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CONOCOPHILLIPS 8-K Report, Material Agreement (Oct 6, 2006)

Filed October 6, 2006For Securities:COP

Summary

This Form 8-K filing by ConocoPhillips (COP) on October 6, 2006, primarily reports on two significant developments. The company announced the formation of two joint ventures with EnCana Corporation, aimed at expanding its North American upstream and downstream operations. The upstream venture, focused on EnCana's oil sands projects in Alberta, will be equally owned and operated by EnCana, with both companies contributing equally. The downstream venture involves ConocoPhillips' refineries in Illinois and Texas, which will be expanded to process heavy oil, with ConocoPhillips operating and holding a disproportionate economic interest in one refinery for the initial two years. In addition to the joint venture news, the filing also discloses an increase in compensation for ConocoPhillips' non-employee directors, including an enhanced annual equity award and new compensation for a presiding director. Investors should note that these joint ventures are subject to final agreement and regulatory approval, with an expected closing date of January 2, 2007. The company also included standard forward-looking statement disclaimers, highlighting potential risks and uncertainties related to the ventures and general industry factors.

Key Highlights

  • 1ConocoPhillips and EnCana Corporation have entered into an agreement to form two equal 50/50 joint ventures focused on North American assets.
  • 2The upstream joint venture will combine EnCana's oil sands projects in northeast Alberta, with plans to increase production from 50,000 BPD.
  • 3EnCana will be the operator of the upstream joint venture, which will be headquartered in Calgary.
  • 4The downstream joint venture will involve ConocoPhillips' Wood River and Borger refineries, with significant expansion plans for heavy oil processing capacity.
  • 5ConocoPhillips will operate the downstream joint venture, headquartered in Houston, and will hold a disproportionate economic interest in the Borger refinery for the first two years (85% in 2007, 65% in 2007).
  • 6The joint ventures are subject to the execution of final definitive agreements and regulatory approval, with an expected closing date of January 2, 2007.
  • 7ConocoPhillips' Board of Directors approved changes to non-employee director compensation, including an increased annual equity award and new compensation for a presiding director.

Frequently Asked Questions

The joint ventures are designed to expand ConocoPhillips' and EnCana's North American upstream (oil sands production) and downstream (refining) operations. The upstream venture aims to increase production from existing oil sands projects, while the downstream venture will focus on expanding the refining capacity for heavy oil processing.

The upstream joint venture includes EnCana's Foster Creek and Christina Lake projects in Alberta. The downstream joint venture involves ConocoPhillips' Wood River refinery in Illinois and its Borger refinery in Texas.

While the downstream joint venture will be a 50/50 partnership, ConocoPhillips will retain a disproportionate economic interest in the Borger refinery for the first two years of operation: 85% in 2007 and 65% in 2008. This means ConocoPhillips will receive a larger share of the profits from this specific refinery during this period.

Both companies' boards of directors have approved the transaction. However, it is subject to the execution of final definitive agreements and regulatory approvals, with an expected closing date of January 2, 2007.