ConocoPhillips: The Last Snapshot of Them Together

You may have occasionally watched television programs wherein homes are essentially torn apart, only to be returned to a substantially upgraded condition. Following ConocoPhillips (NYS: COP) , the (for now) third-largest U.S.-based integrated oil company, seems somewhat akin to walking into one of TV's housing reclamation projects.

The company, which sits behindExxonMobil (NYS: XOM) and Chevron (NYS: CVX) in the domestic size hierarchy, is itself undergoing a total renovation. Most significantly, on May 1, the company will follow the path trod last year by Marathon Oil (NYS: MRO) , which separated its upstream and downstream operations into two separate companies. Next week, ConocoPhillips will become solely an exploration and production operation, while its refining, midstream, and chemicals units will be jettisoned to become Phillips 66, perhaps a new name to youthful Fools, but a comfortable old shoe to those of us somewhat longer in the tooth.

Apples and oranges
On that basis, and because it's been actively selling upstream operations as well, Conoco's results for the first quarter -- it was the first integrated company out of the shoot -- hardly represent an apples-to-apples comparison versus a year ago. (You'll please excuse my metaphor mixture.) Nevertheless, in the final quarter before it undergoes its split, the company earned $2.94 billion, or $2.27 per share, versus $3.03 billion, or $2.09 a share, for the comparable quarter of 2011.

Backing out one-time items, of which there were a bagful, the per-share line in the most recent quarter came in at $2.02, a $0.06 per-share miss vis-a-vis analysts' expectations. But accurate modeling for a company undergoing such an extensive metamorphosis is difficult at best.

Along with its planned spinoff, ConocoPhillips has been selling upstream assets, having unloaded about $20 billion worth of properties thus far, including its investment in Russian oil giant Lukoil. However, since it envisions selling another $8 billion to $10 billion of additional properties during the next year, it's hardly retracted its "For Sale" sign.

Will the sale take off?
On the downstream end, the company has pushed back the deadline for the sale of its refinery in Trainer, Pa., apparently as a result of strong interest in the property. You may have encountered media reports that Delta Air Lines (NYS: DAL) is interested in the facility. I suppose that the completion of such a transaction would permit Delta to substantiate a claim to being the world's first thoroughly integrated airline.

Upstream production at the company slid by 65,000 barrels of oil equivalent per day to 1.64 million daily equivalent barrels. Correcting for the properties that have been sold, along with the results of a suspension of activities at Peng Lai, China, yields a figure 9,000 BOE higher than the year-ago average. Also among the positives, Libyan operations continue to be restarted, with average daily production from the country hitting 40,000 barrels by quarter's end.

And while, like some other U.S. natural gas producers, the company has reduced its output in the face of prices in the doldrums, it continues to be active in the liquids-rich Eagle Ford of South Texas, the Bakken of the north central U.S., and the Permian Basin of West Texas. Internationally, in addition to its Canadian oil sands operations and the aforementioned Libyan return toward normalcy, the company is maintaining an active upstream pace in the North Sea, Malaysia, Angola, the deepwater Gulf of Mexico, and offshore Australia.

At the same time, the company has exercised the co-option for its 70% operating interest on a 5,000-acre position in Poland. It thereby is joining the expanding crowd of companies attempting to ring success from shale operations in that country.

Foolish bottom line
To add a little color on plans for the independent Phillips 66 operation, Greg Garland, who will serve as chairman and CEO of the company, said, "Phillips 66's strategic priorities are enhancing returns on capital, delivering profitable growth, and growing shareholder distributions. We are focused on operation excellence and building a great organization to execute our strategic plans."

My inclination, given the amazing makeovers of houses I've witnessed on the telly, is to observe ConocoPhillips' continuing restructuring and renovation carefully. I'd urge Fools with a taste for energy investments to do the same, beginning by adding the company to your individual version of My Watchlist.

At the time thisarticle was published Fool contributorDavid Lee Smithdoesn't have financial interests in any of the companies named above.Motley Fool newsletter serviceshave recommended buying shares of ExxonMobil and Chevron. The Motley Fool has adisclosure policy.
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