ConocoPhillips (COP) unveiled plans on Thursday to break itself into two separate publicly-traded companies, sending shares of the third-largest U.S. energy company soaring more than 8%.

Under the break-up plans, Conoco would spin off its refining and marketing businesses to shareholders via a tax-free transaction. That would leave the existing company with its pure-play exploration and production businesses.

Like ExxonMobil (XOM) and Chevron (CVX), the two largest U.S. energy companies, Conoco had married its oil producing and refining operations into an integrated business. However, the companies refining operations have been hurt by easing demand and excess capacity.

Seeing the changing dynamics, a number of smaller energy companies have split up in recent years, including Marathon Oil (NYSE:MRO in January.

The Conoco spinoff, which doesnt require a shareholder vote, is expected to be completed in the first half of 2012. Once the move is finalized, James Mulva plans to retire as chairman and CEO.

We have concluded that two independent companies focused on their respective industries will be better positioned to pursue their individually focused business strategies, Mulva said in a statement. Both companies will continue to benefit from the size and scale of their significant high-quality asset bases and free cash flow generation, allowing them to invest and create shareholder value in a changing environment.

Shareholders cheered the breakup plans, bidding Conoco 7.25% higher to $79.79 Thursday morning. That leaves the stock up 9.3% so far in 2011 and 41% from a year ago.

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