Phillips-Conoco deal could cause merger fever

The recently announced Phillips-Conoco merger significantly increases pressure on the remaining mid-tier majors to merge or be acquired, according to a report released today by Boston-based Strategy Analytics. Phillips Petroleum and Conoco announced November 19 plans for a $35 billion "merger of equals." Phillips and Conoco intend to create ConocoPhillips, which will be the third largest petroleum

The recently announced Phillips-Conoco merger significantly increases pressure on the remaining mid-tier majors to merge or be acquired, according to a report released today by Boston-based Strategy Analytics.

Phillips Petroleum and Conoco announced November 19 plans for a $35 billion "merger of equals." Phillips and Conoco intend to create ConocoPhillips, which will be the third largest petroleum company, by assets, in the United States, following ExxonMobil and ChevronTexaco, and will become the nation's largest refiner and gasoline retailer.

In terms of marketing capacity, ConocoPhillips will have approximately 17,000 service stations under its various brands, assuming no significant mandated divestitures. This would result in a 10% share of the market, making it the single-largest retailer of gasoline in the United States.

"Phillips' merger with Conoco will help move the company into the realm of the super-majors,” said Randall Nottingham, director of Strategy Analytics energy market strategies practice. “Among other things, the merger will significantly increase ConocoPhillips' international exploration and production portfolio, refining capacity, and marketing outlets."

As a result of these benefits to Phillips and Conoco, Nottingham noted that the merger will "put considerable pressure on the remaining mid-tier majors, including Marathon, Valero (Ultramar Diamond Shamrock), Sunoco, and Amerada Hess, to merge with a complementary regional partner or be acquired by one of the super-majors."

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