July 15, 2011
Splitting Oil Companies Could Be A Good Thing for Investors and Business
ConocoPhillips recently announced that it would be splitting its company into two separate entities, one that explores for and produces oil, and another that refines the oil. Back in January, Marathon Oil announced a similar move. Marathon's spin-off, Marathon Petroleum Corp., which is the refining company, starting trading July 1 of this year.
In this recent era of consolidation, the separation of these operations into separate companies could be a good thing. The executives of these entities will now have a more focused business model, and the concerns of each part of the business are now less likely to compete. I will be particularly interested to see how the new refining entities operate. Obviously, as independent, publicly traded companies, the refining entities may have interests in working with other oil producers. This could create some real opportunities for synergies, geographically and otherwise, that were less likely to occur under the old model.
I'm also curious just how independent the new entities will look and act out of the gate.