revenue Service ruling that approves its planned tax-free status.