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UNITED STATES |
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SECURITIES AND EXCHANGE COMMISSION |
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Washington, D.C. 20549 |
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SCHEDULE 14A |
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Proxy Statement Pursuant
to Section 14(a) of |
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Filed by the Registrant ý |
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Filed by a Party other than the Registrant o |
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Check the appropriate box: |
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
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Kerr-McGee Corporation |
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(Name of Registrant as Specified In Its Charter) |
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant) |
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Payment of Filing Fee (Check the appropriate box): |
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No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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Aggregate number of securities to which transaction applies: |
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
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Proposed maximum aggregate value of transaction: |
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
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Form, Schedule or Registration Statement No.: |
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Persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number. |
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EXPLANATORY NOTE
Kerr-McGee Corporation (the “Company”) is filing the materials contained in this Schedule 14A with the Securities and Exchange Commission on March 16, 2005 in connection with the solicitation of proxies for the election of two directors to the Company’s Board of Directors at the Company’s 2005 Annual Meeting of Stockholders.
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[GRAPHIC]
BALANCE
Kerr-McGee Corporation
Delivering Value for Stockholders
March, 2005
[LOGO]
Forward-Looking Statement
The company makes certain forward-looking statements in this presentation that are subject to risks and uncertainties. Future results and developments discussed in these statements may be affected by numerous factors and risks, such as the accuracy of the assumptions that underlie the statements, the success of the oil and gas exploration and production program, drilling risks, the market value of Kerr-McGee’s products, uncertainties in interpreting engineering data, demand for consumer products for which Kerr-McGee’s businesses supply raw materials, the financial resources of competitors, changes in laws and regulations, the ability to respond to challenges in international markets, including changes in currency exchange rates, political or economic conditions in areas where Kerr-McGee operates, trade and regulatory matters, general economic conditions, and other factors and risks discussed herein and in the company’s other SEC filings, and many such factors and risks are beyond Kerr-McGee’s ability to control or predict. Forward-looking statements are not guarantees of performance. Actual results and developments may differ materially from those expressed or implied in this presentation. Readers are cautioned not to place any undue reliance on any forward-looking statements. Forward-looking statements speak only as of the date of this presentation. Kerr-McGee undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. For such statements, Kerr-McGee claims the protection of the safe harbor for “forward-looking statements” set forth in the Private Securities Litigation Reform Act of 1995.
Delivering Value for Stockholders
• Chemical separation
• Under valued in current structure
• KMG Chemical has critical mass and strong business plan
• Business cycle is prime
• Share repurchase
• $1 billion initially
• Expect to expand with Chemical separation
• E&P is well-positioned for per share growth
• Balanced portfolio of high-quality assets
• Balanced strategy to deliver repeatable, consistent performance
KMG Stock Performance
Through March 11, 2005
[CHART]
|
Returns |
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12/31/02 |
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12/31/03 |
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12/31/04 |
|
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Simple price appreciation |
|
78 |
% |
70 |
% |
37 |
% |
|
Total stockholder return |
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93 |
% |
77 |
% |
38 |
% |
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TSR - Annualized |
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35 |
% |
61 |
% |
428 |
% |
Chemical Business Separation
Pursuing separation of chemical business via a spinoff or sale to unlock value for stockholders
• Critical mass and profitability enhancements have been achieved
• Value not adequately reflected in KMG stock price
• Market conditions are ideal
• Dual track will maximize value
• Proceeding expeditiously
Share Repurchase Program
Board authorzed $1 billion share repurchase program
• Stock is undervalued
• Company is generating significant free cash
• Underpinned with commodity hedges
• Evaluating additional, longer-term hedges
• Expect to maintain investment-grade credit
• Board expects to expand repurchase program with separation of Chemical
Kerr-McGee Oil & Gas Today
• Balanced portfolio
• High-quality assets
• Large inventory of repeatable, low-risk exploitation projects
• Balanced exploration program focused in proven hydrocarbon basins
• Operational and development expertise
• Proven record of value-enhancing transactions
Return on Average Capital Employed %
[CHART]
*From continuing operations
Gross Production Margin Per BOE
Nine Months 2004 - $ / BOE
Peer Group
[CHART]
Source - Company earnings reports: Gross production margin = oil & gas revenues - LOE - production tax - transportation, adjusted for hedges
5-Year Changes in Reserves
MM BOE
[CHART]
Financial Performance
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2003 |
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2004 |
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Change |
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Adjusted net income* ($MM) |
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405.5 |
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623.4 |
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54 |
% |
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Adjusted EPS* ($) |
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3.86 |
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4.71 |
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22 |
% |
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Cash
flow from operations** |
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1,560 |
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2,136 |
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37 |
% |
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Return on equity (%) |
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8.5 |
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10.2 |
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20 |
% |
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Return on average capital (%)*** |
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6.7 |
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7.4 |
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10 |
% |
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Production (M BOE/D) |
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271 |
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312 |
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15 |
% |
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Gross production margin per |
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BOE ($) |
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24.09 |
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30.20 |
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25 |
% |
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Dividends per share ($) |
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1.80 |
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1.80 |
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*Non-GAAP measures and excludes the effects of certain items affecting comparability totaling $141.4 million and $208.8 million for 2003 and 2004.
**Non-GAAP measures and excludes changes in assets and liabilities.
***From continuing operations
Reduced Leverage
$MM
[CHART]
Delivering Value to Stockholders
• Chemical separation
• Under valued in current structure
• KMG Chemical has critical mass and strong business plan
• Business cycle is prime
• Share repurchase
• $1 billion initially
• Expect to expand with Chemical separation
• E&P is well-positioned for per share growth
• Balanced portfolio of high-quality assets
• Balanced strategy to deliver repeatable, consistent performance
[GRAPHIC]
BALANCE
Kerr-McGee Corporation
Delivering Value for Stockholders
March, 2005
[GRAPHIC]
Kerr McGee Oil & Gas
Balanced portfolio with proven record of success
[LOGO]
Kerr-McGee Oil & Gas Today
• Balanced portfolio
• High-quality assets
• Large inventory of repeatable, low-risk exploitation projects
• Balanced exploration program focused in proven hydrocarbon basins
• Operational and development expertise
• Proven record of value-enhancing transactions
Kerr-McGee Oil & Gas Activity
[GRAPHIC]
Creating Value through Balanced Growth
Balanced growth strategy
• Exploration
• Exploitation
• Tactical transactions
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Discoveries |
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Developments |
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[GRAPHIC] |
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Brazil BM-C-7 |
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Nansen |
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Alaska |
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Boomvang |
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China CFD 14-5 |
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Gunnison |
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Blind Faith |
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HSR acquisition |
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Red Hawk |
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Constitution |
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China CFD 11-1/2 |
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Atwater Valley |
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Westport acquisition |
Reserve Balance
As of Jan. 1, 2005
1,218 MM BOE of Reserves
By Location
[CHART]
By Category
[CHART]
By Product
[CHART]
5-Year Changes in Reserves
MM BOE
[CHART]
[GRAPHIC]
Exploitation
Large inventory of repeatable, low-risk projects
[LOGO]
Rocky Mountain Basins
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• |
Long-life gas adds balance |
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[GRAPHIC] |
• |
Capitalizing on tight-gas expertise |
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• |
Large inventory of low-risk repeatable plays |
Provides balance with predictable production, cash flow and repeatable low-risk reserve adds
Exploitation
Rockies
• Track record of execution in the Rockies
• Repeatability of play
• Rigs contracted to carry out 2005 program
• Using scale to maximize efficiencies
• Over 9,000 projects identified
• Attractive full-cycle development costs
Growth in the Rockies
Reserves
MM BOE
[CHART]
Daily Production
M BOE/D
[CHART]
Exploitation
Greater Natural Buttes
|
[GRAPHIC] |
Key Program Statistics |
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2004 |
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2005 |
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Capital ($MM) |
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$ |
160 |
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$ |
245 |
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Number of wells |
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140 |
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>200 |
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IRR: |
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>60 |
%* |
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*Assumes budget prices
Estimated Full-Cycle Development Costs
$ / BOE
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Greater Natural Buttes |
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Allocated |
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Develop. |
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Full-cycle |
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Reserves |
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Purch. Cost |
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Cost |
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Cost |
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MM BOE |
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Proved Developed |
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51 |
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$ |
5.20 |
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$ |
— |
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$ |
5.20 |
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Proved Undeveloped |
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59 |
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5.20 |
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5.00 |
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10.20 |
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Average Full-cycle Cost |
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$ |
7.88 |
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Exploitation
Wattenberg
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Key Program Statistics |
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[GRAPHIC] |
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2004 |
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2005 |
|
|
Capital ($MM) |
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$110 |
|
$120 |
|
|
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Number of wells |
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180 |
|
220 |
|
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Total projects |
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310 |
|
400 |
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IRR average: |
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>75 |
%* |
|
|
*Assumes budget prices
[GRAPHIC]
Exploration
Focused on proven hydrocarbon basins with track record of success
[LOGO]
2005 Exploration Program
$380 MM
[GRAPHIC]
Deepwater Gulf of Mexico
|
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Past five years’ results |
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• 50 new-field wildcats |
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[GRAPHIC] |
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• >100 total exploration wells |
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• Developed fields including: Nansen Boomvang, Gunnison Red Hawk, Constitution |
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|
• Producing >80 MBOE/D, net |
Production Growth from Deep Water
[CHART]
Sampling of Large Prospect Inventory
[GRAPHIC]
Alaska
Nikaitchuq Discovery
|
|
#4 Horizontal Test |
|
|
• Schrader Bluff reservoir |
|
|
• Tested up to 1,200 BOPD |
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• 16°-17° API |
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[GRAPHIC] |
#3 Horizontal Well |
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• Sag River reservoir |
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• Drilling new fault block |
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#1 Discovery Well |
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• Initial vertical test at 960 BOPD of 38° API in Sag River reservoir |
Alaska
Exploration
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Tuvaaq Discovery |
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• Proved extension of Schrader Bluff reservoir three miles west |
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[GRAPHIC] |
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• KMG: increased WI to 82% |
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Kigun Prospect |
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• Drilling |
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• KMG: 55% WI |
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Ataruq Prospect |
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• Potential extension of Kuparuk and Palm fields |
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[GRAPHIC] |
• 1-2 exploratory wells in 2005 drilling season |
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|
• KMG: 50% WI |
[GRAPHIC]
Execution Excellence
Industry Leader in drilling and development performance
[LOGO]
IPA Benchmarking Study - Facilities
• 12 companies
• Mostly major operators
• Key findings: Kerr-McGee has . . .
• Lowest cost facilities
• Fastest execution
• Lowest cost variability
UIBC 2003
[GRAPHIC]
Comparative Facility Costs
• KMG is a low-cost developer compared to industry
Facilities
Cost Performance
Most project systems within +/- 5% of industry
Facilities cost index
[CHART]
Source: Independent Project Analysis
Comparative Development Performance
• KMG is considered faster than the rest of industry at developing projects
Schedule Performance
Schedule performance varies widely
Execution schedule index*
[CHART]
*Measured from start of detailed engineering through first oil
Source: Independent Project Analysis
Execution Excellence
Summarizing Cost-Schedule Trade-off for UIBC Companies
[CHART]
|
*Compared to industry norm |
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Source: Independent Project Analysis |
Deepwater Hubs
[GRAPHIC]
[GRAPHIC]
Transactions
Capitalizing on core competencies to enhance value
[LOGO]
Comparative Rockies’ Transactions
[CHART]
HSR Acquisition Lookback
Since acquisition. . .
• Completed >1,100 projects in Wattenberg
• Added >400 BCFe of proved reserves
• Produced 300 BCFe
• Increased project inventory 12%
• Created core area to exploit tight-gas expertise
Blind Faith Discovery
Exchanged declining legacy Arkoma assets for 37.5% WI in Blind Faith
• Potential to capitalize on KMG’s industry-leading cycle time
• Adds new hub in central gulf
Production Consistency
M BOE/D
Delivering as promised!
[CHART]
Summary
A Balanced Portfolio
• High-impact exploration in proven basins
• Low-risk repeatable plays in established basins
• Evaluating tactical transactions
Operational Execution
• Efficient and effective operator
• Meeting production targets consistently
• Growing infrastructure in deepwater Gulf of Mexico
Financially Sound
• Strong cash generating capability
• Reduced debt-to-cap to approximately 32%
• Initiated $1 B share repurchase program
[GRAPHIC]
Kerr-McGee Chemical
World’s third-largest producer and marketer of titanium dioxide pigment
[LOGO]
Titanium Dioxide Pigment - TiO2
|
• Foundational pigment |
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• Unsurpassed opacifying and whitening properties |
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[GRAPHIC] |
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• Primarily used in paints, coatings, plastics & paper |
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• Kerr-McGee is the world’s third-largest producer & marketer |
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TiO2 Markets
Global TiO2 market 4 MM tonnes per year
Global Demand by End Use
[CHART]
Global Demand by Geographic Region
[CHART]
Production Processes
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Sulfate |
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Chloride |
|
• Mature technology |
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• Proprietary technology |
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• Hardware-intensive |
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• Preferred products |
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• Specialty applications |
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• Growth segment |
Kerr-McGee Chemical TiO2 Production Facilities
M tonnes / year
[GRAPHIC]
[CHART]
KERR-McGEE CORPORATION
Investor Relations Contact: Rick Buterbaugh (405) 270-3561
P.O. Box 25861, Okla. City, OK 73125
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2004 (1) |
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2003 (1) |
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(Millions of dollars, except per share amounts) |
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Year |
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Year |
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Net Income (GAAP) |
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$ |
404.0 |
|
$ |
218.6 |
|
|
Discontinued Operations |
|
10.6 |
|
10.8 |
|
||
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Change in Accounting Principle |
|
— |
|
34.7 |
|
||
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Adjustment for Other Items |
|
208.8 |
|
141.4 |
|
||
|
Adjusted After-Tax Income (Non-GAAP) |
|
$ |
623.4 |
|
$ |
405.5 |
|
|
|
|
|
|
|
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||
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Diluted Earnings Per Share |
|
|
|
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||
|
Net Income (GAAP) |
|
$ |
3.11 |
|
$ |
2.17 |
|
|
Discontinued Operations |
|
0.08 |
|
0.09 |
|
||
|
Change in Accounting Principle |
|
— |
|
0.32 |
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||
|
Adjustment for Other Items |
|
1.52 |
|
1.28 |
|
||
|
Adjusted After-Tax Income (Non-GAAP) |
|
$ |
4.71 |
|
$ |
3.86 |
|
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|
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Average Common Shares Outstanding Assuming Dilution (millions) |
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136.9 |
|
110.7 |
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Other Items: |
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|
|
|
|
||
|
Nonhedge commodity derivatives and Devon stock revaluation |
|
$ |
(6.6 |
) |
$ |
(4.0 |
) |
|
Foreign currency losses |
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(14.0 |
) |
(39.5 |
) |
||
|
Asset impairments |
|
(18.1 |
) |
(8.8 |
) |
||
|
Gain (loss) associated with assets held for sale |
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(18.9 |
) |
28.9 |
|
||
|
Litigation costs |
|
(4.1 |
) |
(5.8 |
) |
||
|
Mobile plant shutdown |
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(4.5 |
) |
(30.3 |
) |
||
|
Savannah plant write-down |
|
(79.4 |
) |
— |
|
||
|
Environmental expenses, net of reimbursements |
|
(55.3 |
) |
(38.9 |
) |
||
|
Gain (Loss) on sale of Devon stock |
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5.8 |
|
11.1 |
|
||
|
Curtailment of pension and postretirement plans and other costs related to the 2003 workforce reduction program |
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(1.3 |
) |
(34.8 |
) |
||
|
Insurance premium adjustment |
|
(9.8 |
) |
— |
|
||
|
Compensation expense related to ESOP loan repayments |
|
— |
|
(14.0 |
) |
||
|
Other items |
|
(2.6 |
) |
(5.3 |
) |
||
|
Total |
|
$ |
(208.8 |
) |
$ |
(141.4 |
) |
(1) Reflects results of operations of the forest products business as discontinued operations.
Adjusted after-tax income and the related measure per diluted share exclude items that management deems to not be reflective of the company’s core operations. These measures are non-GAAP financial measures. Management believes that these measures provide valuable insight into the company’s core earnings from operations and enable investors and analysts to better compare core operating results with those of other companies by eliminating items that may be unique to the company. Other companies may define these items differently, and the company cannot assure that adjusted after-tax income is comparable with similarly titled amounts for other companies.
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|
|
2004 |
|
2003 (1) |
|
||
|
(Millions of dollars, except per-share amounts) |
|
Year |
|
Year |
|
||
|
RECONCILIATION OF CASH PROVIDED BY OPERATING ACTIVITIES PER SHARE BEFORE CHANGES IN ASSETS AND LIABILITIES |
|
|
|
|
|
||
|
Net Cash Provided by Operating Activities (GAAP) |
|
$ |
2,050.2 |
|
$ |
1,517.9 |
|
|
Less Changes in Assets and Liabilities: |
|
|
|
|
|
||
|
(Increase) decrease in accounts receivable |
|
(236.0 |
) |
45.1 |
|
||
|
(Increase) decrease in inventories |
|
82.8 |
|
21.5 |
|
||
|
(Increase) decrease in deposits, prepaids and other assets |
|
48.3 |
|
12.4 |
|
||
|
Increase (decrease) in accounts payable and accrued liabilities |
|
135.8 |
|
(57.1 |
) |
||
|
Increase (decrease) in taxes payable |
|
28.2 |
|
65.9 |
|
||
|
Environmental expenditures |
|
(99.1 |
) |
(103.6 |
) |
||
|
Other |
|
(45.7 |
) |
(25.8 |
) |
||
|
Cash Provided by Operating Activities Before Changes in Assets and Liabilities (Non-GAAP) |
|
$ |
2,135.9 |
|
$ |
1,559.5 |
|
|
Average Shares Outstanding (millions) |
|
126.3 |
|
100.1 |
|
||
|
Cash Provided by Operating Activities Per Share Before Changes in Assets and Liabilities (Non-GAAP) |
|
$ |
16.91 |
|
$ |
15.58 |
|
(1) Certain prior year amounts have been updated to conform to the 2004 presentation.
Cash provided by operating activities before changes in assets and liabilities and the related measure per share exclude items that management deems to not be reflective of the company’s core operations. These measures are non-GAAP financial measures. Management believes these measures provide valuable insight into the company’s ability to generate cash flows from operations and enable investors and analysts to better compare operating results with those of other companies in the industry. However, similarly titled measures used by other companies may not be determined on the same basis and, therefore, may not be comparable to the measures presented above.
Kerr-McGee Corporation
Range of Projected Daily Average Production Volumes
As of January 2005
|
|
|
2005 Production Forecast |
|
||||||||||||||||||||||||||||
|
|
|
1-Qtr |
|
2-Qtr |
|
3-Qtr |
|
4-Qtr |
|
Year |
|
||||||||||||||||||||
|
|
|
Projected |
|
Projected |
|
Projected |
|
Projected |
|
Projected |
|
||||||||||||||||||||
|
Crude
Oil |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Onshore |
|
32,500 |
|
- |
|
35,000 |
|
32,500 |
|
- |
|
34,000 |
|
31,500 |
|
- |
|
34,000 |
|
31,000 |
|
- |
|
34,000 |
|
31,900 |
|
- |
|
34,200 |
|
|
Offshore |
|
48,000 |
|
- |
|
52,000 |
|
45,000 |
|
- |
|
48,000 |
|
40,000 |
|
- |
|
43,000 |
|
38,000 |
|
- |
|
40,500 |
|
42,700 |
|
- |
|
45,800 |
|
|
U.S. |
|
80,500 |
|
- |
|
87,000 |
|
77,500 |
|
- |
|
82,000 |
|
71,500 |
|
- |
|
77,000 |
|
69,000 |
|
- |
|
74,500 |
|
74,600 |
|
- |
|
80,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North Sea |
|
66,500 |
|
- |
|
72,000 |
|
62,000 |
|
- |
|
67,500 |
|
52,500 |
|
- |
|
57,000 |
|
64,000 |
|
- |
|
67,000 |
|
61,200 |
|
- |
|
65,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China |
|
24,500 |
|
- |
|
26,500 |
|
18,000 |
|
- |
|
19,500 |
|
14,000 |
|
- |
|
15,500 |
|
18,000 |
|
- |
|
20,000 |
|
18,600 |
|
- |
|
20,300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
171,500 |
|
- |
|
185,500 |
|
157,500 |
|
- |
|
169,000 |
|
138,000 |
|
- |
|
149,500 |
|
151,000 |
|
- |
|
161,500 |
|
154,400 |
|
- |
|
166,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-Qtr |
|
2-Qtr |
|
3-Qtr |
|
4-Qtr |
|
Year |
|
||||||||||||||||||||
|
Natural
Gas |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Onshore* |
|
612 |
|
- |
|
652 |
|
612 |
|
- |
|
652 |
|
637 |
|
- |
|
682 |
|
672 |
|
- |
|
702 |
|
633 |
|
- |
|
672 |
|
|
Offshore |
|
440 |
|
- |
|
475 |
|
455 |
|
- |
|
500 |
|
445 |
|
- |
|
480 |
|
460 |
|
- |
|
490 |
|
450 |
|
- |
|
486 |
|
|
U.S. |
|
1,052 |
|
- |
|
1,127 |
|
1,067 |
|
- |
|
1,152 |
|
1,082 |
|
- |
|
1,162 |
|
1,132 |
|
- |
|
1,192 |
|
1,083 |
|
- |
|
1,158 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North Sea |
|
90 |
|
- |
|
100 |
|
65 |
|
- |
|
75 |
|
45 |
|
- |
|
50 |
|
75 |
|
- |
|
85 |
|
70 |
|
- |
|
75 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
0 |
|
- |
|
0 |
|
0 |
|
- |
|
0 |
|
0 |
|
- |
|
0 |
|
0 |
|
- |
|
0 |
|
0 |
|
- |
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
1,142 |
|
- |
|
1,227 |
|
1,132 |
|
- |
|
1,227 |
|
1,127 |
|
- |
|
1,212 |
|
1,207 |
|
- |
|
1,277 |
|
1,153 |
|
- |
|
1,233 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BOE/D ** |
|
361,800 |
|
- |
|
390,000 |
|
346,200 |
|
- |
|
373,500 |
|
325,800 |
|
- |
|
351,500 |
|
352,200 |
|
- |
|
374,300 |
|
352,000 |
|
- |
|
367,000 |
|
* Adjusted to reflect sale of Arkoma basin asset to BP in exchange for 37.5% interest in Blind Faith discovery.
** Annual sums reflect the company’s expectations.
** Cautionary Statement Concerning Forward-Looking Statements **
The information contained in this table regarding Kerr-McGee’s projected production volume forecasts are only estimated projections that may or may not occur in the future, and constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Future results and developments set forth in this statement may be affected by numerous uncertainties, factors and risks, such as but not limited to the accuracy of the assumptions that underlie the statement, the success of the oil and gas exploration and production program, drilling risks, market value of oil and gas, uncertainties in interpreting engineering data, changes in laws and regulations, the ability to respond to challenges in international markets, political or economic conditions in areas where Kerr-McGee operates, trade and regulatory matters, and other factors and risks identified in the Risk Factors section of Kerr-McGee’s Annual Report on Form 10-K and other SEC filings. Actual results and developments may differ materially from those expressed or implied in this statement. Therefore, the information contained in this statement may not be accurate. Kerr-McGee does not undertake to update, revise or correct any of the forward-looking information.
As of February 2005
|
|
|
2005 Production Forecast |
|
||||||||||||||||||||||||||||
|
|
|
1-Qtr |
|
2-Qtr |
|
3-Qtr |
|
4-Qtr |
|
Year |
|
||||||||||||||||||||
|
|
|
Projected |
|
Projected |
|
Projected |
|
Projected |
|
Projected |
|
||||||||||||||||||||
|
Crude
Oil |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Onshore |
|
33,500 |
|
- |
|
36,000 |
|
34,000 |
|
- |
|
36,000 |
|
33,000 |
|
- |
|
35,500 |
|
32,500 |
|
- |
|
35,000 |
|
33,200 |
|
- |
|
35,600 |
|
|
Offshore |
|
56,000 |
|
- |
|
60,000 |
|
50,000 |
|
- |
|
53,000 |
|
44,000 |
|
- |
|
47,000 |
|
44,000 |
|
- |
|
46,500 |
|
48,500 |
|
- |
|
51,600 |
|
|
U.S. |
|
89,500 |
|
- |
|
96,000 |
|
84,000 |
|
- |
|
89,000 |
|
77,000 |
|
- |
|
82,500 |
|
76,500 |
|
- |
|
81,500 |
|
81,700 |
|
- |
|
87,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North Sea |
|
67,000 |
|
- |
|
72,000 |
|
62,000 |
|
- |
|
67,500 |
|
52,000 |
|
- |
|
56,500 |
|
64,000 |
|
- |
|
67,000 |
|
61,200 |
|
- |
|
65,700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China |
|
22,000 |
|
- |
|
24,000 |
|
20,000 |
|
- |
|
21,500 |
|
14,000 |
|
- |
|
15,500 |
|
18,000 |
|
- |
|
20,000 |
|
18,500 |
|
- |
|
20,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
178,500 |
|
- |
|
192,000 |
|
166,000 |
|
- |
|
178,000 |
|
143,000 |
|
- |
|
154,500 |
|
158,500 |
|
- |
|
168,500 |
|
161,400 |
|
- |
|
173,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-Qtr |
|
2-Qtr |
|
3-Qtr |
|
4-Qtr |
|
Year |
|
||||||||||||||||||||
|
Natural
Gas |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Onshore* |
|
600 |
|
- |
|
640 |
|
600 |
|
- |
|
640 |
|
625 |
|
- |
|
670 |
|
670 |
|
- |
|
700 |
|
624 |
|
- |
|
663 |
|
|
Offshore |
|
400 |
|
- |
|
420 |
|
420 |
|
- |
|
465 |
|
400 |
|
- |
|
435 |
|
425 |
|
- |
|
465 |
|
411 |
|
- |
|
446 |
|
|
U.S. |
|
1,000 |
|
- |
|
1,060 |
|
1,020 |
|
- |
|
1,105 |
|
1,025 |
|
- |
|
1,105 |
|
1,095 |
|
- |
|
1,165 |
|
1,035 |
|
- |
|
1,109 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North Sea |
|
90 |
|
- |
|
100 |
|
75 |
|
- |
|
85 |
|
45 |
|
- |
|
50 |
|
80 |
|
- |
|
90 |
|
72 |
|
- |
|
81 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
0 |
|
- |
|
0 |
|
0 |
|
- |
|
0 |
|
0 |
|
- |
|
0 |
|
0 |
|
- |
|
0 |
|
0 |
|
- |
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
1,090 |
|
- |
|
1,160 |
|
1,095 |
|
- |
|
1,190 |
|
1,070 |
|
- |
|
1,155 |
|
1,175 |
|
- |
|
1,255 |
|
1,107 |
|
- |
|
1,190 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BOE/D ** |
|
360,200 |
|
- |
|
385,300 |
|
348,500 |
|
- |
|
376,300 |
|
321,300 |
|
- |
|
347,000 |
|
354,300 |
|
- |
|
377,700 |
|
352,000 |
|
- |
|
367,000 |
|
* Adjusted to reflect sale of Arkoma basin asset to BP in exchange for 37.5% interest in Blind Faith discovery.
** Annual sums reflect the company’s expectations.
** Cautionary Statement Concerning Forward-Looking Statements **
The information contained in this table regarding Kerr-McGee’s projected production volume forecasts are only estimated projections that may or may not occur in the future, and constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Future results and developments set forth in this statement may be affected by numerous uncertainties, factors and risks, such as but not limited to the accuracy of the assumptions that underlie the statement, the success of the oil and gas exploration and production program, drilling risks, market value of oil and gas, uncertainties in interpreting engineering data, changes in laws and regulations, the ability to respond to challenges in international markets, political or economic conditions in areas where Kerr-McGee operates, trade and regulatory matters, and other factors and risks identified in the Risk Factors section of Kerr-McGee’s Annual Report on Form 10-K and other SEC filings. Actual results and developments may differ materially from those expressed or implied in this statement. Therefore, the information contained in this statement may not be accurate. Kerr-McGee does not undertake to update, revise or correct any of the forward-looking information.
Kerr-McGee Corporation
Oil and Gas Derivatives
As of January 26, 2005
|
|
|
2004 |
|
||||||||||||||||||
|
|
|
First Quarter |
|
Second Quarter |
|
Third Quarter |
|
Fourth Quarter |
|
||||||||||||
|
|
|
Avg Price/Collar |
|
BOPD |
|
Avg Price/Collar |
|
BOPD |
|
Avg Price/Collar |
|
BOPD |
|
Avg Price/Collar |
|
BOPD |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Crude Oil ($/Barrel) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Fixed-price swaps (WTI) |
|
$ |
29.03 |
|
52,352 |
|
$ |
28.23 |
|
54,300 |
|
$ |
27.93 |
|
65,882 |
|
$ |
28.54 |
|
68,015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Fixed-price swaps (Brent) |
|
$ |
26.76 |
|
49,286 |
|
$ |
26.27 |
|
51,800 |
|
$ |
26.45 |
|
46,850 |
|
$ |
26.71 |
|
52,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Costless collars (WTI) |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Three-way Collars (NYMEX) |
|
— |
|
— |
|
— |
|
— |
|
$24.38 - $27.71 |
|
4,000 |
(2) |
$24.38 - $27.71 |
|
4,000 |
(2) |
||||
|
Three-way average floor |
|
|
|
|
|
|
|
|
|
$ |
19.25 |
|
|
|
$ |
19.25 |
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total |
|
|
|
101,638 |
|
|
|
106,100 |
|
|
|
116,732 |
|
|
|
124,015 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
2004 |
|
||||||||||||||||||
|
|
|
First Quarter |
|
Second Quarter |
|
Third Quarter |
|
Fourth Quarter |
|
||||||||||||
|
|
|
Avg Price/Collar |
|
MMBtu/D |
|
Avg Price/Collar |
|
MMBtu/D |
|
Avg Price/Collar |
|
MMBtu/D |
|
Avg Price/Collar |
|
MMBtu/D |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Natural
Gas |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Fixed-price swaps (NYMEX) |
|
$ |
5.33 |
|
195,000 |
|
$ |
4.74 |
|
565,000 |
|
$ |
4.89 |
|
807,663 |
|
$ |
4.96 |
|
870,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Fixed-price swaps (NWPRM) |
|
— |
|
— |
|
— |
|
— |
|
$ |
3.33 |
|
30,000 |
|
$ |
3.33 |
|
30,000 |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Costless collars (NYMEX) |
|
$4.48 - $6.00 |
|
85,000 |
|
— |
|
— |
|
$3.70 - $4.00 |
|
44,674 |
(2) |
$3.70 - $4.00 |
|
44,674 |
(2) |
||||
|
|
|
$4.64 - $7.00 |
|
50,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
$4.71 - $7.50 |
|
50,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
$5.00 - $6.74 |
|
50,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
$5.00 - $6.06 |
|
100,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
$5.00 - $6.01 |
|
25,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Three-way collars (NYMEX) |
|
— |
|
— |
|
— |
|
— |
|
$4.00 - $5.00 |
|
10,000 |
(2) |
$4.00 - $5.00 |
|
10,000 |
(2) |
||||
|
Three-way average floor |
|
|
|
|
|
|
|
|
|
$ |
3.15 |
|
|
|
$ |
3.15 |
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total |
|
|
|
555,000 |
|
|
|
565,000 |
|
|
|
892,337 |
|
|
|
954,674 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
2004 |
|
||||||||||||||||||
|
|
|
First Quarter |
|
Second Quarter |
|
Third Quarter |
|
Fourth Quarter |
|
||||||||||||
|
|
|
Avg Price/Collar |
|
MMBtu/D |
|
Avg Price/Collar |
|
MMBtu/D |
|
Avg Price/Collar |
|
MMBtu/D |
|
Avg Price/Collar |
|
MMBtu/D |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Basis
swaps versus NYMEX |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
CIG |
|
$ |
0.62 |
|
120,000 |
|
$ |
0.59 |
|
46,703 |
|
$ |
0.65 |
|
75,000 |
|
$ |
0.68 |
|
161,196 |
|
|
CIG |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
$ |
0.80 |
|
3,316 |
(2) |
|||
|
NWPRM |
|
$ |
0.20 |
|
15,000 |
|
$ |
0.20 |
|
15,000 |
|
$ |
0.38 |
|
25,000 |
|
$ |
0.44 |
|
31,630 |
|
|
NWPRM |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
$ |
0.78 |
|
16,576 |
(2) |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total |
|
|
|
135,000 |
|
|
|
61,703 |
|
|
|
100,000 |
|
|
|
212,718 |
|
||||
Notes:
MMBtu/D = million British thermal units per day
NWPRM = Northwest Pipeline Rocky Mountain Index
(1) Derivative transactions are on a million Btu (MMBtu) basis. Kerr-McGee reports production/sales on a MCF basis. The conversion rate is 1.080 MMBtu to 1 MCF.
(2) Derivatives that have not been designated as hedges or that do not qualify for hedge accounting treatment.
For further disclosure regarding accounting treatment of derivatives, please refer to the Quarterly Report on Form 10-Q for the third quarter 2004, filed on November 9, 2004.
** Cautionary Statement Concerning Forward-Looking Statements **
The information contained in this table represents Kerr-McGee’s current derivative contracts. These derivative contracts were entered into based on projected production volume forecasts. These forecasts are estimated projections that may or may not occur in the future, and constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, in those documents in which such projections are provided. Future results and developments set forth in this statement may be affected by numerous uncertainties, factors and risks, such as but not limited to the accuracy of the assumptions that underlie the statement, the success of the oil and gas exploration and production program, drilling risks, market value of oil and gas, uncertainties in interpreting engineering data, changes in laws and regulations, the ability to respond to challenges in international markets, political or economic conditions, trade and regulatory matters, and other factors and risks identified in the Risk Factors section of Kerr-McGee’s Annual Report on Form 10-K and other SEC filings. Actual results and developments may differ materially from those expressed or implied in this statement. Therefore, the information contained in this statement may not be accurate. Kerr-McGee does not undertake to update, revise or correct any of the forward-looking information.
As of February 23, 2005
|
|
|
2005 |
|
2006 |
|
|||||||||||||||||||||
|
|
|
First Quarter |
|
Second Quarter |
|
Third Quarter |
|
Fourth Quarter |
|
Full Year |
|
|||||||||||||||
|
|
|
Avg Price/Collar |
|
BOPD |
|
Avg Price/Collar |
|
BOPD |
|
Avg Price/Collar |
|
BOPD |
|
Avg Price/Collar |
|
BOPD |
|
Avg Price/Collar |
|
BOPD |
|
|||||
|
Crude Oil ($/Barrel) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Hedge |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Fixed Price Swaps (WTI) |
|
$ |
29.23 |
|
3,000 |
|
$ |
29.23 |
|
3,000 |
|
$ |
29.23 |
|
3,000 |
|
$ |
29.23 |
|
3,000 |
|
— |
|
— |
|
|
|
|
|
$ |
43.78 |
|
4,589 |
|
$ |
43.78 |
|
7,000 |
|
$ |
43.78 |
|
7,000 |
|
$ |
43.78 |
|
7,000 |
|
— |
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Fixed Price Swaps (Brent) |
|
$ |
41.03 |
|
16,000 |
|
$ |
41.03 |
|
16,000 |
|
$ |
41.03 |
|
16,000 |
|
$ |
41.03 |
|
16,000 |
|
— |
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Costless Collars (WTI) |
|
$28.50 - $31.89 |
|
14,000 |
|
$28.50 - $31.89 |
|
14,000 |
|
$28.50 - $31.89 |
|
14,000 |
|
$28.50 - $31.89 |
|
14,000 |
|
$27.00 - $30.58 |
|
19,000 |
|
|||||
|
|
|
$40.00 - $49.18 |
|
10,089 |
|
$40.00 - $49.05 |
|
12,500 |
|
$40.00 - $49.05 |
|
12,500 |
|
$40.00 - $49.05 |
|
12,500 |
|
— |
|
— |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Costless Collars (Brent) |
|
$38.00 - $48.38 |
|
13,778 |
|
$38.00 - $48.48 |
|
15,500 |
|
$38.00 - $48.48 |
|
15,500 |
|
$38.00 - $48.48 |
|
15,500 |
|
— |
|
— |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Non-hedge |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Three-way Collars (WTI) |
|
$25.00 - $28.23 |
|
5,000 |
|
$25.00 - $28.23 |
|
5,000 |
|
$25.00 - $28.23 |
|
5,000 |
|
$25.00 - $28.23 |
|
5,000 |
|
$25.00 - $28.65 |
|
2,000 |
|
|||||
|
Three-way Average Floor |
|
$ |
20.93 |
|
|
|
$ |
20.93 |
|
|
|
$ |
20.93 |
|
|
|
$ |
20.93 |
|
|
|
$ |
20.88 |
|
|
|
|
|
|
|
|
66,456 |
|
|
|
73,000 |
|
|
|
73,000 |
|
|
|
73,000 |
|
|
|
21,000 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
2005 |
|
2006 |
|
|||||||||||||||||||||
|
|
|
First Quarter |
|
Second Quarter |
|
Third Quarter |
|
Fourth Quarter |
|
Full Year |
|
|||||||||||||||
|
|
|
Avg Price/Collar |
|
MMBtu/D |
|
Avg Price/Collar |
|
MMBtu/D |
|
Avg Price/Collar |
|
MMBtu/D |
|
Avg Price/Collar |
|
MMBtu/D |
|
Avg Price/Collar |
|
MMBtu/D |
|
|||||
|
Natural Gas ($/MMBtu) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Hedge |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Fixed Price Swaps (NYMEX) |
|
$ |
4.42 |
|
55,000 |
|
$ |
4.42 |
|
55,000 |
|
$ |
4.42 |
|
55,000 |
|
$ |
4.42 |
|
55,000 |
|
— |
|
— |
|
|
|
|
|
— |
|
— |
|
$ |
6.29 |
|
150,000 |
|
$ |
6.29 |
|
150,000 |
|
$ |
6.29 |
|
50,544 |
|
— |
|
— |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Costless Collars (NYMEX) |
|
$5.00 - $6.25 |
|
280,000 |
|
$5.00 - $6.25 |
|
280,000 |
|
$5.00 - $6.25 |
|
280,000 |
|
$5.00 - $6.25 |
|
280,000 |
|
$4.75 - $5.50 |
|
340,000 |
|
|||||
|
|
|
$6.50 - $10.31 |
|
225,000 |
|
$6.00 - $7.33 |
|
195,000 |
|
$6.00 - $7.33 |
|
195,000 |
|
$6.00 - $7.33 |
|
65,707 |
|
— |
|
— |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Non-hedge |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Costless Collars (NYMEX) |
|
$4.09 - $5.57 |
|
60,000 |
|
$4.09 - $5.57 |
|
60,000 |
|
$4.09 - $5.57 |
|
60,000 |
|
$4.09 - $5.57 |
|
60,000 |
|
— |
|
— |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Three-way Collars (WTI) |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
$4.00 - $6.00 |
|
20,000 |
|
|||||
|
Three-way Average Floor |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
3.04 |
|
|
|
||||
|
|
|
|
|
620,000 |
|
|
|
740,000 |
|
|
|
740,000 |
|
|
|
511,251 |
|
|
|
360,000 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
2005 |
|
2006 |
|
|||||||||||||||||||||
|
|
|
First Quarter |
|
Second Quarter |
|
Third Quarter |
|
Fourth Quarter |
|
Full Year |
|
|||||||||||||||
|
|
|
Avg Price/Collar |
|
MMBtu/D |
|
Avg Price/Collar |
|
MMBtu/D |
|
Avg Price/Collar |
|
MMBtu/D |
|
Avg Price/Collar |
|
MMBtu/D |
|
Avg Price/Collar |
|
MMBtu/D |
|
|||||
|
Basis swaps versus NYMEX ($/MMBtu) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Hedge |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
CIG |
|
$ |
0.39 |
|
20,000 |
|
$ |
0.61 |
|
50,000 |
|
$ |
0.61 |
|
50,000 |
|
$ |
0.51 |
|
21,109 |
|
— |
|
— |
|
|
|
NWPL |
|
$ |
0.43 |
|
25,000 |
|
$ |
0.62 |
|
67,500 |
|
$ |
0.62 |
|
67,500 |
|
$ |
0.54 |
|
39,321 |
|
— |
|
— |
|
|
|
HSC |
|
|
|
|
|
$ |
0.13 |
|
70,000 |
|
$ |
0.13 |
|
70,000 |
|
$ |
0.13 |
|
23,587 |
|
— |
|
— |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Non-hedge |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
CIG |
|
$ |
0.71 |
|
175,000 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
$ |
0.39 |
|
20,000 |
|
|||
|
NWPL |
|
$ |
0.71 |
|
70,000 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
$ |
0.20 |
|
15,000 |
|
|||
|
HSC |
|
$ |
0.35 |
|
54,500 |
|
— |
|
— |
|
— |
|
— |
|
$ |
0.33 |
|
13,261 |
|
— |
|
— |
|
|||
|
|
|
|
|
344,500 |
|
|
|
187,500 |
|
|
|
187,500 |
|
|
|
97,278 |
|
|
|
35,000 |
|
|||||
Acquired in the Westport merger
Placed by Kerr-McGee in connection with the Westport merger
(1) Derivative transactions are on a million Btu (MMBtu) basis. Kerr-McGee reports production/sales on a MCF basis. The conversion rate is 1.095 MMBtu to 1 MCF.
Certain collars are presented on a weighted-average basis. Actual collar prices may differ.
** Cautionary Statement Concerning Forward-Looking Statements **
The information contained in this table represents Kerr-McGee’s current derivative contracts. These derivative contracts were entered into based on projected production volume forecasts. These forecasts are estimated projections that may or may not occur in the future, and constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, in those documents in which such projections are provided. Future results and developments set forth in this statement may be affected by numerous uncertainties, factors and risks, such as but not limited to the accuracy of the assumptions that underlie the statement, the success of the oil and gas exploration and production program, drilling risks, market value of oil and gas, uncertainties in interpreting engineering data, changes in laws and regulations, the ability to respond to challenges in international markets, political or economic conditions, trade and regulatory matters, and other factors and risks identified in the Risk Factors section of Kerr-McGee’s Annual Report on Form 10-K and other SEC filings. Actual results and developments may differ materially from those expressed or implied in this statement. Therefore, the information contained in this statement may not be accurate. Kerr-McGee does not undertake to update, revise or correct any of the forward-looking information.
Kerr-McGee Corporation
Budget Pricing Assumptions
|
|
|
2005 |
|
2006 |
|
2007 & |
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Crude Oil (WTI $/Bbl) |
|
$ |
38.00 |
|
$ |
34.00 |
|
$ |
32.00 |
|
|
Natural Gas (NYMEX $/MM Btu) |
|
$ |
6.00 |
|
$ |
5.50 |
|
$ |
5.00 |
|
Kerr-McGee Corporation
Return on Average Capital Employed
(Millions of Dollars)
Return on Average Capital Employed - Consolidated
|
|
|
2004 |
|
2003 |
|
2002 |
|
2001 |
|
2000 |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Income (loss) from continuing operations, net of tax |
|
$ |
415 |
|
$ |
264 |
|
$ |
(590 |
) |
$ |
480 |
|
$ |
812 |
|
|||||
|
Add: Interest and debt expense, net of tax |
|
159 |
|
163 |
|
179 |
|
127 |
|
135 |
|
||||||||||
|
Income (loss) from continuing operations before interest and debt expense, net of tax |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
$ |
574 |
|
$ |
427 |
|
$ |
(411 |
) |
$ |
607 |
|
$ |
947 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Average capital employed |
|
$ |
7,759 |
|
$ |
6,385 |
|
$ |
6,948 |
|
$ |
6,220 |
|
$ |
4,419 |
|
|||||
|
Return on average capital employed |
|
7.40 |
% |
6.69 |
% |
-5.92 |
% |
9.76 |
% |
21.43 |
% |
||||||||||
Return on Average Capital Employed - Exploration and Production
|
|
|
2004 |
|
2003 |
|
2002 |
|
2001 |
|
2000 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Net operating profit (loss) from continuing operations (1) |
|
$ |
787 |
|
$ |
629 |
|
$ |
(269 |
) |
$ |
580 |
|
$ |
927 |
|
|
Allocated share of corporate and other income (expense) (2) |
|
(80 |
) |
(91 |
) |
(74 |
) |
26 |
|
(28 |
) |
|||||
|
Net operating profit (loss) after deducting a share of |
|
|
|
|
|
|
|
|
|
|
|
|||||
|
corporate and other income (expense) |
|
$ |
707 |
|
$ |
538 |
|
$ |
(343 |
) |
$ |
606 |
|
$ |
899 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Average capital employed |
|
$ |
6,554 |
|
$ |
5,003 |
|
$ |
5,578 |
|
$ |
4,909 |
|
$ |
3,345 |
|
|
Return on average capital employed |
|
10.78 |
% |
10.75 |
% |
-6.14 |
% |
12.33 |
% |
26.88 |
% |
|||||
Return on Average Capital Employed - Exploration and Production
(excluding effects of commodity derivatives)
|
|
|
2004 |
|
2003 |
|
2002 |
|
2001 |
|
2000 |
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Net operating profit (loss) from continuing operations (1) |
|
$ |
787 |
|
$ |
629 |
|
$ |
(269 |
) |
$ |
580 |
|
$ |
927 |
|
||||
|
Allocated share of corporate and other income (expense) (2) |
|
(80 |
) |
(91 |
) |
(74 |
) |
26 |
|
(28 |
) |
|||||||||
|
Net operating profit (loss) after deducting a share of |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
corporate and other income (expense) |
|
707 |
|
538 |
|
(343 |
) |
606 |
|
899 |
|
|||||||||
|
Add: Losses on commodity derivatives, net of taxes |
|
488 |
|
179 |
|
51 |
|
— |
|
— |
|
|||||||||
|
Net operating profit (loss) excluding effects of commodity derivatives |
|
$ |
1,194 |
|
$ |
717 |
|
$ |
(291 |
) |
$ |
606 |
|
$ |
899 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Average capital employed |
|
$ |
6,765 |
|
$ |
5,079 |
|
$ |
5,603 |
|
$ |
4,909 |
|
$ |
3,345 |
|
||||
|
Return on average capital employed |
|
17.65 |
% |
14.11 |
% |
-5.19 |
% |
12.33 |
% |
26.88 |
% |
|||||||||
(1) Net operating profit represents segment results of operations before considering general corporate expenses, interest and debt expense, environmental provisions related to businesses in which the company’s affiliates are no longer engaged and other income (expense).
(2) Computation of estimated share of corporate and other income (expense) is provided below.
Calculation of Allocated Corporate and Other Income (Expense)
|
|
|
2004 |
|
2003 |
|
2002 |
|
2001 |
|
2000 |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
Income from continuing operations |
|
$ |
415 |
|
$ |
264 |
|
$ |
(590 |
) |
$ |
480 |
|
$ |
812 |
|
||
|
Add: Interest and debt expense, net of tax |
|
159 |
|
163 |
|
179 |
|
127 |
|
135 |
|
|||||||
|
Income (loss) from continuing operations before interest and debt expense |
|
574 |
|
427 |
|
(411 |
) |
607 |
|
947 |
|
|||||||
|
Less: Net operating (profit) loss from continuing operations - Exploration & Production |
|
(787 |
) |
(629 |
) |
269 |
|
(580 |
) |
(927 |
) |
|||||||
|
Less: Net operating (profit) loss from continuing operations - Chemical |
|
54 |
|
20 |
|
(5 |
) |
24 |
|
(76 |
) |
|||||||
|
Unallocated corporate and other income (expense) |
|
$ |
(159 |
) |
$ |
(182 |
) |
$ |
(147 |
) |
$ |
51 |
|
$ |
(56 |
) |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
One half of corporate and other income (expense) to be allocated |
|
$ |
(80 |
) |
$ |
(91 |
) |
$ |
(74 |
) |
$ |
26 |
|
$ |
(28 |
) |
||
Kerr-McGee Corporation
Capital Employed and Average Capital Employed
(Millions of Dollars)
Capital Employed and Average Capital Employed - Consolidated
|
|
|
2004 |
|
2003 |
|
2002 |
|
2001 |
|
2000 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total Assets |
|
$ |
14,518 |
|
$ |
10,250 |
|
$ |
9,909 |
|
$ |
11,076 |
|
$ |
7,666 |
|
||||||
|
Total Liabilities |
|
9,200 |
|
7,614 |
|
7,373 |
|
7,902 |
|
5,033 |
|
|||||||||||
|
Capital Employed |
|
$ |
5,318 |
|
$ |
2,636 |
|
$ |
2,536 |
|
$ |
3,174 |
|
$ |
2,633 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Deduct: Net assets related to discontinued exploration and production operations |
|
— |
|
— |
|
(178 |
) |
(318 |
) |
(245 |
) |
|||||||||||
|
Deduct: Discontinued forest products operations |
|
(3 |
) |
(4 |
) |
(5 |
) |
(5 |
) |
(5 |
) |
|||||||||||
|
Add: Minority interest in subsidiary companies |
|
4 |
|
7 |
|
4 |
|
3 |
|
24 |
|
|||||||||||
|
Add: Long-term debt including current portion |
|
3,699 |
|
3,655 |
|
3,904 |
|
4,574 |
|
2,425 |
|
|||||||||||
|
Add: Interest payable |
|
97 |
|
109 |
|
105 |
|
100 |
|
81 |
|
|||||||||||
|
Adjusted Capital Employed |
|
$ |
9,115 |
|
$ |
6,403 |
|
$ |
6,366 |
|
$ |
7,528 |
|
$ |
4,913 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Average Capital Employed |
|
$ |
7,759 |
|
$ |
6,385 |
|
$ |
6,948 |
|
$ |
6,220 |
|
$ |
4,419 |
|
||||||
Capital Employed and Average Capital Employed - Exploration and Production
|
|
|
2004 |
|
2003 |
|
2002 |
|
2001 |
|
2000 |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Total Assets (1) |
|
$ |
12,246 |
|
$ |
7,385 |
|
$ |
7,030 |
|
$ |
8,076 |
|
$ |
4,849 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Total Liabilities (1) |
|
4,073 |
|
2,731 |
|
2,194 |
|
2,182 |
|
1,164 |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Capital Employed (1) |
|
$ |
8,173 |
|
$ |
4,654 |
|
$ |
4,836 |
|
$ |
5,894 |
|
$ |
3,685 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Allocated share of corporate and other capital employed |
|
(28 |
) |
308 |
|
208 |
|
217 |
|
21 |
|
||||||||||
|
Adjusted Capital Employed (1) |
|
$ |
8,145 |
|
$ |
4,962 |
|
$ |
5,044 |
|
$ |
6,111 |
|
$ |
3,706 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Average Capital Employed |
|
$ |
6,554 |
|
$ |
5,003 |
|
$ |
5,578 |
|
$ |
4,909 |
|
$ |
3,345 |
|
|||||
Capital Employed and Average Capital Employed - Exploration and Production
(excluding effects of commodity derivative assets and liabilities)
|
|
|
2004 |
|
2003 |
|
2002 |
|
2001 |
|
2000 |
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Total Assets (1) |
|
$ |
12,246 |
|
$ |
7,385 |
|
$ |
7,030 |
|
$ |
8,076 |
|
$ |
4,849 |
|
||||
|
Total Liabilities (1) |
|
4,073 |
|
2,731 |
|
2,194 |
|
2,182 |
|
1,164 |
|
|||||||||
|
Capital Employed (1) |
|
$ |
8,173 |
|
$ |
4,654 |
|
$ |
4,836 |
|
$ |
5,894 |
|
$ |
3,685 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Allocated share of corporate and other capital employed |
|
(28 |
) |
308 |
|
208 |
|
217 |
|
21 |
|
|||||||||
|
Add: E&P commodity derivative liabilities, net of tax |
|
321 |
|
101 |
|
51 |
|
— |
|
— |
|
|||||||||
|
Adjusted Capital Employed (1) |
|
$ |
8,466 |
|
$ |
5,063 |
|
$ |
5,095 |
|
$ |
6,111 |
|
$ |
3,706 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Average Capital Employed |
|
$ |
6,765 |
|
$ |
5,079 |
|
$ |
5,603 |
|
$ |
4,909 |
|
$ |
3,345 |
|
||||
Calculation of Allocated Corporate and Other Capital Employed
|
|
|
2004 |
|
2003 |
|
2002 |
|
2001 |
|
2000 |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
Adjusted Consolidated Capital Employed (1) |
|
$ |
9,115 |
|
$ |
6,403 |
|
$ |
6,366 |
|
$ |
7,528 |
|
$ |
4,913 |
|
||
|
E&P Capital Employed (1) |
|
8,173 |
|
4,654 |
|
4,836 |
|
5,894 |
|
3,685 |
|
|||||||
|
Chemical Capital Employed (1) |
|
997 |
|
1,134 |
|
1,114 |
|
1,200 |
|
1,186 |
|
|||||||
|
Corporate and Other Capital Employed (1) |
|
$ |
(55 |
) |
$ |
615 |
|
$ |
416 |
|
$ |
434 |
|
$ |
42 |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
One half of corporate and other capital employed |
|
$ |
(28 |
) |
$ |
308 |
|
$ |
208 |
|
$ |
217 |
|
$ |
21 |
|
||
(1) Excludes assets and liabilities related to discontinued operations.
IMPORTANT INFORMATION
Kerr-McGee filed an amended preliminary proxy statement with the U.S. Securities and Exchange Commission on March 11, 2005 relating to Kerr-McGee’s solicitation of proxies from the stockholders of Kerr-McGee with respect to the Kerr-McGee 2005 annual meeting of stockholders. Kerr-McGee and its directors and certain of its officers and other employees may be deemed to be participants in the solicitation of proxies for the 2005 annual meeting. The amended preliminary proxy statement contains detailed information regarding the names, affiliation and interests of individuals who may be deemed participants in the solicitation of proxies of Kerr-McGee’s stockholders. Kerr-McGee will also be filing a definitive proxy statement and other relevant documents. KERR-MCGEE ADVISES SECURITY HOLDERS TO READ THE DEFINITIVE PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Kerr-McGee’s proxy statement and other relevant documents may be obtained without charge from the SEC’s website at www.sec.gov and from Kerr-McGee at www.kerr-mcgee.com. You may also obtain a free copy of Kerr-McGee’s definitive proxy statement, when it becomes available, by contacting Georgeson Shareholder Communications Inc. toll free at 877-278-6310. This presentation contains expressions of opinion and belief. Except as otherwise expressly attributed to another individual or entity, these opinions and beliefs are the opinions and beliefs of Kerr-McGee Corporation.