Conoco and Phillips, 1st May 2012

On 1st May 2012, ConocoPhillips spun off its refining, transportation, and chemicals divisions. The upstream exploration and production divisions will remain with Conoco (NYSE:COP) and the downstream and chemicals divisions have become Phillips 66 (NYSE:PSX). It is anticipated that the price of Phillips 66 will drop after 1st May 2012. This decline is expected because of the low profit margin of the refining business and that Phillips 66 is expected to have a market capitalization of about $22 billion, which will cause some of the large institutional investors to divest themselves of the Phillips 66 shares. Also, a number of investors may not want to hold companies that are in the refining business. Once the market clears the weaker investors and the first financial statements arrive from both COP and PSX, it is thought that the price of these two companies will rise substantially. This situation creates a special opportunity for those willing and able to purchase at the correct time.

In addition, the dividend yield for COP is expected to be 4.5% based upon a price of $54.52 and the dividend yield for PSX is expected to be 2.24% based upon a share price of $35.68. With the future price of petroleum, and petroleum products, set to rise for the foreseeable future, one might reasonably expect that each of these two companies will afford a total return of between 8% and 10% per year.

Table 1: Closing Prices for Conoco and Phillips 66. “WTI” is the spot price for West Texas Intermediate Crude at Cushing, Oklahoma, as reported by the Energy Information Administration.
Date   COP PSX CVX MPC MRO TOT E WTI
30 Apr   54.52 35.68 106.56 41.61 29.34 48.11 44.56 104.86
01 May   56.51 32.76 108.27 41.21 30.19 48.42 44.76 106.17
02 May   54.59 32.00 105.69 41.49 28.88 47.62 44.10 105.25
03 May   54.26 31.39 105.99 40.36 27.65 47.39 43.78 102.56
04 May   53.17 30.16 103.72 40.36 26.80 46.51 42.70 98.49
07 May   53.35 29.35 103.31 39.66 26.32 47.05 43.57 97.86
08 May   54.31 30.10 102.84 38.52 26.17 45.83 43.37 97.13
09 May   53.47 32.49 101.78 38.21 26.44 44.65 42.73 96.80
10 May   54.22 32.48 103.36 38.20 26.98 45.44 42.78 97.10
11 May   53.50 31.83 102.69 37.21 26.18 44.99 43.22 96.03
14 May   52.93 31.32 101.94 35.82 25.45 44.16 42.15 94.75
15 May   52.53 31.67 100.90 35.30 24.81 43.63 41.04 93.97
16 May   52.32 32.10 100.10 35.27 24.51 44.31 40.70 92.76
17 May   51.19 31.26 100.14 34.87 24.16 43.71 40.29 92.56
18 May   50.82 31.38 98.46 34.92 24.13 43.83 40.27 91.48
21 May   51.71 32.19 99.69 35.96 24.52 44.53 39.66 92.57
22 May   51.67 31.63 99.32 35.93 24.33 44.39 40.14 91.44
23 May   52.09 31.41 99.00 35.42 24.52 44.03 39.19 89.40
24 May   52.14 31.13 100.06 35.80 24.88 43.76 39.26 90.36
25 May   52.11 31.30 98.86 36.88 25.29 43.89 39.36 90.64
29 May   53.27 31.01 100.24 37.23 25.52 43.98 39.21 90.75
30 May   52.04 30.44 97.63 36.58 24.86 42.83 37.92 87.79
31 May   52.16 30.03 98.31 36.07 24.91 43.07 38.54 86.52
01 Jun   51.19 29.92 96.41 35.24 23.89 42.17 38.11 83.17
04 Jun   51.30 29.53 96.58 34.28 23.84 42.60 38.66 83.95
05 Jun   51.87 29.90 96.49 35.20 23.94 42.89 38.84 84.31
06 Jun   53.58 31.53 99.80 36.32 24.96 43.87 40.23 85.05
07 Jun   53.81 31.83 100.93 37.24 25.00 43.64 40.19 84.78
08 Jun   53.97 32.12 100.84 37.76 25.03 43.55 40.04 84.08
11 Jun   53.88 32.60 99.91 37.88 24.42 43.22 39.54 82.58
12 Jun   54.71 33.49 100.74 39.07 24.76 43.60 40.00 83.35
13 Jun   54.10 32.77 100.13 38.76 24.47 42.82 39.86 82.56
14 Jun   54.68 33.53 101.92 39.40 24.61 43.39 40.60 83.83
15 Jun   55.46 34.90 104.33 40.15 24.87 44.34 41.24 84.03
18 Jun   55.07 33.86 103.46 39.84 24.21 43.83 40.42 83.26
19 Jun   55.64 33.86 104.06 40.87 24.81 44.73 41.66 83.99
20 Jun   55.44 34.66 103.63 42.80 24.69 44.77 41.67 81.06
21 Jun   52.76 33.48 100.02 41.33 23.32 43.30 40.56 77.91
22 Jun   53.41 34.16 100.44 41.79 23.74 43.50 40.72 79.33
25 Jun   52.96 32.87 99.08 41.34 23.69 42.36 39.12 78.76
26 Jun   53.64 32.58 100.95 42.55 24.00 42.14 39.12 79.34
27 Jun   54.45 31.89 102.57 42.52 24.40 42.65 39.80 80.27
28 Jun   54.53 32.31 103.46 44.19 24.66 42.69 40.14 77.72
29 Jun   55.88 33.24 105.50 44.92 25.57 44.95 42.52 85.04
02 Jul   55.73 34.00 105.86 46.07 25.30 45.50 43.10 83.72
03 Jul   56.41 34.24 107.37 45.36 26.01 46.54 44.26 87.74
05 Jul   55.28 33.80 106.03 44.20 25.47 45.14 42.67 87.11
06 Jul   54.75 33.37 105.07 44.51 24.96 44.57 41.54 84.37
09 Jul   54.33 33.25 104.46 44.39 24.55 44.49 41.86 85.93
10 Jul   53.48 32.68 103.88 43.99 24.09 43.89 41.28 83.92
11 Jul   54.36 33.48 104.85 44.39 24.64 44.22 41.55 85.88
12 Jul   53.98 33.01 105.03 43.43 24.27 43.65 41.22 86.02
13 Jul   54.98 34.94 106.01 44.95 24.87 44.18 41.43 87.15
16 Jul   55.46 34.10 106.78 44.85 25.58 44.24 41.22 88.41
17 Jul   56.28 36.69 107.43 45.45 26.01 44.43 40.95 89.07
18 Jul   56.77 37.10 107.88 46.83 26.58 45.02 41.37 89.88
19 Jul   56.37 35.60 108.84 45.51 26.75 45.02 41.36 92.78
20 Jul   53.99 35.32 109.19 45.56 26.54 44.10 39.86 91.56
23 Jul   55.05 35.02 107.95 45.86 25.95 43.32 38.37 87.77
24 Jul   54.64 35.23 106.30 44.44 25.42 42.71 36.85 88.28
25 Jul   53.24 35.40 106.06 44.51 25.34 42.54 37.16 88.80
26 Jul   54.40 35.96 108.27 45.82 26.30 44.19 39.50 89.40
27 Jul   54.97 36.52 109.26 47.20 27.03 45.92 41.98 90.13
30 Jul   54.87 37.64 109.88 47.46 26.91 45.64 41.38 89.80
31 Jul   54.44 37.60 109.58 47.30 26.47 45.95 41.24 88.08
01 Aug   55.22 38.27 110.50 46.80 26.52 46.48 41.27 88.99
02 Aug   54.65 38.30 109.25 48.00 25.73 45.68 40.19 87.22
03 Aug   55.71 39.67 111.12 49.39 26.72 47.73 43.51 91.40
06 Aug   55.89 40.07 111.33 49.35 26.71 48.12 43.81 92.30
07 Aug   56.45 39.77 111.95 50.44 27.40 49.37 44.73 93.68
08 Aug   57.17 40.15 112.14 49.47 27.58 49.46 44.64 93.39
09 Aug   57.09 40.32 112.63 48.79 27.59 49.25 44.00 93.39
10 Aug   57.28 40.00 113.55 49.56 27.90 49.31 44.11 92.94
13 Aug   57.31 40.15 113.28 49.56 27.55 49.15 41.24 92.76
14 Aug   57.35 39.93 113.32 49.13 27.38 49.22 44.04 93.40
15 Aug   57.24 40.36 112.57 49.72 27.48 49.29 43.97 94.35
16 Aug   57.55 41.18 113.32 49.71 27.36 49.80 44.23 95.66
17 Aug   57.39 42.77 112.66 49.25 27.10 49.71 44.24 96.00
20 Aug   57.03 43.07 112.52 49.55 27.16 50.00 44.09 96.03
21 Aug   56.63 41.55 111.98 48.92 27.02 50.15 44.60 96.55
22 Aug   56.68 41.48 112.15 49.25 27.68 50.06 44.44 96.89
23 Aug   56.16 41.33 111.29 49.04 27.70 48.34 44.09 95.87
24 Aug   56.36 41.36 112.01 48.75 27.84 49.11 43.46 95.78
27 Aug   56.38 41.07 111.73 49.60 27.62 49.20 43.56 95.54
28 Aug   56.46 41.96 112.35 49.83 27.96 49.46 44.03 96.30
29 Aug   56.35 41.98 111.80 49.72 27.67 49.39 43.85 95.50
30 Aug   56.11 42.48 110.93 50.81 27.26 49.17 43.29 94.61
31 Aug   56.79 42.00 112.16 51.75 27.82 49.86 44.11 96.47
04 Sep   56.21 42.41 111.22 50.79 27.45 49.64 43.54 95.34
05 Sep   54.87 41.74 110.77 50.32 27.18 49.49 42.95 95.37
06 Sep   55.79 43.42 113.03 50.92 28.28 51.07 44.78 95.58
07 Sep   56.64 44.26 114.00 51.89 28.61 51.84 46.05 96.41
10 Sep   56.18 44.54 113.96 52.36 28.47 51.37 45.35 96.52
11 Sep   56.37 45.59 114.18 53.35 29.22 52.65 46.08 97.03
12 Sep   56.54 46.28 114.48 53.48 29.06 52.79 46.11 97.02
13 Sep   57.65 46.64 116.56 54.67 29.85 53.69 47.58 98.30
14 Sep   58.21 46.73 117.25 55.61 31.09 54.51 48.97 98.94
17 Sep   58.30 46.14 117.14 53.64 30.80 53.96 48.30 96.51
18 Sep   57.82 45.52 116.97 52.07 30.31 53.66 47.83 95.25
19 Sep   57.31 45.57 116.60 53.21 30.40 53.19 48.06 91.97
20 Sep   57.59 45.78 117.85 53.37 30.39 52.16 47.20 92.14
21 Sep   57.36 46.82 117.80 53.72 30.78 52.25 47.94 92.64
24 Sep   57.96 46.74 117.78 53.45 30.34 52.35 46.57 91.68
25 Sep   57.41 45.98 116.93 53.65 30.03 52.00 45.81 91.07
26 Sep   57.01 45.53 116.30 53.00 29.57 51.04 45.06 89.92
27 Sep   57.39 46.53 117.20 54.53 30.02 51.57 45.28 91.89
28 Sep   57.18 46.37 116.56 54.59 29.57 50.10 43.84 92.18
01 Oct   57.41 46.56 117.25 55.34 29.85 50.39 44.41 92.44
02 Oct   57.37 46.42 117.96 55.39 29.88 50.59 44.62 91.88
03 Oct   56.77 45.16 116.14 54.52 29.41 49.84 44.08 88.19
04 Oct   57.40 45.39 117.15 55.59 29.84 50.07 44.55 91.69
05 Oct   57.58 46.02 117.50 54.87 29.54 50.27 45.13 89.87
08 Oct   57.62 45.93 117.62 57.92 29.60 49.93 44.74 89.43
09 Oct   57.80 46.09 117.36 57.13 29.60 49.44 44.46 92.42
10 Oct   57.24 45.15 112.45 55.30 29.56 49.16 45.05 91.24
11 Oct   56.63 44.60 113.06 54.66 29.30 49.78 44.89 92.19
12 Oct   56.17 43.92 112.07 54.30 29.38 49.62 44.80 91.83
15 Oct   56.79 44.38 112.82 54.38 29.87 50.21 45.45 91.84
16 Oct   57.62 46.49 114.09 55.05 30.64 51.54 46.68 92.07
17 Oct   58.12 46.65 115.18 55.75 31.33 52.29 47.42 92.04
18 Oct   58.27 45.56 114.65 54.79 31.23 51.99 46.81 92.00
19 Oct   57.45 44.64 113.38 54.94 30.59 51.39 45.93 90.00
22 Oct   57.04 45.58 112.74 54.52 30.09 51.62 46.13 88.30
23 Oct   56.06 44.92 109.38 53.25 29.56 50.10 44.80 86.65
24 Oct   55.95 44.78 109.71 53.70 29.86 50.16 45.08 85.39
25 Oct   57.16 45.03 110.96 53.96 30.20 49.98 45.13 85.59
26 Oct   57.31 47.50 111.18 55.61 29.91 50.04 45.23 85.84
31 Oct   57.85 47.16 110.24 54.93 30.06 50.40 45.89 85.52
01 Nov   58.42 47.38 111.46 54.03 30.37 50.74 46.14 85.65
02 Nov   57.65 46.21 108.37 53.05 29.95 50.42 45.64 86.23
05 Nov   57.53 47.76 109.19 54.76 30.51 49.98 45.05 87.05
06 Nov   58.22 50.04 110.36 56.98 31.21 50.19 45.81 84.90
07 Nov   56.77 49.46 107.51 55.46 29.96 48.75 44.82 85.64
08 Nov   55.86 49.00 105.87 54.31 29.86 47.88 44.05 88.62
09 Nov   55.67 47.41 105.84 53.12 30.44 48.15 44.16 84.50
12 Nov   55.64 47.35 105.93 53.88 30.23 48.10 44.40 85.07
13 Nov   55.35 46.86 105.28 53.90 30.16 47.65 44.14 86.08
14 Nov   54.77 45.76 102.50 53.13 30.05 47.51 44.06 85.56
15 Nov   54.59 45.34 101.62 54.06 30.53 47.56 44.35 85.38
16 Nov   55.03 45.77 102.40 54.34 30.86 47.43 43.89 86.32
19 Nov   55.73 48.12 104.35 56.57 31.13 48.94 45.24 85.45
20 Nov   55.63 49.06 103.56 57.00 31.50 48.89 45.40 86.62
21 Nov   56.05 49.39 104.10 57.83 31.50 49.14 45.71 89.05
23 Nov   56.67 49.82 105.47 58.98 31.93 49.98 46.78 86.46
26 Nov   56.80 49.56 104.99 59.06 31.00 49.92 46.47  
27 Nov   56.18 50.06 103.38 58.59 31.04 49.07 46.04  
28 Nov   57.06 51.00 105.58 59.25 31.07 49.68 46.63  

It should not go un-noticed that between 1st May and about 23rd june 2012, the price of Chevron (NYSE: CVX) was approximately linearly related to the spot price of West Texas Intermediate Crude. During that time, the correlation coefficient was about 0.52 and the slope of the line with abscissae WTI and ordinate CVX was about 0.20. However, after 23rd June 2012 the function of the price of a share of CVX, in relation to the spot price of West Texas Intermediate Crude, was shifted to the left: this means that the price of CVX in relation to the price of WTI is higher after 23rd June than before 23rd June. This would seem to suggest that the share price for CVX has been manipulated, after 23rd June, to be artificially high with respect to the normal price of the shares.
Nathan A. Busch

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