It has been a long, strange journey for ConocoPhillips, a company that for a time had ties to Delaware.
The Delaware side of the story began when DuPont bought Conoco in the early 1980s when the company wanted to be in the energy business. The oil giant produced healthy earnings and a reliable source of chemical feed stocks, but was not a good fit. Conoco executives, at times, bristled under ownership that did not have the risk-taking appetite that is part of the oil business.
It also left DuPont with Canada’s Bronfman family, best known for their ownership of the Seagram’s liquor brand, as its largest stockholder. With that big stake in the venerable company, a possible break-up or takeover was more than a remote possibility.
DuPont was finally able to adroitly deal with the situation by selling Conoco, which then merged with Phillips Petroleum and became ConocoPhillips.
DuPont also began a transformation that was puzzling at times, but was ultimately successful as it moved into fast-moving markets overseas, slimmed down and made a smart acquisition – Pioneer seeds.
As one of the major oil companies, ConocoPhillips rarely made the headlines as it avoided environmental catastrophes and other highly visible problems.
But it had a big problem that surfaced during the past recession and did not go away. The refining side of the business is hurting as demand remains weak in the U.S. And other nations compete for imported crude.
The situation this week led to the spinoff of refining and retail assets into a publicly traded company known as Phillips 66, ConocoPhillips’ best known gasoline brand.
The spinoff remain puzzling to some, who figure an integrated oil company, with well-run refineries will fare better in the long run.
Then came the strangest news of all when the new Phillips 66 sold a refinery in Delaware County, Pa. to a subsidiary of Delta Airlines after it appeared the site might close.
When news that Delta was eying the refinery surfaced a few weeks ago, it resulted in a lot of head scratching. Why would an airline want to get into another tough business?
It turned out that Delta, like Thomas O’Malley, who put together PBF Energy and acquired the Delaware City Refinery, could not pass up a bargain.
For what the company said was the price of a wide-body jet, Delta has the potential to save $300 million a year in jet fuel costs and Phillips has one less money losing refinery. PBF closed down a troublesome unit and based on a securities disclosure is making money in Delaware. Plans are now in the works for a $1 billion investment.
Phillips 66 hopes it can see similar success as a “pure play” refiner and marketer without that job of actually finding oil and gas.