Conoco's Split Reflects Sector's Move Toward 'Pure Plays': Strategist

ConocoPhillips decision to separate into two stand-alone businesses is a model energy businesses are embracing, Phillip Weiss, energy analyst at Argus Research, told CNBC Thursday. Companies in the sector are ascribing less value to having fully integrated businesses as more investors search for "pure plays," he said.

“They used to see there was a sort of cash flow for their production business and there’s a way to help them gain access to resource, but I think that’s changed. You have different investors looking to buy shares of (exploration) and (production) companies versus refining companies,” Weiss said.

Weiss told CNBC that, on a production basis, "ConocoPhillips is larger than Occidental. If you look at global, its refining business is larger than Valero."

He notes, however, that Conoco's refining business "is stronger than Valeros. On the other side, on the (exploration) and (production) business... I would say I like both of them."

Weiss said the spin-off hasn't changed his price target of $95 per share on Conoco. "I don’t think there is any reason the price target shouldn’t remain, given that the stock is $80 right now, there still is more room,” he said.

Weiss said he believes that the separation could extend to other parts of the sector as well, “where people are looking for more and more pure plays,” as opposed to these more integrated entities.

“You have Chevron moving in this direction, it’s gotten rid of its refineries.” BP and Shell have also done away with their refinery operations, Weiss said.

Weiss told CNBC, “In a lot of ways Chevron is the best candidate, only because its refining business is a little bit weaker than some of its peers.”

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Disclosures:

Phillip Weiss owns shares of the companies mentioned above.

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