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, 1994 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 $2.6 billion as of February 28, 1995.
The number of shares of common stock outstanding as of February 28,
1995, was 51,707,171.
DOCUMENTS INCORPORATED BY REFERENCE
Specified sections of the Kerr-McGee Corporation 1994 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 1995 Annual Meeting of Stockholders, which will be filed with the
Securities and Exchange Commission within 120 days after December 31,
1994, 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 refining and marketing and 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.
During the past two years, the company has been involved in
discussions and negotiations to sell, merge, or restructure its
refining and marketing operations. Letters of intent were signed
in January 1995 to sell the Corpus Christi, Texas, and Cotton
Valley, Louisiana, refineries and Cato Oil and Grease Co. Offers
for certain other refining and marketing assets are being
evaluated, but no agreements have been entered into. The company
does not believe that the disposals would have a material adverse
effect on its future consolidated operations and cash flow.
INDUSTRY SEGMENTS
For information as to business segments of the company,
reference is made to Note 22 to the Consolidated Financial
Statements on pages 43 and 44 of the 1994 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, and China.
Onshore exploration and production operations are in the United
States, primarily in Louisiana, Texas, and Wyoming; Canada;
Indonesia; and Papua New Guinea.
____________
Except as indicated under Items 1 through 3, 5 through 8, and
10 through 14, no other information appearing in either the
company's 1994 Annual Report to Stockholders or its 1995 Proxy
Statement is deemed to be filed as part of this annual report
on Form 10-K.
<PAGE>
For 1994, the Exploration and Production Division, including
Gas Processing, recorded revenues(1) and operating profit of $633
million and $74 million, respectively, compared with $564 million
and $82 million, respectively, for 1993.
Net operating profit was $49 million for 1994, compared with
$52 million for 1993. Operating profit for 1994 was lower
principally due to lower crude oil sales prices, lower natural gas
deliveries and sales prices, and higher exploration expense,
partially offset by higher crude oil sales volumes.
Total expenditures for property acquisitions, exploration, and
development were $379 million for 1994, a 5% increase from $360
million the previous year.
The company's average crude oil sales price was $14.81 per
barrel for 1994, down 5% from the prior year's price of $15.64.
The 1994 average natural gas sales price was $1.76 per thousand
cubic feet, down 8% from the prior year's price of $1.92.
Kerr-McGee's crude oil and condensate production averaged
67,300 barrels per day for 1994, compared with 53,200 barrels per
day for 1993. Deliveries of natural gas averaged 271 million cubic
feet per day, compared with 286 million cubic feet of gas per day
for 1993. Kerr-McGee's spot sales of natural gas in 1994
represented approximately 74% of its total natural gas sold,
approximately the same as last year.
Undeveloped Acreage
As of December 31, 1994, the company had interests in
undeveloped oil and gas acreage in the Gulf of Mexico and nine
states in the United States, onshore Canada, the United Kingdom
sector of the North Sea, and other international areas as follows:
(1)Includes intersegment sales, primarily crude oil sales, of $151 million in
1994 and $195 million in 1993.
<PAGE>
Gross Net
Location Acreage Acreage
Domestic -
Onshore 340,262 237,203
Offshore 423,834 262,267
764,096 499,470
Canada 266,498 153,696
North Sea 961,783 363,037
Other international -
Onshore
Indonesia 2,029,722 676,574
Papua New Guinea 1,900,000 632,700
Offshore China 563,398 281,699
4,493,120 1,590,973
Total Undeveloped Acreage 6,485,497 2,607,176
The company also owned North American onshore undeveloped oil
and gas mineral and royalty interests totaling 855,361 gross or
158,171 net acres.
Developed Acreage
At December 31, 1994, the company had interests in developed
oil and gas acreage in the Gulf of Mexico and 20 states in the
United States, onshore Canada, the United Kingdom sector of the
North Sea, and offshore China areas as follows:
Gross Net
Location Acreage Acreage
Domestic -
Onshore 857,092 369,686
Offshore 383,745 171,604
1,240,837 541,290
Canada 276,428 165,265
North Sea 162,446 21,057
Offshore China 78,332 19,191
Total Developed Acreage 1,758,043 746,803
The company also owned developed oil and gas mineral and
royalty interests in North America totaling 622,149 gross or 60,457
net acres.
Net Exploratory and Development Wells
Domestic and international exploratory and development wells
drilled during the three years ended December 31, 1994, are
reflected in the following table:
1994 1993 1992
Exploratory Wells - Net(1)
Domestic
Productive 7.53 1.40 .98
Dry holes 5.26 5.30 3.80
12.79 6.70 4.78
Canada
Productive 1.73 - 1.00
Dry holes 1.31 1.75 1.33
3.04 1.75 2.33
North Sea
Productive .35 .82 .61
Dry holes .62 2.29 .40
.97 3.11 1.01
Other international
Dry holes 1.28 .75 -
Total 18.08 12.31 8.12
Development Wells - Net(1)
Domestic
Productive 17.26 33.10 20.38
Dry holes 1.36 .83 1.97
18.62 33.93 22.35
Canada
Productive 3.39 9.52 6.20
Dry holes 3.02 1.50 1.00
6.41 11.02 7.20
North Sea
Productive 1.62 .91 .19
Dry holes .25 - .08
1.87 .91 .27
Other international
Productive - .37 .49
Total 26.90 46.23 30.31
(1)Net wells - The total of the company's fractional working interests in
"gross wells" expressed as the equivalent number of full-interest wells.
<PAGE>
Gross and Net Wells
The company's interest in productive oil and gas wells at
December 31, 1994, is shown in the following table. These wells
include 7,823 gross or 479.55 net wells associated with
secondary-recovery projects and 347 gross or 122.77 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. Of the domestic wells, approximately 58% are in Texas,
11% in Oklahoma, 11% in Wyoming, 9% in Louisiana, 9% offshore in
Federal waters, and 2% in other areas.
Gross Net
Location Wells Wells
Crude Oil
Domestic 9,934 625.97
Canada 948 122.23
North Sea 66 9.36
10,948 757.56
Natural Gas
Domestic 2,292 515.93
Canada 194 62.26
North Sea 19 1.47
2,505 579.66
Total Wells 13,453 1,337.22
Results of Operations, Capitalized Costs, and Costs Incurred
Reference is made to Notes 23, 24, and 25 to the Consolidated
Financial Statements on pages 45, 46, and 47 of the 1994 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, 1994 and 1993, and costs incurred in
crude oil and natural gas activities for the past three years.
Crude Oil and Natural Gas Sales
The following table summarizes the sales of the company's
crude oil and natural gas production (including intersegment sales)
for the three years ended December 31, 1994:
(In millions) 1994 1993 1992
Crude oil and condensate - barrels
Domestic 9.3 10.1 9.3
Canada 1.7 1.7 1.7
North Sea 12.4 5.8 6.1
Other international 1.0 1.5 1.6
24.4 19.1 18.7
Crude oil and condensate
Domestic $136.3 $159.6 $169.7
Canada 23.2 25.3 26.9
North Sea 187.2 92.9 113.6
Other international 14.4 21.7 28.4
$361.1 $299.5 $338.6
Natural gas - MCF
Domestic 76.8 85.1 88.2
Canada 18.1 18.4 18.9
North Sea 4.1 .9 1.1
99.0 104.4 108.2
Natural gas
Domestic $140.4 $172.7 $146.9
Canada 24.9 26.2 19.5
North Sea 8.6 1.2 1.9
$173.9 $200.1 $168.3
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, while Canadian crude oil is sold in Canada at spot
prices. The company's share of other international crude oil was
sold to the company's refining and marketing operations. Natural
gas production is sold to the company's gas marketing affiliates
and ultimately resold to or sold directly to utilities, industrial
customers, and marketing companies under variable-term contracts.
Average Sales Prices and Production Costs
Reference is made to Note 23 to the Consolidated Financial
Statements on page 46 of the 1994 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. 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.
As of December 31, 1994, the company was participating in 76
active secondary-recovery projects worldwide. These projects are
located in all of the principal areas of Kerr-McGee's oil and gas
production activities.
Wells in Process of Drilling
At December 31, 1994, the company had 76 gross or 35.29 net
wells classified as temporarily suspended or in the process of
drilling. Of these totals, 48 gross or 29.31 net wells were
located in the United States, 3 gross or .76 net wells were in
Canada, 5 gross or .31 net wells were in the North Sea, and 20
gross or 4.91 net wells were offshore China.
Reserves
Kerr-McGee's estimated proved crude oil, condensate, and
natural gas reserves at December 31, 1994, and the changes in net
quantities of such reserves for the three years then ended are
shown in Note 26 to the Consolidated Financial Statements on page
48 of the 1994 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
Exploration in the Gulf of Mexico continues to target natural
gas in shallow waters and both oil and gas in deep water. At year-
end 1994, the company held interests in approximately 262,000 net
undeveloped acres. Domestic activities onshore in the United
States emphasize natural gas, while use of enhanced and secondary
methods maximizes oil production from several mature fields.
The United Kingdom sector of the North Sea remains the primary
area of international exploration and production for Kerr-McGee.
The company holds approximately 363,000 net undeveloped acres in
the North Sea with working interest in 28 licenses. Kerr-McGee
operates 11 of these licenses and plans an active North Sea
exploration program over the next five years.
The company also holds sizeable working interests in several
concessions in other international areas.
Kerr-McGee continues to look for acquisitions in core areas
where the company has existing operations and can add value.
Elsewhere, the disposal of marginal and non-core properties
continues. During 1994, interests in more than 200 U.S. onshore
properties and five gas processing plants, one of which was
operated by the company, were sold. These properties represented
production of approximately 400 net barrels of oil equivalent (BOE)
per day and reserves of approximately 600,000 BOE. The company
also sold its 12.3% interest in the Abu Al Bu Khoosh oil field in
the Arabian Gulf, completing withdrawal from that area.
North Sea
Approximately half of the company's 1994 oil production was
from North Sea fields. Gryphon, Scott, and East Brae, which came
on stream in late 1993, contributed 21,300 barrels per day of the
company's 1994 North Sea production of 34,300 barrels of liquids
per day. The start of natural gas deliveries in October 1994 from
the Brae area through the expanded SAGE (Scottish Area Gas
Evacuation) pipeline system (4% interest) resulted in net North Sea
deliveries of 27 million cubic feet per day at year-end.
Gryphon field, Block 9/18b (25% interest) - Production from
Gryphon averaged 32,000 barrels of oil per day for 1994. The field
uses a permanently-moored floating production facility that can be
expanded to process third-party production.
Scott field, blocks 15/21a and 15/22 (5.2%) - Average daily
production was 168,000 barrels of oil per day for 1994. Scott is
the largest field developed in the North Sea in the last decade.
The development of a South Scott extension has been approved. South
Scott will be tied to the existing facility, and first production
is expected in mid-1995.
East Brae field, blocks 16/3a and 16/3b (7.3%) - Production
averaged 64,000 barrels of liquids per day for 1994. Development
drilling should continue through most of 1995. Gas sales through
the SAGE pipeline began in the fourth quarter of 1994.
Beinn field, Block 16/7a (8%) - Drilled from the North Brae
platform, this field averaged 55 million cubic feet of gas and
6,200 barrels of liquids per day in 1994.
Ivanhoe/Rob Roy fields, Block 15/21a (10.8%) - These fields
averaged 60,000 barrels of oil per day in 1994 and continue to
exceed expectations.
Gulf of Mexico
The Gulf of Mexico was the source of one-fourth of Kerr-
McGee's 1994 oil production and 44% of natural gas deliveries. Use
of existing infrastructure is bringing new fields on stream more
quickly and at lower cost. Successful development wells,
workovers, and facility upgrades and consolidations are adding to
production and enhancing efficiency.
Vermilion Block 398 (100%) - Appraisal of the 1993 discovery
has been successful. Development activity is scheduled through
1995, with first oil and gas production expected in mid-1996.
Garden Banks Block 21 (100%) - A discovery encountered gas
pay. Kerr-McGee will evaluate development options while testing
other plays on the block. First production is expected in late
1996.
Viosca Knoll 989 field (25%) - The company's first deepwater
project is expected to be the gulf's largest contributor to 1995
oil production. Initial oil in October 1994 from a platform in
1,300 feet of water completed the first development phase of this
five-block field. Daily production reached 20,000 barrels of oil
at year-end. Work continues on engineering for the second
development phase - subsea systems in 1,900 feet of water -
expected to come on stream in early 1996.
Ship Shoal Block 241 (64.5%) - A discovery-to-production cycle
of four and one-half months set a company record. The block was
acquired in March 1994, and the discovery well was drilled in
August, followed by production start-up in January 1995.
Production was 35 million cubic feet of gas per day in early 1995.
Ewing Bank Block 989 (75%)- Use of new subsea technology and
hook-up to an existing platform brought this two-well project on
stream in December 1994, only 11 months after project approval.
The subsea completions in 600 feet of water are the first in the
Gulf of Mexico to use the horizontal Christmas tree system
pioneered at the Gryphon field in the North Sea. This technology
provides cost benefits over conventional subsea wellhead systems.
Main Pass Block 93 (50%) - Three high-angle development wells
added more than 20 million cubic feet of gas per day to Kerr-
McGee's production.
U.S. Onshore
The search for new U.S. onshore reserves emphasized natural
gas, while use of enhanced and secondary recovery methods maximized
oil production from several mature fields. Domestic onshore fields
supplied 13% of Kerr-McGee's 1994 oil production and 34% of natural
gas deliveries.
West Park, Wheeler County, Texas, and Dockray Rivers, Hemphill
County, Texas (100%) - Discoveries were made in the Granite Wash
formation during 1994. Appraisal of West Park continued with a
successful offset in December 1994. The field was producing at a
rate of more than 13 million cubic feet of gas per day in early
1995.
Sand Dunes (Muddy) Unit, Converse County, Wyoming (26.7%) -
Production from this miscible gas injection project operated by
Kerr-McGee averaged 7,300 barrels of oil per day in 1994.
Canada
Natural gas remains the focus of our exploration efforts in
Canada, which accounted for 18% of Kerr-McGee's 1994 natural gas
sales.
The Gift Lake (Alberta) property received renewed interest
with the successful drilling of a horizontal producer/injector pair
which produced approximately 400 barrels of oil per day.
China
Liuhua 11-1 field (24.5%) - Development of Kerr-McGee's
largest capital project for 1995 is proceeding on schedule in the
South China Sea. The development plans for the estimated reserves
of 125 million barrels of oil include subsea completion of 20
horizontal wells and a floating production, storage, and offloading
vessel similar to that used at the Gryphon field in the North Sea.
The company's share of the estimated $660 million project cost is
$160 million. First oil production is expected in early 1996.
Bohai, Block 04/36 (50%) - In August 1994, Kerr-McGee as
operator signed a production-sharing contract with the China
National Offshore Oil Corporation for a concession in the Gulf of
Bohai, 100 miles southeast of Beijing. With an average water depth
of about 50 feet, the area's operating environment is similar to
the Gulf of Mexico, where the company has operated since 1947. The
first well in the Gulf of Bohai is planned for mid-1995.
Indonesia
South Sumatra Basin (33.3%) - The first of two planned
exploratory wells on the 2 million-acre onshore block in Indonesia
was successfully completed and tested in March 1995. Additional
appraisal drilling will be required.
Gas Processing
At year-end 1994, the company operated both a gas processing
plant and an intrastate gas pipeline in the United States and also
had interests in five plants that are operated by others. These
plants produce natural gas liquids, including ethane, propane,
propylene, isobutane, normal butane, and natural gasoline. Kerr-
McGee's interest in the gas processed at gas plants, including
those that were sold during 1994, averaged 54 million cubic feet
per day during 1994, compared with 67 million cubic feet per day
during 1993.
The company's total net production of natural gas liquids
during 1994 averaged 3,000 barrels per day, compared with 3,600
barrels per day in 1993. The company's share of residue gas sold
was 14 million cubic feet per day and 18 million cubic feet per day
for 1994 and 1993, respectively.
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. See General
Development of Business on page 2 of this Form 10-K for information
on the possible sale of certain assets of Kerr-McGee Refining
Corporation.
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
146,000 barrels per day for 1994. The company's 1994 refined-
product sales averaged 233,000 barrels per day.
Refining and marketing recorded an operating profit of $35
million for 1994, compared with an operating loss of $28 million
for 1993. Revenues were $1.9 billion, compared with $2 billion for
1993. Net operating profit was $22 million for 1994, compared with
a 1993 net operating loss of $19 million. The 1994 operating
profit reflected improved wholesale gasoline and distillate margins
resulting from lower crude oil costs, partially offset by lower
sales prices. Revenues for 1994 were lower than for the prior year
due to the lower sales prices.
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 1994 utilizations:
Refinery Capacities
Crude Oil Downstream
Distillation Units Processing Units(1)
Barrels Percent Barrels Percent
Plant Per Day Utilized Per Day Utilized
Corpus Christi, Texas 120,000 81 104,000 94
Wynnewood, Oklahoma 50,000 88 43,000 103
Cotton Valley, Louisiana 11,000 44 7,800 62
181,000 81 154,800 94
(1)Adjusted for normal turnaround.
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 1994.
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.
A capital project to minimize benzene emissions was completed
at the Corpus Christi refinery during 1994. The refinery also
began production of reformulated gasoline for delivery to east
coast terminals. The refinery produces 1,100 barrels per day of
MTBE, an oxygenate for cleaner-burning fuels, which is sufficient
to reformulate approximately 20% of gasoline produced at the Corpus
Christi refinery.
The refinery at Wynnewood produces gasoline, solvent, diesel
fuel, jet fuel, heavy fuel, light burner fuel, and asphalt. A
waste-water segregation project was completed during the year.
The Cotton Valley facility is a specialty-products plant
producing a full range of high-quality naphtha solvents, diesel
fuel, and jet fuel components. In March 1995, the company signed
a contract for the sale of the Cotton Valley refinery. The sale is
expected to close on or before March 31, 1995.
Crude Oil Supply
In 1994, approximately 165,000 barrels per day of crude oil
and intermediate feedstocks were delivered to the company's
refineries. Of the crude oil delivered, 57% was domestic and 43%
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 26% of the 53 million barrels of crude oil processed by the
refineries was supplied by Kerr-McGee production operations.
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 51 company-operated retail service stations and
approximately 1,175 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 12 waterway and pipeline terminals were owned and operated
by the company at the end of 1994. The company has joint ownership
in two additional terminals and sells products at approximately 200
additional exchange terminals. The sale of the New Hyde Park, New
York, terminal was completed during 1994; terminaling and
transportation agreements were executed in conjunction with the
sale.
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.
CHEMICALS
Kerr-McGee Chemical Corporation produces and markets inorganic
industrial and 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
and elemental boron. Forest-product operations produce railroad
crossties 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 $639
million and $92 million, respectively, for 1994, compared with $556
million and $70 million, respectively, for 1993. Net operating
profit was $59 million for 1994, compared with $44 million the
previous year. The increase in 1994 revenues was due to higher
sales volumes for most chemical products and higher international
titanium dioxide pigment sales prices, partially offset by lower
domestic pigment sales prices. The increase in 1994 operating
profit was due to lower per-unit production costs for most products
and higher revenues.
Pigment
The company's synthetic rutile plant at Mobile, Alabama, has
a production capacity of 162,000 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
128,000 tons per year. An expansion started in the first half of
1995 will increase the Hamilton plant's production capacity to
160,000 tons at the end of three years.
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 173 million tons of sand contains
an estimated 3.5% heavy minerals. The heavy minerals contained
within this 6 million-ton, heavy-mineral deposit are composed of
4.3% rutile, 61.2% ilmenite, 3.5% leucoxene, 11% zircon, and 20%
minerals which are not presently produced or have no value.
Changes in deposit economics required new long-term mine plans,
which reduced the reported heavy minerals in the deposit by
approximately 1.3 million tons compared with last year. 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 heavy
minerals 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
from September 1993 through February 1994. The plant was operating
at near capacity by mid-year 1994.
Production from the synthetic rutile plant serves as feedstock
for the domestic and international pigment operations. The pigment
plant in Australia has a production capacity of 72,000 tons per
year. An expansion of this plant was begun in the fourth quarter
of 1994 to increase capacity to 88,000 tons per year by the end of
1995.
The company also owns a 25% interest in a pigment plant in
Yanbu, Saudi Arabia, which has a capacity of 64,000 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. An expansion of the manganese
dioxide plant, completed mid-1994, increased capacity from 16,000
tons to 24,500 tons. Production capacity for ammonium perchlorate
is 20,000 tons per year. Ammonium perchlorate blending and storage
facilities are located 25 miles north of the Henderson plant.
At the Soda Springs, Idaho, plant, the company recovers
vanadium pentoxide from phosphate byproducts of other operations in
the area. Due to market conditions, one production line was shut
down during 1994, effectively reducing annual capacity at the Soda
Springs plant from 4.3 million pounds to 3.2 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 in the United States. Six of the
plants are east of the Rocky Mountains. Production of crossties
with built-in rail fasteners began in the fourth quarter of 1993 at
a pilot plant in Madison, Illinois. As a result of testing, the
company believes this innovative RAILFAST (Registered Trademark)
system has good potential for use with both wood and concrete ties.
Marketing
Titanium dioxide pigment is the world's preferred white
opacifier and is used primarily in paint, plastics, and paper.
With net production capacity of 180,000 tons per year, Kerr-McGee
has 10% of the United States and 5% of the world markets. The
company's plant in Hamilton, Mississippi, one of the industry's
lower cost-producers, primarily serves the Americas. The majority
of the pigment production from the company's 50% joint venture in
Western Australia is sold in Southeast Asia and Australia. The
company's plant (25% interest) in Saudi Arabia sells primarily to
customers located in the Middle East and Europe. A marketing
subsidiary sells all of the pigment production from the Western
Australia joint venture and approximately 50% of the total
production from the Saudi Arabia plant. World demand increased by
6% in 1994 after only slight growth in 1993.
Manganese dioxide is a major component of alkaline dry-cell
batteries. The company's current production meets approximately
33% of North American demand. The demand is driven by the need for
alkaline batteries for portable electronic devices. Worldwide,
Kerr-McGee is the third-largest manganese dioxide producer.
Manganese metal is used in specialty and stainless steel
alloys. Manganese-aluminum briquettes are used as an alloy to
strengthen aluminum beverage cans. Kerr-McGee supplied about 50%
of the U.S. aluminum industry's manganese requirements in 1994.
Demand improved substantially during 1994 for sodium chlorate,
which is used in the environmentally preferred chlorine dioxide
process for bleaching pulp. North American demand for sodium
chlorate should grow 6% to 8% per year over the near term as the
pulp and paper industry continues conversion to the chlorine
dioxide process. The company has a 7% share of the North American
market and its plant in Mississippi is a low-cost producer.
The company's share of the U.S. railroad crosstie market is
approximately 45%.
For information regarding heavy-mineral reserves, production,
and average market prices for each of the years 1990 through 1994,
reference is made to Note 28 to the Consolidated Financial
statements on page 50 of the 1994 Annual Report to Stockholders,
which note is incorporated by reference in Item 8.
COAL
The company's coal operations are conducted by a subsidiary,
Kerr-McGee Coal Corporation, which produces coal from the Jacobs
Ranch and Clovis Point surface mines 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 coal sold in 1994 was
to electric utilities under long-term 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 $45 million and $80 million for
1994 and 1993, respectively, on revenues of $294 million and $328
million, respectively. The 1994 decrease in revenues from the
prior year was due to lower average sales prices resulting from
1993 contract renegotiations, partially offset by higher sales
volumes. Operating profit for 1994 declined due to the decrease in
revenues. Net operating profit was $34 million and $58 million for
1994 and 1993, respectively.
Reserves and Production
As of December 31, 1994, the company's coal reserves were as
follows (in millions of tons):
In-Place Recoverable
Demonstrated Demonstrated Classifi- Mining
State/Mining Unit Tons Tons cation Method
Wyoming -
Jacobs Ranch Mine 327 294 Steam Surface
Clovis Point Mine 326 294 Steam Surface
Illinois -
Galatia Mine - Met./ Under-
Harrisburg No. 5 129 82 Steam ground
Under-
Herrin No. 6 267 174 Steam ground
West Virginia - Under-
Pioneer Fuel Met./ ground/
Composite 29 20 Steam Surface
1,078 864
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.
Production from Kerr-McGee mines for 1994 and 1993 was as
follows:
(In millions of tons) 1994 1993
Jacobs Ranch Mine 20.6 18.4
Clovis Point Mine .2 -
Galatia Mine 4.0 4.1
West Virginia Operations .8 .8
Total Production 25.6 23.3
For information regarding coal reserves, production, and
average market prices for each of the years 1990 through 1994,
reference is made to Note 28 to the Consolidated Financial
Statements on page 50 of the 1994 Annual Report to Stockholders,
which note is incorporated by reference in Item 8.
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 3,585 acres are underlain by
294 million recoverable tons of coal. The company also owns or
controls the surface rights to 1,684 acres of a buffer zone, or
overstrip area. The mine permit was renewed on August 31, 1994,
for a five-year period and expanded to incorporate additional
leased acreage and the buffer zone.
Shipments began in 1978 and totaled more than 215 million tons
through December 1994. 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 was reopened in 1994 and produced 200,000
tons toward meeting due diligence lease requirements. 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 will
be renewed and extended without change in 1995. The terms of the
state lease, which contains the mine pit, were renewed for an
additional 10-year period in 1993. The state 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 600,000 tons of coal be mined
by September 1996.
Galatia Mine
The Galatia Mine is located in southern Illinois near the town
of Galatia in Saline County. It produces coal from the Harrisburg
No. 5 seam, a coal which can be used as either a semi-soft coking
coal or a high-BTU, relatively low-sulfur steam coal. Its use as
a steam coal allows utilities to comply with Phase I of the Clean
Air Act Amendments of 1990 without installing flue gas
desulfurization units or blending with other coals.
Shipments from the mine began in January 1984 and totaled more
than 30 million tons through December 1994. Shipments are
primarily by rail, although the mine loadout is capable of loading
trucks, and weighing facilities are on-site. The Illinois Central
railroad is the originating carrier for rail shipments, most of
which are comprised of 100-car unit trains. An independent
commercial laboratory is also on-site, and its coal quality
analyses are accepted by most customers as verification of
compliance with contract specifications.
Within the mine area, Kerr-McGee controls nearly 33,000 acres
through leases and mineral ownership. This also includes control
of the Herrin No. 6 seam which, until July 1994, was also mined at
Galatia. Its higher sulfur content and resultant decrease in
demand by the utilities, because of the emission requirements of
the Clean Air Act Amendments of 1990, led to the cessation of
mining in the No. 6 seam and transfer of the mining equipment to
the lower-sulfur/higher-value Harrisburg No. 5 seam.
In anticipation of an increase in market demand for lower-
sulfur coal, an expansion was begun in 1992 to extend production in
the No. 5 seam to the north, on the other side of an ancient river
channel bounding the then-current mining area. Completed in 1994,
the project provided underground access to lower-sulfur coal
reserves and included ventilation and access shafts, tunnels
through the mile-wide river channel that displaced the coal, and
complete surface electrical, communication, borehole, and access
facilities.
Longwall mining is utilized at Galatia. It was first
installed in the No. 6 seam in 1989, and its high recovery, high
productivity, and low operating cost represented a significant
improvement over the continuous miner room-and-pillar method of
mining previously used. A second longwall was installed in 1992 in
the No. 5 seam. With the cessation of mining in the No. 6 seam in
July 1994, its longwall was moved to the No. 5 seam, where both
longwalls operate today. The production capabilities of the
longwalls, combined with a coal processing plant expansion also
completed in 1994, have expanded the mine's capacity to 6 million
tons of high-BTU, relatively low-sulfur coal per year.
Pioneer Fuel Corporation
Pioneer Fuel Corporation operates both surface and underground
mines near Oceana, West Virginia, in Wyoming County. Within the
mine area, the company controls 7,709 acres through leases with
private parties. Shipments since acquisition in late 1990 totaled
approximately 2.6 million tons at year-end 1994 and were made via
the Norfolk and Southern Railroad. The mines currently operate in
the No. 2 Gas, Hernshaw, and Winifrede seams. Coal from the No. 2
Gas and Hernshaw seams is suitable as mid- to high-volatile,
low-sulfur coking coal. Coal from the Winifrede seam is sold
primarily as a low-sulfur, high quality steam coal. Current
facility capacity is approximately 1 million tons of clean coal per
year.
Marketing
Coal is sold primarily under long-term contracts, although
spot sales were made in 1994 to domestic and foreign customers.
During 1994, the company had export sales of semi-soft coking coal
to Japan. Domestic deliveries of steam coal will continue,
primarily under long-term contracts with electric utilities in
Arkansas, Florida, Indiana, Louisiana, Missouri, Oklahoma, and
Texas. While coal sales include sales of coal purchased from third
parties, the company is not dependent on this purchased coal to
meet its contract obligations. A total of 220 million tons of coal
is committed to delivery under contracts expiring between 1996 and
2014.
Coal markets continue to experience competitive pricing.
Kerr-McGee's existing long-term contracts have provided profitable
sales even under these competitive conditions.
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.
OTHER
Research and Development
The company performs research and development in support of
its existing businesses and in the pursuit of new products and
processes. These programs continue to concentrate on improvements
to chemical plant processes and exploratory research. The
company's Technical Center is located in Oklahoma City. Research
and development expenditures totaled $10 million in 1994, $14
million in 1993, and $16 million in 1992.
Employees
The company had 5,524 employees on December 31, 1994.
Approximately 400, or 7%, of these employees were represented by
four collective bargaining agreements through the refining and
marketing operations. One of these agreements representing
approximately 140 employees expired during 1994; negotiations
continue.
The status of labor relations within the company continues to
be stable. No strikes or work stoppages have occurred within the
past seven 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 developing successful 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.
The company is one of eight chloride-process producers of
titanium dioxide pigment in the world. The chloride process
results in significantly less waste than the more costly sulfate
process. Pigment customers worldwide have increasingly preferred
the chloride product due to environmental restrictions. We expect
demand for pigment to grow at about 3% per year through the end of
the century. Manganese dioxide and sodium chlorate are in a
reasonable supply/demand position. Excess capacity currently
exists for ammonium perchlorate and manganese metal worldwide.
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.
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 1994, direct capital and operating
expenditures related to environmental protection and cleanup of
existing sites totaled $45 million. Additional expenditures
totaling $60 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 $140 million in 1995 and $130 million in 1996. 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 produce no 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, and pending proceedings, it is not
possible to reliably estimate the amount or timing of all future
expenditures relating to environmental matters. The company
provides for costs related to environmental contingencies when a
loss is probable and the amount is reasonably estimable. Although
management believes adequate reserves have been provided for all
known environmental 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 environmental 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
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
Environmental Matters section of Management's Discussion and
Analysis and Note 10 to the Consolidated Financial Statements
beginning on pages 24 and 34, respectively, of the 1994 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 1994.
Executive Officers of the Registrant
The following is a list of executive officers, their ages, and
their positions and offices as of January 1, 1995:
Name Age Office
Frank A. McPherson 61 Chairman of the Board and Chief
Executive Officer since May 1983.
Luke R. Corbett 47 Group Vice President since May 1992.
President of Kerr-McGee China Petroleum
Ltd. since July 1994. 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. 51 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 59 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 55 Senior Vice President and Chief
Financial Officer since October 1987.
Tom J. McDaniel 56 Senior Vice President since June 1986
and Secretary since March 1989.
L. V. McGuire 52 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 from February 1992 to January
1993. 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 47 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 47 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. 55 Vice President and General Counsel since
June 1986.
J. Michael Rauh 45 Vice President and Controller since
October 1987.
Donald F. Schiesz 57 Vice President, Safety and Environment
since August 1994. Senior Vice
President of Kerr-McGee Chemical
Corporation from March 1991 to August
1994. Vice President and General
Manager of the Pigment Division for
Kerr-McGee Chemical Corporation from
March 1984 to March 1991.
Thomas B. Stephens 50 Vice President and Treasurer since
January 1985.
Jean B. Wallace 40 Vice President, Human Resources since
November 1989.
Dale E. Warfield 51 Vice President, General Administration
since August 1994. Vice President,
Materials Management and Transportation
from April 1991 until August 1994.
Director of Purchasing and Materials
Management from March 1990 until April
1991. Director of Purchasing from July
1985 until March 1990.
Ray A. Freels 66 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 29 to the
Consolidated Financial Statements on page 50 of the 1994 Annual
Report to Stockholders, which note is incorporated by reference in
Item 8.
Quarterly dividends declared totaled $1.52 per share for each
of the years 1994, 1993, and 1992. Cash dividends have been paid
continuously since 1941 and totaled $78 million in 1994 and $73
million in each of the years 1993 and 1992.
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 51 of the 1994 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 22 through 26
of the 1994 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 1994 Annual Report to Stockholders are incorporated
herein by reference:
Annual
Report
Item Page No.
Report of Independent Public Accountants 26
Consolidated Statement of Income 27
Consolidated Statement of Retained Earnings 27
Consolidated Balance Sheet 28
Consolidated Statement of Cash Flows 29
Notes to Financial Statements 30-50
Item 9. Change in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
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 1995 made in connection with its Annual
Stockholders' Meeting to be held on May 9, 1995.
(b) Identification of executive officers -
The information required under this section is set forth in
the caption "Executive Officers of the Registrant" on pages
25 through 27 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 1995 made in connection with its Annual
Stockholders' Meeting to be held on May 9, 1995.
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 1995 made in connection with
its Annual Stockholders' Meeting to be held on May 9, 1995.
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 1995 made in connection with its Annual
Stockholders' Meeting to be held on May 9, 1995.
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 1995 made in connection with its Annual
Stockholders' Meeting to be held on May 9, 1995.
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 1994 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, 1994, 1993, and 1992
Consolidated Statement of Retained Earnings for
the Years Ended December 31, 1994, 1993, and 1992
Consolidated Balance Sheet at December 31, 1994
and 1993
Consolidated Statement of Cash Flows for the Years
Ended December 31, 1994, 1993, and 1992
Notes to Financial Statements
(a) 2. Financial Statement Schedules - Page
Report of Independent Public Accountants on
Financial Statement Schedule 35
Schedule II - Valuation Accounts and Reserves for
the Years Ended December 31, 1994, 1993, and 1992 36
Schedules I, III, IV, and V 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.
(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 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 a wholly owned subsidiary; the
$325 million Credit Agreement dated as of
August 25, 1994, providing for a five-
year revolving credit facility with a
bullet maturity on the fifth anniversary
of the execution of the Credit Agreement;
the Revolving Credit Agreement dated as
of October 16, 1992, and the first
amendment to the Credit Agreement dated
as of December 21, 1994, among Kerr-McGee
Corporation, Kerr-McGee Oil (U.K.) PLC,
and several banks providing for revolving
credit of up to $230 million through
December 31, 1999; and the Revolving
Credit Agreement dated as of February 24,
1995 between Kerr-McGee China Petroleum
Ltd., as borrower, and Kerr-McGee
Corporation, as guarantor, and several
banks providing for revolving credit of
up to $105 million through February 24,
1998. 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.
4.3 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 as amended and restated
February 1, 1994, filed as Exhibit 10(7)
to the report on Form 10-Q for the
quarter ended March 31, 1994, and
incorporated herein by reference.
10.8* Kerr-McGee Corporation Supplemental
Executive Retirement Plan as amended and
restated effective May 3, 1994.
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.
10.13* Amended and restated Agreement, restated
as of December 31, 1992, between the
company and Tom J. McDaniel.
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 1994 Annual Report to Stockholders.
21 Subsidiaries of the Registrant.
23 Consent of Arthur Andersen LLP.
24 Powers of attorney.
*These exhibits relate to the compensation plans and arrangements
of the company.
(b) Reports on Form 8-K -
No reports on Form 8-K were filed by the Registrant during the
quarter ended December 31, 1994.
<PAGE>
Report of Independent Public Accountants On Financial
Statement Schedule
To Kerr-McGee Corporation:
We have audited in accordance with generally accepted auditing
standards, the consolidated financial statements included in Kerr-
McGee Corporation's 1994 Annual Report to Stockholders incorporated
by reference in this Form 10-K, and have issued our report thereon
dated February 17, 1995. 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
Schedule of Valuation Accounts and Reserves is the responsibility
of the company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and
is not part of the basic consolidated financial statements. This
schedule has been subjected to the auditing procedures applied in
the audit of the basic consolidated financial statements and, in
our opinion, fairly states 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 LLP)
ARTHUR ANDERSEN LLP
Oklahoma City, Oklahoma,
February 17, 1995
<PAGE>
<TABLE>
SCHEDULE II
KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES
VALUATION ACCOUNTS AND RESERVES
<CAPTION>
Additions
Balance at Charged to Charged to Deductions Balance 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, 1994
a. Deducted from asset accounts
Allowance for doubtful notes
and accounts receivable $ 5 $ 9 $ - $ 3 $ 11
Warehouse inventory obsolescence 1 1 - - 2
$ 6 $ 10 $ - $ 3 $ 13
b. Not deducted from asset accounts
Environmental $255 $ 21 $(50)(A) $ 60 $166
Postretirement benefits 103 11 - 6 108
Oil and gas site dismantlement
and coal site reclamation and
restoration 81 13 3(B) 3 94
Surface mine stripping cost 14 30 - 32 12
Pension benefits - 4 6(C) 1 9
Other 7 2 - 1 8
$460 $ 81 $(41) $103 $397
Year Ended December 31, 1993
a. Deducted from asset accounts
Allowance for doubtful notes
and accounts receivable $ 3 $ 2 $ - $ - $ 5
Warehouse inventory obsolescence 1 1 - 1 1
$ 4 $ 3 $ - $ 1 $ 6
b. Not deducted from asset accounts
Environmental $281 $ 3 $ (1)(A) $ 28 $255
Postretirement benefits 99 11 - 7 103
Oil and gas site dismantlement
and coal site reclamation and
restoration 71 12 2(B) 4 81
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
Warehouse inventory obsolescence 2 1 - 2 1
$ 6 $ 3 $ - $ 5 $ 4
b.Not deducted from asset accounts
Environmental $102 $205(D) $ (1)(A) $ 25 $281
Postretirement benefits - 112(E) (6)(A) 7 99
Oil and gas site dismantlement
and coal site reclamation and
restoration 63 12 - 4 71
Surface mine stripping cost 19 23 - 27 15
Petroleum product pricing 2 - - - 2
Other 9 - - 1 8
$195 $352 $ (7) $ 64 $476
(A) Transfer (to) from current liabilities.
(B) Obligation assumed in connection with property acquisition.
(C) Additional minimum liability offset by an intangible asset in deferred
charges.
(D) Provision for reclamation and remediation of inactive sites.
(E) Includes $101 million recognized for the accumulated postretirement
benefit obligation at January 1, 1992, in connection with the
adoption of Statement of Financial Accounting
</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
By: Frank A. McPherson*
Frank A. McPherson,
Chairman of the Board and
Chief Executive Officer
March 29, 1995 By: (John C. Linehan)
Date John C. Linehan,
Senior Vice President and
Chief Financial Officer
By: (J. Michael Rauh)
J. Michael Rauh,
Vice President and Controller
and Chief Accounting Officer
* By his signature set forth below, John C. Linehan has signed
this Annual Report on Form 10-K as attorney-in-fact for the
officer noted above, pursuant to power of attorney filed with
the Securities and Exchange Commission.
By: (John C. Linehan)
John C. Linehan
<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: Martin C. Jischke*
Martin C. Jischke, Director
By: Robert S. Kerr, Jr.*
Robert S. Kerr, Jr., Director
March 29, 1995 By: Frank A. McPherson*
Date 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>
KERR-McGEE CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(Amended and Restated Effective May 3, 1994)
ARTICLE 1
ESTABLISHMENT AND PURPOSE
1.1 Establishment and Purpose. The following are the
provisions of the Kerr-McGee Corporation Supplemental Executive
Retirement Plan which was established by Kerr-McGee Corporation
effective as of January 1, 1991, and is amended and restated
hereby, effective as of May 3, 1994, in order to provide for the
payment of supplemental retirement benefits to certain eligible key
senior executives. Benefits under this Plan are stated as life
annuities calculated under a benefit formula. Nevertheless, this
Plan pays all but Disability benefits only in lump sums.
1.2 Pre May 3, 1994 Participants. Participants in the
Superseded Plan as of May 2, 1994 will receive supplemental
retirement benefits under the Superseded Plan or this Plan,
whichever provides the greater benefits.
ARTICLE II
DEFINITIONS
Whenever used in this Plan, the following words and
phrases shall have the meanings set forth below unless a different
meaning is plainly required by the context. The masculine gender,
where appearing in this Plan, shall be deemed to include the
feminine gender, the singular may include the plural, and vice
versa, unless the context clearly indicates to the contrary.
2.1 "Actuarial Equivalence" means the actuarial
assumptions and methods that are used to determine actuarially
equivalent values under the Plan and shall be the same as those
that are used at that time to determine corresponding values under
the provisions of the Retirement Plan.
2.2 "Affiliate" means:
(a) any corporation other than Kerr-McGee
Corporation which together with Kerr-McGee Corporation is a
member of a "controlled group of corporations" within the
meaning of Section 414(b) of the Internal Revenue Code;
(b) any organization that is under "common control"
with Kerr-McGee Corporation as determined under Section 414(c)
of the Internal Revenue code;
(c) any organization which together with Kerr-McGee
Corporation is a member of an "affiliated service group"
within the meaning of Section 414(m) of the Internal Revenue
Code; or
(d) any foreign affiliate of Kerr-McGee Corporation
which is covered by an agreement under Section 3121(1) of the
Internal Revenue Code.
2.3 "Anticipated Monthly Primary Insurance Amount" means
the amount computed under Section 2.3.1 or 2.3.2, below. The
Committee shall determine a Participant's average monthly wage to
compute his Anticipated Monthly Primary Insurance Amount based on
the Participant's actual compensation for all years prior to his
retirement or termination of employment as reflected in the
Employer's records for such years. The Anticipated Monthly Primary
Insurance Amount computed by the Committee shall be binding for the
purpose of determining benefits payable under the Plan. Increases
in benefits under the Social Security Act or Railroad Retirement
Act due to automatic cost-of-living adjustments, benefit levels,
wage or benefit bases after the Participant's retirement or
termination of employment shall not be considered. A Participant's
Anticipated Monthly Primary Insurance Amount will not be altered by
his failure to apply for such Social Security benefit or Railroad
Retirement benefit on his Normal Retirement Date or his
ineligibility for such Social Security benefit or Railroad
Retirement benefit for any reason.
2.3.1 Retirement or Termination on or After Normal
Retirement Date. If a Participant retires or terminates
employment on or after his Normal Retirement Date, his
Anticipated Monthly Primary Insurance Amount shall equal (a)
the monthly old-age insurance benefit payable upon his actual
retirement date under the provisions of the Social Security
Act in effect on his Normal Retirement Date; and/or (b) the
amount of the monthly retirement annuity benefit, excluding
supplemental annuities, which is payable to the Participant
(and not his spouse or other dependents) on his actual
retirement date under the provisions of the Railroad
Retirement Act as in effect on his Normal Retirement Date.
2.3.2 Retirement or Termination Before Normal
Retirement Date. If a Participant retires or terminates
employment before his Normal Retirement Date, his Anticipated
Monthly Primary Insurance Amount shall equal (a) the monthly
old-age insurance benefit payable upon his Normal Retirement
Date under the provisions of the Social Security Act in effect
on the date of his retirement or termination of employment and
computed as if he continued employment with the Employer until
his Normal Retirement Date at the same regular rate of
compensation as in effect on the date of his retirement or
termination of employment; and/or (b) the amount of the
monthly retirement annuity benefit, excluding supplemental
annuities, which would be payable to the Participant (and not
his spouse or other dependents) on his Normal Retirement Date
under the provisions of the Railroad Retirement Act, as in
effect on the date of his retirement or termination of
employment, computed as if said Participant had continued
employment with the Employer until his Normal Retirement Date
and as if his last regular rate of compensation prior to the
date of his retirement or termination of employment were the
rate of compensation he would receive until his Normal
Retirement Date.
2.4 "Beneficiary" means the trust, person or persons on
whose behalf benefits may be payable under the Plan after a
Participant's death. Unless a specific designation to the contrary
has been made by the Participant and filed with the Committee, a
Participant's Beneficiary under this Plan shall be the same person
that is his beneficiary to receive corresponding benefits under the
Retirement Plan.
2.5 "Cause" means willful and gross misconduct on the
part of the Participant that has a materially adverse effect on the
Company and its Subsidiaries, as defined in Section 2.6, taken as
a whole, or the conviction of the Participant 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, as defined in
Section 2.6, of the Company.
2.6 "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 Kerr-McGee
Corporation 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 Kerr-McGee Corporation as in effect on
January 1, 1991);
(b) any Person or Group, together with its
Affiliates, becomes the Beneficial Owner, directly or
indirectly, of 25% or more of Kerr-McGee Corporation's then
outstanding Common Stock or 25% or more of the voting power of
Kerr-McGee Corporation's then outstanding securities entitled
to vote generally for the election of Kerr-McGee Corporation's
directors;
(c) Kerr-McGee Corporation's stockholders approve
(i) the merger or consolidation of Kerr-McGee Corporation with
any other corporation (other than a merger or consolidation of
Kerr-McGee Corporation and a wholly-owned Subsidiary in which
the holders of Kerr-McGee Corporation 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 Kerr-McGee Corporation or
(iii) the liquidation or dissolution of Kerr-McGee
Corporation; or
(d) a majority of the members of the Board of
Directors in office immediately prior to the proposed
transaction determine, by written resolution, that such
proposed transaction, if taken, will be deemed a Change of
Control and such proposed transaction is effected.
For the purposes of this definition, "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 ("SEC Rules"); "Beneficial Owner" has the meaning set
forth in Rules 13d-3 and 13d-5 of the SEC Rules; "Person" means any
individual, firm, corporation or other entity; "Group" has the
meaning set forth in Rule 13d-5 of the SEC Rules; and "Subsidiary"
with respect to the Company has the meaning set forth in Rule 12b-2
of the SEC Rules.
2.7 "Committee" means the Executive Compensation
Committee of the Board of Directors of Kerr-McGee Corporation,
which shall administer the Plan in accordance with Article VIII.
2.8 "Company" means Kerr-McGee Corporation and its
Affiliates, or any successor thereto.
2.9 "Credited Service" means, except as modified in
other provisions of the Plan, the total period of a Participant's
service with the Company as an employee, computed in completed
months, until his date of actual retirement or termination of
employment or, where applicable, until such other date as is
specified hereunder; provided:
(a) any complete calendar month that the
Participant is absent from the service of the Company shall be
excluded from his Credited Service unless he receives regular
compensation from the Employer as an employee for all or any
portion of such month; provided, however, that any absence due
to the employee's engagement in military service will, except
as provided below, be included in his Credited Service if such
absence is covered by a leave of absence granted by the
Company or is by reason of compulsory military service and
provided that such Participant is entitled under applicable
Federal laws to reemployment by the Company upon his discharge
from active duty and he returns to the active service of the
Company within the period of time during which he has
reemployment rights under applicable Federal law or within 60
days from and after discharge or separation from such
engagement if no Federal law is applicable;
(b) Credited Service shall never be calculated in
a manner which would result in a duplication of credit for any
service of any Participant with the Company; and
(c) Except for the determination of eligibility
under Section 4.1(a) hereof, Credited Service shall not
include service as an employee after the Participant has
reached his Normal Retirement Date.
2.10 "Disability" means a mental or physical condition
which qualifies the Participant as being disabled for purposes of
any of the plans or programs of the Employer that employs the
Participant under which benefits, compensation, or awards are
contingent upon a finding of disability or, in the opinion of the
committee, causes the Participant to be unable to perform his usual
duties for the Employer.
Such a Participant shall be considered as suffering a
Disability for benefit entitlement purposes regardless of whether
the Participant's employment with the Employer has actually
terminated.
2.11 "Employer" means, collectively or separately as the
context may indicate, the Company.
2.12 "Final Average Monthly Pay" means the same amount as
is determined under the Retirement Plan except that any portion of
a bonus or salary that is deffered under a deferred compensation
plan maintained by the Company shall be included for purposes of
determining Final Average Monthly Pay. These amounts shall be
included in the calendar year for which the amount could have been
received by the Participant whether or not the Participant elects
to defer such compensation. Deferred compensation shall be
excluded in the calendar year actually paid. The foregoing
notwithstanding, Final Average Monthly Pay shall exclude all
compensation received or deferred after a Participant's Normal
Retirement Date.
2.13 "Good Reason" means:
(a) without the Participant's express written
consent
(i) the assignment to the Participant of any
duties or any limitation of the Participant's
responsibilities, inconsistent with the Participant's
positions, duties, responsibilities and status with the
Company that employs the Participant immediately prior to
the date of the Change of Control, or
(ii) any removal of the Participant from, or
any failure to re-elect the Participant to, any of the
Participant's positions with the Company or any
Subsidiary that employs the Participant immediately prior
to the Change of Control, except in connection with the
involuntary termination of the Participant's employment
hereunder for Cause or as a result of the Participant's
death or Disability or the termination of the
Participant's employment on or after the Participant's
Normal Retirement Date;
(b) any failure by the company to pay, or any
reduction by the Company of, the Participant's base annual
salary in effect immediately prior to the Change of Control;
(c) any failure by the Company to
(i) continue to provide the Participant with
the opportunity to participate, on terms no less
favorable than those in effect immediately prior to the
Change of Control, in any benefit plans and compensation
programs in which the Participant was participating
immediately prior to the Change of Control, or their
equivalent, including but not limited to participation in
pension, profit sharing, stock grants, stock option,
savings, employee stock ownership, incentive
compensation, group insurance plans, this Plan or similar
plans or programs, or
(ii) provide the Participant with all other
fringe benefits (or their equivalent), including paid
vacation, from time to time in effect for the benefit of
any executive, management or administrative group which
customarily includes a person holding the employment
position with the Company then held by the Participant;
(d) without the Participant's express written
consent, the relocation of the Company's headquarters or of
the principal place of the Participant's employment to a
location that is more than 35 miles further from the
Participant's principal residence than such principal place of
employment immediately prior to the Change of Control;
(e) any change in the sick leave policy for
salaried employees or employees generally of the Company which
has an adverse effect on the Participant's rights and benefits
pursuant to such policy;
(f) any reduction in the travel and accommodation
benefits provided to the Participant pursuant to a written
employment agreement or other written agreement;
(g) any reduction to the extent applicable in
benefits offered under an income protection insurance plan for
salaried employees or employees generally of the Company;
(h) any change in the pay policy for salaried
employees or employees generally of the Company which has an
adverse effect on the Participant's rights and benefits
pursuant to such policy;
(i) with respect to a Subsidiary that employs the
Participant, the sale by the Company of 25% or more of such
Subsidiary's common stock or 25% or more of the Subsidiary's
then outstanding securities entitled to vote generally for the
election of the Subsidiary's directors, or the sale by the
Company of all or substantially all of the assets of such
Subsidiary;
(j) the breach of any provision of any written
employment agreement or other written agreement the
Participant has with the Company, other than a breach by the
Participant; or
(k) the failure of any successor company to the
Company to expressly assume such a written employment
agreement or other written agreement. The term "Subsidiary"
shall have the meaning prescribed in Section 2.6.
2.14 "Monthly Offset Amount" determined as of any
specified date means the sum of:
(a) the monthly amount of retirement income or
other benefit which is payable to or on behalf of the
Participant on or after such specified date under any
qualified defined benefit pension plan maintained by the
Company;
(b) the monthly amount of retirement income or
other benefit which represents a "Restored Defined Benefit
Plan Benefit" within the meaning of the Kerr-McGee Corporation
Benefits Restoration Plan and is payable to or on behalf of
the Participant on or after such specified date under such
Restoration Plan; and
(c) the Anticipated Monthly Primary Insurance
Amount.
If the retirement income or other benefit described in
(a) through (c) is payable to the Participant in a form other than
a straight life annuity, such retirement income or other benefit
shall be converted to an Actuarially Equivalent amount that is
payable in the form of a straight life annuity.
If the retirement income or other benefit described in
(a)through (c) is due to commence at a date that is subsequent to
the specified date, such retirement income or other benefit shall
be converted to an Actuarially Equivalent amount that is payable in
the form of a straight life annuity beginning at such specified
date.
If the Participant has received all or a portion of the
retirement income or other benefit described in (a) through (c)
prior to such specified date, the amount that he has received prior
to such specified date shall be converted to an Actuarially
Equivalent amount that is payable in the form of a straight life
annuity beginning at such specified date and shall be added to the
amount, if any, of the retirement income described in (a) through
(c) that is payable to him on and after such specified date.
Any provisions above to the contrary notwithstanding, the
Monthly Offset Amount that is applied in determining the amount of
the monthly retirement income that is payable under Section 4.2(b)
hereof to a disabled Participant prior to his attainment of the age
of 62 years shall be equal to the sum of the amounts described in
(a) through (c) that the Committee anticipates that he will
actually receive during each such month. The Monthly Offset Amount
shall be redetermined as of the first day of the month coincident
with or next following the date on which such Participant attains
the age of 62.
2.15 "Normal Retirement Date" means the first day of the
month coincident with or next following the date on which a
Participant attains the age of 65 years.
2.16 "Participant" means any key senior executive of the
Employer who is participating in the Plan in accordance with the
provisions of Article III.
2.17 "Plan" means this Kerr-McGee Corporation
Supplemental Executive Retirement Plan, as set forth herein and as
it may be amended from time to time. The Plan's "plan year" is the
calendar year.
2.18 "Reason" means (a) action by a Participant involving
willful malfeasance, (b) failure to act by a Participant involving
material nonfeasance having a material adverse effect on the
Company or the Subsidiary (as defined in Section 2.6) that employs
the Participant, (c) the Participant being convicted of a felony
under United States federal, state, or local criminal law, or (d)
the material breach by the Participant of any written employment
agreement or other written agreement he has with the Company or
Subsidiary (as defined in Section 2.6) that employs the
Participant.
2.19 "Retirement Plan" means the Kerr-McGee Corporation
Retirement Plan, as amended from time to time, or any successor
plan.
2.20 "Superseded Plan" means the Kerr-McGee Corporation
Supplemental Executive Retirement Plan as in effect from January 1,
1991, through May 2, 1994, a copy of which is attached hereto as
Exhibit 2.20.
of the Participant's employment term, determined as of the date of
the Change of Control under a written employment agreement or other
written agreement, if any, under which he is serving the Employer;
or
(e) his service is terminated because of his death.
A Participant who retires or whose service is terminated
other than as specified in Subsections (a) through (e) shall not be
entitled to any benefit under the Plan.
ARTICLE III
PARTICIPATION
3.1 Participation. Participation in this Plan shall be
limited to those key senior executives of the Employer who are
recommended by management for participation in the Plan and are
designated as Participants in the Plan by the Committee.
No person shall have the right to be selected as a
Participant. Prior to a Change of Control, a person who is
selected to be a Participant may be deprived of that status by the
Committee at any time prior to his attainment of age 62, except
while suffering a Disability. If a Participant terminates
employment with the Employer for any reason at any age, the
individual shall not become a Participant again if he is
subsequently rehired unless he is then again selected to
participate in the Plan in accordance with this Section.
ARTICLE IV
BENEFITS
4.1 Eligibility for Benefits. A Participant shall, subject
to the other provisions of this Plan, be eligible for a benefit as
described in Section 4.2 if:
(a) he retires from the service of the Employer on
or after his attainment of the age of 62 years and completion
of five years of Credited Service;
(b) he retires from the service of the Employer
before his attainment of the age of 62 years and, in the sole
opinion of the Committee, it would be in the best interest of
both the Employer and the Participant for the Participant to
receive a benefit under the Plan;
(c) his active service with the Employer is
terminated prior to his attainment of the age of 62 years and
the reason for his termination is, in the opinion of the
Committee, because of his Disability;
(d) his service with the Employer is terminated by
the Employer for any reason, other than for Cause, or by the
Participant for Good Reason during the period starting with a
Change of Control and ending on the later of the second
anniversary thereof or the expiration of the remaining period
4.2 Amount of Benefits. The benefits provided
under the Plan on behalf of a Participant who is eligible for
a benefit under the provisions of Section 4.1 shall be
determined in accordance with the following provisions of this
Section 4.2. If in the Committee's sole opinion there are
circumstances which warrant the payment of a larger benefit to
a Participant than otherwise would be computed hereunder such
benefit may be increased. Such percentage may not, however,
be increased to exceed 65% of Final Average Monthly Pay. The
Committee, in its sole discretion, may also decrease the
Monthly Offset Amount and/or the actuarial reduction required
under this Section. Except in the case of Disability
benefits, the amounts described below are only payable as
Actuarially Equivalent lump sums, despite being described
below for benefit computation purposes as life annuities.
(a) Retirement: The benefit provided under the
Plan on behalf of an eligible Participant described in Section
4.1(a) or 4.1(b) who retires from the service of the Employer
shall be a monthly retirement income payable to him for life
commencing on the first day of the month coincident with or
next following the date of his retirement in an amount equal
to the excess, if any, of;
(i) an amount determined by multiplying the
years and fraction of years of the Participant's Credited
Service by 2.5% and multiplying such product by the
Participant's Final Average Monthly Pay, over
(ii) his Monthly Offset Amount determined as
of the date of his retirement or, in the case of a
Participant who retires after attaining age 65, any
earlier date the Committee in its sole discretion elects
to use.
or
(i) - (ii) = Benefit Received
(b) Termination Due to Disability: The benefit
provided under the Plan on behalf of an eligible Participant
described in Section 4.1(c) whose active service is terminated
prior to his attainment of the age of 62 years by reason of
Disability shall be determined as follows.
Monthly Income Provided: The amount of monthly
retirement income provided under this Section 4.2(b)
shall be equal to the excess, if any, of:
(i) an amount determined by multiplying
the years and fraction of years of the
Participant's anticipated Credited Service
determined as if the Participant had continued in
active service with the Company until retirement at
age 62 by 2.5% and multiplying such product by the
Participant's Final Average Monthly Pay; over
(ii) his Monthly Offset Amount determined
as of (1) the date of each payment with respect to
payments due prior to his attainment of the age of
62 years and (2) his attainment of the age of 62
years with respect to payments due after his
attainment or such age.
or
(i) - (ii) = Monthly Benefit
Such amount of monthly retirement income shall
commence on the first day of the month coincident with or next
following the date of termination of such Participant's active
service due to Disability and shall be payable to him for
life; provided, if, in the opinion of the Committee, the
Participant has recovered from his Disability prior to his
attainment of the age of 62 years, such monthly retirement
income shall cease with the payment due on the first day of
the month immediately preceding the date as of which the
Committee deems the Participant to have recovered from his
Disability. If the Participant resumes active duties for the
Company immediately after his Disability ceases, he shall
remain a Participant. If he does not immediately resume
active duties for the Employer, he shall cease to be a
Participant. The lump sum form of payment described in
Section 5.1 hereof shall not apply with respect to the
payments provided under this Section 4.2(b) prior to the date
as of which the Participant will attain the age of 62 years,
but a Disabled participant who attains the age of 62 years
without recovering from his Disability shall receive a lump
sum payment under Section 5.1 upon attaining age 62.
(c) Termination Due to Change of Control: The
benefit provided under the Plan on behalf of an eligible
Participant described in Section 4.1(d), shall be equal to a
monthly retirement income, payable to him for life commencing
on the first day of the month coincident with or next
following the date of termination of his service, in an amount
equal to the excess, if any, of:
(i) an amount determined by multiplying the
years and fraction of years of the Participant's Credited
Service by 2.5%, multiplying such product by the
Participant's Final Average Monthly Pay, and multiplying
such product by a factor of one (1) if the Participant
has attained the age of 62 as of the date of his
termination of service or a factor which will convert a
monthly retirement income payable for life commencing at
age 62 to an Actuarially Equivalent amount of monthly
retirement income payable for life commencing at the
Participant's attained age as of the date of his
termination of service; over
(ii) his Monthly Offset Amount determined as of
the date of termination of his service.
or
(i) - (ii) = Monthly Benefit
Notwithstanding anything to the contrary, following a Change
of Control, each Participant described in Section 4.1(d) shall
upon termination of employment following a Change of Control
have a nonforfeitable right to benefits under the Plan. For
purposes of computing such benefits under this Section 4.2(c)
(but not under Section 4.2(d), each such Participant shall be
credited with five additional years of Credited Service (but
Credited Service shall not exceed the anticipated Credited
Service at Normal Retirement Date) and five years shall be
added to the Participant's age (for determining actuarial
reduction for commencement prior to age 62).
(d) Termination Due to Death: The benefit provided
under the Plan on behalf of an eligible Participant who is
either described in Section 4.1(e) or a Disabled Participant
who dies prior to attaining age 62 shall be equal to the
monthly retirement income, payable to the Beneficiary for life
commencing on the first day of the month coincident with or
next following the Participant's death, which can be provided
on an Actuarially Equivalent basis by the actuarially computed
present value, determined as of the date of the Participant's
death, of the monthly retirement income computed under Section
4.2(c); provided, the Participant's date of death shall be
used in lieu of his date of termination of service. Final
Average Monthly Pay and Monthly Offset Amounts shall be
determined as of the date of the Participant's death.
Credited Service shall be the greater of the amount determined
at the Participant's death and the amount determined as if the
Participant had continued in active service with the Company
until retirement at age 62. In the case of the death of a
Disabled Participant, the benefit shall be computed as if he
had remained in the active service of the Employer until his
death and his Final Average Monthly Pay at the date of his
death was the same as his Final Average Monthly Pay at the
date of his termination of active service due to Disability.
The lump sum amount due under this Section shall be paid to
the Participant's Beneficiary promptly following the
Participant's death.
4.3 Benefit Limits. Notwithstanding anything to the
contrary the benefit provided under this Plan shall not be less
than 40%, nor more than 65% of Final Average Monthly Pay, but any
benefit provided prior to age 62 will be subject to actuarial
reduction, less the Participant's Monthly Offset Amount.
ARTICLE V
FORM OF PAYMENT
5.1 Lump-Sum Tax Equalization Payments. The life
annuity benefits described in Article IV are merely set forth in
the Plan to establish lifetime income replacement targets for
Participants. Except as to benefits payable on account of
Disability under Section 4.2(b) prior to age 62, cash benefits
payable under this Plan shall be paid as an immediate tax-equalized
lump sum, to be paid as soon as practicable, as determined by the
Committee, following the occurrence of the event which makes the
benefit payable. The amount of the lump sum shall be calculated as
follows: the amount shall equal the amount that would be required
to pay the single premium (plus the federal and state income taxes
that would be due on such single premium if it were paid to the
recipient in a lump sum) for a single-life annuity, commencing on
the first day of the calendar month following the Participant's
termination of service (or attainment of age 62 in the case of
Disability) which caused the benefits to be payable (the "Annuity
Commencement Date") in an amount equal to the monthly annuity
described in the following sentence. The amount of monthly annuity
to be used in determining the single premium described above shall
be equal to that amount that would enable the recipient to have the
same amount of monthly income remaining, after the payment of
federal and state income taxes on such monthly income (and taking
into account the exclusion ratio within the meaning of Section
72(b) of the Internal Revenue Code that would apply if such income
were being paid under an annuity purchased by the recipient from an
insurance company), as he would have remaining, after the payment
of federal and state income taxes on monthly income payments, if
the monthly lifetime income to which he is entitled under the Plan
were payable directly from the Employer commencing on the Annuity
Commencement Date. The federal and state income taxes that would
be due on such single premium and monthly incomes described above
shall be based on the maximum tax rates that are in effect during
the calendar year during which the Annuity Commencement Date occurs
or upon such other tax rates which, in the opinion of the Committee
based on the circumstances of the recipient, are appropriate with
respect to the recipient for such calendar year. The single
premium determined under this Section that is required to purchase
the monthly annuity described above shall be equal to the lump-sum
amount that would be required to purchase such monthly annuity at
the Annuity Commencement Date from an insurance or annuity company
selected by the Committee that has a rate of AA+ or better by a
recognized rating agency selected by the Committee.
ARTICLE VI
LIMITATIONS ON BENEFITS
6.1 Limitations Due to IRC Section 280G. Any provisions
of Articles IV and V above to the contrary notwithstanding, the
benefits under the Plan shall be reduced, but only to the extent
necessary, so that no portion thereof shall constitute an "excess
parachute payment," within the meaning of Section 280G of the
Internal Revenue Code of 1986, that is subject to the excise tax
imposed by Section 4999 of said Code; provided, however, that such
a reduction will apply only if, by reason of such reduction, the
amount of the Participant's Net After Tax Benefit exceeds the
amount of the Net After Tax Benefit that would apply if such
reduction were not made. For the purpose of this Section, the
Participant's Net After Tax Benefit shall be equal to the sum of
(i) the total amounts payable to the Participant under this Plan,
plus (ii) all other payments and benefits which the Participant
receives or is then entitled to receive from the Company or any
Subsidiary (within the meaning set forth in rule 12b-2 of the
General Rules and Regulations promulgated under the Securities
Exchange Act of 1934, as amended) of the Company that would
constitute a "parachute payment" within the meaning of Section 280G
of the Internal Revenue Code, less (iii) the amount of federal
income taxes payable with respect to the foregoing calculated at
the maximum marginal income tax rate for each year in which the
foregoing shall be paid to the Participant (based upon the rate in
effect for such year, as set forth in the Internal Revenue Code at
the time of termination of his employment), less (iv) the amount of
excise taxes imposed with respect to the payments and benefits
described in (i) and (ii) above by Section 4999 of the Internal
Revenue Code. The calculations under this Section shall be made,
at the Company's expense, by the Committee and the Participant. If
no agreement on the calculations is reached within five days of the
date of termination of the Participant's service, then the
Participant and the Committee will agree to the selection of an
accounting firm to make the calculations. If no agreement can be
reached regarding the selection of an accounting firm, the
Committee shall select a major national accounting firm which has
offices in at least 15 principal cities in the United States and
which has no current or recent business relationship with the
Company or with the Participant. The determination of any such
firm selected by the Committee will be conclusive and binding on
all parties.
6.2 Termination for Cause or Reason. If a Participant's
service with the Employer is terminated for Cause or, prior to a
Change of Control, for Reason, the Committee may terminate such
Participant's interest and benefits under this Plan,
notwithstanding anything in Section 9.1 to the contrary.
ARTICLE VII
PROVISIONS FOR BENEFITS
7.1 Provisions for Benefits. Benefits provided by this
Plan shall constitute general obligations of the Employer in
accordance with the terms hereof. No amounts in respect of such
benefits shall be set aside or held in trust and no recipient of
any benefit shall have any right to have the benefit paid out of
any particular assets of the Employer; provided, however, that
nothing herein shall be construed to prevent a transfer of funds to
a grantor trust for the purpose of paying benefits or any part
thereof as directed by the Committee under this Plan.
ARTICLE VIII
ADMINISTRATION
8.1 Administration by Committee. The Executive
Compensation Committee shall, unless otherwise determined by the
Board of Directors of Kerr-McGee Corporation, administer this Plan.
The Committee shall be the "plan administrator" with respect to the
Plan. The Company shall be the "named fiduciary" of the Plan.
8.2 Rules of Conduct. Except as provided at Section
8.4, the Committee shall adopt such rules for the conduct of its
business and the administration of this Plan as it considers
desirable, provided they do not conflict with the provisions of
this Plan.
8.3 Legal, Accounting, Clerical and Other Services. The
Committee may authorize one or more if its members or any agent to
act on its behalf and may contract for legal, accounting, clerical
and other services to carry out this Plan. All expenses of the
Committee shall be paid by the Employer.
8.4 Interpretation of Provisions. Prior to a Change of
Control the Committee shall have the authority to make rules to
administer and interpret the Plan in any fashion it, in its
discretion, determines to be appropriate, and the decisions and
interpretations of the Committee shall be final and binding on the
Employer, Participants and all other persons.
8.5 Records of Administration. The committee shall keep
records reflecting the administration of this Plan which shall be
subject to audit by the Employer.
8.6 Expenses. The expenses of administering the Plan
shall be borne by the Employer.
8.7 Indemnification and Exculpation. The officers and
directors of the Employer, members of the Committee, and any
employees of the Employer who administer the Plan (including in-
house counsel who interprets the Plan) shall be indemnified and
held harmless by the Employer against and from any and all loss,
cost, liability, or expense that may be imposed upon or reasonably
incurred by them in connection with or resulting from any claim,
action, suit, or proceeding to which they may be a party or in
which they may be involved by reason of any action taken or failure
to act under this Plan and against and from any and all amounts
paid by them in settlement with the Employer's written approval or
paid by them in satisfaction of a judgment in any such action,
suit, or proceeding. The foregoing provision shall not be
applicable to any person if the loss, cost, liability, or expense
is due to such person's fraud or willful misconduct.
8.8 Claims Review Procedures. The following claim
procedures shall apply until such time as a Change of Control has
occurred. Thereafter, these procedures shall apply only to the
extent the claimant requests their applications:
(a) Denial of Claim. If a claim for benefits is
wholly or partially denied, the claimant shall be given notice
in writing of the denial within a reasonable time after the
receipt of the claim, but not later than 90 days after the
receipt of the claim. However, if special circumstances
require an extension, written notice of the extension shall be
furnished to the claimant before the termination of the 90-day
period. In no event shall the extension exceed a period of 90
days after the expiration of the initial 90-day period. The
notice of the denial shall contain the following information
written in a manner that may be understood by a claimant:
(i) the specific reasons for the denial;
(ii) specific reference to pertinent Plan
provisions on which the denial is based;
(iii) a description of any additional material
or information necessary for the claimant to perfect his
claim and an explanation of why such material or
information is necessary;
(iv) an explanation that a full and fair review
by the Committee of the denial may be requested by the
claimant or his authorized representative by filing a
written request for a review with the Committee within 60
days after the notice of the denial is received; and
(v) if a request for review is filed, the
claimant or his authorized representative may review
pertinent documents and submit issues and comments in
writing within the 60-day period described in Section
8.8(a)(iv).
(b) Decisions After Review. The decision of the
Committee with respect to the review of the denial shall be
made promptly, but not later than 60 days after the Committee
receives the request for the review. However, if special
circumstances require an extension of time, a decision shall
be rendered not later than 120 days after the receipt of the
request for review. A written notice of the extension shall
be furnished to the claimant prior to the expiration of the
initial 60-day period. The claimant shall be given a copy of
the decision, which shall state, in a manner calculated to be
understood by the claimant, the specific reasons for the
decision and specific references to the pertinent Plan
provisions on which the decision is based.
(c) Other Procedures. Notwithstanding the
foregoing, the Committee may, in its discretion, adopt
different procedures for different claims without being bound
by past actions. Any procedures adopted, however, shall be
designed to afford a claimant a full and fair review of his
claim and shall comply with applicable regulations under
ERISA.
8.9 Finality of Determinations; Exhaustion of Remedies.
To the extent permitted by law, decisions reached under the claims
procedures set forth in Section 8.8 shall be final and binding on
all parties. No legal action for benefits under the Plan shall be
brought unless and until the claimant has exhausted his remedies
under this Section. In any such legal action, the claimant may
only present evidence and theories which the claimant presented
during the claims procedure. Any claims which the claimant does
not in good faith pursue though the review stage of the procedure
shall be treated as having been irrevocably waived. Judicial
review of a claimant's denied claim shall be limited to a
determination of whether the denial was an abuse of discretion
based on the evidence and theories the claimant presented during
the claims procedure. This Section shall have no application
following a Change of Control as to a claim which is first asserted
or first denied after the Change of Control and, as to such a
claim, the de novo standard of judicial review shall apply.
8.10 Effect of Fiduciary Action. The Plan shall be
interpreted by the Committee and all Plan fiduciaries in accordance
with the terms of the Plan and their intended meanings. However,
the Committee and all Plan fiduciaries shall have the discretion to
make any findings of fact needed in the administration of the Plan,
and shall have the discretion to interpret or construe ambiguous,
unclear or implied (but omitted) terms in any fashion they deem to
be appropriate in their sole judgment. The validity of any such
finding of fact, interpretation, construction or decision shall not
be given de novo review if challenged in court, by arbitration or
in any other forum, and shall be upheld unless clearly arbitrary or
capricious. To the extent the Committee or any Plan fiduciary has
been granted discretionary authority under the Plan, the
Committee's or Plan fiduciary's prior exercise of such authority
shall not obligate it to exercise its authority in a like fashion
thereafter. If, due to errors in drafting, any Plan provision does
not accurately reflect its intended meaning, as demonstrated by
consistent interpretations or other evidence of intent, or as
determined by the Committee in its sole and exclusive judgment, the
provision shall be considered ambiguous and shall be interpreted by
the Committee and all Plan fiduciaries in a fashion consistent
with its intent, as determined by the Committee in its sole
discretion. The Committee, without the need for Board of
Directors' approval, shall amend the Plan retroactively to cure any
such ambiguity. This Section may not be invoked by any person to
require the Plan to be interpreted in a manner which is
inconsistent with its interpretation by the Committee or by any
Plan fiduciaries. All actions taken and all determinations made in
good faith by the Committee or by Plan fiduciaries shall be final
and binding upon all persons claiming any interest in or under the
Plan. This Section shall not apply to fiduciary or Committee
actions or interpretations which take place or are made following
a Change of Control.
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.1 Plan Amendment, Suspension and/or Termination. The
Board of Directors of Kerr-McGee Corporation may, by resolution, in
its absolute discretion, from time to time, amend, suspend or
terminate in whole or in part, and if terminated, reinstate any or
all of the provisions of this Plan, except that no amendment,
suspension or termination may apply so as to decrease the amount
then payable (1) to a Participant who already has at least attained
his sixty-second birthday, (2) the Disability benefits payable to
a Participant who, at the time the amendment, etc., is adopted, is
receiving Disability benefits, or (3) the Beneficiary or
Beneficiaries of a deceased Participant who died before the
amendment, etc., is adopted. Any such amendment, suspension or
terminations shall become effective on such date as shall be
specified in such resolution and, except as expressly limited in
this Section 9.1, shall include provisions and shall have such
effect as the Board of Directors of the Company, in its absolute
discretion, deems desirable. Notwithstanding the foregoing, on or
after a Change of Control, any amendment, suspension or
termination of the Plan shall not apply to any Participant or
Beneficiary in any way in which the Participant or Beneficiary
reasonably considers to be personally detrimental if the
Participant objects to such application in writing within thirty
days after notice of the amendment, etc., unless the Participant or
Beneficiary theretofore had consented, or thereafter consents, to
the amendment, etc., in writing.
9.2 Plan Not an Employment Contract. The Plan is
strictly a voluntary undertaking on the part of the Company and
shall not constitute a contract between the Company and any
Employee, or consideration for, or an inducement or condition of,
the employment of an Employee. Except as otherwise required by
statute, nothing contained in the Plan shall give any Employee the
right to be retained in the service of the Company or its
Affiliates or to interfere with or restrict the right of the
Company or its Affiliates, which is hereby expressly reserved, to
discharge or retire any Employee at any time for any reason not
prohibited by statute, without the Company or its Affiliates being
required to show cause for the termination. Except as otherwise
required by statute, inclusion under the Plan will not give any
Employee any right or claim to any benefit hereunder except to the
extent such right has specifically become fixed under the terms of
the Plan. The doctrine of substantial performance shall have no
application to Employees, Participants or Beneficiaries. Each
condition and provision, including numerical items, has been
carefully considered and constitutes the minimum limit on
performance which will give rise to the applicable right.
9.3 Non-alienation of Benefits. Except as provided in
this Section and to the extent permitted by law, benefits payable
under this Plan shall not, without Committee consent, be subject in
any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, charge, garnishment, execution, or levy of any
kind, either voluntary or involuntary. Any unauthorized attempt to
anticipate, alienate, sell, transfer, assign, pledge, encumber,
charge or otherwise dispose of any right to benefits payable
hereunder shall be void. No part of the assets of the Employer
shall be subject to seizure by legal process resulting from any
attempt by creditors of or claimants against any Participant (or
Beneficiary), or any person claiming under or through the
foregoing, to attach his interest under this Plan. The anti-
alienation restrictions of this Section shall not apply to
"qualified domestic relations order" described in Section 206(d) of
the Employee Retirement Income Security Act of 1974. The Committee
shall establish procedures to determine whether domestic relations
orders are "qualified domestic relations orders" and to administer
distributions under such qualified domestic relations orders.
Nothing in this Section shall preclude the Employer from
withholding from amounts payable to a Participant or his
Beneficiary under this Plan amounts the Participant owes the
Employer. Following a Change of Control, the Employer shall not be
entitled to withhold amounts in the manner described in the
preceding sentence.
9.4 Accelerated Payment. In connection with termination
of the Plan or otherwise, the Committee may elect to accelerate the
time for payment of benefits to any Participant, in which case the
Employer shall pay the Participant the amount, if any, that would
then be payable to the Participant if he then terminated employment
with the Employer other than for Cause or Reason. If such a
Participant is receiving Disability benefits, the Participant may
be paid the Actuarial Equivalent of (a) the remaining disability
benefits he would have received prior to age 62 if those benefits
continued at the level then in effect and (b) the lump sum the
individual would have received at age 62 if he continued to receive
Disability benefits until that time.
9.5 Tax Consequences Not Guaranteed. The Employer does
not warrant that this Plan will have any particular tax
consequences for Participants or Beneficiaries and shall not be
liable to them if tax consequences they anticipate do not actually
occur. The Employer shall have no obligation to indemnify a
Participant or Beneficiary for lost tax benefits (or other damage
or loss) in the event benefits are cancelled as permitted under
Section 9.1, or are accelerated under Section 9.4 or because of
change in Plan design or funding; e.g., establishment of a "secular
trust".
9.6 Plan Spinoffs. If, prior to a Change of Control,
all or a portion of the Employer is sold, the buyer may, with the
Company's consent, assume sponsorship of the portion of the Plan
that covered a Participant who transfers to the buyer's employ.
The Employer shall thereafter have no obligations whatsoever under
this Plan with respect to the portion of the Plan assumed by the
buyer even if the buyer fails to satisfy its obligations under this
Plan. For example, if following such an assumption, the buyer is
unable to pay benefits when due, the Employer shall not be liable
for such amounts.
9.7 Special Payment Situations.
(a) Missing Participant or Beneficiary. Payment of
benefits to the person entitled thereto may be sent by first
class mail, address correction requested, to the last known
address on file with the Committee. If, within two months
from the date of issuance of the payment, the payment letter
cannot be delivered to the person entitled thereto or the
payment has not been negotiated, the payment shall be treated
as forfeited. However, if the person to whom the benefit
became payable subsequently appears and identifies himself to
the satisfaction of the Committee, the amount forfeited
(without earnings thereon) shall be distributed to the person
entitled thereto. The right of any person to restoration of
a benefit which was forfeited pursuant to this Section shall
cease upon termination of this Plan.
(b) Private Investigators, etc. If the Committee
retains a private investigator or other person or service to
assist in locating a missing person, all costs incurred for
such services shall be charged against the benefit to which
the missing person was believed to be entitled and the benefit
shall be reduced by the amount of the costs incurred, except
as the Committee may otherwise direct.
(c) Delayed Payment. Payments to Participants or
Beneficiaries may be postponed by the Committee until any
anticipated taxes, expenses or amounts to be paid under a
qualified domestic relations order have been paid in full or
until it is determined that such charges will not be imposed.
A payment to a Participant or Beneficiary may also be delayed
in the event payment might defeat an adverse potential or
asserted claim by some other person to the payment. The cost
incurred by the Employer in dealing with any such adverse
claim shall be charged against the benefit to which the claim
relates, except as the Committee otherwise directs.
9.8 Termination of Employment.
(a) General Rule. A Participant's employment with
the Employer shall terminate upon the first to occur of his
resignation from or discharge by the Employer (except as
provided in subsection (c) with respect to business
dispositions) or his death or retirement. A Participant's
employment shall not terminate on account of an authorized
leave of absence, disability leave, sick leave, vacation, on
account of a military leave described in subsection (b), or
transfers between the Company and its Affiliates. However,
failure to return to work upon expiration of any leave of
absence, sick leave, disability leave, or vacation shall be
considered a resignation effective as of the expiration of
such leave of absence, sick leave, disability leave, or
vacation.
(b) Military Leaves. Any Participant who leaves
the Company or its Affiliates directly to perform service in
the Armed Forces of the United States or in the United States
Public Health Service under conditions entitling the
Participant to reemployment rights, as provided in the laws of
the United States, shall be on military leave. A
Participant's military leave shall expire if the Participant
voluntarily resigns from the Company and its Affiliates during
the leave or if he fails to make application for reemployment
within the period specified by such law for the preservation
of reemployment rights. In such event, the individual's
employment shall be deemed to terminate by resignation on the
date the military leave expired.
(c) Spinoffs. Special rules shall apply to a
Participant who ceases to be employed by the Company or its
Affiliates because of the disposition by the Company or an
Affiliate of its interest in a subsidiary, plant, facility or
other unit. These rules also apply when the entity which
employs a Participant ceases to be Affiliate. Such a
Participant's employment shall be considered terminated for
all Plan purposes, except as provided below. If the buyer
assumes the Plan with respect to the Participant, his
employment shall be considered terminated under the
circumstances prescribed under the Plan as then maintained by
the buyer. See Section 9.6. This Section shall not apply to
the extent it is overridden by any contrary or inconsistent
provision in applicable sales documents or any related
documents, whether adopted before or after the sale and any
such contrary or inconsistent provision shall instead apply
and is hereby incorporated in the Plan by this reference.
9.9 Duty to Provide Data.
(a) Data Requests. Every person with an interest
in the Plan or claiming benefits under the Plan shall furnish
the Committee on a timely and accurate basis with such
documents, evidence or information as it considers necessary
or desirable for the purpose of administering the Plan. The
Committee may postpone payment of benefits (without accrual of
interest) until such information and such documents have been
furnished.
(b) Addresses. Every person claiming a benefit
under this Plan shall given written notice to the Committee of
his post office address and each change of post office
address. Any communication, statement or notice addressed to
such a person at his latest post office address as filed with
the Committee will, on deposit in the United States mail with
postage prepaid, be as binding upon such person for all
purposes of the Plan as if it had been received, whether
actually received or not. If a person fails to give notice of
his correct address, the Committee, the Company and its
Affiliates and Plan fiduciaries shall not be obliged to search
for, or to ascertain, his whereabouts.
(c) Failure to Comply. If benefits which are
otherwise currently payable cannot be paid to the person
entitled to the benefits because the individual has failed to
comply with this Section or other Plan provisions relating to
claims for benefits, any unpaid past due amount shall be
forfeited on the individual's death or presumed death.
9.10 Tax Withholding. The Company or other payor may
withhold from a benefit payment under this Plan any Federal, state
or local taxes required by law to be withheld with respect to such
payment and may withhold such sum as the payor may reasonably
estimate as necessary to cover any taxes for which the Company or
any Affiliate may be liable and which may be assessed with regard
to such payment.
9.11 Liability. No member of the Board of Directors of
Kerr-McGee Corporation or of the Committee shall be liable for any
act or action, whether of commission or omission, taken by any
other member, or by any officer, agent, or employee of the Employer
or of any such body, nor, except in circumstances involving his bad
faith, for anything done or omitted to be done by himself.
9.12 Governing Law. This Plan is subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), but
is exempt from most parts of ERISA since it is an unfunded deferred
compensation plan maintained for a select group of management or
highly compensated employees. In no event shall any references to
ERISA in the Plan be construed to mean that the Plan is subject to
any particular provisions of ERISA. The Plan shall be governed and
construed in accordance with federal law and the laws of the State
of Oklahoma, except to the extent such laws are preempted by ERISA.
IN WITNESS WHEREOF, KERR-McGEE CORPORATION has caused
this Plan to be duly adopted and executed, effective as of May 3,
1994.
KERR-McGEE CORPORATION
By
Bennett G. Bidwell,
Chairman of the Executive
Compensation Committee
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 Tom J. McDaniel, residing in Oklahoma City,
Oklahoma (the "Executive"). Unless otherwise indicated, terms used
herein and defined in Schedule A and Schedule I-A to Annexure 1
shall have the meanings assigned to them in said Schedules, as
applicable.
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. Operation of Agreement: From the effective date of this
Agreement through and including January 31, 1996, or the occurrence
of a Change of Control as defined in Schedule A, whichever occurs
earlier (the earlier of such dates being referred to as the
"Annexure 1 Effective Date"), the operative provisions of this
Agreement shall be as set forth in Sections 2 through 19 below and
Schedule A hereto. Beginning the Annexure 1 Effective Date, the
operative provisions of this Agreement shall be as set forth in
Annexure 1 hereto, including Schedule I-A thereto (the "Annexure 1
Provisions"). When used in Annexure 1, the term "Agreement" shall
refer to and mean Annexure 1. Beginning the Annexure 1 Effective
Date, the operative provisions of this Agreement as set forth in
Sections 2 through 19 and Schedule A shall be superseded and
replaced by the Annexure 1 Provisions.
2. 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 such employment is (i) prior to a Change
of Control, involuntarily terminated hereunder for Reason or as a
result of the Executive's death or disability or (ii) subsequent to
a Change of Control, involuntarily terminated hereunder for Cause
or as a result of the Executive's death or Disability or terminated
hereunder by the Executive for Good Reason. 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 Senior Vice
President and Secretary 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.
3. 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 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.
4. 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.
5. 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.
6. 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.
7. 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.
8. 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 or the Executive's
termination of his employment hereunder for Good Reason, will not
preclude payments under this Agreement to which the Executive is
entitled in respect of such termination.
9. Compensation Upon Termination Following a Change of Control:
In addition to the rights and benefits accruing to the Executive as
otherwise described in this Agreement, in the event that (a) a
Change of Control shall have occurred while the Executive is
employed hereunder and (b) the Executive's employment hereunder
shall be involuntarily terminated for any reason other than Cause,
death or Disability or the Executive shall terminate his employment
hereunder for Good Reason, then the Company shall make a lump sum
payment in cash to the Executive as severance pay on the fifth day
following the Date of Termination equal to three times the
Executive's annual base salary (including for these purposes any
amounts previously deferred under any qualified or nonqualified
deferred compensation plan, program or arrangement) in effect
immediately prior to the date that either a Change of Control shall
occur or such termination, whichever salary is higher; provided,
however, that if all or any portion of the payments or benefits
provided under this Section 9, either alone or together with other
payments and benefits which the Executive receives or is then
entitled to receive from the Company or any Subsidiary, would
constitute a "parachute payment" within the meaning of Section 280G
of the Code, then the payments and benefits provided to the
Executive under this Section 9 shall be reduced but only to the
extent necessary that no portion thereof shall be subject to the
excise tax imposed by Section 4999 of the Code; but only if, by
reason of such reduction, the Executive's Net After Tax Benefit
shall exceed the Net After Tax Benefit if such reduction were not
made. The foregoing calculations (and any calculations required
under the definition of Net After Tax Benefit) shall be made, at
the Company's expense, by the Company and the Executive. If no
agreement on the calculations is reached within five days of the
Date of Termination then the Executive and the Company will agree
to the selection of an accounting firm to make the calculations.
If no agreement can be reached regarding the selection of an
accounting firm, the Company shall select a "big six" accounting
firm which has no current or recent business relationship with the
Company or with the Executive. The determination of any such firm
selected will be conclusive and binding on all parties.
10. 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 grant 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.
11. Benefits Restoration Plan Following Change of Control: To the
extent that the Executive is or becomes a participant in the
Benefits Restoration Plan, the Company shall amend or have amended
the Benefits Restoration Plan, which amendment shall thereafter
remain in effect, to provide that in the event a Change of Control
shall have occurred while the Executive is employed hereunder and
the Executive's employment hereunder shall be involuntarily
terminated for any reason other than Cause, death or Disability or
the Executive shall terminate his employment hereunder for Good
Reason, then the Executive shall be entitled to a nonforfeitable
right to all benefits credited to such Executive to such additional
years of credit for purposes of calculating the years of service
and age of such Executive under the terms of the Benefits
Restoration Plan equal to the lesser of (i) five years or (ii) the
number of years necessary to bring the Executive to age 65 under
the terms of the Benefits Restoration Plan.
12. 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 the 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.
13. 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.
14. 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.
15. 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: Tom J. McDaniel
16. 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. Subject to Section 1 hereof, any
inconsistency between Sections 9, 10, 11, 12, 13, 16, 17, 18 and 19
of this Agreement and any other provisions of this Agreement shall
be resolved in favor of such Sections.
17. 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.
18. 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.
<PAGE>
19. 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
(Tom J. McDaniel) Chairman of the Board and
Tom J. McDaniel 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.
"Benefits Restoration Plan" means the Company's Benefits
Restoration Plan, effective September 12, 1989, 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.
"Good Reason" means (a) without the Executive's express written
consent, (i) (A) the assignment to the Executive of any duties, or
any limitation of the Executive's responsibilities, inconsistent
with the Executive's positions, duties, responsibilities and status
with the Company or any Subsidiary that employs the Executive
immediately prior to the date of the Change of Control, or (B) any
removal of the Executive from, or any failure to re-elect the
Executive to, any of the Executive's positions with the Company or
any Subsidiary that employs the Executive immediately prior to the
Change of Control, except in connection with the involuntary
termination of the Executive's employment hereunder for Cause or as
a result of the Executive's death or Disability or the termination
of the Executive's employment on the Executive's normal retirement
date; (b) any failure by the Company to pay, or any reduction by
the Company of, the Executive's base annual salary or bonus
compensation in effect immediately prior to the Change of Control;
(c) any failure by the Company or any Subsidiary that employs the
Executive to (i) continue to provide the Executive with the
opportunity to participate, on terms no less favorable than those
in effect immediately prior to the Change of Control, in any
benefit plans and compensation programs in which the Executive was
participating immediately prior to the Change of Control, or their
equivalent, including but not limited to participation in pension,
profit sharing, stock grants, stock option, savings, employee stock
ownership, incentive compensation, group insurance plans or similar
plans or programs or (ii) provide the Executive with all other
fringe benefits (or their equivalent), including paid vacation,
from time to time in effect for the benefit of any executive,
management or administrative group which customarily includes a
person holding the employment position with the Company or its
Subsidiaries then held by the Executive; (d) without the
Executive's express written consent, the relocation of the
Company's headquarters or of the principal place of the Executive's
employment to a location that is more than 35 miles further from
the Executive's principal residence than such principal place of
employment immediately prior to the Change of Control; (e) any
change in the sick leave policy for salaried employees or employees
generally of the Company or any Subsidiary that employs the
Executive which has an adverse effect on the Executive's rights and
benefits pursuant to such policy; (f) any reduction in the benefits
provided to the Executive pursuant to Section 14 of this Agreement;
(g) any reduction to the extent applicable in benefits offered
under an income protection insurance plan for salaried employees or
employees generally of the Company or any Subsidiary that employs
the Executive; (h) any change in the pay policy for salaried
employees or employees generally of the Company or any Subsidiary
that employs the Executive which has an adverse effect on the
Executive's rights and benefits pursuant to such policy; (i) with
respect to a Subsidiary that employs the Executive, the sale by the
Company of 25% or more of such Subsidiary's common stock or 25% or
more of the Subsidiary's then outstanding securities entitled to
vote generally for the election of the Subsidiary's directors, or
the sale by the Company of all or substantially all of the assets
of such Subsidiary; (j) the breach of any provision of this
Agreement by the Company or (k) the failure of any successor
company to the Company to expressly assume this Agreement.
"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.
"Net After Tax Benefit" means the sum of (i) the total amounts
payable to the Executive under Section 9 of this Agreement, plus
(ii) all other payments and benefits which the Executive receives
or is then entitled to receive from the Company or any Subsidiary
that would constitute a "parachute payment" within the meaning of
Section 280G of the Code, less (iii) the amount of federal income
taxes payable with respect to the foregoing calculated at the
maximum marginal income tax rate for each year in which the
foregoing shall be paid to the Executive (based upon the rate in
effect for such year as set forth in the Code at the time of
termination of his employment), less (iv) the amount of excise
taxes imposed with respect to the payments and benefits described
in (i) and (ii) above by Section 4999 of the Code.
"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.
<PAGE> Annexure 1
Operative Provisions beginning
the Annexure 1 Effective Date
1. OPERATION OF AGREEMENT
The operative provisions of this Agreement shall become effective
February 1, 1996, or immediately upon a Change of Control occurring
after December 31, 1992, whichever occurs earlier, provided that
the Executive is employed by the Company immediately prior to such
Change of Control. Once the provisions become effective, this
Agreement shall not terminate until the third anniversary of the
Change of Control. Notwithstanding the termination of this
Agreement, the Company shall remain liable for any rights or
payments arising prior to such termination to which the Executive
is entitled under this Agreement.
2. SERVICE AFTER CHANGE OF CONTROL
Following a Change of Control, the Company will not terminate the
Executive's employment with the Company except on account of Cause
prior to the third anniversary of the Change of Control. Upon any
termination of employment of the Executive, other than for Cause or
upon death, a Notice of Termination shall be provided by the party
causing such termination of employment.
3. BENEFITS UPON CHANGE OF CONTROL
(a) Stock Plans. 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 grant 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 shall,
upon the occurrence of the Change of Control which causes this
Agreement to become effective (i) 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, of
which the Executive is the Beneficial Owner on the date of such
Change of Control and (ii) 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 the Executive
is the Beneficial Owner of on the date of such Change of Control.
(b) Pension Plan. Following a Change of Control, 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.
(c) Benefits Restoration Plan. To the extent that the Executive
is or becomes a participant in the Benefits Restoration Plan, the
Company shall amend or have amended the Benefits Restoration Plan,
which amendment shall thereafter remain in effect, to provide in
the event of an Executive's Termination for the benefits specified
in Section 4(b) hereof.
(d) Death of an Executive. In the event of the Executive's death
prior to Termination, but while employed by the Company or any
Subsidiary, as the case may be, 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.
4. PAYMENTS AND BENEFITS UPON TERMINATION
The Executive shall be entitled to the following payments and
benefits following Termination:
(a) Termination Payment. In recognition of past services to the
Company by the Executive and in consideration for the undertaking
by the Executive to provide services to the Company, pursuant to
Section 2 hereof, the Company shall make a lump sum payment in cash
to the Executive as severance pay on the fifth day following the
Date of Termination equal to three times the Executive's annual
base salary (including for these purposes any amounts previously
deferred under any qualified or nonqualified deferred compensation
plan, program or arrangement) in effect immediately prior to the
date that either a Change of Control shall occur or such Date of
Termination, whichever salary is higher.
Notwithstanding the foregoing, if all or any portion of the
payments or benefits provided under this Section 4(a), either alone
or together with other payments and benefits which the Executive
receives or is then entitled to receive from the Company or any
Subsidiary, would constitute a Parachute Payment, then the payments
and benefits provided to the Executive under this Section 4(a)
shall be reduced but only to the extent necessary to ensure that no
portion thereof shall be subject to the excise tax imposed by
Section 4999 of the Code; but only if, by reason of such reduction,
the Executive's Net After Tax Benefit shall exceed the Net After
Tax Benefit if such reduction were not made. The foregoing
calculations (and any calculations required under the definition of
Net After Tax Benefit) shall be made, at the Company's expense, by
the Company and the Executive. If no agreement on the calculations
is reached within five days of the Date of Termination, then the
Executive and the Company will agree to the selection of an
accounting firm to make the calculations. If no agreement can be
reached regarding the selection of an accounting firm, the Company
shall select a "big six" accounting firm which has no current or
recent business relationship with the Company or with the Person or
Group responsible for the Change of Control. The determination of
any such firm selected will be conclusive and binding on all
parties.
(b) Benefits Restoration Plan. The Executive shall be entitled to
additional years of credit for purposes of calculating the years of
service and age of such Executive under the terms of the Benefits
Restoration Plan equal to the lesser of (i) five years or (ii) the
number of years necessary to bring the Executive to age 65 under
the terms of the Benefits Restoration Plan, and the Executive shall
have a nonforfeitable right to any and all benefits credited to
such Executive under the Benefits Restoration Plan.
(c) Death of the Executive. In the event of the Executive's death
subsequent to Termination, all payments and benefits required by
this Agreement shall be paid to the Executive's designated
beneficiary or beneficiaries or, if he has not designated a
beneficiary or beneficiaries, to his estate.
5. CONFIDENTIALITY
The Executive agrees to hold in confidence any and all confidential
information known to him concerning the Company and its
Subsidiaries and their respective businesses so long as such
information is not otherwise publicly disclosed.
6. 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.
7. CONFLICT IN BENEFITS
This Agreement is not intended to and shall not adversely affect,
limit or terminate any other agreement or arrangement between the
Executive and the Company presently in effect or hereafter entered
into, including any employee benefit plan under which the Executive
is entitled to benefits.
<PAGE>
8. MISCELLANEOUS
(a) No Mitigation. 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.
(b) Legal Expenses. The Company shall pay all costs and expenses,
including reasonable attorneys' fees and disbursements, of the
Executive, at least monthly, in connection with any litigation,
arbitration or similar proceeding, whether or not instituted by the
Company or the Executive, with respect to the interpretation or
enforcement of any provision of this Agreement.
(c) Notices. Any notices required under the terms of this
Agreement shall be effective when mailed, postage prepaid, by
certified mail and addressed to, in the case of the Company:
R. G. Horner, Jr.
Vice President and General Counsel
Kerr-McGee Corporation
Kerr-McGee Center
Oklahoma City, Oklahoma 73102
and to, in the case of the Executive:
Tom J. McDaniel
Either party may designate a different address by giving written
notice of change of address in the manner provided above.
(d) Waiver. No waiver or modification in whole or in part of this
Agreement, or any term or condition hereof, shall be effective
against any party unless in writing and duly signed by the party
sought to be bound. Any waiver of any breach of any provision
hereof or any right or power by any party on one occasion shall not
be construed as a waiver of, or a bar to, the exercise of such
right or power on any other occasion or as a waiver of any
subsequent breach.
(e) Binding Effect; Successors. Subject to the provisions hereof,
nothing in the 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 and
assets, or the assignment of this Agreement by the Company in
connection with any of the foregoing actions. This Agreement shall
be binding upon, inure to the benefit of and be enforceable by the
Company and the Executive and their respective heirs, legal
representatives, successors and assigns. If the Company shall be
merged into or consolidated with another entity, the provisions of
this Agreement shall be binding upon and inure to the benefit of
the entity surviving such merger or resulting from such
consolidation. The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business 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 had taken place. The
provisions of this Section 8(e) shall continue to apply to each
subsequent employer of the Executive hereunder in the event of any
subsequent merger, consolidation or transfer of assets of such
subsequent employer.
(f) 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.
(g) Controlling Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Oklahoma
applicable to contracts made and to be performed therein.
(h) 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.
(i) Entire Agreement. This Agreement comprise 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.
<PAGE>
Schedule I-A
to Annexure 1
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.
"Benefits Restoration Plan" means the Company's Benefits
Restoration Plan, As Amended and Restated Effective September 12,
1989, 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 two-thirds 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, become 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 (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 affected.
"Code" means the Internal Revenue Code of 1986, as amended.
"Date of Termination" means if the Executive's employment is
terminated during the term of this Agreement, 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.
"Good Reason" means (a) without the Executive's express written
consent, (i) the assignment to the Executive of any duties, or any
limitation of the Executive's responsibilities, inconsistent with
the Executive's positions, duties, responsibilities and status with
the Company or any Subsidiary that employs the Executive
immediately prior to the date of the Change of Control, or (ii) any
removal of the Executive from, or any failure to re-elect the
Executive to, any of the Executive's positions with the Company or
any Subsidiary that employs the Executive immediately prior to the
Change of Control, except in connection with the involuntary
termination of the Executive's employment by the Company for Cause
or as a result of the Executive's death or Disability; (b) any
failure by the Company to pay, or any reduction by the Company of,
the Executive's base annual salary or bonus compensation in effect
immediately prior to the Change of Control; (c) any failure by the
Company or any Subsidiary that employs the Executive to (i)
continue to provide the Executive with the opportunity to
participate, on terms no less favorable than those in effect
immediately prior to the Change of Control, in any benefit plans
and compensation programs in which the Executive was participating
immediately prior to the Change of Control or their equivalent,
including, but not limited to, participation in pension, profit-
sharing, stock grants, stock option, savings, employee stock
ownership, incentive compensation, group insurance plans or similar
plans or programs, or (ii) provide the Executive with all other
fringes benefits (or their equivalent) including paid vacation,
from time to time in effect for the benefit of any executive,
management or administrative group which customarily includes a
person holding the employment position with the Company or its
Subsidiaries then held by the Executive; (d) without the
Executive's express written consent, the relocation of the
Company's headquarters or of the principal place of the Executive's
employment to a location that is more than 35 miles further from
the Executive's principal residence than such principal place of
employment immediately prior to the Change of Control; (e) any
change in the sick leave policy for salaried employees or employees
generally of the Company or any Subsidiary that employs the
Executive which has an adverse effect on the Executive's rights and
benefits pursuant to such policy; (f) any reduction to the extent
applicable in benefits offered under an income protection insurance
plan for salaried employees or employees generally of the Company
or any Subsidiary that employs the Executive; (g) any change in the
pay policy for salaried employees or employees generally of the
Company or any Subsidiary that employs the Executive which has an
adverse effect on the Executive's rights and benefits pursuant to
such policy; (h) with respect to a Subsidiary that employs the
Executive, the sale by the Company of 25% or more of such
Subsidiary's common stock or 25% or more of the Subsidiary's then
outstanding securities entitled to vote generally for the election
of the Subsidiary's directors, or the sale by the Company of all or
substantially all of the assets of such Subsidiary; (i) the breach
of any provision of this Agreement by the Company or (j) the
failure of any successor company to the Company to expressly assume
this Agreement.
"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.
"Net After Tax Benefit" means the sum of (i) the total amounts
payable to the Executive under Section 4(a) of this Agreement, plus
(ii) all other payments and benefits which the Executive receives
or is then entitled to receive from the Company or any Subsidiary
that would constitute a Parachute Payment, less (iii) the amount of
federal income taxes payable with respect to the foregoing
calculated at the maximum marginal income tax rate for each year in
which the foregoing shall be paid to the Executive (based upon the
rate in effect for such year as set forth in the Code at the time
of termination of his employment), less (iv) the amount of excise
taxes imposed with respect to the payments and benefits described
in (i) and (ii) above by Section 4999 of the Code.
"Notice of Termination" means a written notice to the Executive or
to the Company, as the case may be, 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 the termination of the Executive's employment
constituting a Termination under the provision so indicated.
"Parachute Payment" means any payment deemed to constitute a
"parachute payment" as defined in Section 280G of the Internal
Revenue Code of 1986, as amended.
"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.
"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.
"Termination" means following the occurrence of any Change of
Control by the Company (i) the involuntary termination of the
employment of the Executive for any reason other than for Cause,
death or Disability, or (ii) the termination of employment by the
Executive for Good Reason; provided, however, that any retirement
under a retirement plan available to salaried employees or
employees generally of the Company or any Subsidiary that employs
the Executive that is coincident with or subsequent to a
Termination, will not preclude payments under this Agreement to
which the Executive is entitled in respect of such Termination.
EXHIBIT 12
KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In millions of dollars) 1994 1993 1992 1991 1990
Income (loss) from
continuing operations $ 90 $ 77 $(26) $102 $113
Add -
Provision (benefit) for
income taxes 42 41 (38) 64 43
Interest expense 59 47 66 78 86
Rental expense representa-
tive of interest factor 5 5 6 6 6
Earnings $196 $170 $ 8 $250 $248
Fixed Charges -
Interest expense $ 59 $ 47 $ 66 $ 78 $ 86
Rental expense representa-
tive of interest factor 5 5 6 6 6
Interest capitalized 10 20 15 16 19
Total fixed charges $ 74 $ 72 $ 87 $100 $111
Ratio of earnings to fixed
charges 2.6 2.4 -(1) 2.5 2.2
(1)Earnings in 1992 were inadequate to cover fixed charges by $79 million.
Management's Discussion and Analysis
Results of Consolidated Operations
The company's net income for 1994 was $90 million, or $1.74
per common share, compared with 1993 net income of $77 million,
or $1.57 per common share, and a 1992 net loss of $101 million,
or $2.08 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 $5 million, or $.10 per common share, for the
early extinguishment of the 9-3/4% debt (see Note 9). Excluding
these charges, the net loss was $26 million, or $.53 per common
share. The 1992 net loss also included a provision of $205
million, or $130 million after income tax benefits, for
environmental reclamation and remediation of inactive sites.
Operating profit for 1994 was $245 million, compared with
$199 million and $229 million for 1993 and 1992, respectively.
The $46 million increase in 1994 operating profit was due to
improved results from refining and marketing and chemical
operations, which more than offset the decreased operating
profit from exploration and production and coal. The $30
million decrease in 1993 operating profit, compared with 1992,
resulted from lower operating profit from all segments except
coal, which increased slightly.
Consolidated sales totaled $3.4 billion for 1994, compared
with $3.3 billion for 1993 and $3.4 billion for 1992. The
slight improvement in 1994 revenues was primarily due to higher
crude oil and titanium dioxide pigment sales volumes and higher
international pigment sales prices partially offset by lower
crude oil, natural gas, and coal sales prices and lower natural
gas sales volumes.
Costs and operating expenses decreased $11 million in 1994,
primarily due to lower crude oil costs for refining and
marketing operations, partially offset by higher costs for
exploration and production resulting from increased crude oil
production and higher costs for chemical operations due to
higher production volumes. The $90 million decrease in 1993
costs and operating expenses, compared with 1992, was 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.
Selling, general, and administrative expenses for 1994 were
$20 million higher than 1993 due to restructuring costs and
higher provisions for bad debts. The $16 million decrease in
selling, general, and administrative expenses in 1993, compared
with 1992, resulted from 1992 restructuring costs and lower
costs associated with assets sold in prior years.
Exploration costs for 1994, 1993, and 1992 were $85
million, $71 million, and $55 million, respectively. The 1994
increase resulted primarily from higher geophysical and dry hole
costs. The increase in 1993 resulted primarily from higher dry
holes costs.
Provisions for environmental reclamation and remediation of
inactive facilities totaled $10 million, $4 million, and $205
million in 1994, 1993, and 1992, respectively. These amounts
represented additional provisions established for the removal of
low-level radioactive materials from the company's inactive
facility in West Chicago, Illinois, and reclamation of several
other inactive facilities.
Interest and debt expense of $59 million for 1994 was $12
million higher than for the prior year, primarily due to lower
capitalized interest, higher average interest rates, and higher
debt. Interest and debt expense for 1993 decreased $19 million
from the prior year, primarily due to lower average interest
rates, lower debt, and higher capitalized interest. Other income
for 1994 increased $4 million from 1993 due to higher interest
income. Other income totaled $19 million for 1993, a $23
million decrease from 1992. This decrease was primarily due to
lower foreign currency transaction gains.
Segment Operations
Operating profit (loss) from each of the company's segments
is summarized in the following table:
(In millions of dollars) 1994 1993 1992
Exploration and production $ 74 $ 82 $ 91
Refining and marketing 35 (28) (21)
Chemicals 92 70 79
Coal 45 80 77
Other (1) (5) 3
Total $245 $199 $229
Exploration and Production
Exploration and production operating profit was $74
million for 1994, compared with $82 million for 1993 and $91
million for 1992. Operating profit for 1994 was lower due
principally to lower crude oil sales prices, lower natural gas
deliveries and sales prices, and higher exploration expense,
partially offset by higher crude oil sales volumes. 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. Revenues and crude oil and
natural gas volumes and prices are summarized in the following
table:
1994 1993 1992
Revenues, including intersegment
sales (millions of dollars) $ 633 $ 564 $ 560
Crude oil and condensate produced
(thousands of barrels per day) 67.3 53.2 50.5
Average price per barrel of crude
oil sold $14.81 $15.64 $18.11
Natural gas deliveries
(MMCF per day) 271 286 296
Average price per MCF of
natural gas delivered $ 1.76 $ 1.92 $ 1.56
Refining and Marketing
Refining and marketing had operating profit of $35 million
for 1994, compared with operating losses of $28 million and $21
million for 1993 and 1992, respectively. Revenues were $1.9
billion, $2 billion, and $2.2 billion in 1994, 1993, and 1992,
respectively. The 1994 operating profit reflected improved
wholesale gasoline and distillate margins resulting from lower
crude oil costs, partially offset by lower sales prices. The
1993 operating loss resulted from negative margins due to
product prices declining faster than feedstock costs and a
reduction in LIFO inventory carrying value in 1993. The lower
1994 revenues resulted from lower sales prices. Revenues for
1993 were lower than the prior year due to lower sales prices
and volumes.
Chemicals
Operating profit from chemicals totaled $92 million, $70
million, and $79 million for 1994, 1993, and 1992, respectively,
on revenues of $639 million, $556 million, and $515 million,
respectively. The increase in 1994 revenues was due to higher
sales volumes for most chemical products and higher
international titanium dioxide pigment sales prices, partially
offset by lower domestic pigment sales prices. The increase in
1994 operating profit was due to lower per-unit production costs
for most products and higher revenues. The increase in 1993
revenues, compared with 1992, was due primarily to higher sales
volumes, partially offset by lower sales prices for 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.
Coal
Coal operating profit was $45 million for 1994, compared
with $80 million for 1993 and $77 million for 1992. Revenues
were $294 million, $328 million, and $307 million in 1994, 1993,
and 1992, respectively. Revenues decreased in 1994 due to lower
average sales prices resulting from contract renegotiations in
1993, partially offset by higher sales volumes. Operating
profit for 1994 declined due to the decrease in revenues. The
increase in 1993 revenues, compared with 1992, was due to higher
sales volumes, partially offset by lower average sales prices.
The increased 1993 operating profit, compared with 1992, was
primarily due to the increased revenues that more than offset
higher operating expenses.
Financial Condition
Cash Flow
Net cash provided by operating activities totaled $355
million for 1994, compared with $424 million and $277 million
for 1993 and 1992, respectively. The company's net cash
provided by operating activities for 1994 included net income of
$90 million; depreciation, depletion, and amortization of $345
million; an environmental provision for inactive sites of $18
million; and other noncash charges of $73 million. These
noncash charges were partially offset by a net increase in
working capital items, excluding cash and short-term debt. 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 net loss of $101
million which included noncash charges for depreciation,
depletion, and amortization of $312 million; an after-tax
environmental provision for inactive sites of $130 million; and
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 used by the company in investing activities
totaled $389 million, $396 million, and $325 million for 1994,
1993, and 1992, respectively. The major investing activity
during each of the three years was for cash capital
expenditures, which totaled $411 million in 1994, $451 million
in 1993, and $373 million in 1992. Partially offsetting were
investing inflows of $39 million in 1993 from the sale of the
contract drilling operations and $35 million in 1992 from a
contract settlement.
Financing activities include dividends paid to common
stockholders of the company totaling $78 million in 1994, and
$73 million in both 1993 and 1992. In 1994 and 1993, increases
in short-term borrowings exceeded long-term debt repayments by
$99 million and $79 million, respectively; and in 1992, an
additional $15 million was used for the net repayment of debt.
Liquidity
The net working capital position of the company at year-end
1994 of $73 million did not significantly change from the end of
1993. The current ratio was 1.1 to 1 at both December 31, 1994
and 1993, and was 1.3 to 1 at December 31, 1992.
The percentage of total debt to total capitalization was
39% at December 31, 1994, compared with 37% and 42% at year-end
1993 and 1992, respectively. The year-end 1994 percentage
increased from the prior year due to the increase in debt.
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 $325
million through August 25, 1999, of which $70 million was
outstanding at year-end 1994. 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
December 21, 1999, of which $80 million was outstanding at year-
end 1994. 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.
The company's wholly owned subsidiary, Kerr-McGee Canada
Ltd., has revolving credit agreements with three banks each to
provide borrowings of up to U.S. $30 million. Interest is
payable at varying rates. These agreements may be extended for
one-year terms if mutually agreed to by the company and the
banks. During 1994, these agreements were extended for one
year. The company is the guarantor for each of these
agreements. At December 31, 1994, amounts outstanding pursuant
to these agreements were as follows:
Amount Outstanding
Date of Agreement Termination Date (In millions of dollars)
September 20, 1993 September 19, 1995 $28
October 4, 1993 October 3, 1995 15
October 20, 1993 October 19, 1995 23
At year-end 1994, the company had available unused lines of
credit and revolving credit facilities of $480 million. Of this
amount, $285 million and $171 million can be used to support the
commercial paper borrowings of Kerr-McGee Credit Corporation and
Kerr-McGee Oil (U.K.) PLC, respectively.
In February 1995, the company's wholly owned subsidiary,
Kerr-McGee China Petroleum Ltd., entered into a revolving credit
agreement with several banks. This facility is in conjunction
with the exploration and production activities in China. The
agreement provides for borrowings up to $105 million and has a
three-year term with interest at varying rates.
Capital expenditures for the three years ended December 31,
1994, totaled $1.2 billion and have been financed through
internally generated funds and various borrowings. For the
three-year period ended December 31, 1994, net cash provided by
operating activities, excluding working capital changes, was
approximately the same as the total capital expenditures during
the same period.
Management anticipates that the cash requirements for the
1995 capital expenditures program, currently estimated to be
$420 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 portion of its
monetary assets, liabilities, and commitments denominated in
foreign currencies; therefore, from time to time, the company
purchases foreign currency forward contracts to provide funds
for known or anticipated operating and capital requirements that
will be denominated in foreign currencies. Additionally, the
company uses commodity futures and options to minimize the price
risks associated with producing and holding petroleum products.
Outstanding futures, forward, and option contracts are described
in Note 12 to the financial statements.
Coal markets continue to experience competitive pricing.
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.
During the past two years, the company has been involved in
discussions and negotiations to sell, merge, or restructure its
refining and marketing operations. Letters of intent were
signed in January 1995 to sell the Corpus Christi, Texas, and
Cotton Valley, Louisiana, refineries and a lubricant
manufacturing company. Offers for certain other refining and
marketing assets are being evaluated, but no agreements have
been entered into. The company does not believe the disposals
would have a material adverse effect on its future consolidated
operations and cash flow.
Environmental Matters
The company's operations are subject to various
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 (EPA) pursuant to the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980 (CERCLA), as
amended. At December 31, 1994, the company had received notices
that it has been named a potentially responsible party (PRP)
with respect to the remediation of 13 existing EPA Superfund
sites and may share liability at certain of these sites. During
1994, the company received notification from the EPA that it was
no longer considered a PRP with respect to one site. 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
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 1994, $21 million was added to the
reserve for active and inactive sites. At December 31, 1994,
the company's reserve for these sites totaled $239 million. In
addition, at year-end 1994, the company had reserves of $78
million for the future costs for the abandonment and removal of
offshore well and production facilities at the end of their
productive lives and $16 million for the decommissioning and
reclamation of coal mining locations. In the Consolidated
Balance Sheet, $260 million of the total reserve is classified
as a deferred credit, and the remaining $73 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 ended December 31, 1994, were as follows:
(In millions of dollars) 1994 1993 1992 Total
Capital expenditures $ 17 $13 $16 $ 46
Recurring expenses 28 26 26 80
Charges to environmental
reserves 60 30 26 116
Total $105 $69 $68 $242
The company has not recorded in the financial statements
potential reimbursements from governmental agencies (see Note
10) 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 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
Stage of Investigation/ Estimated Expenditures of Identifiable
Location of Site Remediation Cost Through 1994 PRPs
(In millions of Dollars)
<S> <C> <C> <C> <C>
EPA Superfund sites
Milwaukee, Wis. Executed consent decree
to remediate the site
of a former wood-treating
facility. Conducting pre-
design studies under EPA
oversight. $ 19 $ 3 3
West Chicago, Ill., Agreed to begin cleanup
outside the of a portion of the site
facility in 1995 (see Note 10). 22 - 1
11 sites Various stages of
individually not investigation. 7 3 489
material
Total 48 6 493
Non-EPA Superfund
sites under consent order,
license, or agreement
West Chicago, Ill., Pursuing a license to
facility decommission a former
facility (see Note 10).
Began shipments to a
permanent disposal facility
during 1994. 252 95
Three sites Agreed to remediation
individually plans for a major
not material portion of these sites. 48 39
Total 300 134
Non-EPA Superfund
sites individually
not material 119 88
Total for all sites $467 $228
</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
During 1994, the company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," issued by the
Financial Accounting Standards Board which 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. There was no effect on
net income as the result of adopting the standard (see Note 12).
<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.
<PAGE>
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, 1994 and 1993, and the
related consolidated statements of income, retained earnings,
and cash flows for each of the three years in the period ended
December 31, 1994. 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, 1994 and 1993, and the results of their operations
and their cash flows for each of the three years in the period
ended December 31, 1994, 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 LLP)
ARTHUR ANDERSEN LLP
Oklahoma City, Oklahoma,
February 17, 1995
<PAGE>
Kerr-McGee Corporation
Consolidated Statement of Income
(In millions of dollars,
except per-share amounts) 1994 1993 1992
Sales $3,353 $3,281 $3,382
Costs and Expenses
Costs and operating expenses 2,533 2,544 2,634
Selling, general, and
administrative expenses 154 134 150
Depreciation and depletion 328 303 294
Exploration, including dry holes
and amortization of undeveloped
leases 85 71 55
Provision for environmental
reclamation and remediation
of inactive sites 10 4 205
Taxes, other than income taxes 75 79 84
Interest and debt expense 59 47 66
Total Costs and Expenses 3,244 3,182 3,488
109 99 (106)
Other Income 23 19 42
Income (Loss) before Income Taxes,
Extraordinary Charge, and
Cumulative Effect on Prior
Years of Changes in
Accounting Principles 132 118 (64)
Provision (Benefit) for
Income Taxes 42 41 (38)
Income (Loss) before Extraordinary
Charge and Cumulative Effect
on Prior Years of Changes in
Accounting Principles 90 77 (26)
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) $ 90 $ 77 $ (101)
Net Income (Loss) per Common Share:
Income (Loss) before Extraordinary
Charge and Cumulative Effect on
Prior Years of Changes in
Accounting Principles $1.74 $ 1.57 $ (.53)
Extraordinary Charge - - (.10)
Cumulative Effect on Prior
Years of Changes in
Accounting Principles - - (1.45)
Total $ 1.74 $ 1.57 $(2.08)
The accompanying notes are an integral part of these statements.
<PAGE>
Kerr-McGee Corporation
Consolidated Statement of Retained Earnings
(In millions of dollars,
except per-share amount) 1994 1993 1992
Balance at Beginning of Year $1,309 $1,306 $1,480
Net income (loss) 90 77 (101)
Dividends declared -
$1.52 per common share (79) (74) (73)
Balance at End of Year $1,320 $1,309 $1,306
The accompanying notes are an integral part of these statements.
<PAGE>
Kerr-McGee Corporation
Consolidated Balance Sheet
(In millions of dollars) 1994 1993
ASSETS
Current Assets
Cash $ 82 $ 94
Notes and accounts receivable 422 373
Inventories 399 349
Deposits and prepaid expenses 60 50
Total Current Assets 963 866
Investments and Other Assets 95 101
Property, Plant, and Equipment - Net 2,552 2,513
Deferred Charges 88 67
$3,698 $3,547
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $ 312 $ 265
Accounts payable 375 328
Long-term debt due within one year 8 43
Taxes, other than income taxes 33 39
Accrued liabilities 162 112
Total Current Liabilities 890 787
Long-Term Debt 673 590
Deferred Credits and Reserves
Income taxes 179 172
Other 413 486
Total Deferred Credits and Reserves 592 658
Stockholders' Equity
Common stock, par value $1.00 -
150,000,000 shares authorized,
53,304,076 shares issued in
1994 and 53,268,181 shares
issued in 1993 53 53
Capital in excess of par value 309 308
Preferred stock purchase rights 1 1
Retained earnings 1,320 1,309
Unrealized gain on available-for-
sale securities 12 -
Common stock in treasury,
at cost - 1,610,438 shares in
1994 and 1,612,688 shares in 1993 (63) (63)
Deferred compensation (89) (96)
Total Stockholders' Equity 1,543 1,512
$3,698 $3,547
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.
<PAGE>
Kerr-McGee Corporation
Consolidated Statement of Cash Flows
(In millions of dollars) 1994 1993 1992
Cash Flow from Operating Activities
Net income (loss) $ 90 $ 77 $(101)
Adjustments to reconcile to net cash
provided by operating activities -
Depreciation, depletion, and
amortization 345 321 312
Deferred income taxes 3 2 (88)
Cumulative effect on prior years
of changes in accounting principles - - 70
Provision for environmental
reclamation and remediation
of inactive sites 18 4 205
Noncash items affecting net income 73 54 47
Retirements and gain on sale of assets (4) (9) (2)
Changes in current assets and
liabilities and other -
(Increase) decrease in accounts
receivable (48) 34 (57)
(Increase) decrease in inventories (51) 36 (23)
(Increase) decrease in deposits
and prepaids (2) 7 2
Increase (decrease) in accounts payable
and accrued liabilities 26 (9) (13)
Decrease in taxes payable (3) (21) (18)
Other (92) (72) (57)
Net cash provided by
operating activities 355 424 277
Cash Flow from Investing Activities
Capital expenditures (411) (451) (373)
Proceeds from sale of assets 27 17 25
Proceeds from sale of drilling
operations - 39 -
Proceeds from contract settlement - - 35
Purchase of long-term investments (35) (25) (16)
Proceeds from sale of long-term
investments 30 24 4
Net cash used in
investing activities (389) (396) (325)
Cash Flow from Financing Activities
Increase in short-term borrowings 146 95 135
Proceeds from issuance of
long-term debt - - 3
Repayment of long-term debt (47) (16) (153)
Issuance of common stock 1 3 1
Dividends paid (78) (73) (73)
Net cash provided (used)
in financing activities 22 9 (87)
Net Increase (Decrease) in Cash
and Cash Equivalents (12) 37 (135)
Cash and Cash Equivalents at
Beginning of Year 94 57 192
Cash and Cash Equivalents at
End of Year $ 82 $ 94 $ 57
The accompanying notes are an integral part of this statement.
<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.
Foreign Currencies
As the U.S. dollar has been adopted as the functional
currency for each of the company's international operations,
foreign currency transaction gains or losses are recognized in
the period incurred. Total foreign currency transaction gains
and losses in 1994 and 1993 were immaterial. The company
recorded net foreign currency transaction gains of $20 million
in 1992.
Net Income (Loss) per Common Share
After adding the dilutive effect of the conversion of stock
options to the weighted average number of shares outstanding,
the shares used to compute net income per common share were
51,739,880 in 1994 and 49,281,023 in 1993. The weighted average
number of shares used to compute the 1992 net loss per common
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 all totaling $45 million in 1994 and $39
million in 1993.
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 basis using the
unit-of-production method as the oil and gas are produced.
Proved properties are evaluated on an area-of-interest
basis and impaired when capitalized costs exceed estimated
future revenues, computed by applying current oil and gas prices
to estimated future production, less estimated future
expenditures to develop and produce the reserves.
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 and Sales - 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 1994, 1993, and 1992
was $10 million, $20 million, and $15 million, respectively.
Income Taxes
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.
Research and Development Costs
Research and development costs are charged against earnings
as incurred. Such costs totaled $10 million in 1994, $14
million in 1993, and $16 million in 1992.
Site Dismantlement, Reclamation, and Remediation Costs
The company provides for the estimated cost at current
prices of final reclamation and land restoration at coal mining
locations and the dismantlement and removal of 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, 1994 and 1993, 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 each of the years
1994 and 1993 and $19 million in 1992.
The aggregate minimum annual rentals under noncancelable
leases in effect on December 31, 1994, totaled $33 million, of
which $8 million is due in 1995, $8 million in 1996, $14 million
in the period 1997 through 1999, and $3 million thereafter.
Futures, Forward, and Option Contracts
To minimize the price risks associated with producing and
holding refined products, the company uses commodities futures
and option contracts to hedge a portion of its crude oil,
natural gas, and refined-product sales. These contracts
generally have maturities of one year or less. Since the
contracts qualify as hedges and correlate to price movements of
crude oil, natural gas, and refined products, any gains or
losses from these contracts are explicitly deferred and
recognized as part of the hedged transaction. The company also
hedges a portion of crude oil purchased for refineries and
natural gas purchased for other operations.
The company hedges a portion of its monetary assets,
liabilities, and commitments denominated in foreign currencies.
Periodically, the company purchases foreign currency forward
contracts to provide funds for operating and capital expenditure
requirements that will be denominated in foreign currencies and
sells foreign currency forward contracts to convert receivables
that will be paid in foreign currencies to U.S. dollars. Since
these contracts qualify as hedges and correlate to currency
movements, any gain or loss resulting from market changes will
be offset by gains or losses on the hedged receivable, capital
item, or operating cost.
Management of price risks must consider market conditions
and availability. As these factors change, the company adjusts
its hedging strategy and modifies its futures, forward, and
option contract positions.
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," and FAS No. 109, "Accounting for Income
Taxes." The full amount of the company's accumulated
postretirement benefit obligation of $64 million ($1.32 per
common share) was recognized in 1992 as the cumulative effect on
prior years of changes in accounting principles, net of income
taxes, along with $6 million ($.13 per common share) related to
the adoption of the liability approach in accounting for income
taxes.
3. Cash Flow Information
Net cash provided by operating activities reflects cash
payments for interest and income taxes as follows:
(In millions of dollars) 1994 1993 1992
Interest paid $76 $69 $74
Income taxes paid 42 59 52
During 1993, $149 million of the company's 7-1/4%
convertible debentures due in 2012 was converted into common
stock of the company. The common stock was issued from the
company's treasury (see Note 17). 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
each of the years 1994, 1993, and 1991, and the remaining $8
million will be paid over the next two years. Other capital
expenditures for which payment will be made in the subsequent
year totaled $20 million, $10 million, and $32 million at year-
end 1994, 1993, and 1992, respectively.
Transactions affecting the debt and deferred
compensation associated with the Employee Stock Ownership Plan
as well as the revaluation of certain investments to fair value
are noncash transactions and are not reflected in the
Consolidated Statement of Cash Flows (see Notes 19 and 12,
respectively).
The effect of foreign currency exchange rate
fluctuations on cash and cash equivalents was not material.
4. Notes and Accounts Receivable
Notes and accounts receivable, net of the related
allowance for doubtful accounts, at year-end 1994 and 1993 are:
(In millions of dollars) 1994 1993
Notes receivable $ 1 $ 5
Accounts receivable 424 373
425 378
Allowance for doubtful accounts (3) (5)
Total $422 $373
5. Inventories
Major categories of inventories at year-end 1994 and
1993 are:
(In millions of dollars) 1994 1993
Crude oil and refined products $181 $144
Chemicals and other products 147 134
Materials and supplies 71 71
Total $399 $349
Substantially all inventories of crude oil and
refined products are valued using the LIFO method. If these
inventories had been valued at current cost rather than on the
LIFO basis at year-end 1994, their value would have been higher
by approximately $5 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, 1994, certain LIFO
inventory quantities were reduced. The effect of the reductions
was not material in 1994 or 1992. For 1993, the effect of the
reduction was to decrease net income by $5 million.
6. Investments and Other Assets
Investments and other assets consisted of the
following at December 31, 1994 and 1993:
(In millions of dollars) 1994 1993
Long-term receivables - net(1) $ 4 $ 17
Net deferred tax asset(2) 24 23
Investment in and advances
to equity affiliates 9 10
U. S. government obligations 17 26
Corporate stocks 34 14
Other 7 11
Total $95 $101
(1)During 1994, the company provided an $8 million allowance for
doubtful notes.
(2)For a discussion of the net deferred tax asset, see Note 14.
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 1994
and 1993:
(In millions of dollars) 1994 1993
Cost of injected gas $33 $31
Pension plan prepayment 20 -
Preoperating and startup costs 6 12
Intangible assets 6 -
Other 23 24
Total $88 $67
8. Property, Plant, and Equipment
Fixed assets and related reserves by business
segment at December 31, 1994 and 1993, are as follows:
<TABLE>
<CAPTION>
Reserves for
Depreciation,
Depletion, and
Gross Property Amortization Net Property
(In millions of dollars) 1994 1993 1994 1993 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Exploration and production $3,920 $3,783 $2,366 $2,294 $1,554 $1,489
Refining and marketing 577 561 366 340 211 221
Chemicals 755 760 355 357 400 403
Coal 532 517 267 249 265 268
Other 226 231 104 99 122 132
Total $6,010 $5,852 $3,458 $3,339 $2,552 $2,513
</TABLE>
9. Debt
Lines of Credit and Short-Term Borrowings
At year-end 1994, the company had available unused bank
lines of credit and revolving credit facilities of $480 million.
Of this amount, $285 million and $171 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
1994, 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.
At year-end 1994, short-term borrowings consisted of notes
payable totaling $110 million (6% average interest rate) and
commercial paper totaling $202 million (6.3% average interest
rate). Outstanding at year-end 1993 were notes payable totaling
$101 million (3.76% average interest rate) and commercial paper
totaling $164 million (3.56% average interest rate).
Long-Term Debt
The company's policy is to classify borrowings under
revolving credit facilities and commercial paper of up to $400
million in 1994 and $300 million in 1993 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.
<PAGE>
Long-term debt consisted of the following at year-end 1994
and 1993:
(In millions of dollars) 1994 1993
Debentures -
7% Debentures due November 1, 2011,
net of unamortized debt discount
of $114 million in 1994 and $116
million in 1993 (14.25% effective
rate) $136 $134
8-1/2% Sinking fund debentures
due June 1, 2006 56 68
Commercial Paper (6.29% at
December 31, 1994) 250 15
Guaranteed Debt of Employee Stock
Ownership Plan -
9.47% Series A notes due in
installments through
January 2, 2000 38 44
9.61% Series B notes due in
installments through
January 2, 2005 51 51
Notes Payable -
Variable interest rate
revolving credit agreements
with banks (6.4% average rate
at December 31, 1994)
$70 million due August 25, 1999;
$80 million due December 21, 1999 150 285
Variable interest rate loan
with banks - 36
681 633
Long-Term Debt Due Within One Year (8) (43)
Total $673 $590
Maturities of long-term debt due after December 31, 1994,
are $8 million in 1995, $9 million in 1996, $10 million in 1997,
$12 million in 1998, $412 million in 1999, and $230 million
thereafter.
In addition to the debt shown in the preceding table, the
company guaranteed its ratable portion of the debt of
unconsolidated affiliates accounted for by the equity method
totaling $17 million at year-end 1994 and $16 million at year-
end 1993. No loss is anticipated by reason of these guarantees.
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 17). 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 debt
during the periods and unused commitments for financing is
included in the Financial Condition discussion in Management's
Discussion and Analysis.
10. Contingencies
West Chicago
Since August 1979, when the company filed a plan with the
Nuclear Regulatory Commission to decommission a former operation
in West Chicago, Illinois, the company has been involved in a
number of judicial and administrative proceedings. 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 has been settled or resolved, the following
discusses the remaining proceedings.
Decommissioning - Several approvals have been received for
the decommissioning process, but a license amendment to
decommission has not been issued. The State of Illinois (the
State) has jurisdiction over the site and requires offsite
disposal of contaminated material. In July 1994, the company,
the City of West Chicago and the State executed a Settlement
Agreement (the Agreement) regarding the decommissioning of the
closed West Chicago facility. Pursuant to the Agreement, the
company leased appropriate support facilities during the summer
of 1994 and began shipments of material from the site to a
licensed permanent disposal facility in Utah in September 1994.
Under the Illinois Uranium and Thorium Mill Tailings
Control Act (the Act), the company is obligated to pay an annual
storage fee of $2.00 per cubic foot of byproduct material
located at the former facility. Under the Agreement, the amount
of the storage fee paid each year shall not exceed $26 million,
and all amounts paid pursuant to the Act are to be reimbursed to
the company as decommissioning expenditures are incurred. The
company has received reimbursement for all amounts paid under
the Act to the State in 1994 and will continue to seek
reimbursement for future amounts paid under the Act as
decommissioning costs are incurred.
The aggregate cost to decommission the former facility is
difficult to estimate because of the many contingencies,
including the terms of the license amendment required to
complete the decommissioning process. Decommissioning costs to
the company will be reduced by any amounts recovered pursuant to
the Energy Policy Act of 1992 (which could total up to $40
million, of which $7 million was received in 1994). At December
31, 1994, the remaining reserves provided for the cost to
decommission the site under the plan proposed by the company
were $157 million (before any further recovery under the Energy
Policy Act of 1992), payable over the time necessary to relocate
the materials, presently estimated at between four and six
years.
Offsite Areas - The U.S. Environmental Protection Agency
(EPA) has listed four areas in the vicinity of the West Chicago
facility on the National Priority List that the EPA promulgates
under authority of the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 and has designated the
company as a potentially responsible party in these four areas.
The EPA issued a unilateral administrative order for one of
these areas (referred to as the residential area), which
requires the company to conduct a removal action to excavate
contaminated soils and to ship the soil elsewhere for disposal.
While the company has agreed to conduct the cleanup, the company
continues to assert all of its rights, including the right to
seek compensation from the EPA for its expenses.
Judicial Proceedings - Several personal injury lawsuits
have been filed against the company's wholly owned subsidiary,
Kerr-McGee Chemical Corporation, by residents of West Chicago
seeking compensation for illnesses allegedly caused by exposure
to thorium wastes from the former West Chicago facility. One
case was settled in 1994 with a payment by the company. The
remaining cases are in the early stages of discovery. The
company will continue its defense of these cases and its efforts
to recover insurance proceeds from policies on the former
facility.
Summary
The company's plants and facilities are subject to various
environmental laws and regulations. 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. At year-end 1994, the remaining
reserves provided for the cost to investigate and/or remediate
all presently identified sites of former or current operations,
including $179 million for the former facility and offsite areas
in West Chicago, were $239 million. Expenditures through
December 31, 1994, totaled $228 million.
In addition to the environmental issues previously
discussed, 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 laws and regulations, the nature of the
company's businesses, and pending legal proceedings, it is not
possible to reliably estimate the amount or timing of all future
expenditures relating to 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.
11. Other Deferred Credits and Reserves
Other deferred credits and reserves consisted of the
following at year-end 1994 and 1993:
(In millions of dollars) 1994 1993
Reserves for site dismantlement,
reclamation, and remediation $260 $336
Postretirement benefit obligations 108 103
Other 45 47
Total $413 $486
During 1994, the company provided $10 million, net of $8 million
for reimbursements received pursuant to the Energy Policy Act of 1992 ($7
million related to the former facility in West Chicago, Illinois, see Note
10), for environmental reclamation and remediation of former plant sites. A
provision of $4 million was made in 1993. During 1992, $205 million was
provided principally for the West Chicago, Illinois, facility decommissioning
project and former chemical and refining operating sites.
12. Financial Instruments and Hedging Activities
Investments in Certain Debt and Equity Securities
During the first quarter of 1994, the company adopted the
accounting requirements of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," which
affects the company's accounting for investments in certain obligations of
the U.S. government and equity securities that are considered to be available
for sale. These financial instruments are carried in the Consolidated Balance
Sheet at fair value, which is based on quoted market prices. Prior to the
adoption of the new accounting method, these securities were carried at cost.
Net income was not affected by this change in accounting principle since
unrealized holding gains and losses, net of income taxes, are classified as
a separate component of Stockholders' Equity. The company held no securities
classified as held to maturity or trading during the year. At December 31,
1994 and 1993, these U.S. government obligations and equity securities were
as follows:
1994 1993
Gross Unrealized
(In millions of Fair Holding Gains Carrying Fair
dollars) Cost Value (Losses) Amount Value
Equity securities $12 $32 $20 $12 $43
U.S. government
obligations -
Maturing within
one year 11 11 - 2 2
Maturing between
one year and
four years 19 17 (2) 26 26
Total $42 $60 $18 $40 $71
Equity securities are carried in the Consolidated Balance
Sheet as Investments and Other Assets. U.S. government
obligations are carried as Current Assets or Investments and
Other Assets, depending upon their maturity. The change in the
equity component for unrealized holding gains and losses, net of
income taxes, during 1994 was as follows:
(In millions of dollars)
Balance January 1, 1994 $ -
Effect of change in accounting principle 20
Net unrealized holding losses (8)
Balance December 31, 1994 $12
Financial Instruments for Other than Trading Purposes
In addition to the investments discussed above, the
company holds or issues financial instruments for other than
trading purposes. At December 31, 1994 and 1993, the carrying
amount and estimated fair value of such financial instruments
for which fair value can be determined, are as follows:
1994 1993
Carrying Fair Carrying Fair
(In millions of dollars) Amount Value Amount Value
Cash and cash equivalents $82 $82 $94 $94
Long-term notes receivable 2 2 2 1
Contracts to sell foreign
currencies - 19 - 10
Contracts to purchase
foreign currencies - 95 - 202
Short-term borrowings 312 312 265 265
Long-term debt 681 759 633 764
The carrying amount of cash and cash equivalents
approximates fair value of those instruments due to their short
maturity. The fair value of notes receivable is based on
discounted cash flows. The fair value of the company's short-
term and 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. The
fair value of foreign currency forward contracts represents the
aggregate replacement cost based on financial institutions'
quotes.
It was not practicable to estimate the fair value of
financial instruments including investments in untraded, closely
held entities that are carried in the Consolidated Balance Sheet
at original cost of $4 million at both December 31, 1994 and
1993. It was not practicable to estimate the fair value of a
$10 million long-term note receivable held in connection with
the sale of a discontinued operation as the instrument is not
marketable. At December 31, 1994 and 1993, the average interest
rates were 4.8% and 3.8%, respectively.
This note is scheduled to mature in November 1997.
Hedging Activities
The company's foreign currency contracts are hedges
principally for chemicals' accounts receivable generated from
pigment sales denominated in foreign currencies ($56 million in
1994) and operating costs and capital expenditures in
international chemical and exploration and production joint-
venture operations ($117 million in 1994). The purpose of these
foreign currency hedging activities is to protect the company
from the risk that the eventual U.S. dollar amount from sales to
foreign customers and purchases from foreign suppliers will be
adversely affected by foreign currency exchange rates. During
1994, the company's net foreign currency hedging gains and
losses were immaterial. At year-end 1994, the company had
foreign currency contracts maturing between January and December
1995 to purchase for $86 million various foreign currencies (42
million British pounds sterling and $38 million Australian).
The company also had contracts to sell for $19 million various
currencies, principally European currencies, maturing between
January and April 1995. Net unrealized gains on these contracts
totaled $9 million at year-end 1994. 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). Additionally, at December 31, 1993, the
company had contracts to sell for $10 million various
currencies, principally European currencies, which matured
between January and May 1994.
Contract amounts do not quantify risk or represent assets
or liabilities of the company, but are used in the calculation
of cash settlements under the contracts. These financial
instruments are with major financial institutions, limit the
company's market risks, expose the company to credit risks, and
may at times be concentrated with certain institutions or groups
of institutions. However, the credit worthiness of these
institutions is subject to continuing review, and full
performance is anticipated.
The company also uses futures and option contracts to
reduce the effect of the price volatility of crude oil, natural
gas, and refined products. The futures contracts permit
settlement by delivery of commodities.
At year-end 1994, the aggregate value and quantities of
open crude oil and refined-product contracts were insignificant.
During 1994, the company sold forward approximately 25% and 11%
of its worldwide natural gas and crude oil production,
respectively, and 32% of refined-product sales. Additionally,
the company purchased forward contracts covering 9% of crude
runs at the refineries. Net hedging gains and losses are
recognized as a part of the transactions hedged and were
immaterial during 1994. The company also hedges a portion of
natural gas purchased for other operations; however, these
amounts were not material to the cost of enhanced recovery or
the total annual throughput volume of the operations.
Year-end hedge positions and activity during 1994 are not
necessarily indicative of future activities and results.
13. Taxes, Other than Income Taxes
Taxes, other than income taxes, during the years ended
December 31, 1994, 1993, and 1992, are composed of the
following:
(In millions of dollars) 1994 1993 1992
Production/severance $ 27 $ 28 $ 33
Payroll 18 19 19
Property 18 17 17
Other 12 15 15
Total 75 79 84
Motor fuel and other excise taxes(1) 372 239 219
Total $447 $318 $303
(1)These taxes are excluded from both sales and costs.
14. Income Taxes
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:
(In millions of dollars) 1994 1993 1992
Domestic $ 90 $120 $(99)
International 42 (2) 35
Total $132 $118 $(64)
During 1993, legislation was enacted that, among other
things, increased the U.S. Federal income tax rate by 1%
effective January 1, 1993. Separately, the income tax rate in
Australia was reduced from 39% to 33%. The deferred income tax
balances were adjusted to reflect these revised rates, which
increased the 1993 U.S. Federal deferred provision by $2 million
and decreased the international deferred benefit by $3 million.
The 1994, 1993, and 1992 provision (benefit) for income taxes on
income (loss) before extraordinary charge and cumulative effect
on prior years of changes in accounting principles is summarized
below:
(In millions of dollars) 1994 1993 1992
U. S. Federal -
Current $22 $12 $ 20
Deferred (3) 15 (67)
19 27 (47)
International -
Current 16 20 23
Deferred 2 (13) (14)
18 7 9
State 5 7 -
Total $42 $41 $(38)
Deferred tax liabilities (assets) at December 31, 1994 and
1993, are composed of the following:
(In millions of dollars) 1994 1993
Net deferred tax liability -
Accelerated depreciation $362 $325
Exploration and development 65 61
Undistributed earnings of
foreign subsidiaries 29 28
Postretirement benefits (44) (41)
Dismantlement, reclamation,
remediation, and other
reserves (109) (110)
Foreign operating loss
carryforwards (81) (62)
Other (43) (29)
179 172
Net deferred tax asset -
Accelerated depreciation 9 8
Other 5 1
Foreign operating loss
carryforward (38) (32)
(24) (23)
Total deferred taxes $155 $149
The net deferred tax asset shown in the preceding table
represents the net deferred taxes in certain foreign tax
jurisdictions and therefore is classified as Investments and
Other Assets in the Consolidated Balance Sheet.
At December 31, 1994, the company had foreign net operating
loss carryforwards totaling $360 million that have no expiration
dates.
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.
1994 1993 1992
U.S. statutory rate 35.0% 35.0% (34.0)%
Increases (decreases) resulting
from -
Statutory depletion in
excess of cost depletion (3.6) (4.9) (4.7)
Taxation of foreign operations (.5) 3.8 2.4
State income taxes 2.7 4.4 (2.7)
Adjustment of prior years'
accruals - (6.3) (12.6)
Federal income tax credits (1.1) (2.1) (4.6)
Adjustment of deferred tax
balances due to tax rate
changes - 4.8 -
Other - net (.8) - (3.5)
Total 31.7% 34.7% (59.7)%
15. 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; however, benefits available and costs to
individual employees vary depending on the employee's date of
retirement and date of employment with the company.
At December 31, 1994 and 1993, the actuarial and recorded
liabilities for postretirement benefits, none of which has been
funded, are as follows:
1994 1993
(In millions of dollars) Health Life Health Life
Actuarial present value of
accumulated postretirement
benefit obligations -
Retirees $(60) $(14) $(58) $(18)
Fully eligible active
participants (14) (2) (11) (2)
Other active participants (19) (3) (19) (3)
Total (93) (19) (88) (23)
Unrecognized net (gain) loss 2 (5) - 1
Accrued postretirement
expense $(91) $(24) $(88) $(22)
For the years ended December 31, 1994, 1993 and 1992, the
components of net periodic expense for postretirement benefits
were as follows:
1994 1993 1992
(In millions of dollars) Health Life Health Life Health Life
Service cost - benefits
earned during the
period $2 $1 $2 $1 $2 $1
Interest cost on
accumulated post-
retirement benefit
obligation 7 1 7 1 7 1
Net postretirement
expense $9 $2 $9 $2 $9 $2
The following assumptions were used in estimating the
actuarial present value of the accumulated postretirement
benefit obligations and net periodic postretirement benefit
expense:
1994 1993 1992
Future compensation increases 5.0% 5.0% 6.0%
Discount rate 8.5 7.5 8.5
The health care cost trend rate used to determine the year-
end 1994 accumulated postretirement obligation was 10% in 1995,
gradually declining to 5% in the year 2009 and thereafter. The
assumed trend rate used in measuring the year-end 1993
obligation was 12% in 1994, gradually declining to 4.5% in the
year 2008 and thereafter.
A 1% increase in the assumed health care cost trend rates
for each future year would increase the accumulated
postretirement benefit obligation by $11 million at December 31,
1994, and $10 million at December 31, 1993. In addition, the
aggregate of the service and interest cost components of net
periodic postretirement expense would increase by $1 million for
each of the years 1994 and 1993 and $2 million for 1992 as a
result of a 1% assumed increase.
16. 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 (ERISA).
The funded status of plans with assets in excess of
accumulated benefits at December 31, 1994 and 1993, is as
follows:
(In millions of dollars) 1994 1993
Plan assets at fair value $ 402 $ 415
Actuarial present value of
accumulated benefit obligations -
Vested (263) (262)
Nonvested (14) (18)
Total (277) (280)
Plan assets in excess of
accumulated benefit obligations $ 125 $ 135
Plan assets at fair value $ 402 $ 415
Projected benefit obligations -
Actuarial present value of
accumulated benefit
obligations (277) (280)
Projected salary increases (45) (45)
Total (322) (325)
Plan assets in excess of
projected benefit obligations 80 90
Unrecognized net asset at January 1, 1987 (26) (30)
Unrecognized prior service costs 17 20
Unrecognized net gain (51) (65)
Pension prepayment at end of year $ 20 $ 15
Net periodic pension credit, excluding a $2 million charge
in 1994 related to the restructuring program (see Note 21), for
each of the three years ended December 31, 1994, 1993, and 1992,
is summarized as follows:
(In millions of dollars) 1994 1993 1992
Service cost - benefits earned
during the period $10 $ 9 $ 9
Interest cost on projected
benefit obligations 24 23 20
Return on plan assets (6) (69) (35)
Net amortization and deferral (35) 33 (1)
Net pension credit $(7) $(4) $(7)
The amount of benefits that can be covered by the funded
plans is limited by ERISA and the Internal Revenue Code.
Therefore, the company has unfunded supplemental plans designed
to maintain benefits for all employees at the plan formula level
and to provide senior executives with benefits equal to a
specified percentage of their final average compensation. The
projected benefit obligation for these unfunded plans totaled
$13 million and $11 million at December 31, 1994 and 1993,
respectively. An additional liability of $6 million was
recognized in 1994 with an offsetting intangible asset (see Note
7) to record the amount by which the accumulated benefit
obligation exceeded the accrued pension expense for these plans.
Although not considered plan assets, the company has established
a grantor trust with a balance of $4 million at December 31,
1994, from which payments for certain of these supplemental
plans will be made. Net periodic pension expense for these
plans was $4 million for 1994 and $3 million for each of the
years 1993 and 1992.
In estimating the actuarial present value of the projected
benefit obligation and net periodic pension costs, the following
rates were used:
1994 1993 1992
Future compensation increases 5.0% 5.0% 6.0%
Discount rate 8.5 7.5 8.5
Long-term rate of return on
plan assets 9.0 9.0 9.0
17. Stockholders' Equity
Changes in common stock, capital in excess of par
value, and treasury stock for 1994, 1993, and 1992 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, 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
Exercise of stock options
and stock appreciation rights 36 - 1 - -
Issuance of shares for achievement
awards - - - (3) -
Balance December 31, 1994 53,304 $53 $309 1,610 $ 63
(1)See Note 9 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 and 33,350 shares was
issued as restricted stock to certain employees during 1993 and
1992, respectively. The restrictions on these shares lapse
three years from the date of issue. The restrictions on 28,325
shares issued in 1991 lapsed in 1994.
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.
18. 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.
In January 1995, the company's Board of Directors approved
a proposal to be brought before the stockholders to amend this
plan to restore the number of shares available to be granted to
one million. The proposal to amend the plan will be voted on by
the stockholders at the 1995 annual meeting.
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>
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 granted - - - 380,900 44.00- 46.88
Options exercised (13,000) 27.06 - (21,151) 32.38- 46.00
Options surrendered
upon exercise of
stock appreciation
rights (11,500) 33.38 - (8,500) 42.63- 47.63
Options cancelled - - - (32,468) 38.06- 50.56
Balance outstanding
December 31, 1994 33,000 27.06- 29.50 1,178,403 32.38- 51.69
Options exercisable
December 31, 1994 33,000 27.06- 29.50 561,534 32.38- 51.69
Shares available to
be granted
December 31, 1994 - 264,644
</TABLE>
With respect to all option outstanding on December 31,
1994, the average option price was $44.64; expiration dates
ranged from January 22, 1995, to March 8, 2004; and the market
value of each share subject to options was $46.19, based on the
average of the high and low prices as reported in the NYSE
Composite Transactions of the Wall Street Journal on December
30, 1994.
19. 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'
contribution to the Kerr-McGee Corporation Savings Investment
Plan (SIP). Most of the company's employees are eligible to
participate in both the ESOP and the SIP. Although the ESOP and
the SIP are separate plans, matching contributions to the ESOP
are contingent upon participants' contributions to the SIP.
In 1989, the ESOP borrowed $125 million from a group of
lending institutions and used the proceeds to purchase 2.7
million shares of the company's treasury stock. The borrowings
are guaranteed by the company and are reflected in the
Consolidated Balance Sheet as Long-Term Debt and offset by a
like amount of Deferred Compensation in Stockholders' Equity.
The company used the $125 million proceeds from the sale of the
stock to reacquire shares of its common stock on the open market
and in privately negotiated transactions.
The company stock acquired with the proceeds of the loan is
held by the ESOP trust in a loan suspense account. The
company's matching contribution and dividends on the shares held
by the ESOP are used to repay the loan. Stock is released from
the loan suspense account as the principal and interest are
paid. The stock is then allocated to participants' accounts at
market value as the participants' contributions are made to the
SIP. Both the Long-Term Debt and the Deferred Compensation
reflected in the company's Consolidated Balance Sheet are
reduced in equal amounts as the ESOP loan is repaid. Dividends
paid on the common stock held in participants' accounts are also
used to repay the loan. Stock with a market value equal to the
amount of the dividend is allocated to the participants'
accounts.
At December 31, 1994, the ESOP held 1,054,076 shares of
stock allocated to participants' accounts and 1,659,373 shares
in the loan suspense account. The shares allocated to
participants include 7,835 that were released in January 1995.
All ESOP shares are considered outstanding for earnings per
share calculations. Dividends on ESOP shares are charged to
retained earnings.
Compensation expense is recognized on the cash method and
is reduced for dividends paid on the ESOP shares. The company
recognized ESOP-related expense of $15 million in each of the
years 1994, 1993, and 1992. These amounts include interest
expense incurred on the ESOP debt of $9 million in 1994, $9
million in 1993, and $10 million in 1992. The company
contributed $14 million cash to the ESOP in 1994, $12 million in
1993, and $14 million in 1992. 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 1994, 1993, and 1992.
20. Other Financial Information
Condensed financial information relating to the company's
previously unconsolidated, wholly owned finance and insurance
subsidiaries is summarized below:
(In millions of dollars) 1994 1993 1992
Results of operations -
Interest income $ 20 $ 13 $ 12
Net income 4 3 3
Financial position -
Assets $460 $245 $357
Liabilities (362) (151) (266)
Stockholder's equity $ 98 $ 94 $ 91
21. Restructuring Charges
During 1994, the company implemented a restructuring program consisting
principally of a reorganization of corporate support functions. As a result of
the program, 237 employees were terminated during the year. The company accrued
a total of $8 million for future compensation, outplacement, and the cost of
special termination benefits for retiring employees to be paid from retirement
plan assets. The year-end reserve balance of $2 million represents primarily
future compensation, which is expected to be paid and charged to the reserve
during 1995.
22. Reporting by Business Segments
(In millions of dollars) 1994 1993 1992
Sales -
Exploration and production(1) $ 482 $ 369 $ 349
Refining and marketing 1,893 1,992 2,175
Chemicals 639 556 515
Coal 294 328 307
Other 45 36 36
Total $3,353 $3,281 $3,382
Operating profit (loss) -
Exploration and production $ 74 $ 82 $ 91
Refining and marketing 35 (28) (21)
Chemicals 92 70 79
Coal 45 80 77
Other (1) (5) 3
Total $ 245 $ 199 $ 229
Net operating profit (loss) -
Exploration and production $ 49 $ 52 $ 53
Refining and marketing 22 (19) (13)
Chemicals 59 44 50
Coal 34 58 53
Other (1) (3) 3
Total 163 132 146
Net interest expense (30) (27) (34)
Net nonoperating expense(2) (43) (28) (138)
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) $ 90 $ 77 $ (101)
Sales to unaffiliated customers -
U.S. operations $2,958 $3,045 $3,174
International operations:(3)
Canada - exploration and
production 54 53 48
North Sea - exploration
and production 191 81 92
Australia - chemicals 114 100 67
Other 36 2 1
395 236 208
Total $3,353 $3,281 $3,382
Operating profit (loss) -
U.S. operations $186 $210 $217
International operations:
Canada - exploration and
production 8 2 2
North Sea - exploration
and production 54 3 6
Australia - chemicals 7 (13) (13)
Other (10) (3) 17
59 (11) 12
Total $245 $199 $229
(1)Excludes intersegment sales, primarily crude oil sales, of
$151 million in 1994, $195 million in 1993, and $211 million
in 1992.
(2)Includes provision for reclamation and remediation of $6
million in 1994 and $130 million in 1992. The 1993 amount was
not material.
(3)Excludes international crude oil sales to domestic
affiliates of $28 million in 1994, $39 million in 1993, and $55
million in 1992.
<PAGE>
(In millions of dollars) 1994 1993 1992
Depreciation, depletion, and
amortization expense -
Exploration and production $228 $206 $201
Refining and marketing 28 26 23
Chemicals 51 49 49
Coal 24 26 25
Other 14 14 14
Total $345 $321 $312
Capital expenditures -
Exploration and production $318 $318 $264
Refining and marketing 18 34 40
Chemicals 51 39 33
Coal 27 28 69
Other 3 6 9
Total capital expenditures 417 425 415
Exploration expenses -
Petroleum exploration and production:
Dry hole costs 30 28 5
Amortization of undeveloped leases 17 18 18
Other 35 22 29
Total 82 68 52
Minerals and other 3 3 3
Total exploration expenses 85 71 55
Less - Amortization of oil and gas
and minerals leases and other
noncash expenses (18) (18) (18)
67 53 37
Total capital expenditures and
cash exploration expenses $ 484 $ 478 $ 452
Identifiable assets -
Exploration and production $1,781 $1,669 $1,547
Refining and marketing 579 541 595
Chemicals 735 733 753
Coal 320 335 327
Other 118 135 127
Total 3,533 3,413 3,349
Corporate assets 165 134 172
Total $3,698 $3,547 $3,521
Identifiable assets -
U.S. operations $2,292 $2,223 $2,256
International operations:
Canada - exploration and
production 193 206 233
North Sea - exploration
and production 679 681 516
Australia - chemicals 257 256 300
Other 112 47 44
1,241 1,190 1,093
Total $3,533 $3,413 $3,349
23. 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, 1994,
consisted of the following:
<TABLE>
<CAPTION>
Gross Revenues Results of
Sales to Sales to Production Other Depreciation Operations,
(In millions Unaffiliated Affiliated (Lifting) Related Exploration and Depletion Income Tax Producing
of dollars) Entities Entities Total Costs Costs Expenses Expenses Expenses Activities
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1994 -
Domestic $169 $108 $277 $ 96 $ 6 $45 $115 $ 4 $11
Canada 48 - 48 13 1 6 26 1 1
North Sea 182 14 196 70 - 17 61 17 31
Other international - 14 14 5 1 14 5 (3) (8)
Total crude oil
and natural gas
activities 399 136 535 184 8 82 207 19 35
Other(1) 83 15 98 73 1 - 4 6 14
Total $482 $151 $633 $257 $ 9 $82 $211 $25 $49
1993 -
Domestic $203 $129 $332 $105 $ 8 $36 $119 $20 $44
Canada 50 2 52 17 1 8 24 - 2
North Sea 77 17 94 45 - 13 36 - -
Other international - 22 22 7 - 11 5 5 (6)
Total crude oil
and natural gas
activities 330 170 500 174 9 68 184 25 40
Other(1) 39 25 64 43 - - 4 5 12
Total $369 $195 $564 $217 $ 9 $68 $188 $30 $52
1992 -
Domestic $187 $130 $317 $111 $ 8 $28 $109 $19 $42
Canada 44 2 46 17 1 8 20 - -
North Sea 89 27 116 47 8 14 44 2 1
Other international - 28 28 8 - 2 7 12 (1)
Total crude oil
and natural gas
activities 320 187 507 183 17 52 180 33 42
Other(1) 29 24 53 34 - - 3 5 11
Total $349 $211 $560 $217 $17 $52 $183 $38 $53
(1)Includes brokered gas marketing, gas processing plants, pipelines,
and other items that do not fit the definition of crude oil and
natural gas activities but have been included above to reconcile to
the segment presentations.
</TABLE>
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.
1994 1993 1992
Average sales price -
Crude oil (per barrel)
Domestic $14.64 $15.76 $18.17
Canada 13.39 14.65 16.24
North Sea 15.15 15.90 18.71
Other international 14.48 14.97 17.44
Average 14.81 15.64 18.11
Natural gas (per MCF)
Domestic 1.83 2.03 1.67
Canada 1.37 1.42 1.03
North Sea 2.11 1.39 1.73
Average 1.76 1.92 1.56
Production costs -
(per barrel of oil equivalent)(1)
Domestic 4.34 4.32 4.61
Canada 2.75 3.44 3.51
North Sea 5.25 7.24 7.80
Other international 4.91 5.11 4.98
Average 4.47 4.73 5.01
(1)Natural gas production has been converted to a barrel of oil
equivalent based on approximate relative heating value (6 MCF
equals 1 barrel).
24. 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 1994 and 1993 are set forth below:
(In millions of dollars) 1994 1993
Capitalized costs -
Proved properties $3,746 $3,602
Unproved properties 101 103
Other 73 78
3,920 3,783
Reserves for depreciation,
depletion, and amortization -
Proved properties 2,261 2,195
Unproved properties 60 53
Other 45 46
2,366 2,294
Net capitalized costs $1,554 $1,489
25. 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,
1994, are reflected in the following table:
Property
Acquisition Exploration Development
(In millions of dollars) Costs(1) Costs(2) Costs(3)
1994 -
Domestic $43 $ 67 $125
Canada 1 5 9
North Sea - 16 39
China - 1 56
Other international 3 12 2
Total $47 $101 $231
1993 -
Domestic $ 5 $ 48 $93
Canada - 5 6
North Sea - 16 172
China - 5 -
Other international 3 4 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
(1)Includes $36 million and $8 million applicable to purchases of
reserves in place in 1994 and 1992, 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.
26. 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 has no 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, 1994:
Crude Oil and Condensate
(In millions of barrels)
North
Domestic Canada Sea China Other Total
Proved developed and
undeveloped reserves-
Balance December 31,1991 80.4 14.3 61.0 - 4.7 160.4
Revisions of previous
estimates .5 .9 5.1 - 1.2 7.7
Purchases of reserves
in place 2.1 .1 - - - 2.2
Sales of reserves in
place (.3) (.7) - - - (1.0)
Extensions, discoveries,
and other additions 1.2 .6 20.0 - - 21.8
Production (9.3) (1.7) (5.9) - (1.6) (18.5)
Balance December 31, 1992 74.6 13.5 80.2 - 4.3 172.6
Revisions of previous
estimates 5.2 .7 6.4 - .3 12.6
Purchases of reserves
in place .3 - - 26.1 - 26.4
Sales of reserves in
place (.4) (.1) - - - (.5)
Extensions, discoveries,
and other additions 5.9 .6 .8 - - 7.3
Production (10.1) (1.7) (6.1) - (1.5) (19.4)
Balance December 31, 1993 75.5 13.0 81.3 26.1 3.1 199.0
Revisions of previous
estimates 4.9 1.4 5.7 - - 12.0
Purchases of reserves
in place 1.3 .1 - - .1 1.5
Sales of reserves in
place (1.0) (.1) - - (2.1) (3.2)
Extensions, discoveries,
and other additions 5.7 .2 - - - 5.9
Production (9.3) (1.7) (12.6) - (1.0) (24.6)
Balance December 31, 1994 77.1 12.9 74.4 26.1 .1 190.6
Proved developed reserves -
December 31, 1991 42.7 12.8 20.9 - 4.4 80.8
December 31, 1992 40.1 13.4 16.3 - 3.9 73.7
December 31, 1993 44.8 12.9 40.5 - 2.7 100.9
December 31, 1994 44.5 12.4 48.8 - .1 105.8
Natural Gas
(In billions of cubic feet)
North
Domestic Canada Sea Other Total
Proved developed and
undeveloped reserves-
Balance December 31,1991 540.6 137.7 159.7 4.0 842.0
Revisions of previous
estimates 19.8 3.4 2.6 - 25.8
Purchases of reserves
in place 1.2 .1 - - 1.3
Sales of reserves in
place (5.7) (8.0) - - (13.7)
Extensions, discoveries,
and other additions 17.7 9.6 - - 27.3
Production (88.2) (18.9) (.9) - (108.0)
Balance December 31, 1992 485.4 123.9 161.4 4.0 774.7
Revisions of previous
estimates (6.2) (7.2) 16.2 (4.0) (1.2)
Purchases of reserves
in place .2 - - - .2
Sales of reserves in
place (3.3) (1.7) - - (5.0)
Extensions, discoveries,
and other additions 21.7 14.2 8.2 - 44.1
Production (85.2) (18.4) (.9) - (104.5)
Balance December 31, 1993 412.6 110.8 184.9 - 708.3
Revisions of previous
estimates 36.0 (16.6) 18.5 - 37.9
Purchases of reserves
in place 16.3 .9 - - 17.2
Sales of reserves in
place (.9) (1.0) - - (1.9)
Extensions, discoveries,
and other additions 181.0 6.0 - - 187.0
Production (76.8) (18.1) (4.4) - (99.3)
Balance December 31, 1994 568.2 82.0 199.0 - 849.2
Proved developed reserves -
December 31, 1991 378.4 131.5 56.9 4.0 570.8
December 31, 1992 345.5 120.4 56.8 4.0 526.7
December 31, 1993 346.8 107.4 113.2 - 567.4
December 31, 1994 345.9 78.6 134.3 - 558.8
The following presents the company's barrel of oil
equivalent proved developed and undeveloped reserves based on
approximate relative heating value (6 MCF equals 1 barrel).
(In millions of North
equivalent barrels) Domestic Canada Sea China Other Total
December 31, 1991 170.5 37.2 87.6 - 5.4 300.7
December 31, 1992 155.5 34.1 107.1 - 5.0 301.7
December 31, 1993 144.3 31.5 112.1 26.1 3.1 317.1
December 31, 1994 171.8 26.6 107.5 26.1 .1 332.1
27. 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 of total
reserves, development costs, 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>
Standardized
Future Measure of
Development 10% Discounted
(In millions Future and Production Future Future Net Annual Future Net
of dollars) Cash Inflows Costs Income Taxes Cash Flows Discount Cash Flows
<S> <C> <C> <C> <C> <C> <C>
1994 -
Domestic $2,124 $1,013 $257 $ 854 $312 $ 542
Canada 297 79 65 153 63 90
North Sea 1,679 596 280 803 237 566
China 418 193 52 173 77 96
Other international 3 - 1 2 1 1
Total $4,521 $1,881 $655 $1,985 $690 $1,295
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
China 309 258 17 34 55 (21)
Other international 41 30 6 5 1 4
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
</TABLE>
The changes in the standardized measure of future net cash
flows are presented below for each of the past three years:
(In millions of dollars) 1994 1993 1992
Net change in sales and transfer
prices and in production costs $ 265 $ (433) $ 149
Changes in estimated future
development costs (44) (137) (32)
Sales and transfers less
production costs (351) (326) (324)
Purchases of reserves in place 20 (9) 9
Changes due to extensions,
discoveries, etc. 97 96 99
Changes due to revisions in
quantity estimates 131 86 32
Current period development costs 231 274 220
Accretion of discount 120 150 122
Changes in income taxes (135) 156 (71)
Timing and other (1) 1 3
Net change 333 (142) 207
Total at beginning of year 962 1,104 897
Total at end of year $1,295 $ 962 $1,104
28. 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 governmental regulations.
(In thousands of tons) 1994 1993 1992 1991 1990
Proved and probable
(demonstrated)
reserves, December 31 -
Coal 864,180 887,900 906,400 774,900 793,600
Heavy minerals 6,000(1) 8,000 8,600 9,000 9,500
Production -
Coal 25,607 23,325 20,756 21,750 19,782
Heavy minerals 268 263 262 251 139
Average market price
(per ton) -
Coal $10.73 $13.78 $14.57 $ 14.18 $ 13.52
Heavy minerals 85.43 69.47 77.99 101.35 101.53
(1)Represents 173 million tons of sand containing 3.5% heavy
minerals in Western Australia. The percentages of valuable
heavy minerals within the heavy mineral concentrate are 4.3%
rutile, 61.2% ilmenite, 3.5% leucoxene, and 11% zircon.
29. Quarterly Financial Information (Unaudited)
A summary of quarterly consolidated results for 1994
and 1993 is presented below:
<TABLE>
<CAPTION>
Net Income
(In millions of dollars, Operating Net Per Common
except per-share amounts) Sales Profit Income Share
<S> <C> <C> <C> <C>
1994 Quarter Ended -
March 31 $ 801 $ 55 $22 $ .42
June 30 865 74 30 .58
September 30 858 62 18 .35
December 31 829 54 20 .39
Total $3,353 $245 $90 $1.74
1993 Quarter Ended -
March 31 $ 783 $ 55 $24 $ .50
June 30 846 71 34 .70
September 30 819 49 19 .39
December 31 833 24 - -
Total $3,281 $199 $77 $1.57(1)
(1)The 1993 quarterly amounts do not add to the annual
per-share amount due to shares issued during the year
(see Note 17).
</TABLE>
The company's common stock is listed for trading on
the New York Stock Exchange and on December 31, 1994, was
held by approximately 12,000 shareholders. The ranges of
sales prices and dividends declared during the last two
years were as follows:
Market Prices Dividends
1994 1993 per Share
High Low High Low 1994 1993
Quarter Ended -
March 31 48-1/4 41 49-3/8 41-3/4 $.38 $.38
June 30 48-1/2 40 53-1/4 47-3/4 .38 .38
September 30 51 46-1/8 56 48 .38 .38
December 31 49-1/4 43-3/4 54 43-5/8 .38 .38
<PAGE>
<TABLE>
Six-Year Financial Summary
(In millions of dollars,
except per-share amounts) 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C>
Summary of Net Income (Loss)
Sales $3,353 $3,281 $3,382 $3,274 $3,683 $3,000
Operating costs and expenses 3,185 3,135 3,422 3,090 3,374 2,732
Interest expense 59 47 66 78 86 72
Total costs and expenses 3,244 3,182 3,488 3,168 3,460 2,804
109 99 (106) 106 223 196
Other income (expense) 23 19 42 60 (67) 19
Provision (benefit) for income
taxes 42 41 (38) 64 43 81
Income (loss)from continuing
operations before extraordinary
charge and cumulative effect on
prior years of changes in
accounting principles 90 77 (26) 102 113 134
Income from discontinued operations - - - - 37 22
Extraordinary charge - - (5) - - -
Cumulative effect on prior
years of changes in
accounting principles - - (70) - - -
Net income (loss) $ 90 $ 77 $ (101) $ 102 $ 150 $ 156
Common Stock Information, per Share
Net income (loss) per common share
Continuing operations $ 1.74 $ 1.57 $ (.53) $ 2.10 $ 2.26 $ 2.75
Discontinued operations - - - - .75 .45
Extraordinary charge - - (.10) - - -
Cumulative effect on prior years
of changes in accounting
principles - - (1.45) - - -
Total $ 1.74 $ 1.57 $(2.08) $ 2.10 $ 3.01 $ 3.20
Dividends declared 1.52 1.52 1.52 1.50 1.41 1.27
Stockholders' equity 29.82 29.24 27.93 31.43 30.70 29.31
Market high for the year 51.00 56.00 46.38 46.88 53.63 52.00
Market low for the year 40.00 41.75 35.63 35.13 42.38 37.38
Market price at year-end $46.25 $45.25 $45.00 $38.63 $44.88 $50.75
Shares outstanding at
year-end (thousands) 51,694 51,655 48,284 48,229 48,453 50,144
Balance Sheet Information
Working capital $ 73 $ 79 $ 210 $ 343 $ 472 $ 328
Property, plant, and
equipment, net 2,552 2,513 2,422 2,299 2,169 2,373
Total assets 3,698 3,547 3,521 3,421 3,473 3,332
Long-term debt 673 590 792 926 805 858
Total debt 993 898 971 983 820 886
Stockholders' equity 1,543 1,512 1,350 1,516 1,491 1,476
Cash Flow Information
Net cash provided by operating
activities 355 424 277 194 579 346
Capital expenditures 411 451 373 504 488 365
Dividends paid 78 73 73 72 69 58
Sale (purchase) of treasury
stock, net $ - $ - $ - $ (13) $ (98) $ 83
Ratios and Percentage
Current ratio 1.1 1.1 1.3 1.6 1.7 1.6
Average price/earnings ratio 26.1 31.1 NM 19.5 15.9 14.0
Total debt to total capitalization 39% 37% 42% 39% 34% 37%
<PAGE>
Six-Year Operating Summary
1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C>
Exploration and Production
Net production of crude oil
and condensate
(thousands of barrels
per day)
Domestic 25.5 27.8 25.5 23.0 20.7 21.4
Canada 4.7 4.7 4.5 4.6 4.3 3.1
North Sea 34.3 16.7 16.0 18.6 21.2 17.2
Other international 2.8 4.0 4.5 4.2 4.2 4.1
Total 67.3 53.2 50.5 50.4 50.4 45.8
Average price of crude oil
sold (per barrel)
Domestic $14.64 $15.76 $18.17 $19.24 $22.22 $17.73
Canada 13.39 14.65 16.24 17.36 20.58 15.71
North Sea 15.15 15.90 18.71 19.64 21.84 17.64
Other international 14.48 14.97 17.44 16.71 20.43 15.71
Average $14.81 $15.64 $18.11 $19.01 $21.77 $17.35
Natural gas deliveries
(MMCF per day) 271 286 296 281 255 249
Average price of natural
gas delivered (per MCF) $ 1.76 $ 1.92 $ 1.56 $ 1.44 $ 1.66 $ 1.63
Net exploratory wells drilled
Oil 2.10 1.22 .86 3.22 2.07 5.31
Gas 7.51 1.00 1.73 2.41 10.41 1.66
Dry 8.47 10.09 5.53 9.18 16.15 15.97
Total 18.08 12.31 8.12 14.81 28.63 22.94
Net development wells drilled
Oil 9.60 17.81 11.33 26.18 16.61 16.39
Gas 12.67 26.09 15.93 14.01 35.18 21.53
Dry 4.63 2.33 3.05 3.04 1.71 3.30
Total 26.90 46.23 30.31 43.23 53.50 41.22
Undeveloped net acreage
(thousands)
Domestic onshore 237 277 362 409 333 401
Domestic offshore 262 246 258 281 257 221
Canada 154 161 184 209 237 287
North Sea 363 243 184 188 113 123
Other international 1,591 1,926 217 4,092 4,166 3,421
Total 2,607 2,853 1,205 5,179 5,106 4,453
Developed net acreage
(thousands)
Domestic onshore 370 384 418 447 385 406
Domestic offshore 172 155 131 144 157 148
Canada 165 156 163 202 203 208
North Sea 21 21 18 17 17 14
Other international 19 43 24 24 24 24
Total 747 759 754 834 786 800
Estimated proved reserves
Crude oil and condensate
(millions of barrels) 191 199 173 160 136 117
Natural gas (billions of
cubic feet) 849 708 775 842 826 794
Refining and Marketing
Refining capacity (thousands of
barrels per day)
Crude oil distillation 181 181 181 181 181 181
Downstream processing units 155 155 155 155 155 155
Refinery runs (thousands of
barrels per day) 146 140 135 130 142 147
Refined products produced
(thousands of barrels per day)
Unleaded gasoline 82.1 77.8 75.9 77.2 84.0 66.7
Leaded gasoline - - - - 3.0 15.2
Distillate 45.6 41.0 39.7 41.3 43.4 46.1
Residual fuel 11.4 13.2 13.5 13.7 13.1 11.0
Solvents, LPG, and asphalt 10.2 10.0 9.5 8.3 9.7 10.0
Other 13.0 14.3 12.7 10.3 9.9 13.9
Total 162.3 156.3 151.3 150.8 163.1 162.9
Refined products sold (thousands
of barrels per day)
Unleaded gasoline 115.1 113.1 119.5 110.0 108.5 86.8
Leaded gasoline - - - .3 4.2 15.7
Distillate 75.9 85.6 83.3 72.2 66.1 66.0
Residual fuel 9.7 12.4 11.3 11.7 11.3 8.6
Solvents, LPG, and asphalt 18.0 16.0 19.1 15.9 14.2 11.2
Other 14.7 11.5 9.6 10.6 11.0 12.7
Total 233.4 238.6 242.8 220.7 215.3 201.0
Refined-product sales prices
(cents per gallon)
Unleaded gasoline 53.06 55.51 61.50 65.78 74.06 59.32
Leaded gasoline - - - 70.56 69.70 60.10
Distillate 50.78 53.78 57.17 61.60 71.18 56.03
Residual fuel 29.88 30.61 31.72 27.30 41.25 39.92
Solvents, LPG, and asphalt 39.59 41.16 38.00 44.46 45.27 39.19
Other 68.16 60.66 69.06 69.58 86.48 77.75
Average 51.27 52.89 57.07 61.02 70.11 57.51
Chemicals
Industrial and specialty chemical
sales (thousands of tons) 381 331 314 263 233 196
Heavy-mineral sales (thousands
of tons) 89 191 92 114 86 22
Treated forest-product sales
(millions of board feet) 207 223 237 202 228 205
Coal
Sales (millions of tons) 27.5 23.5 20.8 21.9 19.8 17.5
Recoverable reserves
(millions of tons) 864 888 906 775 794 785
Employees
Number of employees at year-end 5,524 5,812 5,866 6,072 6,756 7,942
Total wages and benefits
(millions of dollars) $319 $319 $326 $323 $398 $361
</TABLE>
EXHIBIT 21
KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES
SUBSIDIARIES
State or Country Percent
Name of Subsidiary of Incorporation Owned
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)
Kerr-McGee China Petroleum Ltd. Bahamas 100%
(1)Owned by Kerr-McGee Refining Corporation
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, 1994.
EXHIBIT 23
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the
incorporation of our reports dated February 17, 1995, included on
page 26 of the company's 1994 Annual Report to Stockholders and
incorporated by reference in this Form 10-K and on page 35 of this
Form 10-K, into the company's previously filed Form S-8's numbered
2-90981, 33-18268, 33-24274, and 33-50949, and the company's
previously filed Form S-3's numbered 2-78952, 33-5473, and
33-66112.
(ARTHUR ANDERSEN LLP)
ARTHUR ANDERSEN LLP
Oklahoma City, Oklahoma
March 29, 1995
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, 1994 (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 14th day of March, 1995.
(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, 1994 (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 14th day of March, 1995.
(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, 1994 (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 14th day of March, 1995.
(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, 1994 (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 14th day of March, 1995.
(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, 1994 (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 14th day of March, 1995.
(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, 1994 (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 14th day of March, 1995.
(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, 1994 (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 14th day of March, 1995.
(Martin C. Jischke)
Martin C. Jischke, 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, 1994 (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 14th day of March, 1995.
(Farah M. Walters)
Farah M. Walters, 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, 1994 (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 14th day of March, 1995.
(F. A. McPherson)
F. A. McPherson, Chairman of the
Board and Chief Executive Officer
and Director
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet at December 31, 1994, and the
Consolidated Statement of Income for the year ended December 31, 1994,
and is qualified in its entirety by reference to such From 10-K.
</LEGEND>
<CIK> 0000055458
<NAME> KERR-MCGEE CORPORATION
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 82<F1>
<SECURITIES> 0<F2>
<RECEIVABLES> 425<F3>
<ALLOWANCES> 3
<INVENTORY> 399
<CURRENT-ASSETS> 963
<PP&E> 6010
<DEPRECIATION> 3548
<TOTAL-ASSETS> 3698
<CURRENT-LIABILITIES> 890
<BONDS> 0
<COMMON> 53
0
0
<OTHER-SE> 1490<F4>
<TOTAL-LIABILITY-AND-EQUITY> 3698
<SALES> 3353
<TOTAL-REVENUES> 3353
<CGS> 2533
<TOTAL-COSTS> 3244
<OTHER-EXPENSES> 711
<LOSS-PROVISION> 0<F5>
<INTEREST-EXPENSE> 59
<INCOME-PRETAX> 132
<INCOME-TAX> 42
<INCOME-CONTINUING> 90
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 90
<EPS-PRIMARY> 1.74
<EPS-DILUTED> 0
<FN>
<F1>See Note 1 to the Consolidated Financial Statements.
<F2>See Note 12 to the Consolidated Financial Statements.
<F3>See Note 4 to the Consolidated Financial Statements.
<F4>See Notes 12 and 17 to the Consolidated Financial Statements.
<F5>See Schedule II to Form 10-K.
</FN>
</TABLE>
