FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from _____ to _____
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 of (I.R.S. Employer
Incorporation or Organization) Identification No.)
Kerr-McGee Center, Oklahoma City, Oklahoma 73125
(Address of Principal Executive Offices and Zip Code)
Registrant's telephone number, including area code (405) 270-1313
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 (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Number of shares of common stock, $1.00 par value, outstanding as of October 31,
1997: 47,669,868
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
(Millions of dollars, except per-share amounts) 1997 1996 1997 1996
-------------------- ----------------------
<S> <C> <C> <C> <C>
Sales $402.2 $487.6 $1,281.9 $1,412.6
Costs and Expenses
Costs and operating expenses 229.8 261.0 729.4 773.0
Selling, general and administrative expenses 46.6 51.0 96.8 141.8
Depreciation and depletion 62.1 81.2 197.2 214.9
Exploration, including dry holes and
amortization of undeveloped leases 19.4 17.9 50.9 70.0
Taxes, other than income taxes 12.6 17.1 40.8 51.4
Interest and debt expense 10.6 13.6 33.1 38.5
------ ------ -------- --------
Total Costs and Expenses 381.1 441.8 1,148.2 1,289.6
------ ------ -------- --------
21.1 45.8 133.7 123.0
Other Income 31.6 44.6 78.8 110.3
------ ------ -------- --------
Income before Income Taxes 52.7 90.4 212.5 233.3
Provision for Income Taxes 15.9 28.1 63.9 72.4
------ ------ -------- --------
Net Income $ 36.8 $ 62.3 $ 148.6 $ 160.9
====== ====== ======== ========
Net Income per Common Share $ .77 $ 1.27 $ 3.09 $ 3.22
Cash Dividends Declared per Common Share $ .45 $ .41 $ 1.35 $ 1.23
Average Number of Shares Outstanding
(thousands) 47,643 48,901 47,851 49,751
The accompanying notes are an integral part of this statement.
</TABLE>
<PAGE>
<TABLE>
KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<CAPTION>
September 30, December 31,
(Millions of dollars) 1997 1996
-------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash $ 75.9 $ 120.9
Notes and accounts receivable 291.5 374.4
Inventories 161.8 218.2
Deposits and prepaid expenses 62.3 91.1
-------- --------
Total Current Assets 591.5 804.6
-------- --------
Property, Plant and Equipment 4,525.2 4,836.9
Less reserves for depreciation,
depletion and amortization 2,557.8 2,889.5
-------- --------
1,967.4 1,947.4
-------- --------
Investments and Other Assets 399.3 372.5
-------- --------
$2,958.2 $3,124.5
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $ 20.0 $ 36.4
Accounts payable 209.4 262.3
Other current liabilities 230.1 186.0
-------- --------
Total Current Liabilities 459.5 484.7
-------- --------
Long-Term Debt 489.0 625.9
-------- --------
Deferred Credits and Reserves 597.1 646.4
-------- --------
Stockholders' Equity
Common stock, par value $1 - 150,000,000
shares authorized, 54,094,233 shares issued at
9-30-97 and 53,862,347 shares issued at 12-31-96 54.1 53.9
Capital in excess of par value 344.6 334.2
Preferred stock purchase rights .5 .5
Retained earnings 1,432.0 1,348.0
Unrealized gain on available-for-sale securities .1 11.6
Common shares in treasury, at cost - 6,434,465
shares at 9-30-97 and 5,568,815 at 12-31-96 (362.4) (305.2)
Deferred compensation (56.3) (75.5)
-------- --------
Total Stockholders' Equity 1,412.6 1,367.5
-------- --------
$2,958.2 $3,124.5
======== ========
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 statement.
</TABLE>
<PAGE>
<TABLE>
KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Nine Months Ended
September 30,
(Millions of dollar) 1997 1996
---------------------
<S> <C> <C>
Operating Activities
Net income $148.6 $160.9
Adjustments to reconcile to net cash
provided by operating activities -
Depreciation, depletion and amortization 202.4 222.0
Deferred income taxes 22.6 37.1
Realized gain on available-for-sale securities (18.4) (22.9)
Noncash items affecting net income 16.3 42.6
Other net cash provided by operating activities 55.7 43.1
------ ------
Net Cash Provided by Operating Activities 427.2 482.8
------ ------
Investing Activities
Capital expenditures (253.1) (298.2)
Proceeds from the sales of available-for-sale securities 21.1 28.5
Proceeds from sales of exploration and production assets 17.6 26.5
Other investing activities 7.7 30.2
----- ------
Net Cash Used in Investing Activities (206.7) (213.0)
------ ------
Financing Activities
Increase (decrease) in short-term borrowings (16.4) 30.8
Issuance of long-term debt - 24.2
Purchase of treasury stock (59.5) (163.5)
Dividends paid (63.0) (62.7)
Repayment of long-term debt (137.2) (35.8)
Other financing activities 10.6 9.8
----- ------
Net Cash Used in Financing Activities (265.5) (197.2)
------ ------
Net Increase (Decrease) in Cash and Cash Equivalents (45.0) 72.6
Cash and Cash Equivalents at Beginning of Period 120.9 87.3
------ ------
Cash and Cash Equivalents at End of Period $ 75.9 $159.9
====== ======
The accompanying notes are an integral part of this statement.
</TABLE>
<PAGE>
KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
A. The condensed financial statements included herein have been prepared by
the company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission and, in the opinion of management,
include all adjustments, consisting only of normal recurring accruals,
necessary to present fairly the resulting operations for the indicated
periods. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules
and regulations. Although the company believes that the disclosures are
adequate to make the information presented not misleading, it is suggested
that these condensed financial statements be read in conjunction with the
financial statements and the notes thereto included in the company's latest
annual report on Form 10-K.
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (FAS) No. 130, "Reporting
Comprehensive Income," effective for fiscal years beginning after December
15, 1997, and FAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information," effective for financial statements for periods
beginning after December 15, 1997. The company plans to adopt both
accounting standards as of January 1, 1998.
FAS No. 130 requires that all items required to be recognized under
accounting standards as components of comprehensive income be reported as a
part of the basic financial statements. FAS No. 131 establishes standards
for reporting information about operating segments in annual financial
statements and requires selected information about operating segments in
interim financial reports issued to shareholders. The company expects
adoption of the new standards will not materially affect the company's
reporting practices.
B. After adding the dilutive effect of the conversion of options to the
weighted average number of shares outstanding, the shares used to compute
net income per common share were 47,831,385 and 49,128,607 for the three
months ended September 30, 1997 and 1996, respectively, and 48,044,928 and
50,003,527 for the nine months ended September 30, 1997 and 1996,
respectively.
In March 1997, the FASB issued FAS No. 128, "Earnings per Share," which
requires the calculation of basic and diluted earnings per share (EPS).
Basic EPS includes no dilution and is computed by dividing income available
to common stockholders by the weighted-average number of common shares
outstanding for the period. Diluted earnings per share is computed by
dividing net income by the weighted-average number of shares of common stock
and common stock equivalents. The statement is effective for periods ending
after December 15, 1997, and does not allow for early adoption. Restatement
of prior years' EPS is required upon adoption. Had the company been required
to adopt FAS No. 128 currently, basic earnings per share for the three
months ended September 30, 1997 and 1996, would have been $.78 and $1.28,
respectively, and for the nine months ended September 30, 1997 and 1996,
would have been $3.11 and $3.24, respectively. Diluted earnings per share
for both the three months and nine months ended September 30, 1997 and 1996,
would not have differed materially from basic EPS. The company expects the
effect of the new standard on its EPS in future periods will be immaterial.
C. Net cash provided by operating activities reflects cash payments for income
taxes and interest as follows:
Nine Months Ended
September 30,
(Millions of dollars) 1997 1996
-------------------
Income taxes $14.8 $22.9
Interest 36.9 42.2
<PAGE>
D. The company held U.S. government obligations considered to be available for
sale at September 30, 1997 and December 31, 1996. 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 respective periods. At
September 30, 1997 and December 31, 1996, these financial instruments were
as follows:
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
------------------------------ -----------------------
Fair Gross Unrealized Fair Gross Unrealized
(Millions of dollars) Value Cost Holding Gains Value Cost Holding Gains
<S> <C> <C> <C> <C> <C> <C>
Equity Securities $ - $ - $ - $21.9 $ 3.1 $18.8
U.S. Government Obligations
Maturing within one year 5.6 5.6 - 25.7 25.7 -
Maturing between one
and four years 20.5 20.4 .1 - - -
----- ------ --- ----- ----- -----
Total $26.1 $26.0 $.1 $47.6 $28.8 $18.8
===== ===== === ===== ===== =====
</TABLE>
During 1997, the company sold equity securities considered to be available
for sale. Proceeds from the sale during the 1997 third quarter totaled $8.7
million, resulting in a realized gain of $7.7 million before income taxes.
Proceeds from the sale for the first nine months of 1997 totaled $21.1
million, resulting in a realized gain of $18.4 million before income taxes.
The average cost of the securities was used in computing the realized gain.
During 1997, the company donated 50,000 shares of its available-for-sale
securities to the Kerr-McGee Foundation Corporation, a tax-exempt entity
whose purpose is to contribute to not-for-profit organizations. The fair
value of these donated shares totaled $3.2 million, which includes
appreciation of $2.8 million before income taxes.
The change in the equity component for unrealized holding gains and losses,
net of income taxes, for the first nine months of 1997 and 1996 was as
follows:
Nine Months Ended
September 30,
(Millions of dollars) 1997 1996
--------------------
Balance, January 1 $11.6 $25.9
Net realized gains (2.5) (5.6)
Net unrealized holding gains .5 4.0
----- -----
Balance, March 31 9.6 24.3
Net realized gains (4.3) (5.5)
Net appreciation of donated securities (1.7) -
Net unrealized holding gains .8 1.2
----- -----
Balance, June 30 4.4 20.0
Net realized gains (4.8) (3.8)
Net appreciation of donated securities - (7.6)
Net unrealized holding gains .5 1.4
----- -----
Balance, September 30 $ .1 $10.0
===== =====
<PAGE>
E. Investments in equity affiliates totaled $262.6 million at September 30,
1997, and $243.7 million at December 31, 1996. Equity income related to the
investments and included in Other Income in the Consolidated Statement of
Income totaled $6.7 million and $.9 million for the three months ended
September 30, 1997 and 1996, respectively, and $22.8 million and $4.4
million for the nine months ended September 30, 1997 and 1996, respectively.
F. CONTINGENCIES
WEST CHICAGO -
In 1973, a wholly owned subsidiary, Kerr-McGee Chemical Corporation (KMCC),
closed the facility located in West Chicago, Illinois, that processed
thorium ores. Operations resulted in some low-level radioactive
contamination at the site, and in 1979, KMCC filed a plan with the Nuclear
Regulatory Commission (NRC) to decommission the facility. The NRC
transferred jurisdiction of this site to the State of Illinois (the State)
in 1990. The following discusses the current status of various matters
associated with this closed facility.
Decommissioning - In 1994, KMCC, the City of West Chicago (the City), and
the State reached agreement on Phase I of the decommissioning plan for the
closed West Chicago facility. Pursuant to the Phase I agreement, KMCC began
shipping material from the site to a licensed permanent disposal facility in
Utah during 1994.
In February 1997, KMCC executed an agreement with the City as to the
terms and conditions for completing the final phase of decommissioning
work, the bulk of which is expected to be completed about four to six years
after receiving the necessary license amendment. The State has indicated
approval of this agreement, and KMCC expects the State to issue a license
amendment that will enable KMCC to complete the final phase of
decommissioning work. In the meantime, decommissioning work is progressing,
and KMCC continues to ship material from the site.
In 1992, the State enacted legislation imposing an annual storage fee equal
to $2 per cubic foot of byproduct material located at the closed facility.
The storage fee cannot exceed $26 million per year, and any storage fee
payments must be reimbursed to KMCC as decommissioning costs are incurred.
KMCC has been fully reimbursed for all storage fees paid pursuant to this
legislation. In June 1997, the legislation was amended to provide that
future storage fee obligations are to be offset against decommissioning
costs incurred but not yet reimbursed.
Pursuant to Title X of the Energy Policy Act of 1992 (Title X), the United
States Department of Energy is obligated to reimburse KMCC for certain
decommissioning and cleanup costs in recognition of the fact that much of
the facility's production was dedicated to United States government
contracts. Title X was amended in 1996 to increase the amount authorized to
$65 million plus inflation adjustments and to date, KMCC has been reimbursed
approximately $40 million under Title X.
At September 30, 1997, the remaining reserves to decommission the site
totaled $177 million (without regard to any further recovery under Title X),
payable over the course of the decommissioning work.
Offsite Areas - The United States 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 unilateral administrative orders for two of these
areas (referred to as the residential area and Reed-Keppler Park), which
require KMCC to conduct removal actions to excavate contaminated soils and
ship the soils elsewhere for disposal. At September 30, 1997, the remaining
reserves to clean up the residential area and Reed-Keppler Park totaled $19
million. Without waiving any of its rights or defenses, KMCC has begun the
cleanup of these two sites and anticipates completing the work within four
years.
Judicial Proceedings - In December 1996, a lawsuit was filed against the
company and its subsidiary, KMCC, in Illinois state court on behalf of a
purported class of present and former West Chicago residents. The lawsuit
seeks damages for alleged diminution in property values and the
establishment of a medical monitoring fund to benefit those allegedly
exposed to thorium wastes originating from the former facility. The case was
removed to federal court and is being vigorously defended.
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 September 30, 1997, the remaining reserves provided for the
cost to investigate and/or remediate all presently identified sites of
former or current operations totaled $278 million, which included $196
million for the former West Chicago facility, the residential area and
Reed-Keppler Park. The ultimate costs to decommission these sites are
difficult to estimate because of the numerous contingencies. Actual costs
could differ from those currently estimated as information becomes available
for sites that are not now included in the reserve, if contamination is not
as expected, or field conditions or other variables differ significantly
from those that are now assumed. Actual costs will be reduced by the amounts
recovered under Title X and other government programs. Expenditures from
inception through September 30, 1997, totaled $401 million for currently
known sites.
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 the 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.
<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition.
Comparison of 1997 Results with 1996 Results
CONSOLIDATED OPERATIONS
Third-quarter 1997 net income totaled $36.8 million, compared with 1996
third-quarter net income of $62.3 million. Excluding unusual items, net income
was $40 million in the 1997 third quarter, compared with $57.7 million in the
same 1996 period. For the first nine months of 1997, net income was $148.6
million, compared with $160.9 million in the same 1996 period. Excluding unusual
items, net income for the first nine months of 1997 totaled $139 million,
compared with $152 million in 1996.
Operating profit for the 1997 third quarter was $65 million, compared with $89
million in the same 1996 quarter. Higher chemical operating profit, compared
with last year's quarter, was more than offset by lower operating profit from
exploration and production and coal. The decline in operating profit was due
primarily to lower crude oil and natural gas sales volumes, lower crude oil and
coal sales prices and lower coal production, partially offset by lower operating
expense for the exploration and production unit, higher natural gas sales prices
and higher pigment sales volumes. Operating profit for the first nine months of
1997 was $225.2 million, compared with $257 million for the same 1996 period.
The lower results for the nine-month period were due primarily to lower crude
oil and natural gas sales volumes, lower coal and pigment sales prices and
higher production costs for pigment operations, partially offset by higher
natural gas sales prices, lower operating and exploration expenses for the
exploration and production unit and higher pigment sales volumes. Third-quarter
1997 nonoperating expense was $12.3 million, compared with income of $1.4
million for the 1996 quarter. Unusual items affecting nonoperating expense in
the third quarter of 1997 were environmental provisions (net of reimbursements)
totaling $19.5 million, partially offset by the recognition of a $10 million
previously deferred gain from the sale of the company's former soda products
facility and gains on sales of equity securities totaling $7.7 million. Unusual
items benefiting nonoperating income in the 1996 third quarter were insurance
settlements of $26.5 million and gains on sales of equity securities totaling $6
million, partially offset by environmental provisions (net of reimbursements)
totaling $11.4 million. Excluding unusual items, third-quarter 1997 nonoperating
expense was $8.1 million, down from $19.7 million in 1996, due primarily to
lower net interest expense and higher equity income.
For the first nine months of 1997, nonoperating expense was $12.7 million,
compared with $23.7 million in 1996. Unusual items affecting nonoperating
expense for the first nine months of 1997 were gains on sales of equity
securities of $18.4 million, insurance settlements of $12.2 million, and the
recognition of a $10 million previously deferred gain from the sale of the
company's former soda products facility, partially offset by environmental
provisions (net of reimbursements) totaling $19.5 million. Unusual items
benefiting nonoperating expense for the first nine months of 1996 included
insurance settlements of $65.3 million and gains on sales of equity securities
totaling $22.9 million, partially offset by provisions for settled and pending
litigation of $28.9 million, environmental provisions (net of reimbursements)
totaling $25.8 million and other provisions of $5.8 million. Nonoperating
expense, excluding unusual items, for the first nine months of 1997 was $29.8
million, down from $51.4 million in 1996, due primarily to higher equity income,
lower net interest expense and higher foreign currency translation gains.
Partially offsetting were lower gains on sales of assets in 1997.
The provision for income taxes was $15.9 million and $63.9 million for the third
quarter and first nine months of 1997, respectively, compared with $28.1 million
and $72.4 million for the respective 1996 periods. The decrease in both 1997
periods was due primarily to lower pretax income.
<PAGE>
SEGMENT OPERATIONS
Following is a summary of sales and operating profit and a discussion of major
factors influencing the results of each of the company's business segments for
the third quarter and first nine months of 1997, compared with the same period
last year.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
(Millions of dollars) 1997 1996 1997 1996
-------------------- --------------------
<S> <C> <C> <C> <C>
Sales
Exploration and production $131.6 $217.0 $ 478.4 $ 612.4
Chemicals 192.2 171.7 564.6 520.1
Coal 78.3 98.8 238.7 279.8
Other .1 .1 .2 .3
------ ------ ------- --------
Total $402.2 $487.6 $1,281.9 $1,412.6
====== ====== ======== ========
Operating Profit (Loss)
Exploration and production $ 31.4 $ 50.9 $ 131.9 $ 121.6
Chemicals 24.9 15.5 61.8 72.2
Coal 7.8 21.9 28.8 58.1
Other .9 .7 2.7 5.1
------ ------ ------- --------
Total 65.0 89.0 225.2 257.0
Nonoperating Income (Expense) (12.3) 1.4 (12.7) (23.7)
------ ------ ------- --------
Income before Income Taxes 52.7 90.4 212.5 233.3
Provision for Income Taxes 15.9 28.1 63.9 72.4
------ ------ ------- --------
Net Income $ 36.8 $ 62.3 $ 148.6 $ 160.9
====== ====== ======= ========
</TABLE>
Exploration and Production -
Operating profit for the third quarter of 1997 was $31.4 million, compared with
$50.9 million for the same 1996 period. Operating profit for the first nine
months of 1997 and 1996 was $131.9 million and $121.6 million, respectively. The
third-quarter results decreased due to lower proprietary crude oil and natural
gas sales volumes and lower crude oil sales prices, partially offset by lower
operating expenses, lower relocation costs and higher natural gas sales prices.
Despite the lower results for the quarter, operating profit for the first nine
months of 1997 was higher due to improved natural gas sales prices, lower
operating expenses and lower relocation costs, partially offset by the lower
proprietary crude oil and natural gas sales volumes. The lower oil and natural
gas volumes for both 1997 periods were primarily a result of properties merged
into an equity affiliate and asset sales.
Revenues were $131.6 million and $217 million for the three months ended
September 30, 1997 and 1996, respectively, and $478.4 million and $612.4 million
for the first nine months of 1997 and 1996, respectively. The following table
shows the company's average crude oil and natural gas sales prices and volumes
for both the third quarter and first nine months of 1997 and 1996.
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, Increase September 30, Increase
1997 1996 (Decrease) 1997 1996 (Decrease)
----------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
Crude oil sales
(thousands of bbls/day)
United States 23.4 34.4 (32) 24.6 29.6 (17)
North Sea 23.3 28.7 (19) 23.9 30.5 (22)
China 8.8 4.9 80 8.6 3.2 169
Other .3 3.0 (90) .1 3.6 (97)
----- ------ ----- ------
Total proprietary sales 55.8 71.0 (21) 57.2 66.9 (14)
Proportionate interest in
equity affiliate's sales 7.2 - NM 7.3 - NM
----- ------ ----- ------
Total 63.0 71.0 (11) 64.5 66.9 (4)
===== ====== ===== ======
Average crude oil sales price
(per barrel)
United States $17.77 $19.82 (10) $18.73 $18.43 2
North Sea 17.63 19.14 (8) 18.88 18.15 4
China 17.21 18.58 (7) 17.83 18.53 (4)
Other 17.86 17.99 (1) 17.86 17.10 4
Average $17.63 $19.38 (9) $18.66 $18.24 2
Natural gas sold
(MMCF/day)
United States 138 258 (47) 161 215 (25)
North Sea 28 17 65 30 26 15
Other - 24 NM - 30 NM
----- ------ ----- ------
Total proprietary sales 166 299 (44) 191 271 (30)
Proportionate interest in
equity affiliate's sales 60 - NM 59 - NM
----- ------ ----- ------
Total 226 299 (24) 250 271 (8)
===== ====== ===== ======
Average natural gas sales price
(per MCF)
United States $2.42 $1.90 27 $2.45 $1.90 29
North Sea 2.25 2.60 (13) 2.52 2.45 3
Other - 1.07 NM - 1.07 NM
Average $2.39 $1.87 28 $2.47 $1.86 33
</TABLE>
<PAGE>
Chemicals -
Third-quarter 1997 operating profit totaled $24.9 million on revenues of $192.2
million, compared with $15.5 million on revenues of $171.7 million for the 1996
quarter. For the first nine months of 1997 and 1996, operating profit was $61.8
million and $72.2 million, respectively, on revenues of $564.6 million and
$520.1 million, respectively. Revenues for the third quarter and first nine
months of 1997 increased primarily due to higher pigment sales volumes resulting
from plant expansions at the company's Hamilton, Miss., plant and its 50%-owned
Western Australia chemical plant. Operating profit for the third quarter of 1997
increased due to higher pigment sales volumes and the 1996 unusual charge for
the shutdown of a crosstie-treatment facility. For the first nine months of
1997, operating profit decreased due to lower pigment sales prices and higher
operating expense associated with the U.S. pigment plant expansion, partially
offset by higher pigment sales volumes.
Coal -
Third-quarter 1997 operating profit was $7.8 million, compared with $21.9
million for the same 1996 quarter. For the first nine months of 1997, operating
profit was $28.8 million, compared with $58.1 million last year. Revenues were
$78.3 million and $98.8 million for the third quarter of 1997 and 1996,
respectively, and $238.7 million and $279.8 million for the first nine months of
1997 and 1996, respectively. Revenues for the third quarter and the first nine
months of 1997 declined due to lower average sales prices and lower sales
volumes. Operating profit decreased for both 1997 periods primarily due to the
lower revenues partially offset by lower average per-unit production costs. The
lower average sales prices and volume declines were attributable to an
earlier 1997 underground ignition at the company's Galatia, Ill., mine.
Financial Condition
At September 30, 1997, the company's net working capital position was $132
million, compared with $319.9 million at December 31, 1996. The current ratio
was 1.3 to 1 at September 30, 1997, compared with 1.5 to 1 at September 30,
1996, and 1.7 to 1 at December 31, 1996. The company's percentage of total debt
to total capitalization was 27% at September 30, 1997, compared with 36% at
September 30, 1996, and 33% at December 31, 1996.
In October 1997, the company issued $150 million - 6.625% notes due October 15,
2007, and $150 million - 7.125% debentures due October 15, 2027. The proceeds
received by the company will be used to reduce its outstanding commercial paper
and indebtedness under variable interest rate credit agreements.
The company had unused lines of credit and revolving credit facilities of $602
million at September 30, 1997. Of this amount, $255 million and $265 million can
be used to support commercial paper borrowings of Kerr-McGee Credit Corporation
and Kerr-McGee Oil (U.K.) PLC, respectively.
Cash capital expenditures for the first nine months of 1997 totaled $253.1
million, compared with $298.2 million for the same 1996 period. For 1997,
exploration and production expenditures, principally in the Gulf of Mexico, the
North Sea and offshore China, were 60% of the total. Chemical expenditures were
28% of the total. Management anticipates that the cash requirements for the next
several years can be provided through internally generated funds and selective
long- and/or short-term borrowing.
The company completed its $300 million stock repurchase program in the 1997
third quarter. A total of 4.8 million shares was purchased under the program,
which began in October 1995.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits -
4.2 The company agrees to furnish to the Securities and Exchange
Commission, upon request, a copy of the Indenture dated as of
August 1, 1982, between the company and Citibank, N. A., as
trustee, relating to the company's 6.625% Notes due October 15,
2007, and the 7.125% Debentures due October 15, 2027
27.0 Financial Data Schedule
(b) Reports on Form 8-K
None
SIGNATURE
Pursuant to the requirements 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
Date November 12, 1997 By: (Deborah A. Kitchens)
----------------- ---------------------
Deborah A. Kitchens
Vice President and Controller
and Chief Accounting Officer
<TABLE> <S> <C>
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<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet at September 30, 1997, and the Consolidated Statement
of Income for the period ending September 30, 1997, and is qualified in its
entirety by reference to such Form 10-Q.
</LEGEND>
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