[CONOCO LOGO] [PHILLIPS LOGO]
CONOCO AND PHILLIPS AGREE TO MERGER OF EQUALS
NEWS RELEASE
$35 BILLION STRATEGIC COMBINATION CREATES THIRD-LARGEST INTEGRATED
U.S. ENERGY COMPANY
ARCHIE W. DUNHAM TO SERVE AS CHAIRMAN AND
JAMES J. MULVA TO SERVE AS PRESIDENT AND CHIEF EXECUTIVE OFFICER OF
CONOCOPHILLIPS
Houston, Texas, and Bartlesville, Oklahoma (Nov.18, 2001) --- Conoco Inc.
(NYSE:COC) and Phillips Petroleum Company (NYSE:P) today announced that their
boards of directors have unanimously approved a merger of equals, and that the
companies have signed a definitive merger agreement. The new company, which will
be named ConocoPhillips, will be a strong competitor with enhanced returns and
accelerated growth opportunities from an excellent financial and operational
position.
ConocoPhillips will be the third-largest integrated U.S. energy company based
on market capitalization and oil and gas reserves and production. Worldwide,
it will be the sixth-largest energy company based on hydrocarbon reserves and
the fifth-largest global refiner.
As a premier global major, ConocoPhillips will have the size, portfolio of
high-quality assets, and the capabilities and financial strength to generate
enhanced value for its shareholders. Specifically, ConocoPhillips will have:
o substantial growth opportunities;
o world-class technology, workforce and operational practices;
o significant opportunity to enhance its exploration portfolio;
o diversified earnings and cash flow;
o a strong balance sheet, with an expected debt-to-capitalization
ratio of approximately 35 percent;
o improved capital efficiency; and
o an efficient cost structure.
Under the terms of the agreement, Phillips shareholders will receive one
share of new ConocoPhillips common stock for each share of Phillips they own
and Conoco shareholders will receive 0.4677 shares of new ConocoPhillips
common stock for each share of Conoco they own. Based on the closing market
prices for the shares of both companies on Friday, Nov. 16, 2001, and their
debt levels as of Sept. 30, 2001, the new company would have an enterprise
value of $53.5 billion ($34.9 billion of equity;$18.6 billion of debt and
preferred securities). At inception, Phillips shareholders will own about
56.6 percent and Conoco shareholders will own about 43.4 percent of the new
company. The transaction is structured to be tax-free to the shareholders of
each company.
-more-
-2-
The transaction is expected to be accretive to earnings and cash flow per
share of each company after achieving anticipated annual cost savings of
approximately $750 million. The companies expect to achieve the annual rate of
synergies within the first year after closing.
Upon completion of the merger, Archie W. Dunham, Conoco chairman and chief
executive officer, will serve as chairman of ConocoPhillips and will delay
his scheduled retirement to 2004. James J. Mulva, Phillips chairman and chief
executive officer, will be president and chief executive officer of the
combined company, and also become chairman upon Mr. Dunham's retirement. The
ConocoPhillips board of directors will consist of 16 directors, eight
designated by each of the two companies, including Mr. Dunham and Mr. Mulva.
ConocoPhillips will be headquartered in Houston, with a significant and
continuing presence in Bartlesville and Oklahoma.
Mr. Dunham of Conoco said, "This merger of equals represents an excellent
strategic fit for both Conoco and Phillips. It will position ConocoPhillips
as a stronger U.S.-based, global energy producer by significantly enhancing
its capability and growth prospects on five continents in both current and
prospective ventures, while generating major synergies. It will create
significant long-term value for the shareholders of both companies, partly
through cost savings, but also because of a significantly larger portfolio of
global assets, skills and opportunities. With a very strong balance sheet,
more capital for upstream investment, and greater operational efficiency
downstream, ConocoPhillips will be a tough new competitor to the larger
global majors."
Mr. Mulva of Phillips said, "This merger ensures that the United States will
be home to a third major international petroleum company. For Conoco and
Phillips, joining forces is the ideal way to be competitive in the reshaped
energy industry. ConocoPhillips will move forward to deliver on our legacy
growth projects, develop new opportunities in existing and emerging business
lines, and enhance returns in our downstream business with our companies'
leading technologies. With our greater financial strength and flexibility, we
will be able to fund these capital programs while also reducing our
debt-to-capitalization ratio, repurchasing shares and providing a competitive
dividend. Just as important, our compatible cultures, similar values and
determined focus will facilitate a smooth integration and enable
ConocoPhillips to get off to a fast and successful start."
Mr. Mulva added, "I want to emphasize that, reflecting our companies' deep
roots in Oklahoma, ConocoPhillips will continue to have a significant
operational presence here. ConocoPhillips intends to continue the
philanthropic and community commitments of Conoco and Phillips. In addition,
ConocoPhillips will initiate technology or other partnership commitments with
the University of Oklahoma and Oklahoma State University."
-more-
-3-
SUPERIOR GROWTH AND STRONG CORE CAPABILITIES
In the upstream segment, ConocoPhillips' global scale and presence will allow
for increased efficiency in core areas and delivery of legacy growth
projects. The combined company will have pro forma year 2000 hydrocarbon
reserves of 8.7 billion barrels of oil equivalent (BOE) and daily production
of 1.7 million BOE, based on the companies' estimates for 2001 year-end
production. ConocoPhillips will have numerous legacy asset positions,
including those in Alaska, Canada, the Lower 48, the North Sea, Venezuela,
China, the Timor Sea, Indonesia, Vietnam, the Middle East, Russia and the
Caspian area.
In the refining and marketing segment, ConocoPhillips will operate or have
equity interests in 19 refineries in the United States, the U.K., Ireland,
Germany, the Czech Republic and Malaysia, with a refining capacity of 2.6
million barrels a day. It will also have a strong marketing presence in the
United States.
In addition, ConocoPhillips will continue Phillips' equity participation in
the natural gas gathering and processing joint venture, Duke Energy Field
Service, and in the chemicals and plastics joint venture, Chevron Phillips
Chemicals.
SUBSTANTIAL RETURN ENHANCEMENTS AND VALUE CREATION
The companies expect the combined enterprise to achieve annual cost savings of
at least $750 million within the first full year after closing. These savings
will result from more efficient exploration, production and downstream
activities, and the elimination of duplicate corporate and administrative
positions, programs and operating offices. A transition team led by Philip L.
Frederickson, Conoco's Senior Vice President Corporate Strategy and Business
Development, and John E. Lowe, Phillips' Senior Vice President, Corporate
Strategy and Development, will begin work immediately to ensure integration
occurs quickly and smoothly.
It is anticipated that upon closing of the transaction, the ConocoPhillips
board of directors will adopt a competitive dividend policy. Currently,
Conoco pays an annual dividend of $0.76 per share and Phillips pays an annual
dividend of $1.44 per share.
The merger is conditioned upon, among other things, the approvals of the
shareholders of each company and customary regulatory approvals. The
transaction is expected to be completed in the second half of 2002.
Morgan Stanley, Credit Suisse First Boston and Salomon Smith Barney acted as
financial advisors and Cravath, Swaine & Moore acted as legal counsel to
Conoco. Goldman, Sachs & Co., J.P. Morgan Securities Inc. and Merrill Lynch &
Co. acted as financial advisors and Wachtell, Lipton, Rosen & Katz acted as
legal counsel to Phillips.
-more-
-4-
Conoco Inc. is an integrated, international energy company with operations in
more than 40 countries. Headquartered in Houston, Texas, the company had
20,000 employees and $27.7 billion in assets at Sept. 30, 2001.
Phillips Petroleum Company is an integrated petroleum company with interests
around the world. Headquartered in Bartlesville, Oklahoma, the company had
38,500 employees and $35.4 billion of assets at Sept. 30, 2001.
ADDITIONAL INFORMATION
In connection with the proposed Conoco/Phillips merger, Conoco, Phillips and
CorvettePorsche Corp. (which will be renamed ConocoPhillips in connection with
the proposed merger) will file a joint proxy statement/prospectus with the
Securities and Exchange Commission (the "SEC"). INVESTORS AND SECURITY HOLDERS
ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS REGARDING THE PROPOSED
MERGER WHEN IT BECOMES AVAILABLE, BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION.
Investors and security holders may obtain a free copy of the joint proxy
statement/prospectus (when it is available) and other documents filed by Conoco
and Phillips with the SEC at the SEC's web site at www.sec.gov. The joint proxy
statement/prospectus (when it is available) and these other documents may also
be obtained for free from Conoco or Phillips by calling Conoco at 281-293-6800,
and through Conoco's web site at www.conoco.com, or by calling Phillips at
918-661-3700, and through Phillips' web site at www.phillips66.com.
Conoco, Phillips and their respective directors, executive officers and
certain other members of management and employees may be soliciting proxies
from their respective stockholders in favor of the proposed merger.
Information regarding the persons who may, under the rules of the SEC, be
considered to be participants in the solicitation of Conoco's stockholders in
connection with the proposed Conoco/Phillips merger is set forth in Conoco's
proxy statement for a special meeting of stockholders, dated August 8, 2001
and filed with the SEC on August 3, 2001, and information regarding the
persons who may, under the rules of the SEC, be considered to be participants
in the solicitation of Phillips' stockholders in connection with the proposed
Conoco/Phillips merger is set forth in Phillips' proxy statement for its 2001
annual meeting, dated March 29, 2001 and filed with the SEC on March 29,
2001. Additional information will be set forth in the joint proxy
statement/prospectus when it is filed with the SEC.
CAUTIONARY STATEMENT FOR THE PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This press release contains forward-looking statements within the meaning of
the "safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. These statements are based on management's current expectations and
beliefs and are subject to a number of factors and uncertainties that could
cause actual results to differ materially from those described in the
forward-looking statements. The forward-looking statements contained in this
press release include statements about future financial and operating results
and the proposed Conoco/Phillips merger. These statements are not guarantees of
future performance, involve certain risks, uncertainties, and assumptions that
are difficult to predict, and are based upon assumptions as to future events
that may not prove accurate. Therefore, actual outcomes and results may differ
materially from what is expressed herein.
-more-
-5-
In any forward-looking statement in which Conoco or Phillips expresses an
expectation or belief as to future results, such expectation or belief is
expressed in good faith and believed to have a reasonable basis, but there can
be no assurance that the statement or expectation or belief will result or be
achieved or accomplished. The following factors, among others, could cause
actual results to differ materially from those described in the forward-looking
statements: the risk that Conoco's and Phillips' businesses will not be
integrated successfully; costs related to the proposed merger; failure of the
Conoco or Phillips stockholders to approve the proposed merger; and other
economic, business, competitive and/or regulatory factors affecting Conoco's and
Phillips' businesses generally as set forth in Conoco's and Phillips' filings
with the SEC, including their Annual Reports on Form 10-K for the fiscal year
ended 2000, especially in the Management's Discussion and Analysis section,
their most recent Quarterly Reports on Form 10-Q and their Current Reports on
Form 8-K. Conoco and Phillips are under no obligation to (and expressly disclaim
any such obligation to) update or alter their forward-looking statements whether
as a result of new information, future events or otherwise.
NOTE TO NEWS MEDIA: Today's news release, along with other information about
Conoco and Phillips, is available on the Internet at www.conoco.com and
www.phillips66.com. Conoco and Phillips will host a media teleconference today
at 4:00 p.m. EST. To participate, please call (888) 790-3408 and ask to be
connected to the Conoco/Phillips teleconference. For those outside the U.S.,
please call (712) 271-3401. Because of the expected number of callers, please
dial in at least 15 minutes before the conference is to begin.
NOTE TO FINANCIAL ANALYSTS: There will be a meeting for financial analysts
tomorrow, Monday, November 19, 2001 at 9:30 a.m. EST. An audiocast of the
financial analyst meeting as well as the speakers' slide presentation will be
available on the Internet at www.conoco.com and www.phillips66.com. Microsoft
Media Player is required to access the audiocast and can be downloaded from
www.microsoft.com.
An audio replay of the meeting will be available beginning at 2:00 p.m. EST on
November 19, 2001 until 10:00 p.m. EST on December 3, 2001. The replay can be
accessed by telephone at (888) 433-2203 in the U.S. or at (402) 998-1306
internationally. The access code is 4548032. The meeting replay will also be
archived on www.conoco.com and www.phillips66.com for the same time period.
# # #
Contacts:
For Conoco For Phillips
Investors: Investors:
Tom Henkel Clayton Reasor
(281) 293-3232 (212) 207-1996
Media: Media:
Caroline Churchill Kristi DesJarlais
(281) 293-4290 (918) 661-6117