Oct. 29--ConocoPhillips CEO James Mulva signaled a dramatic shift in course for the nation's third-largest oil company Wednesday, saying that after years of bulking up through acquisitions, it is now focused on being a smaller, leaner business that takes better care of its shareholders.

"Some will say what we're doing essentially is that we're shrinking to grow," Mulva said during a conference call to discuss the company's quarterly earnings. "That would be a fair assessment."

But the change is necessary in light of the global recession and the difficulty of accessing new oil and gas reserves around the globe, coupled with the massive costs of extracting them, he said.

At the heart of the strategy is a sweeping plan announced this month to sell $10 billion in company assets, the first details of which were revealed Wednesday.

Under the two-year program, the company is considering selling the bottom 10 percent of its producing assets in North America and some natural gas properties in the North Sea, Mulva said. It may also unload pipelines and terminals in the U.S. and its 9 percent stake in Syncrude, a joint venture to develop oil sands in Canada, as well as other assets.

The company intends to retain a "strategic relationship" with Russia's Lukoil, in which it owns a 20 percent stake, and has no immediate plans to sell oil refineries in the U.S. or abroad, Mulva said. However, it could look to sell less sophisticated and less competitive refineries beginning in 2012, once the struggling refining business improves and valuations for facilities rise, he said.

Delivering better returns

Mulva's comments underscore challenges facing major oil and gas companies and may even call into question the bigger-is-better, integrated business model that has prevailed in the oil industry for decades.

International oil companies including Exxon Mobil Corp., Chevron Corp. and BP have vastly increased their size in recent decades to expand their global reach, reduce costs and diversify asset bases as it's gotten harder to find and develop reserves.

ConocoPhillips, Houston's largest public company, with $225 billion in revenue last year, has followed the same course. In 2006, it purchased Burlington Resources for $35.6 billion in a deal that expanded its natural gas holdings in the U.S. but was criticized for being too costly and loading the company with too much debt. In the last quarter of 2008, the company had to write down $34 billion in assets stemming mostly from the Burlington deal.