600 North Dairy Ashford Road
Our role is to find and develop oil and natural gas, to manufacture a wide range of petroleum products, and to transport and market them through a variety of channels. We do this in a superior way, and by doing so serve our customers very well. We benefit from being an integral part of Du Pont and strive in everything we do to achieve the broader corporate vision of a great global company through people.
Conoco Inc. is a fully integrated and broadly based oil and gas company, involved in all aspects of the petroleum business on an international scale. Since its acquisition by Du Pont in 1981, Conoco has moved toward a renewed concentration on petroleum, as well as specialty petroleum and commodity products that play an integral part in Du Pont's other industrial operations. Upstream operations mainly located in North America, the North Sea, Dubai, and Indonesia produce more than 430,000 barrels of crude oil and 1.3 billion cubic feet of gas per day. Downstream operations process about 700,000 barrels of crude oil and other feedstock each day at four refineries in the United States, one in the United Kingdom, and one in Germany in which Conoco holds a 25 percent stake. Conoco's marketing operations include more than 7,000 retail outlets in the United States, Europe, and the Asia-Pacific region selling petroleum products under the Conoco, Jet, and Seca brand names. The company's transportation assets include eight oceangoing tankers and full or part-ownership in 8,000 miles of pipelines. Conoco is also the worldwide leader in supplying graphite coke to the steel industry. Conoco is Du Pont's largest subsidiary, accounting for about 42 percent of the parent company's annual revenues.
Early History as Continental Oil
Conoco's earliest predecessor, Continental Oil & Transportation Company (CO&T), was founded in Ogden, Utah, in 1875 by Isaac Elder Blake to transport petroleum products from the East Coast for sale in Utah, Idaho, Montana, and Nevada. Operations were later expanded to include Denver and San Francisco, and in 1877 the company was reincorporated in California.
Blake's pioneering use of railroad tank cars to transport oil contributed to CO&T's quick success. By the early 1880s, CO&T was sending modest shipments to Mexico, Canada, the Hawaiian islands, the Samoan islands, and Japan. In the western United States it was competing with Standard Oil.
In 1884 CO&T agreed to become a Standard affiliate. The following year CO&T merged with Standard's Rocky Mountain operations, and the company was reincorporated in Colorado as the Continental Oil Company. Blake was named president of the new concern, and headquarters were established in Denver. Continental continued to function much as CO&T had, although operations were consolidated with Standard's in Colorado, New Mexico, Wyoming, Montana, and Utah.
Continental products were purchased from Standard and other providers in the East and included kerosene refined for lamp oil, lubricating oils, heavy oil for heating fuel, and paraffin used in candlemaking. In 1888 Continental eliminated the need for transporting products from the East Coast by acquiring a minority interest in United Oil Company with production and refining interests in Colorado.
In 1893 Blake resigned, having become bogged down in personal debt due to heavy investments in railroads and other ventures. For the next 14 years, Henry Morgan Tilford served as president. By 1900, Continental was heavily involved in the marketing of kerosene, although its product line had been expanded to include lamps, cooking stoves, ovens, and a variety of household and industrial oils.
Continental continued to grow in its own market under Tilford but did not venture outside of the Rocky Mountain area, where it became the Standard affiliate most closely resembling a monopoly. In 1906 Continental took over Standard bulk stations in Idaho and Montana, and by the end of the year controlled better than 98 percent of the western market.
In 1907 Continental purchased the Denver office building that housed its sixth-floor headquarters and renamed it the Continental Oil Building. That same year, Edward T. Wilson, who had worked his way up from junior clerk, was named president.
In 1911 the U.S. Supreme Court ordered Standard Oil to divest some of its holdings. Two years later Continental Oil Company became one of 34 independent oil companies formed as a result of the court's antitrust ruling. Continental tapped into the growing market for automobile gasoline in 1914 and built its first service station. Two years later Continental bought out United Oil and officially entered the oil production business.
During World War I Continental worked under the direction of the oil division of the U.S. Fuel Administration, producing airplane fuel for pioneer aircraft and training planes. In 1919 the company adopted a new trademark, a circular emblem with a soldier standing below the word Conoco.
In 1924 C. E. Strong, who had worked his way up through the Continental accounting department, was elected president and chief executive officer. Continental became a fully integrated oil company later that year when it merged with Mutual Oil Company, owning assets in production, refining, and distribution.
By 1926 Continental's assets topped $80 million, including 530 miles of pipeline, six refineries, and marketing operations ranging through 15 states. That year, sales surpassed $50 million for the first time. The following year the company moved into its new $1 million Denver headquarters, and S. H. Keoughan, a former president of Mutual Oil, was named president and chief executive officer of Continental.
In 1929 Continental merged with Marland Oil Company. The Marland Oil Company had been incorporated in 1920 to combine assets of the Marland Refining Company and Kay County Gas Company, all under the direction of Ernest Whitworth Marland. E. W. Marland, a Pittsburgh attorney turned oil wildcatter, had come to Oklahoma in 1908 and a year later discovered oil on Indian burial grounds near Ponca City. Marland later assembled a staff of geologists who led him to one strike after another, while his young companies paced development of the Oklahoma oil industry and the new group of independent oil concerns. Marland's interests in exploration extended outside of Oklahoma, leaving him in need of additional financing. In 1923, that financing approached Marland when John Pierpont Morgan of J.P. Morgan & Co. offered to become Marland Oil's banker. E. W. Marland agreed and sold Morgan $90 million in company stock.
By 1926 the company owned or controlled 5,000 tank cars emblazoned with Marland Oil's red triangle, operated more than 600 service stations in the Midwest, and was marketing products in every state as well as in 17 foreign countries. Employees shared in the success, receiving high salaries, free medical and dental care, and company loans to buy homes. In 1926 Marland negotiated the right to explore for oil in Canada on land concessions owned by the Hudson's Bay Company of Canada.
However, while Marland had expanded rapidly, so had its liabilities, which had grown to more than $8 million by the end of the year. Marland blamed the company's increasing liabilities on Morgan's bankers, who had forced him to sell oil to Standard, vetoed pipeline plans, and stymied expansion during the mid-1920s. By 1928 those bankers had gained increasing power on the company's board. During an executive committee meeting that year Marland was informed that he would be replaced as president by Dan Moran, former vice-president of the Texas Company. Marland was offered the chairmanship of the company and a pension but was told he would have to leave Ponca City. Marland promptly resigned and left the oil industry altogether shortly thereafter. He was later elected Oklahoma governor and became instrumental in leasing state capital grounds for oil production.
In January 1929 Marland Oil acquired the Prudential Refining Company with a large refinery in Baltimore, Maryland. In June of that year Morgan bankers fostered a merger agreement between Marland Oil and Continental, under which Marland agreed to purchase Continental while the Continental name would be retained. Moran was named president and chief executive officer, Edward Wilson chairman of the board, and Keoughan chairman of the executive committee.
Shortly after the new Continental moved its headquarters from Denver to Ponca City in 1929, the stock market crashed with the company holding a $43 million debt load. During the first full year of the ensuing Depression, Continental lost nearly $11 million. While losses were mounting that year, Moran devised a scheme for a pipeline that would run from Ponca City to Chicago and Minnesota and greatly reduce transportation costs. A partnership was formed called the Great Lakes Pipe Line Company, and Continental subscribed to a 31 percent stake.
The 1930s and 1940s
In 1932 Continental entered the Midwest through the acquisition of 119 service stations and 43 bulk plants. Meanwhile an emphasis on research resulted in the development of new products, which included Germ Processed Motor Oil and Bronze Gasoline, touted as a high-performance fuel. To reduce company debt, Moran focused the company's attention on domestic operations. In 1933 the Sealand Petroleum Company in the United Kingdom, formed seven years earlier by Marland, was sold and the following year Hudson's Bay operations were shut down. Continental also withdrew from northeastern states but maintained production at the Baltimore refinery to serve southern markets. By 1937 Continental had eliminated its debt load, and in December of that year 5,000 bonus checks worth a total of $770,000 were awarded to employees.
During the late 1930s Continental expanded its pipeline system by purchasing majority interests in the Rocky Mountain Pipe Line Company and the Crude Oil Pipe Line Company. Refinery operations were expanded in 1941 and a new $4.5 million refinery was opened in Lake Charles, Louisiana. In June of that year, Continental introduced its new lubricant, Conoco Nth Motor Oil, to meet the demand for heavy fuel oils.
During World War II the U.S. government constructed a 100-octane refinery in Ponca City, and Continental's vice-president of manufacturing, Walter Miller, was named to supervise operations. The plant went online in mid-1943 and began producing high-octane jet gasoline. Following the war, Continental focused on areas in which it was fully integrated, namely Texas, Colorado, Oklahoma, Illinois, Kansas, Missouri, and Iowa.
In 1946 a new era of oil exploration was launched when Continental joined with three other oil companies in developing Laniscot I, the world's pioneer offshore exploration boat. The following year Dan Moran resigned because of ill health, and Leonard F. McCollum left Standard Oil Company of New Jersey to become president and chief executive officer at Continental. McCollum's aggressive exploration program soon led to the 1947 acquisition of oil leases for 209,000 acres in the Gulf of Mexico. Hudson's Bay Oil and Gas Company (HBOG) was reactivated about the same time, after oil was discovered in Alberta, Canada. In 1948 Continental joined Ohio Oil Company and Amerada Petroleum Corporation in forming Conorada Petroleum Corporation to explore for oil outside North America.
Continental also initiated a refinery modernization and construction program in the late 1940s, leading to enlarged refineries in Denver and Ponca City and a new refinery in Billings, Montana. Meanwhile, production efforts in Kansas were reduced as the company focused on Texas, Kansas, California, and Wyoming.
Exploration and Diversificationin the 1950s and 1960s
Continental celebrated its 75th anniversary in 1950 by breaking ground for a $2.25 million Ponca City research laboratory and relocating its headquarters from Ponca City to Houston. The company also broke into new business fields during the early 1950s. A synthetic detergent plant was acquired, and Continental Oil Black Company was formed to produce carbon black, used in the production of synthetic rubber.
In 1952 Continental acquired interests in 1,390 miles of pipeline, including the new 1,080-mile line from Wyoming oil fields to an important refining center in Wood River, Illinois. Four years later offshore exploration was revolutionized when Continental, along with the Union, Shell, and Superior oil groups, launched CUSS I, the world's first drill ship.
Continental's interest in overseas exploration grew throughout the decade, and by 1957 the company held exploratory concessions for nearly 50 million acres outside the United States, including land in Libya, Guatemala, and Italian Somaliland. Hudson's Bay Oil and Gas Company (HBOG), by 1957, had rights to a total of 700,000 acres in Egypt, Libya, Somalia, British Somaliland, Venezuela, and Guatemala.
During the 1960s, Continental purchased several independent gasoline station chains in Europe to provide a market for its newly found Libyan oil. Included in a string of acquisitions were SOPI, with more than 400 stations in West Germany and Austria; Jet Petroleum, Ltd., with more than 400 stations in the United Kingdom; SECA, with stations in Belgium; Arrow Oil Company, with 70 retail outlets in eastern Ireland; and the U.K. Georg Von Opel chain of 155 stations in West Germany.
Continental also strengthened its European presence in the carbon black market by establishing production facilities in Italy, the Netherlands, France, and Japan. The company's presence in North and South America also grew with an expansion of its Montana pipeline system and purchase of the Douglas Oil Company, operating three southern California refineries and more than 300 stations. Continental opened a new refinery near the Atlantic Ocean entrance to the Panama Canal and acquired Mexofina, S.A. de C.V., with exploratory rights in Mexico.
Annual sales topped $1 billion in 1962 and diversification moves followed. In 1963, Continental acquired American Agricultural Chemical Company (Agrico), a major manufacturer of plant foods and agricultural chemicals. About the same time Continental became involved in the production of biodegradable detergents and plastic piping.
In 1964 Andrew W. Tarkington, a former executive vice-president, was named president of Continental. McCollum remained chief executive and was named to the additional post of chairman. By that time, Continental was pumping more crude out of Libya, Canada, Venezuela, and Iran than it was producing in the United States, with Libyan oil having almost by itself made Continental an international dealer. Exploration and production teams also were operating in the Middle East, Mexico, Panama, Argentina, Pakistan, New Guinea, and Australia. With its worldwide presence growing, Continental moved its headquarters from Houston to New York that same year.
In 1966 Continental diversified into minerals and acquired Consolidation Coal Company (Consol), the second largest U.S. coal-producing company. During the late 1960s expansion and diversification continued as the company purchased the Australia pesticides distributor Amalgamated Chemicals, Ltd. as well as Vinyl Maid, Inc., a manufacturer of polyvinyl chloride containers. Continental also entered joint agreements to build a calcined-petroleum coke plant in Japan, a polyvinyl chloride resin plant in the United Kingdom, and Spain's first biodegradable detergent plant.
In 1967 Tarkington assumed the additional duties of chief executive officer while McCollum remained chairman. During the next two years Tarkington spearheaded consolidation efforts and established new policies for gauging financial risks. John G. McLean, another former executive vice-president, was named president and chief executive officer in 1969, replacing Tarkington, who was named vice-chairman of the board.
New Leadership and a New Name in the 1970s
McLean reorganized administrative levels and created a management team with four divisions--Western Hemisphere petroleum, Eastern Hemisphere petroleum, Conoco Chemicals, and Consol. In 1972 he replaced McCollum, who had retired as company chairman. Under McLean's leadership, the company established a policy of focusing on its new mix of natural resources, including coal, uranium, and copper. During the early 1970s the company sold its plastic pipe manufacturing business and interest in Amalgamated Chemicals and closed a petroleum sulfonates plant. Continental stepped up its mineral production during the same period, entering joint ventures to develop uranium prospects in Texas and France. With the onset of the 1973 oil crisis, Continental accelerated its search for oil outside the Middle East, and during the next two years made significant discoveries in the North Sea.
In March 1974, Howard W. Blauvelt was named to fill the post of president, which McLean had left vacant when he assumed the chairmanship. Within two months, however, the responsibilities of chairman and chief executive were also thrust upon Blauvelt, following the untimely death of McLean. During this time of upheaval, John Kircher was named president.
Conoco Coal Development Company, a wholly owned subsidiary, was formed in 1974 to coordinate research and long-range planning for the production of synthetic fuels made from coal. That same year the company signed a ten-year contract for oil and gas exploration for over two million acres in Egypt.
In 1979 Continental changed its name to Conoco Inc. That year, Ralph E. Bailey was named president, replacing Kircher who remained deputy chairman, a post to which he had been appointed in 1975.
During the late 1970s Conoco entered three major joint ventures, combining with Monsanto Company to manufacture ethylene and related products, with Du Pont in a $130 million oil and natural gas exploratory program, and with Wyoming Mineral Corporation, a subsidiary of Westinghouse Electric Corporation, to develop a Conoco uranium deposit in New Mexico. Blauvelt resigned as chairman and chief executive officer in 1979 and was replaced by Bailey in both positions.
The 1980s: Takeover by Du Pont
Conoco began the 1980s as the ninth largest oil company in the United States with $2 billion dedicated to capital outlays. In 1980 Conoco purchased Globe Petroleum Ltd., with 220 retail outlets in the United Kingdom, and entered into a second exploration venture with Du Pont. A facility expansion program was also initiated early in the decade, including a $2 billion upgrade of the Lake Charles refinery, additions to the Lake Charles coke-manufacturing plant, and construction of a Lake Charles detergent chemical plant as well as a St. Louis-based lube-oil plant. In 1981 the company announced it would build a new world headquarters in Houston for its petroleum and chemical operations.
In May 1981, Dome Petroleum, Ltd. of Canada offered to buy 13 percent of Conoco's common stock for $910 million, in hopes of exchanging the stock for Conoco's 53 percent stake in HBOG. A month later a deal was consummated giving Dome a 20 percent interest in Conoco, which was traded along with $245 million for Conoco's stake in HBOG. The transaction sent a message that Conoco was ripe for a takeover, and a bidding war for the company ensued with Seagram Company and Mobil Corporation participating. With threats of a hostile takeover looming, Conoco went in search of a white knight--a friendly acquirer--and found Du Pont a willing participant. By August 1981, Du Pont had acquired Conoco for $6.8 billion in the most expensive merger to that date.
Following the takeover, Du Pont consolidated Conoco operations and began selling the oil company's interests to reduce a $3.9 billion debt incurred in the purchase. During the first three years after the takeover Du Pont closed down some oil and chemical facilities and sold better than $1.5 billion in Conoco assets, including Continental Carbon Company and a variety of chemical, mineral, oil and gas assets. Conoco Chemicals was absorbed by Du Pont's larger petrochemicals departments. Du Pont also began utilizing some of Conoco's former chemical assets, including its ethylene business. By 1983 Du Pont had increased its output of ethylene, a petrochemical feedstock used in making polyethylene, from 850 million pounds annually to three billion pounds.
In 1983 Constantine S. Nicandros was named president of Conoco. In the following years, Conoco stepped up offshore exploration and production efforts in the Gulf of Mexico and the North Sea. In 1984 the company began operating the world's first tension leg well platform for deep-sea oil exploration in the North Sea, with capabilities of producing oil under 2,000 feet of water.
During the mid-1980s, Conoco also expanded its oil and gas activities in Canada and Egypt. In January 1985 Conoco joined four other oil companies in a $312 million partnership to produce oil in Alaska. However, two years later Conoco pulled out of the partnership, after the price of crude oil dropped.
In 1987 Bailey retired as chairman and his position was eliminated. Edgar S. Woolard was named president of Du Pont, with duties to include overseeing Conoco operations. At the same time, Nicandros assumed the additional duties of chief executive officer.
During the late 1980s Conoco made significant oil discoveries in Norway, the United Kingdom, Indonesia, Ecuador, and the United States. In 1989, after a two-year lapse, Conoco reopened its oil fields in Alaska. That same year 64 service stations were purchased in the Denver area in an effort to boost name recognition and sales by branded outlets. In an early 1990 joint venture, Conoco and Calcined Coke Corporation formed a company called Venco to enhance Conoco's ability to meet Du Pont's needs for specialty coke products.
The 1990s and Beyond
Nicandros would head Conoco from the early 1990s until 1996, a period in which he became widely known both within and outside the international oil industry because of his commitment to the environment and his company's penchant for prospecting in high-risk areas. In 1990 he issued his "nine points for environmental excellence" program as a guide for Conoco's future development in an "earth-friendly" manner. Hailed by environmentalists and anticipative of future U.S. Congressional mandates, the program's most striking commitment was to construct only doubled-hulled tankers in the future in order to prevent oil spills at sea. Industry experts estimated that adherence to the program cost Conoco $50 million a year.
Conoco began the 1990s with exploration teams in 21 countries, and under Nicandros the company aggressively sought new areas of exploration in the early 1990s. With the huge oil fields of North America and the North Sea continuing to be drained, Conoco more than any other oil company reached out to high-risk areas as a long-term strategy of keeping its reserves at an acceptable level. In 1991 the company formed a joint venture in Russia--in that country's largest oil investment by a foreign country to date&mdashø drill oil in the Russian Arctic. By fall 1994, the Ardalin oil complex began producing crude oil out of its field of 110 million barrels of recoverable oil beneath the frozen tundra. Conoco also began to see results in 1995 from its 18 percent interest in a $3.9 billion project in the Norwegian Sea, which involved a 288,000-ton tension leg platform installed at a water depth of 1,150 feet through a combined 30 million person-hours of work over a four-year period.
However, a few of the company's exploration efforts met with some challenges. In March 1995, for example, after three years of negotiations, a $1 billion deal to produce oil in Iran was blocked by the Clinton administration as part of increasingly hostile relations between the United States and Iran. Moreover, in January 1996 a consortium led by Conoco proposed to develop a natural gas field in northern Mexico, a country highly protective of its petroleum industry. Two months later Conoco signed a deal with the state oil company of Taiwan to explore for oil and gas in the Taiwan Strait, an area that had recently been the site of Chinese war games. In April Vietnam's state-owned Petro-Vietnam awarded Conoco rights to develop three million acres of the South China Sea, an area whose sovereignty was in dispute between Vietnam, China, and other southeast Asian countries. China, which had already granted rights to an overlapping area to Denver-based Crestone Energy Corp., issued a warning to Conoco not to proceed, with the company responding that it would leave the issue up to the involved governments.
Meanwhile, also in Asia, Conoco began in 1993 to develop refining and marketing operations as a start toward capturing part of the region's fast-growing petroleum market. That year, the company began by building gas stations in Thailand under the Jet brand name, with a goal of having 260 retail outlets in place by the year 2004. Then in 1994 Conoco entered a joint venture (holding a 40 percent stake) with Petronas, the national oil company in Malaysia, and Statoil of Norway to construct a 100,000 barrel per day, $1.1 billion refinery in Malaysia. This represented Conoco's largest investment outside the United States. Future plans were to spend more than $2.5 billion in Malaysia through 2005, with plans for more than 200 retail outlets in the country. Overall, from 1996 to 1998, Conoco planned to spend ten to 15 percent of its $2.5 billion capital spending budget in Asia.
Conoco's overall operating results stagnated during the early 1990s under the pressure of heavy competition. The after-tax operating income as a percentage of sales mark of 6.7 percent in 1990 represented the high level through 1996. A three-year restructuring program that Nicandros initiated helped the company post better results than it would have otherwise. In addition to its exploration efforts and entrance into Asia, neither of which helped in the short term, Nicandros also sought new areas for growth within the broader energy sector, notably the establishment of a Conoco Power business unit which would pursue projects in the worldwide electrical power market. One possible shorter-term aid to company profitability arose in the talks between Conoco and Phillips Petroleum Co. started in late 1995 regarding the combination of the companies' domestic marketing, refinery, and pipeline operations in a 50-50 venture. This would have created the sixth-largest refiner of crude oil in the United States and the second-largest chain of U.S. gas stations, but talks broke off in June 1996 when the two sides could not reach agreement on "significant commercial issues."
During the 14 years since the Du Pont takeover, the parent company's shareholders had not always benefited from the Conoco acquisition, according to some observers. Although about 42 percent of Du Pont's revenues were derived from Conoco operations, Conoco contributed only about 17 percent of after-tax operating income to Du Pont's overall total. Following the takeover, Du Pont had been left with Seagram holding 24 percent of its common stock and a seat on Du Pont's board. In the spring of 1995, Du Pont paid $8.8 billion to repurchase all the shares Seagram then held, leaving a huge debt load behind. At the same time Du Pont announced plans to sell $650 million in Conoco assets. Speculation then arose about the possibility that Du Pont would divest itself of Conoco, in particular after Jack Krol replaced Edgar Woolard as chief executive of the parent company.
It was in these difficult and uncertain circumstances that Archie W. Dunham succeeded Nicandros as Conoco chairman, president, and chief executive at the beginning of 1996. Dunham's term at the helm was certain to be a critical one for the future of a troubled giant of the oil industry.
Principal Subsidiaries: Conoco Asia Pacific Ltd.; Conoco Canada Limited; Conoco Europe Gas Limited; Conoco Exploration Production Europe Limited; Conoco France Hydrocarbures; Conoco Indonesia Inc.; Conoco International Petroleum Company (Russia); Conoco Middle East Ltd.; Conoco Norway Inc.; Conoco Overseas Oil Company; Conoco Trinidad Inc.; Conoco (U.K.) Limited; Continental Europe Energy Company; Continental Netherlands Oil Company; Dubai Petroleum Company; DuPont Nigeria Ltd.; DuPont Services B.V. (The Netherlands); Conoco Power; Conoco Asia Pacific Sdn. Bhd.; Conoco International Singapore; Conoco Ireland Limited; Conoco Jet Malaysia Sdn. Bhd.; Conoco Limited (United Kingdom); Conoco Mineraloel GmbH (Germany); Conoco Thailand Ltd.; DuPont Scandinavia AB (Sweden); Société Europé-ne Des Carburants (SECA, Belgium).