ConocoPhillips has announced that it will be spinning off its refining and marketing arm into a new business, two weeks after Marathon Oil split itself up in the same way in order to increase returns for investors, according to a Bloomberg report.
ConocoPhillips will divide into two stand-alone, publicly traded operations. The division is expected to be completed in the first half of 2012, the Houston-based company said in a statement today.
Marathon Petroleum, Marathon’s former refining business, debuted on the New York Stock Exchange this month. Marathon rose as much as 11% on the day the split was announced, reports Bloomberg.
“I love it!” said Fadel Gheit, a New York-based analyst for Oppenheimer & Co, who rates the shares “outperform” and owns none. “It worked for Marathon and it will work even better for ConocoPhillips. ConocoPhillips is a much better company.”
ConocoPhillips made the announcement before regular trading opened on U.S. markets. ConocoPhillips rose $4.61, or 6.2%, to $79.01 in New York at 7:16 a.m EDT. Before today, the shares had risen 9.25% this year. The shares have 11 buys, 10 holds and three sell ratings from analysts.
ConocoPhillips is the second-largest U.S. oil refiner with capacity of 2 million barrels per day, according to its website. It owns 12 U.S. refineries, and has a two-refinery joint venture with Alberta-based oil producer Cenovus Corp. The plants account for about 10 percent of U.S. refining capacity, according to data compiled by Bloomberg.
Largest Independent Refiner
Following the split, ConocoPhillips’ refining arm will be the largest U.S. independent refiner, with more capacity than Valero Energy Corp., according to data compiled by Bloomberg. ConocoPhillips also owns five refineries outside the U.S.
“Their refining assets are certainly more geographically diversified than Marathon’s,” said Ann Kohler, an analyst at CRT Capital Group LLC in Stamford, Connecticut. “Marathon benefits from its high integration in the Mid-Continent.”
The announcement comes as the crack spread, a measure of the difference between the cost of crude oil and the price of products derived from it, exceeded $35 a barrel, the widest in at least 25 years, according to data compiled by Bloomberg.
After the split is completed Chief Executive Officer Jim Mulva will retire, according to the statement.