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 excerpts from a special issue of Conoco World relating to
the proposed merger between Conoco Inc. and Phillips Petroleum Company that
have been distributed to Conoco employees on December 7, 2001.
ISSUE: Conoco World -- 2001 No. 7
SLUG: AWD message
HEAD:
Chairman and CEO Archie Dunham sent the following message to all employees and
contractors on Sunday, November 18.
This afternoon I have some exciting news to share with you! Just minutes ago,
we announced that Conoco and Phillips Petroleum Company will merge, forming a
new and even stronger company named ConocoPhillips. The new company will have
an enterprise value of $53.5 billion.
More details about the merger are provided in the news release. But,
specifically, the merger will:
/_/ Create the third-largest integrated U.S. energy company based on
market capitalization and oil and natural gas reserves and production.
/_/ Increase daily oil and natural gas production to 1.7 million
barrels of oil equivalent (BOE), and expand our combined reserves to 8.7
billion BOE, making ConocoPhillips the sixth-largest energy company globally
in terms of reserves.
/_/ Position ConocoPhillips as the fifth-largest global refiner, with a
refining capacity of 2.6 million
barrels per day; and significantly strengthen our marketing operations.
/_/ Significantly expand our presence in North America, Northwestern
Europe, Northern South America and Asia Pacific, and provide future growth
opportunities in the Middle East, the Caspian Sea, West Africa and Russia.
The new company will be headquartered at Conoco's current location in
Houston. I will delay my normal retirement to 2004 and serve as Chairman of
ConocoPhillips. Jim Mulva, Phillips' current Chairman and CEO, will be
President and CEO of the combined company, and will also become Chairman when
I retire.
Under the terms of the agreement, Conoco shareholders will receive 0.4677
shares of new ConocoPhillips common stock for each share of Conoco stock they
own, and Phillips shareholders will receive one share of ConocoPhillips common
stock for each share of Phillips stock they own.
The boards of both companies have unanimously approved the merger and the
companies have signed a definitive merger agreement. The merger is expected to
be completed in the second half of 2002, following the approval of both
companies' shareholders and customary regulatory approvals. A Transition Team
- -- led by Phil Frederickson, Conoco's Senior Vice President for Corporate
Strategy and Business
Development, and John Lowe, Phillips' Senior Vice President for Corporate
Strategy and Development -- will begin work immediately to ensure the two
companies are integrated quickly and smoothly when the merger is completed.
For those of you who are not familiar with Phillips, I'd like to tell you
a bit about their history and current operations. Like Conoco, Phillips' roots
are strong. Both companies were founded in the early days of the oil industry
- -- Conoco in 1875 and Phillips in 1917. From these early beginnings, both
companies have grown and prospered, becoming leaders in the global energy
industry. Today, Phillips is a major international energy company that
explores for and produces crude oil, natural gas and natural gas liquids
worldwide. It recently completed one of the largest transactions in its
history with the purchase of Arco Alaska, which made Phillips the largest oil
and natural gas producer in Alaska. In downstream, Phillips is a major U.S.
refiner and marketer, having significantly expanded its U.S. presence with the
recent acquisition of Tosco Corporation. Phillips also is involved in natural
gas gathering and processing; and it produces and distributes chemicals and
plastics worldwide.
By joining forces, we are combining two impressive energy portfolios. The
merger will strengthen operations in
our core areas; ensure future growth; and achieve expected annual cost savings
of approximately $750 million (U.S.) through more efficient exploration,
production and downstream activities, and the elimination of duplicate corporate
and administrative positions, programs and operating offices.
Unfortunately, there will be work force reductions, but we anticipate
accomplishing as much of this as possible through redeployment, attrition and
reduced hiring. In fact, as a much larger, more diverse company,
ConocoPhillips will be able to provide even greater career opportunities long
term for employees around the world.
This announcement represents a major achievement for both companies, and
I know many of you will have questions. I have tried to address some of those
questions in a video message that is posted on the Pathfinder Intranet site. A
Q&A also is posted on Pathfinder, and we'll continue to communicate regularly
in the days ahead.
Although this is a time of change for Conoco, it's also a time of great
opportunity. As Conoco and Phillips join together, we will pursue a bright new
future built on a foundation of unwavering values. Over the years I have come
to know many Phillips employees, and along with the similarities in our
histories and operations, we also share
common values. Like Conoco, Phillips is committed to safety, environmental
responsibility, maintaining the highest ethical standards and valuing all
people. I'm confident that when our two extraordinary work forces are joined,
we will accomplish far more together than either of us could have accomplished
alone.
In the history of Conoco and Phillips, November 18, 2001 -- like May 11,
1998, when we announced the IPO -- will be a day to remember ... a day when we
accelerated our journey of growth. I hope you share my excitement about the
potential the merger represents, and the promise of this exceptional new
enterprise.
Warm regards,
Archie
SSUE: Conoco World - SPECIAL EDITION
SLUG: News2
HEAD: It's a merger of equals
Conoco and Phillips Petroleum have signed a definitive merger agreement,
creating "a tough new competitor to the larger global majors," in the words of
Chairman and CEO Archie Dunham.
The "merger of equals," unanimously approved by both companies' boards of
directors, was announced Sunday, Nov. 18. The transaction is expected to be
completed in the second half of 2002.
Most employees learned of the merger when they arrived for work on Monday
and read an e- mail message from Dunham, sent the previous afternoon (see
below). Also, a video message from the chairman, providing greater detail
about the historic step, was posted on the Pathfinder intranet site.
The new company, to be named ConocoPhillips, would have an enterprise
value of $53.5 billion and 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.
The companies expect the combined enterprise to achieve annual cost
savings of approximately $750 million within the first 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.
Upon completion of the merger, the ConocoPhillips board of directors will
consist of 16 directors, eight selected by each company. The new company
will be headquartered at Conoco's complex in Houston, with a significant and
continuing presence in Bartlesville, Okla. (Phillips' current headquarters),
and Oklahoma.
In upstream, 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 downstream, the new company 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 total refining capacity of 2.6 million barrels a
day. It also will have a strong marketing presence in the United States.
ISSUE: Conoco World -- 2001 No. 7
SLUG: Q&A
HEAD: Questions and Answers
More questions and answers about the merger can be found on the Q&A pick of
the Merger of Equals site on Pathfinder. The site will be updated periodically
as questions are received.
HOW WAS THE MERGER DETERMINED TO BE A "MERGER OF EQUALS" WITH RESPECT TO
PHILLIPS GETTING A 56.6 PERCENT STAKE IN THE NEW COMPANY? THIS WOULD INDICATE
MORE OF A BUYOUT THAN A MERGER. WHAT WILL KEEP CONOCO'S VIEWS FROM BEING
OVERRULED?
A number of steps were taken to ensure that the merger truly is a "merger of
equals," which is the desire of both companies' senior management.
Conoco Chairman and CEO Archie Dunham will delay his retirement until 2004 and
remain actively involved, jointly selecting the management team for the new
company and serving as Chairman of the Board of Directors of ConocoPhillips.
The board will be made up of 16 directors, 8 selected by each of the two
companies. The corporate headquarters will be located in Houston. And Conoco
will maintain its identity with the name ConocoPhillips.
Despite some media reports, the merger was not an acquisition or a sale
by either company, which is why there was no premium received by either
company. Shareholders in each company will simply be exchanging their current
shares in Conoco and/or Phillips for an equal value of new ConocoPhillips
stock. The reason Phillips shareholders will own 56 percent of the new company
and Conoco shareholders 44 percent is because Phillips is currently a slightly
bigger company than Conoco in terms of equity value. Both sets of shareholders
will hold stock valued at roughly the same total value as before, only now
they will own it in the new ConocoPhillips company.
I'VE READ THAT SOME OTHER COMPANY MAY STEP FORWARD AS A "SUITOR" FOR CONOCO,
OFFERING A PREMIUM ABOVE THE PER-SHARE VALUE PROVIDED IN THE CONOCO-PHILLIPS
AGREEMENT. WHAT WILL CONOCO DO IF THIS HAPPENS?
The Conoco-Phillips merger agreement doesn't provide a premium for either stock
because it is a merger of two companies, rather than being an acquisition of
one by the other. Conoco and Phillips believe that, while not providing a
short-term gain, the merger offers significant long-term value to shareholders
through the excellent fit of the two companies' asset portfolios and the
enormous
growth potential they provide. Of course, Conoco's board of directors will
fulfill its fiduciary responsibility to its shareholders by examining the
merits of any offer presented.
THE MERGER NEWS RELEASE SAID PHILLIPS SHAREHOLDERS WILL RECEIVE ONE SHARE OF
CONOCOPHILLIPS STOCK FOR EACH SHARE OF PHILLIPS STOCK THEY OWN, WHILE CONOCO
SHAREHOLDERS WILL GET 0.4677 SHARES OF THE NEW COMPANY FOR EACH SHARE OF
CONOCO STOCK THEY OWN. WHY SUCH A BIG DIFFERENCE, AND WHAT IS THE DISTRIBUTION
BASED ON?
To make distribution of shares of ConocoPhillips equitable, the number of
shares that stockholders of each company will receive is determined by the
20-day average closing price (ending Nov. 16) for each company's stock, as
well as the number of shares outstanding (which together represent the total
equity value of each company).
IS THERE ANY ESTIMATE OF THE SIZE OF THE WORK FORCE REDUCTION THAT WILL OCCUR
AS A RESULT OF THE MERGER, AND WHEN WILL IT BEGIN?
No estimates have been made regarding the impact on the Conoco work force, and
it is likely to be several months before these decisions are made. Leaders of
both companies
are committed to working diligently to redeploy affected employees and
accommodate personal preferences whenever possible.
WHAT WILL THE SELECTION PROCESS BE FOR STAFFING THE MERGED COMPANY?
The most qualified employees with the necessary skills and experience from
both companies will fill the positions. The staffing of the new company will
be completed as soon as practical following closure of the merger. Company
management will use a fair and thorough process for evaluating all employees
and positions.
ISSUE: Conoco World - SPECIAL EDITION
SLUG: McKee quote
HEAD:
"The overall strategic fit of the two companies is excellent. Individually,
both upstream organizations are very strong, with excellent assets and growth
opportunities. But, by combining the two asset portfolios and the distinctive
strengths of each organization, we have a unique opportunity to take our
performance to the next level and to ensure its strength and longevity.
"The merger strengthens all of Conoco's core areas -- North America and
Northern South America in particular. And in the North Sea, the combination
will make us the fifth-largest producer of oil and gas. The merger also will
expand our scope in Asia Pacific.
"Finally, by combining Conoco's position in Dubai, Syria and Saudi
Arabia's Core Venture 3 with Phillips' involvement in Core Venture 1 and the
other Middle Eastern and Caspian opportunities we both have, that region
becomes a strong candidate for a fifth core area."
ISSUE: Conoco World -- 2001 No. 7
SLUG: Nokes quote
HEAD:
"I can't think of a better merger partner than Phillips, which has always
been a respected company and a premier brand.
"The merger will enable us to further optimize downstream, while pursuing
focused expansion in high-growth markets. In the U.S., we'll have the size and
complexity to compete even more effectively, allowing us to fully capitalize on
positive market cycles and our greater geographic diversity. We'll also have
access to cost-advantaged feedstocks, and there is the potential for even
greater synergies with the upstream business.
"Internationally, ConocoPhillips will be a top-rated refiner with
high-conversion capacity. "I think it's clear, the merger of Conoco and
Phillips will open new doors of opportunity for the downstream
business. It will build on our strengths, and help us overcome the challenges of
a highly competitive industry."
ISSUE: Conoco World -- 2001 No. 7
SLUG: Profile
HEAD:
Phillips Petroleum is a fully integrated, international energy company with
38,600 employees and $25.4 billion in assets. Specifically, Phillips:
o Holds E&P acreage in 19 countries and produces in nine -- the
Norwegian, United Kingdom and Danish sectors of the North Sea; the
United States; Canada; China; Nigeria; Venezuela; and the Timor
Sea.
o Conducts gas gathering, processing and marketing activities through
its 30.3 percent interest in Duke Power Services, one of the
largest natural gas liquids manufacturers and marketers in the U.S.
o Operates 10 U.S. refineries with a combined crude oil refining
capacity of approximately 1.7 million barrels per day. Also
operates a refinery in Ireland.
o Markets motor fuels through approximately 12,400 outlets in 46
states under brands including Phillips 66, Union 76 and Circle
K. Owns or has an interest in about 16,000 miles of pipeline
systems.
o Is a global manufacturer of chemicals through Chevron Phillips
Chemical Company.
CAUTIONARY STATEMENT FOR THE PURPOSES OF THE "SAFE
HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995
These excerpts contain 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
excerpts 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
4
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.