ConocoPhillips is following the recent trend and will split its refinery business into a separate entity. The announcement follows Marathon Oil’s spin of of its refinery business into Marathon Petroleum on July 1. Conoco has resisted a change as substantial as this one, but the current success of the Marathon split was a likely motivating factor.
I do wonder how this will work itself out over the long-run. While the refining business has not been glamorous for a few years, it has provided the needed stability to counter the volatile nature of the upstream business. Refineries have thin margins at times, but it is a cash flow business. We won’t really know if these spin offs were good decisions until the next down cycle in commodity prices. As long as oil prices are high, the upstream business will be just fine.
ConocoPhillips, the nation’s third-largest oil company, said Thursday that it will split itself into two separate publicly traded companies and its CEO and Chairman Jim Mulva plans to retire once the transaction is complete.The breakup would create the largest independent refiner in the world, a prominent analyst said.
Its shares jumped $6.90, or 9.3 percent, to $81.30 in premarket trading.
“We have concluded that two independent companies focused on their respective industries will be better positioned to pursue their individually focused business strategies,” Mulva said in a statement.
Read the full news release from the Associated Press