SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
January 14, 1999
(Date of Report - Date of earliest event reported)
KERR-MCGEE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 1-3939 73-0311467
(State of (Commission File Number) (IRS Employer
Incorporation) Identification No.)
Kerr-McGee Center
Oklahoma City, Oklahoma 73125
(Address of principal executive offices) (Zip Code)
(405) 270-1313
(Registrant's telephone number)
The Current Report on Form 8-K of Kerr-McGee Corporation filed with the
Securities and Exchange Commission on January 19, 1999, is hereby amended and
restated by this Form 8-K/A as follows:
Item 5. Other Events
Kerr-McGee Corporation announced it is budgeting $545 million for capital
spending in 1999, following the completion of the proposed merger between
Kerr-McGee and Oryx Energy Company.
Kerr-McGee also announced it would take a non-cash, after-tax charge of
$250 million in the fourth quarter of 1998. The charge was taken in accordance
with generally accepted accounting principles. The company deemed that certain
oil and gas fields located the in North Sea, China and the United States and two
chemical plants were impaired because the assets were no longer expected to
recover their net book values through future cash flows. Expectations of future
cash flows decreased from those previously forecast primarily as a result of
continued weakness in crude oil, natural gas and certain chemical product
prices.
The oil and gas asset impairment tests were based on estimates of future
cash flows using crude oil prices of $13 per barrel for 1999 increasing $1 per
barrel annually thereafter up to $20 per barrel and natural gas prices of $2.25
per MMBtu for 1999 increasing by $.10 per MMBtu annually thereafter up to $2.45
per MMBtu. The prices used in the impairment tests are consistent with industry
forecasts by investment bankers and industry consultants. In addition, downward
reserve revisions were deemed necessary for certain oil and gas fields. Proven
reserves at December 31, 1998 were used and probable reserves were taken into
consideration when justified by actual drilling and planned additional drilling.
The chemical asset impairment tests were based on current product prices
for a variety of different products including vanadium compounds and fertilizers
manufactured at the Soda Springs, Idaho plant and synthetic rutile manufactured
at the Mobile, Alabama plant. Prices were increased based on current market
perceptions.
The before-tax impairment losses, which totaled $313 million for oil and
gas assets and $57 million for chemical assets, were determined based on the
difference between the net book value of the assets and the present value of
future cash flows discounted at 10%, which approximates Kerr-McGee's cost of
capital, or, if appropriate, market value. The impairment of property, plant and
equipment represents approximately 16% of such oil and gas assets and 9% of such
chemical assets. The impairment will be recorded in the operations section of
the company's income statement.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(c) Exhibits
99.1 News Release dated January 14, 1999, announcing Kerr-McGee's
capital budget for 1999, a fourth quarter 1998 asset impairment
write-down and the rescission of its stock repurchase program.
SIGNATURES
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 hereunto duly authorized.
KERR-MCGEE CORPORATION
By: (Deborah A. Kitchens)
Deborah A. Kitchens
Vice President and Controller
Dated: January 26, 1999
EXHIBIT INDEX
Exhibit No. Description
99.1 News Release dated January 14, 1999, announcing Kerr-McGee's capital
budget for 1999, a fourth quarter 1998 asset impairment write-down
and the rescission of its stock repurchase program.
Exhibit 99.1
Kerr-McGee Announces Capital Budget for 1999
OKLAHOMA CITY (Jan. 14, 1999) - Kerr-McGee Corp. (NYSE: KMG) announced
plans for its 1999 capital expenditure budget, following the completion of the
proposed merger between Kerr-McGee and Oryx Energy Company (NYSE: ORX). The
corporation is budgeting $545 million for capital expenditures in 1999, about a
45% decrease from the companies' combined 1998 capital expenditures.
After completion of the proposed merger, the capital budget for exploration
and production in 1999 will be $430 million. Of this amount, $140 million is
allocated to the North Sea, $160 million to the Gulf of Mexico, $65 million to
U.S. onshore, and $65 million to other international areas.
The merged company's daily production volumes for 1999 are estimated at
approximately 190,000 barrels of oil and approximately 580 million cubic feet of
natural gas.
Capital expenditures for chemical operations are budgeted at $110 million
in 1999. This includes funds to complete a $57 million expansion that was
started last year at the company's titanium dioxide pigment facility in
Hamilton, Miss. This expansion, with completion expected in the third quarter,
will increase the facility's annual production capacity to 178,000 metric tons.
The Hamilton pigment facility represents approximately 50% of Kerr-McGee's
pigment production capacity and ranks as the third-largest chloride-process
titanium dioxide pigment plant in the United States.
The remaining $5 million will be corporate capital expenditures.
Kerr-McGee also announced it would take a non-cash, after-tax charge of
$250 million in the fourth quarter of 1998, in accordance with Financial
Accounting Standard 121. The write-down is primarily a result of continued low
oil and natural gas prices.
As a result of the proposed merger, the Kerr-McGee board of directors voted
to rescind the $300 million stock repurchase program that was announced in July
1998.
Kerr-McGee Corp. is an Oklahoma City-based energy and chemical company with
worldwide operations and assets of $3.7 billion. This capital budget will only
be implemented upon completion of the proposed merger with Oryx. The proposed
transaction is subject to approval by the shareholders of both companies, and
completion is anticipated in the first quarter of 1999.
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CONTACT: Debbie Schramm
(405) 270-2877
99-04
