Phillips/Conoco merger a go for second half of 2002.

• Author: Jones, Patricia

Will the union of two oil giants be good for Alaska? It depends on who you ask.

Ask 10 different individuals how the proposed business merger between Phillips Petroleum Co. and Conoco Inc. will affect Alaska's oil and gas industry, and you're likely to hear 10 different answers.

Of course, that's nothing new in Alaska, where opinions on controversial issues can be as divergent as the individuals who make their home in the Last Frontier.

"There's some speculating that it will be good for Alaska, and some saying it might be bad," said Bob Stinson, president of the Alaska Support Industry Alliance, and also president of CONAM Construction Co. "The jury is still out on this one."

Alaska's oil and gas industry--and those businesses that support exploration, development and operations on the North Slope and in Cook Inlet--are closely watching as Phillips and Conoco take steps to combine the companies.

Although the heads of both companies assure continued growth once the merger is complete, what the structural change means for Alaska is anybody's guess.

Yet most views tend to focus on these few, related points: A combined company provides stronger finances for future development, but competition for those capital dollars is greater. Alaska offers some rich resources for future development, but costs are typically higher here. And finally, the state's uncertain financial condition provides an increased amount of concern for oil companies, which provide about 80 percent of Alaska's annual governmental revenues.

"Shareholders don't care where the oil comes from," said Larry Houle, general manager of the Alliance. "Bottom line: The barrel of oil that wins at the end of the day is the one that provides the most margin for the company."

MERGER PLANS

Phillips and Conoco board of directors announced last November plans to combine worldwide operations of the two oil and gas companies, calling it a merger of equals. Shareholders of both companies approved the deal this spring. Provided that regulatory agencies give the necessary approvals, the deal should be completed by the end of 2002.

Structured as a tax-free exchange, shareholders in each company will receive stock in the new company, called ConocoPhillips. Phillips shareholders will receive one share of new ConocoPhillips common stock for each share of Phillips they own and Conoco shareholders will receive 0.4677 shares. At inception, Phillips shareholders will own about 56.6 percent and Conoco shareholders will own about 43.4 percent of the new company.

The combined company, with an estimated value of $53.5 billion, will be the third-largest integrated U.S. energy company based on market capitalization and oil and gas reserves and production. Worldwide, it will be the sixth-largest energy company...