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, 1995 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 $3 billion as of February 29, 1996.
The number of shares of common stock outstanding as of February 29,
1996, was 50,566,862.
DOCUMENTS INCORPORATED BY REFERENCE
Specified sections of the Kerr-McGee Corporation 1995 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 1996 Annual Meeting of Stockholders, which will be filed with the
Securities and Exchange Commission within 120 days after December 31,
1995, 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 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 1995, the company disposed of substantially all of its
refining and marketing assets and exited the refining and marketing
business, which had been conducted by wholly owned subsidiaries,
Kerr-McGee Refining Corporation, Southwestern Refining Company,
Inc., and Cato Oil and Grease Co.
INDUSTRY SEGMENTS
For information as to business segments of the company,
reference is made to Note 21 to the Consolidated Financial
Statements in the 1995 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 and natural gas.
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 Texas, Oklahoma, and Wyoming; Canada; and
Southeast Asia.
____________
Except as indicated under Items 1 through 3, 5 through 8, and
10 through 14, no other information appearing in either the
company's 1995 Annual Report to Stockholders or its 1996 Proxy
Statement is deemed to be filed as part of this annual report
on Form 10-K.
<PAGE>
Kerr-McGee's 1995 oil production increased 5% to 70,400
barrels per day, which continued a steady rise in production that
began in 1988. Oil production levels for 1996 are not expected to
vary significantly as new production in China and the Gulf of
Mexico should offset the production from divested properties
discussed below and the normal decline of older fields. Kerr-
McGee's average oil price rose 8% to $15.99 per barrel in 1995.
Natural gas sales averaged 291 million cubic feet per day, up
7% from 1994. Spot sales constituted approximately 75% of 1995
sales, about the same as 1994. The average natural gas price
declined 14% in 1995 to $1.52 per thousand cubic feet.
Kerr-McGee continued to add to its prospect inventory in
selected domestic and international areas during 1995. Total 1995
expenditures for property additions, exploration, and development
were $445 million, a 17% increase from $379 million last year.
The company continues to reduce per-unit lifting costs despite
inflation and rising regulatory-compliance expense. Since 1990,
lifting cost has decreased 24% to $4.02 per oil-equivalent barrel
in 1995.
During the 1995 third quarter, the company's exploration and
production operating unit announced a divestiture and restructuring
program. Included in this program are a number of crude oil and
natural gas producing properties that are considered nonstrategic.
The majority of these properties are located onshore in the United
States; however, certain of these properties are located in the
Gulf of Mexico, Canada, and the North Sea. At September 30, 1995,
these properties constituted approximately 10% of the company's oil
and gas reserves, 10% of the oil and gas production volumes, and 5%
of the company's total 1995 cash flow from operations and are
expected to be sold or abandoned by the end of 1996.
Undeveloped Acreage
As of December 31, 1995, the company had interests in
undeveloped oil and gas leases in the Gulf of Mexico and nine
states in the United States, onshore Canada, the United Kingdom
sector of the North Sea, offshore China, and onshore in other
international areas as follows:
Gross Net
Location Acreage Acreage
Domestic -
Onshore 241,066 158,997
Offshore 437,980 313,415
679,046 472,412
Canada 142,458 114,538
North Sea 948,800 357,573
China 717,837 341,045
Other international -
Indonesia 2,029,722 676,574
Papua New Guinea 1,900,000 632,700
3,929,722 1,309,274
Total Undeveloped Acreage 6,417,863 2,594,842
The company also owned North American onshore undeveloped oil
and gas mineral and royalty interests totaling 857,338 gross or
159,822 net acres.
Developed Acreage
At December 31, 1995, 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 as follows:
Gross Net
Location Acreage Acreage
Domestic -
Onshore 818,474 355,320
Offshore 391,215 181,786
1,209,689 537,106
Canada 339,993 158,679
North Sea 172,330 21,848
China 78,332 19,191
Total Developed Acreage 1,800,344 736,824
The company also owned developed oil and gas mineral and
royalty interests in North America totaling 622,584 gross or 60,806
net acres.
Net Exploratory and Development Wells
Domestic and international exploratory and development wells
drilled during the three years ended December 31, 1995, are
reflected in the following table:
1995 1994 1993
Exploratory Wells - Net(1)
Domestic
Productive 2.00 7.53 1.40
Dry holes 6.51 5.26 5.30
8.51 12.79 6.70
Canada
Productive 1.71 1.73 -
Dry holes 1.43 1.31 1.75
3.14 3.04 1.75
North Sea
Productive - .35 .82
Dry holes .77 .62 2.29
.77 .97 3.11
China
Dry holes .45 - .50
Other international
Dry holes - 1.28 .25
Total 12.87 18.08 12.31
Development Wells - Net(1)
Domestic
Productive 30.23 17.26 33.10
Dry holes 2.28 1.36 .83
32.51 18.62 33.93
Canada
Productive 6.92 3.39 9.52
Dry holes .67 3.02 1.50
7.59 6.41 11.02
North Sea
Productive 1.26 1.62 .91
Dry holes - .25 -
1.26 1.87 .91
China
Productive 2.45 - -
Other international
Productive - - .37
Total 43.81 26.90 46.23
(1)Net Wells - The total of the company's fractional working
interests in "gross wells" expressed as the equivalent number of
full-interest wells.
Gross and Net Wells
The company's interest in productive oil and gas wells at
December 31, 1995, is shown in the following table. These wells
include 7,730 gross or 489.69 net wells associated with secondary-
recovery projects and 285 gross or 116.28 net wells that have
multiple completions but are included as single wells. Of the net
wells below, 85% are domestic, 14% in Canada, and 1% in the North
Sea and China. Of the domestic wells, approximately 58% are in
Texas, 12% in Wyoming, 11% in Oklahoma, 7% in Louisiana, 9%
offshore in Federal waters, and 3% in other areas.
Gross Net
Location Wells Wells
Crude Oil
Domestic 9,869 603.17
Canada 731 109.50
North Sea 70 9.51
China 10 2.45
10,680 724.63
Natural Gas
Domestic 2,265 519.37
Canada 201 68.10
North Sea 22 1.69
2,488 589.16
Total Wells 13,168 1,313.79
Results of Operations, Costs Incurred, and Capitalized Costs
Reference is made to Notes 23, 24, and 25 to the Consolidated
Financial Statements in the 1995 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 and costs incurred in crude oil and natural
gas activities for the past three years, and capitalized costs of
crude oil and natural gas activities at December 31, 1995 and 1994.
Crude Oil and Natural Gas Sales
The following table summarizes the sales of the company's
crude oil and natural gas production (including sales to
discontinued operations) for the three years ended December 31,
1995:
(In millions) 1995 1994 1993
Crude oil and condensate - barrels
Domestic 10.6 9.3 10.1
Canada 1.7 1.7 1.7
North Sea 13.6 12.4 5.8
Other international - 1.0 1.5
25.9 24.4 19.1
Crude oil and condensate
Domestic $165.7 $136.3 $159.6
Canada 26.4 23.2 25.3
North Sea 221.9 187.2 92.9
Other international - 14.4 21.7
$414.0 $361.1 $299.5
Natural gas - MCF
Domestic 82.2 76.8 85.1
Canada 16.5 18.1 18.4
North Sea 7.4 4.1 .9
106.1 99.0 104.4
Natural gas
Domestic $127.8 $140.4 $172.7
Canada 14.1 24.9 26.2
North Sea 19.8 8.6 1.2
$161.7 $173.9 $200.1
Sales of Production
The company's domestic crude oil is sold at spot prices. The
company's share of Canadian crude oil is sold in Canada at market
prices, while crude oil from other international operations is sold
at local spot prices. Gas production is sold primarily to the
company's marketing affiliates and ultimately resold to utilities,
industrial customers, and intrastate pipelines under short-term
contracts at market prices. Although sold at market prices, the
marketing of domestic natural gas is focused on long-term
relationships with selected industrial customers and local
distribution companies. Prior to the sale of the discontinued
refining and marketing operations, most of the company's domestic
crude oil production was exchanged at market prices for crude oil
used in the company's refineries.
Average Sales Prices and Production Costs
Reference is made to Note 23 to the Consolidated Financial
Statements in the 1995 Annual Report to Stockholders, which note is
incorporated by reference in Item 8, for information regarding
average sales prices per unit of crude oil and natural gas and
production costs per barrel of oil equivalent for each of the past
three years.
Secondary Recovery
The company continues to initiate and/or participate in
secondary-recovery projects where geological, engineering, and
economic conditions are favorable. As of December 31, 1995, the
company was participating in 67 active secondary-recovery projects
worldwide. These projects are located in all of the principal
areas of Kerr-McGee's oil and gas production activities. Most of
the company's operations outside North America incorporate water
injection. Pressure-maintenance operations began at the time of
initial production from these fields.
Wells in Process of Drilling
At year-end 1995, the company had wells classified as
temporarily suspended or in the process of drilling as follows:
Gross Net
Wells Wells
Domestic 21 13.77
Canada 5 2.37
North Sea 10 1.20
China 5 1.23
Indonesia 4 1.33
Total 45 19.90
Reserves
Kerr-McGee's estimated proved crude oil, condensate, and
natural gas reserves at December 31, 1995, 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 of the
1995 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
North Sea
The United Kingdom sector of the North Sea continues to be an
important area of overseas activity. Kerr-McGee was awarded five
blocks in 1995 with interests of 40% to 100%, all of which will be
company operated. At year-end 1995, the company had interests
averaging 37% in 43 blocks covering 358,000 net undeveloped acres
in the North Sea area. Kerr-McGee operates 23 of these blocks. The
U.K. portfolio includes prospective exploration blocks and quality
exploitation opportunities on producing properties.
During 1995, farm-in strategies also produced three additional
exploration opportunities in the North Sea. Exploratory drilling
on the first of these three farm-in blocks began in late 1995 and
will be completed during the first half of 1996. Two of the blocks
have existing discoveries, which should reduce the exploration
risk.
In 1995, the North Sea accounted for 52% of Kerr-McGee's
liquids production, primarily from the Gryphon, Scott, Brae, and
Ivanhoe/Rob Roy fields. Deliveries of North Sea natural gas
averaged 21 million cubic feet per day in 1995, primarily from the
Brae area and Scott field.
Gryphon field (KM 25%), Block 9/18b: This field averaged
41,100 barrels of oil per day in 1995. Operated by Kerr-McGee, the
innovative Gryphon field development was the first in the North Sea
to use a floating production, storage, and offloading facility.
Scott field (5.2%), Blocks 15/21a and 15/22: Production
averaged 184,200 barrels of oil per day. The South Scott satellite
development, which is tied into the Scott field, began production
in October 1995 at a rate of 20,000 barrels of oil per day from a
single subsea completion. Additional wells in South Scott are
planned during 1996.
Ivanhoe/Rob Roy fields (10.8%), Block 15/21a: Production
averaged 43,400 barrels of oil per day.
Brae area: Kerr-McGee has production from the North, South,
Central, and East Brae fields and the more recent Beinn discovery,
which underlies North Brae. East Brae (7.3%) on Blocks 16/3a and
16/3b is the largest of the Brae fields. Production of condensate
from this field averaged 85,700 barrels per day in 1995. The Beinn
field (8%) on Block 16/7a, drilled from the North Brae platform,
averaged 11,800 barrels of condensate and 77 million cubic feet of
gas per day in 1995. Additional drilling is been planned for 1996.
Other International
Kerr-McGee's assets in China and Southeast Asia include the
Liuhua field development in the South China Sea, four operated
exploration blocks in China's Bohai Bay, and the onshore Jabung
Block in Indonesia.
Liuhua 11-1 field (24.5%): Development of this field - the
largest in the South China Sea - continues on schedule for first
oil in April 1996. The $650 million project includes floating
production facilities in 1,000 feet of water.
Bohai Bay: Exploratory drilling will continue in 1996 to test
structures on the 565,000-acre, Kerr-McGee-operated Block 04/36
(45%). Kerr-McGee holds a 57% interest and is operator on two
adjacent blocks, Laopu and Getuo. This area, also known as Jidong,
was awarded in 1995 and comprises 154,000 acres. Exploratory
drilling will begin in late 1996. In January 1996, the company
signed a contract to acquire the 415,000-acre Block 05/36 directly
east of Block 04/36. Kerr-McGee will be the operator with a 65%
interest. Kerr-McGee now holds more than a million gross acres in
Bohai Bay, one of the more prolific oil and gas areas in China.
Jabung Block (33.3%): Kerr-McGee participated in two 1995
discoveries, the North Geragai and the Northeast Betara fields, on
this 2 million-acre block in Sumatra's equatorial lowlands. A
second well in the North Geragai field was completed successfully
in the fourth quarter of 1995. The third North Geragai well was
completed in early 1996 and tested at a combined rate of 2,800
barrels of oil and 2.4 million cubic feet of gas per day. The
Northeast Betara 1995 discovery well encountered gas and condensate
zones. Additional drilling is planned for both fields in 1996 with
first oil production expected in 1997.
Gulf of Mexico
Kerr-McGee had an inventory of 313,000 net undeveloped acres
in the Gulf of Mexico at year-end 1995. During the year, the
company added 20 federal blocks and eight state blocks offshore
Louisiana. The company operates all the recently acquired blocks,
with interests of 50% to 100%. Exploratory drilling on several of
these new blocks will begin in 1996. The Gulf of Mexico
contributed 29% of the company's 1995 oil production and 46% of its
natural gas sales.
The company's strategy in the Gulf of Mexico is to operate the
leases in which Kerr-McGee holds interests and to increase the
company's working interest, where possible. At year-end 1995,
Kerr-McGee operated 64% of its Gulf of Mexico leases with an
average working interest of 73%.
The company continues to exploit producing properties, using
3-D seismic surveys to accelerate development and production while
reducing risk. Proven new technology such as horizontal drilling
and fracture stimulation is also used to increase production.
Recent development activity includes projects in the South
Timbalier, Viosca Knoll, and Ship Shoal areas.
South Timbalier Block 265 (100%): This 1994 discovery is
expected to come on stream in July 1996 at 125 million cubic feet
of gas and 6,800 barrels of oil per day.
Following the discovery on South Timbalier Block 265, the
adjacent acreage was acquired in subsequent lease sales, including
blocks 266, 250, and 237. These acquisitions were based on 3-D
seismic surveys and will form an important part of the company's
future exploration programs.
Viosca Knoll 989 field (25%): This five-block field known as
the Pompano project was the gulf's largest contributor to Kerr-
McGee's 1995 oil production. The field's production averaged
18,400 barrels of oil and 25 million cubic feet of gas per day in
1995. The production platform is located in 1,300 feet of water.
Pompano's second phase, a subsea system in 1,900 feet of water,
should come on stream in April 1996.
Ship Shoal Block 239 (46%): A 1996 discovery on this block,
a product of recent 3-D seismic surveys, is expected to come on
stream in April 1996 and add about 20 million cubic feet of gas per
day to existing production from this block.
Onshore North America
During 1995, onshore fields accounted for 19% of Kerr-McGee's
oil production and 47% of natural gas sales. Domestically, the
company continues to emphasize drilling for natural gas and
increasing crude oil production from more mature fields through
enhanced and secondary recovery methods. Production from U.S.
onshore fields during 1995 was 12%, or 8,700 barrels of per day, of
the company's crude oil production and 31%, or 91 million cubic
feet per day, of natural gas sales. The company's exploration and
production operations in Canada continue to concentrate on natural
gas. Canadian operations accounted for 16%, or 45 million cubic
feet of gas per day, of total natural gas sales and 7%, or 4,800
barrels per day, of the company's crude oil production.
Business strategy led to the restructuring of the exploration
and production unit and to the initiation of a program to divest
nonstrategic properties, most of which are located onshore North
America. Onshore exploration will focus on gas prospects in
Oklahoma, Texas, and the Canadian provinces of Alberta and
northeast British Columbia.
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, and
manganese products. 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 rutile, ilmenite, leucoxene,
and zircon.
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
130,000 tons per year. An expansion, which is expected to be
completed in 1997, will increase the Hamilton plant's production
capacity to 160,000 tons.
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 168 million tons of sand contain
an estimated 3.4% heavy minerals. The heavy minerals contained
within this 5.7 million-ton, heavy-mineral deposit are composed of
4.3% rutile, 61.3% ilmenite, 3.4% leucoxene, 10.9% zircon, and
20.1% minerals that are not presently produced or have no value.
Additional drilling is required to determine the actual quantities
and grade of heavy minerals contained in a second 2,540-acre
property and the extent to which it may be feasible to mine this
deposit. The company holds a 50% interest in both properties. The
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 178,000 tons per year.
The plant operated near capacity during 1995.
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 73,000 tons per
year. An expansion of this plant is expected to increase capacity
to 88,000 tons per year in 1996.
The company also owns a 25% interest in a pigment plant in
Yanbu, Saudi Arabia. The plant has a capacity of 66,000 tons per
year.
Electrolytic Products
The company's major electrolytic products are manganese
dioxide, manganese metal, sodium chlorate, ammonium perchlorate,
and specialty boron products.
The sodium chlorate plant at the company's Hamilton,
Mississippi, complex has production capacity of 123,000 tons per
year. An expansion started in 1995 will increase annual capacity
to 138,000 tons by year-end 1996. Also at Hamilton is a manganese
metal plant that has capacity of 12,000 tons per year.
Facilities at Henderson, Nevada, include electrolytic cells
and processing equipment for the manufacture of manganese dioxide,
a plant for the manufacture of ammonium perchlorate, and a
specialty boron products plant. The annual capacity of the
manganese dioxide plant is 24,500 tons. An expansion, expected to
be completed at the end of 1996, will increase capacity to 28,200
tons per year. 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.
Production capacities for elemental boron and boron trichlorine are
80,000 pounds and 175,000 pounds per year, respectively.
Forest Products
The company's principal forest product is treated railroad
crossties. Other products include crossing materials, bridge
timbers, 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 late 1993 at a
pilot plant in Madison, Illinois. As a result of testing, the
company believes this innovative RAILFAST (registered trademark) system has
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 1995 net production capacity of approximately 185,000 tons per
year, Kerr-McGee has 10% of the U.S. 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. Most of the
pigment production from the company's 50% joint venture in Western
Australia is sold in the Far East and Australia. The production
from the company's plant (25% interest) in Saudi Arabia is sold
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 40% of the total
production from the Saudi Arabia plant. World demand is expected
to increase by an average of 3% to 4% per year over the next
several years.
Manganese dioxide is a major component of alkaline dry-cell
batteries. The company's current production meets approximately
30% of North American demand. The average annual demand growth of
6% is driven by the need for alkaline batteries for portable
electronic devices.
Sodium chlorate is used in the environmentally preferred
chlorine dioxide process for bleaching pulp. North American demand
for sodium chlorate is expected to increase an average of 2% to 4%
per year in 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.
Manganese metal is used in aluminum, specialty, and stainless
steel alloys. The largest use of manganese metal is for alloying
aluminum can sheet. Kerr-McGee supplied about 50% of the U.S.
aluminum industry's manganese requirements in 1995.
Ammonium perchlorate is used as an oxidizer for solid rocket
fuel, primarily in the U.S. space and defense programs. The
company is one of two domestic producers of the product.
Kerr-McGee is the world's largest producer of elemental boron,
which is used primarily in automobile airbags. Kerr-McGee is
essentially the only producer of boron trichloride, which is used
to produce boron filament for sports equipment and composites for
high-performance aircraft.
The company's share of the U.S. railroad crosstie market is
approximately 45%. Domestic crosstie demand is expected to remain
relatively flat at about 13 million to 15 million ties per year.
For information regarding heavy-mineral reserves, production,
and average market prices for each of the years 1991 through 1995,
reference is made to Note 28 in the Consolidated Financial
Statements of the 1995 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 and Galatia Mine, an underground mine in the Illinois Basin.
The sale of Pioneer Fuel Corporation in West Virginia was completed
in February 1996. Most 1995 coal sales were to electric utilities
under long-term contracts. The company also makes spot sales to
domestic and foreign customers. At year-end 1995, the company
owned or leased coal reserves in Illinois, Wyoming, and West
Virginia. The West Virginia reserves were sold in February 1996.
Reserves and Production
At December 31, 1995, 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 299 269 Steam Surface
Clovis Point Mine 326 293 Steam Surface
Illinois -
Galatia Mine - Met./ Under-
Harrisburg No. 5 112 72 Steam ground
Under-
Herrin No. 6 268 174 Steam ground
West Virginia - Under-
Pioneer Fuel Met./ ground
Composite 35 26 Steam Surface
1,040 834
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. Prior to the sale of Pioneer Fuel
Corporation in early 1996, the West Virginia coal reserves were
held under leases with private parties.
Production from Kerr-McGee mines for 1995 and 1994 was as
follows:
(In millions of tons) 1995 1994
Jacobs Ranch Mine 24.6 20.6
Clovis Point Mine .4 .2
Galatia Mine 5.5 4.0
West Virginia Operations .6 .8
Total Production 31.1 25.6
For information regarding coal reserves, production, and
average market prices for each of the years 1991 through 1995,
reference is made to Note 28 to the Consolidated Financial
Statements in the 1995 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 3,299 acres are underlain by
269 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 in August 1994 for a
five-year period and expanded to incorporate additional leased
acreage and the buffer zone. The terms of the Jacobs Ranch Mine
Federal leases were adjusted by the Bureau of Land Management (BLM)
in 1990. In February 1995, the BLM approved consolidation of the
three federal leases into a logical mining unit, which will allow
a more effective mining sequence of the combined leases.
Jacobs Ranch Mine has annual production capacity of 24 million
tons of low-sulfur coal. Further production growth requires the
expansion of the Jacobs Ranch Mine preparation plant, which is
under way. Expected to be completed in 1997, the expansion should
allow production at Jacobs Ranch to increase by approximately 2
million tons per year until the mine's target capacity of 35
million tons is reached.
Shipments began in 1978 and totaled more than 239 million tons
through December 1995. All deliveries were made via the Burlington
Northern or Chicago Northwestern railroads. Jacobs Ranch Mine coal
meets Phase II emission requirements of the Clean Air Act
Amendments of 1990 and is sold primarily under long-term contracts
for ultimate use by electric utilities.
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 has since
produced more than 600,000 tons toward the due diligence lease
requirements, which will be met in 1996. 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 BLM in 1990, and
the terms of the other Federal lease were 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 200,000 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 that 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 35 million tons through December 1995. 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 approximately 33,000
acres through leases and mineral ownership. This includes control
of the Herrin No. 6 seam, which was mined at Galatia until July
1994. 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 that were an integral part of mining operations during
1995.
Longwall mining is utilized at Galatia. Two of these high
recovery, high productivity, low-operating cost longwall mining
units now operate in the No. 5 seam. Due to the production
capabilities of the longwall units and the coal processing plant,
which was expanded in 1994, Galatia Mine has annual production
capacity of 6 million tons of high-Btu, relatively low-sulfur coal.
Pioneer Fuel Corporation
Pioneer Fuel Corporation, the company's mining operation near
Oceana, West Virginia, was sold in early 1996. The gain on the sale
was immaterial.
Marketing
Coal is sold under both long-term contracts and spot sale
agreements. During 1995, the company had export sales of steam
coal to utilities in Germany and Morocco and semi-soft coking coal
to industrial customers in Japan. These export sales originated
principally from the Galatia mine and were made via Mobile,
Alabama. Domestic deliveries of steam coal will continue,
primarily under long-term contracts with electric utilities in
Arkansas, Florida, Georgia, 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 194 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 stable
earnings under these competitive conditions and are the basis for
the expansion of business with key domestic electric utilities.
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 67% 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.
DISCONTINUED OPERATIONS
During 1995, the company disposed of substantially all of its
refining and marketing assets and exited the refining and marketing
business, which had been conducted by wholly owned subsidiaries,
Kerr-McGee Refining Corporation, Southwestern Refining Company,
Inc., and Cato Oil and Grease Co.
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. The company's Technical Center is
located in Oklahoma City.
Employees
On December 31, 1995, the company had 3,976 employees. Less
than 1% were represented by a collective bargaining agreement.
Competitive Conditions
In the petroleum industry, competition exists from the initial
process of bidding for leases to the sale of crude oil and natural
gas. Competitive factors include finding and developing petroleum
hydrocarbons, transporting raw materials, and developing successful
marketing strategies. The volatility of crude oil and natural gas
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 increasingly prefer the
chloride product due to environmental restrictions. The demand for
pigment is expected to increase by an average of 3% to 4% per year
through the end of the century. Manganese dioxide and sodium
chlorate are in a near-balanced supply/demand position. Excess
worldwide capacity currently exists for ammonium perchlorate, boron
specialty products, and manganese metal.
Most of the company's coal customers are domestic electric
utilities, an extremely competitive market. Cost efficiencies,
transportation strategies, and product quality, such as Btu and
sulfur content, 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 almost all of the company's 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 1995, direct capital and operating
expenditures related to environmental protection and cleanup of
existing sites totaled $43 million. Additional expenditures
totaling $61 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 $100 million in each of the years 1996 and 1997. Some
expenditures to reduce the occurrence of releases to the
environment 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 matters.
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
Kerr-McGee Chemical Corporation (KMCC), a wholly owned
subsidiary of the company, has been informed by the Environmental
Protection Agency (EPA) that it is one of several companies against
whom a civil action may be filed for the recovery of remediation
costs incurred by the EPA at the Bayou Bonfouca Superfund site
located at Slidell, Louisiana. KMCC never owned nor operated the
site, nor disposed of any waste at the site. It is alleged that a
former wood-treating subsidiary of American Creosoting Corporation
(ACC) had owned the site at one time, but ACC sold it in 1958. The
company acquired ACC in 1964. The company and the government have
entered into an agreement in principle regarding the company's
obligations at this site, and the company has established a
reserve.
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 13 to the Consolidated Financial Statements in
the 1995 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 1995.
Executive Officers of the Registrant
The following is a list of executive officers, their ages, and
their positions and offices as of January 1, 1996:
Name Age Office
Frank A. McPherson 62 Chairman of the Board and Chief
Executive Officer since 1983.
Luke R. Corbett 48 President and Chief Operating Officer
since 1995. President of Kerr-McGee
Coal Corporation since 1995. President
of Kerr-McGee China Petroleum Ltd. since
1994. President of Kerr-McGee Canada
Ltd. since 1989. President of Kerr-
McGee Oil (U.K.) PLC since 1987. Group
Vice President from 1992 until 1995.
Senior Vice President from 1991 until
1992. Vice President, Oil and Gas
Exploration from 1987 until 1991.
Wayne T. Ewing 62 Senior Vice President since 1995.
Executive Vice President of Marketing
for Kerr-McGee Coal Corporation from
1993 until 1995. Executive consultant
from 1990 until 1993.
George R. Hennigan 60 Senior Vice President since 1991.
President of Kerr-McGee Chemical
Corporation since 1991. Executive Vice
President, Kerr-McGee Chemical
Corporation from 1984 until 1991.
John C. Linehan 56 Senior Vice President and Chief
Financial Officer since 1987.
Tom J. McDaniel 57 Senior Vice President since 1986 and
Secretary since 1989.
Robert C. Scharp 48 Senior Vice President since 1991.
Senior Vice President, Production,
Exploration and Production Division
since 1995. President of Kerr-McGee
Coal Corporation from 1991 until 1995.
Vice President of Operations for Kerr-
McGee Coal Corporation from 1990 until
1991.
Michael G. Webb 48 Senior Vice President since 1993.
Senior Vice President, Exploration,
Exploration and Production Division
since 1992. Vice President, Exploration
from 1992 to 1993. Vice President,
North American Onshore Exploration from
1991 until 1992. Exploration Manager,
Kerr-McGee Canada Ltd. from 1988 until
1991.
R. G. Horner, Jr. 56 Vice President and General Counsel since
1986.
J. Michael Rauh 46 Vice President and Controller since
1987.
Donald F. Schiesz 58 Vice President, Safety and Environment
since 1994. Senior Vice President of
Kerr-McGee Chemical Corporation from
1991 until 1994. Vice President and
General Manager of the Pigment Division
for Kerr-McGee Chemical Corporation from
1984 until 1991.
Thomas B. Stephens 51 Vice President and Treasurer since 1985.
Jean B. Wallace 41 Vice President, Human Resources since
1989.
Dale E. Warfield 52 Vice President, General Administration
since 1994. Vice President, Materials
Management and Transportation from 1991
until 1994. Director of Purchasing and
Materials Management from 1990 until
1991.
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 in 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 in the 1995 Annual Report to
Stockholders, which note is incorporated by reference in Item 8.
Quarterly dividends declared totaled $1.55 per share for the
year 1995 and $1.52 per share for each of the years 1994 and 1993.
Cash dividends have been paid continuously since 1941 and totaled
$79 million in 1995, $78 million in 1994, and $73 million in 1993.
Item 6. Selected Financial Data
Information regarding selected financial data required in this
item is presented in the schedule captioned "Six-Year Financial
Summary" in the 1995 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" in the 1995 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 1995 Annual Report to Stockholders are incorporated
herein by reference:
Report of Independent Public Accountants
Consolidated Statement of Income
Consolidated Statement of Retained Earnings
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Notes to Financial Statements
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 1996 made in connection with its Annual
Stockholders' Meeting to be held on May 14, 1996.
(b) Identification of executive officers -
The information required under this section is set forth in
the caption "Executive Officers of the Registrant" on pages
22 and 23 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 1996 made in connection with its Annual
Stockholders' Meeting to be held on May 14, 1996.
Item 11. Executive Compensation
For information required under this section, reference is made
to the "Executive Compensation and Other Information" section of
the company's proxy statement for 1996 made in connection with its
Annual Stockholders' Meeting to be held on May 14, 1996.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
For information required under this section, reference is made
to the "Security Ownership" portion of the "Election of Directors"
section of the company's proxy statement for 1996 made in
connection with its Annual Stockholders' Meeting to be held on May
14, 1996.
Item 13. Certain Relationships and Related Transactions
For information required under this section, reference is made
to the "Election of Directors" and "Certain Relationships and
Related Transactions" sections of the company's proxy statement for
1996 made in connection with its Annual Stockholders' Meeting to be
held on May 14, 1996.
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 1995 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, 1995, 1994, and 1993
Consolidated Statement of Retained Earnings for the Years
Ended December 31, 1995, 1994, and 1993
Consolidated Balance Sheet at December 31, 1995 and 1994
Consolidated Statement of Cash Flows for the Years Ended
December 31, 1995, 1994, and 1993
Notes to Financial Statements
(a) 2. Financial Statement Schedules -
Report of Independent Public Accountants on Financial
Statement Schedule
Schedule II - Valuation Accounts and Reserves for the
Years Ended December 31, 1995, 1994, and 1993
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 as amended and restated
effective August 1, 1995.
10.3* Description of the company's Annual
Incentive Compensation Plan.
10.4* The Long Term Incentive Program as
amended and restated effective May 9,
1995, filed as Exhibit 4.2 on Form 10-Q
for the quarter ended March 31, 1995, and
incorporated herein by reference.
10.5* 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.
10.6* Kerr-McGee Corporation Executive Deferred
Compensation Plan as amended and restated
effective January 1, 1996.
10.7* Kerr-McGee Corporation Supplemental
Executive Retirement Plan as amended and
restated effective May 3, 1994, filed as
Exhibit 10.8 on Form 10-K for the year
ended December 31, 1994, and incorporated
herein by reference.
10.8* 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.
10.9* 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.
10.10* 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.
10.11* Amended and restated Agreement, restated
as of December 31, 1992, between the
company and Tom J. McDaniel filed as
Exhibit 10.13 on Form 10-K for the year
ended December 31, 1994, and incorporated
herein by reference.
10.12* Amended and restated Agreement, as of
December 31, 1992, between the company
and George R. Hennigan filed as Exhibit
10(13) on Form 10-K for the year ended
December 31, 1993, and incorporated
herein by reference.
10.13* 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 1995
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 1995 Annual Report to Stockholders.
21 Subsidiaries of the Registrant.
23 Consent of Arthur Andersen LLP.
24 Powers of Attorney.
27 Financial Data Schedule (electronic
filing only).
*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, 1995.
<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 1995 Annual Report to Stockholders incorporated
by reference in this Form 10-K, and have issued our report thereon
dated February 16, 1996. Our report on the consolidated financial
statements includes an explanatory paragraph with respect to the
adoption of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of," in 1995 as discussed in Note 3 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 16, 1996
<PAGE>
SCHEDULE II
KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES
VALUATION ACCOUNTS AND RESERVES
<TABLE>
<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, 1995
a. Deducted from asset accounts
Allowance for doubtful notes
and accounts receivable $ 11 $ 3 $ 1 $ 1 $ 14
Warehouse inventory obsolescence 2 1 - - 3
$ 13 $ 4 $ 1 $ 1 $ 17
b. Not deducted from asset accounts
Environmental $166 $121 $ 4 (A) $ 61 $230
Postretirement benefits 108 12 (1)(A) 7 112
Oil and gas site dismantlement
and coal site reclamation and
restoration 94 12 - 3 103
Surface mine stripping cost 12 37 - 33 16
Pension benefits 9 4 - 2 11
Other 8 1 (2)(A) 1 6
$397 $187 $ 1 $107 $478
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 coalsite 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
(A) Transfer (to) from current liabilities.
(B) Obligation assumed in connection with property acquisitions.
(C) Additional minimum liability offset by an intangible asset in deferred charges.
</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, 1996 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: Luke R. Corbett*
Luke R. Corbett, Director
By: Martin C. Jischke*
Martin C. Jischke, Director
By: Robert S. Kerr, Jr.*
Robert S. Kerr, Jr., Director
March 29, 1996 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
STOCK DEFERRED COMPENSATION PLAN
FOR NON-EMPLOYEE DIRECTORS
Amended and Restated Effective August 1, 1995
Article I
INTRODUCTION
This Kerr-McGee Corporation Stock Deferred Compensation
Plan is established by Kerr-McGee Corporation (the "Company")
for the benefit of its Non-Employee Directors and their
Beneficiaries and it shall be maintained according to the terms
of this document. The Company shall have the sole authority to
amend, interpret, manage, and administer this plan.
Article II
DEFINITIONS
2.1 DEFINITIONS. When used in this document, the
following words and phrases shall have the meanings assigned to
them, unless the context clearly indicates otherwise:
(a) BENEFICIARY means the person or persons, natural or
otherwise, designated by a Director under Section 8.1 to receive
any death benefit payable under Section 5.2.
(b) BOARD OF DIRECTORS means the Board of Directors of the
Company.
(c) CHANGE OF CONTROL means (i) a change in any two year
period in a majority of the members of the Board of Directors
resulting from the election of directors who were not Directors
at the beginning of such period; (ii) acquisition by any person
of beneficial ownership of twenty-five percent (25%) or more of
the outstanding common stock of the Company or twenty-five
percent (25%) or more of the voting power of all outstanding
securities of the Company entitled to vote generally for the
election of Directors; (iii) merger or consolidation of the
Company (other than a merger or consolidation of the Company and
a wholly-owned subsidiary); (iv) sale of all or substantially
all the assets of the Company; or, (v) an affirmative vote of
the Board of Directors that a proposed transaction will be
deemed a Change of Control. For purpose of this definition, the
terms "person" "beneficial ownership" and "subsidiary" shall
have the meanings set forth in Section 13(d)(3) of the
Securities Exchange Act of 1934, Rule 13d-3 and 13d-5 under such
Act and Rule 1-02 of Regulation S-X of the Securities and
Exchange Commission.
(d) COMMON STOCK means Kerr-McGee Corporation Common
Stock, par value $1.00.
(e) COMPANY means Kerr-McGee Corporation, whose main
offices are located at P. O. Box 25861, 123 Robert S. Kerr
Avenue, Oklahoma City, Oklahoma 73125.
(f) SECRETARY means the Corporate Secretary of Kerr-McGee
Corporation.
(g) DEFERRED FEE AGREEMENT means the written agreement
between the Company and a Non-Employee Director filed with the
Corporate Secretary that together with this Plan, governs the
Director's rights to payment of deferred Director's Fees under
this Plan.
(h) DIRECTOR means a member of the Board of Directors who
is not also an employee of the Company or any of its
subsidiaries or affiliates.
(i) DIRECTOR'S FEES means the annual retainer paid to a
Director, any fees paid to a Director for attending meetings of
the Board of Directors or any committee of the Board of
Directors, and any fees paid to a Director for serving as
Chairman of a Committee of the Board of Directors that are
deferred under Section 3.1(a) by a non-employee Director.
(j) PLAN means the Kerr-McGee Corporation Stock Deferred
Compensation Plan for Non-Employee Directors set forth in this
document, as amended by the Company from time to time.
(k) SHARES means shares of Common Stock.
(l) STOCK DEFERRED FEE ACCOUNT means an account
established by the Company in the name of a Director to hold the
Shares purchased on behalf of the Director by the Trustee. The
Trustee shall credit such Director's Stock Deferred Fee Account
with shares for any Director's Fees that are deferred by the
Director under Section 3.1(a) and directed into the Stock
Deferred Fee Account under Section 3.2; and any additional
shares that are credited by the Company under Article IV.
(m) TRUST AGREEMENT shall mean the agreement or agreements
entered into between the Company and the Trustee and adopted by
the Company.
(n) TRUST FUND shall mean the Common Stock of the Company
and other properties arising from contributions made by the
Company in accordance with the provisions of this Plan and held
by the Trustee pursuant to the Trust Agreement.
(o) TRUSTEE means Liberty Bank and Trust Company of
Oklahoma City, N.A., Oklahoma, or any successor Trustee named by
the Company to serve in its place.
Article III
DEFERRAL OF DIRECTOR'S FEES
3.1 ELECTION TO DEFER FEES.
(a) The election to defer Director's Fees payable after
September 11, 1995, shall be made on or before September 9,
1995. Before the beginning of any subsequent calendar year, a
Director may elect to defer Director's Fees earned in the
subsequent year and each year thereafter. For a new Director,
the election to defer Director's Fees earned during the
Director's initial calendar year of service shall be made within
thirty days following the Director's election or appointment.
Any election to defer shall continue in effect for subsequent
calendar years unless revoked in accordance with Section 3.4.
(b) An election to defer Director's Fees shall be made by
the Director executing and filing with the Corporate Secretary
a Deferred Fee Agreement in the format of Exhibit A, attached
hereto.
3.2 PAYMENT TO DEFERRED FEE ACCOUNT. When a Director
elects under Section 3.1(b) to defer Director's Fees, the
Company shall contribute an amount to the Trust equal to the
Director's Fees that would have been paid to the Director in
accordance with the option selected by the Director from one of
the following options:
1. Any Director's Fees payable to the Director after an
election is made; or
2. A minimum contribution of $2,500.00 per quarter; or
3. Such amounts in increments of $1,000.00 in addition to
the minimum contribution of $2,500.00, to be
determined by the Director and specified in the
Deferred Fee Agreement.
3.3 REVOCATION OF DEFERRAL. A Director may, on a
prospective basis for future calendar years, revoke the election
to defer Director's Fees by a written revocation to the
Corporate Secretary, but no Deferred Fee Agreement revocation of
an election to defer Director's Fees shall be effective in the
calendar year in which it is executed.
3.4 DIRECTOR CONTRIBUTIONS. No contributions will be made
or permitted by a Director under this Plan.
3.5 TIME OF COMPANY CONTRIBUTIONS. The Company will make
contributions to the Trust on the date Director's Fees are paid
to non-participating Directors.
ARTICLE IV
DIVIDENDS
4.1 DIVIDEND REINVESTMENT. Dividends paid on Shares held
by the Trustee in each Director's Stock Deferred Fee Account
shall be reinvested in Common Stock.
ARTICLE V
PAYMENT OF DEFERRED FEES
5.1 PAYMENT. On or after one hundred eighty-five (185)
days have lapsed after the participant ceased serving as a
Director of the Company, the Trustee shall distribute the
Director's Stock Deferred Fee Account as follows:
(a) Whole shares of Common Stock credited to the
Director's Account shall be distributed in kind; and
(b) The fractional shares of Common Stock credited to the
Director's Account (including fractional shares resulting from
any division of the Director's Account among beneficiaries)
shall be valued at the lowest sale price as reflected by the New
York Stock Exchange-Composite Transactions as of the fifteenth
(15th) day of the month (or next preceding day on which the New
York Stock Exchange is open if it is closed on that day)
following the final allocation of shares to which such Director
is entitled pursuant to the terms of this Plan and shall be
distributed in cash along with any other cash credited to the
Director's Account.
5.2 DEATH OF A DIRECTOR. If a Director dies with any
amount credited to the Director's Stock Deferred Fee Account,
then the Director's Beneficiary shall be entitled to receive the
entire amount in a lump sum in accordance with Section 5.1.
Such payment shall be made as soon as practicable after the end
of the calendar quarter in which the Director's death occurred.
ARTICLE VI
INVESTMENT OF CONTRIBUTIONS
6.1 GENERAL RULES. Contributions of the Company paid over
to the Trust shall be applied by the Trustee to the purchase of
Common Stock as soon as possible on or after the date of receipt
but no later than five (5) days after receipt. Dividends and
any other income shall be applied to the purchase of Common
Stock as promptly as possible after receipt.
6.2 PURCHASE OF STOCK BY THE TRUSTEE. Common Stock shall
be purchased by the Trustee in accordance with the terms of the
Trust Agreement. Common Stock shall be purchased by the Trustee
at the current market price either on the open market or
directly from the Company or from any owners of said Common
Stock, which owners may or may not be other trustees, the
Company, individuals, corporations or entities in which the
Trustee or Company may own a direct or indirect interest. The
current market price for Common Stock shall be the last sale
price reported as the New York Stock Exchange-Composite
Transactions for the day of purchase or, if there was no
transaction that day, reported for the last day on which there
was a transaction; provided that if such Common Stock is
acquired in the open market, then its actual cost shall apply.
All acquisition costs shall be paid by the Trust before
allocation. All Shares shall be held by the Trustee in its name
or that of its nominee, and a Member shall not be deemed to have
an interest in any particular certificate of Common Stock.
6.3 VOTING RIGHTS. Before each annual or special meeting
of the shareholders of the Company, the Company shall cause to
be sent to each Director a copy of the proxy solicitation
material, together with a form requesting confidential
instructions to the Trustee on how to vote the number of Shares
(including fractional shares) in the Director's Stock Deferred
Fee Account as of the record date for such meeting. The Trustee
shall total the votes of all Directors who furnish such
instructions (combining the fractional shares to the extent
possible) and vote the number of whole Shares represented by
such total or totals in accordance with those confidential
instructions. Shares with respect to which no voting
instructions have been received by the Trustee shall not be
voted.
ARTICLE VII
WITHDRAWALS
7.1 WITHDRAWALS FROM STOCK DEFERRED FEE ACCOUNTS. Neither
the Director, his or her Beneficiary, nor any other individual
or entity shall have any right to make any withdrawals from the
Director's Stock Deferred Fee Accounts, except as provided in
Article V.
ARTICLE VIII
BENEFICIARIES
8.1 DESIGNATION OF BENEFICIARY. Each Director may
designate from time to time any person or persons, natural or
otherwise, as his or her Beneficiary or Beneficiaries to whom
benefits under Section 5.2 are to be paid if he or she dies
while entitled to benefits. Each Beneficiary designation shall
be made either in the Deferred Fee Agreement or on a form
prescribed by the Corporate Secretary and shall be effective
only when filed with the Corporate Secretary during the
Director's lifetime. Each Beneficiary designation filed with
the Corporate Secretary shall revoke all Beneficiary
designations previously made by the Director. The revocation of
a Beneficiary designation shall not require the consent of any
designated Beneficiary.
ARTICLE IX
ADMINISTRATION
9.1 RIGHT TO TERMINATE. The Board of Directors may amend
or terminate the Plan at any time in whole or in part. No
amendment or termination of the Plan shall reduce the Director's
Stock Deferred Fee Account, the amount owed to the Director by
the Company as of the date of amendment or termination, or the
number of Shares credited to the Director's account.
9.2 A Director's rights under the Plan are not assignable
or transferable other than by will or the laws of descent and
distribution, and such rights are exercisable during the
Director's lifetime only by the Director, or by the Director's
guardian or legal representative.
9.3 APPLICABLE LAW. This Plan shall be construed and
enforced in accordance with the laws of the State of Oklahoma,
except to the extent superseded by federal law.
9.4 ADMINISTRATION AND INTERPRETATION. The Corporate
Secretary shall have the authority and responsibility to
administer and interpret this Plan. Benefits due and owing to
a Director or Beneficiary under the Plan shall be paid when due
without any requirement that a claim for benefits be filed.
However, any Director or Beneficiary who has not received the
benefits to which he or she believes himself or herself entitled
may file a written claim with the Trustee, who shall act on the
claim within thirty (30) days, and such action on any such claim
shall be conclusive.
ARTICLE X
TRUST FUND AND TRUSTEE
10.1 TRUSTEE. The term "Trustee" means the Trustee, as
defined in Section 2.1, appointed by the Company under the terms
of the Plan as custodian of the Trust Fund created for the
purpose of the Plan, or such other Trustee or Trustees as may be
designated from time to time under the terms of said Trust. The
Trustee's obligations, duties and responsibilities are governed
solely by the terms of such Trust instrument, reference to which
is made herewith for all purposes.
10.2 PURPOSE OF THE TRUST FUND. A Trust Fund known as the
Trust for the Kerr-McGee Corporation Stock Deferred Compensation
Plan for Non-Employee Directors will be created and maintained
for the purpose of the Plan, and the monies thereof will be
invested in accordance with the terms of this Plan and the
declaration of trust which forms a part of the Plan. All
contributions will be paid into the Trust Fund, and all benefits
under the Plan will be paid from the Trust Fund.
ARTICLE XI
MISCELLANEOUS PROVISIONS RESPECTING THE COMPANY
11.1 ABSENCE OF RESPONSIBILITY. Neither the Company, nor
any of the officers, employees, members of the Board of
Directors nor agents of the Company nor the Trustee, guarantee
in any manner the payment of benefits hereunder.
11.2 NOTICE. Notice of the Plan, and any amendments
thereto, notice of eligibility of each Director and notice of
such other matters as may be required by law or this agreement
shall be given by the Company in such form as the Company may
deem appropriate and reasonable.
11.3 INDEMNIFICATION OF FIDUCIARIES. The Company may
indemnify and hold harmless members of the Board of Directors,
any administrator and any other person who is deemed to be a
"fiduciary" under either statutory or common law and who is also
an employee, officer or director of Kerr-McGee Corporation or an
Affiliated Company from and against any damages, judgments,
settlements, costs, charges or expenses incurred in connection
with the defense of any action, suit or proceeding to which any
such person may be a party or which may be threatened against
any such person or in connection with any appeal therefrom by
virtue of any wrongful act or omission in their respective
capacities for the Plan. Notwithstanding anything to the
contrary herein, the foregoing indemnification shall extend and
be effective only to the extent that the same shall be valid and
enforceable under all applicable laws.
ARTICLE XII
AMENDMENT, TERMINATION AND MERGER
12.1 EFFECT OF PLAN TERMINATION. If the Plan is
terminated, it will be administered, under rules uniformly
applicable to all Directors similarly situated, in accordance
with the directions of the Company, until all assets have been
distributed to Directors and/or their Beneficiaries in
accordance with Article V.
It is the intention of the Company to have each Account
established under the Trust treated as a separate account
designed to satisfy the Company's legal liability under the
Agreement in respect of the Participant for whom such Account
has been established, and to have the balance, if any, in each
such Account revert to the Company only after all of the
Company's legal liabilities with respect to benefits under the
Plan payable to all the Directors have been met.
12.2 MERGER OF PLAN. The Plan may not merge or consolidate
with, or transfer its assets or liabilities to, any other Plan
unless each member of the Plan would (if the Plan then
terminated) receive a benefit immediately after the merger,
consolidation or transfer which is equal to or greater than the
benefit he would have been entitled to receive immediately
before the merger, consolidation or transfer (if the Plan had
been terminated).
IN WITNESS WHEREOF, KERR-McGEE CORPORATION has caused this
Stock Deferred Compensation Plan for Non-Employee Directors to
be executed by its duly authorized officers effective as of the
1st day of August, 1995.
(CORPORATE SEAL) KERR-McGEE CORPORATION
ATTEST:
(Tom J. McDaniel)
Secretary
By: (John C. Linehan)
John C. Linehan
Senior Vice President
EXHIBIT A
KERR-McGEE CORPORATION STOCK DEFERRED
COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS
DEFERRED FEE AGREEMENT
This Agreement between Kerr-McGee Corporation (the
"Company") and _______________________ (the "Director") is made
this _____ day of ______________, 1995, under the Kerr-McGee
Corporation Stock Deferred Compensation Plan for Non-Employee
Directors ("Plan").
1. DEFERRED FEE PLAN. The Director agrees to the terms
and conditions of the Plan, a copy of which has been delivered
to the Director and constitutes a part of this Agreement.
Capitalized words and phrases in this Agreement shall have the
meaning given to them in the Plan, unless the context clearly
indicates otherwise.
2. ELECTION TO DEFER FEES. The Director authorizes and
directs the Company to defer the amount of Director's Fees
payable after _______________, 19___, and in each subsequent
year as indicated below:
Check Appropriate Option
(a) Total Director's Fees payable _________
(b) Minimum contribution of $2,500.00
per quarter _________
(c) Contribution of $____________ (Must be
in increments of $1,000.00 in addition
to the minimum contribution of $2,500.00
per quarter) _________
(d) I elect not to participate in the Plan. _________
The Director may revoke this election on a prospective
basis for future calendar years at any time by delivering to the
Corporate Secretary a written revocation of the election.
3. INVESTMENT OF DEFERRED FEES. The Director elects to
have his or her deferred Director's Fees invested in Common
Stock.
4. FORM OF PAYMENT. Kerr-McGee Corporation Common Stock
in the Director's Deferred Fee Account shall be distributed to
the Director on or after one hundred eighty-five (185) days have
lapsed after the Director ceases to serve as a member of the
Board of Directors.
5. BENEFICIARY. The Director requests that, upon his or
her death, any amounts remaining in his or her Deferred Fee
Account be paid to the Beneficiary or Beneficiaries designated
in a Notice of Designation of Beneficiary filed with the
Corporate Secretary.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year written above.
_______________________ _________________________
Witness Director
ATTEST: KERR-McGEE CORPORATION
_______________________ By:___________________________
EXHIBIT 10(3)
DESCRIPTION OF
ANNUAL INCENTIVE COMPENSATION PLAN
The Annual Incentive Compensation Plan is intended to
recognize key employees for major contributions to the Company
and will yield cash awards based on how well the Company
performs financially. When the Company's financial targets are
met or exceeded, incentive cash awards are payable on an annual
basis. A threshold Return on Average Capital Employed (ROACE)
must be achieved by the Company before awards are made. The
threshold ROACE is established by the Executive Compensation
Committee at the beginning of the year along with an award
target expressed as a percentage of salary based on competitive
data. The size of an award is determined by the amount by which
the threshold ROACE is exceeded and the position and performance
of the individual.
KERR-McGEE CORPORATION
EXECUTIVE DEFERRED COMPENSATION PLAN
(Amended and Restated effective January 1, 1996)
KERR-McGEE CORPORATION
EXECUTIVE DEFERRED COMPENSATION PLAN
(Amended and Restated effective January 1, 1996)
TABLE OF CONTENTS
I. Establishment and Purpose
1.1 Establishment . . . . . . . . . . . . . . . . 1
1.2 Purpose . . . . . . . . . . . . . . . . . . . 1
1.3 Effective Date of Plan. . . . . . . . . . . . 1
II. Definitions
2.1 Account . . . . . . . . . . . . . . . . . . . 1
2.2 Affiliate . . . . . . . . . . . . . . . . . . 1
2.3 Base Salary . . . . . . . . . . . . . . . . . 2
2.4 Beneficiary . . . . . . . . . . . . . . . . . 2
2.5 Committee . . . . . . . . . . . . . . . . . . 2
2.6 Company . . . . . . . . . . . . . . . . . . . 2
2.7 Credited Interest . . . . . . . . . . . . . . 2
2.8 Deferral Amount . . . . . . . . . . . . . . . 2
2.9 Deferral Payment Date . . . . . . . . . . . . 2
2.10 Deferral Year . . . . . . . . . . . . . . . . 2
2.11 Disability or Disabled. . . . . . . . . . . . 2
2.12 Eligible Employee . . . . . . . . . . . . . . 3
2.13 Employee. . . . . . . . . . . . . . . . . . . 3
2.14 ERISA . . . . . . . . . . . . . . . . . . . . 3
2.15 Incentive Award . . . . . . . . . . . . . . . 3
2.16 Participant . . . . . . . . . . . . . . . . . 3
2.17 Plan. . . . . . . . . . . . . . . . . . . . . 3
2.18 Plan Year . . . . . . . . . . . . . . . . . . 3
III. Eligibility and Participation
3.1 Eligibility . . . . . . . . . . . . . . . . . 3
3.2 Participation and Classification
of Participants . . . . . . . . . . . . . . . 3
IV. Deferral Amount Elections
4.1 Deferral Amount . . . . . . . . . . . . . . . 4
4.2 Election of Deferral Amount . . . . . . . . . 4
4.3 Deferral Amount Election Forms. . . . . . . . 4
V. Payment of Benefits
5.1 Time of Payment . . . . . . . . . . . . . . . 4
5.2 Method of Payment . . . . . . . . . . . . . . 5
5.3 Death Benefit . . . . . . . . . . . . . . . . 5
5.4 Consolidation of Payments . . . . . . . . . . 6
5.5 Beneficiary Designations. . . . . . . . . . . 6
- i -
VI. Accounts and Credited Interest
6.1 Participant Accounts. . . . . . . . . . . . . 6
6.2 Adjustment of Accounts. . . . . . . . . . . . 7
6.3 Credited Interest . . . . . . . . . . . . . . 7
6.4 Vesting . . . . . . . . . . . . . . . . . . . 8
6.5 Account Statements. . . . . . . . . . . . . . 8
VII. Administration of the Plan
7.1 Administration. . . . . . . . . . . . . . . . 8
7.2 Compensation and Expenses . . . . . . . . . . 8
7.3 Claims Review Procedures. . . . . . . . . . . 8
7.4 Finality of Determinations. . . . . . . . . . 9
7.5 Indemnification . . . . . . . . . . . . . . . 9
VIII. Provision For Benefits
8.1 Provision For Benefits. . . . . . . . . . . . 10
IX. Amendment, Termination, or Merger
9.1 Amendment and Termination . . . . . . . . . . 10
9.2 Merger, Consolidation or Acquisition. . . . . 10
X. General Provisions
10.1 Effect on Other Plans . . . . . . . . . . . . 10
10.2 Nonalienation . . . . . . . . . . . . . . . . 10
10.3 Incompetency. . . . . . . . . . . . . . . . . 11
10.4 Effect of Mistake . . . . . . . . . . . . . . 11
10.5 Plan Not an Employment Contract . . . . . . . 11
10.6 Tax Withholding . . . . . . . . . . . . . . . 11
10.7 Severability. . . . . . . . . . . . . . . . . 12
10.8 Applicable Law. . . . . . . . . . . . . . . . 12
- ii -
KERR-McGEE CORPORATION
EXECUTIVE DEFERRED COMPENSATION PLAN
(Amended and Restated effective January 1, 1996)
Article I
Establishment and Purpose
1.1 Establishment. Kerr-McGee Corporation, a corporation
organized under the laws of the state of Delaware ("Company"),
hereby establishes a deferred compensation plan for Eligible
Employees to be known as the Kerr-McGee Corporation Executive
Deferred Compensation Plan ("Plan").
1.2 Purpose. The Plan shall provide Eligible Employees
the ability to defer payment of Base Salary and Incentive Awards
granted by the Company. The Plan is intended to provide such
Eligible Employees with a degree of flexibility in their
financial planning.
1.3 Effective Date of Plan. The Plan was initially
effective as of January 1, 1991, and was subsequently amended
and restated effective February 1, 1994. The Plan applies only
to the Eligible Employees who are actively employed by the
Company on or after December 31, 1990.
Article II
Definitions
Pronouns and other similar words used herein in the
masculine or neuter gender shall be read in the appropriate
gender. The singular form of words shall be read as plural where
appropriate. Where capitalized words or phrases appear in the
Plan, they shall have the meaning set forth below.
2.1 "Account" means the recordkeeping account maintained
in the name of a Participant to which Deferral Amounts and
Credited Interest are recorded pursuant to the provisions of
Article VI.
2.2 "Affiliate" means:
(a) any corporation other than the Company (i.e., either
a subsidiary corporation or an affiliated or associated
corporation of the Company), which together with the Company 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
the Company as determined under Section 414(c) of the Internal
Revenue Code; or
(c) any organization which together with the Company is a
member of an "affiliated service group" within the meaning of
Section 414(m) of the Internal Revenue Code.
2.3 "Base Salary" means the salary, excluding any
extraordinary compensation, an Eligible Employee is paid from
the Company beginning on and after March 27, 1994.
2.4 "Beneficiary" means the person, persons, trust, or
other entity designated by a Participant to receive benefits, if
any, under this Plan at such Participant's death pursuant to
Section 5.5.
2.5 "Committee" means the Executive Compensation Committee
or such other Committee as may be appointed by the Board of
Directors of Kerr-McGee Corporation from time to time.
2.6 "Company" means Kerr-McGee Corporation and its
Affiliates.
2.7 "Credited Interest" means the amounts credited to a
Participant's Account pursuant to Section 6.3.
2.8 "Deferral Amount" means the portion of an Eligible
Employee's Incentive Award and Base Salary which he elects to
defer pursuant to Article IV. Deferral Amounts shall be
referred to by reference to the Plan Year in which the Incentive
Award and Base Salary deferred under this Plan would otherwise
have been paid.
2.9 "Deferral Payment Date" means the date, specified by
an Eligible Employee on his Deferral Amount election form, on
which a Deferral Amount shall be paid or commence being paid.
An Eligible Employee shall designate from the following Deferral
Payment Dates on his Deferral Amount election form with respect
to each Deferral Year:
(a) "Early Distribution Date" means the first business day
of April of the fifth Plan Year following the applicable
Deferral Year; and
(b) "Normal Distribution Commencement Date" means as soon
as administratively feasible following the earlier of the date
on which the Participant terminates employment as an Employee
for any reason or the date the Participant is determined by the
Committee to be Disabled.
2.10 "Deferral Year" means the Plan Year in which an
Incentive Award or Base Salary for which an Eligible Employee
makes a Deferral Amount election which would have been paid
absent such election.
2.11 "Disability or Disabled" 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.
2.12 "Eligible Employee" means an Employee who is
designated by the Committee as belonging to a "select group of
management or highly compensated employees", as such phrase is
defined under ERISA; is an executive of the Company employed in
salary grade 28 or above; is a resident of the United States; is
paid on the Company's United States payroll; and is employed by
the Company on December 31 preceding the applicable Deferral
Year.
2.13 "Employee" means an individual who is an employee of
the Company or an Affiliate.
2.14 "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
2.15 "Incentive Award" means any award to an Eligible
Employee under the Company's Annual Incentive Compensation Plan
as it may be amended or modified from time to time or any
successor plan ("AICP").
2.16 "Participant" means an Eligible Employee who has
become a Participant under the Plan pursuant to Section 3.2.
2.17 "Plan" means this Kerr-McGee Corporation Executive
Deferred Compensation Plan, as amended from time to time.
2.18 "Plan Year" means the 12-month period beginning each
January 1 and ending on the succeeding December.
Eligibility and Participation
3.1 Eligibility. All Eligible Employees shall be eligible
to participate in the Plan. All determinations as to an
Employee's status as an Eligible Employee shall be made by the
Committee. The determinations of the Committee shall be final
and binding on all Employees. The Committee shall provide each
Eligible Employee with notice of his status as an Eligible
Employee under this Plan and permit such Eligible Employee the
opportunity to make the Deferral Amount election pursuant to
Article IV. Such notice may be given at such time and in such
manner as the Committee may determine.
3.2 Participation and Classification of Participants.
Each Eligible Employee who has a Deferral Amount credited to his
Account under this Plan shall be a Participant. An Eligible
Employee shall continue as a Participant as long as there is a
balance credited to his Account.
Article IV
Deferral Amount Elections
4.1 Deferral Amount. An Eligible Employee shall elect to
defer none, all, or any portion of any Incentive Award that may
be awarded by the Company. The amount deferred shall be
specified as a percentage of any Incentive Award granted to an
Eligible Employee in a Deferral Year; provided, no Deferral
Amount shall be less than $5,000. Effective March 27, 1994, an
Eligible Employee may also elect to defer any portion of his
biweekly Base Salary up to 25% as long as such deferral does not
reduce such Eligible Employee's Base Salary to an amount less
than the amount which is permitted under Section 401(a)(17) of the
Internal Revenue Code of 1986, as amended from time to time.
Incentive Award or Base Salary deferrals are made in 1%
increments, rounded to the nearest whole dollar.
4.2 Election of Deferral Amount. An Eligible Employee
must file a Deferral Amount election form each Plan Year.
Except as may be permitted by the Internal Revenue Code or the
regulations adopted thereunder, the election shall apply to the
Deferral Year which commences immediately following the Plan
Year in which the election is made and to the Base Salary and
all Incentive Awards granted to the Eligible Employee by the
Company with respect to such Deferral Year. Incentive Awards
made with respect to a Deferral Year must be awarded by the
Company during such Deferral Year and be designated by the
Company having been made with respect to such Deferral Year.
If an Eligible Employee does not file a Deferral
Amount election form during a Plan Year, such Eligible Employee
will be deemed to have elected not to defer receipt of any
Incentive Awards or Base Salary attributable to the Deferral
Year immediately following the Plan Year.
4.3 Deferral Amount Election Forms. All Deferral Amount
elections shall be made on the Deferral Amount election form.
The Deferral Amount election form shall specify the Deferral
Amount, Deferral Payment Date, the form of payment, if
applicable, and the Eligible Employee's designated Beneficiary
to receive any death benefit applicable to such Deferral
Amounts. Other than the designation of Beneficiary and the
method of payment to Beneficiaries, all Deferral Amount
elections shall be irrevocable once the Deferral Year has
commenced.
Article V
Payment of Benefits
5.1 Time of Payment. Each Deferral Amount election form
filed by an Eligible Employee shall specify the Deferral Payment
Date on which benefit payments are to be made or commence with
respect to the Deferral Amount covered by such election. An
Eligible Employee shall have the option of designating an Early
Distribution Date that will apply if employment continues until
the Early Distribution Date. If an Eligible Employee fails to
make an effective Deferral Payment Date designation or
terminates employment, his Deferral Payment Date for the
Deferral Amount subject to the election shall be the Eligible
Employee's Normal Distribution Commencement Date. Except as
provided in Section 5.3, all benefit payments shall be made to
the Participant on the Deferral Payment Date specified in his
applicable Deferral Amount election form.
5.2 Method of Payment. If an Eligible Employee elects an
Early Distribution Date, the method of payment is in the form of
a lump sum. However, if an Eligible Employee elects Normal
Distribution Commencement Date on a Deferral Amount election
form, such Eligible Employee must specify on the Deferral Amount
election form the method of payment for the Deferral Amount
covered by such election. An Eligible Employee may designate
payment in the form of a single lump sum payment or in the form
of annual installment payments payable for 5, 10 or 15 years.
Annual installment payments shall be paid once a year, with the
first annual installment payment being paid on the Participant's
Normal Distribution Commencement Date and each subsequent annual
installment paid on the first business day of April of each
subsequent year until all installment payments have been paid.
Annual installment payment amounts shall be determined by
reference to the balance, as of the Participant's Normal
Distribution Commencement Date, in the subaccount of the
Participant's Account which represents the Deferral Amount to be
paid in installments. After commencement of installment
payments, a Participant's Account and subaccounts comprising
such Account shall continue to be adjusted in the same manner as
set forth at Section 6.3.
If the Eligible Employee fails to make an effective
designation as to the method of payment, payment shall be made
in the form of a single lump sum payment on the Participant's
Normal Distribution Commencement Date.
The Committee, in its sole discretion, may elect to
accelerate any installment payment if a Participant's Normal
Distribution Commencement Date is determined with reference to
the date the Participant is deemed Disabled, or a Participant is
deemed Disabled but had previously elected an Early Distribution
Date.
5.3 Death Benefit. If a Participant dies with a balance
credited to his Account, such balance shall be paid to his
Beneficiary designated on the applicable Deferral Amount
election form. The then current balance of each Account or
subaccount payable to a designated Beneficiary shall be paid
under the method of payment designated for the payment of such
amount or under the method of payment separately designated for
payment of benefits to such Beneficiary, as provided in Section
5.5. The Committee, in its sole discretion, may elect to
accelerate payment of any portion of the unpaid balance of any
Account. Each Beneficiary of a deceased Participant who is
eligible to receive death benefit payments under this Section
shall have the amounts to be paid to such Beneficiary allocated
to a subaccount in the name of the Beneficiary under the
deceased Participant's Account. Such subaccount shall be
adjusted from time to time as provided in Article VI.
5.4 Consolidation of Payments. In any case where a
Participant or Beneficiary is receiving more than one benefit
payment during a Plan Year, the Committee may, in its sole
discretion, elect to consolidate such payments into a lesser
number of payments.
5.5 Beneficiary Designations. A Participant shall
designate a Beneficiary who, upon his death, shall receive
payments that otherwise would have been paid to him under the
Plan. All Beneficiary designations shall be in writing. Any
such designation shall be effective only if and when delivered
to the Committee during the lifetime of the Participant. The
Participant may specify on the Beneficiary designation form the
method of payment to the designated Beneficiary. The designated
method of payment must be a method permitted under Section 5.3.
A Participant may change a designated Beneficiary or
Beneficiaries or change a designated method of payment to a
Beneficiary by filing a new Beneficiary designation form.
If a designated Beneficiary of a Participant predeceases
the Participant, the designation of such Beneficiary shall be
void. If a designated Beneficiary to whom benefits under the
Plan remain unpaid dies after the Participant and the
Participant failed to specify a contingent Beneficiary on the
appropriate Beneficiary designation form, the remainder of such
death benefit payments shall be paid to such Beneficiary's
estate. If a Participant fails to designate a Beneficiary with
respect to any death benefit payments or if such designation is
ineffective, in whole or in part, any payment that otherwise
would have been paid to such Participant shall be paid to his
surviving spouse or, if none, to his estate.
Article VI
Accounts and Credited Interest
6.1 Participant Accounts. The Committee shall maintain,
or cause to be maintained, a bookkeeping Account for each
Participant for the purpose of accounting for the Participant's
interest under the Plan. The Committee shall maintain within
each Participant's Account such Deferral Amount subaccounts as
may be necessary to identify each separate Deferral Amount, and
Credited Interest allowable thereto, by reference to the
Deferral Year to which each Deferral Amount relates. The
combination of the subaccounts maintained in the name of a
Participant shall comprise the Participant's Account. In
addition to the foregoing bookkeeping subaccounts maintained
for each Participant, the Committee shall maintain, or cause to
be maintained, such other accounts, subaccounts, records or
books as it deems necessary to properly provide for the
maintenance of Accounts and to carry out the intent and purposes
of the Plan.
6.2 Adjustment of Accounts. Each Participant's Account
shall be adjusted to reflect all Deferral Amounts credited to
his Account, all Credited Interest and other earnings credited
to his Account as provided by Section 6.3, and all benefit
payments charged to his Account. A Participant's Deferral
Amount shall be credited to such Participant's Account as of the
date on which the amount being deferred would have become
payable to the Participant absent the deferral election, or on
such other date as the Committee specifies, and shall be
credited to the applicable subaccount within such Account by
reference to the applicable Deferral Year. Credited Interest
and other earnings shall be credited to Participant Accounts
pursuant to Section 6.3. Charges to a Participant's Account to
reflect benefit payments shall be made as of the date of any
such payment and shall be charged to the applicable subaccount
within such Account. As of any relevant date, the balance
standing to the credit of a Participant's Account, and each
separate subaccount comprising such Account, shall be the
respective balance in such Account and the component subaccounts
as of the close of business on such date after all applicable
credits and charges have been posted.
6.3 Credited Interest. Each Participant's Account shall
be credited with Credited Interest on the balance in such
Account. Credited Interest shall be allocated to the appropriate
subaccount balances within such Account. Credited Interest
shall be credited to Accounts on a quarterly basis at the end of
each calendar quarter and on and after April 1, 1995, to a
Participant's account through the Participant's Normal
Distribution Commencement Date. Credited Interest shall be
adjusted each Plan Year. The Credited Interest rate for each
quarterly date during a Plan Year shall be the highest of the
twelve month certificate of deposit rates quoted by Chase
Manhattan Bank, Citibank, or Morgan Guaranty Bank on December 1
immediately preceding the Plan Year for which Credited Interest
is to be computed. The Committee shall make all determinations
with respect to the applicable Credited Interest rate in effect
from time to time and the crediting of such Credited Interest to
Accounts. Such determinations shall be final and binding on all
interested parties.
A review of earnings in the Plan shall be performed on an
annual basis. Half of the Earnings identified for the time
period under review that exceed the Credited Interest stipulated
above shall be allocated to Participant Accounts on a prorata
basis.
6.4 Vesting. Subject to the conditions and limitations on
payment of benefits under the Plan, a Participant shall have a
fully vested and nonforfeitable beneficial interest in the
balance standing to the credit of his Account as of any relevant
date.
6.5 Account Statements. The Committee shall provide each
Participant with a statement of the status of his Account under
the Plan. The Committee shall provide such statement annually
or at such other times as the Committee may determine. Such
statement shall be in the format prescribed by the Committee.
Article VII
Administration of the Plan
7.1 Administration. The Plan shall be administered by the
Committee. A majority of the members of the Committee shall
constitute a quorum. The acts of a majority of a quorum of the
Committee at a meeting or acts approved in writing by a majority
of the Committee without a meeting shall be the acts of the
Committee. The Committee shall have the authority to make such
rules as it deems necessary to administer the Plan, to interpret
the Plan, to decide questions arising under the Plan, and to
take such other action as may be appropriate to carry out the
purposes of the Plan. The Committee is authorized to employ
attorneys, accountants or any other agents or delegate specified
duties to employees of the Company as it shall deem proper in
the discharge of its duties. The Committee shall be the "plan
administrator", and the Company shall be the "named fiduciary"
as such terms are defined in ERISA.
7.2 Compensation and Expenses. A member of the Committee
may receive compensation from the Company for services as a
member of the Committee. Any member of the Committee may
receive reimbursement by the Company for expenses properly and
actually incurred. All expenses of the Committee shall be paid
by the Company. Such expenses shall include any expenses
incident to the functioning of the Committee or the Plan,
including, but not limited to, fees of actuaries, accountants,
legal counsel and other specialists, and other costs of
administering the Plan.
7.3 Claims Review Procedures.
(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:
(1) the specific reasons for the denial;
(2) specific reference to pertinent Plan provisions on
which the denial is based;
(3) 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;
(4) 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
(5) if a request for a 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 7.3(a) (4).
(b) Decision 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.
7.4 Finality of Determinations. All determinations of the
Committee as to any matter arising under the Plan, including
questions of construction and interpretation shall be final,
binding and conclusive upon all interested parties.
7.5 Indemnification. To the extent permitted by law and
the Company's bylaws, the members of the Committee, its agents,
and the officers, directors and employees of the Company shall
be indemnified and held harmless by the Company from and against
any and all loss, cost, liability or expense that may be imposed
upon or may be 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 the Plan and against
and from any and all amounts paid by them in settlement with the
Company'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 gross
negligence or willful misconduct.
Article VIII
Provision For Benefits
8.1 Provision For Benefits. Benefits provided by this
Plan shall constitute general obligations of the Company. No
amount of any benefit under this Plan shall be set aside or held
in trust, and no recipient shall have a right to be paid from
any particular asset of the Company; provided, this Section
shall not be construed to prevent the Committee from directing
a transfer of funds to a grantor trust as defined at Sections
671 through 679 of the Internal Revenue Code of 1986, as
amended, for the purpose of paying all or any part of a Plan
benefit.
Article IX
Amendment, Termination, or Merger
9.1 Amendment and Termination. The Board of Directors of
the Company may amend, modify or terminate the Plan at any time
and in any manner. In the event of a termination of the Plan,
no further Deferral Amount elections shall be made under the
Plan. Amounts which are then payable or which become payable
under the terms of the Plan shall be paid as scheduled under the
provisions of the Plan.
9.2 Merger, Consolidation or Acquisition. In the event of
a merger, consolidation or acquisition where the Company is not
the surviving corporation and unless the successor or acquiring
corporation elects to continue and carry on the Plan, the Plan
shall terminate at the time of such event. Any successor or
acquiring corporation may elect to accelerate payments under the
Plan.
Article X
General Provisions
10.1 Effect on Other Plans. Deferred Amounts shall not be
considered as part of a Participant's compensation for the
purpose of any qualified employee pension plans maintained by
the Company. However, such amounts may be taken into account
under all other employee benefit plans maintained by the Company
in the year in which such amounts would have been payable absent
the deferral election; provided, such amounts shall not be taken
into account if their inclusion would jeopardize the
tax-qualified status of the plan to which they relate.
10.2 Nonalienation. Except as provided in Section 206(d)
of ERISA, no benefit payable at any time under the Plan shall be
subject in any manner to alienation, sale, transfer, assignment,
pledge, attachment, garnishment, or encumbrance of any kind.
Any attempt to alienate, sell, transfer, assign, pledge, or
otherwise encumber any such benefit, whether presently or
hereafter payable, shall be void. No benefit payable under the
Plan shall in any manner be liable for or subject to the debts
or liabilities of any Participant or Beneficiary entitled to any
benefit, except as may be provided in a qualified domestic
relations order under Section 206(d) of ERISA. The Committee
shall establish procedures to determine whether an order is a
qualified domestic relations order and to administer
distributions under such qualified domestic relations orders.
10.3 Incompetency. Any person receiving or claiming
benefits under the Plan shall be conclusively presumed to be
mentally competent until the date on which the Committee
receives a written notice, in an acceptable form and manner,
that such person is incompetent and a guardian or other person
legally vested with the care of his estate has been appointed.
If the Committee finds that any person to whom a benefit is
payable under the Plan is unable to care for his affairs because
of any disability or infirmity and no legal guardian of such
person's estate has been appointed, any payment due may be paid
to the spouse, a child, a parent, a sibling, or to any person
deemed by the Committee to have incurred expense for such person
otherwise entitled to payment. Any such payment so made shall
be a complete discharge of any liability therefor under the
Plan. If a guardian of the estate of any person receiving or
claiming benefits under the Plan shall be appointed by a court
of competent jurisdiction, benefit payments shall be made to
such guardian, provided proper proof of appointment and
continuing qualification is furnished in the form and manner
acceptable to the Committee. Any such payment so made shall be
a complete discharge of any liability therefor under the Plan.
10.4 Effect of Mistake. If, in the sole opinion of the
Committee, a material mistake or misstatement as to the
eligibility of a Participant or the amount of benefit payments
made or to be made to or with respect to a Participant occurs,
the Committee shall, if possible, cause an adjustment to be made
so as to correct such mistake and provide the correct amount of
benefit payments with respect to such Participant.
10.5 Plan Not an Employment Contract. This Plan is not an
employment contract and does not confer on any person the right
to be continued in employment. All Employees remain subject to
change of salary, transfer, change of job, discipline, layoff,
discharge or any other change of employment status.
10.6 Tax Withholding. The Company or other payor may
withhold from a benefit payment or Deferral Amount any federal,
state or local taxes required by law to be withheld with respect
to such payment or Deferral Amount.
10.7 Severability. If any provision of the Plan is held
invalid or illegal for any reason, any illegality or invalidity
shall not affect the remaining provisions of the Plan, and the
Plan shall be construed and enforced as if the illegal or
invalid provision had never been contained therein. The Company
shall have the privilege and opportunity to correct and remedy
such questions of illegality or invalidity by amendment.
10.8 Applicable Law. The Plan shall be governed and
construed in accordance with the laws of the State of Oklahoma,
except to the extent such laws are preempted by any applicable
federal law. No reference to ERISA in the Plan shall be
construed to mean that the Plan is subject to any particular
provisions of ERISA.
IN WITNESS WHEREOF, the Company has caused this instrument
to be executed by its duly authorized officers, effective as of
January 1, 1996.
KERR-McGEE CORPORATION
ATTEST: By:(John C. Linehan)
John C. Linehan
Senior Vice President and
Chief Financial Officer
(Don Hager)
Don Hager, Assistant Secretary
Signature Page for Kerr-McGee Corporation Executive Deferred
Compensation Plan, amended and restated effective January 1,
1996.
EXHIBIT 12
KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In millions of dollars) 1995 1994 1993 1992 1991
Income (loss) from
continuing operations $(24) $ 69 $ 95 $(12) $ 85
Add -
Provision (benefit) for
income taxes (43) 29 50 (31) 53
Interest expense 61 58 47 66 78
Rental expense representa-
tive of interest factor 4 4 4 5 5
Earnings $ (2) $160 $196 $ 28 $221
Fixed Charges -
Interest expense $ 61 $ 58 $ 47 $ 66 $ 78
Rental expense representa-
tive of interest factor 4 4 4 5 5
Interest capitalized 11 10 20 15 16
Total fixed charges $ 76 $ 72 $ 71 $ 86 $ 99
Ratio of earnings to fixed
charges -(1) 2.2 2.8 -(1) 2.2
(1)Earnings were inadequate to cover fixed charges by $78 million and
$58 million in 1995 and 1992, respectively.
<PAGE>
Management's Discussion and Analysis
Results of Consolidated Operations
The company's 1995 net loss was $31 million, or $.60 per
common share, compared with 1994 net income of $90 million, or
$1.74 per common share, and 1993 net income of $77 million, or
$1.57 per common share. During 1995, the company adopted the
provisions of Statement of Financial Accounting Standards No.
121 (FAS 121), "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of;" began a
divestiture and restructuring program for its exploration and
production operations; and provided for additional future
remediation costs related to the company's closed chemical
processing facility in West Chicago, Illinois. These noncash,
unusual items totaled $161 million after income taxes.
Excluding these unusual items, the company's 1995 income from
continuing operations was $137 million, or $2.63 per common
share. Also during 1995, the company completed the sale of
substantially all of its refining and marketing operations and
has therefore restated the amounts in the accompanying income
statement and related notes to present these operations as
discontinued. The company's 1995 loss from continuing
operations was $24 million, or $.47 per common share, compared
with 1994 income of $69 million, or $1.33 per common share, and
1993 income of $95 million, or $1.93 per common share.
Operating profit for 1995 was $72 million, compared with
$210 million and $227 million for 1994 and 1993, respectively.
The $138 million decrease in 1995 operating profit was due to
the adoption of FAS 121 and the divestiture and restructuring
program in the exploration and production operating unit,
totaling $234 million, partially offset by improved results in
each of the company's three operating units. The $17 million
decrease in 1994 operating profit, compared with 1993, was due
to lower operating results in exploration and production and
coal operations, partially offset by increased chemical
operating profit.
Consolidated sales from continuing operations totaled $1.8
billion for 1995, compared with $1.6 billion for 1994 and $1.5
billion for 1993. The improvement in 1995 revenues was
primarily due to higher titanium dioxide pigment and crude oil
sales prices and higher crude oil, natural gas, synthetic
rutile, and coal sales volumes, partially offset by lower
natural gas and coal sales prices and lower forest products
sales volumes. Costs and operating expenses increased $80
million in 1995, primarily due to higher coal and chemical
production volumes and increased purchases of crude oil and
natural gas for resale. The $116 million increase in 1994 costs
and operating expenses, compared with 1993, was due to higher
costs for exploration and production resulting from increased
crude oil production and higher costs for chemical operations
due to higher production volumes.
The 1995 and 1993 selling, general, and administrative
expenses were lower than 1994 by $13 million and $16 million,
respectively, principally due to the effects of corporate
restructuring and higher provisions for bad debts in 1994.
The $227 million asset impairment in 1995 is the result of
the company's adoption of FAS 121 and the oil and gas
divestiture program (see Note 3).
Exploration costs for 1995, 1994, and 1993 were $92
million, $85 million, and $71 million, respectively. The 1995
increase resulted principally from higher dry hole and
geophysical costs in the Gulf of Mexico and higher other
exploration costs in China and domestic areas. The 1994
increase resulted primarily from higher geophysical and dry hole
costs.
Net provisions for environmental reclamation and
remediation of inactive sites totaled $54 million, $10 million,
and $4 million in 1995, 1994, and 1993, respectively. These
amounts represent additional provisions established for the
removal of low-level radioactive materials from the company's
inactive facility in West Chicago, Illinois, and the reclamation
of several other inactive facilities.
Interest and debt expense totaled $61 million in 1995,
slightly higher than $58 million in 1994. Interest and debt
expense for 1994 was $11 million higher than in 1993 due
primarily to lower capitalized interest, higher average interest
rates, and higher debt.
Segment Operations
Operating profit (loss) from each of the company's segments
is summarized in the following table:
(In millions of dollars) 1995(1) 1994 1993
Exploration and production $(97) $ 74 $ 82
Chemicals 122 92 70
Coal 43 45 80
Other 4 (1) (5)
Total $ 72 $210 $227
(1)Includes unusual items discussed in the following paragraphs.
Exploration and Production
Exploration and production had a 1995 operating loss of $97
million, compared with an operating profit of $74 million for
1994 and $82 million for 1993. The decline in the 1995 results
was due to the FAS 121 asset impairments and the divestiture and
restructuring program, which totaled $210 million (see Notes 3
and 10, respectively). Without these charges, the 1995
operating profit would have been $113 million, or an increase of
$39 million from 1994. This improvement resulted from higher
crude oil sales volumes and prices and higher natural gas sales
volumes, partially offset by lower natural gas sales prices and
higher exploration costs. The decline in 1994, compared with
1993, resulted principally from lower crude oil sales prices,
lower natural gas deliveries and sales prices, and higher
exploration expense, partially offset by higher crude oil sales
volumes.
Revenues and crude oil and natural gas sales volumes and
prices are summarized in the following table:
1995 1994 1993
Revenue (millions of dollars) $ 690 $ 633 $ 561
Crude oil and condensate produced
(thousands of barrels per day) 70.4 67.3 53.2
Average price of crude oil sold
(per barrel) $15.99 $14.81 $15.64
Natural gas deliveries
(MMCF per day) 291 271 286
Average price of natural gas
delivered (per MCF) $ 1.52 $ 1.76 $ 1.92
Chemicals
Operating profit from chemicals totaled $122 million, $92
million, and $70 million for 1995, 1994, and 1993, respectively,
on revenues of $707 million, $639 million, and $556 million,
respectively. The increase in 1995 revenues was due to higher
titanium dioxide pigment sales prices and higher synthetic
rutile sales volumes, partially offset by lower forest products
sales volumes. The increase in 1995 operating profit was due
primarily to the higher titanium dioxide pigment sales prices.
The increase in 1994 revenues was due to higher sales volumes of
most chemical products and higher international titanium dioxide
pigment sales prices, partially offset by lower domestic pigment
sales prices. The higher 1994 operating profit, compared with
1993, was due to lower per-unit production costs for most
products and higher revenues.
Coal
Coal operating profit was $43 million for 1995, compared
with $45 million for 1994 and $80 million for 1993. Revenues
were $353 million, $294 million, and $328 million in 1995, 1994,
and 1993, respectively. Revenues increased in 1995 due to
higher sales volumes, partially offset by lower sales prices.
Operating profit for 1995 declined as a result of the $23
million FAS 121 asset impairments (see Note 3). Excluding the
asset impairments, the operating profit for 1995 would have been
$66 million, or $21 million higher than in 1994, due to lower
per-ton production costs and higher revenues. The decrease in
1994 revenues, compared with 1993, was due to lower average
sales prices resulting from contract renegotiations in 1993,
partially offset by higher sales volumes. Decreased 1994
operating profit, compared with 1993, was due to the decrease in
revenues.
Financial Condition
Cash Flow
Net cash provided by operating activities totaled $402
million for 1995, compared with $355 million and $424 million
for 1994 and 1993, respectively. The company's net cash
provided by operating activities for 1995 included a net loss of
$31 million; depreciation, depletion, and amortization of $341
million; FAS 121 asset impairment provisions of $227 million; a
net deferred tax benefit of $52 million; environmental
provisions for inactive sites of $65 million; and other noncash
charges of $43 million. These noncash items were partially
offset by a net increase in working capital, excluding cash,
short-term debt, and the working capital effects of the sale of
the discontinued operations. Net cash provided by operating
activities for 1994 of $355 million reflects net income of $90
million; depreciation, depletion, and amortization of $345
million; environmental provisions for inactive sites of $18
million; and other noncash charges of $73 million, partially
offset by a net increase in working capital items, excluding
cash and short-term debt. Net cash provided by operating
activities for 1993 of $424 million reflects net income of $77
million; depreciation, depletion, and amortization of $321
million; other noncash charges of $54 million; and a net
decrease in working capital items, excluding cash and short-term
debt.
Net cash used by the company in investing activities
totaled $29 million, $389 million, and $396 million for 1995,
1994, and 1993, respectively. The major investing activity
during each of the three years was cash capital expenditures,
which totaled $485 million in 1995, $411 million in 1994, and
$451 million in 1993. Partially offsetting were investing
inflows of $419 million in 1995 from the sales of the refining
and marketing assets and a $39 million receipt in 1993 from the
sale of the contract drilling operations.
Net cash used by the company in financing activities during
1995 totaled $368 million, which included net repayments of debt
totaling $253 million, dividend payments of $79 million, and the
purchase of treasury stock for $45 million. Financing
activities provided $22 million and $9 million in 1994 and 1993,
respectively, due primarily to increases in short-term
borrowings that exceeded long-term debt repayments by $99
million and $79 million, respectively. Partially offsetting
were dividends paid to common stockholders totaling $78 million
and $73 million in 1994 and 1993, respectively.
In September 1995, the company's Board of Directors
approved an increase in the quarterly dividend payable on
January 2, 1996, from $.38 per share to $.41 per share.
Additionally, the board authorized management to purchase from
time to time company stock of up to $300 million, or
approximately 10% of the outstanding shares at the then current
market price. At December 31, 1995, shares totaling 834,600 had
been acquired at a cost of $48 million. The company expects to
purchase the remaining shares in 1996 and 1997.
Liquidity
The net working capital position of the company at year-end
1995 increased $113 million from year-end 1994. This increase
resulted principally from repayments of short-term debt. The
current ratio was 1.3 to 1 at December 31, 1995, compared with
1.1 to 1 at both December 31, 1994 and 1993.
The percentage of total debt to total capitalization was
34% at December 31, 1995, compared with 39% and 37% at year-end
1994 and 1993, respectively. The decline in the 1995 percentage
resulted from debt repayments during 1995.
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 $35 million was
outstanding at year-end 1995. 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, none of which was outstanding at year-end
1995. 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. $25 million, or a total of $75
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 1995, these agreements
were extended for one year. The company is the guarantor for
each of these agreements. At December 31, 1995, amounts
outstanding pursuant to these agreements were as follows:
Amount Outstanding
Date of Agreement Termination Date (In millions of dollars)
September 20, 1993 September 4, 1996 $21
October 4, 1993 September 27, 1996 19
October 20, 1993 October 16, 1996 16
In February 1995, the company's wholly owned subsidiary,
Kerr-McGee China Petroleum Ltd., entered into a revolving credit
agreement with several banks providing for borrowings up to $105
million through February 24, 1998, of which $31 million was
outstanding at year-end 1995. Interest is payable at varying
rates.
At year-end 1995, the company had available unused lines of
credit and revolving credit facilities of $665 million. Of this
amount, $330 million and $232 million can be used to support the
commercial paper borrowings of Kerr-McGee Credit Corporation and
Kerr-McGee Oil (U.K.) PLC, respectively.
Capital expenditures for the three years ended December 31,
1995, totaled $1.3 billion and have been financed through
internally generated funds and various borrowings. For the
three-year period ended December 31, 1995, net cash provided by
operating activities, excluding working capital changes, was
$1.6 billion, approximately equal to total capital expenditures
and dividends paid during the same period.
Management anticipates that the cash requirements for the
1996 capital expenditures program, currently estimated to be
$400 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 and to sell funds
received from collections of accounts receivable denominated in
foreign currencies. Additionally, the company uses commodity
futures and options to minimize the price risks associated with
producing and selling crude oil and natural gas. Outstanding
futures, forward, and option contracts are described in Note 9.
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, 1995, the company had received notices
that it has been named a potentially responsible party (PRP)
with respect to the remediation of 14 existing EPA Superfund
sites and may share liability at certain of these sites. During
1995, the company received PRP notification from the EPA with
respect to the site in Slidell, Louisiana. 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 1995, $119 million was added to the
reserve for active and inactive sites. At December 31, 1995,
the company's reserve for these sites totaled $297 million. In
addition, at year-end 1995, the company had reserves of $85
million for the future costs for the abandonment and removal of
offshore well and production facilities at the end of their
productive lives and $18 million for the decommissioning and
reclamation of coal mining locations. In the Consolidated
Balance Sheet, $333 million of the total reserve is classified
as a deferred credit, and the remaining $67 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, 1995, were as follows:
(In millions of dollars) 1995 1994 1993 Total
Capital expenditures $ 20 $ 17 $13 $ 50
Recurring expenses 23 28 26 77
Charges to environmental
reserves 61 60 30 151
Total $104 $105 $69 $278
The company has not recorded in the financial statements
potential reimbursements from governmental agencies or other
third parties (see Note 13). 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
ongoing 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 1995 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; installed
and operating a free-
product recovery system. $ 19 $ 4 3
West Chicago, Ill., Began cleanup of a portion
outside the of the site in 1995
facility (see Note 13). 22 6 1
Slidell, La., and Various stages of
11 other sites investigation. 23 6 489
individually not
material
64 16 493
Non-EPA Superfund
sites under consent order,
license, or agreement
West Chicago, Ill., Pursuing a license to
facility decommission a former
facility (see Note 13).
Began shipments to a
permanent disposal
facility during 1994. 295 131
Cleveland/Cushing, Agreed to remediation
Okla. plans for a major 48 19
Cimarron, Okla. portion of these sites. 30 28
373 178
Non-EPA Superfund
sites individually
not material 146 92
Total for all sites $583 $286
</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 1995, the company adopted the provisions of
Statement of Financial Accounting Standards (FAS) No. 121,
"Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," which requires that long-
lived assets be reviewed for impairment. See Note 3 for a
discussion of the effects of the new accounting standard on the
company's results of operations and statement of financial
position.
The Financial Accounting Standards Board recently issued
FAS No. 123, "Accounting for Stock-Based Compensation," which
prescribes an alternative method of accounting for stock-based
compensation awards. Under this optional accounting treatment,
the fair value of stock-based compensation awards is recognized
as expense over the vesting period of the award. The company
expects to continue accounting for stock-based compensation
awards as it has in the past using the intrinsic value method.
Additional disclosure will be required beginning in 1996.
Responsibility for Financial Reporting
The company's management is responsible for the integrity
and objectivity of the financial data contained in the financial
statements. These financial statements have been prepared in
conformity with generally accepted accounting principles
appropriate under the circumstances and, where necessary,
reflect informed judgments and estimates of the effects of
certain events and transactions based on currently available
information at the date the financial statements were prepared.
The company's management depends on the company's system of
internal accounting controls to assure itself of the reliability
of the financial statements. The internal control system is
designed to provide reasonable assurance, at appropriate cost,
that assets are safeguarded and transactions are executed in
accordance with management's authorizations and are recorded
properly to permit the preparation of financial statements in
accordance with generally accepted accounting principles.
Periodic reviews are made of internal controls by the company's
staff of internal auditors, and corrective action is taken if
needed.
The Board of Directors reviews and monitors financial
statements through its audit committee, which is composed solely
of directors who are not officers or employees of the company.
The audit committee meets with the independent public
accountants, internal auditors, and management to review
internal accounting controls, auditing, and financial reporting
matters.
The independent public accountants are engaged to provide
an objective and independent review of the company's financial
statements and to express an opinion thereon. Their audits are
conducted in accordance with generally accepted auditing
standards, and their report is included below.
Report of Independent Public Accountants
To the Stockholders and Board of Directors of Kerr-McGee
Corporation:
We have audited the accompanying consolidated balance sheet
of Kerr-McGee Corporation (a Delaware corporation) and
subsidiary companies as of December 31, 1995 and 1994, and the
related consolidated statements of income, retained earnings,
and cash flows for each of the three years in the period ended
December 31, 1995. 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, 1995 and 1994, and the results of their operations
and their cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted
accounting principles.
As explained in Note 3 to the financial statements, the
company adopted Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of" in 1995.
(ARTHUR ANDERSEN LLP)
ARTHUR ANDERSEN LLP
Oklahoma City, Oklahoma,
February 16, 1996
Kerr-McGee Corporation
Consolidated Statement of Income
(In millions of dollars,
except per-share amounts) 1995 1994 1993
Sales $1,801 $1,612 $1,481
Costs and Expenses
Costs and operating expenses 999 919 803
Selling, general, and
administrative expenses 87 100 84
Depreciation and depletion 310 300 277
Asset impairment 227 - -
Exploration, including dry holes
and amortization of undeveloped
leases 92 85 71
Provision for environmental
reclamation and remediation
of inactive sites, net of
reimbursements 54 10 4
Taxes, other than income taxes 61 65 69
Interest and debt expense 61 58 47
Total Costs and Expenses 1,891 1,537 1,355
(90) 75 126
Other Income 23 23 19
Income (Loss) from Continuing
Operations before Income Taxes (67) 98 145
Provision (Benefit) for Income Taxes (43) 29 50
Income (Loss) from Continuing Operations (24) 69 95
Income (Loss) from Discontinued
Operations, net of provision (benefit)
for income taxes of $(4) in 1995, $13
in 1994, and $(9) in 1993 (7) 21 (18)
Net Income (Loss) $ (31) $ 90 $ 77
Net Income (Loss) per Common Share:
Continuing Operations $ (.47) $ 1.33 $ 1.93
Discontinued Operations (.13) .41 (.36)
Total $ (.60) $ 1.74 $ 1.57
Kerr-McGee Corporation
Consolidated Statement of Retained Earnings
(In millions of dollars,
except per-share amounts) 1995 1994 1993
Balance at Beginning of Year $1,320 $1,309 $1,306
Net income (loss) (31) 90 77
Dividends declared -
$1.55 per common share in 1995 and
$1.52 per common share in each of
the years 1994 and 1993 (80) (79) (74)
Balance at End of Year $1,209 $1,320 $1,309
The accompanying notes are an integral part of these statements.
<PAGE>
Kerr-McGee Corporation
Consolidated Balance Sheet
(In millions of dollars) 1995 1994
ASSETS
Current Assets
Cash $ 87 $ 82
Accounts receivable, net of allowance
for doubtful accounts of $5 million
in 1995 and $3 million in 1994 337 422
Inventories 222 399
Deposits and prepaid expenses 120 60
Total Current Assets 766 963
Investments and Other Assets 120 95
Property, Plant, and Equipment - Net 2,267 2,552
Deferred Charges 79 88
$3,232 $3,698
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $ 94 $ 312
Accounts payable 302 375
Long-term debt due within one year 9 8
Taxes, other than income taxes 18 33
Accrued liabilities 157 162
Total Current Liabilities 580 890
Long-Term Debt 632 673
Deferred Credits and Reserves
Income taxes 105 179
Other 499 413
Total Deferred Credits and Reserves 604 592
Stockholders' Equity
Common stock, par value $1.00 -
150,000,000 shares authorized,
53,513,888 shares issued in
1995 and 53,304,076 shares
issued in 1994 54 53
Capital in excess of par value 318 309
Preferred stock purchase rights 1 1
Retained earnings 1,209 1,320
Unrealized gain on available-for-
sale securities 26 12
Common stock in treasury, at cost -
2,444,690 shares in 1995 and
1,610,438 shares in 1994 (111) (63)
Deferred compensation (81) (89)
Total Stockholders' Equity 1,416 1,543
$3,232 $3,698
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) 1995 1994 1993
Cash Flow from Operating Activities
Net income (loss) $(31) $ 90 $ 77
Adjustments to reconcile to net cash
provided by operating activities -
Depreciation, depletion, and amortization 341 345 321
Asset impairment 227 - -
Deferred income taxes (52) 3 2
Gain on sale of refining and
marketing operations, net of income taxes (2) - -
Provision for environmental reclamation
and remediation of inactive sites 65 18 4
Noncash items affecting net income 43 73 54
Retirements and gain on sale of assets (1) (4) (9)
Changes in current assets and
liabilities and other, net of effects
of discontinued operations sold -
(Increase) decrease in accounts
receivable 78 (48) 34
(Increase) decrease in inventories (1) (51) 36
(Increase) decrease in deposits
and prepaids (50) (2) 7
Increase (decrease) in accounts
payable and accrued liabilities (104) 26 (9)
Decrease in taxes payable (53) (3) (21)
Other (58) (92) (72)
Net cash provided by operating
activities 402 355 424
Cash Flow from Investing Activities
Capital expenditures (485) (411) (451)
Proceeds from sale of assets 17 27 17
Proceeds from sale of refining and
marketing operations 419 - -
Proceeds from sale of drilling operations - - 39
Purchase of long-term investments (8) (35) (25)
Proceeds from sale of long-term
investments 28 30 24
Net cash used in investing
activities (29) (389) (396)
Cash Flow from Financing Activities
Increase (decrease) in short-term
borrowings (218) 146 95
Purchase of treasury stock (45) - -
Dividends paid (79) (78) (73)
Repayment of long-term debt (35) (47) (16)
Issuance of common stock 9 1 3
Net cash provided by (used in)
financing activities (368) 22 9
Net Increase (Decrease) in Cash and
Cash Equivalents 5 (12) 37
Cash and Cash Equivalents at
Beginning of Year 82 94 57
Cash and Cash Equivalents at
End of Year $ 87 $ 82 $ 94
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 were immaterial.
Net Income (Loss) per Common Share
The weighted average number of shares used to compute the
1995 net loss per common share was 51,669,285. 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.
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 $48 million in 1995 and $45
million in 1994.
Inventories
The costs of the crude oil and liquids inventories of the
exploration and production operations and the company's other
product inventories are determined by the first-in, first-out
(FIFO) method. The crude oil and refined products of the
discontinued refining and marketing operations were valued using
the last-in, first-out (LIFO) method until the sale of these
inventories during 1995. Inventory carrying values include
material costs, labor, and indirect manufacturing expenses
associated therewith. Materials and supplies are valued at
average cost.
Deferred Charges
The cost of injected gas is deferred until sold at the
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.
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 by field using the unit-of-production
method as the oil and gas are produced.
Proved properties are reviewed for impairment on a field-
by-field basis when facts and circumstances indicate that their
carrying amount may not be recoverable. In performing this
review, future cash flows are estimated by applying estimated
future oil and gas prices to estimated future production, less
estimated future expenditures to develop and produce the
reserves. If the sum of these estimated future cash flows
(undiscounted and without interest charges) is less than the
carrying amount of the property, an impairment loss is
recognized for the excess of the carrying amount over the
estimated fair value of the property. Prior to the third
quarter of 1995, proved properties were 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.
Chemical, coal, and other assets are reviewed for impairment by
asset group for which the lowest level of independent cash flows
can be identified and impaired in the same manner as proved oil
and gas properties. Prior to the third quarter of 1995,
individual properties were written down when impairments were
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 costs 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 1995, 1994, and 1993
was $11 million, $10 million, and $20 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.
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, 1995 and 1994, both the quantity and dollar amount of such
arrangements recorded in the Consolidated Balance Sheet were
immaterial.
Lease Commitments
The company utilizes various leased properties in its
operations, principally for marketing and office space. Net
lease rental expense was $12 million in each of the years 1995,
1994, and 1993.
The aggregate minimum annual rentals under noncancelable
leases in effect on December 31, 1995, totaled $27 million, of
which $7 million is due in 1996, $6 million in 1997, $13 million
in the period 1998 through 2000, and $1 million thereafter.
Futures, Forward, and Option Contracts
To minimize the price risks associated with the production
and marketing of crude oil and natural gas, the company uses
commodities futures and option contracts to hedge a portion of
its crude oil and natural gas sales and natural gas purchased
for operations. These contracts generally have maturities of one
year or less. Since the contracts qualify as hedges and
correlate to price movements of crude oil and natural gas, any
gain or loss from these contracts is explicitly deferred and
recognized as part of the hedged transaction. Prior to the sale
of the refining and marketing operations, the company also
hedged a portion of its refined-product sales and crude oil
purchased for the refineries.
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 to U.S.
dollars receivables that will be paid in foreign currencies.
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.
In 1995, the company also entered into foreign currency
forward contracts and at year-end had contracts maturing between
January and December 1996 to sell various foreign currencies in
anticipation of titanium dioxide pigment sales denominated in
foreign currencies. These contracts are marked-to-market with
the resulting gain or loss reflected in income in the period in
which the change occurs. The 1995 net gains and losses on these
contracts were immaterial.
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.
Employee Stock Option Plans
The company accounts for its employee stock option plans
using the intrinsic value method in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees."
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements, and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates as
additional information becomes known.
2. Discontinued Operations
During 1995, the company disposed of substantially all of
its refining and marketing operations, which had been conducted
by wholly owned subsidiaries, Kerr-McGee Refining Corporation
and Cato Oil and Grease Co. The 1995 gain on the sale was $2
million, net of $1 million for income taxes. The operating
results of the discontinued refining and marketing operations
are reported separately in the Consolidated Statement of Income.
Revenues applicable to the discontinued operations totaled $1.1
billion, $1.9 billion, and $2 billion in 1995, 1994, and 1993,
respectively. The remaining net assets at December 31, 1995, of
the discontinued operations are not segregated in the
Consolidated Balance Sheet since the amounts are immaterial.
3. Impairment of Long-Lived Assets and Long-Lived Assets to Be
Disposed Of
The company adopted the provisions of the Statement of
Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of," during the 1995 third quarter. In conjunction
with the adoption of this statement, the company now evaluates
impairment of its proved oil and gas assets on a field-by-field
basis rather than the previously used area-of-interest basis.
Chemical, coal, and other assets are evaluated by asset group
for which the lowest level of independent cash flows can be
identified.
As a result of this change in accounting principle, certain
oil and gas fields in the United States and Canada and certain
coal and other assets were deemed to be impaired because the
assets were not expected to recover their entire carrying value
through future cash flows. The impairment loss, totaling $123
million and included in the Consolidated Statement of Income as
Asset Impairment, was determined as the difference between the
carrying value and the estimated fair value. The fair value for
these impaired assets was generally determined based on the
estimated present value of future cash flows. The impairment
loss by segment was $99 million for exploration and production,
$23 million for coal, and $1 million for other.
Also during the 1995 third quarter, the company's
exploration and production operating unit announced a
divestiture and restructuring program (see Note 10). Included
in this program are a number of crude oil and natural gas
producing properties that are considered nonstrategic. The
majority of these properties are located onshore in the United
States; however, certain of these properties are located in the
Gulf of Mexico, Canada, and the North Sea. These properties
constitute approximately 10% of the company's oil and gas
reserves, 10% of the current oil and gas production volumes, and
5% of the company's 1995 cash flows from operations and are
expected to be sold or abandoned by the end of 1996. The
carrying value of these assets totaled $172 million prior to the
impairment discussed in the following paragraph.
As a result of the divestiture program, these nonstrategic
oil and gas properties have been reduced to their estimated fair
value less the cost to sell if the carrying value of the
property exceeded such fair value net of the estimated cost of
selling the property. The impairment loss on the properties for
which a loss was indicated totaled $104 million and has been
included in the Consolidated Statement of Income as Asset
Impairment.
Also held for sale at December 31, 1995, were the net long-
term assets totaling $5 million of a wholly owned coal mining
operation in West Virginia. This sale was completed in February
1996. The gain on the sale was immaterial.
Following are the sales and pretax income (loss) for the
assets held for sale at December 31, 1995, included in the
Consolidated Statement of Income. The impairment losses are
included in the 1995 pretax losses.
Exploration and
Production Coal
Income Income
(In millions of dollars) Sales (Loss) Sales (Loss)
1995 $64 $(108) $18 $(7)
1994 81 (6) 25 1
1993 105 2 23 1
4. Cash Flow Information
Net cash provided by operating activities reflects cash
payments for interest and income taxes as follows:
(In millions of dollars) 1995 1994 1993
Interest paid $68 $76 $69
Income taxes paid 75 42 59
Noncash transactions not reflected in the Consolidated
Statement of Cash Flows include the 1993 conversion of $149
million of the company's 7-1/4% convertible debentures due in
2012 into common stock issued from the company's treasury stock;
capital expenditures for which payment will be made in the
subsequent year totaling $24 million, $20 million, and $10
million at year-end 1995, 1994, and 1993, respectively; the
revaluation of certain investments to fair value; and
transactions affecting the debt and deferred compensation
associated with the Employee Stock Ownership Plan (see Notes 9
and 19, respectively).
The effect of foreign currency exchange rate fluctuations
on cash and cash equivalents was immaterial.
5. Deferred Charges
Deferred charges are as follows at year-end 1995 and 1994:
(In millions of dollars) 1995 1994
Cost of injected gas $29 $33
Pension plan prepayment 28 20
Intangible assets 4 6
Preoperating and startup costs 4 6
Other 14 23
Total $79 $88
6. Inventories
Major categories of inventories at year-end 1995 and 1994
are:
(In millions of dollars) 1995 1994
Chemicals and other products $157 $147
Crude oil and refined products 15 181
Materials and supplies 50 71
Total $222 $399
All of the crude oil and refined-product inventories of the
discontinued refining and marketing operations were valued using
the LIFO method until sold during 1995. LIFO reserves of $12
million were reversed at the time of the sale of these
inventories. 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 1994 and 1993, certain LIFO inventory quantities were
reduced. The effect of the reductions was immaterial in 1994
and decreased net income by $5 million in 1993.
7. Property, Plant, and Equipment
Fixed assets and related reserves by business
segment at December 31, 1995 and 1994, are as follows:
<TABLE>
<CAPTION>
Reserves for
Depreciation,
Depletion, and
Gross Property Amortization Net Property
(In millions of dollars) 1995 1994 1995 1994 1995(1) 1994
<S> <C> <C> <C> <C> <C> <C>
Exploration and production $4,162 $3,920 $2,686 $2,366 $1,476 $1,554
Chemicals 835 755 411 355 424 400
Coal 554 532 317 267 237 265
Other 209 226 106 104 103 122
Discontinued operations 89 577 62 366 27 211
Total $5,849 $6,010 $3,582 $3,458 $2,267 $2,552
(1)Includes net assets held for sale at December 31,
1995, consisting of $52 million for exploration and
production, $7 million for coal, and $27 million for
the discontinued refining and marketing operations.
</TABLE>
8. Investments and Other Assets
Investments and other assets consisted of the following at
December 31, 1995 and 1994:
(In millions of dollars) 1995 1994
Equity securities $ 55 $34
Net deferred tax asset 21 24
Investment in and advances
to equity affiliates 17 9
U.S. government obligations 17 17
Long-term notes receivable, net of
$8 million allowance for
doubtful notes 2 4
Other 8 7
Total $120 $95
9. Financial Instruments and Hedging Activities
Investments in Certain Debt and Equity Securities
The company has investments in equity securities and
certain obligations of the U.S. government 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. The company held no
securities classified as held to maturity or trading during the
two-year period ended December 31, 1995. At December 31, 1995
and 1994, available-for-sale securities were as follows:
Gross Unrealized
Fair Holding Gains
(In millions of dollars) Value Cost (Losses)
1995
Equity securities $53 $12 $41
U.S. government obligations -
Maturing within one year 10 10 -
Maturing between one year
and four years 17 17 -
Total $80 $39 $41
1994
Equity securities $32 $12 $20
U.S. government obligations -
Maturing within one year 11 11 -
Maturing between one year
and four years 17 19 (2)
Total $60 $42 $18
Equity securities are carried in the Consolidated Balance
Sheet as Investments and Other Assets. U.S. government
obligations are carried as Current Assets or as 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 the two-year
period ended December 31, 1995, was as follows:
(In millions of dollars) 1995 1994
Beginning Balance $12 $20
Net unrealized holding gains (losses) 14 (8)
Ending Balance $26 $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, 1995 and 1994, the carrying amount
and estimated fair value of such financial instruments for which
fair value can be determined, were as follows:
1995 1994
Carrying Fair Carrying Fair
(In millions of dollars) Amount Value Amount Value
Cash and cash equivalents $87 $87 $82 $82
Long-term notes receivable 2 2 2 2
Contracts to sell foreign
currencies 15 34 - 19
Contracts to purchase
foreign currencies - 54 - 95
Short-term borrowings 94 94 312 312
Long-term debt 641 763 681 759
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 or the fair value of the note's
collateral. 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.
Hedging Activities
Most of the company's foreign currency contracts are hedges
principally for chemicals' accounts receivable generated from
titanium dioxide pigment sales denominated in foreign currencies
($71 million in 1995 and $56 million in 1994) and operating
costs and capital expenditures in international chemical and
exploration and production joint-venture operations ($91 million
in 1995 and $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 1995, the
company recognized net foreign currency hedging gains totaling
$8 million; during 1994, net gains and losses were immaterial.
At December 31, 1995, the company had foreign currency
contracts maturing between January 1996 and December 1997 to
purchase $74 million Australian for $51 million. Additionally,
at December 31, 1995, the company had contracts to sell for $34
million various foreign currencies, principally European
currencies, which mature between January and December 1996.
This includes contracts totaling $15 million for anticipated
pigment sales that have been marked-to-market. At year-end
1994, the company had foreign currency contracts that matured
between January and December 1995 to purchase for $86 million
foreign currencies (42 million British pounds sterling and $38
million Australian). At December 31, 1994, the company also had
contracts to sell for $19 million various foreign currencies,
principally European currencies, that matured between January
and April 1995. Net unrealized gains on these contracts totaled
$3 million and $9 million at year-end 1995 and 1994,
respectively.
The company also uses futures and option contracts to
reduce the effect of the price volatility of crude oil, natural
gas, and, prior to the sale of the refining and marketing
operations, refined products. The futures contracts permit
settlement by delivery of commodities.
At year-end 1995, the company had sold forward 5.5 million
barrels and 17 billion cubic feet of crude oil and natural gas
production, respectively, expected during the first five months
of 1996. These contracts had an aggregate value of $151 million
and represent 21% and 16% of the company's 1995 worldwide
production of crude oil and natural gas, respectively. The
unrecognized loss on these contracts totaled $14 million at
December 31, 1995.
During 1995, the company sold forward approximately 49% and
18% of its worldwide crude oil and natural gas production,
respectively, and 35% of the refined-product sales of the
discontinued refining and marketing operations. Net hedging
gains and losses were for 1995 immaterial.
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 during
1994 were immaterial.
In 1995 and 1994, the company also hedged a portion of the
natural gas purchased for other operations; however, these
amounts were immaterial to the cost of the enhanced recovery
project or the total annual throughput volume of the operations.
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 limit the company's market risks, are with major
financial institutions, 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.
Year-end hedge positions and activities during a particular
year are not necessarily indicative of future activities and
results.
10. Restructuring Charges
In connection with the divestiture of nonstrategic
properties, the exploration and production operating unit
implemented a restructuring program during 1995 to reorganize
its administrative and operating functions (see Note 3). As a
result of this program, 120 employees were notified that their
positions would be eliminated, and 56 were terminated during
1995. It is expected that the additional employees will be
terminated during 1996. Of the $7 million accrued for future
compensation, outplacement, and the cost of special termination
benefits for retiring employees to be paid from retirement plan
assets, $1 million was paid during 1995. The remaining reserve
at December 31, 1995, represents primarily future compensation,
which will be paid during 1996 and 1997.
The company implemented a restructuring program in 1994,
consisting principally of a reorganization of corporate support
functions and terminated 237 employees. The company accrued a
total of $8 million related to this program for future
compensation, outplacement, and the cost of special termination
benefits for retiring employees to be paid from retirement plan
assets. The December 31, 1994, reserve balance of $2 million
represented primarily future compensation, which was paid and
charged to the reserve during 1995.
11. Other Deferred Credits and Reserves
Other deferred credits and reserves consisted of the
following at year-end 1995 and 1994:
(In millions of dollars) 1995 1994
Reserves for site dismantlement,
reclamation, and remediation $333 $260
Postretirement benefit obligations 112 108
Other 54 45
Total $499 $413
During 1995, the company provided $54 million, net of $11
million for reimbursements received pursuant to the Energy
Policy Act of 1992 related to the former facility in West
Chicago, Illinois (see Note 13). An additional $49 million was
provided in 1995 for refining and marketing-related sites and
included in the discontinued operations (see Note 2). 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 West Chicago). A provision of $4
million was made in 1993.
12. Debt
Lines of Credit and Short-Term Borrowings
At year-end 1995, the company had available unused bank
lines of credit and revolving credit facilities of $665 million.
Of this amount, $330 million and $232 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
1995, the aggregate amount of such compensating balances was
immaterial, and the company was not legally restricted from
withdrawing all or a portion of such balances at any time during
the year.
Short-term borrowings at year-end 1995 consisted of notes
payable totaling $94 million (6.1% average interest rate).
Outstanding at year-end 1994 were notes payable totaling $110
million (6% average interest rate) and commercial paper totaling
$202 million (6.3% 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 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.
Long-term debt consisted of the following at year-end 1995
and 1994:
(In millions of dollars) 1995 1994
Debentures -
7% Debentures due November 1, 2011, net
of unamortized debt discount of $113
million in 1995 and $114 million in
1994(14.25% effective rate) $137 $136
8-1/2% Sinking fund debentures
due June 1, 2006 45 56
Commercial Paper (6.18% at December 31, 1995) 310 250
Guaranteed Debt of Employee Stock
Ownership Plan -
9.47% Series A notes due in installments
through January 2, 2000 30 38
9.61% Series B notes due in installments
through January 2, 2005 51 51
Notes Payable -
Variable interest rate revolving credit
agreements with banks (6.09% average
rate at December 31, 1995) $31 million
due February 24, 1998; $35 million
due August 25, 1999 66 150
Other 2 -
641 681
Long-Term Debt Due Within One Year (9) (8)
Total $632 $673
Maturities of long-term debt due after December 31, 1995,
are $9 million in 1996, $10 million in 1997, $43 million in
1998, $354 million in 1999, $10 million in 2000, and $215
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 $12 million at year-end 1995 and $17 million at year-
end 1994. No loss is anticipated by reason of these guarantees.
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.
13. Contingencies
West Chicago
In 1973, a wholly owned subsidiary, Kerr-McGee Chemical
Corporation (KMCC), closed an operation in West Chicago,
Illinois, that processed thorium ores. Operations resulted in
some low-level radioactive contamination at the site. In 1979,
KMCC filed a plan with the Nuclear Regulatory Commission to
decommission the facility. The State of Illinois (the State)
now has jurisdiction over the site and requires offsite disposal
of contaminated material. The following discusses the current
status of various matters associated with this closed facility.
Decommissioning - In 1994, KMCC, 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, KMCC built or leased
appropriate support facilities and began shipping material from
the site to a licensed permanent disposal facility in Utah
during 1994. Although shipments continued through 1995, the
State has not yet issued a license amendment that would permit
KMCC to complete the decommissioning work.
Under the Illinois Uranium and Thorium Mill Tailings
Control Act (the Act), KMCC is obligated to pay an annual
storage fee of $2 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 KMCC as
decommissioning expenditures are incurred. As of January 1996,
KMCC has received reimbursement for all amounts paid under the
Act to the State 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
KMCC will be reduced by any amounts recovered pursuant to the
Federal Energy Policy Act of 1992 (which could total up to $42
million, of which $18 million had been received through year-end
1995). At December 31, 1995, the remaining reserves provided
for the cost to decommission the site under the plan proposed by
KMCC were $164 million (before any further recovery under the
Energy Policy Act of 1992), payable over the time necessary to
relocate the materials, which was estimated at year-end 1995 to
take a minimum of four years and is dependent on receiving the
necessary licensing agreement. Additions to the reserves during
1995 totaled $43 million.
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 KMCC
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 KMCC to
conduct a removal action to excavate contaminated soils and to
ship the soils elsewhere for disposal. At December 31, 1995,
the remaining estimated cost to clean up the residential area
was $16 million. Without waiving any of its rights or defenses,
KMCC began the cleanup of this site in May 1995.
Judicial Proceedings - Personal injury lawsuits have been
filed against KMCC 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 KMCC. The remaining cases
continue in the judiciary process. KMCC will continue its
defense of these cases and its efforts to recover insurance
proceeds from policies on the former facility.
Summary
The plants and facilities of the company and its
subsidiaries are subject to various environmental laws and
regulations. The company or its subsidiaries have been notified
that they 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 1995, the remaining reserves provided
for the cost to investigate and/or remediate all presently
identified sites of former or current operations, including $180
million for the former facility and offsite areas in West
Chicago, were $297 million. Expenditures through December 31,
1995, totaled $286 million.
In addition to the environmental issues previously
discussed, the company or its subsidiaries are also a party to
a number of other legal proceedings pending in various courts or
agencies in which the company 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 environmental and other 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, the ultimate cost will depend on the outcomes of
above-noted uncertainties. Therefore, it is possible that
additional reserves could be required in the future that could
have a material effect on results of operations in a particular
quarter or annual period. However, the ultimate resolution of
these commitments and contingencies, to the extent not
previously provided for, should not have a material adverse
effect on the company's financial position.
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) from continuing operations before income
taxes is composed of the following:
(In millions of dollars) 1995 1994 1993
Domestic $(103) $56 $147
International 36 42 (2)
Total $ (67) $98 $145
Effective January 1, 1995, the income tax rate in Australia
increased from 33% to 36%. The deferred income tax balances
were adjusted to reflect this revised rate, which decreased the
international deferred provision for income taxes by $2 million.
During 1993, legislation was enacted that, among other things,
increased the U.S. Federal income tax rate by 1% effective
January 1, 1993. Also during 1993, 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 1995, 1994, and 1993 provision (benefit) for income taxes on
income from continuing operations is summarized below:
(In millions of dollars) 1995 1994 1993
U. S. Federal -
Current $ (2) $10 $15
Deferred (63) (1) 24
(65) 9 39
International -
Current 9 16 20
Deferred 9 2 (13)
18 18 7
State 4 2 4
Total $(43) $29 $50
The net deferred tax asset shown in the following table
represents the net deferred taxes in certain foreign tax
jurisdictions, which is classified as Investments and Other
Assets in the Consolidated Balance Sheet. At December 31, 1995,
the net deferred tax asset includes the benefit for $78 million
in net operating loss carryforwards that have no expiration
dates. Realization is dependent on generating sufficient
taxable income. Although realization is not assured, the
company believes it is more likely than not that all of the net
deferred tax asset will be realized.
At December 31, 1995, the company had additional foreign
net operating loss carryforwards totaling $123 million that also
have no expiration dates. These loss carryforwards offset a
portion of the foreign net deferred tax liability.
Deferred tax liabilities (assets) at December 31, 1995 and
1994, are composed of the following:
(In millions of dollars) 1995 1994
Net deferred tax liability -
Accelerated depreciation $250 $362
Exploration and development 69 65
Undistributed earnings of
foreign subsidiaries 29 29
Postretirement benefits (48) (44)
Dismantlement, reclamation,
remediation, and other
reserves (128) (109)
Foreign operating loss
carryforwards (40) (81)
Other (27) (43)
105 179
Net deferred tax asset -
Accelerated depreciation 8 9
Foreign operating loss
carryforward (28) (38)
Other (1) 5
(21) (24)
Total deferred taxes $ 84 $155
In the following table, the U.S. Federal income tax rate is reconciled to
the company's effective tax rates for income from continuing operations as
reflected in the Consolidated Statement of Income.
1995 1994 1993
U.S. statutory rate (35.0)% 35.0% 35.0%
Increases (decreases) resulting
from -
Statutory depletion in excess
of cost depletion (10.7) (4.8) (4.0)
Taxation of foreign operations (2.1) (.7) 3.1
State income taxes (2.2) 2.5 3.4
Adjustment of prior years'
accruals (2.1) - (5.0)
Federal income tax credits (4.2) (1.5) (1.7)
Dividends paid on employee
stock ownership plan (2.1) (1.4) (1.0)
Foreign equity income (2.7) - .9
Adjustment of deferred tax
balances due to tax rate
changes (3.1) - 3.9
Other - net .1 .3 .1
Total (64.1)% 29.4% 34.7%
The Internal Revenue Service has examined the company's
Federal income tax returns for all years through 1992, 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.
15. Taxes, Other than Income Taxes
Taxes, other than income taxes, during the years ended
December 31, 1995, 1994, and 1993, are composed of the
following:
(In millions of dollars) 1995 1994 1993
Production/severance $22 $27 $28
Payroll 14 14 15
Property 10 13 12
Other 15 11 14
Total $61 $65 $69
16. Postretirement Benefits
The company sponsors contributory plans to provide certain
health care and life insurance benefits for retired employees.
Substantially all the company's employees may become eligible
for these benefits if they reach retirement age while working
for the company; 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, 1995 and 1994, the actuarial and recorded
liabilities for postretirement benefits, none of which has been
funded, are as follows:
1995 1994
(In millions of dollars) Health Life Health Life
Actuarial present value of
accumulated postretirement
benefit obligations -
Retirees $(75) $(19) $(60) $(14)
Fully eligible active
participants (11) (1) (14) (2)
Other active participants (20) (3) (19) (3)
Total (106) (23) (93) (19)
Unrecognized net (gain) loss 12 (3) 2 (5)
Accrued postretirement
expense $(94) $(26) $(91) $(24)
For the years ended December 31, 1995, 1994 and 1993, the
components of net periodic expense for postretirement benefits
were as follows:
1995 1994 1993
(In millions of dollars) Health Life Health Life Health Life
Service cost - benefits
earned during the
period $1 $1 $2 $1 $2 $1
Interest cost on
accumulated post-
retirement benefit
obligations 8 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:
1995 1994 1993
Future compensation increases 5.00% 5.0% 5.0%
Discount rate 7.25 8.5 7.5
The health care cost trend rate used to determine the year-
end 1995 accumulated postretirement benefit obligation was 9% in
1996, gradually declining to 5% in the year 2009 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 $6 million at December 31,
1995. In addition, the aggregate of the service and interest
cost components of net periodic postretirement expense for 1995
would increase by $2 million.
17. Retirement Plans
Most of the company's employees are covered under
noncontributory retirement plans of the company and certain of
its subsidiaries. The benefits of these plans are based
primarily on years of service and employees' remuneration near
retirement. The company's policy is to fund the minimum amounts
as permitted by the Employee Retirement Income Security Act of
1974 (ERISA).
The funded status of plans with assets in excess of
accumulated benefits at December 31, 1995 and 1994, is as
follows:
(In millions of dollars) 1995 1994
Plan assets at fair value $492 $402
Actuarial present value of
accumulated benefit obligations -
Vested (323) (263)
Nonvested (10) (14)
Total (333) (277)
Plan assets in excess of
accumulated benefit obligations $159 $125
Plan assets at fair value $492 $402
Projected benefit obligations -
Actuarial present value of
accumulated benefit
obligations (333) (277)
Projected salary increases (48) (45)
Total (381) (322)
Plan assets in excess of
projected benefit obligations 111 80
Unrecognized net asset at January 1, 1987 (22) (26)
Unrecognized prior service costs 12 17
Unrecognized net gain (73) (51)
Pension prepayment at end of year $ 28 $ 20
The net periodic pension credit, excluding charges of $1
million and $2 million in 1995 and 1994, respectively, related
to the restructuring programs (see Note 10), for each of the
three years ended December 31, 1995, 1994, and 1993, is
summarized as follows:
(In millions of dollars) 1995 1994 1993
Service cost - benefits earned
during the period $ 8 $10 $ 9
Interest cost on projected
benefit obligations 27 24 23
Return on plan assets (115) (6) (69)
Net amortization and deferral 71 (35) 33
Net pension credit $(9) $(7) $(4)
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
$15 million and $13 million at December 31, 1995 and 1994,
respectively. To reflect the amount by which the accumulated
benefit obligation exceeded the accrued pension expense for
these plans, an additional liability totaling $4 million and $6
million at December 31, 1995 and 1994, respectively, is recorded
in the Consolidated Balance Sheet with an offsetting intangible
asset (see Note 5). Although not considered plan assets, a
grantor trust was established from which payments for certain of
these supplemental plans are made. The trust had a balance of
$6 million and $4 million at December 31, 1995 and 1994,
respectively. Net periodic pension expense for these plans was
$4 million for each of the years 1995 and 1994 and $3 million
for 1993.
The following assumptions were used in estimating the
actuarial present value of the projected benefit obligation and
net periodic pension costs:
1995 1994 1993
Future compensation increases 5.00% 5.0% 5.0%
Discount rate 7.25 8.5 7.5
Long-term rate of return on
plan assets 9.00 9.0 9.0
18. Stockholders' Equity
Changes in common stock, capital in excess of par
value, and treasury stock for 1995, 1994, and 1993 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, 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 5 308 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
Exercise of stock options
and stock appreciation rights 210 1 9 - -
Stock purchase program - - - 835 48
Balance December 31, 1995 53,514 $54 $318 2,445 $111
(1)See Note 4 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.
During 1995, the Board of Directors authorized management
to purchase up to $300 million of the common stock of the
company. The company expects to complete the stock acquisitions
during 1996 and 1997.
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. The rights expire in July 1996.
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 acquire 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, 1995 and 1994, the ESOP held shares of
stock allocated to participants' accounts and in the loan
suspense account as follows:
(In thousands of shares) 1995 1994
Participants' accounts 1,151 1,054
Loan suspense account 1,460 1,659
In addition to the 1995 shares above, 19,404 shares have
been released that will be allocated to participants in 1996.
The shares allocated to participants at December 31, 1994,
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 using the cash method
and is reduced for dividends paid on the ESOP shares. The
company recognized ESOP-related expense of $14 million in 1995
and $15 million in each of the years 1994 and 1993. These
amounts include interest expense incurred on the ESOP debt of $8
million in 1995 and $9 million in each of the years 1994 and
1993. The company contributed $15 million cash to the ESOP in
1995, $14 million in 1994, and $12 million in 1993. 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 1995,
1994, and 1993.
20. Employee Stock Option Plans
The 1987 Long Term Incentive Program authorized the
issuance of shares of the company's common stock through
December 31, 2002, in the form of stock options, restricted
stock, or long-term performance awards. The options may be
accompanied by stock appreciation rights. The plan was amended
in May 1995 to restore the number of shares available to be
granted to 1,000,000, bringing the total number of shares
authorized to be granted through the plan to 2,740,000.
The 1984 Employee Stock Option Plan authorized the granting
of options over a 10-year period for up to 1,000,000 shares of
common stock and accompanying stock appreciation rights. The
1984 plan was terminated on May 3, 1988. After that date, no
further options could be granted under this plan, although
options and any accompanying stock appreciation rights
outstanding at that time can be exercised prior to their
respective expiration dates.
Transactions during the past three years under these plans are
summarized below:
<TABLE>
<CAPTION>
1984 Stock Option Plan 1987 Incentive Program
Shares Price per Share Shares Price per Share
<S> <C> <C> <C> <C>
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 granted - - - 409,000 44.63- 54.50
Options exercised (3,000) 27.06 - (206,821) 32.38- 50.56
Options surrendered upon exercise of
stock appreciation rights (20,000) 27.06- 29.50 (6,850) 32.38- 42.63
Options cancelled - - - (49,369) 39.56- 54.06
Balance outstanding December 31, 1995 10,000 27.06 - 1,324,363 32.38- 54.50
Options exercisable December 31, 1995 10,000 27.06 - 626,759 32.38- 54.06
Shares available to be granted December 31, 1995 - 853,663
</TABLE>
With respect to all options outstanding on December 31,
1995, the average option price was $46.47; expiration dates
ranged from February 17, 1996, to July 11, 2005; and the market
value of each share subject to options was $63.25, based on the
average of the high and low prices as reported in the NYSE
Composite Transactions in The Wall Street Journal for December
29, 1995.
21. Reporting by Business Segments
The Company is an international energy and chemical
company. The principal areas of oil and gas exploration and
production are the United States, Canada, the United Kingdom
sector of the North Sea, China, and Southeast Asia. The company
also has domestic coal and chemical operations and interests in
international chemical operations in Western Australia and Saudi
Arabia.
(In millions of dollars) 1995 1994 1993
Sales -
Exploration and production(1) $ 690 $ 633 $ 561
Chemicals 707 639 556
Coal 353 294 328
Other 51 46 36
Total $1,801 $1,612 $1,481
Operating profit (loss)(2) -
Exploration and production $ (97) $ 74 $ 82
Chemicals 122 92 70
Coal 43 45 80
Other 4 (1) (5)
Total $ 72 $ 210 $ 27
Net operating profit (loss) -
Exploration and production $ (56) $ 49 $ 52
Chemicals 81 59 44
Coal 35 34 58
Other 3 (1) (3)
Total 63 141 151
Net interest expense (31) (30) (28)
Net nonoperating expense(3) (56) (42) (28)
Income (loss) from discontinued
operations (7) 21 (18)
Net income (loss) $ (31) $ 90 $ 77
(In millions of dollars) 1995 1994 1993
Sales -
U.S. operations(4) $1,284 $1,189 $1,206
International operations(5):
Canada - exploration and
production 42 54 53
North Sea - exploration
and production 272 199 98
Australia - chemicals 158 114 100
Other 45 56 24
517 423 275
Total $1,801 $1,612 $1,481
Operating profit (loss)(2) -
U.S. operations $ 3 $ 151 $ 238
International operations:
Canada - exploration and
production (54) 8 2
North Sea - exploration
and production 108 54 3
Australia - chemicals 24 7 (13)
Other (9) (10) (3)
69 59 (11)
Total $ 72 $ 210 $ 227
(1)Includes sales to the discontinued refining and marketing
operations, primarily crude oil sales, of $112 million in
1995, $151 million in 1994, and $192 million in 1993.
(2)Includes unusual items. Refer to Management's Discussion and
Analysis.
(3)Includes net provisions for reclamation and remediation of
$33 million in 1995, $6 million in 1994, and $3 million in
1993.
(4)Includes U.S. crude oil sales to the discontinued refining
and marketing operations of $105 million in 1995, $123
million in 1994, and $153 million in 1993.
(5)Includes international crude oil sales to the discontinued
refining and marketing operations of $7 million in 1995, $28
million in 1994, and $39 million in 1993.
<PAGE>
(In millions of dollars) 1995 1994 1993
Depreciation, depletion, and
amortization expense -
Exploration and production $ 231 $ 228 $ 206
Chemicals 52 51 49
Coal 29 24 26
Other 13 14 14
Discontinued operations 16 28 26
Total $ 341 $ 345 $ 321
Capital expenditures -
Exploration and production $ 374 $ 318 $ 318
Chemicals 69 51 39
Coal 33 27 28
Other 4 3 6
Discontinued operations 6 18 34
Total capital expenditures 486 417 425
Exploration expenses -
Petroleum exploration and production:
Dry hole costs 34 30 28
Amortization of undeveloped leases 14 17 18
Other 41 35 22
Total 89 82 68
Minerals and other 3 3 3
Total exploration expenses 92 85 71
Less - Amortization of oil and gas
and minerals leases and other
noncash expenses (19) (18) (18)
73 67 53
Total capital expenditures and
cash exploration expenses $ 559 $ 484 $ 478
Identifiable assets -
Exploration and production $1,748 $1,781 $1,669
Chemicals 802 735 733
Coal 327 320 335
Other 96 118 135
Total 2,973 2,954 2,872
Corporate assets 220 165 134
Discontinued operations 39 579 541
Total $3,232 $3,698 $3,547
(In millions of dollars) 1995 1994 1993
Identifiable assets -
U.S. operations $1,723 $1,713 $1,682
International operations:
Canada - exploration and
production 124 193 206
North Sea - exploration
and production 669 679 681
Australia - chemicals 260 257 256
China - exploration and
production 149 78 -
Other 48 34 47
1,250 1,241 1,190
Total $2,973 $2,954 $2,872
Net assets -
U.S. operations $ 623 $ 824 $ 879
International operations:
Canada - exploration and
production 44 69 64
North Sea - exploration
and production 409 354 318
Australia - chemicals 199 212 229
China - exploration and
production 106 65 -
Other 35 19 22
793 719 633
Total $1,416 $1,543 $1,512
22. Other Financial Information
Condensed financial information relating to the company's
previously unconsolidated, wholly owned finance subsidiary is
summarized below:
(In millions of dollars) 1995 1994 1993
Results of operations -
Interest income $ 25 $ 20 $ 13
Net income 5 4 3
Financial position -
Assets $360 $460 $245
Liabilities (257) (362) (151)
Stockholder's equity $103 $ 98 $ 94
23. Results of Operations from Crude Oil and Natural Gas
Activities
The table below presents the average per-unit sales price
of crude oil and natural gas for each of the past three years.
1995 1994 1993
Average sales price -
Crude oil (per barrel)
Domestic $15.69 $14.64 $15.76
Canada 15.21 13.39 14.65
North Sea 16.31 15.15 15.90
Other international - 14.48 14.97
Average 15.99 14.81 15.64
Natural gas (per MCF)
Domestic 1.56 1.83 2.03
Canada .85 1.37 1.42
North Sea 2.66 2.11 1.39
Average 1.52 1.76 1.92
Following are the company's production cost per barrel of
oil equivalent for each of the past three years:
(Per barrel of oil equivalent)(1) 1995 1994 1993
Production costs -
Domestic $3.96 $4.34 $4.32
Canada 2.94 2.75 3.44
North Sea 4.44 5.25 7.24
Other international - 4.91 5.11
Average 4.02 4.47 4.73
(1)Natural gas production has been converted to a barrel of oil
equivalent based on approximate relative heating value (6 MCF
equals 1 barrel).
The results of operations from crude oil and natural gas
activities for the three years ended December 31, 1995,
consisted of the following:
<TABLE>
<CAPTION>
Gross Revenues Depreciation Income Results of
Sales to Sales to Production Other and Tax Operations,
(In millions Unaffiliated Affiliated (Lifting) Related Exploration Depletion Asset Expenses Producing
of dollars) Entities Entities Total Costs Costs(1) Expenses(1) Expenses Impairment (Benefits) Activities
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995 -
Domestic $197 $ 97 $294 $ 96 $11 $59 $128 $144 $(58) $(86)
Canada 40 - 40 13 2 6 20 53 (17) (37)
North Sea 235 7 242 65 3 15 66 - 31 62
Other international - - - - - 9 - - (3) (6)
Total crude oil
and natural gas
activities 472 104 576 174 16 89 214 197 (47) (67)
Other(2) 106 8 114 84 4 - 3 6 6 11
Total $578 $112 $690 $258 $20 $89 $217 $203 $(41) $(56)
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(2) 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(2) 39 25 64 43 - - 4 - 5 12
Total $369 $195 $564 $217 $ 9 $68 $188 $ - $ 30 $ 52
(1)Includes 1995 restructuring charges of $6 million and $1 million classified as
Other Related Costs and Exploration Expenses, respectively (see Note 10).
(2)Includes 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>
24. 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,
1995, are reflected in the following table:
Property
Acquisition Exploration Development
(In millions of dollars) Costs(1) Costs(2) Costs(3)
1995 -
Domestic $84 $ 64 $128
Canada 1 5 10
North Sea 7 28 23
China 1 4 82
Other international - 8 -
Total $93 $109 $243
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
(1)Includes $29 million and $36 million applicable to purchases
of reserves in place in 1995 and 1994, 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.
25. Capitalized Costs of Crude Oil and Natural Gas Activities
Capitalized costs of crude oil and natural gas activities
and the related reserves for depreciation, depletion, and
amortization at the end of 1995 and 1994 are set forth below:
(In millions of dollars) 1995 1994
Capitalized costs -
Proved properties $3,921 $3,669
Unproved properties 173 178
Other 68 73
4,162 3,920
Reserves for depreciation,
depletion, and amortization -
Proved properties 2,574 2,261
Unproved properties 62 60
Other 50 45
2,686 2,366
Net capitalized costs(1) $1,476 $1,554
(1)Proved properties held at December 31, 1995, have been
reduced $179 million for impairment loss (see Note 3).
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, 1995:
Crude Oil and Condensate
(In millions of barrels)
North
Domestic Canada Sea China Other Total
Proved developed and
undeveloped reserves-
Balance December 31, 1992 75 14 80 - 4 173
Revisions of previous
estimates 5 1 6 - - 12
Purchases of reserves
in place - - - 26 - 26
Sales of reserves in
place - - - - - -
Extensions, discoveries,
and other additions 6 - 1 - - 7
Production (10) (2) (6) - (1) (19)
Balance December 31, 1993 76 13 81 26 3 199
Revisions of previous
estimates 5 2 6 - - 13
Purchases of reserves
in place 1 - - - - 1
Sales of reserves in
place (1) - - - (2) (3)
Extensions, discoveries,
and other additions 6 - - - - 6
Production (10) (2) (12) - (1) (25)
Balance December 31, 1994 77 13 75 26 - 191
Revisions of previous
estimates 2 1 1 4 - 8
Purchases of reserves
in place 1 - - - - 1
Sales of reserves in
place (5) - - - - (5)
Extensions, discoveries,
and other additions 1 - - - - 1
Production (10) (2) (14) - - (26)
Balance December 31, 1995(1) 66 12 62 30 - 170
Proved developed reserves -
December 31, 1992 40 14 16 - 4 74
December 31, 1993 45 13 40 - 3 101
December 31, 1994 45 12 49 - - 106
December 31, 1995 45 12 50 - - 107
Natural Gas
(In billions of cubic feet)
North
Domestic Canada Sea Other Total
Proved developed and
undeveloped reserves-
Balance December 31, 1992 485 124 161 4 774
Revisions of previous
estimates (6) (7) 16 (4) (1)
Purchases of reserves
in place - - - - -
Sales of reserves in
place (3) (2) - - (5)
Extensions, discoveries,
and other additions 22 14 8 - 44
Production (85) (18) (1) - (104)
Balance December 31, 1993 413 111 184 - 708
Revisions of previous
estimates 36 (17) 19 - 38
Purchases of reserves
in place 16 1 - - 17
Sales of reserves in
place (1) (1) - - (2)
Extensions, discoveries,
and other additions 181 6 - - 187
Production (77) (18) (4) - (99)
Balance December 31, 1994 568 82 199 - 849
Revisions of previous
estimates (6) 3 - - (3)
Purchases of reserves
in place 45 - - - 45
Sales of reserves in
place (31) (1) - - (32)
Extensions, discoveries,
and other additions 25 1 - - 26
Production (82) (16) (8) - (106)
Balance December 31, 1995(1) 519 69 191 - 779
Proved developed reserves -
December 31, 1992 346 120 57 4 527
December 31, 1993 347 107 113 - 567
December 31, 1994 346 79 134 - 559
December 31, 1995 329 65 156 - 550
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, 1992 156 34 107 - 5 302
December 31, 1993 144 32 112 26 3 317
December 31, 1994 172 27 107 26 - 332
December 31, 1995(1) 152 24 94 30 - 300
(1)Includes 12 million barrels of oil and 57 billion cubic feet
of natural gas, or 21 million barrels of oil equivalent, held
for sale at December 31, 1995 (see Note 3).
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>
1995 -
Domestic $2,320 $ 910 $350 $1,060 $339 $ 721
Canada 295 94 61 140 54 86
North Sea 1,494 418 328 748 254 494
China 551 179 96 276 81 195
Other international 2 - 1 1 - 1
Total $4,662 $1,601 $836 $2,225 $728 $1,497(1)
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
(1)Includes $51 million from properties held for sale (see Note 3).
</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) 1995 1994 1993
Net change in sales, transfer
prices and production costs $ 464 $ 265 $ (433)
Changes in estimated future
development costs (144) (44) (137)
Sales and transfers less
production costs (402) (351) (326)
Purchases of reserves in place 62 20 (9)
Changes due to extensions,
discoveries, etc. 58 97 96
Changes due to revisions in
quantity estimates and sales of
reserves in place (103) 131 86
Current period development costs 243 231 274
Accretion of discount 167 120 150
Changes in income taxes (124) (135) 156
Timing and other (19) (1) 1
Net change 202 333 (142)
Total at beginning of year 1,295 962 1,104
Total at end of year $1,497 $1,295 $ 962
28. Supplementary Mineral Ore Reserve and Price Data
(Unaudited)
The following table presents 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) 1995 1994 1993 1992 1991
Proved and probable
(demonstrated)
reserves, December 31 -
Coal 833,700 864,200 887,900 906,400 774,900
Heavy minerals 5,700(1) 6,000 8,000 8,600 9,000
Production -
Coal 31,118 25,607 23,325 20,756 21,750
Heavy minerals 238 268 263 262 251
Average market price
(per ton) -
Coal $10.12 $10.73 $13.78 $14.57 $14.18
Heavy minerals 104.40 85.43 69.47 77.99 101.35
(1)Represents 168 million tons of sand containing 3.4% heavy
minerals in Western Australia. The percentages of valuable
heavy minerals within the heavy-mineral concentrate are 4.3%
rutile, 61.3% ilmenite, 3.4% leucoxene, and 10.9% zircon.
29. Quarterly Financial Information (Unaudited)
A summary of quarterly consolidated results for 1995
and 1994 is presented below. Information for the first
two quarters of 1995 and all quarters of 1994 has been
restated to separately present discontinued operations
(see Note 2).
<TABLE>
<CAPTION>
Income
(Loss) Income (Loss) per
Operating from Net Common Share
(In millions of dollars, Profit Continuing Income Continuing Net
except per-share amounts) Sales Loss Operations (Loss) Operations Income
<S> <C> <C> <C> <C> <C> <C>
1995 Quarter Ended -
March 31 $ 464 $ 84 $ 37 $ 38 $ .71 $ .73
June 30 457 80 35 45 .68 .86
September 30 456 (172) (133) (143) (2.56) (2.76)
December 31 424 80 37 29 .70 .57
Total(1) $1,801 $ 72 $(24) $(31) $(.47) $(.60)
1994 Quarter Ended -
March 31 $ 373 $ 32 $ 7 $ 22 $ .13 $ .42
June 30 421 58 20 30 .39 .58
September 30 408 66 21 18 .40 .35
December 31 410 54 21 20 .41 .39
Total $1,612 $210 $ 69 $ 90 $1.33 $1.74
(1)Includes unusual items. Refer to Management's Discussion and Analysis.
</TABLE>
The company's common stock is listed for trading on the New
York Stock Exchange and was held by approximately 12,000
holders of record at year-end 1995. The ranges of sales prices
and dividends declared during the last two years were as
follows:
Market Prices Dividends
1995 1994 per Share
High Low High Low 1995 1994
Quarter Ended -
March 31 51 44 48-1/4 41 $.38 $.38
June 30 56-1/4 49-1/8 48-1/2 40 .38 .38
September 30 59-7/8 53-1/8 51 46-1/8 .38 .38
December 31 64 52-3/4 49-1/4 43-3/4 .41 .38
<PAGE>
Kerr-McGee Corporation
<TABLE>
<CAPTION>
Six-Year Financial Summary
(In millions of dollars,
except per-share amounts) 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
Summary of Net Income (Loss)
Sales $1,801 $1,612 $1,481 $1,415 $1,342 $1,518
Operating costs and expenses 1,830 1,479 1,308 1,433 1,186 1,281
Interest expense 61 58 47 66 78 86
Total costs and expenses 1,891 1,537 1,355 1,499 1,264 1,367
(90) 75 126 (84) 78 151
Other income (expense) 23 23 19 41 60 (64)
Provision (benefit) for income
taxes (43) 29 50 (31) 53 19
Income (loss)from continuing
operations before extraordinary
charge and cumulative effect of
accounting changes (24) 69 95 (12) 85 68
Income (loss) from discontinued
operations (7) 21 (18) (14) 17 82
Extraordinary charge - - - (5) - -
Cumulative effect of
accounting changes - - - (70) - -
Net income (loss) $ (31) $ 90 $ 77 $ (101) $ 102 $ 150
Common Stock Information, per Share
Net income (loss) per common share
Continuing operations $ (.47) $ 1.33 $ 1.93 $ (.25) $ 1.75 $ 1.37
Discontinued operations (.13) .41 (.36) (.28) .35 1.64
Extraordinary charge - - - (.10) - -
Cumulative effect of
accounting changes - - - (1.45) - -
Total $ (.60) $ 1.74 $ 1.57 $(2.08) $ 2.10 $ 3.01
Dividends declared 1.55 1.52 1.52 1.52 1.50 1.41
Stockholders' equity 27.52 29.82 29.24 27.93 31.43 30.70
Market high for the year 64.00 51.00 56.00 46.38 46.88 53.63
Market low for the year 44.00 40.00 41.75 35.63 35.13 42.38
Market price at year-end $63.50 $46.25 $45.25 $45.00 $38.63 $44.88
Shares outstanding at
year-end (thousands) 51,069 51,694 51,655 48,284 48,229 48,453
Balance Sheet Information
Working capital $ 186 $ 73 $ 79 $ 210 $ 343 $ 472
Property, plant, and
equipment, net 2,267 2,552 2,513 2,422 2,299 2,169
Total assets 3,232 3,698 3,547 3,521 3,421 3,473
Long-term debt 632 673 590 792 926 805
Total debt 735 993 898 971 983 820
Stockholders' equity 1,416 1,543 1,512 1,350 1,516 1,491
Cash Flow Information
Net cash provided by operating
activities 402 355 424 277 194 579
Cash capital expenditures 485 411 451 373 504 488
Dividends paid 79 78 73 73 72 69
Purchase of treasury stock $ 45 $ - $ - $ - $ 13 $ 98
Ratios and Percentage
Current ratio 1.3 1.1 1.1 1.3 1.6 1.7
Average price/earnings ratio NM 26.1 31.1 NM 19.5 15.9
Total debt to total capitalization 34% 39% 37% 42% 39% 34%
Employees
Number of employees at year-end 3,976 5,524 5,812 5,866 6,072 6,756
Total wages and benefits
(millions of dollars) $ 314 $ 319 $ 319 $ 326 $ 323 $ 398
<PAGE>
Kerr-McGee Corporation
Six-Year Operating Summary
1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
Exploration and Production
Net production of crude oil
and condensate
(thousands of barrels
per day)
Domestic 28.9 25.5 27.8 25.5 23.0 20.7
Canada 4.8 4.7 4.7 4.5 4.6 4.3
North Sea 36.7 34.3 16.7 16.0 18.6 21.2
Other international - 2.8 4.0 4.5 4.2 4.2
Total 70.4 67.3 53.2 50.5 50.4 50.4
Average price of crude oil
sold (per barrel)
Domestic $15.69 $14.64 $15.76 $18.17 $19.24 $22.22
Canada 15.21 13.39 14.65 16.24 17.36 20.58
North Sea 16.31 15.15 15.90 18.71 19.64 21.84
Other international - 14.48 14.97 17.44 16.71 20.43
Average $15.99 $14.81 $15.64 $18.11 $19.01 $21.77
Natural gas deliveries
(MMCF per day) 291 271 286 296 281 255
Average price of natural
gas delivered (per MCF) $ 1.52 $ 1.76 $ 1.92 $ 1.56 $ 1.44 $ 1.66
Net exploratory wells drilled
Productive 3.71 9.61 2.22 2.59 5.63 12.48
Dry 9.16 8.47 10.09 5.53 9.18 16.15
Total 12.87 18.08 12.31 8.12 14.81 28.63
Net development wells drilled
Productive 40.86 22.27 43.90 27.26 40.19 51.79
Dry 2.95 4.63 2.33 3.05 3.04 1.71
Total 43.81 26.90 46.23 30.31 43.23 53.50
Undeveloped net acreage
(thousands)
Domestic 472 499 523 620 690 590
Canada 115 154 161 184 209 237
North Sea 358 363 243 184 188 113
China 341 282 - - - -
Other international 1,309 1,309 1,926 217 4,092 4,166
Total 2,595 2,607 2,853 1,205 5,179 5,106
Developed net acreage
(thousands)
Domestic onshore 537 542 539 549 591 542
Canada 159 165 156 163 202 203
North Sea 22 21 21 18 17 17
China 19 19 19 - - -
Other international - - 24 24 24 24
Total 737 747 759 754 834 786
Estimated proved reserves
(millions of equivalent barrels)
Crude oil and condensate 300 332 317 302 301 274
Chemicals
Industrial and specialty chemical
sales (thousands of tons) 445 381 331 314 263 233
Heavy-mineral sales (thousands
of tons) 86 89 191 92 114 86
Treated forest-product sales
(millions of board feet) 199 207 223 237 202 228
Coal
Sales (millions of tons) 34.5 27.5 23.5 20.8 21.9 19.8
Recoverable reserves
(millions of tons) 834 864 888 906 775 794
</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 China Petroleum Ltd. Bahamas 100%
Kerr-McGee Coal Corporation Delaware 100%
Kerr-McGee Credit Corporation Delaware 100%
Kerr-McGee Oil (U.K.) PLC England 100%
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, 1995.
<PAGE>
EXHIBIT 23
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the
incorporation of our reports dated February 16, 1996, included in
the company's 1995 Annual Report to Stockholders and incorporated
by reference in this Form 10-K and on page 31 of this Form 10-K,
into the company's previously filed Registration Statements on Form
S-8 File Nos. 33-18268, 33-24274, and 33-50949, and the company's
previously filed Registration Statements on Form S-3 File Nos.
2-78952, 33-5473, and 33-66112.
(ARTHUR ANDERSEN LLP)
ARTHUR ANDERSEN LLP
Oklahoma City, Oklahoma
March 29, 1996
<PAGE>
KERR-McGEE CORPORATION
POWER OF ATTORNEY
WHEREAS, Kerr-McGee Corporation, a Delaware corporation
("Company"), intends to file with the Securities and Exchange
Commission ("Commission") under the Securities Exchange Act of
1934, as amended ("ACT"), an Annual Report on Form 10-K for the
year ended December 31, 1995 ("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, L.
R. Corbett 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 12th day of March, 1996.
(Bennett E. Bidwell)
Bennett E. Bidwell, Director
KERR-McGEE CORPORATION
POWER OF ATTORNEY
WHEREAS, Kerr-McGee Corporation, a Delaware corporation
("Company"), intends to file with the Securities and Exchange
Commission ("Commission") under the Securities Exchange Act of
1934, as amended ("ACT"), an Annual Report on Form 10-K for the
year ended December 31, 1995 ("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, L.
R. Corbett 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 12th day of March, 1996.
(Earnest H. Clark, Jr.)
Earnest H. Clark, Jr., Director
KERR-McGEE CORPORATION
POWER OF ATTORNEY
WHEREAS, Kerr-McGee Corporation, a Delaware corporation
("Company"), intends to file with the Securities and Exchange
Commission ("Commission") under the Securities Exchange Act of
1934, as amended ("ACT"), an Annual Report on Form 10-K for the
year ended December 31, 1995 ("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 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 or Officer or both, as the
case may be, 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 12th day of March, 1996.
(L. R. Corbett)
L. R. Corbett, President, Chief Operating
Officer and Director
KERR-McGEE CORPORATION
POWER OF ATTORNEY
WHEREAS, Kerr-McGee Corporation, a Delaware corporation
("Company"), intends to file with the Securities and Exchange
Commission ("Commission") under the Securities Exchange Act of
1934, as amended ("ACT"), an Annual Report on Form 10-K for the
year ended December 31, 1995 ("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, L.
R. Corbett 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 12th day of March, 1996.
(Martin C. Jischke)
Martin C. Jischke, Director
KERR-McGEE CORPORATION
POWER OF ATTORNEY
WHEREAS, Kerr-McGee Corporation, a Delaware corporation
("Company"), intends to file with the Securities and Exchange
Commission ("Commission") under the Securities Exchange Act of
1934, as amended ("ACT"), an Annual Report on Form 10-K for the
year ended December 31, 1995 ("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, L.
R. Corbett 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 12th day of March, 1996.
(Robert S. Kerr, Jr.)
Robert S. Kerr, Jr., Director
KERR-McGEE CORPORATION
POWER OF ATTORNEY
WHEREAS, Kerr-McGee Corporation, a Delaware corporation
("Company"), intends to file with the Securities and Exchange
Commission ("Commission") under the Securities Exchange Act of
1934, as amended ("ACT"), an Annual Report on Form 10-K for the
year ended December 31, 1995 ("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 L. R. Corbett and 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
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. 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.
IN WITNESS WHEREOF, the undersigned has executed this
instrument this 12th day of March, 1996.
(F. A. McPherson)
F. A. McPherson, Chairman of Board,
Chief Executive Officer and Director
KERR-McGEE CORPORATION
POWER OF ATTORNEY
WHEREAS, Kerr-McGee Corporation, a Delaware corporation
("Company"), intends to file with the Securities and Exchange
Commission ("Commission") under the Securities Exchange Act of
1934, as amended ("ACT"), an Annual Report on Form 10-K for the
year ended December 31, 1995 ("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, L.
R. Corbett 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 12th day of March, 1996.
(William C. Morris)
William C. Morris, Director
KERR-McGEE CORPORATION
POWER OF ATTORNEY
WHEREAS, Kerr-McGee Corporation, a Delaware corporation
("Company"), intends to file with the Securities and Exchange
Commission ("Commission") under the Securities Exchange Act of
1934, as amended ("ACT"), an Annual Report on Form 10-K for the
year ended December 31, 1995 ("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, L.
R. Corbett 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 12th day of March, 1996.
(John J. Murphy)
John J. Murphy, Director
KERR-McGEE CORPORATION
POWER OF ATTORNEY
WHEREAS, Kerr-McGee Corporation, a Delaware corporation
("Company"), intends to file with the Securities and Exchange
Commission ("Commission") under the Securities Exchange Act of
1934, as amended ("ACT"), an Annual Report on Form 10-K for the
year ended December 31, 1995 ("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, L.
R. Corbett 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 12th day of March, 1996.
(John J. Nevin)
John J. Nevin, Director
KERR-McGEE CORPORATION
POWER OF ATTORNEY
WHEREAS, Kerr-McGee Corporation, a Delaware corporation
("Company"), intends to file with the Securities and Exchange
Commission ("Commission") under the Securities Exchange Act of
1934, as amended ("ACT"), an Annual Report on Form 10-K for the
year ended December 31, 1995 ("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, L.
R. Corbett 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 12th day of March, 1996.
(Farah M. Walters)
Farah M. Walters, Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This scedule contains summary financial information extracted from the
Consolidated Balance Sheet at December 31, 1995, and the Consoldiated Statement
of Income for the year then ended and is qualified in its entirety by refernce
to such Form 10-K.
</LEGEND>
<CIK> 0000055458
<NAME> KERR-MCGEE CORPORATION
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 87<F1>
<SECURITIES> 0
<RECEIVABLES> 342
<ALLOWANCES> 5
<INVENTORY> 222
<CURRENT-ASSETS> 766
<PP&E> 5849
<DEPRECIATION> 3582
<TOTAL-ASSETS> 3232
<CURRENT-LIABILITIES> 580
<BONDS> 0
<COMMON> 54
0
0
<OTHER-SE> 1362
<TOTAL-LIABILITY-AND-EQUITY> 3232
<SALES> 1801
<TOTAL-REVENUES> 1801
<CGS> 999
<TOTAL-COSTS> 1891
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 61
<INCOME-PRETAX> (67)
<INCOME-TAX> (43)
<INCOME-CONTINUING> (24)
<DISCONTINUED> (7)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (31)
<EPS-PRIMARY> (.60)
<EPS-DILUTED> 0
<FN>
<F1>See Note 1 to the Consoldiated Financial Statements.
</FN>
</TABLE>
