On August 9 Conoco became an independent company again, as the spin off from DuPont was complete. Conoco began the next phase of its 124 year history and DuPont will head on to celebrate its 198th year as a transformed company. 
 

History

"Under the encouragement of Thomas Jefferson, EleuthSre Ir,n,e du Pont founds E.I. duPont de Nemours & Co., a gun powder Manufacturer." ¹ $36,000 of investor capital allowed duPont to build powder mills and have first year sales of $15,116.² DuPont is now a global research and technology-based life sciences and materials company. Committed for many years to "better things for better living", now "the miracles of science". DuPont serves worldwide markets including food and nutrition; health care; agriculture; fashion and apparel; home and construction; and electronics. The company is active in about 70 countries and has 84,000 employees. ³

In order to assure a adequate supply of petroleum products to use as chemical feed stocks, DuPont bought Conoco for $6.5  Billion, in 1981.⁴ Conoco was an independent oil company which included Consol, a coal mining subsidiary and chemical units. 

Throughout the 1990's Wall Street has said from time to time that DuPont should divest Conoco. In "1997 DuPont states objective : to be the most successful energy- and chemical- based company in the world"⁵. At this time DuPont had already started selling off part of Consol, and now only has a small minority share in Consol. DuPont was slowly starting to reinvent itself in an effort to double in size between 1995 and it's 200th birthday in 2002.  This reinvention started to take DuPont into the life sciences;  drugs, feed, agriculture, and other biotech industries. ⁶  .  Alex Taylor III, in Fortune.com wrote:

Why Du Pont Is Trading Oil for Corn

 In 1998 DuPont decided to divest Conoco and on October 22,1998  the Conoco IPO netted $4.4 billion for 30% of Conoco. On August 9, 1999 the swap of DuPont stock for Conoco stock was finalized. DuPont secured about $21 billion in after tax value through the IPO and stock swap.  Conoco a major fully integrated energy company, now without chemicals units and without Consol, again stands alone.  On the day the stock swap was finalized, Conoco's president said: 

"This is the most important day in Conoco’s 124-year history. We are now a large  independent, global energy company and a formidable competitor around the world. On behalf of Conoco’s 15,000 employees, I thank DuPont for their excellent stewardship of our company. 
Looking forward, our intent is to grow, significantly increase shareholder value and ‘get to the future first.’"⁸

While part of DuPont, Conoco doubled its value between 1986 and 1996, and realigned its assets.⁹ Before and after the IPO Wall Street was buzzing with news and opinions about Conoco:

Conoco should be competitive on its own because it has strong refining and marketing in the United States and abroad, analysts said. 

"They've been doing well and won't have any difficulty surviving, " said Rosario Ilacqua, vice president of Rothschild Inc.¹⁰

Conoco president and CEO Archie W. Dunham says the IPO offers financial advantages for both companies. 

"There are a large number of investment opportunities for energy companies today, largely because of widespread privatization and deregulation around the world," Dunham says. "The IPO will provide Conoco with the means to capitalize on those opportunities."¹¹

Thanks to cost cuts and to aggressive oil and gas exploration, Conoco is ``in exceptional shape to be on its own,'' said Jeffrey R. Spetalnick of Oppenheimer & Co. in New York.¹²

``Conoco has become very aggressive in the last 12 to 18 months'' for instance, investing in oil-drilling ships for the Gulf of Mexico, said analyst George J. Gaspar of Robert W. Baird & Co. in Milwaukee.¹³

``It's much better for them to be separate than to be part of another company that's not in the oil business,'' said analyst Kate Warne of Edward Jones in Maryland. 

``There are a lot of opportunities in the oil business right now,'' such as joint ventures in oil exploration, ``and I don't think Conoco's been able to pursue those as much as they could as an independent company,'' she said."¹⁴

The DuPont divestiture will ``give the Conoco management more of a final opinion on exploration and development activity, and budgeting,'' Gaspar said.

``It's probably their need to be aggressive that is fostering this development,'' he said. ``The company deserves to be a single entity.'' 

Analyst O'Reilly agreed. ``When you're a separate company, it's not Wilmington telling you you can't do it. You've got more control,'' he said.¹⁵

Conoco now stands alone ready to tackle the future. Conoco's plan is to grow the business and be a premiere oil company. As an independent oil company Conoco plans to grow the " goal is to reach a $30bn market value for Conoco by 2003. It now stands at about $22bn." ¹⁶ Grow that's just what Conoco is doing.

There have been significant discoveries of oil and natural gas, increasing the proven reserves of oil and natural gas, and according the Rob McKee:

"Our ongoing goal is to deliver industry-leading production growth, which we estimate to be between 4 to 5 percent per year on average," said McKee. "Between 1998 and 2001, our growth plans will exceed this goal, reaching a total of about 22 percent. For the first nine months of 1999, our early production estimates indicate that our world wide natural gas production will be up about 23 percent." ¹⁷

The $4.4 billion IPO has been repaid to DuPont through the $4 billion  Jumbo Bond offering  secured  in April 1999 and the $2 billion syndicated bank credit facility,  on May 11.¹⁸  Conoco has gone on to reduced its debt, which will be down about $300 million in the third quarter of 1999.¹⁹ 

Conoco was named to the Standard & Poor's 500-stock index on the day the stock split took effect. Archie Dunham, Conoco's CEO has big dreams for Conoco.

A year after the $4.4bn offering, and two months after Conoco was completely separated from DuPont to become the fifth-largest integrated oil company in the US, Archie Dunham, its chief executive, is out to prove that being big is not all that matters.

"Size is not the determining factor in greatness," says Mr Dunham, …"It's having vision, being nimble, being quick, being aggressive. Those are attributes of greatness and where we think we can beat the majors."²⁰

He must prove that Conoco can compete against the oil giants. And he must do so in a world where succeeding as an oil executive means not only understanding bottom-line calculations, but surviving the snakes and ladders of world oil diplomacy.

Mr Dunham's first tenet is: "We don't have to be the size of a super-major to be effective."

To illustrate his point, he describes a meeting with a representative from a foreign government. The man approached him about an investment opportunity, ….

The envoy told him: "I don't want to do business with a company that has revenues larger than the size of our gross national product."²¹

...in 1992, the company was dead last in Schroder & Co.'s ranking of 15 oil companies in a composite measure of things like production profits and reserve replacement. 

Dunham decided that what Conoco needed was focus. ...Last year Conoco topped Schroder & Co.'s. annual ranking. Conoco now leads its peers in profits per barrel. Conoco is projected to have the strongest growth in production among large oil companies (22% between 1998 and 2001).²²

Conoco (NYSE:COC) said today that higher crude oil and natural gas prices, as well as continued growth in oil and natural gas production volumes, will result in earnings appreciably higher than current analysts' estimates for the third quarter.

Conoco Chairman, President and Chief Executive Officer Archie W. Dunham said earnings would be in a range of about 4 to 7 cents higher than First Call's current consensus estimate of 33 cents of underlying earnings per share for the third quarter. "We are very pleased by these results that reflect continued improvement in the business environment and -- more importantly -- our own operational success," Dunham told a meeting of financial analysts in Houston. 

"We're on target to produce production growth of about 10 percent in 1999, in line with earlier estimates," he said.²³

The Feeling

Archie's leadership is instilling the feeling at Conoco that is expressed in the add that ran in many papers around the country right after the stock swap was final.
 
 

On May 11, 1998, DuPont and  Conoco announced that the two 
companies would separate.  Since then, we've been busy. 
Among other things, we've sold  30 percent of our shares for $4.4 
billion in the largest IPO in U.S.  history; brought new oil and 
natural gas to market from giant  fields in the U.S., the U.K. and 
Venezuela; floated the biggest  energy industry jumbo bond 
offering in U.S. history; opened a  new refinery in Asia Pacific; and  put two of the world's most  advanced drillships to work.

Outstanding by any standard, but  we have our sights set even 
higher. Now,   DuPont  stockholders have swapped their 
shares for the other 70 percent of  ours in the biggest split-off in 
U.S. history. So here we are,  totally on our own

Thanks, DuPont.  We'll take it from here. ²⁴

. 

Conoco Homepage Fact Book.

DuPont Homepage

Hovers

Transium

Review Questions
 

1. What is Conoco doing to grow?
2. Can the aggressive management of Conoco overcome the large size of it's major competitors?
3. DuPont spun off Conoco. Was this a good move for Conoco?

1. "DuPont timeline", Forbes Magazine, October 6,1997. 
2. Ibid.
3. Dupont Homepage - At A Glance -Overview. 
4. Forbes Magazine, op. cit..
5. Ibid.
6. DuPont home Page - About Dupont.
7. Taylor III, Alex. "Why DuPont Is Trading Oil for Corn", Fortune, April 26,1999, Vol 139 No. 8.
8. Conoco Homepage - News Releases
9. "Tax-free stock swap would complete oil company disposal", The Dallas Morning News, September 29, 1998, pp 1D
10. Ibid.
11. "Conoco Divestment Stirs Speculation on DuPont's Moves". Vol.160, Chemical Week, May 5, 1998, pp 9(1).
12. Dallabrida, Dale. "With cost cuts, oil exploration, Conoco in exceptional shape to be on own", Gannett News Service, May 5, 1998.
13. Ibid.
14. Ibid.
15. Ibid.
16. "Archie Dunham: Taking on the Giants", ft.com, October, 11, 1999.
17. "Conoco Expects Higher Earnings in Third Quarter: Anticipated Yearly Production Growth Rate Expected to be About 10%", Business Wire, September 28, 1999.
18. Conoco Homepage - News Archive 2nd quarter 1999.
19. Business Wire, op. cit.
20. ft.com, op. cit..
21. Ibid.
22. Palmeri,Christopher. "God to Archie: Stick Around ", Forbes Magazine,October 18,1999.
23. Business Wire, op. cit.
24. Conoco Homepage - index1.