8-KOther EventsExhibits & Filings

CONOCOPHILLIPS 8-K Report, Corporate Update (Mar 12, 2012)

Filed March 12, 2012For Securities:COP

Summary

ConocoPhillips (COP) has filed an 8-K report detailing a significant financing event related to the upcoming separation of its downstream business into a new entity, Phillips 66. On March 7, 2012, Phillips 66 entered into a Terms Agreement to privately place $6.7 billion in senior notes across various maturities (2015, 2017, 2022, and 2042) with initial purchasers. The proceeds from this offering, which closed on March 12, 2012, were placed in escrow accounts. The funds in escrow are earmarked for the benefit of the noteholders and will be released upon the consummation of the separation of Phillips 66 from ConocoPhillips, the effectiveness of a guarantee by Phillips 66 Company, and a favorable private letter ruling from the IRS confirming the tax-free nature of the distribution to ConocoPhillips shareholders. If these conditions are not met by December 31, 2012, Phillips 66 will be required to redeem the notes at a premium, with the escrowed funds used for this purpose.

Key Highlights

  • 1Phillips 66, a subsidiary of ConocoPhillips, conducted a private placement of $6.7 billion in Senior Notes due 2015, 2017, 2022, and 2042.
  • 2The primary purpose of this financing is to support the planned separation of ConocoPhillips' downstream business into the independent entity, Phillips 66.
  • 3Proceeds from the note offering are held in escrow pending the successful completion of the separation and other conditions.
  • 4Key conditions for escrow fund release include the consummation of the downstream business contribution, effectiveness of a guarantee by Phillips 66 Company, and a favorable IRS private letter ruling for a tax-free distribution.
  • 5A mandatory redemption provision is in place if the separation conditions are not met by December 31, 2012, requiring Phillips 66 to redeem the notes at 101% of their principal amount plus accrued interest.
  • 6The filing includes copies of the Terms Agreement, Indenture, Note terms, and Registration Rights Agreement as exhibits.

Frequently Asked Questions

The note issuance is primarily to finance the planned separation of ConocoPhillips' downstream business into a new, independent company named Phillips 66. The proceeds are held in escrow and are intended to facilitate this separation process.

The funds will be released once Phillips 66 demonstrates that the contribution of ConocoPhillips' downstream business has been substantially consummated, the guarantee by Phillips 66 Company is effective, ConocoPhillips has received a private letter ruling from the IRS confirming the tax-free nature of the distribution to shareholders, and other required legal documentation is delivered.

If the conditions for the separation and escrow fund release are not met by December 31, 2012, Phillips 66 is obligated to redeem all of the Senior Notes issued. This redemption will occur five business days after that date at a price of 101% of the principal amount, plus any accrued but unpaid interest.

Phillips 66 Company, a Delaware corporation and likely an affiliate or parent of Phillips 66 within the new structure, is acting as the guarantor for the Senior Notes. The guarantee becomes effective upon delivery of an officers' certificate to the trustee.