Conoco Phillips' (NYSE:COP) upcoming restructuring into separate upstream and downstream entities is proceeding on schedule and is expected to be completed by the end of April 2012. To know more about oil and gas, read Oil And Gas Industry Primer.

Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.

In July 2012, Conoco Phillips announced a plan to split into two separate publicly traded companies. The separation would be effected through a tax-free spinoff of the company's Refining and Marketing segment to Conoco Phillips shareholders. The new downstream company will be called Phillips 66, while the Exploration and Production segment will be retained by the company and operate under the Conoco Phillips name.

Conoco Phillips' shareholders will receive one share of Phillips 66 for two shares owned of Conoco Phillips. If the company receives the necessary regulatory approvals, the distribution date is expected to be Apr. 30, 2012, with the first trading date as separate public companies on May 1, 2012.

Largest Separation
The upcoming separation of Conoco Phillips into two entities is the largest effected in the energy sector in recent years, eclipsing the 2011 separation of Marathon Oil (NYSE:MRO), which spun out its refining businesses as Marathon Petroleum Company (NYSE:MPC).

A Look at Phillips 66
Phillips 66 is a domestic focused company with operations in the refining, chemicals and midstream areas. The company's refining and marketing businesses will dominate the new company and also generated 78% of Phillips 66's net income in 2011.

It owns 15 refineries, including 11 located in the United States. The company has 2.2 million barrels per day of refining capacity, making it's the second largest independent global refiner. Only Valero (NYSE:VLO), with crude oil capacity of 2.58 million barrels per day, is larger.

It also operates 10,000 retail marketing outlets to distribute its product and has 15,000 miles of pipeline in its network.

Phillips 66 plans to pay an annual dividend rate of 80 cents per share, and have net debt of approximately $8 billion. The company's debt to capitalization ratio will be about 30%, with the bonds rated near the bottom of the investment grade range.

Conoco Phillips
After the separation is complete, Conoco Phillips will be the largest U.S. based publicly traded independent exploration and production companies. Conoco Phillips estimates that 2012 production will be approximately 1.55 million barrels of oil equivalent (BOE) per day, with 8.4 billion BOE of reserves.

The company will aggressively explore and develop its oil and gas properties over the next few years and expects to generate 3 to 5% compound annual production growth through 2016.

The Bottom Line
The upcoming restructuring of Conoco Phillips into separate upstream and downstream entities is proceeding on schedule, according to management. The passage of time will solve the mystery of whether a separate focus on individual parts of the energy complex will lead to a long-term increase in shareholder value, or is just useless chicanery. For additional reading, check out A Guide To Investing In Oil Markets.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Investing News

    Latest Labor Numbers: Good News for the Market?

    Some economic numbers are indicating that the labor market is outperforming the stock market. Should investors be bullish?
  2. Investing News

    Stocks with Big Dividend Yields: 'It's a Trap!'

    Should you seek high yielding-dividend stocks in the current investment environment?
  3. Investing News

    Should You Be Betting with Buffett Right Now?

    Following Warren Buffett's stock picks has historically been a good strategy. Is considering his biggest holdings in 2016 a good idea?
  4. Products and Investments

    Cash vs. Stocks: How to Decide Which is Best

    Is it better to keep your money in cash or is a down market a good time to buy stocks at a lower cost?
  5. Investing News

    Who Does Cheap Oil Benefit? See This Stock (DG)

    Cheap oil won't benefit most companies, but this retailer might buck that trend.
  6. Investing

    How to Ballast a Portfolio with Bonds

    If January and early February performance is any guide, there’s a new normal in financial markets today: Heightened volatility.
  7. Stock Analysis

    Performance Review: Emerging Markets Equities in 2015

    Find out why emerging markets struggled in 2015 and why a half-decade long trend of poor returns is proving optimistic growth investors wrong.
  8. Investing News

    Today's Sell-off: Are We in a Margin Liquidation?

    If we're in market liquidation, is it good news or bad news? That party depends on your timeframe.
  9. Economics

    4 Countries Pleading for Higher Commodity Prices

    Discover what countries are struggling the most from the price collapse in commodities and what these countries require to return to economic growth.
  10. Investing News

    Bank Stocks: Time to Buy or Avoid? (WFC, JPM, C)

    Bank stocks have been pounded. Is this the right time to buy or should they be avoided?
  1. Which mutual funds made money in 2008?

    Out of the 2,800 mutual funds that Morningstar, Inc., the leading provider of independent investment research in North America, ... Read Full Answer >>
  2. Do hedge funds invest in commodities?

    There are several hedge funds that invest in commodities. Many hedge funds have broad macroeconomic strategies and invest ... Read Full Answer >>
  3. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  4. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  5. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  6. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
Trading Center