Decoupling and deconstruction

One of my pet theories is that the increasing level of infrastructure (security, transport, capital, ...) will decrease the size of companies. This summer it appears that the oil and gas industry is experiencing a trend of spin-offs and splitting of companies, without even regulator involvement. First Marathon Oil spun off Marathon Petroleum and in today's Financial Times ConocoPhillips announced its intention of splitting itself into two. Interestingly enough after yesterday's announcement the markets rewarded ConocoPhillips with and increase of 7.5% in valuation. So whereas nuclear scientifically fusion energy seems to often fail to materialize in the corporate world, fission certainly seems to have worked in this case.

But of course some caution should be applied before we dive into the theory of infrastructures and company sizes. Without being an expert on oil and gas, my guess is that the industry in itself is in the midst of a turmoil and from an investor perspective I would be careful as my common sense says that peak oil will have most likely already happened and that the industry, at least in terms of oil, will is already declining and buy-and-hold strategy will at this point would only result in tears in a matter of years. But another driver may be increased competition in declining markets and the inability for a large organism to adapt rapidly enough, further held back by the immense amount of effort wasted in internal communication and other functions which spin out of control as a function of company size.

It will, however, be interesting to keep an eye on what is happening and whether or not the benefits of these fission exercises will be sustainable, or whether the markets merely rewarded the companies for making any type of effort.