Form 425
Filed by Westport Resources Corporation
pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
of the Securities Exchange Act of 1934
Subject Company: Kerr-McGee Corporation
Commission File No.: 001-16619
The following joint press release was made by Westport Resources Corporation and
Kerr-McGee Corporation:
Joint News Release
KERR-MCGEE CORPORATION WESTPORT RESOURCES CORPORATION
KERR-MCGEE AND WESTPORT ANNOUNCE $3.4 BILLION STOCK MERGER
Oklahoma City and Denver, April 7, 2004 - Kerr-McGee Corp. (NYSE: KMG)
and Westport Resources Corp. (NYSE: WRC) today announced that their boards of
directors have unanimously approved a strategic merger valued at approximately
$3.4 billion. The merged company will be known as Kerr-McGee Corporation and
will be headquartered in Oklahoma City.
STRATEGIC BENEFITS
o Complementary high-quality assets in core U.S. Onshore and
Gulf of Mexico regions
o Enhances stable base of high-margin production
o Expands low-risk exploitation opportunities
o Increases free cash flow for high-impact exploration
opportunities
o Generates cost savings / synergies in excess of $40 million
pretax annually
o Reduces financial leverage and enables greater financial
flexibility
o Accretive to earnings and cash flow in 2005 and thereafter
"Westport's extensive inventory of low-risk U.S. exploitation
opportunities complements Kerr-McGee's high-impact deepwater exploration program
providing us a more predictable performance profile," said Luke R. Corbett,
Kerr-McGee chairman and chief executive officer. "Westport's substantial
property base in the Rockies expands our platform for applying our proven
tight-gas and supply-chain expertise. These new properties have a probable and
possible resource potential of 1.8 trillion cubic feet of natural gas equivalent
(TCFe), and more than 2,500 low-risk drilling locations have already been
identified. When combined with our existing U.S. onshore property
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position, these properties will provide a stable foundation of high-margin
production and low-risk growth opportunities. Additionally, the incremental free
cash flow generated from these properties will give Kerr-McGee added financial
flexibility to accelerate our high-potential deepwater program."
"This transaction provides important benefits to our shareholders,"
said Don Wolf, Westport chairman and chief executive officer. "It provides
significant value while retaining the opportunity to participate in the exciting
upside potential of Kerr-McGee. Our shareholders will benefit from becoming part
of a larger, more diversified company with tremendous growth opportunities
balanced with a substantial development portfolio and a strong balance sheet."
COMBINED COMPANY
o Proved reserves of approximately 1.3 billion barrels of oil
equivalent - 57% natural gas and 76% located in the U.S.
o High-margin production of approximately 1.2 billion cubic feet
of natural gas and 160,000 barrels of oil per day
o High-potential exploratory program with more than 71 million
gross undeveloped acres worldwide
o Titanium dioxide production capacity of 668,000 tonnes per
year, gross - 76% from proprietary chloride technology
o Net debt as a percent of total capitalization of approximately
42% by year-end
The addition of Westport's reserves will increase Kerr-McGee's proved
reserves by nearly 30%, mainly from North American natural gas. As of December
31, 2003, Westport had 1.8 TCFe of proved reserves which were 76% natural gas
and primarily located in the Rocky Mountain and Texas Gulf Coast areas.
Third-party reserve consultants determined 87% of the proved reserves. Westport
has an additional 1.8 TCFe of identified probable and possible resources.
Approximately 50% of these resources are located in and around the Natural
Buttes field, in the Uinta basin in northeast Utah. The Greater Natural Buttes
area is similar to Kerr-McGee's Wattenberg field and will allow
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Kerr-McGee to apply its proven expertise in tight-gas and supply-chain
management to maximize the efficient recovery of these resources.
Of the $3.4 billion purchase price, approximately $2.1 billion is
expected to be allocated to the 297 million barrels of equivalent (BOE) of
proved reserves equating to approximately $7.23 per BOE. An additional $.9
billion is associated with 300 million BOE of probable and possible resources,
or $3.10 per BOE. The company expects to convert these probable and possible
resources into proved developed reserves at a cost of approximately $3.75 per
BOE.
The combined entity will have a substantial base of low-risk
exploitation opportunities located onshore in the U.S. Potential reserve
additions from these lower risk properties will supplement Kerr-McGee's
high-potential deepwater exploration program. In addition, the broader base of
assets is expected to provide a more predictable stream of production volumes.
Kerr-McGee's total daily production volume is expected to increase more
than 34% following completion of the transaction. Approximately 54% of total
daily volumes will be natural gas. Kerr-McGee has entered into hedges, primarily
in the form of costless collars, that when combined with Westport's existing
hedges, cover approximately 90% of Westport's anticipated proved production
through 2006. Details are available on Kerr-McGee's website at
www.kerr-mcgee.com under the Guidance tab within the Investor Relations section.
As a result of the transaction, Kerr-McGee's net debt as a percent of
total capitalization is expected to decrease approximately 22% from 54% to
approximately 42% by year-end. This reduced leverage, coupled with expected
increased free cash flow, will enhance Kerr-McGee's financial flexibility. In
addition, the companies expect to realize cost savings of approximately $40
million annually. The transaction will be accretive to both earnings and cash
flow per share beginning in 2005.
MERGER AGREEMENT
Under the terms of the merger agreement, Westport shareholders will
receive 0.71 shares of Kerr-McGee common stock for each common share of
Westport. As a result,
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Kerr-McGee expects to issue approximately 49.4 million new shares to Westport's
shareholders. The transaction is expected to be non-taxable to the shareholders
of both companies. In addition, prior to consummation of the transaction,
Westport will redeem all of its 6 1/2% Convertible Preferred Stock at an
anticipated redemption price of $25.65 per share.
The transaction is contingent upon the approval by the shareholders of
both companies as well as other customary closing conditions. Shareholders of
Westport holding more than 42% of Westport's outstanding common stock have
entered into voting agreements pursuant to which such stockholders have agreed
to vote in favor of the merger. Kerr-McGee's executive management team will
continue in their current roles after the close of the transaction. Upon
completion of the transaction, one of the current board members of Westport will
join the Kerr-McGee board of directors, increasing the size of Kerr-McGee's
board to ten members. The transaction is expected to be completed during the
third quarter of this year.
INVESTOR MEETING AND CONFERENCE CALL
Kerr-McGee and Westport will discuss this transaction at a meeting and
conference call with investors and analysts to be held today at 12:00 p.m. EDT.
The meeting and conference call will be webcast and interested parties may
access the webcast from Kerr-McGee's homepage at www.kerr-mcgee.com or
Westport's homepage at www.westportresourcescorp.com or by dialing 800-795-1259
within the United States, or 785-832-1523 outside the United States. The
password for both dial-in numbers will be Kerr-McGee. The webcast will be
temporarily archived on the Kerr-McGee and Westport websites.
Westport is an independent energy company engaged in oil and natural
gas exploitation, acquisition and exploration activities primarily in the Rocky
Mountains, Permian Basin / Mid-Continent, Gulf Coast and offshore Gulf of
Mexico. For additional information about Westport see
www.westportresourcescorp.com.
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Kerr-McGee is an Oklahoma City-based energy and inorganic chemical
company with worldwide operations and assets of more than $10 billion. For
additional information about Kerr-McGee see www.kerr-mcgee.com.
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.
INVESTOR AND SECURITY HOLDERS ARE URGED TO READ THE JOINT PROXY
STATEMENT/PROSPECTUS REGARDING THE PROPOSED TRANSACTION WHEN IT BECOMES
AVAILABLE BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION.
The joint proxy statement/prospectus will be filed with the U.S. Securities and
Exchange Commission (SEC) by Kerr-McGee Corporation and Westport Resources Corp.
Investors and security holders may obtain a free copy of the joint proxy
statement/prospectus when it becomes available and other documents filed or
furnished by Kerr-McGee Corporation or Westport Resources Corp. with the SEC at
the SEC's website at www.sec.gov. The 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
transactions contemplated by the merger agreement. Information regarding
Kerr-McGee's directors and officers is available in the Proxy Statement for its
2004 Annual Meeting of Stockholders, filed March 26, 2004 with the SEC, and its
Annual Report on Form 10-K, filed March 12, 2004 with the SEC. Information
regarding Westport Resources' directors and officers is available in the Proxy
Statement for its 2003 Annual Meeting of Stockholders, filed April 21, 2003 with
the SEC. Other information about the participants in the solicitation will be
set forth in the Joint Proxy Statement/Prospectus and other relevant materials
to be filed with the SEC.
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 include
statements relating to (1) the impact the companies expect the proposed
transaction to have on the combined entity's operations, financial condition,
and
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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 for 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 and Westport Resources' Annual Report on Form 10-K as well
as other of their SEC filings.
The SEC permits oil and gas companies, in their filings with the SEC, to
disclose only proved reserves. We use certain terms in this release, such as
"probable and possible" resources, that the SEC's guidelines strictly prohibit
us from including in filings with the SEC. Investors are urged to consider
closely the disclosures and risk factors in Kerr-McGee's Forms 10-K and 10-Q,
File No. 1-16619, available from its offices or web site, www.kerr-mcgee.com,
and in Westport Resources' Forms 10-K and 10-Q, File No. 1-14256, available from
its offices or web site, www.westportresourcescorp.com. You can also obtain
these forms from the SEC by calling 1-800-SEC-0330.)
CONTACTS: Kerr-McGee Corporation Westport Resources Corporation
Media Debbie Schramm Jonathan Bloomfield
Direct - 405-270-2877 Direct - 303-575-0111
Pager - 888-734-8294
dschramm@kmg.com
Investor Rick Buterbaugh Jonathan Bloomfield
Direct - 405-270-3561 Direct - 303-575-0111
04-15
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KERR-MCGEE FACT SHEET
PROFILE
Kerr-McGee Corporation is a global energy and chemical company with
more than $10 billion of assets. The company's core businesses are oil
and gas exploration and production and the production and marketing of
titanium dioxide pigment. Founded in 1929, Kerr-McGee is based in
Oklahoma City and has been listed on the New York Stock Exchange since
1956 under the ticker symbol KMG.
o Total LTM sales of $4.2 billion
o Total LTM operating cash flow of $1.7 billion
o Total 2004 capital budget of $1.015 billion, plus $300 million
exploration expense
o Current annual dividend of $1.80 per share
EXPLORATION & PRODUCTION
o Worldwide net production of 150,000 barrels of oil per day and
726 million cubic feet of gas per day - 2003
o Worldwide proved reserves of 1,026 MM BOE - as of Dec. 31,
2003
o Gross undeveloped lease holdings of 69 million acres - as of
Dec. 31, 2003
o Oil and gas exploration and production focused in three
countries (U.S. - Gulf of Mexico and Onshore, U.K. North Sea
and China), with exploration efforts extending to other
international countries (Australia, Bahamas, Benin, Brazil,
Gabon, Morocco, Canada, Yemen, and the Danish and Norwegian
sectors of the North Sea)
2003 Gross
Proved 2003 Undeveloped
Reserves Production Acreage (1)
-------- ---------- -----------
(MM BOE) (M BOE/D) (M Acres)
U.S. 707 181 4,674
U.K. North Sea 280 88 784
China 39 2 1,687
Other International -- -- 61,911
-------- ------ -------
Total 1,026 271 69,056
======== ====== =======
(1) As of 12/31/03; includes discontinued operations.
o LTM sales of $2.9 billion
o LTM operating cash flow of $2.1 billion
o 2004 capital budget of $900 million
CHEMICAL - TITANIUM DIOXIDE PIGMENT
o Production capacity of approximately 668,000 metric tons
annually - gross
o Third-largest worldwide producer and marketer
o LTM chemical sales of $1.3 billion
o LTM chemical operating cash flow of approximately $200 million
o 2004 capital budget of $95 million
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WESTPORT RESOURCES FACT SHEET
PROFILE
Westport Resources Corporation is an independent energy company engaged
in oil and natural gas production, exploitation, acquisition and
exploration activities primarily in the United States. Total assets
exceed $2.6 billion. Westport is based in Denver and has been listed on
the New York Stock Exchange since 2000 under the ticker symbol WRC.
EXPLORATION & PRODUCTION
o Worldwide net production of 22,000 barrels of oil per day and
321 million cubic feet of gas per day - 2003
o Worldwide proved reserves of 297 MM BOE - as of Dec. 31, 2003
o Gross undeveloped lease holdings of 1.6 million acres - as of
Dec. 31, 2003
o Top 20 U.S. independent E&P producer
o Operations focused in four regions of the U.S. (Northern -
Rocky Mountains of North Dakota and Wyoming; Western - Uintah
County, Utah; Southern - Oklahoma, Texas, Louisiana; and
offshore Gulf of Mexico)
2003 Gross
Proved 2003 Undeveloped
Reserves Production Acreage (1)
-------- ---------- -----------
(MM BOE) (M BOE/D) (M Acres)
Northern 55 18 1,027
Western 110 13 79
Southern 108 25 182
Gulf of Mexico 24 20 288
----- ---- -------
Total 297 76 1,576
===== ==== =======
(1) As of 12/31/03
o LTM sales of $734 million
o LTM operating cash flow of $437 million
o 2004 capital and exploratory budget of $370 million
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COMBINED COMPANY FACT SHEET
o Equity market capitalization of approximately $7.7 billion
o Total enterprise value of approximately $11.7 billion
o Combined LTM operating cash flow of approximately $2.2 billion
o Worldwide proved reserves of approximately 1.3 B BOE - as of
Dec. 31, 2003
o Gross undeveloped lease holdings of 71 million acres
o 5th largest independent U.S. oil and gas producer
o Largest independent holder of deepwater blocks in the Gulf of
Mexico
o Kerr-McGee annual dividend of $1.80 per share
o 2003 Proved Reserves (MM BOE):
As of December 31, 2003 KMG WRC Combined
-------- -------- --------
North American Onshore 351 273 624
Gulf of Mexico 356 24 380
U.K. North Sea 280 -- 280
China 39 -- 39
------- ------ -------
Total 1,026 297 1,323
======= ====== =======
RESERVES BY PRODUCT RESERVES BY LOCATION
(CHART) (CHART)
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TRANSACTION SUMMARY
Exchange Ratio: .71 Kerr-McGee shares for each outstanding
Westport share
Resulting Equity Split: Current Kerr-McGee shareholders: approximately 67%
Current Westport shareholders: approximately 33%
Newly Issued Shares: Approximately 49.4 million shares (includes option
shares) of Kerr-McGee Common Stock (brings total
shares outstanding to approximately 149 million)
Merged Company Name: Kerr-McGee Corporation
Stock Exchange Listing: NYSE - Ticker KMG
Principal Offices: Oklahoma City - Headquarters
Houston - Exploration & Production
Accounting Treatment: Purchase
Production Hedged: Westport production volumes 90% hedged, second
half of 2004 through 2006
Merger Agreement: Voting Agreement
Westport's major shareholders holding more
than 42% of the outstanding shares have
agreed to vote in favor of the merger
Conditions
The conditions to completing the Merger include
shareholder approvals and expiration of the
Hart-Scott-Rodino waiting period
Termination
The agreement provides for a $90 million
termination fee plus up to $10 million in expenses
to be paid upon the occurrence of certain events
Timing: Expect to close during the third quarter of 2004
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DEFINED TERMS
BOE: Barrel of oil equivalent: 6,000 cubic feet of gas:
1 barrel of oil
B BOE: Billion barrels of oil equivalent
EBITDA: Earnings before interest, taxes, depreciation and
amortization
EBITDX: Earnings before interest, taxes, depreciation,
amortization and exploration expense
Operating Cash Flow: Cash flow from operations plus cash exploration
expense
LTM: Last twelve months
M BOE/D: Thousands of barrels of oil equivalent per day
MM BOE: Millions of barrels of oil equivalent
TCFe: Trillion cubic feet of natural gas equivalent
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