FILED BY KERR-MCGEE CORPORATION
PURSUANT TO RULE 425 UNDER THE
SECURITIES ACT OF 1933 AND DEEMED FILED
PURSUANT TO RULE 14A-12 UNDER THE
SECURITIES EXCHANGE ACT OF 1934
SUBJECT COMPANY: WESTPORT RESOURCES CORP.
SECURITIES ACT FILE NO. 333-114886
The communication filed herewith is the Kerr-McGee Corporation first quarter
2004 earnings release and tables in connection with the merger of Kerr-McGee
Corporation and Westport Resources Corporation.
Kerr-McGee Announces 2004 First-Quarter Earnings
------------------------------------------------
Oklahoma City, April 28, 2004 - Kerr-McGee Corp. (NYSE: KMG) reports net
income for the 2004 first quarter of $152.2 million ($1.41 per diluted common
share), compared with $69.9 million (68 cents per share) for the 2003 first
quarter. The company's 2004 first-quarter adjusted after-tax income was $159.4
million ($1.48 per share), compared with $127.3 million ($1.20 per share) for
the first quarter of 2003. Adjusted after-tax income is determined by excluding
from net income the results from discontinued operations, the cumulative effect
of an accounting change and special items. The increase of $32.1 million in the
2004 first-quarter adjusted after-tax income versus 2003 was primarily due to
higher oil and natural gas sales prices and lower exploration expense. This was
partially offset by lower crude oil sales volumes due to 2003 divestitures of
noncore properties, and higher gathering and general and administrative costs.
Three Months Ended
March 31
--------------------
(Millions of dollars, except per-share amounts) 2004 2003
------ ------
Net Income $152.2 $ 69.9
Less Income from Discontinued Operations - (.4)
Add Change in Accounting Principle - 34.7
------ ------
Income from Continuing Operations $152.2 $104.2
Add Special Items(1) 7.2 23.1
------ ------
Adjusted After-Tax Income $159.4 $127.3
====== ======
Diluted Earnings Per Share
Net Income $ 1.41 $ .68
Change in Accounting Principle - .31
------ ------
Continuing Operations $ 1.41 $ .99
====== ======
Adjusted After-Tax Income $ 1.48 $ 1.20
-===== ======
(1) Items included in "Special Items" are listed on page 9 as "Other
Information, Net of Income Taxes."
Adjusted after-tax income excludes items that management deems to not be
reflective of the company's core operations. This measure is a non-GAAP
financial measure. Management believes that this measure provides valuable
insight into the company's core earnings from operations and enables 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 special items differently, and the company cannot assure
that adjusted after-tax income is comparable with similarly titled amounts for
other companies.
"We continue to consistently meet or exceed our guidance in all aspects of
our operations," said Luke R. Corbett, Kerr-McGee chairman and chief executive
officer. "The ongoing efficient execution of our development and exploitation
program, including the early start-up of Gunnison, enabled us to achieve total
volumes near the upper end of our guidance. Our other major development projects
also are progressing well. In addition, our exploration success, highlighted by
discoveries at the Ticonderoga prospect in the deepwater Gulf of Mexico and at
NW Milne Point in Alaska, resulted in lower exploration costs for the quarter.
"Earlier this month, we announced a strategic merger with Westport
Resources Corp., which will add depth, breadth and balance to our oil and gas
operations," said Corbett. "We've already begun planning for the transition, so
we can immediately and effectively merge our businesses upon completion of the
transaction, which we expect to take place in the third quarter."
Operating Profit
----------------
First-quarter 2004 operating profit was $330.3 million, compared with
$269.6 million in the 2003 first quarter. Exploration and production operating
income for the 2004 period was $329.9 million, compared with $272.2 million for
the prior-year quarter. The increase is due to higher oil and gas sales prices,
slightly higher natural gas sales volumes and lower exploration costs, partially
offset by lower crude oil sales volumes and higher other operating costs.
Operating profit for the chemical operations improved by $3 million in the
2004 first quarter, compared with the 2003 period, primarily due to a decrease
in the loss from the non-pigment chemical operations in the 2004 first quarter.
Debt
----
During the first quarter of 2004, the company reduced debt by $174 million,
resulting in total debt at March 31, 2004 of approximately $3.5 billion. This
compares with total debt of approximately $3.7 billion at Dec. 31, 2003, and
approximately $3.8 billion at March 31, 2003.
Oil and Gas Volumes and Prices
------------------------------
Kerr-McGee's daily oil production from continuing operations averaged
143,200 barrels in the 2004 first quarter, down 13% from 165,400 barrels per day
in the 2003 period. The decrease was primarily due to the 2003 divestiture of
noncore, high-cost properties, combined with lower production generated in the
North Sea area.
Including the effect of the company's hedging program, the per-barrel sales
price for oil from continuing operations averaged $27.30 in the 2004 first
quarter, which was 33 cents higher than in the 2003 first quarter.
Natural gas sales averaged 763 million cubic feet per day for the 2004
first quarter, up slightly from the prior-year period. The average natural gas
sales price, including the effects of the company's hedging program, was $5.35
per thousand cubic feet, a 14% increase from the 2003 first quarter. Details on
the company's hedges for 2004 may be found on Kerr-McGee's website at
http://www.kerr-mcgee.com/pdf/hedgeguidance.pdf.
Revenues and Capital Expenditures
---------------------------------
First-quarter 2004 revenues of $1.1 billion remained essentially flat
compared with the prior year period.
Capital expenditures were $169.8 million, compared with $306 million for
the 2003 first quarter.
Kerr-McGee will hold a conference call today at 11 a.m. EDT to discuss its
first-quarter results and expectations for the future. Interested parties may
listen to the call via Kerr-McGee's website at www.kerr-mcgee.com or by calling
888-482-0024 within the United States or 617-801-9702 outside the United States.
The password for both dial-in numbers will be Kerr-McGee. A replay of the call
will be available for 48 hours at 888-286-8010 within the United States or
617-801-6888 outside the United States. The code for the replay of the call will
be #97428228. The webcast replay will be archived for 30 days on the company's
website.
Kerr-McGee is an Oklahoma City-based energy and inorganic chemical company
with worldwide operations and assets of approximately $10 billion.
# # #
IMPORTANT LEGAL INFORMATION
THIS PRESS RELEASE IS NOT AN OFFER TO SELL THE SECURITIES OF KERR-MCGEE
CORPORATION AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES.
INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE DEFINITIVE JOINT PROXY
STATEMENT/PROSPECTUS REGARDING THE PROPOSED TRANSACTION WHEN IT BECOMES
AVAILABLE BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION.
Kerr-McGee Corporation has filed a Registration Statement on Form S-4 with
the U.S. Securities and Exchange Commission (SEC) containing a preliminary joint
proxy statement/prospectus regarding the proposed transaction between Kerr-McGee
Corporation and Westport Resources Corporation. Investors and security holders
may obtain a free copy of the definitive joint proxy statement/prospectus when
it becomes available and other documents filed or furnished by Kerr-McGee
Corporation or Westport Resources Corporation with the SEC at the SEC's website,
www.sec.gov. Copies of the definitive joint proxy statement/prospectus and other
documents filed or furnished by Kerr-McGee Corporation or Westport Resources
Corporation may also be obtained for free by directing a request to Kerr-McGee
Corporation, Attn: Corporate Secretary, P.O. Box 25861, Oklahoma City, Oklahoma
73125 or to Westport Resources Corporation, Attn: Investor Relations, 1670
Broadway, Suite 2800, Denver, Colorado 80202.
Kerr-McGee, Westport Resources and their respective directors and officers
may be deemed to be participants in the solicitation of proxies with respect to
the proposed transaction involving Kerr-McGee and Westport Resources.
Information regarding Kerr-McGee's and Westport Resources' directors and
officers and a description of their direct and indirect interests, by security
holdings or otherwise, is available in the preliminary joint proxy
statement/prospectus contained in the above referenced Registration Statement on
Form S-4 filed with the SEC on April 27, 2004.
Safe Harbor Language on Forward Looking Statements:
Statements in this news release regarding the company's or management's
intentions, beliefs or expectations, or that otherwise speak to future events,
including resource estimates, production rate estimates, development schedule
and cost estimates, are "forward-looking statements" within the meaning of the
U.S. Private Securities Litigation Reform Act of 1995. These forward-looking
statements include those statements preceded by, followed by or that otherwise
include the words "believes," "expects," "anticipates," "intends," "estimates,"
"projects," "target," "budget," "goal," "plans," "objective," "outlook,"
"should," or similar words. These "forward-looking" statements also may include
statements relating to (1) the impact the companies expect the proposed
transaction to have on the combined entity's operations, financial condition,
and financial results, (2) the companies' expectations about their ability to
successfully integrate the combined businesses, (3) the amount of cost savings
and overall operational efficiencies the companies expect to realize as a result
of the proposed transaction, (4) when the companies expect to close the proposed
transaction, (5) anticipated drilling and development opportunities and (6) the
ability of the companies to meet their stated financial goals. In addition, any
statements regarding possible commerciality, development plans, capacity
expansions, drilling of new wells, ultimate recoverability of reserves, future
production rates, future cash flows and changes in any of the foregoing are
forward-looking statements.
Matters discussed in these statements involve risks and uncertainties which
may cause results to differ materially from those set forth in these statements.
The following factors, among others, could cause actual results to differ from
those set forth in these forward-looking statements: the ability to obtain
governmental approvals of the merger on the proposed terms and schedule; the
failure of Kerr-McGee or Westport Resources stockholders to approve the merger;
the risk that the businesses will not be integrated successfully; the risk that
the cost savings and any synergies from the merger may not be fully realized or
may take longer to realize than expected; disruption from the merger making it
more difficult to maintain relationships with customers, employees or suppliers;
the accuracy of the assumptions that underlie the statements; the success of the
oil and gas exploration and production program; the price of oil and gas;
drilling risks; uncertainties in interpreting engineering data; demand for
consumer products for which Kerr-McGee's oil and gas business supplies 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 identified in the Risk Factors
sections of Kerr-McGee's Annual Report on Form 10-K or Registration Statement on
Form S-4, Westport Resources' Annual Report on Form 10-K and other of their SEC
filings.
Investor Contact: Rick Buterbaugh
405-270-3561
Media Contact: Deborah Schramm
Direct: 405-270-2877
Pager: 888-734-8294
dschramm@kmg.com
KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES
(Unaudited)
Three Months Ended
March 31,
---------------------
(Millions of dollars, except per-share amounts) 2004 2003 (a)
-------- --------
Consolidated Statement of Income
--------------------------------
Revenues $1,116.3 $1,099.6
-------- --------
Costs and Expenses -
Costs and operating expenses 403.0 384.4
General and administrative expenses 83.6 70.9
Shipping and handling expenses 37.7 32.0
Accretion expense 6.6 6.2
Depreciation and depletion 190.3 189.6
Impairments on assets held for use 13.2 5.1
Loss (gain) associated with assets held for sale 3.4 (5.2)
Exploration, including dry holes and amortization of
undeveloped leases 50.6 140.5
Taxes, other than income taxes 28.4 25.4
Provision for environmental remediation and restoration,
net of reimbursements (0.8) 17.3
Interest and debt expense 57.0 65.0
-------- --------
Total Costs and Expenses 873.0 931.2
-------- --------
243.3 168.4
Other Income (Expense) (0.3) 1.7
-------- --------
Income before Income Taxes 243.0 170.1
Provision for Income Taxes (90.8) (65.9)
-------- --------
Income from Continuing Operations 152.2 104.2
Discontinued Operations, net of taxes - 0.4
Cumulative Effect of Change in Accounting Principle,
net of taxes - (34.7)
-------- --------
Net Income $ 152.2 $ 69.9
======== =========
Net Income (Loss) per Common Share -
Basic -
Continuing operations $ 1.52 $ 1.04
Accounting change - (0.34)
-------- --------
Net income $ 1.52 $ 0.70
======== ========
Diluted -
Continuing operations $ 1.41 $ 0.99
Accounting change - (0.31)
-------- --------
Net income $ 1.41 $ 0.68
======== ========
Thousands of Common Shares Outstanding -
End of period 101,398 100,852
Average 100,304 100,121
Average - including dilution 111,346 110,613
(a) Certain prior year amounts have been reclassified to conform with the
current year's presentation.
KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES
(Unaudited)
Three Months Ended
March 31,
---------------------
(Millions of dollars) 2004 2003 (a)
-------- --------
Segment Information
-------------------
Revenues
Exploration and production $ 833.8 $ 795.9
Chemicals - Pigment 252.4 253.3
Chemicals - Other 30.0 50.3
-------- --------
1,116.2 1,099.5
All other 0.1 0.1
-------- --------
Total $1,116.3 $1,099.6
======== ========
Operating Profit
Exploration and production -
Domestic (includes $10.8 loss ($7.0 after tax) in the
2003 first quarter for non-hedge derivatives) $ 308.3 $ 282.0
North Sea 93.0 124.1
China (1.3) 7.9
Other international (2.9) (1.4)
Impairments on assets held for use (13.2) (5.1)
Gain (loss) associated with assets held for sale (3.4) 5.2
-------- --------
Total Production Operations 380.5 412.7
Exploration expense (50.6) (140.5)
-------- --------
329.9 272.2
-------- -----------
Chemicals -
Pigment 7.2 7.4
Other (6.8) (10.0)
-------- --------
0.4 (2.6)
-------- --------
Total 330.3 269.6
Net Interest Expense (55.9) (63.8)
Loss from Equity Affiliates (8.3) (6.1)
Derivatives and Devon Stock Revaluation (b) - 0.9
Foreign Currency Gains (Losses) (2.0) 3.4
Other Expense (21.1) (33.9)
Provision for Income Taxes (90.8) (65.9)
-------- --------
Income from Continuing Operations 152.2 104.2
Discontinued Operations, net of taxes - 0.4
Cumulative Effect of Change in Accounting Principle,
net of taxes - (34.7)
-------- --------
Net Income $ 152.2 $ 69.9
======== ========
Net Operating Profit
Exploration and production $ 207.7 $ 167.4
Chemicals - Pigment 5.3 6.1
Chemicals - Other (4.4) (6.5)
-------- --------
Total 208.6 167.0
Net Interest Expense (36.0) (41.5)
Loss from Equity Affiliates (5.4) (4.0)
Derivatives and Devon Stock Revaluation (b) - 0.6
Foreign Currency Gains (Losses) (1.3) 4.0
Other Expense (13.7) (21.9)
Discontinued Operations, net of taxes - 0.4
Cumulative Effect of Change in Accounting Principle,
net of taxes - (34.7)
-------- --------
Net Income $ 152.2 $ 69.9
======== ========
(a) Certain prior year amounts have been reclassified to conform with the
current year's presentation.
(b) Includes non-hedge derivatives that are not part of operating profit.
KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES
(Unaudited)
Three Months Ended
March 31,
---------------------
(Millions of dollars) 2004 2003 (a)
-------- --------
Selected Exploration and Production Information
-----------------------------------------------
Revenue, excluding marketing revenue $ 752.1 $ 736.1
-------- --------
Production Costs -
Lease operating expense 88.9 87.9
Production taxes 15.1 14.4
-------- --------
Total 104.0 102.3
Depreciation and Depletion 161.7 156.7
Accretion Expense 6.6 6.2
Impairments on Assets Held for Use 13.2 5.1
Loss (Gain) Associated with Assets Held for Sale 3.4 (5.2)
General and Administrative Expense 31.2 22.0
Transportation Expense 26.8 21.7
Gas Gathering, Pipeline and Other Expenses 24.9 15.8
Exploration Expense 50.6 140.5
-------- --------
Total Costs and Expenses 422.4 465.1
-------- --------
Net, excluding marketing activities 329.7 271.0
Marketing - gas sales revenue 81.7 59.8
Marketing - gas purchase cost (including transportation) (81.5) (58.6)
-------- --------
Operating Profit $ 329.9 $ 272.2
======== ========
Other Information, Net of Income Taxes
--------------------------------------
Commodity and Other Derivatives and Devon Stock
Revaluation $ 0.5 $ (6.4)
Foreign Currency Gains (Losses) (1.3) 4.0
Impairments on Assets Held for Use (8.6) (3.3)
Gain (Loss) Associated with Assets Held for Sale (2.3) 3.0
Litigation Reserve - (4.2)
Costs Related to Chemical Plant Shutdown 1.2 (4.8)
Environmental Expenses, Net of Reimbursements (0.1) (10.4)
Gain on Sale of Devon Stock 5.8 -
Other Items (2.4) (1.0)
-------- --------
Total $ (7.2) $ (23.1)
======== ========
Selected Balance Sheet Information
----------------------------------
Cash $ 143.5 $ 80.7
Current Assets 1,690.7 1,279.7
Total Assets 9,941.2 9,892.1
Current Liabilities 2,062.3 1,515.2
Total Debt 3,481.6 3,754.7
Stockholders' Equity 2,650.0 2,563.5
Selected Cash Flow Information
------------------------------
Cash Provided by Operating Activities $ 274.6 $ 321.7
Depreciation, Depletion and Amortization
(including asset impairments and gain/loss on assets
held for sale) 219.7 212.7
Dividends Paid 45.4 45.2
Capital Expenditures (including dry hole expense) -
Exploration and production $ 145.8 $ 287.4
Chemicals - Pigment 20.0 15.5
Chemicals - Other 1.8 1.1
-------- --------
167.6 304.0
All other 2.2 2.0
-------- --------
Total Capital Expenditures (including dry hole expense) $ 169.8 $ 306.0
======== ========
(a) Certain prior year amounts have been reclassified to conform with the
current year's presentation.
KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES
(Unaudited)
Three Months Ended
March 31,
---------------------
2004 2003
-------- --------
Crude oil & condensate production (thousands of bbls/day)
Domestic -
Offshore 57.5 59.7
Onshore 18.8 21.3
North Sea 66.9 80.1
China - 4.3
-------- --------
Total Continuing Operations 143.2 165.4
Discontinued Operations - 2.4
-------- --------
Total 143.2 167.8
======== ========
Average price of crude oil sold (per bbl)
Domestic -
Offshore $ 28.02 $ 26.29
Onshore 28.10 27.57
North Sea 26.49 27.09
China - 31.12
Average for Continuing Operations 27.30 26.97
Discontinued Operations $ - $ 24.47
Natural gas sold (MMCF/day)
Domestic -
Offshore 328 286
Onshore 322 369
North Sea 113 106
-------- --------
Total 763 761
======== ========
Average price of natural gas sold (per MCF)
Domestic -
Offshore $ 5.69 $ 5.38
Onshore 5.33 4.59
North Sea 4.41 3.35
Average $ 5.35 $ 4.71
Titanium dioxide pigment production
(thousands of tonnes) 137 130