Phillips Petroleum's proposed $7 billion stock purchase of Tosco
Corp., announced Sunday, positions Phillips as the No. 2 refiner in the nation.
The deal, if approved by federal regulators, will add considerable heft to Phillips' refining operations at a time when the oil industry is focused on
exploration and production.
"What the company has done is akin to an investor spreading
himself out in the stock market," said Peter Beutel, president of
Cameron Hanover, an energy risk-management firm in New Canaan,
"Exploration is today's hot topic. But crude prices will be a
lot lower in a couple of years and the action will be in
refining," Beutel said. "These companies are breaking the mold
and looking ahead."
The transaction, which also will create the fifth-largest
gasoline retailer in the nation with more than 12,000 stations, was
approved by the boards of both companies on Sunday and is expected
to be completed by the third quarter of 2001.
Phillips is offering 0.80 of one of its shares for each share of
Tosco, initially valuing Tosco shares at $46.50, a 34 percent
premium. Phillips also will assume approximately $2 billion in
The purchase surprised some analysts who thought Phillips would
try to reduce its refining and retailing operations while expanding
its exploration business.
"I think it's kind of a major change of philosophy for
Phillips," said Phil Flynn, senior energy analyst at Alaron
Trading Corp. in Chicago. "We were under the impression that they
wanted to get out of 'mom and pop' retail, and refining."
The combined company's refining, marketing and transportation
operations will be located in Tempe, Ariz. There are no immediate
plans to change the names of any of the retail stations and
convenience stores, Phillips spokeswoman Kristi DesJarlais said.
The Associated Press contributed to this report