By Nathan Slaughter, Energy & Income

ConocoPhillips (COP) plans to split the exploration and production (E&P) and refining and marketing segments into two stand-alone public companies.

Every two shares of COP will get you one share in the new Phillips 66. This upcoming spin-off, expected in the first half of next year, is likely to unlock shareholder value, and create two distinct market leaders in the process.

The company has also unveiled some aggressive investments on the horizon. Specifically, it has earmarked $15.5 billion in capital expenditures for the upcoming year.

That's a big budget (even for what will be the nation's largest pure-play E&P company), and a 15% increase from the $13.5 billion that was put to work this year.

Once the downstream refining and marketing business is cut loose, it would free up more cash to plow into exploration and production. Management has now given us a precise dollar figure.

About $1.2 billion of next year's outlays will be spent on maintenance to keep refineries running smoothly. But the remaining 90% will be dedicated to growth projects to help stimulate oil & gas production.

Much of that will be invested overseas, most notably on a major liquefied natural gas (LNG) venture in Australia. But the lion's share will stay in North America, where the company is taking aim on high-return shale plays such as the Bakken and Eagle Ford formations.

As these upstream investments take root, Conoco's oil production in the lower 48 states alone is expected to rise by 50% (from 400,000 barrels a day to 600,000) through 2015 -- at higher margins per barrel.

Those sales (along with continued divestitures of non-core assets) will pave the way for massive stock buybacks.

ConocoPhillips has repurchased 155 million shares this year and retired more than 15% of its total outstanding shares since 2010.

Now, management is promising to fund another $10 billion in repurchases during the next couple years, which could take as much as 10% of shares outstanding off the market.

Action to Take --> This means profits (and dividend distributions) will soon stretch much further on a per-share basis. The time is right to add COP to our model portfolio.

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