SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Fiscal year ended December 31, 1993 Commission file number 1-3939
KERR-MCGEE CORPORATION
(Exact name of registrant as specified in its charter)
A DELAWARE CORPORATION 73-0311467
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
KERR-MCGEE CENTER, OKLAHOMA CITY, OKLAHOMA 73125
(Address of principal executive offices)
Registrant's telephone number, including area code: (405)270-1313
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
Common Stock $1 Par Value New York Stock Exchange
8-1/2% Sinking Fund Debentures,
Due June 1, 2006 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
The aggregate market value of the voting stock held by non-affiliates of
the registrant was approximately $2.3 billion as of February 28, 1994.
The number of shares of common stock outstanding as of February 28,
1994, was 51,656,493.
DOCUMENTS INCORPORATED BY REFERENCE
Specified sections of the Kerr-McGee Corporation 1993 Annual Report to
Stockholders, as described herein, are incorporated by reference in
Parts I and II of this Form 10-K. The definitive Proxy Statement for
the 1994 Annual Meeting of Stockholders, which will be filed with the
Securities and Exchange Commission within 120 days after December 31,
1993, is incorporated by reference in Part III of this Form 10-K.
<PAGE>
KERR-McGEE CORPORATION
PART I
Items 1. and 2. Business and Properties
GENERAL DEVELOPMENT OF BUSINESS
Kerr-McGee Corporation, an energy and chemical company, had
its beginning in 1929 with the formation of Anderson & Kerr
Drilling Company. The company was incorporated in Delaware in
1932. With oil and gas exploration and production as its base, the
company has expanded into petroleum refining and marketing,
chemical manufacturing, and coal and mineral mining. Kerr-McGee
owns a large inventory of natural resources that includes oil, gas,
and coal reserves and chemical and mineral deposits.
INDUSTRY SEGMENTS
For information as to business segments of the company,
reference is made to Note 23 to the Consolidated Financial
Statements on pages 48 and 49 of the 1993 Annual Report to
Stockholders, which note is incorporated by reference in Item 8.
EXPLORATION AND PRODUCTION
The Exploration and Production Division manages Kerr-McGee's
oil and gas operations worldwide. This division acquires leases
and concessions and explores for, develops, produces, and markets
crude oil, natural gas, and natural gas liquids.
The areas of Kerr-McGee's offshore oil and gas exploration and
production activities are the Gulf of Mexico, North Sea, Arabian
Gulf, South China Sea, Egypt, and Vietnam. Onshore exploration and
production operations are in the United States, primarily in
Louisiana, Oklahoma, Texas, and Wyoming, Canada, Papua New Guinea,
and Indonesia.
For 1993, the Exploration and Production Division, including
Gas Processing, recorded revenues(1) and operating profit of $564
million and $82 million, respectively, compared with $560 million
(1)Includes intercompany sales, primarily crude oil sales, of $195 million in
1993 and $211 million in 1992.
____________
Except as indicated under Items 1 through 3, 5 through 8, and
10 through 14, no other information appearing in either the
company's 1993 Annual Report to Stockholders or its 1994 Proxy
Statement is deemed to be filed as part of this annual report
on Form 10-K.
<PAGE>
and $91 million, respectively, for 1992. Net operating profit was
$52 million for 1993, compared with $53 million for 1992. The
decline in 1993 operating profit resulted principally from lower
crude oil sales prices, higher exploration costs, and lower natural
gas deliveries, partially offset by higher natural gas sales prices
and crude oil sales volumes.
Total expenditures for property acquisitions, exploration, and
development were $360 million for 1993, a 24% increase from $290
million the previous year.
The company's average crude oil sales price was $15.64 per
barrel for 1993, down 14% from the prior year's price of $18.11.
The 1993 average natural gas sales price was $1.92 per thousand
cubic feet, up 23% from the prior year's price of $1.56.
Kerr-McGee's crude oil and condensate production averaged
53,200 barrels per day for 1993, compared with 50,500 barrels per
day for 1992. Deliveries of natural gas averaged 286 million cubic
feet of gas per day for 1993, compared with 296 million cubic feet
per day for 1992. Kerr-McGee's spot sales of natural gas in 1993
represented approximately 77% of the total natural gas sold,
approximately the same as last year.
Undeveloped Acreage
As of December 31, 1993, the company had interests in
undeveloped oil and gas leases in the Gulf of Mexico and 10 states
in the United States, onshore Canada, the United Kingdom sector of
the North Sea, and other international areas as follows:
Gross Net
Location Acreage Acreage
Domestic -
Onshore 373,688 277,016
Offshore 429,859 246,077
803,547 523,093
Canada 262,633 160,951
North Sea 769,214 242,982
Other international -
Egypt 869,807 217,452
Indonesia 2,029,722 676,574
Papua New Guinea 1,900,000 632,700
Vietnam 1,140,000 399,000
5,939,529 1,925,726
Total Undeveloped Acreage 7,774,923 2,852,752
<PAGE>
The company also owned North American onshore undeveloped oil
and gas mineral and royalty interests totaling 860,408 gross or
158,504 net acres.
Developed Acreage
At December 31, 1993, the company had interests in developed oil
and gas leases in the Gulf of Mexico and 22 states in the United
States, onshore Canada, the United Kingdom sector of the North Sea,
and other international areas as follows:
Gross Net
Location Acreage Acreage
Domestic -
Onshore 916,486 384,354
Offshore 367,354 154,451
1,283,840 538,805
Canada 315,333 155,970
North Sea 162,446 21,057
Other international -
Abu Dhabi 444,542 24,189
China 78,332 19,191
522,874 43,380
Total Developed Acreage 2,284,493 759,212
In addition to these developed oil and gas leases, the company
owned developed oil and gas mineral and royalty interests in North
America totaling 609,431 gross or 59,721 net acres.
<PAGE>
Net Exploratory and Development Wells
Domestic and international exploratory and development wells
drilled during the three years ended December 31, 1993, are
reflected in the following table:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Exploratory Wells - Net(1)
Domestic
Productive 1.40 .98 1.71
Dry holes 5.30 3.80 3.02
6.70 4.78 4.73
Canada
Productive - 1.00 3.60
Dry holes 1.75 1.33 4.50
1.75 2.33 8.10
North Sea
Productive .82 .61 .32
Dry holes 2.29 .40 .41
3.11 1.01 .73
Other international
Productive - - -
Dry holes .75 - 1.25
.75 - 1.25
Total 12.31 8.12 14.81
Development Wells - Net(1)
Domestic
Productive 33.10 20.38 34.06
Dry holes .83 1.97 1.94
33.93 22.35 36.00
Canada
Productive 9.52 6.20 5.40
Dry holes 1.50 1.00 .75
11.02 7.20 6.15
North Sea
Productive .91 .19 .24
Dry holes - .08 .35
.91 .27 .59
Other international
Productive .37 .49 .49
Dry holes - - -
.37 .49 .49
Total 46.23 30.31 43.23
(1)Net wells - The total of the company's fractional working interests in "gross wells" expressed as the
equivalent number of full-interest wells.
</TABLE>
<PAGE>
Gross and Net Wells
The company's interest in productive oil and gas wells at
December 31, 1993, is shown in the following table. These wells
include 8,084 gross or 470.71 net wells associated with
secondary-recovery projects and 352 gross or 126.65 net wells that
have multiple completions but are included as single wells. Of the
net wells below, 85% are domestic, 14% in Canada, and 1% in the
North Sea and other international areas. Of the domestic wells,
approximately 56% are in Texas, 11% in Oklahoma, 11% in Wyoming, 9%
in Louisiana, 9% offshore in Federal waters, and 4% in other areas.
Gross Net
Location Wells Wells
Crude Oil
Domestic 10,186 685.79
Canada 946 125.21
North Sea 66 9.12
Other international 52 6.37
11,250 826.49
Natural Gas
Domestic 2,199 528.82
Canada 222 81.70
North Sea 17 1.34
2,438 611.86
Total Wells 13,688 1,438.35
Results of Operations and Costs Incurred
Reference is made to Notes 24, 25, and 26 to the Consolidated
Financial Statements on pages 50, 51, and 52 of the 1993 Annual
Report to Stockholders, which notes are incorporated by reference
in Item 8. These notes contain information on the results of
operations from crude oil and natural gas activities for the past
three years, capitalized costs of crude oil and natural gas
activities at December 31, 1993 and 1992, and costs incurred in
crude oil and natural gas activities for the past three years.
<PAGE>
Crude Oil and Natural Gas Sales
The following table summarizes the sales of the company's
crude oil and natural gas production (including intercompany sales)
for the three years ended December 31, 1993:
<TABLE>
<CAPTION>
(In millions) 1993 1992 1991
<S> <C> <C> <C>
Crude oil and condensate - barrels
Domestic 10.1 9.3 8.4
Canada 1.7 1.7 1.7
North Sea 5.8 6.1 6.8
Other international 1.5 1.6 1.5
19.1 18.7 18.4
Crude oil and condensate
Domestic $159.6 $169.7 $161.6
Canada 25.3 26.9 28.7
North Sea 92.9 113.6 133.4
Other international 21.7 28.4 25.5
$299.5 $338.6 $349.2
Natural gas - MCF
Domestic 85.1 88.2 86.7
Canada 18.4 18.9 14.6
North Sea .9 1.1 1.1
104.4 108.2 102.4
Natural gas
Domestic $172.7 $146.9 $129.2
Canada 26.2 19.5 16.7
North Sea 1.2 1.9 1.9
$200.1 $168.3 $147.8
</TABLE>
<PAGE>
Sales of Production
Most of the company's domestic crude oil production is
exchanged at market prices for crude oil used in the company's
refineries. The company's North Sea crude oil is sold at spot
prices or utilized by the company's refining and marketing
operations. The company's share of Canadian crude oil is sold in
Canada at market prices, while the other international crude oil is
sold to the company's refining and marketing operations. Gas
production is sold under short-term contracts to utility and
industrial markets and under long-term contracts with interstate
and intrastate pipeline companies.
Average Sales Prices and Production Costs
Reference is made to Note 24 to the Consolidated Financial
Statements on page 51 of the 1993 Annual Report to Stockholders,
which note is incorporated by reference in Item 8, for information
regarding average sales prices per unit of crude oil and natural
gas and production costs per barrel of oil equivalent for each of
the past three years.
Secondary Recovery
The company continues to initiate and/or participate in
secondary-recovery projects where geological, engineering, and
economic conditions are favorable. As of December 31, 1993, the
company was participating in 86 active secondary-recovery projects
worldwide. These projects are located in all of the principal
areas of Kerr-McGee's oil and gas production activities.
Most of the company's operations outside North America
incorporate water injection. Pressure maintenance operations began
at the time of initial production from these fields.
Wells in Process of Drilling
At December 31, 1993, the company had 40 gross or 17.04 net
wells classified as temporarily suspended or in the process of
drilling. Of these totals, 34 gross or 15.78 net wells were
located in the United States, 2 gross or .83 net wells were in
Canada, and 4 gross or .43 net wells were in the North Sea.
<PAGE>
Reserves
Kerr-McGee's estimated proved crude oil, condensate, and
natural gas reserves at December 31, 1993, and the changes in net
quantities of such reserves for the three years then ended are
shown in Note 27 to the Consolidated Financial Statements on page
53 of the 1993 Annual Report to Stockholders, which note is
incorporated by reference in Item 8.
From time to time, reports are filed with the United States
Department of Energy relating to the company's reserves. The
reserves reported in the Notes to Consolidated Financial Statements
are consistent with other filings pertaining to proved net
reserves. Minor differences in gas volumes occur due to different
pressure bases being required in the reports. However, the
difference in estimates does not exceed 5% of the total estimated
reserves.
Exploration and Development Activities
The company continues to emphasize drilling for natural gas
onshore North America and in the Gulf of Mexico to participate in
domestic market growth. Kerr-McGee holds an oil and natural gas
prospect inventory of approximately 246,000 net undeveloped acres
in the gulf.
The U.K. sector of the North Sea remains the most important
international area for Kerr-McGee, with emphasis on oil and large
natural gas reserves. Existing infrastructure and a cooperative
regulatory climate enhance the potential value of approximately
243,000 net undeveloped acres. Kerr-McGee has interests averaging
25% in 41 blocks and is the operator on 15 of these. Participation
in at least 25 North Sea wells is planned over the next five years.
In other international areas, where the potential for sizeable
discoveries is greater than in the more mature domestic oil and gas
areas, Kerr-McGee holds sizeable working interests in several
concessions.
The following is a description of certain of the company's
exploration and development activities.
North Sea
Fields in the United Kingdom sector of the North Sea accounted
for 31% of the company's total 1993 liquids production, or 16,700
barrels of crude oil and condensate per day.
Gryphon field, Block 9/18b (25% interest) -- The field uses
the North Seas's first permanently moored floating production,
storage, and offloading vessel. This facility was commissioned 10
months after approval of the project by the U.K. government. First
oil flowed in October 1993. Kerr-McGee is the operator.
Scott field, Blocks 15/21a and 15/22 (5.4%) -- Production
began in September 1993 from this field, which is the largest field
developed in the North Sea during the last decade. During early
1994, the U.K. government approved development of an extension,
South Scott, which will be tied to the existing facility. South
Scott is expected to come on stream in mid-1995.
East Brae (7.5%) -- This field, the largest of the four
producing fields in the Brae area, began production in December
1993.
Gulf of Mexico
Offshore fields in the Gulf of Mexico were the source of 30%
of the company's oil production and nearly half of the natural gas
deliveries. Kerr-McGee's daily production for 1993 averaged 16,000
barrels oil and 136 million cubic feet of gas.
Ship Shoal Block 315 (75%) -- The field is scheduled to come
on stream in 1994, 22 months after discovery. Crude oil and
natural gas production will be processed through a facility on the
adjoining Ship Shoal Block 300.
Ewing Bank Block 989 (75%) -- This 1992 discovery will be
developed with two subsea wells tied to an existing platform.
Production is expected to start in late 1994.
Breton Sound area (50%) -- Three horizontal wells are
increasing production in this mature area. The cost of two of the
wells was recovered in less than four months, compared with about
15 months for a vertical well in the same area. The third
horizontal well came on stream in December 1993. Additional
horizontal drilling is planned.
Viosca Knoll field 989 (25%) -- Production is scheduled to
start in late 1994 from a platform in 1,300 feet of water.
U.S. Onshore
The company's daily production from U.S. onshore fields
averaged 11,700 barrels of oil and 97 million cubic feet of gas in
1993. During 1993, the company emphasized drilling for natural gas
while working to produce more oil from mature fields through
enhanced and secondary recovery methods.
Texas Panhandle area (100%) -- A successful deep-gas well was
drilled and tied to an existing pipeline less than six weeks after
discovery. Offset drilling is scheduled for 1994. Several high-
potential prospects have been identified in the same trend.
Sands Dunes Unit (26.7%) -- This miscible gas flood unit in
Wyoming's Powder River Basin has been on stream since 1991 and
averaged 12,100 barrels of oil per day in 1993.
North Buck Draw (34.6%) -- Also in Wyoming, this miscible gas
flood unit started production in late 1988, has recovered 50% of
the oil in place and continued to produce more than 3,000 barrels
of oil per day in 1993.
<PAGE>
Canada
During 1993, daily production of oil and gas from Canadian
fields totaled 4,700 barrels and 50 million cubic feet,
respectively. The company's focus in Canada continues to be on
large natural gas reserves, and Kerr-McGee continues to pursue
prospects in west central Alberta and northeastern British
Columbia.
Boundary Lake South (50%) -- Gas production will commence
during the summer of 1994, when plant and gathering lines are
complete.
Other International
Liuhua 11-1 field (24.5%) -- The company will participate in
the development of this South China Sea field, which was discovered
in 1987. Development drilling should begin in the second half of
1994.
Papua New Guinea (33.3%) -- The 1.9 million-acre PPL 163
concession is located onshore near a significant recent oil
discovery. An exploratory well was spudded in January 1994.
South Con Son Basin (35%) -- Lifting of the U.S. trade embargo
on Vietnam opened access to a new area. Kerr-McGee has acquired an
interest in this 1.1 million-acre offshore block. Drilling is
scheduled to start in the first half of 1994.
South Sumatra Basin (33.3%) -- Seismic work is under way on
this onshore concession, a 2 million-acre block in Indonesia.
Spudding of the first well is planned for late 1994.
Egypt (25%) -- A second exploratory well is planned for early
1994 on this 870,000 acre offshore concession.
Gas Processing
Kerr-McGee's Gas Processing Division operates two gas
processing plants and one intrastate gas pipeline in the United
States and also has interests in 9 plants that are operated by
others. These plants produce natural gas liquids, including
ethane, ethylene, propane, propylene, isobutane, normal butane, and
natural gasoline. In 1993, Kerr-McGee's interest in the gas
processed at these plants averaged 67 million cubic feet per day.
The company's total net production of natural gas liquids
during 1993 averaged 3,600 barrels per day, compared with 4,200
barrels per day in 1992. The company's share of residue gas sold
during 1993 was 18 million cubic feet per day, compared with 23.1
million cubic feet per day in the prior year.
<PAGE>
REFINING AND MARKETING
Kerr-McGee Refining Corporation is engaged in the purchase,
gathering, transportation, and refining of crude oil and the
transportation, distribution, and wholesale and retail marketing of
petroleum products. The company's gasolines, distillates,
lubricating oils, and allied products are marketed under the brand
names Kerr-McGee, Mystik, and various other trade names, according
to the territory where sold.
In a highly competitive industry, Kerr-McGee Refining
Corporation considers its products to be competitive in quality,
service, and price and has been able to compete successfully with
other products offered in the markets it serves.
Kerr-McGee Corporation is not crude oil self-sufficient and
must supplement its production with spot purchases and crude oil
purchased under short-term agreements. Also, spot purchases of
intermediate feedstocks are made to meet refining requirements.
While the company's three refineries all process domestic
crude oil, the Corpus Christi, Texas, and Wynnewood, Oklahoma,
refineries also process foreign crude oil and other feedstocks.
Total runs to stills at the company's three refineries averaged
140,000 barrels per day for 1993. The company's 1993 refined-
product sales averaged 239,000 barrels per day.
Refining and marketing had an operating loss of $28 million
for 1993, compared with an operating loss of $21 million for 1992.
Revenues were $2 billion for 1993, compared with $2.2 billion for
1992. The 1993 net operating loss was $19 million, compared with
a net operating loss of $13 million for 1992. The operating losses
for both years resulted from negative margins due to product prices
declining faster than feedstock costs. Reduction of the LIFO
inventory carrying value to market also adversely affected 1993
results. Revenues for 1993 were lower than the prior year due to
lower sales prices and volumes.
Kerr-McGee Corporation continues its efforts to sell, merge,
or restructure its refining and marketing operations.
<PAGE>
Refining
The company owns and operates three refineries with total
crude oil distillation capacity of 181,000 barrels per day. The
following table lists the company's refinery locations, processing
capacities, and 1993 utilizations:
<TABLE>
<CAPTION>
Refinery Capacities
Crude Oil Downstream
Distillation Units Processing Units(1)
Barrels Percent Barrels Percent
Plant Per Day Utilized Per Day Utilized
<S> <C> <C> <C> <C>
Corpus Christi, Texas 120,000 76 104,000 88
Wynnewood, Oklahoma 50,000 88 43,000 102
Cotton Valley, Louisiana 11,000 43 7,800 60
181,000 78 154,800 91
(1)Adjusted for normal turnaround.
</TABLE>
The crude oil distillation capacity represents throughput
capacity of the crude oil stills. The downstream refinery
processing capacity recognizes a practical limit on the ability to
absorb output of the crude oil distillation facilities. The
downstream rating method is in conformance with the American
Petroleum Institute's definition for rating refinery capacity. The
capacities of the refineries did not change in 1993.
The Corpus Christi refinery produces gasoline, kerosene,
diesel fuel, heating oil, heavy fuel, jet fuel, and petrochemical
feedstocks. Desulfurization/hydrotreating and sulfur-recovery
units provide the ability to process higher-sulfur crude and gas
oils and improve product yields.
During 1993, construction of a 25 million gallon per year
cyclohexane unit was completed at Corpus Christi. This unit
converts the refinery's benzene production into higher valued
cyclohexane, an intermediate feedstock used in nylon manufacturing.
Upgrades to both the primary products and the crude oil ship docks
enhanced logistical capabilities of the Corpus Christi refinery.
The refinery at Wynnewood produces gasoline, solvent, diesel
fuel, jet fuel, heavy fuel, light burner fuel, and asphalt. During
1993, the refinery was connected to two major pipelines. These
additional pipeline connections facilitate the delivery of crude
oil from West Texas and shipment of product from the Wynnewood
refinery.
The Cotton Valley facility is a specialty-products plant
producing a full range of high-quality naphtha solvents, diesel
fuel, and jet fuel components.
Crude Oil Supply
In 1993, approximately 159,000 barrels per day of crude oil
and intermediate feedstocks were delivered to the company's
refineries. Of the crude oil delivered, 63% was domestic and 37%
was foreign. This supply is acquired primarily from the company's
crude oil gathering system in Oklahoma and long-standing purchase
relationships with both domestic and foreign producers and
resellers. The imported crude oil consisted largely of Kerr-
McGee's equity production from the North Sea and purchases of
additional light sweet crudes from West Africa and South America.
About 24% of the 50 million barrels of crude oil processed by the
refineries was supplied by Kerr-McGee production operations.
The company continues to expand both the Corpus Christi and
Wynnewood refineries' crude slates, extending their capability for
processing selected domestic sour crude oil.
The company operates a crude oil pipeline system in Oklahoma
that contains approximately 1,500 miles of gathering and trunk
lines. This system is used to gather and deliver domestic crude
oil to the Wynnewood refinery. In addition, spot-market and
futures-market domestic crude oil is purchased at Cushing,
Oklahoma, where the company's crude oil storage capacity is 580,000
barrels. Kerr-McGee Refining also operates a fleet of trucks in
Louisiana and Oklahoma to gather and deliver crude oil and
transport petroleum products.
Marketing and Product Distribution
Products from the Wynnewood refinery are sold in the Midwest
and Southwest under the Kerr-McGee brand. Gasoline, diesel fuel,
and heating oil are marketed through independent jobbers, dealers,
and company-operated stations.
Kerr-McGee Refining markets to independent distributors and
bulk rack accounts in 30 states east of the Rocky Mountains,
selling a complete line of petroleum products in unbranded markets.
At the retail level, gasoline and other products are marketed
through 52 company-operated retail service stations and
approximately 1,150 branded stations operated by jobbers and
independent dealers.
Products are transported for distribution through various
common-carrier pipeline systems and by cargo ships and barges. A
total of 13 waterway and pipeline terminals were owned and operated
by the company at the end of 1993. The company has joint ownership
in two additional terminals. The company sells products at
approximately 200 additional exchange terminals.
Cato Oil and Grease Co., a wholly owned subsidiary of Kerr-
McGee Refining, produces and markets automotive, marine,
industrial, mining, and agricultural lubricants and specialty
petroleum products at plants in Oklahoma City and Atlanta. Most of
these products are marketed under the Kerr-McGee and Mystik brand
names throughout the United States. Cato also manufactures and
packages lubricants and specialty petroleum products under private
label for several major-brand marketers and markets bulk lubricants
for use by industrial and mining operations.
<PAGE>
CHEMICALS
Kerr-McGee Chemical Corporation produces and markets basic
industrial chemicals, specialty chemicals, forest products, and
heavy minerals. Many of these products are processed using
proprietary technology developed by the company.
Industrial chemicals include titanium dioxide pigment,
synthetic rutile, sodium chlorate, ammonium perchlorate, manganese
products, and vanadium. Specialty chemicals are boron trichloride,
boron tribromide, and elemental boron. Forest-product operations
produce railroad ties and other hardwood products and provide wood-
treating services. Heavy minerals produced are ilmenite,
leucoxene, zircon, and rutile.
Kerr-McGee Chemical had revenues and operating profit of $556
million and $70 million, respectively, for 1993, compared with $515
million and $79 million, respectively, for 1992. Net operating
profit was $44 million for 1993, compared with $50 million the
previous year. The increase in 1993 revenues, compared with 1992,
was due to higher sales volumes, partially offset by lower sales
prices for titanium dioxide pigment and most other products.
Operating profit for 1993 was less than 1992 due to higher
operating expenses resulting from the increased sales volumes,
partially offset by lower per-unit cost of sales for synthetic
rutile and most other products.
Pigment
The company's synthetic rutile plant at Mobile, Alabama, has
a production capacity of 155,000 tons per year. This product
serves as feedstock for the company's titanium dioxide pigment
plant at Hamilton, Mississippi, which has a production capacity of
120,000 tons per year.
KMCC Western Australia Pty. Ltd., a wholly owned subsidiary of
Kerr-McGee Chemical Corporation, owns a 50% interest in a joint
venture that operates the world's first integrated titanium dioxide
project. The project consists of a heavy minerals mine and mill
and facilities for the production of synthetic rutile and titanium
dioxide pigment, located on three sites within 120 miles of Perth.
Heavy minerals are mined from a lease that totals 10,350
acres. The property's remaining 270 million tons of sand contain
3% heavy minerals. The heavy minerals contained within this 8
million-ton, heavy-mineral deposit are composed of 3.8% rutile, 61%
ilmenite, 6.8% leucoxene, 10.3% zircon, and 18.1% minerals which
are not presently produced or are of no value. Additional drilling
is required to determine the actual quantities and grade of heavy
minerals contained in a second 2,540-acre property and the extent
to which it may be feasible to mine this deposit. The company
holds a 50% interest in both properties. The separation mill has
a capacity of 559,000 tons per year.
The recovered ilmenite is processed into synthetic rutile at
the plant which has production capacity of 176,000 tons per year.
Due to weak demand for synthetic rutile, the plant was shut down in
September 1993. Operations resumed in March 1994.
Production from the synthetic rutile plant serves as feedstock
for the domestic and international pigment operations. The related
pigment plant has a production capacity of 66,000 tons per year.
The company also owns a 25% interest in a pigment plant in
Yanbu, Saudi Arabia, which has a capacity of 56,000 tons per year.
Electrolytic Products
The company's major electrolytic products are manganese
dioxide, manganese metal, sodium chlorate, and ammonium
perchlorate.
The sodium chlorate plant at the company's Hamilton,
Mississippi, complex has production capacity of 123,000 tons per
year. Also at Hamilton is a manganese metal plant that has a
capacity of 12,000 tons per year.
Facilities at Henderson, Nevada, include electrolytic cells
and processing equipment for the manufacture of manganese dioxide,
a plant for the manufacture of ammonium perchlorate, and a
specialty boron products plant. The production capacity at
Henderson is 16,000 and 20,000 tons per year for manganese dioxide
and ammonium perchlorate, respectively. An expansion of the
manganese dioxide plant, currently in the final stage of mechanical
completion, is expected to increase capacity by 50% to 24,000 tons
per year by mid-1994. Ammonium perchlorate blending and storage
facilities are located 25 miles north of the Henderson plant.
The company also recovers vanadium pentoxide at a Soda
Springs, Idaho, plant from phosphate byproducts of other operations
in the area. Annual capacity at the Soda Springs plant is 4.3
million pounds.
Forest Products
The company's principal forest product is railroad crossties.
Other products include crossing materials, bridge timber, and
utility poles. The company owns seven wood-preserving plants
located along major railroads, six of which are east of the Rocky
Mountains. Production of crossties with built-in rail fasteners
began in the fourth quarter 1993 at the Madison, Illinois, pilot
plant. This innovative RAILFAST (Registered Trademark) system has been
patented by Kerr-McGee.
Phosphate Deposits
During 1993, the company sold its remaining property
containing deposits of phosphate rock located in Alachua County,
Florida.
Marketing
With net annual capacity in excess of 165,000 tons, Kerr-McGee
ranks seventh among the world's producers of titanium dioxide
pigment used primarily in the paint, plastics, and paper
industries. Due to an oversupply during 1993, the company's sales
price declined 3% in the United States and more than 10% overseas;
however, consistent quality helped retain domestic and global
market shares of 10% and 5%, respectively. The company entered
global pigment production in 1991 with the startup of plants in
Western Australia and Saudi Arabia. Primary markets for this
production are the Pacific Rim and Europe. During 1993, the
company assumed marketing responsibility for pigment from the Saudi
Arabian plant in all regions except the Middle East and a part of
Africa. Global demand for this white pigment is expected to grow
about 3% per year.
Manganese dioxide is a major component of alkaline dry-cell
batteries. During 1993, Kerr-McGee supplied about 25% of the
manganese dioxide used by domestic battery manufacturers. The
completion of the expansion of the Henderson plant should make
Kerr-McGee the world's third-largest manganese dioxide producer.
Growth in U.S. demand is projected at an annual rate of 5% through
the end of the century.
Manganese metal is used in specialty and stainless steel
alloys, and manganese-aluminum briquettes are an alloy that
strengthens aluminum beverage cans. Kerr-McGee supplied about 50%
of the U.S. aluminum industry's manganese requirements in 1993.
There is growth potential in sodium chlorate, which is used to
produce chlorine dioxide for an environmentally preferred pulp-
bleaching process. Demand for sodium chlorate is expected to
continue to grow at an 8% annual rate over the near term as more
mills convert to this process. Kerr-McGee has a 7% share of the
North American sodium chlorate market.
The company's share of the U.S. railroad crosstie market is
more than 40%.
For information regarding heavy-mineral reserves, production,
and average market prices for each of the years 1989 through 1993,
reference is made to Note 29 to the Consolidated Financial
Statements on page 55 of the 1993 Annual Report to Stockholders,
which note is incorporated by reference in Item 8.
<PAGE>
COAL
The company's coal operations are conducted by a subsidiary,
Kerr-McGee Coal Corporation, which produces coal from Jacobs Ranch
Mine, a surface mine in the Wyoming Powder River Basin; Galatia
Mine, an underground mine in the Illinois Basin; and Pioneer Fuel
Corporation, a combined surface and underground operation in West
Virginia. The majority of shipments in 1993 were to electric
utilities under long-term sales contracts. The company also makes
spot sales to domestic and foreign customers. The company owns or
leases coal reserves in Illinois, West Virginia, and Wyoming.
Coal operating profit totaled $80 million and $77 million for
1993 and 1992, respectively, on revenues of $328 million and $307
million, respectively. The 1993 increase in revenues from the
prior year was due to higher sales volumes, partially offset by
lower sales prices. Operating profit for 1993 improved due to the
increased revenues that more than offset higher operating expenses.
Operating expenses were higher due to increased production volumes
even though the per-unit production costs declined. Net operating
profit was $58 million and $53 million for 1993 and 1992,
respectively.
Coal Shipments
Shipments from Kerr-McGee mines for 1993 and 1992 were as
follows:
<TABLE>
<CAPTION>
(In millions of tons) 1993 1992
<S> <C> <C>
Surface Mine -
Powder River Basin, Wyoming 18.4 16.4
Underground Mine -
Illinois Basin, Illinois 4.2 3.8
Surface/Underground Mines -
West Virginia .8 .5
Total Shipments 23.4 20.7
</TABLE>
<PAGE>
Reserves
As of December 31, 1993, the company's coal reserves were as
follows (in millions of tons):
<TABLE>
<CAPTION>
In-Place Recoverable
Demonstrated Demonstrated Classifi- Mining
State/Mining Unit Tons Tons cation Method
<S> <C> <C> <C> <C>
Wyoming -
Jacobs Ranch Mine 346 311 Steam Surface
Clovis Point Mine 326 294 Steam Surface
Illinois -
Galatia Mine - Met./ Under-
Harrisburg No. 5 135 86 Steam ground
Under-
Herrin No. 6 269 175 Steam ground
West Virginia - Under-
Pioneer Fuel Met./ ground/
Composite 30 22 Steam Surface
1,106 888
</TABLE>
Of the Wyoming reserves, 91% are held under Federal leases,
and the remaining 9% are leased from the State of Wyoming. The
Illinois coal reserves are owned by Kerr-McGee or held under leases
with private parties. West Virginia coal reserves are all held
under leases with private parties. The company's mining units are
described below.
Jacobs Ranch Mine
Jacobs Ranch Mine is located 50 miles southeast of Gillette,
Wyoming, in the South Powder River Basin. The coal lease area
contains 7,514 acres of land, of which 3,832 acres are underlain by
311 million recoverable tons of coal. This includes 1,700 acres
underlain by 132 million recoverable tons of coal which were
acquired in 1992 with additional acreage leased from the Bureau of
Land Management. The company also owns or controls the surface
rights to 1,684 acres of a buffer zone, or overstrip area. The
mine permit is presently being renewed for a five-year period and
expanded to incorporate the additional leased-acreage and the
buffer zone.
Shipments began in 1978 and, through December 1993, totaled
more than 194 million tons. All deliveries were made via the
Burlington Northern or Chicago Northwestern railroads. Jacobs
Ranch Mine coal is sold primarily under long-term contracts for
ultimate use by electric utilities. The terms of the Jacobs Ranch
Mine Federal leases were adjusted by the Bureau of Land Management
in 1990.
Clovis Point Mine
Clovis Point Mine is located eight miles east of Gillette,
Wyoming. In 1988, the company consolidated its Wyoming mining
operations at Jacobs Ranch Mine and ceased shipments from Clovis
Point Mine. The facility remains on standby status. The mine
permit has been renewed until 1999.
The Clovis Point mining area consists of 3,143 acres leased
from the Federal government and 640 acres leased from the State of
Wyoming. The company either owns or has surface-owner consent to
mine 71% of the Federal lease permit area. The remaining 29% is
positioned so that it would be mined near the end of the mine life;
however, before mining, surface-owner consent must be obtained and
the mine permit amended. The terms of one of the two Federal
leases at Clovis Point Mine were adjusted by the Bureau of Land
Management in 1990, and the terms of the other Federal lease are
due to be reconsidered in 1995. The terms of the state lease,
which contains the mine pit, were renewed for an additional 10-year
period during 1993. The royalty rate may be adjusted for the last
five years of the lease. The three Clovis Point leases are held in
a logical mining unit. The provisions of the leases require that
an additional 800,000 tons of coal be mined by September 1996.
Galatia Mine
The Galatia Mine is located near Galatia, Illinois, in Saline
County. Within the mine area, Kerr-McGee controls 33,338 acres
through leases and mineral ownership. Shipments from Galatia Mine
began in 1984 and, through December 1993, totaled more than 26
million tons and were made principally via the Illinois Central
Railroad. The mine is a dual-seam mine operating in both the
Harrisburg No. 5 and the Herrin No. 6 coal seams. The Harrisburg
No. 5 coal is suitable as a semi-soft coking coal or as a high-Btu,
relatively low-sulfur steam coal, which will allow utilities to
comply with Phase I of the Clean Air Act Amendments of 1990 (Phase
I) without installing flue gas desulfurization units. The Herrin
No. 6 is a high-Btu, medium-sulfur steam coal. Its sulfur content
requires that it be blended or used by plants equipped with flue
gas desulfurization units to meet Phase I requirements.
Longwall mining has been used in the No. 5 seam since 1992 and
in the No. 6 seam since 1989. Longwall mining is a high-recovery,
high-productivity, and low operating cost system. It represents a
significant improvement over the previously used room-and-pillar
continuous miner method.
In anticipation of market demand for low-sulfur coal, an
expansion was begun in 1992 to extend production in the No. 5 seam
through an ancient river channel north of the current mining area.
Scheduled for completion in 1994, the project will provide access
to lower-sulfur coal reserves. Ventilation and access shafts are
complete, as are tunnels through the mile-wide river channel that
has displaced the coal. Development of the shaft bottom area and
the first longwall panel gate entry is under way. Mining of the
No. 6 seam will cease on completion of this longwall panel
development, and the longwall equipment will be moved from the No.
6 seam to this low-sulfur reserve. The No. 5 seam will then be a
dual-longwall operation. Combined with a plant expansion that is
underway and scheduled for completion in 1994, the No. 5 seam will
be capable of sustaining production and shipments of six million
tons per year of high-Btu, low-sulfur Phase I compliance coal.
Pioneer Fuel Corporation
Pioneer Fuel Corporation operates both surface and underground
mines located near Oceana, West Virginia, in Wyoming County.
Within the mine area, the company controls 7,970 acres through
leases with private parties. Shipments since acquisition in late
1990 totaled approximately 2 million tons and were made via the
Norfolk and Southern Railroad. The mines currently operate in the
No. 2 Gas and Hernshaw seams. Both seams are suitable as mid- to
high-volatile, low-sulfur coking coal. Current facility capacity
is approximately 1 million tons of clean coal per year.
Marketing
Coal is sold predominantly under long-term contracts, although
spot sales were made in 1993 to domestic and foreign customers.
During 1993, the company had export sales of metallurgical coal to
Japan, France, Italy, Spain, and Sweden and steam coal to Morocco.
Domestic deliveries of steam coal will continue, primarily under
long-term contracts with electric utilities in Arkansas, Indiana,
Louisiana, Missouri, Oklahoma, and Texas. A total of 200 million
tons of coal is committed to delivery under long-term contracts
expiring between 1996 and 2012.
Coal markets continue to experience competitive pricing.
Kerr-McGee's existing long-term contracts have provided profitable
sales even under these competitive conditions. For a discussion of
the effects of a 1993 contract renegotiation, reference is made to
the Financial Condition section of Management's Discussion and
Analysis beginning on page 27 of the 1993 Annual Report to
Stockholders, which discussion is incorporated herein by reference
in Item 7.
Although domestic markets are affected by the Clean Air Act
Amendments of 1990, the company is well positioned with its
reserves of low-sulfur coal. Approximately 70% of the company's
coal will continue to be considered compliance coal after the year
2000. Uncommitted reserves and existing production capacity should
permit the company to expand its export sales and participate in
the expected growth in domestic demand for low-sulfur coal.
For information regarding coal reserves, production, and
average market prices for each of the years 1989 through 1993,
reference is made to Note 29 to the Consolidated Financial
Statements on page 55 of the 1993 Annual Report to Stockholders,
which note is incorporated by reference in Item 8.
<PAGE>
OTHER
Research and Development
Research and development in support of the company's existing
businesses and in the pursuit of new products and processes is
carried out primarily by the Technology and Engineering Division.
The Technology and Engineering Division's programs continue to
concentrate on improvements to existing chemical plant processes,
exploratory research, and support for refining and coal processing.
The division includes a Technical Center, located in Oklahoma City,
as well as a process engineering department and a technology
planning and evaluation group. Research and development
expenditures totaled $19 million in 1993, $17 million in 1992, and
$16 million in 1991.
Employees
The company had 5,812 employees on December 31, 1993.
Approximately 430, or 7%, of these employees were represented by
collective bargaining agreements. Kerr-McGee Corporation was a
party to four collective bargaining agreements through its refining
and marketing operations. Collective bargaining agreements
representing approximately 180 employees will expire during 1994.
The status of labor relations within the company continues to
be stable. No strikes or work stoppages have occurred within the
past six years.
Competitive Conditions
In the petroleum industry, competition exists from the initial
process of bidding for leases to the sales of refined products.
Competitive factors include finding and developing petroleum
hydrocarbons, transporting raw materials, distributing and pricing
refined products, and marketing strategies. During the past several
years, crude oil and natural gas supplies and refining capacities
have exceeded demand. This excess of supply over demand has
resulted in lower prices, compared with the prices received prior
to 1985. The volatility of crude oil prices during the past few
years has placed increased emphasis on all competitive aspects of
the petroleum industry.
Excess capacity for titanium dioxide pigment and ammonium
perchlorate has also reduced prices for these products. The key
competitive factor in the industrial and specialty chemicals
industry is the application of technology to produce high-quality,
value-added proprietary products at the lowest possible cost.
Most of the company's coal customers are domestic electric
utilities, an extremely competitive market. Cost efficiencies,
transportation strategies, and product quality are key competitive
factors in the coal industry.
It is not possible to predict the effect of future competition
on Kerr-McGee's operating and financial results.
<PAGE>
GOVERNMENT REGULATIONS AND ENVIRONMENTAL RESERVES
General
The company is subject to extensive regulation by Federal,
state, local, and foreign governments. The production and sale of
crude oil and natural gas in the United States are subject to
regulation by Federal and state authorities, particularly with
respect to allowable rates of production, offshore production, and
environmental matters. Stringent environmental protection laws and
regulations apply to refining and chemical operations. In
addition, there are special taxes that apply to the oil, gas, and
coal mining industries.
Environmental Matters
Federal, state, and local laws and regulations relating to
environmental protection affect almost all plants and facilities of
the company. During 1993, direct capital and operating
expenditures related to environmental protection and cleanup of
existing sites totaled $39 million. Additional expenditures
totaling $30 million were charged to environmental reserves. While
it is extremely difficult to estimate the total direct and indirect
costs to the company of government environmental regulations, it is
presently estimated that the direct capital and operating
expenditures and expenditures charged to reserves will be
approximately $65 million in 1994. Additional amounts could be
charged to environmental reserves in 1994 if regulatory approvals
for removal of waste material from the West Chicago site are
obtained. Some expenditures to reduce the occurrence of releases
to the environment, such as replaced or upgraded underground
storage tanks, may result in increased efficiency; however, most of
these expenditures do not produce any significant increase in
production capacity, efficiency, or revenue. Operation of
pollution control equipment installed for these purposes usually
entails additional expense. Moreover, there are costs associated
with staff and management time that cannot be calculated or
estimated with any assurance of accuracy.
Based on present information, the company believes that it has
accrued and is accruing reasonable reserves for expenditures that
may have to be made in the future for environmental protection.
Because of continually changing laws and regulations, the nature of
the company's businesses, the large number of other potentially
responsible parties, and pending proceedings, it is not possible to
estimate the amount or timing of all future expenditures relating
to environmental matters. The company provides for costs related
to contingencies when a loss is probable and the amount is
reasonably estimable. Although management believes adequate
reserves have been provided for all known contingencies, it is
possible, due to the above noted uncertainties, that additional
reserves could be required in the future that could have a material
effect on results of operations in a particular quarter or annual
period. However, the ultimate resolution of these commitments and
contingencies, to the extent not previously provided for, should
not have a material adverse effect on the company's financial
position.
Also see "Item 3. Legal Proceedings," which follows.
Item 3. Legal Proceedings
On April 2, 1992, the company's subsidiary, Kerr-McGee Coal
Corporation, received a Complaint, Compliance Order, and Notice of
Opportunity for Hearing from the U.S. Environmental Protection
Agency (EPA) for alleged violations at the Jacobs Ranch Mine in
northern Wyoming. Included in the EPA order are provisions for
fines totaling more than $2.9 million. The company and its
subsidiary continue to take all necessary steps to resolve this
matter.
In 1991, the California Department of Toxic Substance Control
(DTSC) issued a Report of Violation outlining certain violations of
the California Health and Safety Code alleged to have occurred
during operation by a subsidiary of the company of the former
Searles Valley chemical facilities. The DTSC and the company's
subsidiary are negotiating an agreement to resolve this matter
which, if it is adopted in its current form, would result in a
settlement of less than $1.5 million.
The company continues its efforts to obtain the necessary
approvals to decommission a facility located in West Chicago,
Illinois, which processed thorium ores and was closed in 1973.
Currently, the State of Illinois has jurisdiction of this site and
the company has agreed to offsite disposal of the waste material.
For a discussion of contingencies, including a detailed
discussion of the West Chicago matter, reference is made to the
Financial Condition section of Management's Discussion and Analysis
and Note 11 to the Consolidated Financial Statements on pages 27
and 39 respectively, of the 1993 Annual Report to Stockholders,
which discussion and note are incorporated by reference in Item 7
and Item 8, respectively.
Item 4. Submission of Matters to a Vote of Security Holders
None submitted during the fourth quarter of 1993.
<PAGE>
Executive Officers of the Registrant
The following is a list of executive officers, their ages, and
their positions and offices as of January 1, 1994:
Name Age Office
Frank A. McPherson 60 Chairman of the Board and Chief
Executive Officer since May 1983.
Luke R. Corbett 46 Group Vice President since May 1992.
President of Kerr-McGee Canada Ltd.
since July 1989. President of Kerr-
McGee Oil (U.K.) PLC since August 1987.
Senior Vice President from March 1991
until May 1992. Vice President, Oil and
Gas Exploration from August 1987 until
March 1991.
C. C. Stewart, Jr. 50 Group Vice President since May 1992.
President of Southwestern Refining
Company, Inc. since November 1992.
Senior Vice President from March 1991
until May 1992. Vice President, Oil and
Gas Operations from February 1990 until
March 1991. Senior Vice President,
Technical for Hamilton Brothers Oil and
Gas Ltd. from July 1988 until January
1990.
George R. Hennigan 58 Senior Vice President since October
1991. President of Kerr-McGee Chemical
Corporation since October 1991.
Executive Vice President, Kerr-McGee
Chemical Corporation from October 1984
until October 1991.
John C. Linehan 54 Senior Vice President and Chief
Financial Officer since October 1987.
Tom J. McDaniel 55 Senior Vice President since June 1986
and Secretary since March 1989.
<PAGE>
L. V. McGuire 51 Senior Vice President since December
1993. Senior Vice President,
Production, Exploration and Production
Division since May 1992. Vice President
and Managing Director, Kerr-McGee Oil
(U.K.) PLC since February 1992. Vice
President, Production from July 1992 to
December 1993. Vice President, Gulf
Coast Production Operations, Exploration
and Production Division from January
1991 until February 1992. Vice
President, Production for Hamilton
Brothers Oil and Gas Ltd. from July 1990
until January 1991. Vice President,
Operations for Hamilton Brothers Oil and
Gas Ltd. from June 1988 until July 1990.
Robert C. Scharp 46 Senior Vice President since October
1991. President of Kerr-McGee Coal
Corporation since October 1991. Vice
President of Operations for Kerr-McGee
Coal Corporation from June 1990 until
October 1991. General Manager of
Galatia Mine for Kerr-McGee Coal
Corporation from May 1988 until June
1990.
Michael G. Webb 46 Senior Vice President since December
1993. Senior Vice President,
Exploration, Exploration and Production
Division since May 1992. Vice
President, Exploration from July 1992 to
December 1993. Vice President, North
American Onshore Exploration from May
1991 until May 1992. Exploration
Manager, Kerr-McGee Canada Ltd. from
November 1988 until May 1991.
R. G. Horner, Jr. 54 Vice President and General Counsel since
June 1986.
J. Michael Rauh 44 Vice President and Controller since
October 1987.
Kenneth J. Richards 61 Vice President, Technology since May
1986. President, Technology and
Engineering Division since September
1984.
<PAGE>
Thomas B. Stephens 49 Vice President and Treasurer since
January 1985.
Edwin T. Still 58 Vice President, Environment and Health
Management since June 1990. Vice
President and Director of Environment
and Health Management Division since
September 1984.
Jean B. Wallace 39 Vice President, Human Resources since
November 1989. Director of Human
Resources from May 1988 until November
1989.
Dale E. Warfield 50 Vice President, Materials Management and
Transportation since April 1991.
Director of Purchasing and Materials
Management from March 1990 until April
1991. Director of Purchasing from July
1985 until March 1990.
Ray A. Freels 65 President, Kerr-McGee Refining
Corporation since July 1993.
Independent consultant from October 1992
until July 1993. Senior Vice President,
Kerr-McGee Corporation from January 1986
until he retired in October 1992.
President, Kerr-McGee Refining
Corporation from December 1985 until
October 1992.
There is no family relationship between any of the executive
officers.
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
Information relative to the market on which the company's
common stock is traded, the high and low sales prices of the common
stock by quarters for the past two years, and the approximate
number of holders of common stock is furnished in Note 30 to the
Consolidated Financial Statements on page 56 of the 1993 Annual
Report to Stockholders, which note is incorporated by reference in
Item 8.
<PAGE>
Quarterly dividends declared totaled $1.52 per share for each
of the years 1993 and 1992 and $1.50 per share for the year 1991.
Cash dividends have been paid continuously since 1941 and totaled
$73 million in each of the years 1993 and 1992 and $72 million in
1991.
Item 6. Selected Financial Data
Information regarding selected financial data required in this
item is presented in the schedule captioned "Six-Year Financial
Summary" on page 57 of the 1993 Annual Report to Stockholders and
is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
"Management's Discussion and Analysis" on pages 25 through 29
of the 1993 Annual Report to Stockholders is incorporated herein by
reference.
Item 8. Financial Statements and Supplementary Data
The following financial statements and supplementary data
included in the 1993 Annual Report to Stockholders are incorporated
herein by reference:
Annual
Report
Item Page No.
Report of Independent Public Accountants 30
Consolidated Statement of Income 31
Consolidated Statement of Retained Earnings 31
Consolidated Balance Sheet 32
Consolidated Statement of Cash Flows 33
Notes to Financial Statements 34-56
Item 9. Change in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
(a) Identification of directors -
For information required under this section, reference is
made to the "Election of Directors" section of the company's
proxy statement for 1994 made in connection with its Annual
Stockholders' Meeting to be held on May 3, 1994.
(b) Identification of executive officers -
The information required under this section is set forth in
the caption "Executive Officers of the Registrant" on pages
24 through 26 of this Form 10-K pursuant to Instruction 3 to
Item 401(b) of Regulation S-K and General Instruction G(3)
to Form 10-K.
(c) Compliance with Section 16(a) of the 1934 Act -
For information required under this section, reference is
made to the "Compliance with Section 16(a) of the Securities
Exchange Act of 1934" section of the company's proxy
statement for 1994 made in connection with its Annual
Stockholders' Meeting to be held on May 3, 1994.
Item 11. Executive Compensation
For information required under this section, reference is
made to the "Executive Compensation" section of the
company's proxy statement for 1994 made in connection with
its Annual Stockholders' Meeting to be held on May 3, 1994.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
For information required under this section, reference is
made to the "Security Ownership" section of the company's
proxy statement for 1994 made in connection with its Annual
Stockholders' Meeting to be held on May 3, 1994.
Item 13. Certain Relationships and Related Transactions
For information required under this section, reference is
made to the "Election of Directors" section of the company's
proxy statement for 1994 made in connection with its Annual
Stockholders' Meeting to be held on May 3, 1994.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
(a) 1. Financial Statements -
The following consolidated financial statements of Kerr-
McGee Corporation and its subsidiary companies, included in
the company's 1993 Annual Report to Stockholders, are
incorporated by reference in Item 8:
Report of Independent Public Accountants
Consolidated Statement of Income for the Years Ended
December 31, 1993, 1992, and 1991
Consolidated Statement of Retained Earnings for the Years
Ended December 31, 1993, 1992, and 1991
Consolidated Balance Sheet at December 31, 1993 and 1992
Consolidated Statement of Cash Flows for the Years Ended
December 31, 1993, 1992, and 1991
Notes to Financial Statements
(a) 2. Financial Statement Schedules - Page
Report of Independent Public Accountants on Finan-
cial Statement Schedules 34
Schedule V - Property, Plant, and Equipment for the
Years Ended December 31, 1993, 1992, and 1991 35
Schedule VI - Reserves for Depreciation, Depletion,
and Amortization for the Years Ended December 31,
1993, 1992, and 1991 36
Schedule VIII - Valuation Accounts and Reserves for
the Years Ended December 31, 1993, 1992, and 1991 37
Schedule X - Supplementary Income Statement Informa-
tion for the Years Ended December 31, 1993, 1992,
and 1991 38
Schedules I, II, III, IV, VII, XI, XII, and XIII are omitted
as the subject matter thereof is either not present or is
not present in amounts sufficient to require submission of
the schedules in accordance with instructions contained in
Regulation S-X. Schedule IX is omitted as the subject
matter thereof is included in Note 10 to the Consolidated
Financial Statements on page 38 of the 1993 Annual Report to
Stockholders, which note is incorporated by reference in
Item 8.
<PAGE>
(a) 3. Exhibits -
Exhibit No.
3.1 Restated Certificate of Incorporation of
Kerr-McGee Corporation, filed as Exhibit
3.1 to the report on Form 10-Q for the
quarter ended June 30, 1987, and
incorporated herein by reference.
3.2 Bylaws of Kerr-McGee Corporation, as
amended, filed as Exhibit 3(b) to the
report on Form 10-K for the year ended
December 31, 1986, and incorporated
herein by reference.
4.1 Amended and Restated Rights Agreement
dated as of July 11, 1989, filed as
Exhibit 1 to the report on Form 8-K dated
July 13, 1989, and incorporated herein by
reference.
4.2 The company agrees to furnish to the
Securities and Exchange Commission, upon
request, copies of each of the following
instruments defining the rights of the
holders of certain long-term debt of the
company: the Indenture dated as of June
1, 1976, between the company and
Citibank, N.A., as trustee, relating to
the company's 8-1/2% Sinking Fund
Debentures due June 1, 2006; the
Indenture dated as of November 1, 1981,
between the company and United States
Trust Company of New York, as trustee,
relating to the company's 7% Debentures
due November 1, 2011; the Note Agreement
dated as of November 29, 1989, among the
Kerr-McGee Corporation Employee Stock
Ownership Plan Trust (the Trust) and
several lenders, providing for a loan
guaranteed by the company of $125 million
to the Trust; the $300 million Credit
Agreement dated as of August 15, 1990,
providing for a five-year revolving
credit facility with a bullet maturity on
the fifth anniversary of the execution of
the Credit Agreement; the Facilities
Agreement dated March 3, 1991, providing
for borrowings of up to $65 million
through September 3, 1993, by National
Titanium Dioxide Company Limited
(Cristal), a Saudi Arabian limited
liability company (owned 25% by a wholly
owned subsidiary of the company), and
several banks with 25% of the loans
guaranteed on a several basis by the
company's subsidiary; and the Revolving
Credit Agreement dated as of October 16,
1992, among Kerr-McGee Corporation, Kerr-
McGee Oil (U.K.) PLC, and several banks
providing for revolving credit of up to
$230 million through October 16, 1997.
The total amount of securities authorized
under each of such instruments does not
exceed 10% of the total assets of the
company and its subsidiaries on a
consolidated basis.
4.2 Kerr-McGee Corporation Direct Purchase
and Dividend Reinvestment Plan filed on
Form S-3 effective August 19, 1993,
Registration No. 33-66112, and
incorporated herein by reference.
10.1 Deferred Compensation Plan for Non-
Employee Directors as amended and
restated effective October 1, 1990, filed
as Exhibit 10(1) to the report filed on
Form 10-K for the year ended December 31,
1990, and incorporated herein by
reference.
10.2 Kerr-McGee Corporation Stock Deferred
Compensation Plan for Non-Employee
Directors effective October 1, 1988,
filed as Exhibit 10(2) to the report
filed on Form 10-K for the year ended
December 31, 1988, and incorporated
herein by reference.
10.3 Description of the company's Annual
Incentive Compensation Plan, filed as
Exhibit 10(3) to the report filed on Form
10-K for the year ended December 31,
1989, and incorporated herein by
reference.
10.4 The 1984 Employee Stock Option Plan filed
as Exhibit 4.2 to Form S-8 Registration
No. 2-90981 and incorporated herein by
reference.
10.5 The Long Term Incentive Program effective
July 1, 1987, filed as Exhibit 4.1 to
Form S-8 Registration No. 33-24274 and
incorporated herein by reference.
10.6 Benefits Restoration Plan as amended and
restated effective September 13, 1989,
filed as Exhibit 10(6) to the report on
Form 10-K for the year ended December 31,
1992, and incorporated herein by
reference.
10.7 Kerr-McGee Corporation Executive Deferred
Compensation Plan effective January 1,
1991, filed as Exhibit 10(7) to the
report on Form 10-K for the year ended
December 31, 1990, and incorporated
herein by reference.
10.8 Kerr-McGee Corporation Supplemental
Executive Retirement Plan effective
January 1, 1991, filed as Exhibit 10(8)
to the report on Form 10-K for the year
ended December 31, 1990, and incorporated
herein by reference.
10.9 Amended and restated Agreement, restated
as of December 31, 1992, between the
company and Frank A. McPherson filed as
Exhibit 10(9) on Form 10-K for the year
ended December 31, 1992, and incorporated
herein by reference.
10.10 Amended and restated Agreement, restated
as of December 31, 1992, between the
company and John C. Linehan filed as
Exhibit 10(10) on Form 10-K for the year
ended December 31, 1992, and incorporated
herein by reference.
10.11 Amended and restated Agreement, restated
as of December 31, 1992, between the
company and Luke R. Corbett filed as
Exhibit 10(11) on Form 10-K for the year
ended December 31, 1992, and incorporated
herein by reference.
10.12 Agreement, effective January 2, 1990,
between the company and C. C. Stewart,
Jr., filed as Exhibit "A" within Exhibit
10(14) to the report on Form 10-K for the
year ended December 31, 1991, and
incorporated herein by reference.
<PAGE>
10.13 Amended and restated Agreement, restated
as of December 31, 1992, between the
company and George R. Hennigan.
10.14 Form of agreement, amended and restated
as of December 31, 1992, between the
company and certain executive officers
not named in the Summary Compensation
Table contained in the company's
definitive Proxy Statement for the 1994
Annual Meeting of Stockholders, filed as
Exhibit 10(14) on Form 10-K for the year
ended December 31, 1992, and incorporated
herein by reference.
12 Computations of ratio of earnings to
fixed charges.
13 1993 Annual Report to Stockholders.
21 Subsidiaries of the Registrant.
23 Consent of Arthur Andersen & Co.
24 Powers of attorney.
(b) Reports on Form 8-K -
No reports on Form 8-K were filed by the Registrant during the
quarter ended December 31, 1993.
<PAGE>
Report of Independent Public Accountants On Financial
Statement Schedules
To Kerr-McGee Corporation:
We have audited in accordance with generally accepted auditing
standards, the consolidated financial statements included in Kerr-
McGee Corporation's 1993 Annual Report to Stockholders incorporated
by reference in this Form 10-K, and have issued our report thereon
dated February 18, 1994. Our report on the consolidated financial
statements includes an explanatory paragraph with respect to
changes in accounting for postretirement benefits other than
pensions and income taxes in 1992 as discussed in Note 2 to the
financial statements. Our audit was made for the purpose of
forming an opinion on those statements taken as a whole. The
financial statement schedules V, VI, VIII, and X are the
responsibility of the company's management and are presented for
purposes of complying with the Securities and Exchange Commission's
rules and are not part of the basic consolidated financial
statements. These schedules have been subjected to the auditing
procedures applied in the audit of the basic consolidated financial
statements and, in our opinion, fairly state in all material
respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a
whole.
(Arthur Andersen & Co.)
ARTHUR ANDERSEN & CO.
Oklahoma City, Oklahoma,
February 18, 1994
<PAGE>
<TABLE>
SCHEDULE V
KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES
PROPERTY, PLANT, AND EQUIPMENT
<CAPTION>
Balance at Balance at
Beginning of Additions Other End of
(In millions of dollars) Year at Cost RetirementsTransfersChanges(A) Year
<S> <C> <C> <C> <C> <C> <C>
Year Ended December 31, 1993
Exploration and production $3,536 $318 $72 $ 1 - $3,783
Refining and marketing 530 34 3 - - 561
Chemicals 728 39 7 - - 760
Coal 491 28 3 1 - 517
Other 232 6 3 (2) - 231
$5,517 $425 $88 $ - $ - $5,852
Year Ended December 31, 1992
Exploration and production $3,330 $264 $127 $(3) $72 $3,536
Refining and marketing 503 40 16 3 - 530
Chemicals 747 33 52 - - 728
Coal 427 69 7 (2) 4 491
Other 231 9 10 2 - 232
$5,238 $415 $212 $ - $76 $5,517
Year Ended December 31, 1991
Exploration and production $3,039 $318 $ 27 $ - $ - $3,330
Refining and marketing 463 54 4 (10) - 503
Chemicals 665 89 7 - - 747
Coal 408 20 2 1 - 427
Other 194 33 5 9 - 231
Discontinued operations 292 - 292 - - -
$5,061 $514 $337 $ - $ - $5,238
(A) Effective January 1, 1992, the differences between the assigned values and the tax bases of assets previously
acquired were recognized in connection with the adoption of Statement of Financial Accounting Standards No. 109.
The offsetting amounts were to deferred income taxes.
<PAGE>
Depreciation, Depletion, and Amortization Rates
Costs of producing oil and gas wells and a portion of the producing coal and chemical assets are charged to
depreciation, depletion, and amortization over their estimated lives using the unit-of-production method. It is
not practical to summarize depreciation and amortization rates applicable to other assets for which the
straight-line method is used because of the variety of properties and numerous rates used. These rates are
reviewed annually and revised as deemed necessary.
Reclassification
For a discussion of the reclassification of previously presented information, reference is made to Note 2 to the
Consolidated Financial Statements beginning on page 35 of the 1993 Annual Report to Stockholders, which note is
incorporated by reference in Item 8.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE VI
KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES
RESERVES FOR DEPRECIATION, DEPLETION, AND AMORTIZATION
<CAPTION>
Balance at Charged toCharged to Balance at
Beginning Profit or Other End of
(In millions of dollars) of Year Loss Accounts Retirements Transfers Year
<S> <C> <C> <C> <C> <C> <C>
Year Ended December 31, 1993
Exploration and production $2,152 $206 $ - $ 65 $ 1 $2,294
Refining and marketing 315 26 - 1 - 340
Chemicals 317 49 (4) 5 - 357
Coal 221 26 4 3 1 249
Other 90 14 - 3 (2) 99
$3,095 321 $ - $ 77 $ - $3,339
Year Ended December 31, 1992
Exploration and production $2,069 $201 $ - $117 $(1) $2,152
Refining and marketing 304 23 - 13 1 315
Chemicals 284 49 (4) 12 - 317
Coal 199 25 3 6 - 221
Other 83 14 - 7 - 90
$2,939 $312 $(1) $155 $ - $3,095
Year Ended December 31, 1991
Exploration and production $1,892 $201 $ - $ 24 $ - $2,069
Refining and marketing 292 18 - 1 (5) 304
Chemicals 245 46 (2) 5 - 284
Coal 171 27 3 2 - 199
Other 69 12 - 3 5 83
Discontinued operations 223 - - 223 - -
$2,892 $304 $ 1 $258 $ - $2,939
Reclassification
For a discussion of the reclassification of previously presented information, reference is made to Note 2 to the
Consolidated Financial Statements beginning on page 35 of the 1993 Annual Report to Stockholders, which note is
incorporated by reference in Item 8.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE VIII
KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES
VALUATION ACCOUNTS AND RESERVES
<CAPTION>
Additions
Balance at Charged toCharged to DeductionsBalance at
Beginning Profit and Other from End of
(In millions of dollars) of Year Loss Accounts Reserves Year
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1993
a. Deducted from asset accounts
Allowance for doubtful notes
and accounts receivable $ 3 $ 2 $ - $ - $ 5
b. Not deducted from asset accounts
Environmental and reclamation $294 $ 4 $(1)(A) $28 $269
Postretirement Benefits 99 11 - 7 103
Oil and gas site dismantlement 58 11 2 (B) 4 67
Surface mine stripping cost 15 27 - 28 14
Petroleum product pricing 2 - - 2 -
Other 8 1 (1) 1 7
$476 $54 $ - $70 $460
Year Ended December 31, 1992
a. Deducted from asset accounts
Allowance for doubtful notes
and accounts receivable $ 4 $ 2 $ - $ 3 $ 3
b. Not deducted from asset accounts
Environmental and reclamation $113 $207(C) $(1)(A) $25 $294
Postretirement Benefits - 112(D) (6)(A) 7 99
Oil and gas site dismantlement 52 10 - 4 58
Surface mine stripping cost 19 23 - 27 15
Petroleum product pricing 2 - - - 2
Other 9 - - 1 8
$195 $352 $(7) $64 $476
Year Ended December 31, 1991
a. Deducted from asset accounts
Allowance for doubtful notes
and accounts receivable $ 6 $ 2 $(1)(E) $ 3 $ 4
b. Not deducted from asset accounts
Environmental and reclamation $121 $ 15 $(3)(A) $20 $113
Oil and gas site dismantlement 46 10 - 4 52
Surface mine stripping cost 23 22 - 26 19
Petroleum product pricing 5 - - 3 2
Other 8 2 1 2 9
$203 $ 49 $(2) $55 $195
(A) Transfer (to) from current.
(B) Obligation assumed in connection with property acquisition.
(C) Includes $205 million provision for reclamation and remediation of inactive sites.
(D) Includes $101 million recognized for the accumulated postretirement benefit obligation at January 1, 1992,
in connection with the adoption of Statement of Financial Accounting Standards No. 106.
(E) Recovery of receivables applicable to discontinued operations sold in 1989 previously reserved.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE X
KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
<CAPTION>
Year Ended December 31,
(In millions of dollars) 1993 1992 1991
Charges to costs and expenses -
<S> <C> <C> <C>
Maintenance and repairs $135 $139 $128
Royalties 40 45 46
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
KERR-McGEE CORPORATION
March 28, 1994 By: (Frank A. McPherson)
Date Frank A. McPherson,
Chairman of the Board and
Chief Executive Officer
March 28, 1994 By: (John C. Linehan)
Date John C. Linehan,
Senior Vice President and
Chief Financial Officer
March 28, 1994 By: (J. Michael Rauh)
Date J. Michael Rauh,
Vice President and Controller
and Chief Accounting Officer
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons in
the capacities and on the date indicated.
By: Bennett E. Bidwell*
Bennett E. Bidwell, Director
By: E. H. Clark, Jr.*
E. H. Clark, Jr., Director
By: Richard D. Harrison*
Richard D. Harrison, Director
By: Martin C. Jischke*
Martin C. Jischke, Director
March 28, 1994 By: Robert S. Kerr, Jr.*
Date Robert S. Kerr, Jr., Director
By: Frank A. McPherson*
Frank A. McPherson, Director
By: William C. Morris*
William C. Morris, Director
By: John J. Murphy*
John J. Murphy, Director
By: John J. Nevin*
John J. Nevin, Director
By: Farah M. Walters*
Farah M. Walters, Director
* By his signature set forth below, John C. Linehan has signed
this Annual Report on Form 10-K as attorney-in-fact for the
directors noted above, pursuant to power of attorney filed
with the Securities and Exchange Commission.
By: (John C. Linehan)
John C. Linehan
<PAGE>
Exhibit Index
The following exhibits are filed with this document:
Exhibit 10.13
Exhibit 12
Exhibit 21
Exhibit 23
Exhibit 24
AGREEMENT
AMENDED AND RESTATED AGREEMENT, restated as of December 31, 1992
(the "Agreement") between KERR-McGEE CORPORATION, a Delaware
corporation having its executive offices at Oklahoma City, Oklahoma
(the "Company"), and George R. Hennigan, residing in XXXXXX,
Oklahoma (the "Executive"). Unless otherwise indicated, terms used
herein are defined in Schedule A.
WHEREAS, the Executive is currently employed by the Company and/or
its Subsidiaries pursuant to an amended and restated agreement,
restated as of February 1, 1988 (the "Existing Agreement"); and
WHEREAS, the Executive and the Company's Board of Directors believe
that such Existing Agreement, which is a three-year self-renewing
employment agreement, should be amended and restated as of
December 31, 1992; and
WHEREAS, the Company's Board of Directors has determined that it
wishes to continue the employment of the Executive and that it is
appropriate to reinforce the continued attention and dedication of
the Executive to his assigned duties without distraction in
potentially disturbing circumstances arising from the possibility
of a Change of Control of the Company; and
WHEREAS, the Company and the Executive now wish to amend and
restate the Existing Agreement.
NOW, THEREFORE, in consideration of the covenants and agreements
hereinafter set forth, the Company and the Executive agree as
follows:
1. Employment: The Company agrees to continue to employ the
Executive and he agrees to continue to serve the Company and its
Subsidiaries, upon the terms and conditions stated herein, for the
term of employment commencing on the date hereof and ending on
January 31, 1996, unless prior to a Change of Control such
employment is involuntarily terminated hereunder for Reason or as
a result of the Executive's death or disability. The Company
further agrees that if a Change of Control occurs either before, on
or after January 31, 1996, and the Executive is employed by the
Company immediately prior to such Change of Control, the Company
will not, prior to the third anniversary of the Change of Control,
terminate the Executive's employment with the Company except for
Cause or as a result of the Executive's death or Disability.
Following a Change of Control any involuntary termination of the
Executive's employment hereunder for any reason other than death
shall be communicated by a Notice of Termination. The Executive
will be employed in an executive capacity and will perform the
duties of President of Kerr-McGee Chemical Corporation and Senior
Vice President of Kerr-McGee Corporation or such other duties as
may be assigned to him from time to time by the Company.
The Executive shall devote substantially all of his business time,
attention, skill and efforts to the business of the Company and its
Subsidiaries while employed hereunder and shall perform the duties
of his position and any other duties assigned to him by the Company
to the best of his ability.
2. Compensation: As compensation for his services, the Company
agrees to pay the Executive, so long as he shall be employed
hereunder, a salary determined from time to time by the Company,
but at a rate not less than $200,000 per annum, payable either
biweekly or in equal semimonthly installments on the fifteenth and
last day of the month, provided that if at any time while the
Executive is employed hereunder he should receive an increase in
the annual base salary being paid him by the Company, the above
specified minimum salary rate shall thereupon increase by a
corresponding amount. The Executive shall also be eligible for
participation in any employee benefit plans and compensation
programs available to salaried employees or employees generally of
the Company or any Subsidiary that employs the Executive.
3. Noncompetition: The Executive agrees that at any time while
employed hereunder he will not engage in any activity competitive
with any business carried on by the Company or its Subsidiaries and
Affiliates, without obtaining the specific prior written consent of
the Company. He, however, shall be free without the consent of the
Company to purchase stocks or other securities of any corporation
listed on a national securities exchange or included in a published
"over the counter" list.
4. Compensation During Illness: If while employed hereunder the
Executive shall become unable to perform his duties hereunder due
to illness or other incapacity, compensation during such period
shall be provided in accordance with the sick leave policy for
salaried employees or employees generally of the Company or any
Subsidiary that employs the Executive, or if applicable, under an
income protection insurance plan for salaried employees and
employees generally of the Company or any Subsidiary that employs
the Executive. Subject to the other terms of this Agreement, no
other compensation shall be provided during the period of such
illness or incapacity.
5. Death: In the event of the Executive's death while employed
hereunder, his spouse, or personal representative if such spouse
shall have died, shall be entitled to receive his salary at the
rate then in effect through the date of his death plus one
additional pay period as provided under the Company's pay policy,
as well as any amounts previously earned and not paid for the
periods of service prior to his date of death.
6. Successors: Nothing in this Agreement shall prevent the
consolidation of the Company with, or its merger into, any other
corporation or the sale by the Company of all or substantially all
of its properties or assets, or the assignment by the Company of
this Agreement in connection with any of the above mentioned
actions; provided that the Company will require any successor
(whether direct or indirect, by merger, consolidation or otherwise)
to all or substantially all of the properties or assets of the
Company, by agreement in form and substance satisfactory to the
Executive, to expressly assume and agree to perform this Agreement
in the same manner and to the same extent that the Company would be
required to perform it if no such succession has taken place. This
Agreement shall not be assignable by the Executive or by the
Company or its successors except as provided herein.
7. Retirement: Notwithstanding the Executive's agreement herein
to serve for the term of his employment under this Agreement, the
Executive may retire under a retirement plan available to salaried
employees or employees generally of the Company or any Subsidiary
that employs the Executive when entitled to do so, except that he
may elect early retirement under any such plan only upon giving the
Company (or a Subsidiary employing the Executive) six months'
written notice; and upon his retirement his term of employment
hereunder shall terminate. Notwithstanding the foregoing,
following a Change of Control, (i) the Executive may elect early
retirement under a retirement plan available to salaried employees
or employees generally of the Company or any Subsidiary that
employs the Executive upon giving the Company (or a Subsidiary
employing the Executive) two days' written notice and (ii) any
retirement under such plan that is coincident with or subsequent to
an involuntary termination of the Executive's employment for any
reason other than Cause, death or Disability will not preclude
payments under this Agreement to which the Executive is entitled in
respect of such termination.
8. Acceleration and Vesting of Stock Plans, Stock Options and
SAR's Following a Change of Control: In the event a Change of
Control of the Company shall have occurred while the Executive is
employed hereunder, then, notwithstanding the terms and conditions
of any benefit plan or compensation program of the Company or any
Subsidiary that employs the Executive including but not limited to
any purchase plan, stock bonus plan, stock incentive plan, stock
option plan, employee stock ownership plan or similar plan or
program (excluding any plan qualified under Section 401(a) of the
Code), the Company agrees (i) to accelerate, vest, and make
immediately exercisable in full (to the extent not already provided
for under the terms of such applicable plans or programs) all
unexercisable installments of all options to acquire securities of
the Company and any accompanying stock appreciation rights, which
are Beneficially Owned by the Executive on the date of such Change
of Control, and (ii) to waive any applicable restrictions,
including resale restrictions or rights of repurchase, relating to
or imposed on securities granted by the Company to the Executive
pursuant to such plans or programs which securities are
Beneficially Owned by the Executive on such date.
9. Mitigation: If at any time the Executive's employment
hereunder shall be terminated for any reason, then all payments and
benefits to which the Executive is entitled under this Agreement
shall be made and provided without offset, deduction or mitigation
on account of income the Executive could or may receive from other
employment or otherwise; provided, however, that if the Executive
is involuntarily terminated for any reason other than Reason prior
to a Change of Control, then, until the term of this Agreement
ends, the amount payable under this Agreement shall be reduced by
any compensation actually received by the Executive from comparable
employment (as to position, compensation and responsibility) with
any person or entity that is engaged in a business that is
competitive with the Company or its Subsidiaries and Affiliates.
10. Legal Expenses: The Company shall pay (at least monthly) all
costs and expenses, including reasonable attorneys' fees and
disbursements, which the Executive may incur in connection with any
litigation, arbitration or similar proceeding, whether instituted
by the Company or the Executive, with respect to the interpretation
or enforcement of any provision under this Agreement.
11. Accommodations and Travel Expenses: The Company agrees that
while the Executive is employed hereunder he shall be furnished
office space and accommodations suitable to the character of his
position and adequate for the performance of his duties.
Reasonable traveling expenses incurred by him in traveling on
business of the Company and its Subsidiaries will be reimbursed in
accordance with the established traveling expense policy of the
Company or any Subsidiary that employs the Executive.
12. Notices: Any notices required under the terms of this
Agreement shall be effective when mailed, postage prepaid, by
certified mail, addressed:
If to Kerr-McGee: R. G. Horner, Jr.
Vice President and General Counsel
Kerr-McGee Corporation
Kerr-McGee Center
Oklahoma City, Oklahoma 73102
If to the Executive: George R. Henningan
XXXXXXXXXXX
XXXXXXXXXXXXXXXX XXXXX
13. Entire Agreement: This Agreement comprises the entire
agreement between the Company and its Subsidiaries and the
Executive and shall supersede any and all previous contracts,
agreements or understandings between the Company and its
Subsidiaries and the Executive with respect to the subject matter
hereof. This Agreement may not be modified except by written
agreement between the parties. Any inconsistency between Sections
8, 9, 10, 13, 14, 15 and 16 of this Agreement and any other
provisions of this Agreement shall be resolved in favor of such
Sections.
14. Arbitration: Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by
arbitration in Oklahoma City, Oklahoma, or, at the option of the
Executive, in the county where the Executive resides, in accordance
with the Rules of the American Arbitration Association then in
effect; provided, however, that if the Executive institutes an
action relating to this Agreement the Executive may, at his option,
bring such action in an Oklahoma court of competent jurisdiction.
Judgment may be entered on the arbitrator's award in any such court
having jurisdiction.
15. Separability: Any provision of this Agreement which is held
to be unenforceable or invalid in any respect in any jurisdiction
shall be ineffective in such jurisdiction to the extent that it is
unenforceable or invalid without affecting the remaining provisions
hereof, which shall continue in full force and effect. The
enforceability or invalidity of a provision of this Agreement in
one jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.
16. Section and Other Headings: The section and other headings
contained in this Agreement are for reference purposes only and
shall not affect the meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, the Company and the Executive have executed
this Agreement on the 31st day of March, 1993.
KERR-McGEE CORPORATION
By (F.A. McPherson)
F.A. McPherson
(George R. Hennigan) Chairman of the Board and
George R. Hennigan Chief Executive Officer
<PAGE>
Schedule A
Certain Definitions
As used in this Agreement, and unless the context requires a
different meaning, the following terms have the meanings indicated:
"Affiliate" has the meaning set forth in Rule 12b-2 of the General
Rules and Regulations promulgated under the Securities Exchange Act
of 1934, as amended.
"Beneficial Owner" has the meaning set forth in Rules 13d-3 and
13d-5 of the General Rules and Regulations promulgated under the
Securities Exchange Act of 1934, as amended.
"Cause" means willful and gross misconduct on the part of the
Executive that has a materially adverse effect on the Company and
its Subsidiaries, taken as a whole, or the conviction of the
Executive of a felony under United States federal, state or local
criminal law, as determined in good faith by a written resolution
duly adopted by the affirmative vote of not less than 2/3 of all of
the directors who are not employees, officers, or otherwise
Affiliates of the Company.
"Change of Control" means any one of the following: (a) a change
in any two year period in a majority of the members of the Board of
Directors of the Company resulting from the election of directors
who were not directors at the beginning of such period (other than
the election of directors to fill vacancies created by death or
Disability, or the election of a director to replace a director who
by virtue of his age is not eligible for election under the By-laws
of the Company as in effect on the date of this Agreement); (b) any
Person or Group, together with its Affiliates, becomes the
Beneficial Owner, directly or indirectly, of 25% or more of the
Company's then outstanding Common Stock or 25% or more of the
voting power of the Company's then outstanding securities entitled
to vote generally for the election of the Company's directors; (c)
the approval by the Company's stockholders of (i) the merger or
consolidation of the Company with any other corporation (other than
a merger or consolidation of the Company and a wholly-owned
subsidiary in which the holders of the Company's Common Stock
immediately prior to such merger or consolidation have the same
proportionate ownership of common stock of the surviving
corporation immediately after the merger or consolidation), (ii)
the sale, lease, exchange or other transfer (in one transaction or
a series of related transactions) of all or substantially all, of
the assets of the Company or (iii) the liquidation or dissolution
of the Company; or (d) a majority of the members of the Board of
Directors in office immediately prior to a proposed transaction
determined by written resolution that such proposed transaction, if
taken, will be deemed a Change of Control and such proposed
transaction is effected.
"Code" means the Internal Revenue Code of 1986, as amended.
"Date of Termination" means (i) if the Executive's employment is
terminated under this Agreement due to Disability, thirty days
after Notice of Termination is given to the Executive (provided the
Executive shall not have returned to the performance of the
Executive's duties on a full-time basis during such thirty-day
period) or (ii) if the Executive's employment is involuntarily
terminated under this Agreement for any other reason, the date on
which a Notice of Termination is given; provided, however, that if
within thirty days after any Notice of Termination is given to the
Executive, the Executive notifies the Company or the Subsidiary
that employs the Executive that a dispute exists concerning the
termination, the Date of Termination shall be the date the dispute
is finally determined, whether by mutual agreement by the parties
or upon final judgment, order or decree of a court of competent
jurisdiction (the time for appeal therefrom having expired and no
appeal having been perfected).
"Disability" means that (i) a person has been totally incapacitated
by bodily injury or physical or mental disease so as to be
prevented thereby from engaging in a comparable occupation or
employment for remuneration or profit, (ii) such person will be
subject to such total incapacity for a period of at least eighteen
consecutive months and (iii) such person is disabled for purposes
of any and all of the plans or programs of the Company or any
Subsidiary that employs the Executive under which benefits,
compensation or awards are contingent upon a finding of disability.
The determination with respect to whether the Executive is
suffering from a Disability will be determined by a mutually
acceptable physician or, if there is no physician mutually
acceptable to the Company and the Executive, by a physician
selected by the Dean of the University of Oklahoma Medical School.
"Group" has the meaning set forth in Rule 13d-5 of the General
Rules and Regulations promulgated under the Securities Exchange Act
of 1934, as amended.
"Notice of Termination" means a written notice which shall indicate
those specific provisions in this Agreement relied upon and which
sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment
under the provision so indicated.
"Person" means any individual, firm, corporation, group (as such
term is used in Rule 13d of the General Rules and Regulations
promulgated under the Securities Exchange Act of 1934, as amended)
or other entity.
"Reason" means (a) action by the Executive involving willful
malfeasance, (b) failure to act by the Executive involving material
nonfeasance having a material adverse effect on the Company or the
Subsidiary that employs the Executive, (c) the Executive being
convicted of a felony under United States federal, state, or local
criminal law, or (d) the material breach of any provision of this
Agreement by the Executive.
"Subsidiary" with respect to the Company has the meaning set forth
in Rule 12b-2 of the General Rules and Regulations promulgated
under the Securities Exchange Act of 1934, as amended.
EXHIBIT 12
<TABLE>
KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<CAPTION>
(In millions of dollars) 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Income (loss) from
continuing operations $77 $(26) $102 $113 $134
Add -
Provision (benefit) for
income taxes 41 (38) 64 43 81
Interest expense 47 66 78 86 72
Rental expense representa-
tive of interest factor 5 6 6 6 6
Earnings (loss) $170 $ 8 $250 $248 $293
Fixed Charges -
Interest expense $ 47 $ 66 $ 78 $ 86 $ 72
Rental expense representa-
tive of interest factor 5 6 6 6 6
Interest capitalized 20 15 16 19 12
Total fixed charges $ 72 $ 87 $100 $111 $ 90
Ratio of earnings to fixed
charges 2.4 -(1) 2.5 2.2 3.3
(1)Earnings in 1992 were inadequate to cover fixed charges by $79 million.
</TABLE>
Kerr-McGee Corporation
Financial Review
Contents
Management's Discussion and Analysis 25
Results of Consolidated Operations 25
Segment Operations 26
Financial Condition 27
Responsibility for Financial Reporting 30
Report of Independent Public Accountants 30
Consolidated Statement of Income 31
Consolidated Statement of Retained Earnings 31
Consolidated Balance Sheet 32
Consolidated Statement of Cash Flows 33
Notes to Financial Statements 34
Six-Year Financial Summary 57
Management's Discussion and Analysis
Results of Consolidated Operations
The company's net income for 1993 was $77 million, or $1.57 per
common share, compared with a 1992 net loss of $101 million, or $2.08
per common share, and 1991 net income of $102 million, or $2.10 per
common share. The 1992 loss included after-tax charges for the
cumulative effect on prior years of changes in accounting principles
of $70 million, or $1.45 per common share (see Note 2), and for the
early extinguishment of the 9-3/4% debt of $5 million, or $.10 per
common share (see Note 10). Excluding these charges, the net loss was
$26 million, or $.53 per common share. The 1992 net loss also
included a provision for environmental reclamation and remediation of
inactive plant sites in the amount of $205 million, or $130 million
after income tax benefits (see Note 11).
Operating profit for 1993 was $199 million, compared with $229
million and $267 million for 1992 and 1991, respectively. The $30
million decrease in 1993 operating profit, compared with 1992,
resulted from lower operating profit from all segments except coal,
which increased slightly. The $38 million decline in 1992 operating
profit from 1991 was due to lower results from refining and marketing
and chemical operations, which more than offset the increased
operating profit from exploration and production operations. Coal
operating profit did not change from 1991 to 1992.
Consolidated sales totaled $3.3 billion for 1993, compared with
$3.4 billion for 1992 and $3.3 billion for 1991. Revenues in 1993
were slightly lower than 1992 as higher crude oil and coal sales
volumes and higher natural gas sales prices were more than offset by
lower sales prices for crude oil, coal, and most chemical and refined
products.
Costs and operating expenses decreased $90 million in 1993 due to
lower crude oil and feedstock costs for refining and marketing
operations, partially offset by higher costs resulting from increased
sales volumes of coal and certain chemical products. The $170 million
increase in 1992 costs and operating expenses compared with 1991 was
due to higher product costs incurred by refining and marketing and
chemical operations.
25
<PAGE>
Selling, general, and administrative expenses for 1993 were $16
million lower than 1992 due to lower costs resulting from the
company's streamlining program and lower costs associated with assets
sold in prior years. In 1992, the $16 million decrease in selling,
general, and administrative expenses from 1991 was due primarily to
lower costs associated with the company's streamlining and incentive
compensation programs.
Exploration costs for 1993, 1992, and 1991 were $71 million, $55
million, and $81 million, respectively. The 1993 increase resulted
primarily from higher costs for dry holes. The decline in 1992 from
1991 resulted principally from lower costs for dry holes.
Provisions for environmental reclamation and remediation of
inactive facilities totaled $4 million, $205 million, and $11 million
in 1993, 1992, and 1991, respectively. The 1992 amount represented
additional provisions established for the removal of low-level
radioactive materials from the company's inactive facility in West
Chicago, Illinois, and reclamation and remediation of several other
inactive facilities.
Interest and debt expense for 1993, 1992, and 1991 was $47 million,
$66 million, and $78 million, respectively. The decrease over the
three-year period resulted primarily from lower average interest rates
and lower debt in 1993.
Other income totaled $19 million for 1993, a $23 million decrease
from 1992. This decrease was primarily due to lower foreign currency
translation gains. Other income for 1992 was $18 million lower than
1991 due to lower gains from property sales and lower interest income,
partially offset by foreign currency translation gains in 1992,
compared with 1991 losses.
Segment Operations
Operating profit (loss) from each of the company's segments is
summarized in the following table:
<TABLE>
<CAPTION>
(In millions of dollars) 1993 1992 1991
<S> <C> <C> <C>
Exploration and Production $ 82 $ 91 $ 67
Refining and Marketing (28) (21) 31
Chemicals 70 79 101
Coal 80 77 77
Other (5) 3 (9)
Total $199 $229 $267
</TABLE>
Exploration and Production
Exploration and production operating profit was $82 million for
1993, compared with $91 million for 1992 and $67 million for 1991.
The decline in 1993 compared with 1992 resulted from lower crude oil
sales prices, higher exploration costs, and lower natural gas
deliveries, partially offset by higher natural gas sales prices and
higher crude oil sales volumes. The 1992 increase from 1991 was due
to lower exploration costs and higher natural gas deliveries and sales
prices, partially offset by lower crude oil sales prices. Revenues
and crude oil and natural gas volumes and prices are summarized in the
following table:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Revenues, including intercompany
sales (millions of dollars) $ 564 $ 560 $ 560
Crude oil and condensate produced
(thousands of barrels per day) 53.2 50.5 50.4
Average price per barrel of crude
oil sold $15.64 $18.11 $19.01
Natural gas deliveries (MMCF per day) 286 296 281
Average price per MCF of natural
gas delivered $ 1.92 $ 1.56 $ 1.44
</TABLE>
Refining and Marketing
Refining and marketing had an operating loss of $28 million for
1993, compared with an operating loss of $21 million for 1992 and
operating profit of $31 million for 1991. Revenues were $2 billion,
$2.2 billion, and $2.1 billion in 1993, 1992, and 1991, respectively.
The 1993 and 1992 operating losses resulted from negative margins due
to product prices declining faster than feedstock costs and a
reduction in LIFO inventory carrying value in 1993. Revenues for 1993
were lower than the prior year due to lower sales prices and volumes.
The 1992 revenue increase was due to higher sales volumes, partially
offset by lower sales prices.
Chemicals
Chemicals operating profit totaled $70 million, $79 million, and
$101 million for 1993, 1992, and 1991, respectively, on revenues of
$556 million, $515 million, and $454 million, respectively. The
increase in 1993 revenues, compared with 1992, was due primarily to
higher sales volumes, partially offset by lower sales prices for
titanium dioxide pigment and most other products. Operating profit
for 1993 was less than 1992 due to higher operating expenses resulting
from the increased sales volumes, partially offset by lower per-unit
cost of sales for synthetic rutile and most other products. The
increase in 1992 revenues, compared with 1991, was due to higher sales
volumes for most products and higher sales prices for ammonium
perchlorate, partially offset by lower sales prices for most other
products. The decrease in 1992 operating profit from the prior year
was due to higher per-unit production costs for ammonium perchlorate
and the Western Australia operation, partially offset by the increased
revenues.
26
<PAGE>
Coal
Coal operating profit totaled $80 million in 1993 and $77 million
in both 1992 and 1991. Revenues were $328 million, $307 million, and
$315 million in 1993, 1992, and 1991, respectively. Revenues
increased in 1993 due to higher sales volumes, partially offset by
lower average sales prices. Operating profit for 1993 improved due to
the increased revenues that more than offset higher operating
expenses. Operating expenses were higher due to increased production
volumes even though the per-unit production costs declined. The 1992
decrease in revenues from the prior year was due to lower sales
volumes, partially offset by higher average sales prices. Operating
profit for 1992 remained level with 1991 due to lower production costs
offset by the decrease in revenues.
Financial Condition
Cash Flow
Net cash provided by operating activities continued to be the
primary source of funding for the company's capital expenditures
program and dividend payments. For 1993, net cash provided by
operating activities totaled $424 million, compared with $277 million
and $194 million for 1992 and 1991, respectively. The company's net
cash provided by operating activities for 1993 reflects net income of
$77 million; depreciation, depletion, and amortization of $321
million; and a net decrease in working capital items, excluding cash
and short-term debt. Net cash provided by operating activities for
1992 consisted of the 1992 net loss of $101 million, which included
noncash charges for: (1) depreciation, depletion, and amortization of
$312 million; (2) an after-tax environmental provision for inactive
sites of $130 million; and (3) the cumulative effect of accounting
changes of $70 million. These noncash charges were partially offset
by changes in working capital items, excluding cash and short-term
debt. Net cash provided by operating activities in 1991 was less than
the 1992 amount due to the prepayment of future income tax settlements
and the payment of income taxes resulting from the 1990 sale of the
foreign contract drilling operations.
Net cash used by the company in investing activities totaled $396
million, $325 million, and $458 million for 1993, 1992, and 1991,
respectively. The major investing activity during each of the three
years was for cash capital expenditures, which totaled $451 million in
1993, $373 million in 1992, and $504 million in 1991. Partially
offsetting were investing inflows of $35 million in 1992 from a
contract settlement and $39 million and $36 million in 1993 and 1991,
respectively, from the sale of the contract drilling operations.
Financing activities provided net cash totaling $9 million in 1993
and $3 million in 1991 and used net cash of $87 million in 1992.
Dividends paid to common stockholders of the company totaled $73
million in both 1993 and 1992 and $72 million in 1991. In 1993,
increases in short-term borrowings exceeded long-term debt repayments
by $79 million. In 1992, an additional $15 million was used for the
net repayment of debt. In addition to common stock dividends paid
during 1991, the company purchased $13 million of treasury stock, paid
dividends of $82 million to the minority stockholders of foreign
subsidiaries, and increased net borrowings by $169 million.
Liquidity
The net working capital position of the company at year-end 1993
was $79 million, compared with $210 million at the end of 1992. This
$131 million decrease resulted primarily from an increase in short-
term debt of $129 million. The current ratio was 1.1 to 1 at December
31, 1993, compared with 1.3 to 1 at December 31, 1992, and 1.6 to 1 at
December 31, 1991.
In September 1993, the company called its $150 million, 7-1/4%
convertible subordinated debentures due in 2012 for redemption on
October 15, 1993 (see Note 10). The percentage of total debt to total
capitalization was 37% at December 31, 1993, compared with 42% and 39%
at year-end 1992 and 1991, respectively. The year-end 1993 percentage
decreased from the prior year due to the reduction in total debt
outstanding of $73 million and the conversion of the convertible
debentures.
The company has several revolving credit agreements. One provides
for combined borrowings by the company and Kerr-McGee Credit
Corporation, a wholly owned subsidiary, of up to $300 million through
August 15, 1995, of which $70 million was outstanding at year-end
1993. Another agreement entered into by the company and Kerr-McGee
Oil (U.K.) PLC, a wholly owned subsidiary, is a revolving credit
agreement with several banks providing for combined borrowings of up
to $230 million through October 16, 1997, of which $215 million was
outstanding at year-end 1993. Both of these agreements require that
the principal amounts outstanding be paid in full on the respective
termination dates. Interest is payable at varying rates.
During 1993, one of the company's wholly owned subsidiaries, Kerr-
McGee Canada Ltd. (KMCL), entered into revolving credit agreements
with three banks, each to provide borrowings of up to U.S. $30
million. Interest is payable at varying rates. Prior to the
termination dates and in accordance with the terms of the respective
agreements, KMCL may request an extension of the commitment period for
not more than one year. The company is the
27
<PAGE>
guarantor of each of these agreements. At December 31, 1993, amounts
outstanding pursuant to the agreements were as follows:
<TABLE>
<CAPTION>
Amount Outstanding
Date of Agreement Termination Date (In millions of dollars)
<S> <C>
September 20, 1993 September 19, 1994 $30
October 4, 1993 October 3, 1994 24
October 20, 1993 October 19, 1994 30
</TABLE>
At year-end 1993, the company had available unused lines of credit
and revolving credit facilities of $328 million. Of this amount, $270
million and $51 million can be used to support the commercial paper
borrowings of Kerr-McGee Credit Corporation and Kerr-McGee Oil (U.K.)
PLC, respectively.
Capital expenditures for the three years ended December 31, 1993,
totaled $1.3 billion and have been financed through internally
generated funds and various borrowings. For the three-year period
ended December 31, 1993, net cash provided by operating activities,
excluding working capital changes, totaled $1.1 billion, slightly less
than the total capital expenditures during the same period.
Management anticipates that the cash requirements for the 1994
capital expenditures program, currently estimated to be $430 million,
excluding acquisitions, and the capital expenditures programs for the
next several years can be provided through internally generated funds
and selective short-term and/or long-term borrowings.
It is the company's intent to hedge a large portion of its material
monetary assets, liabilities, and commitments denominated in foreign
currencies; therefore, from time to time, the company purchases
foreign currencies and forward contracts to provide funds for known or
anticipated operating requirements that will be denominated in foreign
currencies. Outstanding forward contracts are described in Note 1 to
the financial statements.
Coal markets continue to experience competitive pricing due to
excess production capacity. As a result, the scheduled contract price
renegotiation with an Illinois coal customer during the 1993 fourth
quarter resulted in a commitment for continued deliveries through 1999
but at prices lower than under the previous contract. The negative
impact of these lower contract prices on 1994 operating profit is
expected to be approximately $25 million.
Although domestic markets are affected by the Clean Air Act
Amendments of 1990, the company is well positioned with its reserves
of low-sulfur coal. Approximately 70% of the company's present
reserves will continue to be considered compliance coal after the year
2000. Uncommitted reserves and existing production capacity should
permit the company to expand its export sales and participate in the
expected growth in domestic demand for low-sulfur coal.
Environmental Matters
The company's operations are subject to various federal and state
environmental laws and regulations. Under these laws, the company is
subject to possible obligations to remove or mitigate the effects on
the environment of the disposal or release of certain chemical,
petroleum, or low-level radioactive substances at various sites,
including sites that have been designated Superfund sites by the
United States Environmental Protection Agency (U.S. EPA) pursuant to
the Comprehensive Environmental Response, Compensation, and Liability
Act of 1980 (CERCLA), as amended. The company has received notices
that it has been named a potentially responsible party (PRP) with
respect to the remediation of 14 existing U.S. EPA Superfund sites and
may share liability at certain of these sites. In addition, the
company and/or its subsidiaries have executed consent orders, operate
under a license, or have reached agreements to perform or have
performed remediation or remedial investigations and feasibility
studies on sites not included as U.S. EPA Superfund sites.
The company does not consider the number of sites for which it has
been named a PRP to be a relevant measure of liability. Because of
continually changing environmental laws and regulations, the nature of
the company's businesses, the large number of other PRPs, the present
state of the law which, under CERCLA, imposes joint and several
liability on all PRPs, and pending legal proceedings, the company is
uncertain as to its involvement in many of the sites. Therefore, the
company is unable to reliably estimate the potential liability and the
timing of future expenditures that may arise from many of these
environmental sites. Reserves have been established for the
remediation and reclamation of active and inactive sites where it is
probable that future costs will be incurred and the liability is
estimable. In 1993, $8 million was added to the reserve for active
and inactive sites. At December 31, 1993, the company's reserve for
these sites totaled $278 million. In addition, at year-end 1993, the
company had reserves of $67 million for the future costs for the
abandonment and removal of offshore well and production facilities at
the end of their productive lives and $14 million for the
decommissioning and reclamation of coal mining locations. In the
Consolidated Balance Sheet, $336 million of these reserves is
classified as a deferred credit and the remaining $23 million is
included in current liabilities.
Expenditures for the environmental protection and cleanup of
existing sites for each of the last three years and for the three-year
period ending December 31, 1993, were as follows:
<TABLE>
<CAPTION>
(In millions of dollars) 1993 1992 1991 Total
<S> <C> <C> <C> <C>
Capital expenditures $13 $16 $16 $ 45
Recurring expenses 26 26 15 67
Charges to environmental reserves 30 26 21 77
Total $69 $68 $52 $189
</TABLE>
28
<PAGE>
The company has not recorded in the financial statements potential
reimbursements from government agencies (see Note 11) or other third
parties. The following table reflects the known estimated cost of
investigation and/or remediation that is probable and estimable. The
table includes all U.S. EPA Superfund sites where the company has been
notified it is a PRP under CERCLA and other sites where the company
believes it has some financial involvement in investigation and/or
remediation.
<TABLE>
<CAPTION>
Total Known Total Total Number
Estimated Expenditures of Identifiable
Location of Site Stage of Investigation/Remediation Cost Through 1993 PRPs
(In millions of Dollars)
U.S. EPA Superfund sites
<S> <C> <C> <C>
Milwaukee, Wis. Executed consent decree to
remediate the site of a former
wood-treating facility. $ 38 $ 3 3
13 sites individually Various stages of investigation.
not material 6 2 674
44 5 677
Non-U.S. EPA Superfund
sites under consent order,
license, or agreement
West Chicago, Ill. Pursuing a license to decommission
the site of a former facility
(see Note 11). 201 51
Cleveland/Cushing, Okla. Agreed to remediation plans for
a major portion of these sites. 50 10
Cimarron, Okla. Substantially completed remediation
process. 28 25
279 86
Non-U.S. EPA Superfund
sites individually
not material 120 74
Total for all sites $443 $165
</TABLE>
Although management believes adequate reserves have been provided
for environmental and all other known contingencies, it is possible,
due to the previously noted uncertainties, that additional reserves
could be required in the future that could have a material effect on
the results of operations in a particular quarter or annual period.
However, the ultimate resolution of these commitments and
contingencies, to the extent not previously provided for, should not
have a material adverse effect on the company's financial position.
Accounting Matters
In November 1992, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (FAS) No. 112,
"Employers' Accounting for Postemployment Benefits," effective for
years beginning after December 15, 1993. This statement requires the
accrual of compensation expense for the cost of benefits to be
provided to former or inactive employees after employment but before
retirement.
In May 1993, the FASB issued FAS No. 114, "Accounting by Creditors
for Impairment of a Loan." FAS 114, effective for years beginning
after December 15, 1994, requires that impaired loans be measured
based on the present value of expected future cash flows discounted at
the loan's effective interest rate or the fair value of the
collateral, if the loan is collateral-dependent.
Also in May 1993, the FASB issued FAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." FAS 115,
effective for years beginning after December 15, 1993, expands the use
of fair value accounting for certain investments in debt and equity
securities but retains the use of the amortized cost method for
investments in debt securities that the company has the positive
intent and ability to hold to maturity.
The impact of the new accounting requirements on the company's
results of operations or financial condition is not expected to be
material.
29
<PAGE>
Responsibility for Financial Reporting
The company's management is responsible for the integrity and
objectivity of the financial data contained in the financial
statements. These financial statements have been prepared in
conformity with generally accepted accounting principles appropriate
under the circumstances and, where necessary, reflect informed
judgments and estimates of the effects of certain events and
transactions based on currently available information at the date the
financial statements were prepared.
The company's management depends on the company's system of
internal accounting controls to assure itself of the reliability of
the financial statements. The internal control system is designed to
provide reasonable assurance, at appropriate cost, that assets are
safeguarded and transactions are executed in accordance with
management's authorizations and are recorded properly to permit the
preparation of financial statements in accordance with generally
accepted accounting principles. Periodic reviews are made of internal
controls by the company's staff of internal auditors, and corrective
action is taken if needed.
The Board of Directors reviews and monitors financial statements
through its audit committee, which is composed solely of directors who
are not officers or employees of the company. The audit committee
meets with the independent public accountants, internal auditors, and
management to review internal accounting controls, auditing, and
financial reporting matters.
The independent public accountants are engaged to provide an
objective and independent review of the company's financial statements
and to express an opinion thereon. Their audits are conducted in
accordance with generally accepted auditing standards, and their
report is included below.
Report of Independent Public Accountants
To the Stockholders and Board of Directors of Kerr-McGee Corporation:
We have audited the accompanying consolidated balance sheet of
Kerr-McGee Corporation (a Delaware corporation) and subsidiary
companies as of December 31, 1993 and 1992, and the related
consolidated statements of income, retained earnings, and cash flows
for each of the three years in the period ended December 31, 1993.
These financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Kerr-McGee
Corporation and subsidiary companies as of December 31, 1993 and 1992,
and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1993, in conformity
with generally accepted accounting principles.
As explained in Note 2 to the financial statements, effective
January 1, 1992, the company adopted Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions," and Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes." Prior years' financial
statements were not restated.
(Arthur Andersen & Co.)
ARTHUR ANDERSEN & CO.
Oklahoma City, Oklahoma,
February 18, 1994
30
<PAGE>
<TABLE>
<CAPTION>
Kerr-McGee Corporation
Consolidated Statement of Income
(In millions of dollars, except per-share amounts) 1993 1992 1991
<S> <C> <C> <C>
Sales $3,281 $3,382 $3,274
Costs and Expenses
Costs and operating expenses 2,544 2,634 2,464
Selling, general, and administrative expenses 134 150 166
Depreciation and depletion 303 294 285
Exploration, including dry holes and amortization of undeveloped leases 71 55 81
Provision for environmental reclamation and remediation of inactive sites 4 205 11
Taxes, other than income taxes 79 84 83
Interest and debt expense 47 66 78
Total Costs and Expenses 3,182 3,488 3,168
99 (106) 106
Other Income 19 42 60
Income (Loss) before Income Taxes, Extraordinary Charge, and Cumulative
Effect on Prior Years of Changes in Accounting Principles 118 (64) 166
Provision (Benefit) for Income Taxes 41 (38) 64
Income (Loss) before Extraordinary Charge and Cumulative Effect on Prior
Years of Changes in Accounting Principles 77 (26) 102
Extraordinary Charge, Net of Income Taxes - (5) -
Cumulative Effect on Prior Years of Changes in Accounting Principles,
Net of Income Taxes - (70) -
Net Income (Loss) $ 77 $ (101) $ 102
Net Income (Loss) per Common Share:
Income (Loss) before Extraordinary Charge and Cumulative Effect on Prior
Years of Changes in Accounting Principles $ 1.57 $ (.53) $ 2.10
Extraordinary Charge - (.10) -
Cumulative Effect on Prior Years of Changes in Accounting Principles - (1.45) -
Total $ 1.57 $(2.08) $ 2.10
</TABLE>
<TABLE>
<CAPTION>
Kerr-McGee Corporation
Consolidated Statement of Retained Earnings
(In millions of dollars, except per-share amounts) 1993 1992 1991
<S> <C> <C> <C>
Balance at Beginning of Year $1,306 $1,480 $1,451
Net income (loss) 77 (101) 102
Dividends
(per common share: $1.52 in each of the years
1993 and 1992 and $1.50 in 1991) (74) (73) (73)
Balance at End of Year $1,309 $1,306 $1,480
The accompanying notes are an integral part of these statements.
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
Kerr-McGee Corporation
Consolidated Balance Sheet
(In millions of dollars) 1993 1992
ASSETS
<S> <C> <C>
Current Assets
Cash $ 94 $ 57
Notes and accounts receivable 373 411
Inventories 349 385
Deposits and prepaid expenses 50 64
Total Current Assets 866 917
Investments and Other Assets 101 125
Property, Plant, and Equipment - Net 2,513 2,422
Deferred Charges 67 57
$ 3,547 $ 3,521
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $ 265 $ 170
Accounts payable 328 360
Long-term debt due within one year 43 9
Taxes on income 1 22
Taxes, other than income taxes 39 37
Accrued liabilities 111 109
Total Current Liabilities 787 707
Long-Term Debt 590 792
Deferred Credits and Reserves
Income taxes 172 166
Other 486 506
Total Deferred Credits and Reserves 658 672
Stockholders' Equity
Common stock, par value $1.00 - 150,000,000
shares authorized, 53,268,181 shares
issued in 1993 and 53,191,644 shares issued
in 1992 53 53
Capital in excess of par value 308 283
Preferred stock purchase rights 1 1
Retained earnings 1,309 1,306
Common stock in treasury, at cost -
1,612,688 shares in 1993 and 4,907,969 shares
in 1992 (63) (191)
Deferred compensation (96) (102)
Total Stockholders' Equity 1,512 1,350
$ 3,547 $ 3,521
The "successful efforts" method of accounting for oil and gas exploration and production
activities has been followed in preparing this balance sheet.
The accompanying notes are an integral part of this balance sheet.
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
Kerr-McGee Corporation
Consolidated Statement of Cash Flows
(In millions of dollars) 1993 1992 1991
<S> <C> <C> <C>
Operating Activities
Net income (loss) $ 77 $ (101) $ 102
Adjustments to reconcile to net cash
provided by operating activities -
Depreciation, depletion, and amortization 321 312 304
Deferred income taxes 2 (88) 2
Cumulative effect on prior years of changes
in accounting principles - 70 -
Provision for environmental reclamation and
remediation of inactive sites 4 205 11
Noncash items affecting net income 54 47 40
Gain on sales and retirements of assets (9) (2) (27)
Changes in current assets and liabilities -
(Increase) decrease in accounts receivable 34 (57) 60
(Increase) decrease in inventories 36 (23) (62)
(Increase) decrease in deposits and prepaids 7 2 (9)
Decrease in accounts payable and
accrued liabilities (9) (13) (60)
Decrease in taxes payable (21) (18) (107)
Other (72) (57) (60)
Net cash provided by operating activities 424 277 194
Investing Activities
Capital expenditures (451) (373) (504)
Proceeds from sale of assets 17 25 32
Proceeds from sale of drilling operations 39 - 36
Proceeds from contract settlement - 35 -
Purchase of long-term investments (25) (16) (24)
Proceeds from sale of long-term investments 24 4 2
Net cash used in investing activities (396) (325) (458)
Financing Activities
Increase in short-term borrowings 95 135 35
Proceeds from issuance of long-term debt - 3 138
Repayment of long-term debt (16) (153) (4)
Issuance of common stock 3 1 1
Dividends paid (73) (73) (72)
Dividends paid to minority stockholders of
foreign subsidiaries - - (82)
Purchase of treasury stock - - (13)
Net cash provided (used) in financing activities 9 (87) 3
Net Increase (Decrease) in Cash and Cash Equivalents 37 (135) (261)
Cash and Cash Equivalents at Beginning of Year 57 192 453
Cash and Cash Equivalents at End of Year $ 94 $ 57 $ 192
The accompanying notes are an integral part of this statement.
</TABLE>
33
<PAGE>
Notes to Financial Statements
1. Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of all
subsidiary companies that are more than 50% owned and the
proportionate share of joint ventures in which Kerr-McGee has an
undivided interest. Investments in affiliated companies that are 20%
to 50% owned are carried as Investments and Other Assets in the
Consolidated Balance Sheet at cost adjusted for equity in
undistributed earnings. Except for dividends, changes in equity in
undistributed earnings are included in the Consolidated Statement of
Income. All material intercompany transactions have been eliminated.
Translation of Foreign Currencies
As the U.S. dollar has been adopted as the functional currency for
each of the company's international operations, foreign currency
translation gains or losses are recognized in the period incurred.
Total foreign currency translation gains and losses in 1993 and 1991
were immaterial. The company recorded net foreign currency
translation gains of $20 million in 1992.
Net Income (Loss) per Common Share
After adding the dilutive effect of the restricted stock and the
conversion of stock options to the weighted average number of shares
outstanding, the shares used to compute net income per common share
were 49,281,023 in 1993 and 48,330,405 in 1991. The weighted
average number of shares used to compute the 1992 net loss per share
was 48,275,913.
Cash Equivalents
The company considers all investments purchased with a maturity of
three months or less to be cash equivalents. Cash includes time
deposits, certificates of deposit, and U.S. government securities
totaling $39 million in 1993 and $29 million in 1992.
Inventories
The cost of substantially all crude oil and refined petroleum
product inventories is determined by the last-in, first-out (LIFO)
method, and the cost of remaining inventories is determined by the
first-in, first-out (FIFO) method. Inventory carrying values include
material costs, labor, and indirect manufacturing expenses associated
therewith. Materials and supplies are valued at average cost.
Property, Plant, and Equipment
Oil and Gas - Exploration expenses, including geological and
geophysical costs, rentals, and exploratory dry holes, are charged
against income as incurred. Costs of successful wells and related
production equipment and developmental dry holes are capitalized and
amortized on a field-wide basis using the unit-of-production method as
the oil or gas is produced.
Undeveloped acreage costs are capitalized and amortized at rates
that provide full amortization on abandonment of unproductive leases.
Costs of abandoned leases are charged to the accumulated amortization
accounts, and costs of productive leases are transferred to the
developed property accounts.
Other - Property, plant, and equipment is stated at original cost
less reserves for depreciation, depletion, and amortization.
Maintenance and repairs are expensed as incurred, except that costs of
replacements or renewals that improve or extend the lives of existing
properties are capitalized. Costs of nonproducing mineral acreage
surrendered or otherwise disposed of are charged to expense at the
time of disposition. Individual properties are written down when
impairments are deemed to have occurred.
Depreciation, Depletion, and Amortization - Property, plant, and
equipment is depreciated, depleted, or amortized over its estimated life by
application of the unit-of-production or the straight-line method. In
arriving at rates under the unit-of-production method, the quantities
of recoverable oil, gas, and other minerals are established based on
estimates made by the company's geologists and engineers.
Retirements - The cost and related depreciation, depletion, and
amortization reserves are removed from the respective accounts upon
retirement or sale of property, plant, and equipment. The resulting
gain or loss is included in other income.
Interest Capitalized - The company capitalizes interest costs on major
projects that require a considerable length of time to complete.
Interest capitalized in 1993, 1992, and 1991 was $20 million, $15
million, and $16 million, respectively.
Income Taxes
Effective January 1, 1992, deferred income taxes are provided to
reflect the future tax consequences of differences between the tax
bases of assets and liabilities and their reported amounts in the
financial statements. Prior to 1992, deferred taxes were provided for
all material items of income and expense recognized in different time
periods for financial and income tax reporting purposes. See Note 2
for a discussion of the effects of the change in the method of
accounting for income taxes.
Research and Development Costs
Research and development costs are charged against earnings as
incurred. Such costs totaled $19 million in 1993, $17 million in
1992, and $16 million in 1991.
34
<PAGE>
Site Dismantlement, Reclamation, and Remediation Costs
The company provides for the estimated cost at current prices of
dismantling and removing oil and gas production and related
facilities. Such costs are being accumulated over the estimated lives
of the facilities by the use of the unit-of-production method. As
sites of environmental concern are identified, the company assesses
the existing conditions, claims, and assertions, generally related to
former operations, and records an estimated liability when
environmental assessments and/or remedial efforts are probable and the
associated costs can be reasonably estimated.
Gas-Balancing Arrangements
Gas-balancing arrangements with partners in natural gas wells are
accounted for by the entitlements method. At December 31, 1993 and
1992, neither the quantity nor dollar amount of such arrangements
recorded in the Consolidated Balance Sheet was material.
Lease Commitments
The company utilizes various leased properties in its operations,
principally for marketing facilities and buildings. Net lease rental
expense was $16 million in 1993 and $19 million in each of the years
1992 and 1991.
The aggregate minimum annual rentals under noncancelable leases in
effect on December 31, 1993, totaled $31 million, of which $8 million
is due in 1994, $6 million in 1995, $14 million in the period 1996
through 1998, and $3 million thereafter.
Futures Contracts
The company periodically enters into futures contracts for
commodities to hedge a portion of its petroleum products inventories
and natural gas sales and into forward contracts for foreign
currencies to hedge specific foreign currency transactions. The
resulting gains or losses are deferred and recognized as part of the
transactions hedged.
At December 31, 1993, the company had foreign currency contracts
maturing between January 1994 and December 1995 to purchase for $209
million various foreign currencies (105 million British pounds
sterling and $72 million Australian). The company had contracts to
sell for $10 million various currencies, principally European
currencies, which mature at various dates during 1994. At year-end
1992, the company had foreign currency contracts maturing between
January 1993 and December 1995 to purchase for $243 million various
foreign currencies (147 million British pounds sterling and $16
million Australian). The company also had contracts to sell for $7
million various currencies, principally European currencies, maturing
at various dates during 1993. Based on financial institutions'
quotes, the net aggregate replacement cost of the contracts
outstanding at December 31, 1993 and 1992, totaled $192 million and
$221 million, respectively.
2. Accounting Changes
Effective January 1, 1992, the company adopted the provisions of
Statement of Financial Accounting Standards (FAS) No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions" (see Note
16). This statement requires the accrual method of accounting for
postretirement health care and life insurance benefits based on
actuarially determined costs to be recognized over the period from the
date of hire to the full eligibility date of employees who are
expected to qualify for such benefits. The company recognized the
full amount of its accumulated postretirement benefit obligation,
which represents the present value at January 1, 1992, of the
estimated future benefits payable to current retirees and a pro rata
portion of estimated benefits payable to active employees after
retirement. The pre-tax charge to 1992 earnings was $101 million.
After income tax benefits, $64 million, or $1.32 per common share, was
reflected in the Consolidated Statement of Income as the cumulative
effect on prior years of changes in accounting principles. This
change in the accounting method for postretirement health care and
life insurance benefits resulted in an after-tax incremental cost for
such benefits of $3 million, or $.06 per common share, for the year
1992.
Also effective January 1, 1992, the company adopted FAS No. 109,
"Accounting for Income Taxes," which requires an asset and liability
approach in accounting for income taxes (see Note 15). The cumulative
effect as of January 1, 1992, of the adoption of the statement
resulted in a 1992 charge of $6 million, or $.13 per common share. An
additional deferred tax liability of $76 million was recognized for
the differences between the assigned values and the tax bases of
assets previously acquired. The offset to this additional liability
was an increase to property, plant, and equipment. As the result of
the change in the method of accounting for income taxes, the 1992 net
loss was reduced by $16 million, or $.33 per common share, due to the
recognition of income tax benefits for the losses of a foreign
subsidiary and foreign currency translation gains recognized on the
higher deferred tax balances of the foreign operations. The
additional depreciation expense resulting from the addition to
property, plant, and equipment noted above was offset by income tax
benefits. The company elected not to restate prior years' financial
statements.
During 1993, the company changed the grouping of its operations for
business segment reporting (see Notes 8 and 23).
35
<PAGE>
Information related to the operations of a plant that processes off-
gases from refineries has been reclassified from the Exploration and
Production business segment to the Other segment for all periods
presented. This operation is now the major component of the Other
segment. Information related to crude oil and natural gas activities
also reflects the reclassification, where applicable (see Notes 24 and
25).
3. Cash Flow Information
Net cash provided by operating activities reflects cash payments
for interest and income taxes as follows:
<TABLE>
<CAPTION>
(In millions of dollars) 1993 1992 1991
<S> <C> <C> <C>
Interest paid $69 $74 $107
Income taxes paid 59 52 169
</TABLE>
The effect of foreign currency exchange rate fluctuations on cash
and cash equivalents was not material.
During 1993, approximately $149 million of the company's 7-1/4%
convertible debentures due in 2012 was converted into the common stock
of the company. The common stock was issued from the company's
treasury (see Note 10). During 1992, the company added coal reserves
in a $20 million acquisition of additional leased acreage. A portion
of the acquisition cost was paid in 1991 and 1993, and the remaining
$12 million will be paid over the next three years. Other capital
expenditures for which payment will be made in the subsequent year
totaled $10 million, $32 million, and $10 million at year-end 1993,
1992, and 1991, respectively. In 1991, the company received cash and
a note in exchange for the assets of the domestic drilling operation.
The final payment of the note was received in 1993 (see Note 22). The
noncash effects of these transactions are not reflected in the
Consolidated Statement of Cash Flows.
Transactions affecting the debt and deferred compensation
associated with the Employee Stock Ownership Plan are noncash
transactions and are not reflected in the Consolidated Statement of
Cash Flows (see Note 20).
4. Notes and Accounts Receivable
The following table summarizes notes and accounts receivable, net
of the related allowance for doubtful accounts, at year-end 1993 and
1992:
<TABLE>
<CAPTION>
(In millions of dollars) 1993 1992
<S> <C> <C>
Notes receivable $ 5 $ 12
Accounts receivable 373 402
378 414
Allowance for doubtful accounts (5) (3)
Total $373 $411
</TABLE>
5. Inventories
Major categories of inventories at year-end 1993 and 1992 are as
follows:
<TABLE>
<CAPTION>
(In millions of dollars) 1993 1992
<S> <C> <C>
Crude oil and refined products $144 $180
Chemicals and other products 134 133
Materials and supplies 71 72
Total $349 $385
</TABLE>
Substantially all inventories of crude oil and refined petroleum
products are valued using the LIFO method. If these inventories had
been valued at the lower of cost or market rather than on the LIFO
basis at year-end 1992, their value would have been higher by
approximately $11 million. At year-end 1993, market prices were lower
than LIFO values, and the company recorded a $2 million charge to
income to reduce the carrying value of these inventories to market
value. During each of the years in the three-year period ended
December 31, 1993, certain LIFO inventory quantities were reduced.
For 1993, the effect of the reduction was to decrease net income by $5
million. The effect of the reductions was not material in 1992 or
1991.
36
<PAGE>
6. Investments and Other Assets
Investments and Other Assets consisted of the following at December
31, 1993 and 1992:
<TABLE>
<CAPTION>
(In millions of dollars) 1993 1992
<S> <C> <C>
Long-term receivables $ 17 $ 55
Net deferred tax asset(1) 23 20
Investment in and advances to equity affiliates 10 12
U.S. government obligations 26 15
Corporate stocks 14 14
Other 11 9
Total $101 $125
(1)For a discussion of the net deferred tax asset, see Note 15.
</TABLE>
7. Deferred Charges
The cost of injected gas is deferred until sold at completion of
miscible gas flood projects. The deferral of preoperating and startup
costs associated with new plants and facilities is generally amortized
over the first five years of operations. Deferred charges are as
follows at year-end 1993 and 1992:
<TABLE>
<CAPTION>
(In millions of dollars) 1993 1992
<S> <C> <C>
Cost of injected gas $31 $24
Preoperating and startup costs 12 15
Other 24 18
Total $67 $57
</TABLE>
8. Property, Plant, and Equipment
Fixed assets and related reserves by business segment at December
31, 1993 and 1992, are as follows:
<TABLE>
<CAPTION>
Reserves for
Depreciation,
Depletion, and
Gross Property Amortization Net Property
(In millions of dollars) 1993 1992 1993 1992 1993 1992
<S> <C> <C> <C> <C> <C> <C>
Exploration and production $ 3,783 $ 3,536 $ 2,294 $ 2,152 $ 1,489 $ 1,384
Refining and marketing 561 530 340 315 221 215
Chemicals 760 728 357 317 403 411
Coal 517 491 249 221 268 270
Other 231 232 99 90 132 142
Total $ 5,852 $ 5,517 $ 3,339 $ 3,095 $ 2,513 $ 2,422
</TABLE>
9. Lines of Credit
At year-end 1993, the company had available unused bank lines of
credit and revolving credit facilities of $328 million. Of this
amount, $270 million and $51 million can be used to support commercial
paper borrowing arrangements of Kerr-McGee Credit Corporation and
Kerr-McGee Oil (U.K.) PLC, respectively.
The company has arrangements to maintain compensating balances with
certain banks that provide credit. At year-end 1993, the aggregate
amount of such compensating balances was not material, and the company
was not legally restricted from withdrawing all or a portion of such
balances at any time during the year.
37
<PAGE>
10. Debt
Short-term borrowings, consisting of notes payable and commercial
paper, are summarized below:
<TABLE>
<CAPTION>
1993 1992 1991
Notes Commercial Notes Commercial Notes Commercial
(In millions of dollars) Payable Paper Payable Paper Payable Paper
<S> <C> <C> <C> <C> <C> <C>
Balance outstanding at December 31 $101 $164 $26 $144 $ 2 $33
Average interest rate at year-end 3.76% 3.56% 4.14% 4.24% 4.75% 5.46%
Average daily balance outstanding
during year $ 38 $225 $12 $ 91 $ 2 $11
Weighted average interest rate
for year 3.63% 3.43% 3.88% 4.02% 6.65% 6.16%
High balance for year $120 $328 $27 $174 $16 $67
</TABLE>
The company's policy is to classify short-term debt (borrowings
under revolving credit facilities and commercial paper) of up to $300
million in 1993 and 1992 and $200 million in 1991 as long-term debt
since the company has the ability under certain revolving credit
agreements and the intent to maintain these obligations for longer
than one year. Therefore, the above information excludes the
following, which has been classified as long-term debt:
<TABLE>
<CAPTION>
(In millions of dollars) 1993 1992 1991
<S> <C> <C> <C>
Revolving credit facilities $285 $180 $140
Commercial paper 15 120 60
Total $300 $300 $200
</TABLE>
The increase in the 1993 and 1992 amounts classified as long-term
was principally due to the greater use of short-term borrowings.
During 1993, the company called its 7-1/4% convertible debentures
due June 15, 2012. Virtually all of the debt was converted into
common stock of the company at the conversion price of $45.30 per
share. The common stock was issued from the company's treasury. This
conversion resulted in no gain or loss (see Notes 3 and 18). During
1992, the company redeemed its 9-3/4% debentures due April 1, 2016.
This early retirement resulted in an extraordinary charge of $8
million ($5 million after income taxes).
Additional information regarding the major changes in long-term
debt during the periods and unused commitments for long-term financing
is included in the Financial Condition discussion starting on page 27
in Management's Discussion and Analysis.
Maturities of long-term debt due after December 31, 1993, are $43
million in 1994, $78 million in 1995, $9 million in 1996, $245 million
in 1997, $17 million in 1998, and $241 million thereafter.
Long-term debt consisted of the following at year-end 1993 and
1992:
<TABLE>
<CAPTION>
(In millions of dollars) 1993 1992
<S> <C> <C>
Debentures -
7% Debentures due November 1, 2011, net of unamortized
debt discount of $116 million in 1993 and $118 million
in 1992 (14.25% effective rate) $134 $132
8-1/2% Sinking fund debentures due June 1, 2006 68 79
7-1/4% Convertible subordinated sinking fund
debentures due June 15, 2012, and convertible into
common stock at $45.30 per share - 150
Commercial Paper (3.56% at December 31, 1993) 15 120
Guaranteed Debt of Employee Stock Ownership Plan -
9.47% Series A notes due in installments through
January 2, 2000 44 49
9.61% Series B notes due in installments through
January 2, 2005 51 51
Notes Payable -
Variable interest rate revolving credit agreements with
banks (3.44% average rate at December 31, 1993)
$70 million due August 15, 1995; $215 million due
October 16, 1997 285 180
Variable interest rate loan with banks (3.78% at
December 31, 1993) due January 31, 1994 36 40
633 801
Long-Term Debt Due Within One Year (43)
(9)
Total $590 $792
</TABLE>
In addition to the debt shown above, the company guaranteed its
ratable portion of the debt of an unconsolidated affiliate accounted
for by the equity method totaling $16 million at both year-end 1993
and 1992. No loss is anticipated by reason of this guarantee.
38
<PAGE>
11. Contingencies
Since August 1979, when the company filed a plan with the Nuclear
Regulatory Commission to decommission a former operation in West
Chicago, Illinois, a number of judicial and administrative proceedings
have been filed. The operation, which was closed in 1973, processed
thorium ores, leaving ore residues, process buildings, and equipment
with some low-level radioactivity on site. While a number of these
proceedings have been settled or resolved, several proceedings remain
pending, and a license to decommission has not been received.
Currently, the State of Illinois has jurisdiction of this site and
continues to require offsite disposal of the material.
In March 1992, the company entered into an agreement with a third
party to provide for the disposal of such waste material at a
permanent disposal facility in Utah, and the third party received a
disposal license from the Nuclear Regulatory Commission in 1993. The
agreement covers an estimated 13.5 million cubic feet of thorium mill
tailings and other related materials. Removal of the waste material
is subject to additional regulatory approvals being obtained.
In September 1992, the Governor of Illinois signed the Uranium and
Thorium Mill Tailings Control Act, which imposes on the company,
beginning January 1, 1994, an annual fee of $2.00 per cubic foot of
byproduct material stored at the former West Chicago mill site. The
act also provides that the assessed fee may be used as reimbursement
for removal expenses. In February 1993, the company filed suit in the
Northern District of Illinois challenging this act on federal
constitutional grounds and seeking to enjoin state officials from
assessing such a fee. This suit is still pending. In early 1994, the
company paid an assessed fee of $33 million under protest and filed
suit in the Cook County Circuit Court protesting the amount of the
fee, which the company believes, if any is due, should be $2 million.
The aggregate decommissioning and relocation costs to the company
are difficult to estimate because of the many contingencies. These
contingencies include the absence of regulatory approval of a
relocation plan. It is presently estimated, however, that the total
remaining decommissioning costs, including the relocation costs that
may be expended pursuant to the agreement referred to above, will
approximate $150 million, payable over the time necessary to relocate
the materials, presently estimated at between four and seven years.
The company has established reserves for offsite disposal of the
material. The costs to the company would be reduced to the extent the
company is able to obtain reimbursement pursuant to the Energy Policy
Act of 1992 (which could be up to $40 million). The company should
also be able to recover substantially all the amounts it pays to the
State of Illinois pursuant to the Uranium and Thorium Mill Tailings
Control Act, previously referred to, as reimbursement of the
company's removal costs.
Almost all of the company's plants and facilities are subject to
various environmental laws and regulations. In addition to the West
Chicago site discussed above, the company has been notified that it
may be responsible in varying degrees for a portion of the costs to
clean up certain waste disposal sites and former plant sites. The
total aggregate estimated cost to investigate and/or remediate all
presently identified sites of former or current operations is $443
million of which $165 million was spent through December 31, 1993.
Reserves for future expenditures totaled $278 million at December 31,
1993.
The company is also a party to a number of other legal proceedings
pending in various courts or agencies in which it or a subsidiary
appears as plaintiff or defendant.
Because of continually changing environmental laws and regulations,
the nature of the company's businesses, the large number of other
potentially responsible parties, and pending legal proceedings, it is
not possible to reliably estimate the amount or timing of all future
expenditures relating to these contingencies. The company provides
for costs related to contingencies when a loss is probable and the
amount is reasonably estimable. Although management believes, after
consultation with general counsel, that adequate reserves have been
provided for all known contingencies, it is possible, due to the
above-noted uncertainties, additional reserves could be required in
the future that could have a material effect on results of operations
in a particular quarter or annual period. However, the ultimate
resolution of these commitments and contingencies, to the extent not
previously provided for, should not have a material adverse effect on
the company's financial position.
39
<PAGE>
12. Other Deferred Credits and Reserves
Other deferred credits and reserves consisted of the following at
year-end 1993 and 1992:
<TABLE>
<CAPTION>
(In millions of dollars) 1993 1992
<S> <C> <C>
Reserve for site dismantlement,
reclamation, and remediation $336 $352
Postretirement benefit obligations 103 99
Other 47 55
Total $486 $506
</TABLE>
During 1992, the company provided $205 million ($130 million after
income tax benefits) for environmental reclamation and remediation of
former plant sites, principally for the West Chicago, Illinois,
facility decommissioning project and former chemical and refining
operations sites. Similar provisions in the amount of $4 million and
$11 million were made in 1993 and 1991, respectively.
13. Fair Value of Financial Instruments
The carrying amount and estimated fair value of the company's
financial instruments, excluding foreign currency contracts discussed
in Note 1, at December 31, 1993 and 1992, are as follows:
<TABLE>
<CAPTION>
1993 1992
Carrying Fair Carrying Fair
(In millions of dollars) Amount Value Amount Value
<S> <C> <C> <C> <C>
Cash and short-term investments $ 96 $ 96 $ 66 $ 66
Long-term investments -
U.S. government obligations 26 26 15 15
Equity securities and
notes receivable 16 46 - -
Long-term debt (633) (764) (801) (920)
</TABLE>
The carrying amount of cash and other short-term investments
approximates fair value of those instruments due to their short
maturity. The fair value of U.S. government obligations and equity
securities is based on quoted market prices. The fair value of notes
receivable is based on discounted cash flows. The fair value of the
company's long-term debt is based on the quoted market prices for the
same or similar debt issues or on the current rates offered to the
company for debt with the same remaining maturity.
It was not practicable to estimate the fair value of financial
instruments totaling $12 million and $64 million at December 31, 1993
and 1992, respectively. These financial instruments include
investments in untraded, closely held companies that are carried in
the Consolidated Balance Sheet at original cost of $2 million and $14
million at December 31, 1993 and 1992, respectively. It was not
practicable to estimate the fair value of long-term notes receivable
held in connection with the sales of discontinued operations as the
instruments are not marketable. At December 31, 1993, one such note
was outstanding in the amount of $10 million (3.8% average 1993
interest rate). This note matures in November 1997. The other note
was paid in full in 1993 prior to its scheduled 1997 maturity (see
Note 22). At December 31, 1992, these notes were carried at $40
million (3.8% average 1992 interest rate) and $10 million (4.5%
average 1992 interest rate).
40
<PAGE>
14. Taxes, Other Than Income Taxes
Taxes, other than income taxes, for the years ended December 31,
1993, 1992, and 1991, are composed of the following:
<TABLE>
<CAPTION>
(In millions of dollars) 1993 1992 1991
<S> <C> <C> <C>
Production/severance $ 28 $ 33 $ 32
Payroll 19 19 20
Property 17 17 15
Other 15 15 16
79 84 83
Motor fuel and other excise taxes(1) 239 219 207
Total $318 $303 $290
(1) These taxes are excluded from both sales and costs.
</TABLE>
15. Income Taxes
Effective January 1, 1992, the company adopted FAS No. 109,
"Accounting for Income Taxes." For a discussion of the effects of
this accounting change, see Note 2. The taxation of a company that
has operations in several countries involves many complex variables,
such as differing tax structures from country to country and the
effect on U.S. taxation of international earnings. These complexities
do not permit meaningful comparisons between the domestic and
international components of income before income taxes and the
provision for income taxes, and disclosures of these components do not
provide indicators of relationships in future periods.
Income (loss) before income taxes, extraordinary charge, and
cumulative effect on prior years of changes in accounting principles
is composed of the following:
<TABLE>
<CAPTION>
(In millions of dollars) 1993 1992 1991
<S> <C> <C> <C>
Domestic $120 $(99) $152
International (2) 35 14
Total $118 $(64) $166
</TABLE>
During 1993, legislation was enacted that, among other things,
increased the U.S. Federal income tax rate by 1% effective January 1,
1993. Separately, income tax rates in Australia were reduced from 39%
to 33%. The deferred income tax balances were adjusted to reflect
these new rates, which increased the 1993 U.S. Federal deferred
provision by $2 million and decreased the international deferred
benefit by $3 million. The provision (benefit) for income taxes on
income (loss) before extraordinary charge and cumulative effect on
prior years of changes in accounting principles for 1993, 1992, and
1991 is summarized below:
<TABLE>
<CAPTION>
(In millions of dollars) 1993 1992 1991
<S> <C> <C> <C>
U.S. Federal -
Current $12 $ 20 $39
Deferred 15 (67) (3)
27 (47) 36
International -
Current 20 23 17
Deferred (13) (14) 5
7 9 22
State 7 - 6
Total $41 $(38) $64
</TABLE>
41
<PAGE>
The net deferred tax asset in the following table is classified as
Investments and Other Assets in the Consolidated Balance Sheet as it
represents the net deferred tax asset in a foreign tax jurisdiction.
Deferred tax liabilities (assets) at December 31, 1993 and 1992, are
composed of the following:
<TABLE>
<CAPTION>
(In millions of dollars) 1993 1992
<S> <C> <C>
Net deferred tax liability -
Accelerated depreciation $325 $313
Exploration and development 61 59
Undistributed earnings of foreign subsidiaries 28 34
Postretirement benefits (41) (39)
Dismantlement, reclamation, remediation,
and other reserves (110) (119)
Foreign operating loss carryforwards (62) (51)
Other (29) (31)
172 166
Net deferred tax asset -
Accelerated depreciation 8 9
Other 1 4
Foreign operating loss carryforward (32) (33)
(23) (20)
Total deferred taxes $149 $146
</TABLE>
At year-end 1993, the company had foreign net operating loss
carryforwards totaling $286 million that have no expiration dates.
Prior to the change in accounting methods, the sources of deferred tax
items and the corresponding tax effects during 1991 were as follows:
<TABLE>
<CAPTION>
(In millions of dollars)
<S> <C>
U.S. Federal -
Accelerated depreciation $ 1
Exploration and development 5
Lease abandonment reserves 3
Capitalized interest (1)
Dismantlement, reclamation, remediation,
and other reserves 12
Sale of domestic drilling operation (23)
(3)
International -
Exploration and development 5
Total $ 2
</TABLE>
The Internal Revenue Service has examined the company's Federal
income tax returns for all years through 1989, and the years have been
closed through 1983. The company believes that it has made adequate
provision for income taxes that may become payable with respect to
open tax years.
In the following table, the U.S. Federal income tax rate is
reconciled to the company's effective tax rates for income before
extraordinary charge and cumulative effect on prior years of changes
in accounting principles as reflected in the Consolidated Statement of
Income.
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
U.S. statutory rate 35.0% (34.0)% 34.0%
Increases (decreases) resulting
from -
Statutory depletion in excess
of cost depletion (4.9) (4.7) (4.2)
Foreign income taxes 3.8 2.4 4.8
State income taxes 4.4 (2.7) 2.5
Adjustment of prior years' accruals (6.3) (12.6) -
Federal income tax credits (2.1) (4.6) (.4)
Adjustment of deferred tax balances
due to tax rate changes 4.8 - -
Other - net - (3.5) 1.8
Total 34.7% (59.7)% 38.5%
</TABLE>
42
<PAGE>
16. Postretirement Benefits
The company sponsors contributory plans to provide certain health
care and life insurance benefits for retired employees. Substantially
all the company's employees may become eligible for these benefits if
they reach retirement age while working for the company. Effective
January 1, 1992, the company adopted FAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." See Note
2 for a discussion of the effects of the adoption of this standard.
At December 31, 1993 and 1992, the actuarial and recorded
liabilities for postretirement benefits, none of which has been
funded, are as follows:
<TABLE>
<CAPTION>
1993 1992
(In millions of dollars) Health Life Health Life
<S> <C> <C> <C> <C>
Actuarial present value of accumulated
postretirement benefit obligations -
Retirees $(58) $(18) $(55) $(14)
Fully eligible active participants (11) (2) (11) (2)
Other active participants (19) (3) (20) (3)
Total (88) (23) (86) (19)
Unrecognized net (gain) loss - 1 1 (1)
Accrued postretirement benefit cost $(88) $(22) $(85) $(20)
</TABLE>
For the years ended December 31, 1993 and 1992, the components of
periodic expense for postretirement benefits were as follows:
<TABLE>
<CAPTION>
1993 1992
(In millions of dollars) Health Life Health Life
<S> <C> <C> <C> <C>
Service Cost - benefits earned
during the period $2 $1 $2 $1
Interest cost on accumulated
postretirement benefit obligation 7 1 7 1
Net postretirement benefit cost $9 $2 $9 $2
</TABLE>
In prior years, the company recognized as expense the cost of
retiree health care benefits as claims were paid, while the cost of
providing life insurance benefits was recognized by expensing the
annual insurance premiums paid. The amount included in expense for
1991 under the previous accounting method was $5 million.
The assumed health care cost trend rate used in measuring the
accumulated postretirement benefit obligation at December 31, 1993,
was 12% in 1994, gradually declining to 4.5% in the year 2008 and
thereafter. The assumed trend rate used in measuring the year-end
1992 obligation was 13% in 1993, gradually declining to 5.5% in the
year 2006 and thereafter. The rate of increase in future compensation
levels used in measuring the life insurance accumulated postretirement
benefit obligation was 5% and 6% at December 31, 1993 and 1992,
respectively. The weighted average discount rate used in determining
both the health care and life insurance accumulated postretirement
benefit obligations was 7.5% at December 31, 1993, and 8.5% at
December 31, 1992.
A 1% increase in the assumed health care cost trend rates for each
future year would increase the accumulated postretirement benefit
obligation by $10 million at December 31, 1993, and $18 million at
December 31, 1992. Additionally, the aggregate of the service and
interest cost components of net periodic postretirement benefit cost
for the year ended December 31, 1993 and 1992, would increase by $1
million and $2 million, respectively, as a result of a 1% assumed
increase.
43
<PAGE>
17. Retirement Plans
Most of the company's employees are covered under noncontributory
retirement plans of the company and certain of its subsidiaries. The
benefits of these plans are based primarily on years of service and
employees' remuneration near retirement. The company's policy is to
fund the minimum amounts as permitted by the Employee Retirement
Income Security Act of 1974. The company also sponsors supplemental
retirement plans to provide employees with benefits provided for by
the plans but in excess of the limits under the Federal tax law and to
provide senior executives with benefits equal to a specified
percentage of their final average compensation.
The funded status of the plans with assets in excess of accumulated
benefits at December 31, 1993 and 1992, is as follows:
<TABLE>
<CAPTION>
(In millions of dollars) 1993 1992
<S> <C> <C>
Plan assets at fair value $ 415 $ 368
Actuarial present value of accumulated
benefit obligations -
Vested (266) (233)
Nonvested (21) (9)
Total (287) (242)
Plan assets in excess of accumulated
benefit obligations $ 128 $ 126
Plan assets at fair value $ 415 $ 368
Projected benefit obligations -
Actuarial present value of accumulated
benefit obligations (287) (242)
Projected salary increases (49) (51)
Total (336) (293)
Plan assets in excess of projected
benefit obligations 79 75
Unrecognized net asset at January 1, 1987 (28) (31)
Unrecognized prior service costs 27 29
Unrecognized net gain (65) (61)
Pension prepayment at end of year $ 13 $ 12
</TABLE>
In determining the actuarial present value of the projected benefit
obligation at December 31, 1993 and 1992, the rate of increase in
future compensation levels was 5% and 6%, respectively, and the
discount rate was 7.5% and 8.5%, respectively. The expected long-term
rate of return on plan assets was 9% for 1993 and 1992.
Net periodic pension costs for each of the three years ended
December 31, 1993, 1992, and 1991 are summarized as follows:
<TABLE>
<CAPTION>
(In millions of dollars) 1993 1992 1991
<S> <C> <C> <C>
Service cost - benefits earned
during the period $10 $ 9 $ 9
Interest cost on projected benefit
obligations 24 21 20
Return on plan assets (69) (35) (91)
Net amortization and deferral 34 1 62
Net pension cost (credit) $(1) $(4) $ -
</TABLE>
44
<PAGE>
18. Stockholders' Equity
Changes in common stock, capital in excess of par value, and
treasury stock for 1993, 1992, and 1991 are as follows:
<TABLE>
<CAPTION>
Common Stock Capital in Treasury Stock
(In millions of dollars and Shares Par Excess of
thousands of shares) Issued Value Par Value Shares Cost
<S> <C> <C> <C> <C> <C>
Balance December 31, 1990 53,150 $53 $281 4,696 $182
Exercise of stock options and
stock appreciation rights 19 - 1 - -
Issuance of restricted stock, net
of forfeitures - - - (26) (1)
Purchase of shares - - - 270 11
Balance December 31, 1991 53,169 53 282 4,940 192
Exercise of stock options and
stock appreciation rights 23 - 1 - -
Issuance of restricted stock, net
of forfeitures - - - (32) (1)
Balance December 31, 1992 53,192 53 283 4,908 191
Exercise of stock options and
stock appreciation rights 76 - 2 - -
Issuance of restricted stock, net
of forfeitures - - - (1) -
Issuance of shares upon debt
conversion(1) - - 23 (3,294) (128)
Balance December 31, 1993 53,268 $53 $308 1,613 $ 63
(1)See Note 10 for a discussion of the debt conversion.
</TABLE>
The company has 40 million shares of preferred stock without par
value authorized, and none is issued.
Treasury stock totaling 1,100 shares, 33,350 shares, and 28,325
shares was issued as restricted stock to certain employees during
1993, 1992, and 1991, respectively. The restrictions on these shares
lapse three years from the date of issue. The remaining restrictions
on 16,062 shares issued in 1988 lapsed in 1991.
In 1986, the company's Board of Directors adopted a
stockholder-rights plan, which was subsequently amended and restated
as of July 11, 1989. Such rights were distributed as a dividend at
the rate of one right for each share of the company's common stock.
Generally, the rights may be redeemed at $.05 per right 10 days after
a person or group acquires 15% or more of the company's common stock.
After the rights are no longer redeemable, each right would then
entitle the holder (other than a 15% holder) to buy the company's
common stock having a market value of twice the exercise price of $85.
In the event the company is acquired in a merger or other business
combination transaction, each right would entitle the holder to buy,
at the exercise price of $85, the number of shares of the acquiring
company's common stock having a market value of twice the right's
exercise price. Unless redeemed earlier, the rights expire in 1996.
45
<PAGE>
19. Employee Stock Option Plans
As amended in May 1992, the 1987 Long Term Incentive Program
authorized the issuance of 1,790,000 shares of the company's common
stock through December 31, 2002, in the form of stock options,
restricted stock, or long-term performance awards. The options may be
accompanied by stock appreciation rights.
The 1984 and the 1978 Employee Stock Option Plans authorized the
granting of options over 10-year periods for up to 1,000,000 and
800,000 shares, respectively, of common stock and accompanying stock
appreciation rights. The 1984 plan was terminated on May 3, 1988, and
the 1978 plan was terminated on May 1, 1984. After those dates, no
further options could be granted under either plan, although options
and any accompanying stock appreciation rights outstanding at those
times can be exercised prior to their respective expiration dates.
Transactions during the past three years under these plans are
summarized below:
<TABLE>
<CAPTION>
1978 Stock Option Plan 1984 Stock Option Plan 1987 Incentive Program
Shares Price per Share Shares Price per Share Shares Price per Share
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance outstanding
December 31, 1990 35,900 $27.38-$34.34 131,783 $27.06-$33.38 443,762 $32.38-$50.50
Options granted - - - - - - 136,600 39.56- 45.06
Options exercised - - - - - - (13,397) 32.38- 49.25
Options surrendered upon
exercise of stock
appreciation rights (10,350) 27.38- 34.34 (24,266) 27.06- 33.38 (3,667) 32.38- 38.06
Options cancelled - - - (517) 27.06 - (33,113) 38.06- 49.25
Balance outstanding
December 31, 1991 25,550 27.38- 34.00 107,000 27.06- 33.38 530,185 32.38- 50.50
Options granted - - - - - - 142,550 36.69- 40.81
Options exercised (1,000) 27.38 - (4,750) 33.38 - (8,481) 32.38- 39.56
Options surrendered upon
exercise of stock
appreciation rights (24,550) 27.38- 34.00 (14,250) 27.06 - (3,001) 32.38 -
Options cancelled - - - - - - (17,350) 32.38- 49.25
Balance outstanding
December 31, 1992 - 88,000 27.06- 33.38 643,903 32.38- 50.50
Options granted - - - 327,300 43.00- 51.69
Options exercised (6,000) 27.06 - (61,333) 32.38- 49.25
Options surrendered upon
exercise of stock
appreciation rights (24,500) 27.06- 33.38 (40,733) 32.38- 49.25
Options cancelled - - - (9,515) 39.56- 49.25
Balance outstanding
December 31, 1993 57,500 27.06- 33.38 859,622 32.38- 51.69
Options exercisable
December 31, 1993 57,500 27.06- 33.38 406,740 32.38- 50.50
Shares available to be
granted December 31, 1993 - 615,326
</TABLE>
With respect to all options outstanding on December 31, 1993, the
average option price was $43.78; expiration dates ranged from March
31, 1994, to October 18, 2003; and the market value of each share
subject to options was $45.50, based on the average of the high and
low prices as reported in the Wall Street Journal's NYSE Composite
Transactions on December 31, 1993.
46
<PAGE>
20. Employee Stock Ownership Plan
In 1989, the company's Board of Directors approved a leveraged
Employee Stock Ownership Plan (ESOP) into which is paid the company's
matching contribution for the employees' contributions to the
Kerr-McGee Corporation Savings Investment Plan (SIP). Subsequently,
the ESOP borrowed $125 million from a group of lending institutions
and used the borrowings to purchase 2.7 million shares of the
company's treasury stock at $46.63 per share. The company used the
$125 million proceeds from the sale of stock to reacquire shares of
its common stock on the open market and in privately negotiated
transactions.
The company has guaranteed the ESOP's borrowings. The borrowings,
which are reflected as Long-Term Debt in the Consolidated Balance
Sheet, are offset by a like amount of deferred compensation in
Stockholders' Equity. As company contributions and dividends on the
shares held by the ESOP are used to make principal and interest
payments on the loan, shares are allocated to employees' accounts
based on their savings contributions to the SIP. Both the long-term
debt and the deferred compensation in Stockholders' Equity are reduced
in equal amounts as the ESOP loan is repaid.
The company recognized ESOP-related expense of $15 million in each
of the years 1993 and 1992 and $16 million in 1991. These amounts
include interest expense incurred on the ESOP debt of $9 million in
1993, $10 million in 1992, and $10 million in 1991. The company
contributed $12 million cash to the ESOP in 1993, $14 million in 1992,
and $15 million in 1991. The cash contributions are net of $4 million
for the dividends paid on the company stock held by the ESOP in each
of the years 1993, 1992, and 1991.
21. Other Financial Information
Condensed financial information relating to the company's
previously unconsolidated, wholly owned finance and insurance
subsidiaries is summarized below:
<TABLE>
<CAPTION>
(In millions of dollars) 1993 1992 1991
<S> <C> <C> <C>
Results of operations -
Interest income $ 13 $ 12 $9
Net income 3 3 2
Financial position -
Assets $245 $357
Liabilities (151) (266)
Stockholder's equity $ 94 $ 91
</TABLE>
22. Discontinued Operations
During 1990, the company disposed of its contract drilling
operations, which had been conducted by the Transworld Drilling
companies. The sale of the domestic assets was completed in January
1991, and Kerr-McGee received cash and a $70 million note. The terms
of this note were subsequently modified in a late-1991 debt
restructuring. During 1993, the note was paid in full prior to its
scheduled 1997 maturity. At year-end 1992, the company's investment
in the note, classified as Investments and Other Assets in the
Consolidated Balance Sheet, was $40 million, which included $1 million
of accrued interest income. Additional interest income of $2 million
would have been recorded under the original terms of the note in 1992.
47
<PAGE>
23. Reporting by Business Segments
<TABLE>
<CAPTION>
(In millions of dollars) 1993 1992 1991
<S> <C> <C> <C>
Sales -
Exploration and production(1) $ 369 $ 349 $ 360
Refining and marketing 1,992 2,175 2,127
Chemicals 556 515 454
Coal 328 307 315
Other 36 36 18
Total $3,281 $3,382 $3,274
Operating profit (loss) -
Exploration and production $ 82 $ 91 $ 67
Refining and marketing (28) (21) 31
Chemicals 70 79 101
Coal 80 77 77
Other (5) 3 (9)
Total $ 199 $ 229 $ 267
Net operating profit (loss) -
Exploration and production $ 52 $ 53 $ 34
Refining and marketing (19) (13) 20
Chemicals 44 50 64
Coal 58 53 57
Other (3) 3 (4)
Total 132 146 171
Net interest expense (27) (34) (36)
Net nonoperating expense(2) (28) (138) (33)
Extraordinary charge, net of income taxes - (5) -
Cumulative effect on prior years of
changes in accounting principles,
net of income taxes - (70) -
Net income (loss) $ 77 $ (101) $ 102
Sales to unaffiliated customers -
U.S. operations $3,045 $3,174 $3,076
International operations:(3)
Canada - exploration and production 53 48 50
North Sea - exploration and production 81 92 107
Australia - chemicals 100 67 40
Other 2 1 1
236 208 198
Total $3,281 $3,382 $3,274
Operating profit (loss) -
U.S. operations $210 $217 $257
International operations:
Canada - exploration and production 2 2 3
North Sea - exploration and production 3 6 13
Australia - chemicals (13) (13) (2)
Other (3) 17 (4)
(11) 12 10
Total $199 $229 $267
(1)Excludes intercompany sales, primarily crude oil sales, of $195
million in 1993, $211 million in 1992, and $200 million in 1991.
(2)Includes provision for reclamation and remediation of $130 million
in 1992.
(3)Excludes international crude oil sales to domestic affiliates of $39
million in 1993, $55 million in 1992, and $56 million in 1991.
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
(In millions of dollars) 1993 1992 1991
<S> <C> <C> <C>
Depreciation and depletion expense -
Exploration and production $188 $183 $182
Refining and marketing 26 23 18
Chemicals 49 49 46
Coal 26 25 27
Other 14 14 12
Total $303 $294 $285
Capital expenditures -
Exploration and production $318 $264 $318
Refining and marketing 34 40 54
Chemicals 39 33 89
Coal 28 69 20
Other 6 9 33
Total capital expenditures 425 415 514
Exploration expenses -
Petroleum exploration and production:
Dry hole costs 28 5 27
Amortization of undeveloped leases 18 18 19
Other 22 29 30
Total 68 52 76
Minerals and other 3 3 5
Total exploration expenses 71 55 81
Less - Amortization of oil and gas
and minerals leases and other
noncash expenses (18) (18) (19)
53 37 62
Total capital expenditures and
cash exploration expenses $ 478 $ 452 $ 576
Identifiable assets -
Exploration and production $1,669 $1,547 $1,409
Refining and marketing 541 595 529
Chemicals 733 753 755
Coal 335 327 282
Other 135 127 143
Total 3,413 3,349 3,118
Corporate assets 134 172 303
Total $3,547 $3,521 $3,421
Identifiable assets -
U.S. operations $2,223 $2,256 $2,213
International operations:
Canada - exploration and production 206 233 194
North Sea - exploration and production 681 516 417
Australia - chemicals 256 300 246
Other 47 44 48
1,190 1,093 905
Total $3,413 $3,349 $3,118
</TABLE>
49
<PAGE>
24. Results of Operations from Crude Oil and Natural Gas Activities
The results of operations from crude oil and natural gas activities for the
three years ended December 31, 1993, consisted of the following:
<TABLE>
<CAPTION>
Gross Revenues
Sales to Sales to Production Other Depreciation
Unaffiliated Affiliated (Lifting) Related Exploration and Depletion Income Tax
(In millions of dollars) Entities Entities Total Costs Costs Expenses Expenses Expenses
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1993 -
Domestic $203 $129 $332 $105 $ 8 $36 $119 $20
Canada 50 2 52 17 1 8 24 -
North Sea 77 17 94 45 - 13 36 -
Other international - 22 22 7 - 11 5 5
Total crude oil and
natural gas activities 330 170 500 174 9 68 184 25
Gas processing,
pipelines and other(1) 39 25 64 43 - - 4 5
Total $369 $195 $564 $217 $ 9 $68 $188 $30
1992 -
Domestic $187 $130 $317 $111 8 $28 $109 $19
Canada 44 2 46 17 1 8 20 -
North Sea 89 27 116 47 8 14 44 2
Other international - 28 28 8 - 2 7 12
Total crude oil and
natural gas activities 320 187 507 183 17 52 180 33
Gas processing,
pipelines and other(1) 29 24 53 34 - - 3 5
Total $349 $211 $560 $217 $17 $52 $183 $38
1991 -
Domestic $168 $123 $291 $105 10 $34 $104 $13
Canada 44 1 45 17 1 12 16 (1)
North Sea 104 31 135 50 6 16 53 4
Other international 1 25 26 8 - 14 6 6
Total crude oil and
natural gas activities 317 180 497 180 17 76 179 22
Gas processing,
pipelines and other(1) 43 20 63 38 - - 3 11
Total $360 $200 $560 $218 $17 $76 $182 $33
(1)Gas processing plants, pipelines, and other do not fit a strict definition of crude oil and natural gas
activities but have been included above to reconcile to the segment presentations.
</TABLE>
50
<PAGE>
The table below presents the average sales price per unit of crude
oil and natural gas produced and the production costs per barrel of
oil equivalent during each of the past three years.
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Average sales price -
Crude oil (per barrel)
Domestic $15.76 $18.17 $19.24
Canada 14.65 16.24 17.36
North Sea 15.90 18.71 19.64
Other international 14.97 17.44 16.71
Average 15.64 18.11 19.01
Natural gas (per MCF)
Domestic 2.03 1.67 1.49
Canada 1.42 1.03 1.15
North Sea 1.39 1.73 1.72
Average 1.92 1.56 1.44
Production costs -
(per barrel of oil equivalent)(1)
Domestic 4.32 4.61 4.60
Canada 3.44 3.51 4.18
North Sea 7.24 7.80 7.18
Other international 5.11 4.98 5.39
Average 4.73 5.01 5.09
(1)Natural gas production has been converted to a barrel of oil
equivalent based on approximate relative heating value (6 MCF equals 1
barrel).
</TABLE>
25. Capitalized Costs of Crude Oil and Natural Gas Activities
Capitalized costs of crude oil and natural gas activities and the
related reserves for depreciation, depletion, and amortization at the
end of 1993 and 1992 are set forth below:
<TABLE>
<CAPTION>
(In millions of dollars) 1993 1992
<S> <C> <C>
Capitalized costs -
Proved properties $3,680 $3,411
Unproved properties 103 125
3,783 3,536
Reserves for depreciation, depletion, and amortization -
Proved properties 2,241 2,097
Unproved properties 53 55
2,294 2,152
Net capitalized costs $1,489 $1,384
</TABLE>
51
<PAGE>
26. Costs Incurred in Crude Oil and Natural Gas Activities
Total expenditures, both capitalized and expensed, for crude oil
and natural gas property acquisition, exploration, and development
activities for the three years ended December 31, 1993, are reflected
in the following table:
<TABLE>
<CAPTION>
Property
Acquisition Exploration Development
(In millions of dollars) Costs (1) Costs (2) Costs (3)
<S> <C> <C> <C>
1993 -
Domestic $ 5 $48 $93
Canada - 5 6
North Sea - 16 172
Other international 3 9 3
Total $ 8 $78 $274
1992 -
Domestic $ 11 $29 $ 87
Canada 1 6 8
North Sea - 22 123
Other international - 1 2
Total $ 12 $58 $220
1991 -
Domestic $122 $29 $ 61
Canada 11 12 11
North Sea - 16 93
Other international - 13 3
Total $133 $70 $168
(1)Includes $8 million and $109 million applicable to purchases of
reserves in place in 1992 and 1991, respectively.
(2)Exploration costs include delay rentals, exploration staff,
exploratory dry holes, dry hole and bottom hole contributions,
geological and geophysical studies, costs of carrying and retaining
properties, etc., plus capital expenditures, such as costs of drilling
and equipping successful exploratory wells, etc.
(3)Development costs include costs incurred to obtain access to proved
reserves (surveying, clearing ground, building roads, etc.), to drill
and equip development wells, and to acquire, construct, and install
production facilities and improved recovery systems. Development
costs also include costs of developmental dry holes.
</TABLE>
52
<PAGE>
27. Crude Oil, Condensate, and Natural Gas Net Reserves (Unaudited)
The estimates of proved reserves have been prepared by the
company's geologists and engineers. Such estimates include reserves
on certain properties that are partially undeveloped and reserves that
may be obtained in the future by secondary recovery operations now in
operation or for which successful testing has been demonstrated. The
company does not have any proved reserves attributable to long-term
supply agreements with governments, consolidated subsidiaries in which
there are significant minority interests, or affiliates accounted for
by the equity method.
The following table summarizes the changes in the estimated
quantities of the company's crude oil and condensate and natural gas
reserves for the three years ended December 31, 1993:
<TABLE>
<CAPTION>
Crude Oil and Condensate Natural Gas
(In millions of barrels) (In billions of cubic fee
International International
North North
Domestic Canada Sea Other Total Domestic Canada Sea Other Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Proved developed and undeveloped reserves -
Balance December 31, 1990 51.0 13.7 65.6 6.0 136.3 541.4 120.3 160.0 4.0 825.7
Revisions of previous estimates 4.2 .8 2.2 .2 7.4 9.7 9.4 .7 - 19.8
Purchases of reserves in place 12.0 .3 - - 12.3 32.9 13.1 - - 46.0
Sales of reserves in place (.1) (.3) - - (.4) (.3) (.3) - - (.6)
Extensions, discoveries, and other additions 21.7 1.5 - - 23.2 43.6 9.8 - - 53.4
Production (8.4) (1.7) (6.8) (1.5) (18.4) (86.7) (14.6) (1.0) - (102.3)
Balance December 31, 1991 80.4 14.3 61.0 4.7 160.4 540.6 137.7 159.7 4.0 842.0
Revisions of previous estimates .5 .9 5.1 1.2 7.7 19.8 3.4 2.6 - 25.8
Purchases of reserves in place 2.1 .1 - - 2.2 1.2 .1 - - 1.3
Sales of reserves in place (.3) (.7) - - (1.0) (5.7) (8.0) - - (13.7)
Extensions, discoveries, and other additions 1.2 .6 20.0 - 21.8 17.7 9.6 - - 27.3
Production (9.3) (1.7) (5.9) (1.6) (18.5) (88.2) (18.9) (.9) - (108.0)
Balance December 31, 1992 74.6 13.5 80.2 4.3 172.6 485.4 123.9 161.4 4.0 774.7
Revisions of previous estimates 5.2 .7 6.4 .3 12.6 (6.2) (7.2) 16.2 (4.0) (1.2)
Purchases of reserves in place .3 - - 26.1 26.4 .2 - - - .2
Sales of reserves in place (.4) (.1) - - (.5) (3.3) (1.7) - - (5.0)
Extensions, discoveries, and other additions 5.9 .6 .8 - 7.3 21.7 14.2 8.2 - 44.1
Production (10.1) (1.7) (6.1) (1.5) (19.4) (85.2) (18.4) (.9) - (104.5)
Balance December 31, 1993 75.5 13.0 81.3 29.2 199.0 412.6 110.8 184.9 - 708.3
Proved developed reserves -
December 31, 1990 39.4 12.3 24.6 5.9 82.2 404.1 114.0 54.0 4.0 576.1
December 31, 1991 42.7 12.8 20.9 4.4 80.8 378.4 131.5 56.9 4.0 570.8
December 31, 1992 40.1 13.4 16.3 3.9 73.7 345.5 120.4 56.8 4.0 526.7
December 31, 1993 44.8 12.9 40.5 2.7 100.9 346.8 107.4 113.2 - 567.4
</TABLE>
53
<PAGE>
28. Standardized Measure of and Reconciliation of Changes in
Discounted Future Net Cash Flows (Unaudited)
The standardized measure of future net cash flows presented in the
following table was computed using year-end prices and costs and a 10%
discount factor. The future income tax expense was computed by
applying the appropriate year-end statutory rates, with consideration
of future tax rates already legislated, to the future pre-tax net cash
flows less the tax basis of the properties involved. However, the
company cautions that actual future net cash flows may vary
considerably from these estimates. Although the company's estimates
as to total reserves, development, and production rates were based
upon the best information available, the development and production of
the oil and gas reserves may not occur in the periods assumed. Actual
prices realized and costs incurred may vary significantly from those
used. Therefore, such estimated future net cash flow computations
should not be considered to represent the company's estimate of the
expected revenues or the current value of existing proved reserves.
<TABLE>
<CAPTION>
Future Standardized
Development 10% Measure of
Future and Production Future Future Net Annual Discounted Future
(In millions of dollars) Cash Inflows Costs Income Taxes Cash Flows Discount Net Cash Flows
<S> <C> <C> <C> <C> <C> <C>
1993 -
Domestic $1,822 $ 968 $189 $ 665 $ 251 $ 414
Canada 352 141 58 153 51 102
North Sea 1,542 662 161 719 256 463
Other international 350 288 23 39 56 (17)
Total $4,066 $2,059 $431 $1,576 $ 614 $ 962
1992 -
Domestic $2,285 $1,038 $323 $ 924 $372 $552
Canada 410 138 83 189 80 109
North Sea 1,854 828 309 717 280 437
Other international 75 46 21 8 2 6
Total $4,624 $2,050 $736 $1,838 $734 $1,104
1991 -
Domestic $2,284 $1,140 $286 $ 858 $391 $ 467
Canada 341 148 47 146 59 87
North Sea 1,650 722 281 647 312 335
Other international 74 43 21 10 2 8
Total $4,349 $2,053 $635 $1,661 $764 $ 897
</TABLE>
54
<PAGE>
The changes in the standardized measure of future net cash flows
are presented below for each of the past three years:
<TABLE>
<CAPTION>
(In millions of dollars) 1993 1992 1991
<S> <C> <C> <C>
Net change in sales and transfer prices
and in production costs $ (433) $ 149 $(1,070)
Changes in estimated future development
costs (137) (32) (99)
Sales and transfers less production costs (326) (324) (317)
Purchases of reserves in place (9) 9 83
Changes due to extensions,
discoveries, etc. 96 99 23
Changes due to revisions in quantity
estimates 86 32 91
Current period development costs 274 220 168
Accretion of discount 150 122 211
Changes in income taxes 156 (71) 396
Timing and other 1 3 18
Net change (142) 207 (496)
Total at beginning of year 1,104 897 1,393
Total at end of year $ 962 $1,104 $ 897
</TABLE>
29. Supplementary Mineral Ore Reserve and Price Data (Unaudited)
The following table represents selected statistics related to the
company's mineral operations. Mineral reserves presented in the
following table represent those estimated quantities of proved and
probable ore that, under presently anticipated conditions, may be
profitably recovered and processed for the extraction of their mineral
content. Future production of these resources is dependent on many
factors, including market conditions and government regulations.
<TABLE>
<CAPTION>
(In thousands of tons) 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Proved and probable (demonstrated) reserves, December 31 -
Coal 887,900 906,400 774,900 793,600 785,200
Heavy minerals 8,000(1) 8,600 9,000 9,500 9,600
Production -
Coal 23,325 20,756 21,750 19,782 17,525
Heavy minerals 263 262 251 139 -
Average market price (per ton) -
Coal $13.78 $14.57 $ 14.18 $ 13.52 $13.88
Heavy minerals 69.47 77.99 101.35 101.53 -
(1) Represents 270 million tons of sand containing 3.0% heavy minerals in Western Australia. The percentages of valuable
heavy minerals within the heavy mineral concentrate are 3.8% rutile, 61.0% ilmenite, 6.8% leucoxene, and 10.3% zircon.
</TABLE>
55
<PAGE>
30. Quarterly Financial Information (Unaudited)
During 1992, the company adopted FAS 106, "Employers' Accounting
for Postretirement Benefits Other than Pensions," and FAS 109,
"Accounting for Income Taxes" (see Note 2).
A summary of quarterly consolidated results for 1993 and 1992 is
presented below:
<TABLE>
<CAPTION>
Per Common Share
Income (Loss) Income (Loss)
Before Extraordinary Before Extraordinary
Charge and Cumulative Charge and Cumulative
(In millions of Effect on Prior Effect on Prior
dollars, except Operating Years of Changes In Net Income Years of Changes in Net Income
per-share amounts) Sales Profit Accounting Principles (Loss) Accounting Principles (Loss)
<S> <C> <C> <C> <C> <C> <C>
1993 Quarter Ended -
March 31 $ 783 $ 55 $ 24 $ 24 $ .50 $ .50
June 30 846 71 34 34 .70 .70
September 30 819 49 19 19 .39 .39
December 31 833 24 - - - -
Total $3,281 $199 $ 77 $ 77 $1.57(1) $ 1.57(1)
1992 Quarter Ended -
March 31 $ 783 $ 36 $ 13 $ (60) $ .26 $(1.24)
June 30 876 83 32 32 .68 .68
September 30 858 55 29 29 .60 .60
December 31 865 55 (100) (102) (2.07) (2.12)
Total $3,382 $229 $(26) $(101) $(.53) $(2.08)
(1)The 1993 quarterly amounts do not add to the annual per-share amount due to shares issued during the year (see Note 18).
</TABLE>
The company's common stock is listed for trading on the New York
Stock Exchange and on December 31, 1993, was held by approximately
12,000 shareholders. The ranges of sales prices and dividends
declared during the last two years were as follows:
<TABLE>
<CAPTION>
Market Prices Dividends
1993 1992 per Share
High Low High Low 1993 1992
<S> <C> <C> <C> <C> <C> <C>
Quarter Ended -
March 31 49-3/8 41-3/4 40 35-5/8 $.38 $.38
June 30 53-1/4 47-3/4 43-1/4 36-1/2 .38 .38
September 30 56 48 46-3/8 38-5/8 .38 .38
December 31 54 43-5/8 45-1/2 38-3/4 .38 .38
</TABLE>
56
<PAGE>
Kerr-McGee Corporation
Six-Year Financial Summary
<TABLE>
<CAPTION>
(In millions of dollars, except per-share amounts) 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C>
Summary of Net Income (Loss)
Sales $3,281 $3,382 $3,274 $3,683 $3,000 $2,611
Operating costs and expenses 3,135 3,422 3,090 3,374 2,732 2,404
Interest expense 47 66 78 86 72 65
Total costs and expenses 3,182 3,488 3,168 3,460 2,804 2,469
99 (106) 106 223 196 142
Other income (expense) 19 42 60 (67) 19 25
Provision (benefit) for income taxes 41 (38) 64 43 81 56
Income (loss) from continuing operations before
extraordinary charge and cumulative effect on prior
years of changes in accounting principles 77 (26) 102 113 134 111
Income (loss) from discontinued operations - - - 37 22 (1)
Extraordinary charge - (5) - - - -
Cumulative effect on prior years of changes in
accounting principles - (70) - - - -
Net income (loss) $ 77 $ (101) $ 102 $ 150 $ 156 $ 110
Common Stock Information, per Share
Net income (loss) per common share
Continuing operations $1.57 $ (.53) $ 2.10 $ 2.26 $ 2.75 $ 2.29
Discontinued operations - - - .75 .45 (.02)
Extraordinary charge - (.10) - - - -
Cumulative effect on prior years of changes
in accounting principles - (1.45) - - - -
Total $1.57 $(2.08) $ 2.10 $ 3.01 $ 3.20 $ 2.27
Dividends declared 1.52 1.52 1.50 1.41 1.27 1.10
Stockholders' equity 29.24 27.93 31.43 30.70 29.31 29.37
Market high for the year 56.00 46.38 46.88 53.63 52.00 42.88
Market low for the year 41.75 35.63 35.13 42.38 37.38 32.75
Market price at year-end $45.25 $45.00 $38.63 $44.88 $50.75 $37.88
Shares outstanding at year-end (thousands) 51,655 48,284 48,229 48,453 50,144 48,327
Balance Sheet Information
Working capital $ 79 $ 210 $ 343 $ 472 $ 328 $ 230
Property, plant, and equipment, net 2,513 2,422 2,299 2,169 2,373 2,203
Total assets 3,547 3,521 3,421 3,473 3,332 3,123
Long-term debt 590 792 926 805 858 615
Stockholders' equity 1,512 1,350 1,516 1,491 1,476 1,422
Cash Flow Information
Net cash provided by operating activities 424 277 194 579 346 397
Capital expenditures 451 373 504 488 365 323
Dividends paid 73 73 72 69 58 53
Sale (purchase) of treasury stock, net $ - $ - $ (13) $ (98) $ 83 $ -
Ratios and Percentage
Current ratio 1.1 1.3 1.6 1.7 1.6 1.4
Average price/earnings ratio 31.1 NM 19.5 15.9 14.0 16.7
Total debt to total capitalization 37% 42% 39% 34% 37% 33%
</TABLE>
57
<PAGE>
Kerr-McGee Corporation
<PAGE>
EXHIBIT 21
KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES
SUBSIDIARIES
<TABLE>
<CAPTION>
State or Country Percent
Name of Subsidiary of Incorporation Owned
<S> <C> <C>
Kerr-McGee Canada Ltd. Canada 100%
Kerr-McGee Chemical Corporation Delaware 100%
Kerr-McGee Coal Corporation Delaware 100%
Kerr-McGee Credit Corporation Delaware 100%
Kerr-McGee Oil (U.K.) PLC England 100%
Kerr-McGee Refining Corporation Delaware 100%
Cato Oil and Grease Co. Oklahoma 100%(1)
Southwestern Refining Company, Inc. Delaware 100%(1)
(1)Owned by Kerr-McGee Refining Corporation
</TABLE>
A number of additional subsidiaries are omitted since,
considered in the aggregate as a single subsidiary, they would not
constitute a significant subsidiary as of December 31, 1993.
EXHIBIT 23
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the
incorporation of our reports dated February 18, 1994, included on
page 30 of the company's 1993 Annual Report to Stockholders and
incorporated by reference in this Form 10-K and on page 34 of this
Form 10-K, into the company's previously filed Form S-8's numbered
2-85844, 2-61426, 2-90981, 33-18268, and 33-24274, and the
company's previously filed Form S-3's numbered 2-78952, 33-5473,
33-35872, and 33-66112.
(Arthur Andersen & Co.)
ARTHUR ANDERSEN & CO.
Oklahoma City, Oklahoma,
March 28, 1994
KERR-McGEE CORPORATION
POWER OF ATTORNEY
WHEREAS, Kerr-McGee Corporation, a Delaware corporation (the
"Company"), intends to file with the Securities and Exchange
Commission (the "Commission") under the Securities Exchange Act of
1934, as amended (the "Act"), an annual report on Form 10K for the
year ended December 31, 1993 (the "Form 10K") with such amendment
or amendments thereto as may be necessary or appropriate from time
to time, together with any and all exhibits and other relevant or
associated documents;
NOW THEREFORE, the undersigned in his capacity as a director
of the Company does hereby appoint F. A. McPherson and John C.
Linehan, and each of them severally, his true and lawful attorneys
or attorney-in-fact and agents or agent with power to act with or
without the other and with full power of substitution and
resubstitution, to execute for him and in his name, place and
stead, in his capacity as a director of the Company, the Form 10-K
and any and all amendments thereto, as said attorneys or each of
them shall deem necessary or appropriate, together with all
instruments necessary or incidental in connection therewith, and to
file the same or cause the same to be filed with the Commission.
Each of said attorneys shall have full power and authority to do
and perform in the name and on behalf of the undersigned, in any
and all capacities, each act whatsoever necessary or desirable to
be done in the premises, as fully and to all intents and purposes
as the undersigned might or could do in person, the undersigned
hereby ratifying and approving the acts of said attorney or
attorneys.
IN WITNESS WHEREOF, the undersigned has executed this
instrument this 8th day of March , 1994.
(John J. Murphy)
John J. Murphy, Director
<PAGE>
KERR-McGEE CORPORATION
POWER OF ATTORNEY
WHEREAS, Kerr-McGee Corporation, a Delaware corporation (the
"Company"), intends to file with the Securities and Exchange
Commission (the "Commission") under the Securities Exchange Act of
1934, as amended (the "Act"), an annual report on Form 10K for the
year ended December 31, 1993 (the "Form 10K") with such amendment
or amendments thereto as may be necessary or appropriate from time
to time, together with any and all exhibits and other relevant or
associated documents;
NOW THEREFORE, the undersigned in his capacity as a director
of the Company does hereby appoint F. A. McPherson and John C.
Linehan, and each of them severally, his true and lawful attorneys
or attorney-in-fact and agents or agent with power to act with or
without the other and with full power of substitution and
resubstitution, to execute for him and in his name, place and
stead, in his capacity as a director of the Company, the Form 10-K
and any and all amendments thereto, as said attorneys or each of
them shall deem necessary or appropriate, together with all
instruments necessary or incidental in connection therewith, and to
file the same or cause the same to be filed with the Commission.
Each of said attorneys shall have full power and authority to do
and perform in the name and on behalf of the undersigned, in any
and all capacities, each act whatsoever necessary or desirable to
be done in the premises, as fully and to all intents and purposes
as the undersigned might or could do in person, the undersigned
hereby ratifying and approving the acts of said attorney or
attorneys.
IN WITNESS WHEREOF, the undersigned has executed this
instrument this 8th day of March , 1994.
(Bennett E. Bidwell)
Bennett E. Bidwell, Director
<PAGE>
KERR-McGEE CORPORATION
POWER OF ATTORNEY
WHEREAS, Kerr-McGee Corporation, a Delaware corporation (the
"Company"), intends to file with the Securities and Exchange
Commission (the "Commission") under the Securities Exchange Act of
1934, as amended (the "Act"), an annual report on Form 10K for the
year ended December 31, 1993 (the "Form 10K") with such amendment
or amendments thereto as may be necessary or appropriate from time
to time, together with any and all exhibits and other relevant or
associated documents;
NOW THEREFORE, the undersigned in his capacity as a director
of the Company does hereby appoint F. A. McPherson and John C.
Linehan, and each of them severally, his true and lawful attorneys
or attorney-in-fact and agents or agent with power to act with or
without the other and with full power of substitution and
resubstitution, to execute for him and in his name, place and
stead, in his capacity as a director of the Company, the Form 10-K
and any and all amendments thereto, as said attorneys or each of
them shall deem necessary or appropriate, together with all
instruments necessary or incidental in connection therewith, and to
file the same or cause the same to be filed with the Commission.
Each of said attorneys shall have full power and authority to do
and perform in the name and on behalf of the undersigned, in any
and all capacities, each act whatsoever necessary or desirable to
be done in the premises, as fully and to all intents and purposes
as the undersigned might or could do in person, the undersigned
hereby ratifying and approving the acts of said attorney or
attorneys.
IN WITNESS WHEREOF, the undersigned has executed this
instrument this 8th day of March , 1994.
(John J. Nevin)
John J. Nevin, Director
<PAGE>
KERR-McGEE CORPORATION
POWER OF ATTORNEY
WHEREAS, Kerr-McGee Corporation, a Delaware corporation (the
"Company"), intends to file with the Securities and Exchange
Commission (the "Commission") under the Securities Exchange Act of
1934, as amended (the "Act"), an annual report on Form 10K for the
year ended December 31, 1993 (the "Form 10K") with such amendment
or amendments thereto as may be necessary or appropriate from time
to time, together with any and all exhibits and other relevant or
associated documents;
NOW THEREFORE, the undersigned in his capacity as a director
the Company does hereby appoint F. A. McPherson and John C.
Linehan, and each of them severally, his true and lawful attorneys
or attorney-in-fact and agents or agent with power to act with or
without the other and with full power of substitution and
resubstitution, to execute for him and in his name, place and
stead, in his capacity as a director of the Company, the Form 10-K
and any and all amendments thereto, as said attorneys or each of
them shall deem necessary or appropriate, together with all
instruments necessary or incidental in connection therewith, and to
file the same or cause the same to be filed with the Commission.
Each of said attorneys shall have full power and authority to do
and perform in the name and on behalf of the undersigned, in any
and all capacities, each act whatsoever necessary or desirable to
be done in the premises, as fully and to all intents and purposes
as the undersigned might or could do in person, the undersigned
hereby ratifying and approving the acts of said attorney or
attorneys.
IN WITNESS WHEREOF, the undersigned has executed this
instrument this 8th day of March , 1994.
(Richard D. Harrison)
Richard D. Harrison, Director
<PAGE>
KERR-McGEE CORPORATION
POWER OF ATTORNEY
WHEREAS, Kerr-McGee Corporation, a Delaware corporation (the
"Company"), intends to file with the Securities and Exchange
Commission (the "Commission") under the Securities Exchange Act of
1934, as amended (the "Act"), an annual report on Form 10K for the
year ended December 31, 1993 (the "Form 10K") with such amendment
or amendments thereto as may be necessary or appropriate from time
to time, together with any and all exhibits and other relevant or
associated documents;
NOW THEREFORE, the undersigned in his capacity as a director
of the Company does hereby appoint F. A. McPherson and John C.
Linehan, and each of them severally, his true and lawful attorneys
or attorney-in-fact and agents or agent with power to act with or
without the other and with full power of substitution and
resubstitution, to execute for him and in his name, place and
stead, in his capacity as a director of the Company, the Form 10-K
and any and all amendments thereto, as said attorneys or each of
them shall deem necessary or appropriate, together with all
instruments necessary or incidental in connection therewith, and to
file the same or cause the same to be filed with the Commission.
Each of said attorneys shall have full power and authority to do
and perform in the name and on behalf of the undersigned, in any
and all capacities, each act whatsoever necessary or desirable to
be done in the premises, as fully and to all intents and purposes
as the undersigned might or could do in person, the undersigned
hereby ratifying and approving the acts of said attorney or
attorneys.
IN WITNESS WHEREOF, the undersigned has executed this
instrument this 8th day of March , 1994.
(Robert S. Kerr, Jr.)
Robert S. Kerr, Jr., Director
<PAGE>
KERR-McGEE CORPORATION
POWER OF ATTORNEY
WHEREAS, Kerr-McGee Corporation, a Delaware corporation (the
"Company"), intends to file with the Securities and Exchange
Commission (the "Commission") under the Securities Exchange Act of
1934, as amended (the "Act"), an annual report on Form 10K for the
year ended December 31, 1993 (the "Form 10K") with such amendment
or amendments thereto as may be necessary or appropriate from time
to time, together with any and all exhibits and other relevant or
associated documents;
NOW THEREFORE, the undersigned in his capacity as a director
or officer or both, as the case may be, of the Company does hereby
appoint John C. Linehan, his true and lawful attorney-in-fact and
agent with power to act and with full power of substitution and
resubstitution, to execute for him and in his name, place and
stead, in his capacity as a director or officer or both, as the
case may be, of the Company, the Form 10-K and any and all
amendments thereto, as said attorney or any of them shall deem
necessary or appropriate, together with all instruments necessary
or incidental in connection therewith, and to file the same or
cause the same to be filed with the Commission. The said attorney
shall have full power and authority to do and perform in the name
and on behalf of the undersigned, in any and all capacities, each
act whatsoever necessary or desirable to be done in the premises,
as fully and to all intents and purposes as the undersigned might
or could do in person, the undersigned hereby ratifying and
approving the acts of said attorney.
IN WITNESS WHEREOF, the undersigned has executed this
instrument this 8th day of March , 1994.
(F. A. McPherson)
F. A. McPherson, Chairman of the
Board and Chief Executive Officer
and Director
<PAGE>
KERR-McGEE CORPORATION
POWER OF ATTORNEY
WHEREAS, Kerr-McGee Corporation, a Delaware corporation (the
"Company"), intends to file with the Securities and Exchange
Commission (the "Commission") under the Securities Exchange Act of
1934, as amended (the "Act"), an annual report on Form 10K for the
year ended December 31, 1993 (the "Form 10K") with such amendment
or amendments thereto as may be necessary or appropriate from time
to time, together with any and all exhibits and other relevant or
associated documents;
NOW THEREFORE, the undersigned in his capacity as a director
of the Company does hereby appoint F. A. McPherson and John C.
Linehan, and each of them severally, his true and lawful attorneys
or attorney-in-fact and agents or agent with power to act with or
without the other and with full power of substitution and
resubstitution, to execute for him and in his name, place and
stead, in his capacity as a director of the Company, the Form 10-K
and any and all amendments thereto, as said attorneys or each of
them shall deem necessary or appropriate, together with all
instruments necessary or incidental in connection therewith, and to
file the same or cause the same to be filed with the Commission.
Each of said attorneys shall have full power and authority to do
and perform in the name and on behalf of the undersigned, in any
and all capacities, each act whatsoever necessary or desirable to
be done in the premises, as fully and to all intents and purposes
as the undersigned might or could do in person, the undersigned
hereby ratifying and approving the acts of said attorney or
attorneys.
IN WITNESS WHEREOF, the undersigned has executed this
instrument this 8th day of March , 1994.
(William C. Morris)
William C. Morris, Director
<PAGE>
KERR-McGEE CORPORATION
POWER OF ATTORNEY
WHEREAS, Kerr-McGee Corporation, a Delaware corporation (the
"Company"), intends to file with the Securities and Exchange
Commission (the "Commission") under the Securities Exchange Act of
1934, as amended (the "Act"), an annual report on Form 10K for the
year ended December 31, 1993 (the "Form 10K") with such amendment
or amendments thereto as may be necessary or appropriate from time
to time, together with any and all exhibits and other relevant or
associated documents;
NOW THEREFORE, the undersigned in his capacity as a director
of the Company does hereby appoint F. A. McPherson and John C.
Linehan, and each of them severally, his true and lawful attorneys
or attorney-in-fact and agents or agent with power to act with or
without the other and with full power of substitution and
resubstitution, to execute for him and in his name, place and
stead, in his capacity as a director of the Company, the Form 10-K
and any and all amendments thereto, as said attorneys or each of
them shall deem necessary or appropriate, together with all
instruments necessary or incidental in connection therewith, and to
file the same or cause the same to be filed with the Commission.
Each of said attorneys shall have full power and authority to do
and perform in the name and on behalf of the undersigned, in any
and all capacities, each act whatsoever necessary or desirable to
be done in the premises, as fully and to all intents and purposes
as the undersigned might or could do in person, the undersigned
hereby ratifying and approving the acts of said attorney or
attorneys.
IN WITNESS WHEREOF, the undersigned has executed this
instrument this 8th day of March , 1994.
(E. H. Clark, Jr.)
E. H. Clark, Jr., Director
<PAGE>
KERR-McGEE CORPORATION
POWER OF ATTORNEY
WHEREAS, Kerr-McGee Corporation, a Delaware corporation (the
"Company"), intends to file with the Securities and Exchange
Commission (the "Commission") under the Securities Exchange Act of
1934, as amended (the "Act"), an annual report on Form 10K for the
year ended December 31, 1993 (the "Form 10K") with such amendment
or amendments thereto as may be necessary or appropriate from time
to time, together with any and all exhibits and other relevant or
associated documents;
NOW THEREFORE, the undersigned in his capacity as a director
of the Company does hereby appoint F. A. McPherson and John C.
Linehan, and each of them severally, his true and lawful attorneys
or attorney-in-fact and agents or agent with power to act with or
without the other and with full power of substitution and
resubstitution, to execute for him and in his name, place and
stead, in his capacity as a director of the Company, the Form 10-K
and any and all amendments thereto, as said attorneys or each of
them shall deem necessary or appropriate, together with all
instruments necessary or incidental in connection therewith, and to
file the same or cause the same to be filed with the Commission.
Each of said attorneys shall have full power and authority to do
and perform in the name and on behalf of the undersigned, in any
and all capacities, each act whatsoever necessary or desirable to
be done in the premises, as fully and to all intents and purposes
as the undersigned might or could do in person, the undersigned
hereby ratifying and approving the acts of said attorney or
attorneys.
IN WITNESS WHEREOF, the undersigned has executed this
instrument this 8th day of March , 1994.
(Martin C. Jischke)
Martin C. Jischke
<PAGE>
KERR-McGEE CORPORATION
POWER OF ATTORNEY
WHEREAS, Kerr-McGee Corporation, a Delaware corporation (the
"Company"), intends to file with the Securities and Exchange
Commission (the "Commission") under the Securities Exchange Act of
1934, as amended (the "Act"), an annual report on Form 10K for the
year ended December 31, 1993 (the "Form 10K") with such amendment
or amendments thereto as may be necessary or appropriate from time
to time, together with any and all exhibits and other relevant or
associated documents;
NOW THEREFORE, the undersigned in her capacity as a director
of the Company does hereby appoint F. A. McPherson and John C.
Linehan, and each of them severally, her true and lawful attorneys
or attorney-in-fact and agents or agent with power to act with or
without the other and with full power of substitution and
resubstitution, to execute for her and in her name, place and
stead, in her capacity as a director of the Company, the Form 10-K
and any and all amendments thereto, as said attorneys or each of
them shall deem necessary or appropriate, together with all
instruments necessary or incidental in connection therewith, and to
file the same or cause the same to be filed with the Commission.
Each of said attorneys shall have full power and authority to do
and perform in the name and on behalf of the undersigned, in any
and all capacities, each act whatsoever necessary or desirable to
be done in the premises, as fully and to all intents and purposes
as the undersigned might or could do in person, the undersigned
hereby ratifying and approving the acts of said attorney or
attorneys.
IN WITNESS WHEREOF, the undersigned has executed this
instrument this 8th day of March , 1994.
(Farah M. Walters)
Farah M. Walters
<PAGE>
