ConocoPhillips is splitting into two companies

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I was always under the impression that the majors had a business model that focused on growing the downstream refining and upstream exploration aspects of their business in some proportional fashion to hedge each other against fluctuations in crude prices

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I just head several conversations with a general counsel at Chevron who is the President of one of their major companies, and she said every oil major is trying to do this, just like Marathon. Downstream is capital intensive and low margin, and that's not what they want, so every one is spinning them off. She doesn't think CVX will, but she thinks it would be a good idea and a trend that will continue.

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What I have seen from the majors is a trend to divest themselves of transportation assets (pipeline and storage). There is not much profit (in relative terms) in transportation. It is also highly regulated, and carries similar risk as the upstream and downstream parts of the business. This is an interesting move.

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Risk is completely different. MLP risk is all regulatory and volume based, the price of oil and gas have almost no effect on income whatsoever because pipeline revenue comes from contracts set years in advance, which, as you mentioned, are heavily determined by regulation. Even in a down economy, the volume demanded for energy is still rising, it just might be rising more slowly.

I'm not 100% sure what you're asking, but I think that's basically what El Paso and Kinder Morgan are. They spun off the pipelines, but retain large interests in the MLPs themselves. I'm not sure if they operate them from a management perspective or if they are shareholders though (although I think it is the latter), which affects the payment waterfall from distributed cash flow. I just started reading about MLPs last week in preparation for a job interview. Quite honestly I think it might be an undervalued sector just because of the (relatively speaking) messy tax issues, which, in reality, are very non-messy but tend to scare away most individual investors, and the regulatory restraints preventing most institutional investors from giving it more consideration.

The CVX lady did not expect that that would happen, either for them or for XOM, because of what she called "geographical synergies and the importance and strength of the brand name." She said she wished they would do it though, so I wouldn't doubt that its on the table.

They're truthfully very simplistic organizations from a financial perspective as well as an investing perspective. Honestly, there is just not that many moving parts. Google "Wachovia MLP Primer 2.0." Its like 50 pages and will give you a very solid base to work from if you want to read about them.

There is some arcane 86-reform tax law that prevent institutional investors from owning more than like 3% of an MLP. As far as I know there is no reason for this really. I think they were talking about changing the law around in 2007, but I was just sourcing whatever I could find, so I'm not sure if the did in fact change it or not. The other side of it is, since it MLPs are pass throughs, if you own it a tax deferred account, you have to realize the income as it comes through the K-1, so it messes up the whole, you know, "deferral" part, which I think scares off a lot of the general investing public. So they get squeezed on both ends of the investing spectrum.

As far as the volume thing for gas pipes, I fully admit I am not well versed in that, I literally just started reading about this stuff on Monday.

Generally, the literature I read said that people incorrectly associate MLP revenue with energy prices, when in fact their revenues are more or less completely uncorrelated to energy prices. The stock prices might be to some degree, but not because of actual financial consideration, but simply perception. Thus far everything I have read is all encompassing, so I haven't gotten to the point of differentiating specific MLPs, just the asset class as a whole. Are you saying that for gas pipes that's not necessarily so? When you say capacity, I feel like that's the same thing as volume, when you say reservation charges, I feel like that's the same thing as fixed contracts that are irrespective of energy prices. If that's not the case please elaborate, I'm trying to pick up some more info on it. Also, do you disagree that they are, generally speaking, relatively simplistic financially, or am I underestimating them? The main sources of revenue and expense seem very straightforward to me, by and large. I don't want to divulge the firm, its publicly traded but its not big. Give me an email an I'll let you know though.

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Chairman and EO, Jim Mulva, plans to retire

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Sure it's not Delores?

LINK ][LINK]

FYI, lady I know is leading this case. As another poster said on this board to me the other day, a good person to have on your side. As much as I generally dislike lawyers, absent those that I know personally that are great friends and all around good peoples, they are crafty mofos and can move mountains if/when need be. The legal implications of this could be huge. Who says the US has lost clout in this world, we're about to tell an entire country to gtfo.

eta: I do love the way lawyers talk/PR, stuff is great.

Your typical firm transportation agreement runs 1+ year, but your major shippers on the pipe are going to have contracts that run 5-10 years. A firm contract simply provides the shipper with the ability to ship XXX dth per day/month on the system. The shipper in turn pays a fee just to "reserve" that space on the system, regardless if actual gas is moving.

Like you said, these contracts are long-term and fixed, so you aren't going to see an immediate impact from the movement in the price of gas. Over the long-term though energy prices and energy demand will seep into these contracts as they expire and shippers push for lower rates or may not renew at all. You DO see more direct correlation with price/demand on your interruptable, storage, and park-and-loan contracts though. PAL revenues have almost completely dried up due to flat price spreads and storage contracts are sitting idle since everyone is sitting on their gas.

What is your email fizz?

Exxon's chemical business does well profit wise if I remember correctly. The chemical business is closely integrated with the refining side, so it would be interesting.