(Solved)ConocoPhillips Spin-off of Phillips 66 On July 14, 2011,


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Hi, is this something you can help with? There are 2 questions in the attached JPG file and you will need the case (Word doc.) and Excel Workbook. . ConocoPhillips Spin-off of Phillips.docx ConocoPhillips Spin-off of Phillips 66 On July 14, 2011, ConocoPhillips [COP] announced that it would separate its exploration and development business from its midstream and downstream businesses. The separation would create two independent, stand-alone businesses. Each business would trade in public markets separately: ConocoPhillips [COP] as an exploration and development company, and Phillips 66 [PSX] as pipeline and refinery operators. The spin-off is expected to be complete by mid-2012. Introduction On July 14, 2011, Jim Mulva, chairman and CEO of ConocoPhillips [COP] stated “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… 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.” ConocoPhillips’ board of directors had previously approved pursuing the separation of the company’s Refining & Marketing (R&M) and Exploration & Development (E&D) businesses through a tax-free spin-off of the R&M business. A tax-free spin-off is executed when a company divests a portion of its business consistent with Section 355 of the Internal Revenue Code. This form of divestiture permits the company to distribute the ownership of the divested assets to existing shareholders (via dividend) without incurring capital gains taxes. Shareholders of record will receive one share of Phillips 66 for every two shares of ConocoPhillips owned. To announce the divestiture, the board prepared the following press release: As a separate company, the Refining and Marketing business of ConocoPhillips is expected be a leading pure-play independent refiner with a competitive and diverse set of assets. In addition to executing the company’s initiatives to improve downstream returns through portfolio rationalization and other operating efficiencies, the new downstream company will be able to further position its portfolio by pursuing transactions and investments across the value chain. Under the contemplated plan, both companies will be well positioned with financial strength and flexibility, and experienced management teams committed to continued value creation. The spin-off is part of a three-year plan to reposition the company to focus on optimizing the COP portfolio, enhance returns, and strengthen financial flexibility while increasing shareholder distributions. 1 ConocoPhillips announced its restructuring plan in Q4 2009 indicating that it planned to sell approximately $10 billion in assets by year-end 2011. In 2010, ConocoPhillips divested $7.1 billion in assets, including a 9% interest in Syncrude for $4.6 billion and $323 million in Refining & Marketing assets. In early 2011, their Lukoil investment was sold for $9.5 billion. ConocoPhillips ConocoPhillips is a globally integrated energy company based in Houston, Texas. It has approximately 29,600 employees, $160 billion in assets, and expected 2011 revenues of $230 billion. It engages in Exploration & Development activities (E&D; aka “upstream”), the transportation, storage and marketing of refined crude oil products (“midstream”), and the processing and purifying of raw natural gas and refining of petroleum crude oil (“downstream”). The downstream operations produce gasoline, natural gas, liquefied petroleum gas (LPG), jet fuel, diesel oil, heating oil, kerosene, lubricants, waxes, and asphalt. It also co-owns CPChem, petrochemical producer, with Chevron. ConocoPhillips has operations in opera

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