Conoco acquisition fails to impress

News of ConocoPhillips’ $36bn acquisition of Burlington Resources has met with a chorus of dismay from investors and analysts alike.

News of ConocoPhillips' $36bn acquisition of Burlington Resources has met with a chorus of dismay from investors and analysts alike.

Conoco's chief, Jim Mulva, is squandering his oil wealth like a Saudi oil Sheik, say Rob Cox and Alex Fak on Breakingviews.com. Conoco is paying $18 per barrel of oil equivalent (BoE) for Burlington's stated reserves. That's more than twice what Occidental paid for Vintage's reserves and much more than Chevron paid for Unocal's. Moreover, it's almost three times the valuation investors put on Conoco's own reserves. "The oil company would have done better to have bought back its stock." Mark Flannery of CSFB agrees, pointing out in a note that "Burlington brings greater size to Conoco at an unacceptable cost". The cost to shareholders has already been significant: Conoco's share price fell 10% after the announcement.

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