October 26, 2011 / 7:45 PM / 7 years ago

UPDATE 1-Conoco marketing its Seaway pipeline stake

* Seeks to sell stake in pivotal crude pipeline

* Pipeline’s future had been subject of speculation

* Conoco says has other ways to supply Oklahoma refinery

By Kristen Hays

HOUSTON, Oct 26 (Reuters) - ConocoPhillips on Wednesday confirmed it is seeking to sell its half interest in the Seaway pipeline, a conduit that could be pivotal in helping ease crude oversupply in the U.S. Midwest.

“We are actively in the marketing process now for that pipeline,” Chief Financial Officer Jeff Sheets told analysts during the company’s third-quarter earnings conference call on Wednesday.

ConocoPhillips co-owns the 350,000 barrel-per-day crude oil pipeline with operator Enterprise Products Partners . The pipeline carries crude from Freeport, Texas, to Cushing, Oklahoma, the delivery point for West Texas Intermediate crude, the U.S. benchmark.

The pipeline’s future had been a subject of speculation for months, as analysts saw its reversal — which could happen in six months to a year — as the quickest way to bring a significant flow of Cushing crude to the Gulf Coast, home to 40 percent of the nation’s refining capacity.

But ConocoPhillips had said it was in the company’s best interests to maintain the status quo to help supply its 198,400 bpd refinery in Ponca City, Oklahoma.

Executives also had said they saw little upside to a costly reversal when TransCanada’s $7 billion Canada-to-Texas Keystone XL pipeline is expected to be built and running by mid-2013, subject to regulatory approvals.

Yet Barclays said in a recent note that ConocoPhillips was “interested in seeking a potential buyer” for their interest.

ConocoPhillips declined comment at the time.

Barclays also said Enterprise would be the most likely potential buyer.

Enterprise spokesman Rick Rainey on Wednesday declined to say if the company wanted to buy its partner’s stake.

“We are aware of ConocoPhillips’ intentions, but do not have any information to share regarding potential impact to Enterprise,” Rainey said.

Enterprise is working with rival Enbridge Inc on plans to build the 800,000 bpd Wrangler pipeline from Cushing to Houston and Port Arthur, Texas, to start up in mid-2013.

GLUT A BOON

The Cushing glut has helped keep WTI-priced crude at a significant discount to London’s Brent for months, creating a huge profit boon for Midwest refiners that spend much less for crude than peers in other regions.

The advantage remains despite the spread narrowing sharply this week to about $18 from $28 two weeks ago as oil markets accept that supply is tightening. Cushing crude stocks have fallen 25 percent to 31.5 million barrels since May.

Sheets told Reuters in a later interview the company has an existing pipeline to supply Ponca City and the company is evaluating rail and barge opportunities as well.

ConocoPhillips on Wednesday attributed its refining division’s $1.2 billion in quarterly profits — a $928 million increase over the year-ago period — to higher refining margins.

He declined to say which region was most profitable, but noted the Midwest was a “very strong area” although East Coast refineries that depend on more expensive Brent-priced crude “continue to struggle.”

ConocoPhillips announced last month the company would idle its 185,000 bpd refinery in Trainer, Pennsylvania, and try to sell it due to poor profits. The plant stopped processing crude on Sept. 30.

“The Trainer refinery was not producing net income,” Sheets told analysts. “Depending upon the exact refining margins of the time, the cash generation was also not very strong.”

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