SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
SCHEDULE 13D*
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13d-2(a)
Kerr-McGee Corporation
--------------------------------------------------------------------------------
(Name of Issuer)
Common Stock, par value $1.00 per share
--------------------------------------------------------------------------------
(Title of Class of Securities)
492386107
--------------------------------------------------------------------------------
(CUSIP Number)
Marc Weingarten, Esq.
Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York 10022
(212) 756-2000
--------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
February 28, 2005
--------------------------------------------------------------------------------
(Date of Event which Requires
Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition that is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the
following box. [ ]
NOTE: Schedules filed in paper format shall include a signed original
and five copies of the schedule, including all exhibits. See Rule 13d-7 for
other parties to whom copies are to be sent.
(Continued on following pages)
(Page 1 of 15 Pages)
__________________________
* The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
------------------------------ ---------------------
CUSIP NO. 492386107 SCHEDULE 13D PAGE 2 OF 15 PAGES
------------------------------ ---------------------
--------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
JANA PARTNERS LLC
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [X]
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
AF
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e) [ ]
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
--------------------------------------------------------------------------------
7 SOLE VOTING POWER
4,501,300 (including options to purchase up to
1,700,200 Shares) (see Item 5)
----------------------------------------------------------
NUMBER OF 8 SHARED VOTING POWER
SHARES
BENEFICIALLY -0-
OWNED BY ----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON WITH 4,501,300 (including options to purchase up to
1,700,200 Shares) (see Item 5)
----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
4,501,300 (including options to purchase up to 1,700,200 Shares)
(see Item 5)
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES*
[x]
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
3.0% (see Item 5)
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IA
--------------------------------------------------------------------------------
* SEE INSTRUCTIONS BEFORE FILLING OUT!
------------------------------ ---------------------
CUSIP NO. 492386107 SCHEDULE 13D PAGE 3 OF 15 PAGES
------------------------------ ---------------------
ITEM 1. SECURITY AND ISSUER.
This statement on Schedule 13D relates to the shares ("Shares") of
common stock, $1.00 par value, of Kerr-McGee Corporation (the "Issuer"). The
principal executive office of the Issuer is located at Kerr-McGee Center,
Oklahoma City, Oklahoma 73125.
ITEM 2. IDENTITY AND BACKGROUND.
(a) This statement is filed by JANA Partners LLC, a Delaware limited
liability company (the "Reporting Person"). The Reporting Person is a private
money management firm which holds the Shares of the Issuer in various accounts
under its management and control. The principals of the Reporting Person are
Barry Rosenstein and Gary Claar (the "Principals").
Any disclosures made herein with respect to persons or entities other
than the Reporting Person and the Principals are made on information and belief
after making inquiry to the appropriate party. By virtue of the communications
with the Issuer by representatives of Icahn Partners LP, Icahn Partners Master
Fund LP and High River Limited Partnership (collectively, the "Icahn Group") and
of the Reporting Person, as more fully described in Item 4, the Reporting Person
may be deemed to be a "group" with the Icahn Group for purposes of the Act.
Although the Reporting Person does not affirm that such a group has been formed,
this disclosure is being made to ensure compliance with the Act. The Reporting
Person expressly disclaims beneficial ownership of securities held by any person
or entity other than, to the extent of any pecuniary interest therein, the
various accounts under the Reporting Person's management and control. The
securities reported herein as being beneficially owned by the Reporting Person
do not include any securities held by the Icahn Group or any other person or
entity other than the various accounts under the Reporting Person's management
and control.
(b) The principal business address of the Reporting Person and the
Principals is 201 Post Street, Suite 1000, San Francisco, California 94108.
(c) The principal business of the Reporting Person and the Principals
is investing for accounts under their management.
(d) Neither the Reporting Person nor the Principals has, during the
last five years, been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors).
(e) Neither the Reporting Person nor the Principals has, during the
last five years, been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws.
------------------------------ ---------------------
CUSIP NO. 492386107 SCHEDULE 13D PAGE 4 OF 15 PAGES
------------------------------ ---------------------
(f) The Reporting Person is a limited liability company organized in
Delaware. The Principals are citizens of the United States of America.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Of the 4,501,300 Shares reported herein by the Reporting Person,
2,801,100 Shares were acquired at an aggregate purchase price of approximately
$174,730,022.67, and the remaining 1,700,200 Shares represent options to acquire
Shares, which options were acquired at an aggregate purchase price of
approximately $4,370,809.54. The Shares beneficially owned by the Reporting
Person were acquired with investment funds in accounts under management.
ITEM 4. PURPOSE OF TRANSACTION.
The Reporting Person originally acquired Shares for investment in the
ordinary course of business. The Reporting Person believes that the Shares at
current market prices are undervalued and represent an attractive investment
opportunity. On or about February 23, 2004, representatives of the Reporting
Person and the Icahn Group spoke with Luke R. Corbett, Chairman and Chief
Executive Officer of the Issuer, and suggested various actions to be taken by
the Issuer that they believe would enhance stockholder value. These suggestions
were then memorialized in a letter to the Issuer on March 3, 2005, a copy of
which is attached hereto as Exhibit A and incorporated herein by reference.
Pursuant to discussions among the Reporting Person and the Icahn Group, on March
2, 2005 the Icahn Group notified the Issuer that it proposed to nominate Barry
Rosenstein and Carl Icahn for election to the Issuer's board of directors at the
2005 annual meeting of stockholders. Based on the March 2, 2005 deadline for
stockholders to submit proposals, as set forth in the Issuer's bylaws, the
Reporting Person and the Icahn Group believed it necessary to preserve their
right to nominate Messrs. Rosenstein and Icahn as candidates, and to solicit
proxies in favor of these nominees, should the Issuer not take satisfactory
measures in pursuit of stockholder value.
Neither the Reporting Person nor the Principals has any present plan or
proposal that would relate to or result in any of the matters set forth in
subparagraphs (a)-(j) of Item 4 of Schedule 13D except as set forth herein or
such as would occur upon completion of any of the actions discussed above. The
Reporting Person intends to review its investment in the Issuer on a continuing
basis. Depending on various factors including, without limitation, the Issuer's
financial position and strategic direction, the Issuer's response to the actions
suggested by the Reporting Person and the Icahn Group, price levels of the
Shares, conditions in the securities market and general economic and industry
conditions, the Reporting Person may in the future take such actions with
respect to its investment in the Issuer as it deems appropriate including,
without limitation, purchasing additional Shares or selling some or all of its
Shares, and, alone or with others, pursuing further discussions with the Issuer,
other stockholders and third parties, soliciting proxies in favor of Messrs.
Rosenstein and Icahn and/or otherwise changing its intention with respect to any
and all matters referred to in Item 4.
SECURITY HOLDERS ARE ADVISED TO READ THE PROXY STATEMENT AND OTHER DOCUMENTS
RELATED TO SOLICITATION OF PROXIES BY JANA PARTNERS LLC AND ITS AFFILIATES FROM
THE STOCKHOLDERS OF KERR-MCGEE CORPORATION FOR USE AT ITS ANNUAL MEETING WHEN
AND IF THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION,
INCLUDING INFORMATION RELATING TO THE PARTICIPANTS IN ANY SUCH PROXY
SOLICITATION. WHEN AND IF COMPLETED, THE PROXY STATEMENT AND SUCH OTHER
DOCUMENTS WILL BE AVAILABLE AT NO CHARGE AT THE SECURITIES AND EXCHANGE
COMMISSION'S WEBSITE AT HTTP://WWW.SEC.GOV, AND A DEFINITIVE PROXY STATEMENT AND
A FORM OF PROXY WILL BE MAILED TO STOCKHOLDERS OF KERR-MCGEE CORPORATION.
------------------------------ --------------------
CUSIP NO. 492386107 SCHEDULE 13D PAGE 5 OF 15 PAGES
------------------------------ --------------------
ITEM 5. INTEREST IN SECURITIES OF THE COMPANY.
(a) The aggregate percentage of Shares reported to be beneficially
owned by the Reporting Person is based upon 151,692,157 Shares outstanding,
which is the total number of Shares outstanding as reported in the Issuer's
Quarterly Report on Form 10-Q for the quarter ended September 30, 2004.
As of the close of business on March 2, 2005, the Reporting Person may
be deemed to beneficially own 4,501,300 Shares (including options to purchase up
to 1,700,200 Shares), constituting approximately 2.6% of the Shares outstanding.
Upon information and belief, the Icahn Group, as of the close of business on
March 2, 2005, may be deemed to beneficially own 7,106,000 Shares. Accordingly,
the 11,607,300 Shares that may be deemed to be beneficially owned in the
aggregate by the Reporting Person and the Icahn Group, as of the close of
business on March 2, 2005, constitutes approximately 7.65% of the Shares
outstanding.
(b) The Reporting Person has sole voting and dispositive powers over
the 4,501,300 Shares reported herein (including, if such options are exercised,
the 1,700,200 Shares underlying the options reported herein), which powers are
exercised by the Principals.
(c) Information concerning transactions in the Shares effected by the
Reporting Persons during the past sixty days is set forth in Exhibit B hereto
and is incorporated herein by reference. Except for 250,000 Shares sold in a
private transaction pursuant to an option that had been issued to and exercised
by the Icahn Group, all of the transactions in Shares listed on Exhibit B hereto
were effected in open market purchases on the New York Stock Exchange through
various brokerage entities. All of the options held, as reported herein, were
acquired in open market purchases as set forth in Item 6.
(d) No person (other than the Reporting Person) is known to have the
right to receive or the power to direct the receipt of dividends from, or the
proceeds from the sale of, the Shares.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE COMPANY.
As set forth below, the Reporting Person holds, as of March 2, 2005,
options to acquire 1,700,200 Shares, each of which was acquired on the open
market:
------------------------------ --------------------
CUSIP NO. 492386107 SCHEDULE 13D PAGE 3 OF 15 PAGES
------------------------------ --------------------
Shares
Date of Underlying Exercise Price Purchase Price
Purchase Options per Share ($) Expiration Date per Option ($)
-------------------------------------------------------------------------------
02/07/05 49,000 65.00 03/18/05 1.1859
02/08/05 100,000 65.00 03/18/05 1.3357
02/22/05 1,000 75.00 03/18/05 2.2555
02/25/05 100,000 80.00 03/18/05 1.1942
02/28/05 73,300 80.00 04/15/05 2.0558
02/28/05 70,700 80.00 03/18/05 0.9558
03/01/05 250,000 80.00 03/18/05 1.5000
03/01/05 211,000 80.00 03/18/05 1.0294
03/01/05 226,900 75.00 03/18/05 3.8279
03/01/05 100,000 80.00 04/15/05 2.7108
03/02/05 272,100 75.00 03/18/05 5.2532
03/02/05 126,900 80.00 04/15/05 3.1693
03/02/05 118,300 80.00 03/18/05 2.2168
03/02/05 1,000 65.00 03/18/05 13.5285
As more fully described in Item 4, pursuant to discussions among the
Reporting Person and the Icahn Group, on March 2, 2005 the Icahn Group notified
the Issuer that it proposed to nominate Barry Rosenstein and Carl Icahn for
election to the Issuer's board of directors at the 2005 annual meeting of
stockholders. Representatives of the Reporting Person and the Icahn Group have
suggested various actions to the Issuer that they believe would enhance
stockholder value. The Reporting Person currently intends to solicit proxies in
favor of Messrs. Rosenstein and Icahn should the Issuer not take satisfactory
measures in pursuit of stockholder value.
Except as otherwise set forth herein, the Reporting Person does not have
any contract, arrangement, understanding or relationship with any person with
respect to securities of the Company.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
1. Exhibit A - Letter to the Issuer dated March 3, 2005.
2. Exhibit B - Transactions in the Shares by the Reporting Person during the
past 60 days.
--------------------------- -------------------
CUSIP NO. 492386107 SCHEDULE 13D PAGE 7 OF 15 PAGES
--------------------------- -------------------
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: March 3, 2005
JANA PARTNERS LLC
By: /s/ Barry S. Rosenstein
---------------------------
Name: Barry S. Rosenstein
Title: Managing Director
By: /s/ Gary Claar
---------------------------
Name: Gary Claar
Title: Managing Director
--------------------------- -------------------
CUSIP NO. 492386107 SCHEDULE 13D PAGE 8 OF 15 PAGES
--------------------------- -------------------
EXHIBIT INDEX
1. Exhibit A - Letter to the Issuer dated March 3, 2005.
2. Exhibit B - Transactions in the Shares by the Reporting Person during the
past 60 days.
--------------------------- -------------------
CUSIP NO. 492386107 SCHEDULE 13D PAGE 9 OF 15 PAGES
--------------------------- -------------------
EXHIBIT A
LETTER TO THE ISSUER DATED MARCH 3, 2005
ICAHN PARTNERS LP
ICAHN PARTNERS MASTER FUND LP
HIGH RIVER LIMITED PARTNERSHIP
JANA PARTNERS LLC
March 3, 2005
VIA FEDERAL EXPRESS AND FACSIMILE
----------------------------------
Mr. Luke R. Corbett
Chairman and Chief Executive Officer
Kerr-McGee Corporation
123 Robert S. Kerr Avenue
Oklahoma City, Oklahoma 73102
Dear Mr. Corbett:
As we have previously discussed with you, each of us is a large
shareholder of Kerr-McGee Corporation ("KMG"), beneficially owning, in the
aggregate, approximately 11.6 million shares or approximately 7.6% of the
outstanding shares of KMG's common stock. Entities affiliated with Carl Icahn
recently proposed Carl Icahn and Barry Rosenstein, managing partner of Jana
Partners (a $3 billion hedge fund), as nominees for KMG's board of directors at
the upcoming annual meeting. This action was taken in order to help ensure that
KMG is focused on maximizing shareholder value. While management's recent
announcement of its intention to review strategic alternatives for its chemicals
business is a positive first step, we feel this action does not go far enough
toward maximizing the value of KMG's common stock.
A great opportunity exists today for shareholders of KMG. Never before
has there been such a disconnect between the stock market valuation of publicly
traded E&P companies such as KMG on a per barrel of oil equivalent ("boe") of
proved reserves basis and the value at which oil and gas futures are trading in
the commodity markets. We believe that this spread can be captured by KMG by
selling today a portion of its production for delivery over the next five years
and utilizing the proceeds from such a sale, today, to immediately repurchase
stock. We believe that if KMG were to follow the plan outlined below (and
detailed in the attached schedule), KMG's share price would increase
significantly. The plan would require KMG to take the following steps:
1. Sell the chemical business;
2. Enter into a transaction to monetize forward production and capitalize
on today's
--------------------------- -------------------
CUSIP NO. 492386107 SCHEDULE 13D PAGE 10 OF 15 PAGES
--------------------------- -------------------
3. high price of oil and gas, low interest rate environment and increased
commodity market liquidity; and
4. Utilize the proceeds from the chemical business sale and the forward
sale of a portion of KMG's future oil and gas production to buy back
shares.
At KMG's current market price of $78.99 per share (as of the close of
the market on March 2, 2005), and pro-forma for the sale of its chemicals
business for $1.7 billion (the mid-point of the range projected on KMG's January
26, 2005 fourth quarter conference call), KMG is trading at approximately $11.80
per boe of proved in the ground reserves. To monetize the current discount in
KMG's stock market valuation versus the commodity market valuation for oil and
gas, we recommend that KMG immediately execute a Volumetric Production Payment
transaction ("VPP") for 50 million boe's of proved producing reserves per year
over each of the next five years (i.e., 250 million boe's of production total,
or approximately 32% of KMG's total proved producing reserves), constituting
approximately 37% of KMG's projected 2005 production.
Based on the current forward curve for oil and gas, the low interest
rate environment and increased liquidity in the commodity markets, we believe
(as a result of discussions with commodity trading firms) that KMG could realize
proceeds of between $35 and $38 per boe sold forward through a VPP transaction.
As such, KMG could raise a total of approximately $8.75 BILLION OF CASH
(assuming the VPP transaction at $35 per boe), or approximately 60% of its
enterprise value (excluding KMG's chemicals business), by selling only
approximately 21% of its total proved reserves. After raising the proceeds
described above (including proceeds from the sale of the chemicals business),
KMG should repurchase up to approximately 116 million shares of its stock at $90
per share. Following such a transaction, KMG would still have approximately 950
million boe of proved reserves, approximately 56% of which would be proved
developed reserves and approximately 44% would be proved undeveloped reserves.
Assuming that KMG would trade at its current value of $11.80 per boe of
proved reserves (excluding the chemical business), the pro forma share price
following the proposed transactions would be $111 per share. Historically, we
believe investors have penalized KMG's share price due to what we perceive as
poor results achieved in exploration, drilling and use of free cash flow.
However, after giving effect to the proposed VPP transaction and the sale of the
chemicals business, we believe that the public market valuation for KMG's
remaining reserves could increase to be more in line with the reserve valuations
attributed to its comparable companies (see attached schedule). If this were to
occur, KMG could trade at $132 per share. Obviously, there can be no assurance
that KMG common stock will trade within the $111 to $132 range, even if all of
these transactions are undertaken and completed.
We would like to discuss this recommendation with you at your earliest
--------------------------- -------------------
CUSIP NO. 492386107 SCHEDULE 13D PAGE 11 OF 15 PAGES
--------------------------- -------------------
convenience since we feel it is important to move quickly while the opportunity
exists.
Very truly yours,
/s/Carl C. Icahn
------------------------
CARL C. ICAHN
/s/Barry Rosenstein
------------------------
BARRY ROSENSTEIN
[03.03.05 Letter to Kerr-McGee from Icahn and Rosenstein re VPP transaction]
--------------------------- -------------------
CUSIP NO. 492386107 SCHEDULE 13D PAGE 12 OF 15 PAGES
--------------------------- -------------------
SCHEDULE A
----------
THIS SHOULD BE READ ONLY IN CONJUNCTION WITH THE ATTACHED LETTER DATED MARCH
3, 2005
KMG VALUATION: PROFORMA FOR SALE OF CHEMICALS BUSINESS
AND 250 MMBOE VPP TRANSACTION AND STOCK REPURCHASE
CHEMICAL BUSINESS SALES PROCEEDS (1) $ 1,700,000,000
Estimated Tax Basis 1,600,000,000
Assumed Tax Rate 35%
---------------
ESTIMATED AFTER-TAX PROCEEDS FROM THE CHEMICAL SALE $ 1,665,000,000
VPP BOE's Sold 250,000,000
Estimated VPP Sales Proceeds per BOE $ 35.00
---------------
ESTIMATED VPP SALES PROCEEDS $ 8,750,000,000
ESTIMATED PROCEEDS AVAILABLE FOR STOCK PURCHASES $ 10,415,000,000
ASSUMED STOCK REPURCHASE PRICE PER SHARE $ 90.00
Diluted Shares Outstanding at 12/31/04 (Per
KMG 2004 Earnings Release) 161,706,000
Assumed Shares Repurchased 115,722,222
Pro Forma Shares Outstanding after Assumed Repurchases 45,983,778
Total Proved Reserves at 12/31/04 (Per KMG
2004 Earnings Release) 1,200,000,000
Proved Producing Reserves Sold in VPP Transaction 250,000,000
---------------
Total Proved Reserves after VPP Transaction 950,000,000
Calculated Current Value of KMG Per Proved Reserve (2) $ 11.80
IMPLIED ENTERPRISE VALUE OF REMAINING KMG RESERVES @
$11.80 PER BOE $11,210,000,000
Value Attributed to KMG Exploratory
Acreage and Other Assets -
Less Current KMG Net Debt (Per KMG 2004 Earnings Release)$ 3,189,100,000
Present Value of Cost Associated with VPP Production 1,581,000,000
(ASSUMED AT $6.0 PER BOE GROWN AT 15% PER ANNUM,
DISCOUNTED AT 8% COST OF CAPITAL)
ESTIMATED PRESENT VALUE OF VPP TAX LIABILITY 1,330,000,000
REMAINDER EQUALS PRO FORMA KMG EQUITY VALUE $ 5,109,900,000
Divided by Pro Forma KMG Shares Outstanding 45,983,778
RESULTS IN PRO FORMA KMG VALUE PER SHARE @
$11.80 PER BOE $ 111.12
-------------------------- -----------------------
CUSIP NO. 492386107 SCHEDULE 13D PAGE 13 OF 15 PAGES
-------------------------- -----------------------
EFFECT ON KMG'S SHARE PRICE ASSUMING A $12.80 PER BOE VALUATION OF
PROVED RESERVES
Current Assumed E&P Comparable Company Value of
Public Market Proved Reserves (3) $ 12.80
IMPLIED ENTERPRISE VALUE OF REMAINING KMG RESERVES @
$12.80 PER BOE $12,160,000,000
Value Attributed to KMG Exploratory
Acreage and Other Assets -
Less Current KMG Net Debt (Per KMG 2004 Earnings Release) $ 3,189,100,000
Present Value of Cost Associated with
VPP Production 1,581,000,000
(ASSUMED AT $6.0 PER BOE GROWN AT 15% PER ANNUM,
DISCOUNTED AT 8% COST OF CAPITAL)
ESTIMATED PRESENT VALUE OF VPP TAX LIABILITY 1,330,000,000
REMAINDER EQUALS PRO FORMA KMG EQUITY VALUE $ 6,059,900,000
Divided by Pro Forma KMG Shares Outstanding 45,983,778
RESULTS IN PRO FORMA KMG VALUE PER SHARE AT
$12.80 PER BOE $ 131.78
Notes:
--------------
(1) Assumes Chemical business is sold for the mid-point of KMG management's
estimated valuation range as of January 26, 2005.
(2) KMG currently is trading at approximately $11.80 per boe of proved reserve
after deducting the value of the Chemical business at the mid-point of KMG
management's estimated valuation range as of January 26, 2005.
(3) Assumes KMG trades at $12.80 per boe of proved reserves. $12.95 represents
the comparable company valuation on a per boe of proved reserves basis (Based on
2004 Earnings Releases for each company.) Comps. are comprised of Apache, Devon,
Chesapeake and XTO Energy.
THIS SHOULD BE READ ONLY IN CONJUNCTION WITH THE ATTACHED LETTER DATED MARCH
3, 2005
--------------------------- -------------------
CUSIP NO. 492386107 SCHEDULE 13D PAGE 14 OF 15 PAGES
--------------------------- -------------------
EXHIBIT B
TRANSACTIONS IN THE SHARES BY THE REPORTING PERSON DURING THE PAST 60 DAYS
Date of Purchase (Sale) Shares of Common Stock Price per Share
Purchased (Sold) ($)
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
12/16/04 100,000 59.0389
12/22/04 100,000 58.3149
12/30/04 35,000 58.1890
01/03/05 100,000 56.9715
01/04/05 65,000 55.8455
01/07/05 75,000 56.4429
01/13/05 27,400 58.5759
01/13/05 100,000 58.7622
01/14/05 500 58.6570
01/14/05 100,000 58.7027
01/18/05 50,000 59.7400
01/20/05 98,000 58.3727
01/21/05 25,000 59.6000
01/24/05 50,000 60.0846
01/25/05 75,000 60.3329
01/26/05 125,000 59.6540
01/27/05 100,000 60.7730
01/28/05 75,000 60.4541
01/31/05 200,000 61.6390
01/31/05 245,000 61.7078
--------------------------- -------------------
CUSIP NO. 492386107 SCHEDULE 13D PAGE 15 OF 15 PAGES
--------------------------- -------------------
01/31/05 10,700 61.4280
01/31/05 22,800 60.4686
02/01/05 150,000 62.5734
02/04/05 200,000 62.9580
02/04/05 1,400 62.8050
02/07/05 80,300 63.6141
02/07/05 45,000 64.2684
02/08/05 100,000 64.3024
02/11/05 50,000 66.8984
02/14/05 100,000 67.3423
02/14/05 100,000 67.5628
02/14/05 50,000 67.6016
02/15/05 95,000 68.2814
02/15/05 100,000 68.6418
02/15/05 100,000 68.3215
02/15/05 100,000 68.4526
03/01/05 (250,000)* 60.0000
*Sold pursuant to an option that had been issued to and exercised by the Icahn
Group.