ConocoPhillips

AMERICAN INTERNATIONAL UNIVERSITY-BANGLADESH

Strategic Management

Prof. Dr. Mahmudul Hasan

Faculty of Business Administration

American International University-Bangladesh (AIUB)

Submitted By:

1. Mostafiz, Saddam Ibne

ID: 12-96230-3

2. Das, Shrijon

ID: 12-96059-3

3. Alam Md. Abdul Muhit Mustaba

ID: 13-96512-1

4. Chakrabarty, Suvash Chandra

ID: 12-96054-3

5. Mahmud

ID: 12-95665-2

Executive Summary

ConocoPhillips Co. is an American multinational energy corporation with its headquarters located in the Energy Corridor district of Houston, Texas in the United States. It is the world's largest independent pure-play exploration & production company and is also one of the Fortune 500 companies. ConocoPhillips was created through the merger of Conoco Inc. and the Phillips Petroleum Co. on August 30, 2002 and was the fifth largest integrated oil company until spinning off its downstream assets to Phillips. ConocoPhillips is a major player in today’s energy market. The Company produces and supplies a wide range of products for a variety of industries around the world. Their mission is to supply high-quality energy products to our customers, to do business with integrity and responsibility, to be a car­ing employer and an efficiency leader, and to achieve long-term and balanced growth of the Company.

ConocoPhillips strategic goal is to become a large international player, with a regionally diversified asset portfolio over the entire value chain, seeking active involvement in regional development projects, and maintaining a high degree of social and environmental responsibility.

The company has four core activities:

• Petroleum exploration and production.
• Natural gas gathering, processing and marketing, including a 50 percent interest in DCP Midstream, LLC.
• Petroleum refining, marketing, supply and transportation.
• Chemicals and plastics production and distribution through a 50 percent interest in Chevron Phillips Chemical Co. LLC.
• In addition, the company is investing in several emerging businesses that provide current and future growth opportunities. These efforts include development of integrated power generation and technology projects to support Exploration and Production (E&P) and Refining and Marketing (R&M)

Table of Contents

Description	Page
1.       Definition of Strategy	3
1.       Most Strategic Management Models	4
2.      Company Profile	5-8
3.      PEST/STEER/PESTEL Analysis, SWOT analysis &  Porter’s Five Forces analysis	9-13
5.      SWAN – Analysis & TOWS – Matrix	14-16
6.      Value Chain Analysis	16-18
7.      ViSA – MODEL & SMARTER – Model,	18-21
8.     BCG Chart	21-22
9.      PURE – Objectives & GREAT Model	22-24
10.  Market Analysis including Market Segmentation	25-27
11.   EFE matrix of ConocoPhillips	28
12.  CPM Matrix	29
13.  QSPM Analysis	30-31
14.  Financial Analysis	31-37
15.   Competitor Analysis	37
16.  Breakeven Analysis	37-39
17.   KSF Analysis (Industry Key Success Factors)	39-40
18.  Strategy Evaluation and Contingency Plan	40-42
19.  Recommendation	43-44
20. Conclusion	44
21. References	45

1.    Definition of Strategy  

·          Strategy:

"Strategy is the direction and scope of an organization over the long-term: which achieves advantage for the organization through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfill stakeholder expectations".

·          Important definition of Strategic Management theory:

·            Strategic Management (Theory: 2000 – 2010)

Strategic Management can be defined as

Ø  The art and science of formulating,

Ø  Implementing, and

Ø  Evaluating cross-functional decisions that enable an organization to achieve its objectives.

Ø  Strategic Management focuses on integrating management, marketing, finance/accounting, production/operation, research and development (R&D) and computer information systems to achieve organizational success.

·            Strategic Management (Theory: 2011 – 2015 ±)

Strategic management involves strategy development, which is comprised of five stages:

·         Discovery,

·         Strategic thinking,

·         Strategic planning,

·         Strategy roll-out,

·         Strategy tune-up/adjustment.

·         ConocoPhillips Business Strategy:

ConocoPhillips strategy is to maintain a core portfolio of low risk, high return development programs associated with legacy assets, coupled with a portfolio of development opportunities which offer high margin growth, such a s unconventional place, deep water and arctic drilling and liquefied natural gas (LNG).

2.  Most Strategic Management Models:

It includes:

• PESTEL analysis
• STEER Analysis
• Five Forces Model

·         SWOT analysis

• Blue Ocean Strategies:
• ConocoPhillips is the result of a decade-long study of 150 strategic moves spanning more than 30 industries.
• ConocoPhillips is the simultaneous pursuit of differentiation and low cost.
• The aim of ConocoPhillips is not to out-perform the competition in the existing industry, but to create new market space or a blue ocean, thereby making the competition irrelevant.
• Open innovation:

Open innovation is a paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology.

• Seven S Model:

·         Business Environment/ Strategy:  CP has higher competition from national oil company, while operation government law is maintain with high ethical standards, operation as for lower effective tax rate, expect to invest about $ 16 billion of capital annually over the next several years.

·         Shared Value: The mission of ConocoPhillips is that- We exist to power civilization. CP SPIRIT values set the tone for how we behave withal our stakeholders, internally and externally.

·         Structure: ConocoPhillips is one of the largest industries in petroleum sector. ConocoPhillips have 29800 efficient employees. They have several departments those are Human Resource Department Marketing, Software Engineering, Hardware Engineering, Project, Finance and Monitoring department etc.

·         Staff: CP hire talent employee when they recruit they consider knowledge, skills and experience, they consider their employee as an asset. Sometimes employees take longer time to take effective decision.

·         System/ Infrastructure:  CP offer attractive salary, pension plans, informs estimated retirement date, provides health care services.

·         Skills:  when they recruit they consider knowledge, skills and experience.

·         Style: they always focus on production quality, innovation as well as teamwork for better performance of the company.

1.    Company Profile

ConocoPhillips Co. is an American multinational energy corporation with its headquarters located in the Energy Corridor district of Houston, Texas in the United States. It is the world's largest independent pure-play exploration & production company and is also one of the Fortune 500 companies. ConocoPhillips was created through the merger of Conoco Inc. and the Phillips Petroleum Co. on August 30, 2002 and was the fifth largest integrated oil company until spinning off its downstream assets to Phillips. ConocoPhillips is a major player in today’s energy market. The Company produces and supplies a wide range of products for a variety of industries around the world. Their mission is to supply high-quality energy products to our customers, to do business with integrity and responsibility, to be a car­ing employer and an efficiency leader, and to achieve long-term and balanced growth of the Company.

ConocoPhillips strategic goal is to become a large international player, with a regionally diversified asset portfolio over the entire value chain, seeking active involvement in regional development projects, and maintaining a high degree of social and environmental responsibility. [1]

The company has four core activities:

• Petroleum exploration and production.
• Natural gas gathering, processing and marketing, including a 50 percent interest in DCP Midstream, LLC.
• Petroleum refining, marketing, supply and transportation.
• Chemicals and plastics production and distribution through a 50 percent interest in Chevron Phillips Chemical Co. LLC.
• In addition, the company is investing in several emerging businesses that provide current and future growth opportunities. These efforts include development of integrated power generation and technology projects to support Exploration and Production (E&P) and Refining and Marketing (R&M) [3]

·            Vision Statement:

The vision of the Global Water Sustainability Center (GWSC) is to become the center of excellence for key water-related technologies particularly those applicable to the petroleum and municipal sectors.

·            Mission Statement:

Our primary mission is to develop innovative ways to treat and reuse by-product water from oil and gas production and refining operations.

ConocoPhillips Spirit values set the tone for how we behave with all our stakeholders, internally and externally. They are shared by everyone is our organization and recognized thought-out the industry. They distinguish us from our competitors. They are a source of pride. 

·            Organ gram:

1.    PEST/STEER/PESTEL Analysis of ConocoPhillips

POLITICAL       Activity remain in Politically stable countries.       Procedures as for lower effective tax rate.	ECONOMICAL       Inflation badly impacted in energy market.       Economic growth is forecast to drive energy demand in the Asian countries to acquire reserves and grow production.
SOCIAL/SOCIO-CULTURAL       Always concern about public health issues.       They are answerable for their actions to the society.	TECHNOLOGICAL       Practices current technology for operation and procedures.       Maintains research and development activities advance.
ECOLOGICAL/ENVIRONMENTAL       Environmental supervisions are immense while operating in abroad.       Hydraulic fracturing pollutes the environment.	LEGAL/REGULATORY       GHG reduction policies could significantly increase costs, reduce demand for fossil energy.       The ultimate financial impact arising from air emission standard, water quality standard and stricter fuel regulations.

SWOT analysis of ConocoPhillips

STRENGTHS       The company stands as the second largest oil company in the United States.       ConocoPhillips has a healthy relationship with the Russian government by offering LUKOIL expertise in the oil industry.	WEAKNESSES       ConocoPhillips is the volatility in oil price.       Decline in oil production.
OPPORTUNITIES       Growth opportunities in emerging businesses.       China and Brazil continue to grow and develop they will have a growing demand for petroleum.	THREATS       ConocoPhillips faces significant amounts of competitive pressure from companies such as Exxon-Mobil, Chevron, Royal Dutch and British Petroleum.       The world discovers a renewable source of energy and produces it on a mass scale, this breakthrough could jeopardize the entire oil industry.

Porter’s Five Forces analysis

·          Industry Analysis Using Porters Five Forces:

The competitive force in the industry was evaluated by employing Porter’s Five Forces Model. Porter’s model measures competitive force through the means of; barriers to entry, bargaining power of suppliers, bargaining power of buyers, threat of substitutes, and degree of rivalry. These forces are used to measure opportunity with respect to the Integrated Oil and Gas environment Conoco Phillips engages in.

·          Barriers to Entry: High

The threat of new businesses emerging within the integrated petroleum industry is quite high for several reasons. First of all, start up costs for a new company would be astronomical. In 2009, Conoco Phillips spent nearly $143 billion on their total cost of goods. Furthermore, Exploration and Production costs are capital intensive. Conoco Phillips implemented a capital program funding for 2010 of $11.2 billion of which 86% for support to Exploration and Production, and 12% allocated to Refining. A new startup company would have to have the finances or access to finances in order to compete with the “super majors” such as Conoco Phillips.

·          Bargaining Power of Suppliers: Medium

Suppliers to vertically integrated industries include services from companies such as Schlumberger and Halliburton for technical hardware. Since there is a limited amount of suppliers who provide technical equipment and the demand for technical supplies is high, means the suppliers wield some leverage regarding technical hardware and support.

·          Bargaining Power of Buyers: Low

Buyers of oil and gas products range from individual users to large corporations and governments. With the demand of fuel products extremely high at a current global consumption rate of 31 billion barrels of crude annually, and the price of fuel being driven by market factors oil industries have little control of demonstrates that customers have little bargaining power when it comes to the price of fuel. Until there is a proven fuel substitute, customers will continue to pay for the high cost of oil.

·          Threat of Substitutes: Low

As of yet, there are very few substitutes for oil. Although technology is moving extremely fast in the area of renewable energy, no ready replacement for oil has been discovered as of yet. Bio-fuel is offering some competition to the traditional means of energy, however, bio-fuel, so far at the least is no real threat to the oil market or industry. Consequently, there is no immediate threat of substitution.

·          Degree of Rivalry: Medium

The vertically integrated oil and gas industry has many competitors which are spread out domestically, and internationally implying a high degree of rivalry. The degree of rivalry is medium and not high since most of the companies already have a specific market to sell to, and really do not have a definitive method to differentiate oil or brand name from competitors, other than brand loyalty and price. Oil companies try to differentiate and market their oil with additives, however, these benefits are difficult to quantify by the customer and thus render little advantage. Until peak oil is a major concern, the degree of rivalry will be medium.

·          Five Forces Summary

The oil and gas industry is an attractive business opportunity. At this moment in time, and for the next decade as the world demands energy via crude oil, the vertically integrated oil companies will be able to meet the demand. With the barriers to entry and substitution risk remaining high there is little room in the near future for the threat of competition or substitution. As Conoco Phillips business model is discussed, it will become clear that Conoco Phillips is in a nice position to gain advantage in relation to their competition.

2.  SWAN – Analysis

·          S - Strength

·         Big brand name and strong market position 

·         High level marketing 

·         It is a fortune 500 company

·         Approximately 17500 employees’ worldwide largest Exploration and Production (Upstream) company.

·          W - Weakness

·         Cost of environmental hazards 

·         Declining oil reserves and production

·         Accused of Pollution

·          A - Achievement

They are the world’s largest independent exploration and production company, based on proved reserves and production of liquids and natural gas. They explore for, develop, and produce crude oil and natural gas globally. A commitment to safety, operating excellence and environmental stewardship guide their operations in 30 countries. ConocoPhillips is the world's largest independent Exploration and Production (E&P) company based on production and proven reserves, with oil and natural gas operations and activities on almost every continent. It is their mission to power civilization, and they will achieve this with an entrepreneurial spirit and unmatched passion for innovation.

·          N - Next step

Their scientists and engineers use technology to maximize production of existing resources and to develop areas that were previously thought to be unrecoverable. They also expect 3% to 5% compound annual margin growth over the next 5 years at flat prices, as they divest lower-margin assets and shift their production mix to higher-value products. They will improve their water treatment system by Global Water Sustainability Center (GWSC).

TOWS - Matrix

Technique used in strategy formulation for combining

           - External analysis (EFE Matrix)

·         Opportunities:

§  Increasing fuel/oil prices 

§  Increasing natural gas market 

§  More oil well discoveries 

§  Increasing demand for gas and refined products

·         Threats:

§  Government regulations 

§  Pollution guidelines

§  High labor costs

§  Hybrid cars not using Fuel.

               - Internal analysis (CPM Matrix)

·         Strength:

o   Big brand name and strong market position 

o   High level marketing 

o   It is a fortune 500 company

o   Approximately 17500 employees’ worldwide largest Exploration and production (Upstream) company.

·         Weakness:

o   Cost of environmental hazards 

o   Declining oil reserves and production

o   Accused of Pollution

3.  Value Chain Analysis

ConocoPhillips Analysis across The Oil and Gas Value Chain is an essential source for data, analysis and strategic insight into ConocoPhillips. The report provides key information relating to oil and gas assets of the company and financial, SWOT and value chain analysis of the company. The report examines company’s business structure and operations, history and products, and provides an analysis of its key revenue lines. It inspects the company’s strategy, both in terms of its value chain positioning and strategic strengths and weaknesses.

·           Scope:

·            Provides historical production or capacity data on ConocoPhillips’s oil and gas assets across value chain.

·            Analyses and forecasts output for major oil and gas assets to 2020.

·            Reports oil and gas exploration assets for each country including operator and equity details for major oil and gas assets of ConocoPhillips

·            Critical analysis of ConocoPhillips’s strengths, weaknesses opportunities and threats and positioning on the value chain.

·            Provides summary analysis of key revenue lines and strategy.

·            Details on ConocoPhillips’s history, key executives, business description, locations and subsidiaries as well as a list of products and services and the latest available company statement.

·            Product and brand updates, strategy changes, financial events.

·            Latest mergers and acquisitions, partnerships or financings of ConocoPhillips including debt, equity or venture finance.

·            Reasons to buy:

·                  Research your competitor’s business structure, strategy and prospects.

·                  Assess your competitor’s major energy assets and their historic and forecast performance.

·                  Identify and assess potential corporate and asset investment opportunities

·                  Support sales activities by understanding your customers businesses better.

·                  Qualify prospective partners and suppliers.

·                  Obtain up to date company information

2.   ViSA - MODEL

·          VI- Vision

Their vision to be the E&P Company of choice for all stakeholders by pioneering a new standard of excellence. Their sprit value consists of safety, people, integrity, responsibility, innovation & team work. Their vision & values are essential building blocks in the continued success of ConocoPhillips. 

·          S-Strategy

Identify and pursue new opportunities to provide energy to China and some region too, primarily targeting the natural gas business. Leverage our global capabilities and knowledge sharing opportunities. Develop skilled and motivated people to realize this growth.

·          A-Action plan

They will expand their major project as they can. Individual employee development goals will be included in annual goal setting. Identify existing and develop new water management best practices and technologies to reduce the environmental impact of their water footprint.

They have several major projects in development in Europe, Malaysia, Canada, including the new Jasmine and Clair fields in the United Kingdom and Ekofisk South and Elfish II expansion projects in Norway. These will significantly boost their production by 2017, and reflect ongoing growth opportunities from a region where they have operated for more than 40 years. They plan to achieve 3% to 5% compound annual production growth, as well as growth in reserves, through drilling programs in their legacy assets and sanctioned major projects globally.

SMARTER - Model

·          Encompassing - Evaluating

From 2002-2014 they face many obstacles to form this position. Their history illustrates a relentless commitment to safety, a passion for innovation and an ability to adapt to a dynamic marketplace. From the earliest discoveries of oil and the revolutionary improvements that followed to the technological advances that altered the course of history, ConocoPhillips has a long history of improving life for people and communities. ​​​ They value relationships with suppliers and other companies with whom they conduct business and are committed to providing prompt, accurate service. Their strategy for the Procure-to-Pay Process (P2P) automates and streamlines procedures to improve operational efficiency and cost effectiveness. ConocoPhillips’s obligations are for the long-term, not just for this quarter or this year. These obligations demand that they adhere to the highest professional, industry and personal ethics. They will build on their history of integrity so that people will have an abiding trust in the company and their employees, they will know they can count on them. They aim to create and maintain inclusive, honest and mutually beneficial relationships with their stakeholders - those individuals and groups who are impacted by their business or who have the ability to impact their business. These relationships are viewed as tangible, valuable assets critical to their business success. For clarification Key performance metrics are updated every year. All reported HSE data are based on operated assets only. Environmental data are represented as 100 percent ownership interest regardless of actual share owned by ConocoPhillips. ConocoPhillips is committed to protecting the environment that they share. They implement high environmental standards in order to ensure that their actions today will not only provide the energy needed to drive economic growth and social well-being, but also secure a stable and healthy environment for tomorrow. ConocoPhillips’ approach to sustainable development integrates principles, commitments, positions, action plans, performance indicators, engagement, results and reporting. It is the expectation that the market share objectives, growth rate set for ConocoPhillips Net will be achieved by their time limit. Considering the amount of financial resources and manpower expertise they at ConocoPhillips Net do believe that objectives set are realistic.

·          Reviewed - Rewarding

From 2002 to now they walk a long way. By walk they get some valuable reward. They are the world’s largest independent exploration and production company, based on proved reserves and production of liquids and natural gas. They explore for, develop, and produce crude oil and natural gas globally. A commitment to safety, operating excellence and environmental stewardship guide their operations in 30 countries. Their global giving is focused primarily on education, health and safety and natural resources. They also support arts, community infrastructure, social services and disaster relief.  This commitment to the communities is core to their Values. In 2013, ConocoPhillips was honored as one of Corporate Responsibility Magazine’s 100 Best Corporate Citizens globally. ConocoPhillips was honored in 2012 for their sustainable development performance and success.

3.  BCG Chart

·           Analysis:

In the BCG matrix, we show ConocoPhillips is STAR. ConocoPhillips has high market share in a growing market. In 2012, ConocoPhillips spent $15.7 billion on their capital program, including approximately $800 million related to discontinued operations. Progress continued on their asset disposition program, which helps improve their portfolio, positions the company for future growth and enhances financial flexibility to fund their growth programs. They also repurchased 80 million shares of ConocoPhillips stock for $5.1 billion and maintained their pre-separation dividend rate of $2.64 per share, a yield of 4.6 percent on their year-end share price.

2.  PURE - Objectives

·          P - Positive

There are many positive sides for ConocoPhillips. Such as, they are the world’s largest independent exploration and production company, based on proved reserves and production of liquids and natural gas. their philosophy – “Their work is never so important that they cannot take the time to do it safely” – was adopted in the late 1930s and has served a constant reminder of the importance of protecting the health and well-being of their people, their partners and the communities where they work each day.​​​​They always try to build beneficial relationship with their customers, partners, and stakeholders etc. They always responsible for their employee and team work.

·           U - Understood

They work in a truly integrated way to find and produce oil and natural gas globally. Technical capabilities, asset quality and scale, and financial strength set us apart - they are unmatched among independent exploration and production companies. They explore for, produce, transport and market crude oil, natural gas, natural gas liquids, liquefied natural gas and bitumen on a worldwide basis - energy that plays a foundational role in enabling global economic development and human progress. Their styles are different from others. That’s why they are in leading position.

·          R - Recorded

Before setting their operation in any country they conduct a market survey. They save those market survey result for doing the business properly. Their regular activity and operation are recorded properly by them very carefully. 

·          E - Ethical

They do more than create jobs and pay taxes in the communities where they operate, they listen. Their dedication as a community partner is evidenced in the local events they sponsor. It is also apparent in the conversations held between their local community liaisons and stakeholders. They don’t do any harmful work which is dangerous for environment. They invest much money for research.

GREAT - Model

·          G - Goal

By demonstrating visible and active leadership in communities where they operate, ConocoPhillips creates and maintains inclusive, honest, and mutually-beneficial relationships with those who are impacted by their business or who have the ability to impact their business. Their goal is to create and maintain long-term relationships. They are committed to conducting their business in a manner that promotes a healthy environment while thoughtfully preparing for the future by pursuing lower carbon energy sources. They adhere to robust operating standards and procedures and have a proven track record of responsible operations. They use technological advances to minimize our environmental footprint; resource development, safety and environmental stewardship can and must be achieved together.

·          R - Results

For their good journey, now they are in leading position and the world’s largest independent exploration and Production Company, based on proved reserves and production of liquids and natural gas. They are operating in 30 countries.

·          E - Expectations

 Their scientists and engineers use technology to maximize production of existing resources and to develop areas that were previously thought to be unrecoverable.  They also expect 3% to 5% compound annual margin growth over the next 5 years at flat prices, as they divest lower-margin assets and shift their production mix to higher-value products. They will improve their water treatment system by Global Water Sustainability Center (GWSC). They have several major projects in development in Europe, Malaysia, Canada, including the new Jasmine and Clair fields in the United Kingdom and Ekofisk South and Elfish II expansion projects in Norway. These will significantly boost their production by 2017, and reflect ongoing growth opportunities from a region where we have operated for more than 40 years. They plan to achieve 3% to 5% compound annual production growth, as well as growth in reserves, through drilling programs in their legacy assets and sanctioned major projects globally.

·          A - Accountabilities

Each of the company’s various businesses are responsible for integrating sustainability issues into day-to-day operations, project development and decision-making, and are held accountable through an annual performance management process. Members of senior management have final responsibility for developing corporate strategy, reporting company performance, and assisting the businesses with implementation of sustainability.

·          T - Timing

ConocoPhillips is one of the successful independent exploration and Production Company, based on proved reserves and production of liquids and natural gas. They always maintain good time management system. They have talent workforce those are responsible to do the work effectively and efficiently in timely. Good time management is their one of the key success factor.

3.  Market Analysis including Market Segmentation

Refining and Marketing (R&M) is the segment of Conoco Phillips that centers on refining crude oil into gasoline, kerosene, diesel, and other types of fuels and feedstock previously mentioned. Conoco Phillips is the second largest refiner operating in the United States processing crude oil at a capacity nearly 2 million barrels daily (MMBD) domestically, and the world’s fourth largest nongovernment controlled refiner processing almost 2.7 MMBD internationally. Furthermore, transportation, purchasing and distribution, and the development of downstream technology all fall under this category. Refining and Marketing accounts for 24% of Conoco Phillips total assets at the year end of 2012. Due to high fuel prices in 2012, Conoco Phillips posted only $37 of operating income from the R&M segment, which is less than 1% of the total net income at year end demonstrating how capital intensive the refining process is.[6] Marketing includes retail with outlets throughout Europe and North America, and wholesale segmentation. Retail outlets consist of both company and dealer owned establishments. Transportation of products to Conoco Phillips customers consists of company- owned and common carrier pipelines, a tanker fleet, terminals, truck and railcars. These allow ConocoPhillips a wide variety of transportation options and help maintain an extensive supply chain. As a leader in the oil industry, ConocoPhillips deals in the sale of both crude and processed oil and fuel products in both the retail and wholesale markets. At the year end of 2012, R&M marketed gasoline, diesel and aviation fuel through approximately 9,900 retail and wholesale outlets globally. The majority of these sites utilize the Phillips 66, Conoco, or 76 brands in the United States, and JET brand in Europe. ConocoPhillips’ wholesale operations utilized a network of marketers operating approximately 7,680 outlets that provide a refined product such as gasoline, and diesel from company-owned refineries. Conoco Phillips also buys and sells petroleum products in the spot market. Furthermore, ConocoPhillips produces products which are marketed on both a branded and unbranded basis. In addition to gasoline and diesel, ConocoPhillips also produces and markets aviation gasoline. At the end of the 2012, aviation gasoline and jet fuel were sold through independent marketers at approximately 710 Phillips 66 branded locations in the United States. In 2006, Conoco Phillips decided to divest 830 U.S. company-owned and company-operated retail, and dealer-operated outlets to new or existing wholesale marketers. Of the 830 sites, nearly 100 dealer-operated sites remain for sale in 2010. Some quick statistics on Conoco Phillips 2012 year end R&M segment include:

Ø  12 U.S. refineries

Ø  5 international refineries in 4 countries

Ø  Approximately 8,500 U.S. marketing outlets

Ø  Approximately 1,400 International marketing outlets

Ø  U.S. crude processing capability 2 MMBD

Ø  International crude processing 0.7 MMBD

Ø  Assets $37 billion

Ø  Employees 11,700

Ø  Key products

o   Gasoline, diesel and jet fuel, LPGs, base oils, lubricants, solvents, aviation gasoline, and premium fuel grade petroleum cokes [5]

 ·         Exploration and Production (E&P) — this segment primarily explores for, produces, transports and markets crude oil, bitumen, natural gas, liquefied natural gas (LNG) and natural gas liquids on a worldwide basis.

·         Midstream— this segment gathers, processes and markets natural gas produced by ConocoPhillips and others, and fractionates and markets natural gas liquids, predominantly in the United States and Trinidad.

·         Refining and Marketing (R&M)— This segment purchases, refines, markets and transports crude oil and petroleum products, mainly in the United States, Europe and Asia.

·         LUKOIL Investment— this segment consists of ConocoPhillips’s past investment in the ordinary shares of OAO LUKOIL, an international, integrated oil and gas company headquartered in Russia.

·         Chemicals— this segment manufactures and markets petrochemicals and plastics on a worldwide basis. The Chemicals segment consists of 50 percent equity investment in Chevron Phillips Chemical Company LLC (CPChem).

·         Emerging Businesses— this segment represents the investment in new technologies or businesses outside the normal scope of operations.

 1.    EFE matrix of ConocoPhillips

SERIAL	EXTERNAL STRATEGIC FATORS	WEIGHT	ConocoPhillips
NO			RATING	WEIGHTED SCORE
OPPORTUNITIEES
1	Increasing fuel/oil prices	0.10	4	0.40
2	Increasing natural gas market	0.20	3	0.60
3		0.15	2	0.30
	More oil well discoveries
4	Increasing demand for gas and refined products	0.05	3	0.15
Threats
1	Government regulations	0.15	3	0.45
2	Pollution guidelines	0.10	2	0.20
3	High labor costs	0.10	4	0.40
4	Hybrid cars not using Fuel	0.05	2	0.10
	4= the response is superior 3=  the response is above average 2= the response is average 1= the response is poor		Rating
	TOTAL	1.00		2.60

1.    CPM Matrix of oil production industries:

1.    QSPM Analysis

QSPM (Quantitative Strategic Planning Matrix) for ConocoPhillips Company

1.    Financial Analysis

Operating Profit Margin                       (all amount in Million Dollar)

	Dec 31, 2013	Dec 31, 2012	Dec 31, 2011
Income from continuing operations before interest expense and income taxes	15,058	16,132	23,973
Sales and other operating revenues	54,413	57,967	244,813

Operating profit margin = 100 × Income from continuing operations before interest expense and income taxes ÷ Sales and other operating revenues
= 100 × 15,058 ÷ 54,413 = 27.67%

Interpratation: ConocoPhillips’s operating profit margin improved from 2011 to 2012 but then slightly deteriorated from 2012 to 2013. [7]

1.    Competitor Analysis

The major international oil and gas companies have a market capitalization of approximately $100 billion or greater. Saudi Aramco is the largest Oil and Gas Company in the entire industry; however, the largest publically owned firms and competitor of Conoco Phillips are Exxon Mobil, Chevron, Royal Dutch Shell PLC, BP PLC and Total SA. All of the companies market their products globally, and are usually some of the largest and recognized businesses on the planet.

Supply and demand is the main driver for profits for oil and gas companies. Price fluctuations affect different industries within oil and gas production and marketing.

Conoco Phillips competes with private, public and state-owned companies in all facets of the E&P business. Some of our competitors are larger and have greater resources. Each of their segments is highly competitive, with no single competitor, or small group of competitors, dominating.

Conoco Phillips compete with numerous other companies in the industry, including state-owned companies, to locate and obtain new sources of supply and to produce oil, bitumen, natural gas liquids and natural gas in an efficient, cost-effective manner. Based on statistics published of the Oil and Gas Journal, they had the third-largest worldwide liquids and natural gas reserves for U.S.-based oil and gas companies. They deliver their production into the worldwide commodity markets. Principal methods of competing include geological, geophysical and engineering research and technology; experience and expertise; economic analysis in connection with portfolio management; and safely operating oil and gas producing properties.

1.    Strategy Evaluation and Contingency Plan

The strategic goal of ConocoPhillips to become a large, international player, possessing a regionally diversified portfolio of assets across the entire value chain, actively participating in regional development, and with a high degree of social and environmental responsibility.

1.    Conclusion

As of March 4, 2011 Conoco Phillips current share price is $79.98. In relation to the intrinsic values calculated in the discounted cash flow analysis compared to the current market price demonstrates Conoco Phillips is undervalued by $17.08 per share using FCFF, and $0.32 using FCFE. This is an attractive buy with promise given Conoco Phillips long-term strategy coupled with the Company’s history of positive growth regarding revenues and dividends.

Furthermore, the year to date return for the energy sector of the CFASP portfolio as of March 04, 2011 is 8.2%, while the S&P 500 energy sector’s year to date return in 15.2% exhibiting the energy sector of the CFASP is underperforming by 7% compared to the S&P500. The S&P 500 is heavily weighted in vertically integrated oil companies with 26.81% of the energy sector weight comprised of Exxon Mobil, and 13.35% of Chevron91. In order to increase the value of the energy sector it is recommended to sell the CFASP portfolio’s interest in Enbridge Inc. and use the proceeds to purchase Conoco Phillips. The addition of Conoco Phillips will add growth and provide more stability to the energy sector, since vertically integrated oil companies are able to profit with different operating segments throughout the cyclical nature of oil prices. In conclusion, with the price of oil expected to continue to rise throughout the year, the share price of ConocoPhillips will increase this year 2014.