Filed by Conoco Inc.
Pursuant to Rule 425 under the
Securities Act of 1933
Subject Company: Conoco Inc.
Commission File No.: 001-14521
Subject Company: Phillips Petroleum
Company
Commission File No.: 001-00720
Set forth below are the text of a transcript from a joint interview with CNNfn
on November 19, 2001 and the text of a transcript from a joint interview with
CNBC on November 19, 2001 regarding the proposed Conoco/Phillips merger. The
interviews have been posted on the Conoco website.
CNNfn Transcript:
Interviewer:
Philips Petroleum and Conoco are joining forces to create one of the country's
largest oil producers. It is an all stock deal valued at $15.2 billion. The
companies call it a merger of equals, but Phillips' shareholders will own more
than 56% of the new entity. Joining me with details of the merger are the
chief executives of both companies, Archie Dunham of Conoco and James Mulva of
Phillips Petroleum. Welcome.
Mr. Mulva:
Good Morning.
Mr. Dunham:
Good Morning.
Interviewer:
Thank you for being here. Just a moment ago we were talking to Nel, an energy
trader from Aleron (phonetic) about this deal. We're seeing the stocks both
move up in instant net trading this morning. Phillips is up $2.88, Conoco is
up $1.44. From your perspective do you think investors see positives in this
deal or do you think it reflects the expectations that another bidder is going
to come out of the wings.
Mr. Dunham:
Well, we're absolutely confident that the reaction in the market place has
been unbelievably positive from the press as well as the analysts. Jim and I
are convinced that we have put together a company that's going to be capable
of delivering superior shareholder value, short-term and long-term and so
we're excited about it.
Interviewer:
Alright, you're happy with the market reaction.
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Mr. Dunham:
You bet.
Interviewer:
Jim, I want to ask you, will another bidder come out of the wings, do you
think?
Mr. Mulva:
Well from our point of view, we have a compelling transaction for the
shareholders. And we have significant synergies and then we expect that we
will get multiple expansion and the result of that coupled with the strong
growth programs of both companies, tremendous significant shareholder value
creation.
Interviewer:
Reason enough for the stock to be up. Have either of you gentlemen been
approached by any other oil companies that are interested?
Mr. Dunham:
We don't even talk about that. Well I want to make a point Deb, we're creating
the third largest energy company in the United States. That's good for the
United States and its good for the consumer. We're going to be 5th or 6th
largest globally. And so this really repositions our company to be a major
league player and that's why its good I think for the country, not only for
energy security but its going to be good for the consumer."
Interviewer:
If I am remembering correctly, you'd also be the largest retailer of gasoline
in the country and largest refiner as well in the country. Do you foresee any
anti-trust concerns coming up on that front?
Mr. Dunham:
No.
Mr. Mulva:
We see no condition or requirement that in any way affects, in any material
way the consummation of the transaction or the value that is created for the
shareholders.
Interviewer:
I want to ask you a little bit about the prospect of staff reductions. You
said you're going to save $750 million a year as a result of this transaction.
But you haven't said how, can either of you gentlemen forsee any staff cuts?
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Mr. Mulva:
But most of the synergies, the $750 million dollars, we know we can do that
for certainty and our target will over time be higher than that. A significant
amount of our synergies is really coming from operations and efficiencies, not
necessarily from work force reductions.
Interviewer:
Okay. I want to ask a little bit about what's been going on in the oil market
lately. To what extent is the recent volatility, in fact a sharp drop in oil
prices, a catalyst for moving this deal forward.
Mr. Dunham:
Really, had no impact at all on our discussions. Jim and I have been talking
for several weeks, even before the price of oil declined. But I'm still
bullish on oil price. We've got a huge poker game going on internationally
between the OPEC and the non-OPEC counties. OPEC needs a high energy price, a
high crude price to make sure they don't have to borrow money in the
international market. That's in the United States' best interest. We need a
stable Saudi Arabia, a stable Middle East producing group of countries. And
so, I think they'll get their act together. We may have some pain here in the
next 30 days or so, but I'm looking forward to a large cut in production at
the end of this year and I think the prices will rebound.
Interviewer:
How much pain do you think, I wonder Jim, if you've got a philosophy on this?
Do you think we'll see, as the Kuwaiti's have warned, oil go down to $10 a
barrel?
Mr. Mulva:
Oh, I don't think we're going to see that kind of oil price. Both of us are
quite bullish on the prospects in the future. We see a better share oil price
as we go into 2002 and 2003.
Interviewer:
Does OPEC wield the clout that it used to, given that the second and third
largest producers of oil are Russia and Norway, not members of OPEC?
Mr. Dunham:
Well they really do. There are only 4 million barrels a day of excess
capacity and that mostly is in Saudi Arabia and Iran. So, they're playing some
geo-political card-playing right now. I think they will understand real
quickly that they need to reduce production and get the price up so they don't
have to go into the international financial markets.
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Interviewer:
Even when the day is over in this poker game, you think OPEC will decide to
kind of eat the loss and cut production to keep prices stable or up and Russia
and the like, or the others, are not going to go along with them?
Mr. Dunham:
I really do.
Mr. Mulva:
This will be sorted out shortly.
Interviewer:
All right. We can look forward to some stability in the oil market. You think
we'll get prices back up to that $22 a barrel level for the OPEC blend that
they're hoping for?
Mr. Dunham:
If that's their basket price and I think they'll be successful during 2002 of
probably having an average price somewhere between $22 and $25 a barrel.
Interviewer:
Alright I want to thank you both for being here to talk about the pending
merger of your companies and also to give us your perspective on the world oil
market.
Mr. Mulva:
It's a great day for both of us.
Interviewer:
I was going to say, you look pretty happy, considering the early hour of the
morning.
Mr. Mulva:
We're good friends. We've known each other a long time. So.
Interviewer:
And you're going to be better friends soon. Thanks a lot. Archie Dunham of
Conoco and James Mulva of Phillips. Thank you so much.
CNBC Transcript:
Mark Haines:
A major marriage in the oil patch this morning, Phillips Petroleum and Conoco
agreeing to merge in an all stock deal worth about 15 billion dollars. It will
create the world's
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5th or 6th largest oil and gas company. It's a deal being called a merger of
equals. The board will be evenly split, but Phillips shareholders will hold
56% of the new company, called ConocoPhillips. Under the terms of the
agreement, Conoco shareholders will receive a little less than one half of one
share of the new company for each Phillips share they held, and the combined
company could surpass ExxonMobil as the largest U.S. refiner and will also
have more than 20,000 gas stations in the U.S., making it one of the top five
retailers. The deal comes as sinking oil prices eat into profits. Here's a
look at the stock of each company over the past year on a relative basis. And
as you can see there was significant outperformance there for quite a while
but since, in the last couple of weeks, the two have converged a bit. Joining
us now from New York to talk about the deal is James Mulva, Phillips
Petroleum's Chairman and CEO, he will be the CEO of ConocoPhillips. And
Conoco's Chairman and CEO Archie Dunham, who will delay retirement to stay on
as Chairman for a while. Good morning Gentlemen, thank you for being with us.
James Mulva:
Good Morning
Mr. Dunham:
Good morning, Mark good to see you.
Mr. Haines:
I'll start with Mr. Mulva. What is animating this deal? What makes it
desirable?
Mr. Mulva:
Well we are both very strong competitors but..really it's a very compelling
transaction. We both have a very strong growth program going forward and
together we have even stronger growth programs to develop our upstream and
downstream part of the business, and it leads to tremendous shareholder value
creation. I'm tremendously excited about the transaction, compelling
transaction for both companies.
Mr. Haines:
How do you grow a company like yours other than do more exploration, find more
reserves, or maybe build more refineries? If you can find some place that will
let you build one?
Mr. Mulva:
Our growth is about 4 percent a year in terms of adding reserves and
production. Around the world, it's a very strong growth rate, in fact we
intend to do even better than
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the 4%. So we have a portfolio over the next decade of growth projects that
essentially we feel is more, very competitive. Probably more than any other
major petroleum company. So these are well-defined projects, not pie-in-the-
sky. We have a growth program, both companies together, that is absolutely
excellent.
Jim Kramer (Guest Analyst):
Mr. Dunham, Jim Kramer here. Conoco stock had been pretty good until recently
when you announced an earnings shortfall. Aren't you afraid you are selling
the company basically after a big decline, where the stock is remarkably low
versus the assets?
Mr. Dunham:
Well first let me say it is a $35 billion transaction, not a $15 billion
transaction. This is a merger of equals. I think the stars were aligned
properly over the last several weeks so that the extremes ratio would allow us
to make this a merger of equal so Jim and I are both really excited about
putting together an outstanding company. If you look at the portfolio with
acquisition of ARCO Alaska, they'll be in Alaska. Conoco acquisition of Gulf
Canada we'll be in Canada, We're both big in the lower 48. We've got two big
from projects in Venezuela. In South East Asia we stretch all the way from
Australia to China so huge assets in the North Sea. It's a tremendous
opportunity for both companies. And we're doing this to create shareholder
value, we are confident that we'll be able to do that.
Mr. Haines:
Is it kind of a merge or die situation? Until this merger, now you are, now
you are in the same league as the others who have already merged. Was it kind
of forced upon you by circumstances?
Mr. Mulva:
No, no this is absolutely a proactive transaction for both companies. We both
have great growth programs but together we can make an even much stronger,
more competitive company. And it's all driven by shareholder value creation.
To us it's the absolutely compelling transaction, best alternative for
Phillips to be with Conoco and Conoco to be with Phillips.
Mr. Dunham:
We really had two strong companies when we began our negotiations and what
we've done is just create an even stronger company and that is why it is so
exciting for our shareholders.
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Mr. Kramer:
Mr. Mulva, the price of oil just keeps going down, down, down. Do you see any
bottom here, $18?
Mr. Mulva:
Well, we see that it will sort out over time, I know from my perspective and I
think Archie can comment certainly in a moment, but we are pretty bullish on
oil and we expect a $22 oil price as we go into next year.
Mr. Kramer:
But what makes you bullish? This is a horrendous bear market.
Mr. Dunham:
Well, let me jump in. I believe that OPEC has the capability to set the price
where they wish it to be. I think it's in the United States' best interest,
especially during this time of war in the Middle East, that we have a stable
Saudi Arabia, that we have a stable suite of Middle East countries. And oil
prices below twenty-two dollars as you know, probably below twenty-five
dollars, they have to go into the international finance market to borrow money
to support their budgets. I don't think that's going to happen long term. I
mean they are playing poker, on the first hand they lost. But I think they'll
re-group and come together strong. I believe they will cut production before
the end of the year, and you'll see prices regaining strength shortly.
David Faber:
Although specific to some of the benefits that your combined shareholders base
are going to see . . . . can you comment on that? How many job cuts and/or at
least cost savings will you see under this deal?
Mr. Mulva:
Well, it's immediately when the companies are put together and we achieve our
synergies, we have indicated synergies of $750 million. We know without
question we can achieve those synergies and our objective is to do even more.
In terms of the transaction within the first year accomplishing these
synergies, immediately accretive to income and cash flow to the shareholders.
So the synergies they come from operating efficiencies, high grading our
investment portfolio expiration, and both upstream, downstream and now we move
from two companies with a headquarters into one corporate headquarters, so
that is where the $750 million comes from. Great shareholder value creation.
And the other thing that we expect over and above synergies, is that we will
trade much better in the marketplace and expect over time to see multiple
expansion and that is where the shareholder value creation really comes from.
Mr. Faber:
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Mr. Dunham while you are calling it a merger of equals, some of your
shareholders knowing the Phillips shareholders will own over 56% of the
combined company would say, well you are really, ultimately selling out. Mulva
is going to be CEO, you will be there as chairman for a few years but their
management is going to take over. Why didn't you get us the big premium?
Mr. Dunham:
Well, its not that kind of a situation at all, it's absolutely a merger of
equals, we're going to have the same number of directors. It's an outstanding
opportunity for our company, for our employees, and also I think it's a
fantastic opportunity for our country. It is important that we have three
strong integrated energy companies, I think that's good for America, it is
good for our energy security, it is good for the consumers long-term.
Typically going to be good for Oklahoma long-term. And so we are excited about
the merger, we are confident we will create tremendous shareholder value.
Mr. Mulva:
Our approach to this question is: Archie and I have been good friends for
quite a long period of time. And our basic approach is it's a marriage of the
two companies. And through the marriage of the two companies, the merger of
equals is our approach, we are creating value for our shareholders. Our
approach was essentially put two companies together.
Mr. Haines:
We are running out of time but I want to return to a point you made, and
please correct me if I am misquoting you, but I believe you said a few moments
ago that you think OPEC has the power to set the price of oil, did you not?
Mr. Dunham:
Absolutely.
Mr. Haines:
All right, now, address if you would the ramifications of this growing
friendship with Russia and its emergence as a stable supply of oil, does that
not change the equation somewhat?
Mr. Dunham:
Well I think it is good for the world that we have a more stable Russia.
Conoco, as you know is probably the largest US energy company investing in
Russia so we know the country and the leadership very well and that's all very
positive. But significant increased volumes in Russia are going to be very
slow in coming. Long, long-term Russia is going to be a stable producer of
oil. The sooner that happens the better for the world economy; but in the
short term, in the next five to ten years, we will be relying on Middle East
oil. So its important, I think, that we have
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relationships with the Saudi and the other governments in the Middle East as I
am confident the administration understands and will pursue, I think, a very
balanced policy in that part of the world.
Mr. Haines:
Gentlemen, thank you, I appreciate you coming in and talking to us about the
deal.
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 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 by calling Conoco at 281-293-6800,
and through Conoco's web site at www.conoco.com.
Conoco and its executive officers and certain other members of management
and employees may be soliciting proxies from its 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. 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
These transcripts 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 these
transcripts 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.
In any forward-looking statement in which Conoco 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 is under no obligation to (and expressly disclaims any such
obligation to) update or alter its forward-looking statements whether as a
result of new information, future events or otherwise.