ConocoPhillips Calls Lube Operations Good Fit


Yesterdays merger of Conoco Inc. and Phillips Petroleum Co. created the fourth-largest lubricants marketer in the United States. Officials called it a well-rounded lubes business with a cohesive portfolio and strong geographical reach.

The deal, proposed nearly 10 months ago, was completed after the U.S. Federal Trade Commission gave its conditional blessing Friday. The commission told the companies to sell refining, terminaling and marketing assets in Colorado, Washington and Utah but did not require divestments affecting lubricant operations.

The new company, ConocoPhillips, is based at Conocos former headquarters in Houston and has a market value of $35 billion, according to previous estimates. Although the merger was driven by upstream and fuels concerns – ConocoPhillips becomes the worlds sixth-largest publicly held energy company – officials said it also created a lubricants operation that is well-positioned for further growth in the United States.

Were extremely excited about what the combination brings to the table, Lubricants General Manager Tom Liberti said. He noted that Conoco had a 50-percent stake in North Americas second-largest base oil refinery, whereas Phillips had no base oil capacity but a stable of motor oil brands that are well recognized, at least regionally. The brands are Trop-Arctic, which has strong sales in the passenger car, commercial fleet and farm segments; 76, which does well in the commercial and industrial motor oil segments; and Kendall, which was relaunched as a premium brand earlier this year. Conoco sells motor oil under the Hydroclear brand but has stronger sales in the industrial segment.

Were going to market four brands and we think those brands fit well together, Liberti said. Its also a good fit geographically with our five blending and packaging plants. The Phillips heritage plants were on the West Coast and the East Coast while Conocos were in the Midwest and the Gulf Coast. What it boils down to is that were going to be able to reach more people and offer more to our customers.

Liberti said it remains to be seen whether the merger will lead to more Excel Paralubes base oil being kept in house for use in ConocoPhillips own lubes. Excel Paralubes is a 50-50 joint venture with Pennzoil-Quaker State and owner of a Westlake, La., refinery with capacity to produce 21,300 barrels per day of Group II stocks.

Its definitely an asset but well have to see what fits – whether we use it ourselves or use more of someone elses base stock, Liberti said.

Noting that ConocoPhillips aims to find $750 million of savings company-wide, Liberti acknowledged that there will likely be some job cuts in lubricants operations. He said the synergies will come mostly from finished lubricants but declined to reveal specifics.

He did disclose appointments of several management positions within the lubricants business: Lou Burke, commercial lubricants manager; Dave Barney, manager of operations and logistics; Jay Hong, manager of base oil and supply and trading; Craig Johnston, manager of planning and optimization; and Robert Thomas, director of sourcing. Burke and Hong were employed by Phillips, as was Liberti. Barney, Johnston and Thomas were employed by Conoco.

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