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HOUSTON -- Big changes are coming to ConocoPhillips, as it revealed in its 2007 capital budget, including a plan to divest all of its company-owned retail stations to existing or new marketers.
"We are completing a study on how to best market our domestic refiner system's clean products. ConocoPhillips plans to market gasoline, diesel fuel and aviation fuel through approximately 10,000 outlets, the majority of which utilize the Phillips 66, Conoco or 76 brands. However, our company-owned and operated outlets will be divested to existing or new wholesale marketers," said Jim Mulva, chairman and CEO of ConocoPhillips.
"Ownership of these assets is not strategic, our future focus is on marketing branded wholesale channels," ConocoPhillips spokesman Phil Blackburn told CSNews Online.
Of the 830 ConcoPhillips locations, 330 are company owned and operated; the remainders are operated by dealers. Divesture of the stations will begin immediately, according to Blackburn. Geographic locations could not be disclosed at this time, however.
The locations will be sold as existing businesses, and as such, the future of current ConocoPhillips' employees will be determined by the buyers, Blackburn said.
As a result of the plan, the company anticipates recording a change in earnings for a held-for-sale impairment of about $200 million in the fourth quarter of 2006. "We look forward to discussing our 2007 capital and operating plans in greater detail when we meet with the investment community on March 14," Mulva stated.
The company also approved cash capital expenditures of $13.5 billion for 2007.
"Our 2007 planned capital program reflects our commitment to selectively invest in projects that will enable us to deliver energy to consumers worldwide, while producing long-term value for our shareholders," said Mulva. "The reduction in the 2007 capital program versus the 2006 capital program primarily reflects the company's completion of our planned 20 percent equity investment in LUKOIL."
Of the $13.5 billion, 84 percent will be allocated to the company's exploration and production segment. The refining and marketing segment will receive 13 percent. The remainder of the funds will be invested in emerging business and corporate costs.
For the company's exploration and production projects in North and South America, spending is expected to total $6.5 billion. Within the U.S., programs will be developed in the San Juan Basin, the Permian and Barnett Shale basins in the Mid-continent region as well as those already existing in the Gulf Coast.
Refining and marketing will receive $1.7 billion in funding, with the majority of it spent in the U.S. business units. Of the money invested, $1.1 billion will go to U.S. refining to maintain and improve existing businesses within the aspects of reliability, energy efficiency, capital maintenance and regulatory compliance. The remainder of the $1.3 billion set aside for the company's refining and marketing budget in the U.S. will go towards domestic transportation and marketing.
Research and development spending on technology will increase by 50 percent to more than $150 million annually, said Mulva. "Research and development efforts will focus on projects that aid the development of unconventional oil and gas resources, such as Canadian oil sands, as well as the development of new energy sources, such as alternatives and renewables."
He continued: "The company is committed to diversifying its energy resource development, significantly enhancing the efficiency of energy use and doing so in a way that addresses climate change and other environmental concerns. … The company intends to become a leader in new energy resource development."