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Conoco, Phillips Get Boost on Deal

Energy: The shares rise after the companies say their merger would save millions and create the biggest refiner in the U.S.

November 20, 2001|Bloomberg News

The proposed merger of Phillips Petroleum Co. and Conoco Inc. got a big thumbs up Monday on Wall Street, where talk of more oil industry deals is already circulating.

Shares of Phillips (ticker symbol: P) rose $1.53 to $53.35, and shares of Conoco (COC) climbed $1.68 to $25.98. Before the merger plans were announced Monday, Phillips shares were down 9% year-to-date and Conoco's were off 16%.

The all-stock deal isn't priced to provide a premium for shareholders. But the shares rose after the companies said their merger would save at least $750 million a year as well as create the biggest refiner and third-biggest oil company in the U.S.

The merger might put more pressure on USX-Marathon Group (MRO), the current No. 3 U.S. oil company, to sell itself, said Philip Dodge, an analyst at Ryan, Beck & Co.

USX Corp. plans to split off Marathon, which has a separately traded stock, this year. The Houston-based oil company has a market value of $8 billion. Potential merger partners include BP (BPAQF), Royal Dutch/Shell Group (RD) and Amerada Hess Corp. (AHC), Dodge said.

Phillips Chief Executive James Mulva said he will reduce exploration-and-production costs and eliminate duplicate corporate jobs.

He expects the merger to give ConocoPhillips the size to compete with Exxon Mobil Corp. (XOM) and ChevronTexaco Corp. (CVX) as well as boost earnings, even if oil prices remain low.

Oil-company earnings have fallen this year as a slowing economy cut demand for fuel and chemicals made from petroleum.

Oil prices, above $35 a barrel a year ago, closed at $17.72.

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