Phillips, Conoco merge to create third largest US oil firm

Phillips Petroleum Co. agreed to a $15.4 billion merger with Conoco Inc., creating the No. 3 U.S. oil company, to cut costs and gain size needed to compete against larger rivals.

Oil companies are under pressure to combine because of competition from bigger rivals formed by mergers, such as Exxon Mobil and ChevronTexaco Corp., and the past year's 50 percent decline in oil prices. Phillips and Conoco say they'll have the capital needed to vie for expensive drilling projects in remote and politically unstable locales.

Phillips shareholders will own 57 percent of ConocoPhillips; Conoco investors will hold 43 percent. The new company will have debt and preferred securities of $18.6 billion. Conoco, the No. 4 U.S. Oil Company, and No. 5 Phillips have combined sales of about $53 billion a year, surpassing current No. 3 USX-Marathon Group Inc. with $34.5 billion.

The company will have reserves of 8.7 billion barrels of oil and natural gas, and daily production of 1.7 million barrels. It will operate in the U.S., Canada, the North Sea, Venezuela, China, the Timor Sea, Indonesia, Vietnam, the Middle East Russia and the Caspian.

In Indonesia, Conoco is the largest non- LNG gas producer with interest in West Natuna Sea and indirect interests in several oil, gas blocks through its ownership of Gulf Indonesia Resources.

The company will run or have stakes in 19 refineries with capacity of 2.6 million barrels a day in the U.S., U.K., Ireland, Germany, the Czech Republic, and Malaysia. (*)