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ConocoPhillips rallies on plans to spin-off downstream business

Published: 16:40 14 Jul 2011 BST

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Integrated energy company ConocoPhillips' (NYSE:COP) shares jumped today as it announced plans to spin off its refining and marketing business to shareholders in a tax-free transaction, following board approval.

Consistent with the company's previously stated strategies of enhancing returns on capital, ConocoPhillips will become a geographically-diverse pure play exploration and production company once the deal is completed, expected in the first half of 2012.

The Houston, Texas-based company said it plans to focus on boosting returns through developing new resources, growing reserves and production per share, as well as continuing its asset sale program.

The new downstream company will be an independent refiner, and will focus on improving portfolio rationalization and other operating efficiencies.

"Consistent with our strategy to create industry-leading shareholder value, we have concluded that two independent companies focused on their respective industries will be better positioned to pursue their individually focused business strategies," said chairman and CEO, Jim Mulva.

"Both companies will continue to benefit from the size and scale of their significant high-quality asset bases and free cash flow generation, allowing them to invest and create shareholder value in a changing environment."

Mulva said that once the spin-off is completed, he intends to retire.

Further details on the allocation of assets, management governance, and the mechanics of completing the separation will be disclosed over the next several months.

The deal, though it does not require shareholder approval, is subject to market conditions, regulatory approvals, final board approval, and a positive IRS ruling, among other conditions.

Headquartered in Houston, the company had approximately 29,600 employees, $160 billion of assets, and $226 billion of annualized revenues as of March 31. Shares rose more than 4.5% on Thursday morning, to trade at $77.73 as of 11:40am EDT, after jumping more than 10% before the bell.

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