Business Restructuring in International Oil Companies (IOCs)

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Increasing Focus on Upstream Business With Spin-Offs and Divestitures in Downstream Operations

This research analyzes the recent divestments and spin-offs by integrated oil companies in the oil and gas industry. The report provides information about the key divestments in the downstream sector undertaken by integrated companies in order to raise the capital needed to focus on upstream activities. The report gives details about the spinoff of Marathon Oil Corporation, which formed an upstream pure play company with the same name and Marathon Petroleum Corporation, a downstream pure play company. It also provides information regarding the planned spinoff of ConocoPhillips to form a separate downstream company, Phillips 66 in May 2012. Information about divestments of downstream assets and plans for growth in the upstream sector by major integrated oil companies also features in the report, which is built using data and information sourced from company reports, primary and secondary research and in-house analysis by GlobalData’s team of industry experts.

 

Scope

  • Key challenges faced by integrated oil companies in the global oil and gas industry
  • Steps taken by major IOCs to increase profitability and shareholder value
  • Key objectives of divestments or spin-offs of major IOCs
  • Increased focus on upstream activities to improve production levels and reserve life
  • Divestment strategies adopted by major IOCs to improve cash flows

 

Reasons to Buy

  • Develop business strategies with the help of specific insights into the oil and gas E&P market
  • Identify opportunities and challenges in the oil and gas industry leading to divestments and spinoffs by major IOCs
  • Plan your strategies based on expected developments in the oil and gas exploration activities by major IOCs and newly formed upstream pure play companies
  • Understand the competitive landscape of the emerging market in the upstream and downstream sector

 

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Table of Contents

1 Table of Contents
1.1 List of Tables
1.2 List of Figures

2 Introduction
2.1 Overview
2.2 GlobalData Report Guide

3 Major Integrated Oil Companies Annouce Spin-Offs and Divestments to Ensure Future Growth
3.1 High Crude Oil Prices and Intense Competition for Reserve Acquisitions Prompt IOCs to Increase Focus on Upstream Activities
3.1.1 IOCs Need to Increase Focus on Upstream Activities to Stay Competitive with Pure-Play E&P Companies
3.1.2 Decrease in Number of Discoveries in the Last Two Years will Drive Upstream Activities in 2012
3.1.3 Sustained High Crude Oil Prices Prompt IOCs to Increase Focus on Upstream Activities
3.2 Environmental Regulations and Increasing Need for Complex Refineries Driving IOCs to Divest from the Downstream Sector
3.2.1 Stringent Environmental Regulations in North America and Europe Make Downstream Activities less Attractive for IOCs
3.2.2 Low Gross Refining Margins Affect Construction of New Refineries in Europe
3.2.3 IOCs Divert Capex towards Upstream Sector Considering Adequate Complexity Levels of their Refining Operations

4 ConocoPhillips and Marathon Oil Corporation Announce Spinoff to Ensure Future Growth
4.1 ConocoPhillips Spun-off its Downstream Segment in May 2012
4.1.1 The “Shrink to Grow” Strategy Drives ConocoPhillips’ Decision to Spinoff
4.1.2 ConocoPhillips Increasing its Focus on Upstream Activities by Divesting from Non-core Assets
4.1.3 The New Downstream Entity is Among the Largest Refiners in the US
4.1.4 ConocoPhillips is Buying Back Shares to Increase Shareholder Returns
4.2 Marathon Oil Corporation’s Spin-Off Enhanced its Downstream Business
4.2.1 Marathon Oil Corporation Decided to Spin-off its Downstream Sector in June, 2011
4.2.2 The Spinoff will Lead to Increased Shareholder Value
4.2.3 Marathon Oil Corporation Increasing its Upstream Activities especially in Shale Plays
4.2.4 Marathon Petroleum Corporation will Focus on Refining and Retail Markets in 2012

5 Major Integrated Oil Companies Decide to Restructure Business Segments through Divestments
5.1 ExxonMobil Corporation Increases Production Levels by Divesting Non-Core Assets
5.1.1 ExxonMobil is Currently Restructuring its Operations to Increase its Upstream Activities
5.1.2 Recent Divestitures of Non-core Assets will Help the Company to Focus on High Growth Strategic Assets
5.1.3 ExxonMobil Plans to Focus on over 130 Upstream Projects to Improve its RRR
5.2 BP Divesting Stakes from its Assets to Meet the Deepwater Horizon Accident Liabilities
5.2.1 BP Raised $38 Billion until 2011 through its Divestment Program to Meet Oil Spill Liabilities
5.2.2 BP will Focus on Upstream Activities to Strengthen its Core Sector
5.2.3 BP Plans to Drill Wells Globally to Increase its RRR
5.3 Royal Dutch Shell will Concentrate on Profitability in 2012
5.3.1 Royal Dutch Shell Plans to Unlock Capital from its Downstream Business
5.3.2 Recent Divestitures of Few Downstream Assets to Focus on Profitability Instead of Growth
5.3.3 Royal Dutch Shell will Focus on Gas Production until 2016
5.4 Chevron Plans to Improve Profitability Through Business Segment Restructuring
5.4.1 Chevron Plans to Streamline its Refining Business to Increase Capital Investments in Exploration
5.4.2 Chevron has been Divesting its Stakes in Non-Core Assets to Increase its Focus on Strategic, Unconventional Shale Plays
5.4.3 Chevron Corporation Increases Unconventional Exploration Activities in 2012
5.4.4 Chevron Corporation Increases Upstream Activities to Improve RRR

6 Appendix
6.1 Market Definition
6.2 Abbreviations
6.3 Sources
6.4 Methodology
6.4.1 Coverage
6.4.2 Secondary Research
6.4.3 Primary Research
6.4.4 Expert Panel Validation
6.5 Contact Us
6.6 Disclaimer

 

List of Tables

Table 1: ConocoPhillips, Major Divestments, January 2011 – February, 2012
Table 2: ConocoPhillips, Planned Production Assets, 2011–2016
Table 3: ExxonMobil Corporation, Major Acquisitions, 2011
Table 4: ExxonMobil Corporation, Major Divestments, 2011
Table 5: BP Plc, Major Divestments, 2011
Table 6: BP Plc, Major Acquisitions, 2011
Table 7: Royal Dutch Shell Plc, Major Divestments, January 2011 – February, 2012
Table 8: Royal Dutch Shell Plc, Major Acquisitions, January 2011 – February, 2012
Table 9: Chevron Corporation, Major Divestitures, 2011
Table 10: Chevron Corporation, Major Acquisition of Unconventional Reserves, 2011

 

List of Figures

Figure 1: Average Reserve Replacement Ratio of Pure-play E&P Companies and IOCs, %, 2007 - 2011
Figure 2: Exploration and Production Companies, Reserve Replacement Ratio, %, 2007 and 2011
Figure 3: Discoveries by Major Integrated Oil Companies, Global, 2007 - 2011
Figure 4:    Trend of Brent, OPEC and WTI Crude oil Prices, $/bbl, January 3, 2011 – April 9, 2012
Figure 5: Affect of Crude Oil Prices on Upstream Capex of Major IOCs, Global, $bn, $/bbl, 2007 – 2011
Figure 6: Planned Refining Capacity Additions, By Region, MMtpa, 2012-2016
Figure 7: Comparison of Refinery Margins in North America, Europe and Asia Pacific, $/bbl, January 2011 – March 16 2012
Figure 8: Comparison of Complexity Levels of Refining Operations of Major IOCs, Nelson’s Complexity Index, 2011
Figure 9: ConocoPhillips, Portfolio of Business on Growth-share Matrix, 2011
Figure 10: ConocoPhillips’ Revenue and Net Profit Margin by Segment, $bn, 2011
Figure 11: ConocoPhillips, Regional Production and Reserves, MMboe/d, Bboe, 2011
Figure 12: Average Reserve Life Higher for IOCs, 2011
Figure 13: Refining Capacity of IOCs and Domestic Pure-plays in the US, MMtpa, 2011
Figure 14: Phillips66, Downstream Operations Worldwide Map, October 2011
Figure 15: Phillips 66, Change in Total Refining Capacity, MMtpa, 2012–2016
Figure 16: ConocoPhillips, Share Buyback, Cash Flow from Operations and Buyback as a Percentage of CFO, 2007–2011
Figure 17: Marathon Oil Corporation, Geographic Distribution of Oil and Gas Production, 2011
Figure 18: Trend in Market Capitalization of MRO and Spun-off Entities, $/bn, December 2008 – April 2014
Figure 19: Marathon Oil Corporation, Eagle Ford Shale, 2011
Figure 20: Marathon Oil Corporation, Upstream Capital Expenditure, 2007 – 2012
Figure 21: Marathon Oil Corporation, Downstream Capital Expenditure, $bn, 2009 – 2012
Figure 22: Marathon Petroleum Corporation, Downstream Operation, 2011
Figure 23: ExxonMobil Corporation, Operational Overview, 2011
Figure 24: ExxonMobil Corporation, Cash Flow From Operations, Capex and Capex as Percentage of CFO, $bn, 2007 - 2011
Figure 25: Integrated Oil Companies, Debt to Equity Ratio, %, 2007 - 2011
Figure 26: ExxonMobil Corporation, Production from Upcoming Assets, MMboe, 2011 – 2015
Figure 27: ExxonMobil Corporation, Reserve Replacement Ratio, %, 2007 - 2011
Figure 28: BP Plc, 10-Point Plan for 2012
Figure 29: BP Plc, Fall in Production Levels and RRR in 2011, Mboe, 2007 – 2011
Figure 30: BP Plc, Upcoming Production Assets, 2011 – 2016
Figure 31: Royal Dutch Shell Plc, Return on Capital Employed of Downstream Business, %, 2007 – 2011
Figure 32: Royal Dutch Shell, Upcoming Production Assets, 2012 – 2016
Figure 33: Chevron Corporation, Contribution of Downstream Operations to Total Revenue and Net Income, (%), 2007–2011
Figure 34: Chevron Corporation, Cash Flow From Operations, Capex and Capex as Part of CFO, $bn, 2007 – 2011
Figure 35: Chevron Corporation, Key Unconventional Exploration Activities, 2012
Figure 36: Chevron Corporation, RRR, %, 2007 - 2011
Figure 37: Chevron Corporation, Planned Conventional Exploration Activities, 2012

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