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Phillips Petroleum to Buy Tosco in $7 billion Deal
   Fox Market Wire
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, Conn.

"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 Tosco debt.

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

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