25, 2001
I
N
S
I
D
E
Alaska no longer core area for BP
5
Canadians claim ANWR veto power
3
BP pulls back on Alaska exploration
11
Forest budgets $225 million for Cook Inlet
15
Agrium wants to grow Cook Inlet operation
14
North Pole petrochemical plant moves ahead
10
Gasline permitting for trenching tests under way
9
This is a nation of many faiths. And this
holiday season, well all be joined in prayer
that those who mourn will find comfort; that
those in danger will find protection; and that
God will continue to watch over the land we
love.
P
RESIDENT
G
EORGE
W. B
USH
, N
OV
. 19, 2001 F I N A N C E & E C O N O M Y E X P L O R A T I O N & P R O D U C T I O N
A new light in the sea: Alberta Energy
moves forward with McCovey exploration
New player on North Slope assumes operatorship of Beaufort unit; drilling
to begin November 2002 from converted tanker managed by Fairweather
By Kay Cashman
PNA Publisher
A
subsidiary of Calgary-
based Alberta Energy
Company Ltd. has
assumed operatorship of
the McCovey unit from partner
Phillips Alaska Inc. and is mov-
ing forward with exploration.
Steve Harding, AECs
Alaska group exploration man-
ager, told PNA Nov. 19 that
drilling is expected to begin in
November 2002 from the SDC
unit, a converted tanker owned
by Seatankers Management Co.
and managed by Fairweather
Inc. If the independent hits oil,
he said the bottom-founded unit
could, with modification, be
used for the development plat-
form.
Which one of the three equal
partners in the McCovey
prospect AEC, Phillips and
Chevron USA would operate
the unit if it is developed has not
been decided, Harding said.
AEC will consider this oppor-
tunity should it arise, but
Phillips, because of its infra-
structure and facilities on the
North Slope, might also be inter-
ested.
No preferred contractors
AEC will probably open an
office in Anchorage in the next
year, Harding said.
Procurement for exploration
Conoco, Phillips merge as equals
ConocoPhillips will be third largest U.S. energy company, sixth largest
worldwide; business as usual in Alaska, company says
By Kristen Nelson
PNA Editor-in-Chief
I
t's a big shakeup in Bartlesville but business as
usual in Anchorage following the Nov. 18
announcement by Conoco Inc. and Phillips
Petroleum Co. that their boards of directors had
unanimously approved a merger of equals.
The new company,
ConocoPhillips, will be
headquartered in Houston
and part of the $750 million
in synergies the companies
have targeted includes a sin-
gle headquarters costing
Bartlesville, Okla., home of
Phillips, an unknown num-
ber of jobs.
But in Anchorage, head-
quarters of Phillips Petroleum
subsidiary Phillips Alaska
Inc., it's business as usual for
us, spokeswoman Natalie
Knox told PNA Nov. 21.
We don't expect any plans to change for devel-
opment, exploration or capital spending as a
result of the merger. Phillips Alaska has not yet
announced exploration plans for the 2001-2002
season; the budget doesn't come up for board
approval until early December.
Knox said Phillips Alaska doesn't expect a sig-
nificant impact on headcount because Conoco has
no operations in Alaska and there's no local staff
overlap between the companies. (See related
story on page 5.)
ConocoPhillips will be the third-largest inte-
grated U.S. energy company based on market cap-
Courtesy of Phillips Petroleum
Conoco Chairman and CEO Archie Dunham, left, and
Phillips Chairman and CEO Jim Mulva, right.
Phillips Alaska
doesnt expect a
significant impact
on headcount
because Conoco
has no operations
in Alaska and
theres no local
staff overlap
between the
companies.
Natalie Knox,
Phillips Alaska Inc.
see MERGER page A2
Phillips, Conoco union a plus for
Arctic gas development
A union of Phillips Petroleum Co. and Conoco Inc. will be
positive for the future of Arctic natural gas by ensuring that nei-
ther the North Slope nor the Mackenzie Delta basins get left on
the shelf, said a spokesman for Conoco's Canadian subsidiary.
Given the strong
interest of both compa-
nies in Arctic gas there
will be a desire to try
and see both sets of
resources getting devel-
oped, Peter Hunt told
reporters Nov. 19.
He said the merging
of Phillips and Conoco, to become the No. 5 oil and gas pro-
ducer in Canada, will give impetus to the search for economi-
cally feasible ways of developing the North Slope and Delta
reserves.
Hunt dismissed fears that a race between the two basins to
come on stream first could see one of them stranded.
Because the merger proposal won't go to a shareholder vote
William Lacey, with FirstEnergy
Capital Corp., said the merger
won't change the fundamentals
of Arctic development, because
both projects still face political
and economic hurdles.
see UNION page A18
What will it take to get BPs focus
back on Alaska?
With competition tight within the company for investment dol-
lars and other places in the world offering better exploration and
development opportunities BP has shut down frontier explo-
ration in Alaska and switched to harvest mode. (See story on page
11)
The man who heads up BP Exploration
(Alaska) Inc.s now defunct exploration
department told PNA the company is focus-
ing its exploration and development dollars
on prospects in the Gulf of Mexico, Trinidad
and West Africa.
In a Nov. 21 interview, F.X. OKeefe
talked about what it would take to get BPs
attention once again focused on Alaska.
The ability to find and develop projects
in a time period that is competitive with
other oil and gas provinces was his answer.
And what in Alaska is preventing BP from doing that now?
A highly developed regulatory climate and the cost to develop
a barrel of oil in Alaska is too high, OKeefe said.
Gov. Knowles was warned
In trying to track down a tip that Gov. Tony Knowles had visit-
Courtesy of Fairweather Inc.
see MCCOVEY page A17
Drilling is expected to begin in November 2002 from the SDC unit, a con-
verted tanker owned by Seatankers Management Co. and managed by
Fairweather Inc.
see FOCUS page A4
F.X. OKeefe, BP
Exploration (Alaska)
Inc. italization and oil and gas reserves and
production, the companies said.
Worldwide, it will be the sixth-largest ener-
gy company based on hydrocarbon
reserves and the fifth-largest global refiner.
Phillips shareholders will receive one
share of new ConocoPhillips common
stock for each share of Phillips and
Conoco shareholders will receive 0.4677
shares of new ConocoPhillips common
stock for each share of Conoco. The new
company will have an estimated enter-
prise value of $53.5 billion ($34.9 billion
of equity; $18.6 billion of debt and pre-
ferred securities), with Phillips sharehold-
ers owning about 56.6 percent and
Conoco shareholders owning about 43.4
percent of the new company.
Archie Dunham, Conoco chairman
and chief executive officer, will serve as
chairman of ConocoPhillips and will
delay his scheduled retirement to 2004.
Jim Mulva, Phillips chairman and chief
executive officer, will be president and
chief executive officer of the combined
company and will become chairman upon
Dunham's retirement.
Each company will designate eight
members of a 16-member board of direc-
tors. Dunham told analysts Nov. 19 that
the target board size is 12.
Initial regulatory filings will be made
in December; shareholder approvals are
expected in February; regulatory
approvals and closing are expected in the
second half of 2002.
The stars were aligned
Mulva said in a Nov. 18 press briefing
that the companies have known each
other for a long time, but that the merger
came together in the last few weeks.
The stars were aligned in the last six
weeks, said Dunham. The exchange
ratio over the last few weeks allowed us
to make this a merger of equals, he told
analysts Nov. 19.
Mulva said the companies have been
very strong competitors and that both
have strong growth programs going for-
ward and Dunham said the goal of the
merger is to take two strong companies
and make one stronger companies. It will
be good for the shareholders and, he
said, it will also be good for the country
to have a third strong integrated oil com-
pany.
ConocoPhillips sees a minimum of
$750 million in recurring synergies: $250
million from upstream operating efficien-
cies; $150 million from exploration; $150
million from downstream operating effi-
ciencies; $50 million from supply chain;
and $150 million from corporate.
Conoco has major Canadian
holdings
Conoco Canada Ltd. is one of four
major leaseholders in Canada's
Mackenzie Delta and is part of the
Mackenzie Delta Producer Group, which
includes ExxonMobil Canada Ltd.,
Imperial Oil Ltd. (69 percent owned by
ExxonMobil) and Shell Canada Ltd. The
group wants to build a gas pipeline from
the Mackenzie Delta south to the United
States.
In August, Dunham spoke to former
Gulf Canada Resources' employees who
would work for Conoco after Conoco's
C$9.8 billion takeover of Gulf Canada.
He said a gas pipeline from the
Mackenzie Delta is very, very important
to us priority No. 1 for (Conoco
Canada). He set an ambitious target of
slashing at least two years from the cur-
rent timetable of five to eight years for
delivering Delta gas to market. I think if
we could do it in four to six years, that
would be good.
On the subject of an over-the-top route
versus a highway route, Dunham said:
Our sole interest right now is going to be
Canada and the Mackenzie Delta, so we
have no potential conflict of interest
around choosing this route versus another
ro