ConocoPhillips Company (NYSE: COP) is an American multinational energy corporation with its headquarters located in the Energy Corridor district of Houston, Texas in the United States. It is also one of the Fortune 500 companies.[3] ConocoPhillips is the fifth largest private sector energy corporation in the world and is one of the six "supermajor" vertically integrated oil companies. It sells fuel under the Conoco, Phillips 66 and Union 76 brands in North America, and Jet in Europe. ConocoPhillips was created through the merger of Conoco Inc. and the Phillips Petroleum Company on August 30, 2002.
ConocoPhillips, incorporated on November 16, 2001, is an international, integrated energy company. the Company operates in six segments: Exploration and Production (E&P), which explores for, produces, transports and markets crude oil, bitumen, natural gas, liquefied natural gas (LNG) and natural gas liquids on a worldwide basis; Midstream, which gathers, processes and markets natural gas produced by it and others, and fractionates and markets natural gas liquids, in the United States and Trinidad; Refining and Marketing (R&M), which purchases, refines, markets and transports crude oil and petroleum products, in the United States, Europe and Asia; LUKOIL Investment, which consists of its investment in the ordinary shares of OAO LUKOIL; Chemicals, which manufactures and markets petrochemicals and plastics worldwide, and Emerging Businesses, which represents investment in new technologies or businesses outside its operations.
EXPLORATION AND PRODUCTION (E&P)
At December 31, 2010, the E&P segment represented 63% of ConocoPhillips’ total assets. This segment explores for, produces, transports and markets crude oil, bitumen, natural gas and natural gas liquids worldwide. Operations to liquefy natural gas and transport the resulting LNG are also included in the E&P segment. At December 31, 2010, the E&P operations were producing in the United States, Norway, the United Kingdom, Canada, Australia, offshore Timor-Leste in the Timor Sea, Indonesia, China, Vietnam, Libya, Nigeria, Algeria, Qatar and Russia. During the year ended December 31, 2010, E&P’s worldwide production, including its share of equity affiliates, averaged 1,752,000 barrels of oil equivalent per day (BOED). During 2010, the United States E&P operations contributed 40% of E&P’s worldwide liquids production and 39% of natural gas production.
The Greater Prudhoe Area includes the Prudhoe Bay Field and five satellite fields, as well as the Greater Point McIntyre Area fields. Bay’s satellites are Aurora, Borealis, Polaris, Midnight Sun and Orion, while the Point McIntyre, Niakuk, Raven and Lisburne Fields are part of the Greater Point McIntyre Area. The Company has a 36.1% nonoperator interest in all fields within the Greater Prudhoe Area. Net oil and natural gas liquids production from the Greater Prudhoe Area averaged 113,000 barrels per day during 2010.
The Company operates the Greater Kuparuk Area, which is made up of the Kuparuk Field and four satellite fields: Tarn, Tabasco, Meltwater and West Sak. Kuparuk is located 40 miles west of Prudhoe Bay on Alaska’s North Slope. Its ownership interest in the area is approximately 55%. Field installations include three central production facilities that separate oil, natural gas and water. The natural gas is either used for fuel or compressed for re-injection. Net oil production from the area averaged 60,000 barrels per day during 2010.
On the Western North Slope, the Company operates the Colville River Unit, which includes the Alpine Field and three satellite fields: Nanuq, Fiord and Qannik. Alpine is located 34 miles west of Kuparuk. Its ownership interest in the area is 78%. Net production, during 2010, was 59,000 barrels of oil per day.
The Company operates the North Cook Inlet Unit, the Beluga River Unit, and the Kenai LNG Plant in the Cook Inlet Area. The Company has 100% interest in the North Cook Inlet Unit, while it owns 33.33% of the Beluga River Unit. Net production, during 2010, from the Cook Inlet Area averaged 73 million cubic feet per day of natural gas. It has 70% interest in the Kenai LNG Plant, which supplies LNG to two utility companies in Japan. It sold 17 net billion cubic feet of LNG during 2010.
During 2010, the Company’s portfolio of producing properties in the Gulf of Mexico consisted of one operated field and three fields operated by co-venturers, including 75 % operator interest in the Magnolia Field in Garden Banks, 16 % nonoperator interest in the unitized Ursa Field located in the Mississippi Canyon Area, 16 % nonoperator interest in the Princess Field, a northern, sub-salt extension of the Ursa Field and 12.4 % nonoperator interest in the unitized K2 Field, comprised of seven blocks in the Green Canyon Area. Net production from these properties averaged 18,000 barrels per day of liquids and 20 million cubic feet per day of natural gas during 2010.
During 2010, E&P operations in Europe contributed 21 % of E&P’s worldwide liquids production. The Company operates and hold a 35.1% interest in the Greater Ekofisk Area, located approximately 200 miles offshore Norway in the North Sea. In addition to its 58.7 % interest in the Britannia natural gas and condensate field, it also owns a 50 % of Britannia Operator Limited, the operator of the field. It also has an 83.5 % interest and a 75 % interest in the Callanish and Brodgar Britannia satellite fields, respectively. Net production from Britannia and its satellite fields averaged 302 million cubic feet of natural gas per day and 39,000 barrels of liquids per day during 2010. E&P operations in Canada contributed 11 % of E&P’s worldwide liquids production in 2010. In 2010, E&P operations in the Asia Pacific/Middle East Region contributed 15 % of E&P’s worldwide liquids production and 19 % of natural gas production.
The Company owns a 30% ownership interest with a 50% governance interest in OOO Naryanmarneftegaz (NMNG), a joint venture with LUKOIL. The Company owns a 24.5 % interest in the N Block, located offshore Kazakhstan. During 2010, drilling operations were completed on the Rak More well.
MIDSTREAM
The Midstream business is conducted through the Company’s 50 % equity investment in DCP Midstream, LLC, a joint venture with Spectra Energy. The Midstream business purchases raw natural gas from producers and gathers natural gas through extensive pipeline gathering systems. The gathered natural gas is then processed to extract natural gas liquids. The remaining residue is marketed to electrical utilities, industrial users and gas marketing companies. Total natural gas liquids extracted, during 2010, including its share of DCP Midstream, were 193,000 barrels per day. At December 31, 2010, DCP Midstream owned or operated 55 natural gas liquids extraction and 10 natural gas liquids fractionation plants, and its gathering and transmission systems included approximately 61,000 miles of pipeline. During 2010, DCP Midstream’s raw natural gas throughput averaged 6.1 billion cubic feet per day, and natural gas liquids extraction averaged 369,000 barrels per day.
REFINING AND MARKETING (R&M)
The R&M segment primarily refines crude oil and other feedstocks into petroleum products (such as gasolines, distillates and aviation fuels); buys, sells and transports crude oil; and buys, transports, distributes and markets petroleum products. R&M has operations in the United States, Europe and Asia. At December 31, 2010, the Company owned or had an interest in 12 operated refineries in the United States. In the United States, as of December 31, 2010, it marketed gasoline, diesel and aviation fuel through approximately 8,300 marketer-owned outlets in 49 states. The majority of these sites utilize the Phillips 66, Conoco or 76 brands. At December 31, 2010, its wholesale operations utilized a network of marketers operating approximately 7,150 outlets that provided refined product offtake from its refineries. In June 2010, it sold its interest in CFJ Properties, a joint venture, which owned and operated 110 Flying J-branded truck travel plazas.
The Company manufactures and sells automotive, commercial and industrial lubricants, which are marketed under the Phillips 66, Conoco, 76 and Kendall brands, as well as other private label brands. It distributes refined products to customers via company owned and common-carrier pipelines, barges, railcars and trucks. At December 31, 2010, R&M managed approximately 24,000 miles of common-carrier crude oil, raw natural gas liquids, natural gas and petroleum products pipeline systems in the United States, including those partially owned or operated by affiliates. In addition, it owned or operated 44 finished product terminals, seven liquefied petroleum gas terminals, five crude oil terminals and 1 coke exporting facility. At December 31, 2010, it had 19 double-hulled crude oil tankers under charter, with capacities ranging in size from 713,000 to 2,100,000 barrels. It manufactures and sells a variety of specialty products, including petroleum cokes, polypropylene, pipeline flow improvers and anode material for high-power lithium-ion batteries. It also manufactures and markets graphite and anode-grade petroleum cokes in the United States and Europe for use in the global steel and aluminum industries. At December 31, 2010, R&M owned or had an interest in five refineries outside the United States. It operates a crude oil and products storage complex consisting of 7.5 million barrels of storage capacity and an offshore mooring buoy, located about 80 miles southwest of the Whitegate Refinery in Bantry Bay, Ireland.
LUKOIL INVESTMENT
In July 2010, the Company announced the selling of its interest in OAO LUKOIL. At December 31, 2010, it was left with an interest of 2.25%. subsequent to the year end, during 2011, it sold the remaining interest.
CHEMICALS
The Chemicals segment consists of the Company’s 50% equity investment in CPChem, a joint venture with Chevron Corporation. CPChem’s business is structured around two primary operating segments: Olefins & Polyolefins (O&P) and Specialties, Aromatics & Styrenics (SAS). The O&P segment produces and markets ethylene, propylene, and other olefin products, which are primarily consumed within CPChem for the production of polyethylene, normal alpha olefins, polypropylene and polyethylene pipe. The SAS segment manufactures and markets aromatics products, such as benzene, styrene, paraxylene and cyclohexane, as well as polystyrene and styrene-butadiene copolymers. SAS also manufactures and markets a variety of specialty chemical products, including organosulfur chemicals, solvents, catalysts, drilling chemicals, mining chemicals and high-performance engineering plastics and compounds. CPChem’s manufacturing facilities are located in Belgium, China, Colombia, Qatar, Saudi Arabia, Singapore, South Korea and the United States.
EMERGING BUSINESSES
The segment encompasses the development of new technologies and businesses outside the Company’s normal operations. Activities within this segment are focused on power generation and new technologies related to conventional and nonconventional hydrocarbon recovery, refining, alternative energy, biofuels and the environment. The focus of power business is on developing projects to support its E&P and R&M strategies. In December 2010, it sold a gas-fired cogeneration plant located in Orange, Texas. The Technology group focuses on developing new business opportunities designed to provide future growth prospects for ConocoPhillips.
On the marketing side of its operations, Phillips's profits were weaker than those in exploration and production. The company worked to expand its network of gas stations and convenience stores in the mid-1990s. As part of an industry trend toward consolidation and the sharing of costs through joint operations, Phillips and Conoco Inc. in 1996 discussed merging their refining and marketing businesses but failed to reach an agreement. That year Phillips posted net income of $1.3 billion on sales of $15.73 billion, enabling it to reduce its debt load to $3.1 billion and its debt-to-equity ratio to 39 percent.
Pressure to consolidate continued to build in the late 1990s as two megamergers rocked the industry: British Petroleum plc's merger with Amoco Corporation to create BP Amoco p.l.c. and Exxon Corporation's merger with Mobil Corporation to form Exxon Mobil Corporation. The new giants dwarfed Phillips with their revenues in excess of $100 billion. In late 1998 Phillips and Ultramar Diamond Shamrock Corporation reached a preliminary agreement to combine their refineries and gas stations in a joint venture, but the deal fell apart early the following year. Meantime, Phillips in 1998 made its largest discovery since Ekofisk in a field in Bohai Bay, off the northeastern coast of China. At the time, this was the largest find off the shore of China.
Phillips's Rapid Transformation into a Major Integrated Oil Company: 1999-2001
During the second half of 1999 James J. Mulva took over as chairman and CEO from the retiring Allen. Mulva would oversee some of the most dramatic events in the company's history soon after taking over, as Phillips decided to focus even further on exploration and production by either selling or placing into joint ventures its other three units. The company at first planned to sell its GPM Gas unit, but instead in March 2000 Phillips combined GPM with the gas gathering, processing, and marketing operations of Duke Energy Corporation to form a joint venture called Duke Energy Field Services, LLC, with Duke initially holding 69.7 percent of the new entity and Phillips holding the remaining 30.3 percent. In April 2000 Phillips substantially bolstered its exploration and production operations through the acquisition of the Alaskan assets of Atlantic Richfield Company for about $7 billion, the largest acquisition in company history. This deal enabled BP Amoco to complete its $28 billion acquisition of Atlantic Richfield. For Phillips, the addition of the Alaskan assets increased its daily production by 70 percent and doubled its oil and gas reserves. Phillips completed a third major deal in July 2000 when it combined its worldwide chemicals businesses with those of Chevron to form a 50-50 joint venture called Chevron Phillips Chemical Company LLC. Through the new entity, whose annual revenues would be nearly $6 billion, the two companies hoped to reap annual cost savings of $150 million.
Plans to shift the company's refining and marketing operations into another joint venture were abandoned with the announcement in February 2001 that Phillips would acquire Tosco Corporation, a major U.S. petroleum refiner and marketer whose main retail brands included 76 and Circle K. Completed in September 2001 at a price tag of $7.36 billion in stock and about $2 billion in assumed debt, the deal made Phillips the number two refiner in the United States, trailing only Exxon Mobil, and the number three gasoline retailer, with about 12,400 outlets in 46 states. Phillips now had strong positions in both the upstream and downstream sides of the oil industry. Although Mulva called this acquisition the "final step" in the company's plan to become one of the major integrated oil companies, just two months after its completion Phillips agreed to merge with Conoco in a truly blockbuster deal.
Creation of ConocoPhillips in 2002
In November 2001 Phillips Petroleum and Conoco agreed to merge. The $15.12 billion deal, completed in August 2002, combined two midtier U.S. players into the sixth largest publicly traded oil company in the world and the third largest in the United States. The new corporation, named simply ConocoPhillips (an entity incorporated in 2001), started with 8.7 billion barrels of proven reserves, 1.7 million barrels of daily production, and 2.6 million barrels per day of refining capacity--the latter making the firm the largest U.S. refiner and the number five refiner in the world. The refining capacity would soon be trimmed slightly because the U.S. Federal Trade Commission (FTC), in approving the merger, forced the sale of a Conoco refinery near Denver and a Phillips refinery near Salt Lake City. The FTC also ordered the new company to sell more than 200 gasoline stations in Colorado, Utah, and Wyoming to address antitrust concerns in the Rocky Mountain region. ConocoPhillips nevertheless retained a worldwide network of fuel outlets totaling more than 17,000. Conoco's headquarters in Houston was retained as the base for ConocoPhillips. James Mulva, the head of Phillips, became the CEO and president of the new firm, while Archie Dunham, head of Conoco, served as ConocoPhillips's first chairman.
Upon announcing the merger, the executives cited the potential for annual cost savings of $750 million. By late 2002 they raised their savings goal to $1.25 billion, concentrating primarily on the downstream side of the business. High oil prices were hurting refining and marketing margins at this time, and ConocoPhillips had a higher proportion of downstream assets than most of its major integrated oil company competitors. The company announced that it planned to sell $3 billion to $4 billion of assets by the end of 2004 to rein in costs and to cut the heavy long-term debt load of nearly $19 billion. Late in 2003 ConocoPhillips said it would cut another $1 billion in assets, or approximately $4.5 billion in total, and raised its cost savings goal to $1.75 billion. The biggest divestment came in December 2003 when the company sold Circle K Corp., an operator of more than 1,650 convenience stores/gasoline stations that had come to Phillips through its acquisition of Tosco. Circle K was sold to Montreal-based Alimentation Couche-Tard Inc. for $821 million. In January 2004 ConocoPhillips announced that it would sell 1,180 Mobil-branded gasoline stations in two separate deals. The stations also had come to Phillips through Tosco. These divestments not only fit with the program of asset sales, they also were consistent with two other company aims: reducing the number of stations it owned and operated and focusing the U.S. retail operations on three main brands--Phillips 66, Conoco, and 76. The sales also significantly reduced ConocoPhillips's workforce, which dropped from 55,800 employees to around 39,000.
After reporting a net loss of $295 million during the transitional restructuring year of 2002, ConocoPhillips posted 2003 profits of $4.74 billion on revenues of $105.1 billion. Debt was reduced to $17.8 billion by the end of 2003. For 2004 the company set a capital spending budget of $6.9 billion, more than three-quarters of which was earmarked for the exploration and production operations. This was in line with ConocoPhillips's shift in emphasis away from the downstream and toward the upstream.
Principal Competitors: Exxon Mobil Corporation; BP p.l.c.; Royal Dutch/Shell Group; ChevronTexaco Corporation; TOTAL S.A.
OVERALL
Beta: 1.15
Market Cap (Mil.): $112,779.80
Shares Outstanding (Mil.): 1,455.79
Annual Dividend: 2.64
Yield (%): 3.41
FINANCIALS
COP.N Industry Sector
P/E (TTM): 9.33 19.51 11.63
EPS (TTM): 118.21 -- --
ROI: -- 0.82 4.22
ROE: -- 1.25 5.55
Statistics:
Public Company
Incorporated: 2001
Employees: 39,000
Sales: $105.1 billion (2003)
Stock Exchanges: New York
Ticker Symbol: COP
NAIC: 211111 Crude Petroleum and Natural Gas Extraction; 211112 Natural Gas Liquid Extraction; 213111 Drilling Oil and Gas Wells; 324110 Petroleum Refineries; 325110 Petrochemical Manufacturing; 422710 Petroleum Bulk Stations and Terminals; 447110 Gasoline Stations with Convenience Stores; 447190 Other Gasoline Stations; 486110 Pipeline Transportation of Crude Oil; 486210 Pipeline Transportation of Natural Gas; 486910 Pipeline Transportation of Refined Petroleum Products
Company Perspectives:
Purpose: Use our pioneering spirit to responsibly deliver energy to the world.
Key Dates:
1875: Isaac Elder Blake founds the Continental Oil & Transportation Company in Ogden, Utah.
1885: Standard Oil Co. takes control of Continental, which is merged with Standard's Rocky Mountain operations and reincorporated in Colorado as the Continental Oil Company.
1903: Brothers Frank and L.E. Phillips form the Anchor Oil and Gas Company.
1913: Following the U.S. Supreme Court-ordered breakup of Standard Oil, Continental Oil becomes an independent company once again.
1914: Continental builds its first gas station.
1916: Continental diversifies into oil production with the purchase of United Oil Company.
1917: The Phillips brothers found Phillips Petroleum Company to acquire Anchor Oil and Gas; headquarters are established in Bartlesville, Oklahoma.
1919: Continental adopts a new trademark featuring the word "Conoco."
1927: Phillips Petroleum enters the refining and marketing businesses, opening its first gas station in Wichita, Kansas, under the Phillips 66 brand name.
1929: Continental merges with Marland Oil Company; the new company takes the Continental name but is headquartered in Ponca City, Oklahoma, where Marland had been based.
1948: Phillips Chemical Company is formed as a subsidiary.
1950: Continental relocates its headquarters to Houston.
1969: Phillips Petroleum makes its biggest discovery, the Greater Ekofisk field under the Norwegian North Sea.
1979: Continental Oil changes its name to Conoco Inc.
1981: To fend off hostile takeovers, Conoco agrees to be acquired by E.I. du Pont de Nemours and Company (DuPont) for $7.4 billion.
1983: General American Oil Company is acquired by Phillips; Conoco's headquarters are shifted to Wilmington, Delaware.
1984: Phillips fends off a takeover attempt by T. Boone Pickens, Jr.
1985: Phillips fends off a takeover attempt by Carl Icahn, running debt up to $8.9 billion in the process; massive restructuring commences.
1987: Conoco moves its headquarters back to Houston.
1998: DuPont sells 30 percent of its Conoco stake to the public in a $4.4 billion public offering; Phillips completes Ekofisk II in the Norwegian North Sea.
1999: DuPont divests its remaining 70 percent interest in Conoco.
2000: Phillips' natural gas gathering, processing, and marketing operations are combined with those of Duke Energy Corporation to form Duke Energy Field Services, 30.3 percent owned by Phillips; the company doubles its oil and gas reserves through its biggest acquisition in company history, a $7 billion deal for the Alaskan assets of Atlantic Richfield; Phillips combines its worldwide chemicals businesses with those of Chevron to form a 50-50 joint venture called Chevron Phillips Chemical Company.
2001: Phillips acquires Tosco Corporation, a major U.S. refiner and gasoline retailer, for $7.36 billion; Conoco acquires Calgary-based Gulf Canada Resources Ltd. for $4.33 billion.
2002: Phillips Petroleum and Conoco merge, forming ConocoPhillips in a $15.12 billion deal.
Name Age Since Current Position
Mulva, James 64 2008 Chairman of the Board, Chief Executive Officer
Sheets, Jeffrey 53 2010 Chief Financial Officer, Senior Vice President - Finance
Kelly, Janet 53 2007 Senior Vice President - Legal, General Counsel, Corporate Secretary
Chiang, Willie 51 2010 Senior Vice President - Refining, Marketing, Transportation and Commercial
Lance, Ryan 49 2009 Senior Vice President - Exploration & Production, International
Hirshberg, Alan 49 2010 Senior Vice President - Planning & Strategy
Garland, Greg 53 2010 Senior Vice President - Exploration & Production, Americas
Schwarz, Glenda 45 2009 Vice President, Controller
Tschinkel, Victoria 63 2002 Independent Director
Turner, Kathryn 63 2002 Independent Director
Auchinleck, Richard 59 2002 Independent Director
Reilly, William 71 2002 Independent Director
Duberstein, Kenneth 66 2002 Independent Director
Harkin, Ruth 66 2002 Independent Director
Copeland, James 66 2004 Independent Director
Norvik, Harald 65 2005 Independent Director
McGraw, Harold 62 2005 Independent Director
Armitage, Richard 65 2006 Independent Director
Shackouls, Bobby 60 2006 Independent Director
Wade, William 68 2006 Independent Director
Niblock, Robert 48 2010 Independent Director
Address:
600 North Dairy Ashford Street
Houston, Texas 77079-1100
U.S.A.
ConocoPhillips, incorporated on November 16, 2001, is an international, integrated energy company. the Company operates in six segments: Exploration and Production (E&P), which explores for, produces, transports and markets crude oil, bitumen, natural gas, liquefied natural gas (LNG) and natural gas liquids on a worldwide basis; Midstream, which gathers, processes and markets natural gas produced by it and others, and fractionates and markets natural gas liquids, in the United States and Trinidad; Refining and Marketing (R&M), which purchases, refines, markets and transports crude oil and petroleum products, in the United States, Europe and Asia; LUKOIL Investment, which consists of its investment in the ordinary shares of OAO LUKOIL; Chemicals, which manufactures and markets petrochemicals and plastics worldwide, and Emerging Businesses, which represents investment in new technologies or businesses outside its operations.
EXPLORATION AND PRODUCTION (E&P)
At December 31, 2010, the E&P segment represented 63% of ConocoPhillips’ total assets. This segment explores for, produces, transports and markets crude oil, bitumen, natural gas and natural gas liquids worldwide. Operations to liquefy natural gas and transport the resulting LNG are also included in the E&P segment. At December 31, 2010, the E&P operations were producing in the United States, Norway, the United Kingdom, Canada, Australia, offshore Timor-Leste in the Timor Sea, Indonesia, China, Vietnam, Libya, Nigeria, Algeria, Qatar and Russia. During the year ended December 31, 2010, E&P’s worldwide production, including its share of equity affiliates, averaged 1,752,000 barrels of oil equivalent per day (BOED). During 2010, the United States E&P operations contributed 40% of E&P’s worldwide liquids production and 39% of natural gas production.
The Greater Prudhoe Area includes the Prudhoe Bay Field and five satellite fields, as well as the Greater Point McIntyre Area fields. Bay’s satellites are Aurora, Borealis, Polaris, Midnight Sun and Orion, while the Point McIntyre, Niakuk, Raven and Lisburne Fields are part of the Greater Point McIntyre Area. The Company has a 36.1% nonoperator interest in all fields within the Greater Prudhoe Area. Net oil and natural gas liquids production from the Greater Prudhoe Area averaged 113,000 barrels per day during 2010.
The Company operates the Greater Kuparuk Area, which is made up of the Kuparuk Field and four satellite fields: Tarn, Tabasco, Meltwater and West Sak. Kuparuk is located 40 miles west of Prudhoe Bay on Alaska’s North Slope. Its ownership interest in the area is approximately 55%. Field installations include three central production facilities that separate oil, natural gas and water. The natural gas is either used for fuel or compressed for re-injection. Net oil production from the area averaged 60,000 barrels per day during 2010.
On the Western North Slope, the Company operates the Colville River Unit, which includes the Alpine Field and three satellite fields: Nanuq, Fiord and Qannik. Alpine is located 34 miles west of Kuparuk. Its ownership interest in the area is 78%. Net production, during 2010, was 59,000 barrels of oil per day.
The Company operates the North Cook Inlet Unit, the Beluga River Unit, and the Kenai LNG Plant in the Cook Inlet Area. The Company has 100% interest in the North Cook Inlet Unit, while it owns 33.33% of the Beluga River Unit. Net production, during 2010, from the Cook Inlet Area averaged 73 million cubic feet per day of natural gas. It has 70% interest in the Kenai LNG Plant, which supplies LNG to two utility companies in Japan. It sold 17 net billion cubic feet of LNG during 2010.
During 2010, the Company’s portfolio of producing properties in the Gulf of Mexico consisted of one operated field and three fields operated by co-venturers, including 75 % operator interest in the Magnolia Field in Garden Banks, 16 % nonoperator interest in the unitized Ursa Field located in the Mississippi Canyon Area, 16 % nonoperator interest in the Princess Field, a northern, sub-salt extension of the Ursa Field and 12.4 % nonoperator interest in the unitized K2 Field, comprised of seven blocks in the Green Canyon Area. Net production from these properties averaged 18,000 barrels per day of liquids and 20 million cubic feet per day of natural gas during 2010.
During 2010, E&P operations in Europe contributed 21 % of E&P’s worldwide liquids production. The Company operates and hold a 35.1% interest in the Greater Ekofisk Area, located approximately 200 miles offshore Norway in the North Sea. In addition to its 58.7 % interest in the Britannia natural gas and condensate field, it also owns a 50 % of Britannia Operator Limited, the operator of the field. It also has an 83.5 % interest and a 75 % interest in the Callanish and Brodgar Britannia satellite fields, respectively. Net production from Britannia and its satellite fields averaged 302 million cubic feet of natural gas per day and 39,000 barrels of liquids per day during 2010. E&P operations in Canada contributed 11 % of E&P’s worldwide liquids production in 2010. In 2010, E&P operations in the Asia Pacific/Middle East Region contributed 15 % of E&P’s worldwide liquids production and 19 % of natural gas production.
The Company owns a 30% ownership interest with a 50% governance interest in OOO Naryanmarneftegaz (NMNG), a joint venture with LUKOIL. The Company owns a 24.5 % interest in the N Block, located offshore Kazakhstan. During 2010, drilling operations were completed on the Rak More well.
MIDSTREAM
The Midstream business is conducted through the Company’s 50 % equity investment in DCP Midstream, LLC, a joint venture with Spectra Energy. The Midstream business purchases raw natural gas from producers and gathers natural gas through extensive pipeline gathering systems. The gathered natural gas is then processed to extract natural gas liquids. The remaining residue is marketed to electrical utilities, industrial users and gas marketing companies. Total natural gas liquids extracted, during 2010, including its share of DCP Midstream, were 193,000 barrels per day. At December 31, 2010, DCP Midstream owned or operated 55 natural gas liquids extraction and 10 natural gas liquids fractionation plants, and its gathering and transmission systems included approximately 61,000 miles of pipeline. During 2010, DCP Midstream’s raw natural gas throughput averaged 6.1 billion cubic feet per day, and natural gas liquids extraction averaged 369,000 barrels per day.
REFINING AND MARKETING (R&M)
The R&M segment primarily refines crude oil and other feedstocks into petroleum products (such as gasolines, distillates and aviation fuels); buys, sells and transports crude oil; and buys, transports, distributes and markets petroleum products. R&M has operations in the United States, Europe and Asia. At December 31, 2010, the Company owned or had an interest in 12 operated refineries in the United States. In the United States, as of December 31, 2010, it marketed gasoline, diesel and aviation fuel through approximately 8,300 marketer-owned outlets in 49 states. The majority of these sites utilize the Phillips 66, Conoco or 76 brands. At December 31, 2010, its wholesale operations utilized a network of marketers operating approximately 7,150 outlets that provided refined product offtake from its refineries. In June 2010, it sold its interest in CFJ Properties, a joint venture, which owned and operated 110 Flying J-branded truck travel plazas.
The Company manufactures and sells automotive, commercial and industrial lubricants, which are marketed under the Phillips 66, Conoco, 76 and Kendall brands, as well as other private label brands. It distributes refined products to customers via company owned and common-carrier pipelines, barges, railcars and trucks. At December 31, 2010, R&M managed approximately 24,000 miles of common-carrier crude oil, raw natural gas liquids, natural gas and petroleum products pipeline systems in the United States, including those partially owned or operated by affiliates. In addition, it owned or operated 44 finished product terminals, seven liquefied petroleum gas terminals, five crude oil terminals and 1 coke exporting facility. At December 31, 2010, it had 19 double-hulled crude oil tankers under charter, with capacities ranging in size from 713,000 to 2,100,000 barrels. It manufactures and sells a variety of specialty products, including petroleum cokes, polypropylene, pipeline flow improvers and anode material for high-power lithium-ion batteries. It also manufactures and markets graphite and anode-grade petroleum cokes in the United States and Europe for use in the global steel and aluminum industries. At December 31, 2010, R&M owned or had an interest in five refineries outside the United States. It operates a crude oil and products storage complex consisting of 7.5 million barrels of storage capacity and an offshore mooring buoy, located about 80 miles southwest of the Whitegate Refinery in Bantry Bay, Ireland.
LUKOIL INVESTMENT
In July 2010, the Company announced the selling of its interest in OAO LUKOIL. At December 31, 2010, it was left with an interest of 2.25%. subsequent to the year end, during 2011, it sold the remaining interest.
CHEMICALS
The Chemicals segment consists of the Company’s 50% equity investment in CPChem, a joint venture with Chevron Corporation. CPChem’s business is structured around two primary operating segments: Olefins & Polyolefins (O&P) and Specialties, Aromatics & Styrenics (SAS). The O&P segment produces and markets ethylene, propylene, and other olefin products, which are primarily consumed within CPChem for the production of polyethylene, normal alpha olefins, polypropylene and polyethylene pipe. The SAS segment manufactures and markets aromatics products, such as benzene, styrene, paraxylene and cyclohexane, as well as polystyrene and styrene-butadiene copolymers. SAS also manufactures and markets a variety of specialty chemical products, including organosulfur chemicals, solvents, catalysts, drilling chemicals, mining chemicals and high-performance engineering plastics and compounds. CPChem’s manufacturing facilities are located in Belgium, China, Colombia, Qatar, Saudi Arabia, Singapore, South Korea and the United States.
EMERGING BUSINESSES
The segment encompasses the development of new technologies and businesses outside the Company’s normal operations. Activities within this segment are focused on power generation and new technologies related to conventional and nonconventional hydrocarbon recovery, refining, alternative energy, biofuels and the environment. The focus of power business is on developing projects to support its E&P and R&M strategies. In December 2010, it sold a gas-fired cogeneration plant located in Orange, Texas. The Technology group focuses on developing new business opportunities designed to provide future growth prospects for ConocoPhillips.
On the marketing side of its operations, Phillips's profits were weaker than those in exploration and production. The company worked to expand its network of gas stations and convenience stores in the mid-1990s. As part of an industry trend toward consolidation and the sharing of costs through joint operations, Phillips and Conoco Inc. in 1996 discussed merging their refining and marketing businesses but failed to reach an agreement. That year Phillips posted net income of $1.3 billion on sales of $15.73 billion, enabling it to reduce its debt load to $3.1 billion and its debt-to-equity ratio to 39 percent.
Pressure to consolidate continued to build in the late 1990s as two megamergers rocked the industry: British Petroleum plc's merger with Amoco Corporation to create BP Amoco p.l.c. and Exxon Corporation's merger with Mobil Corporation to form Exxon Mobil Corporation. The new giants dwarfed Phillips with their revenues in excess of $100 billion. In late 1998 Phillips and Ultramar Diamond Shamrock Corporation reached a preliminary agreement to combine their refineries and gas stations in a joint venture, but the deal fell apart early the following year. Meantime, Phillips in 1998 made its largest discovery since Ekofisk in a field in Bohai Bay, off the northeastern coast of China. At the time, this was the largest find off the shore of China.
Phillips's Rapid Transformation into a Major Integrated Oil Company: 1999-2001
During the second half of 1999 James J. Mulva took over as chairman and CEO from the retiring Allen. Mulva would oversee some of the most dramatic events in the company's history soon after taking over, as Phillips decided to focus even further on exploration and production by either selling or placing into joint ventures its other three units. The company at first planned to sell its GPM Gas unit, but instead in March 2000 Phillips combined GPM with the gas gathering, processing, and marketing operations of Duke Energy Corporation to form a joint venture called Duke Energy Field Services, LLC, with Duke initially holding 69.7 percent of the new entity and Phillips holding the remaining 30.3 percent. In April 2000 Phillips substantially bolstered its exploration and production operations through the acquisition of the Alaskan assets of Atlantic Richfield Company for about $7 billion, the largest acquisition in company history. This deal enabled BP Amoco to complete its $28 billion acquisition of Atlantic Richfield. For Phillips, the addition of the Alaskan assets increased its daily production by 70 percent and doubled its oil and gas reserves. Phillips completed a third major deal in July 2000 when it combined its worldwide chemicals businesses with those of Chevron to form a 50-50 joint venture called Chevron Phillips Chemical Company LLC. Through the new entity, whose annual revenues would be nearly $6 billion, the two companies hoped to reap annual cost savings of $150 million.
Plans to shift the company's refining and marketing operations into another joint venture were abandoned with the announcement in February 2001 that Phillips would acquire Tosco Corporation, a major U.S. petroleum refiner and marketer whose main retail brands included 76 and Circle K. Completed in September 2001 at a price tag of $7.36 billion in stock and about $2 billion in assumed debt, the deal made Phillips the number two refiner in the United States, trailing only Exxon Mobil, and the number three gasoline retailer, with about 12,400 outlets in 46 states. Phillips now had strong positions in both the upstream and downstream sides of the oil industry. Although Mulva called this acquisition the "final step" in the company's plan to become one of the major integrated oil companies, just two months after its completion Phillips agreed to merge with Conoco in a truly blockbuster deal.
Creation of ConocoPhillips in 2002
In November 2001 Phillips Petroleum and Conoco agreed to merge. The $15.12 billion deal, completed in August 2002, combined two midtier U.S. players into the sixth largest publicly traded oil company in the world and the third largest in the United States. The new corporation, named simply ConocoPhillips (an entity incorporated in 2001), started with 8.7 billion barrels of proven reserves, 1.7 million barrels of daily production, and 2.6 million barrels per day of refining capacity--the latter making the firm the largest U.S. refiner and the number five refiner in the world. The refining capacity would soon be trimmed slightly because the U.S. Federal Trade Commission (FTC), in approving the merger, forced the sale of a Conoco refinery near Denver and a Phillips refinery near Salt Lake City. The FTC also ordered the new company to sell more than 200 gasoline stations in Colorado, Utah, and Wyoming to address antitrust concerns in the Rocky Mountain region. ConocoPhillips nevertheless retained a worldwide network of fuel outlets totaling more than 17,000. Conoco's headquarters in Houston was retained as the base for ConocoPhillips. James Mulva, the head of Phillips, became the CEO and president of the new firm, while Archie Dunham, head of Conoco, served as ConocoPhillips's first chairman.
Upon announcing the merger, the executives cited the potential for annual cost savings of $750 million. By late 2002 they raised their savings goal to $1.25 billion, concentrating primarily on the downstream side of the business. High oil prices were hurting refining and marketing margins at this time, and ConocoPhillips had a higher proportion of downstream assets than most of its major integrated oil company competitors. The company announced that it planned to sell $3 billion to $4 billion of assets by the end of 2004 to rein in costs and to cut the heavy long-term debt load of nearly $19 billion. Late in 2003 ConocoPhillips said it would cut another $1 billion in assets, or approximately $4.5 billion in total, and raised its cost savings goal to $1.75 billion. The biggest divestment came in December 2003 when the company sold Circle K Corp., an operator of more than 1,650 convenience stores/gasoline stations that had come to Phillips through its acquisition of Tosco. Circle K was sold to Montreal-based Alimentation Couche-Tard Inc. for $821 million. In January 2004 ConocoPhillips announced that it would sell 1,180 Mobil-branded gasoline stations in two separate deals. The stations also had come to Phillips through Tosco. These divestments not only fit with the program of asset sales, they also were consistent with two other company aims: reducing the number of stations it owned and operated and focusing the U.S. retail operations on three main brands--Phillips 66, Conoco, and 76. The sales also significantly reduced ConocoPhillips's workforce, which dropped from 55,800 employees to around 39,000.
After reporting a net loss of $295 million during the transitional restructuring year of 2002, ConocoPhillips posted 2003 profits of $4.74 billion on revenues of $105.1 billion. Debt was reduced to $17.8 billion by the end of 2003. For 2004 the company set a capital spending budget of $6.9 billion, more than three-quarters of which was earmarked for the exploration and production operations. This was in line with ConocoPhillips's shift in emphasis away from the downstream and toward the upstream.
Principal Competitors: Exxon Mobil Corporation; BP p.l.c.; Royal Dutch/Shell Group; ChevronTexaco Corporation; TOTAL S.A.
OVERALL
Beta: 1.15
Market Cap (Mil.): $112,779.80
Shares Outstanding (Mil.): 1,455.79
Annual Dividend: 2.64
Yield (%): 3.41
FINANCIALS
COP.N Industry Sector
P/E (TTM): 9.33 19.51 11.63
EPS (TTM): 118.21 -- --
ROI: -- 0.82 4.22
ROE: -- 1.25 5.55
Statistics:
Public Company
Incorporated: 2001
Employees: 39,000
Sales: $105.1 billion (2003)
Stock Exchanges: New York
Ticker Symbol: COP
NAIC: 211111 Crude Petroleum and Natural Gas Extraction; 211112 Natural Gas Liquid Extraction; 213111 Drilling Oil and Gas Wells; 324110 Petroleum Refineries; 325110 Petrochemical Manufacturing; 422710 Petroleum Bulk Stations and Terminals; 447110 Gasoline Stations with Convenience Stores; 447190 Other Gasoline Stations; 486110 Pipeline Transportation of Crude Oil; 486210 Pipeline Transportation of Natural Gas; 486910 Pipeline Transportation of Refined Petroleum Products
Company Perspectives:
Purpose: Use our pioneering spirit to responsibly deliver energy to the world.
Key Dates:
1875: Isaac Elder Blake founds the Continental Oil & Transportation Company in Ogden, Utah.
1885: Standard Oil Co. takes control of Continental, which is merged with Standard's Rocky Mountain operations and reincorporated in Colorado as the Continental Oil Company.
1903: Brothers Frank and L.E. Phillips form the Anchor Oil and Gas Company.
1913: Following the U.S. Supreme Court-ordered breakup of Standard Oil, Continental Oil becomes an independent company once again.
1914: Continental builds its first gas station.
1916: Continental diversifies into oil production with the purchase of United Oil Company.
1917: The Phillips brothers found Phillips Petroleum Company to acquire Anchor Oil and Gas; headquarters are established in Bartlesville, Oklahoma.
1919: Continental adopts a new trademark featuring the word "Conoco."
1927: Phillips Petroleum enters the refining and marketing businesses, opening its first gas station in Wichita, Kansas, under the Phillips 66 brand name.
1929: Continental merges with Marland Oil Company; the new company takes the Continental name but is headquartered in Ponca City, Oklahoma, where Marland had been based.
1948: Phillips Chemical Company is formed as a subsidiary.
1950: Continental relocates its headquarters to Houston.
1969: Phillips Petroleum makes its biggest discovery, the Greater Ekofisk field under the Norwegian North Sea.
1979: Continental Oil changes its name to Conoco Inc.
1981: To fend off hostile takeovers, Conoco agrees to be acquired by E.I. du Pont de Nemours and Company (DuPont) for $7.4 billion.
1983: General American Oil Company is acquired by Phillips; Conoco's headquarters are shifted to Wilmington, Delaware.
1984: Phillips fends off a takeover attempt by T. Boone Pickens, Jr.
1985: Phillips fends off a takeover attempt by Carl Icahn, running debt up to $8.9 billion in the process; massive restructuring commences.
1987: Conoco moves its headquarters back to Houston.
1998: DuPont sells 30 percent of its Conoco stake to the public in a $4.4 billion public offering; Phillips completes Ekofisk II in the Norwegian North Sea.
1999: DuPont divests its remaining 70 percent interest in Conoco.
2000: Phillips' natural gas gathering, processing, and marketing operations are combined with those of Duke Energy Corporation to form Duke Energy Field Services, 30.3 percent owned by Phillips; the company doubles its oil and gas reserves through its biggest acquisition in company history, a $7 billion deal for the Alaskan assets of Atlantic Richfield; Phillips combines its worldwide chemicals businesses with those of Chevron to form a 50-50 joint venture called Chevron Phillips Chemical Company.
2001: Phillips acquires Tosco Corporation, a major U.S. refiner and gasoline retailer, for $7.36 billion; Conoco acquires Calgary-based Gulf Canada Resources Ltd. for $4.33 billion.
2002: Phillips Petroleum and Conoco merge, forming ConocoPhillips in a $15.12 billion deal.
Name Age Since Current Position
Mulva, James 64 2008 Chairman of the Board, Chief Executive Officer
Sheets, Jeffrey 53 2010 Chief Financial Officer, Senior Vice President - Finance
Kelly, Janet 53 2007 Senior Vice President - Legal, General Counsel, Corporate Secretary
Chiang, Willie 51 2010 Senior Vice President - Refining, Marketing, Transportation and Commercial
Lance, Ryan 49 2009 Senior Vice President - Exploration & Production, International
Hirshberg, Alan 49 2010 Senior Vice President - Planning & Strategy
Garland, Greg 53 2010 Senior Vice President - Exploration & Production, Americas
Schwarz, Glenda 45 2009 Vice President, Controller
Tschinkel, Victoria 63 2002 Independent Director
Turner, Kathryn 63 2002 Independent Director
Auchinleck, Richard 59 2002 Independent Director
Reilly, William 71 2002 Independent Director
Duberstein, Kenneth 66 2002 Independent Director
Harkin, Ruth 66 2002 Independent Director
Copeland, James 66 2004 Independent Director
Norvik, Harald 65 2005 Independent Director
McGraw, Harold 62 2005 Independent Director
Armitage, Richard 65 2006 Independent Director
Shackouls, Bobby 60 2006 Independent Director
Wade, William 68 2006 Independent Director
Niblock, Robert 48 2010 Independent Director
Address:
600 North Dairy Ashford Street
Houston, Texas 77079-1100
U.S.A.