Conoco CEO sees integrated refining arm

HOUSTON Wed Sep 7, 2011 3:12pm EDT

ConocoPhillips CEO and Chairman James Mulva listens as he and other top oil and gas industry executives testify during a Senate Finance Committee hearing on Oil and Gas Tax Incentives and Rising Energy Prices on Capitol Hill in Washington May 12, 2011. REUTERS/Kevin Lamarque

ConocoPhillips CEO and Chairman James Mulva listens as he and other top oil and gas industry executives testify during a Senate Finance Committee hearing on Oil and Gas Tax Incentives and Rising Energy Prices on Capitol Hill in Washington May 12, 2011.

Credit: Reuters/Kevin Lamarque

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HOUSTON (Reuters) - ConocoPhillips' chemical and pipeline operations will remain with the company's refining business and fuel its growth after a spinoff, Chief Executive Officer Jim Mulva said on Wednesday.

ConocoPhillips first announced a plan in July to spin off its refining business, but many questions about the fate of the some of the company's partnerships remained.

Mulva provided more specifics about the split on Wednesday to investors at the Barclays CEO Energy-Power Conference.

The downstream business will be integrated and "not just focused on refining," Mulva told investors.

After the separation, Chevron Phillips, the company's chemical joint venture with Chevron Corp, will remain with the refining company.

DCP Midstream Partners LP, ConocoPhillips' oil and natural gas gathering and processing venture with Spectra Energy Corp will also be part of the downstream business, Mulva said.

Paul Cheng, analyst at Barclays, told clients after the presentation that his firm still harbors doubts about ConocoPhillips' separation plan.

"We do not believe the intended downstream spinoff creates value as we think the (refining and marketing) business should trade in line with other large (refining and marketing) companies, while the upstream business will likely trade at a slight discount," Cheng said in a research note.

CAPEX SET

Production from unconventional assets in North America and liquefied natural gas projects will drive output in its separated exploration and production arm, Mulva said.

Mulva also told investors where assets from its partnership with Cenovus Energy Inc would land. The partners have Foster Creek and Christina Lake oilsands producing assets, as well as two U.S. refineries.

Foster Creek and Christina Lake will stay with ConocoPhillips' exploration and production business, while the Wood River and Borger refineries will go to the downstream business, the executive said.

Capital spending for the exploration company will be about $15 billion per year, while refining and marketing spending is estimated at $2.5 billion.

The third-largest U.S. oil company plans to complete the spinoff of its refining company by the second quarter of 2012.

For every two shares of ConocoPhillips owned, investors will receive one share of the refining company, ConocoPhillips said.

ConocoPhillips shares rose 2.1 percent to $67.08 on the New York Stock Exchange at mid-afternoon.

(Reporting by Anna Driver; editing by Maureen Bavdek, Lisa Von Ahn and Richard Chang)

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