UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2000
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 July 31,
2000: 94,233,982
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
<CAPTION>
KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
(Millions of dollars, except per-share amounts) 2000 1999 2000 1999
------------------------ ----------------------
<S> <C> <C> <C> <C>
Sales $994.7 $654.5 $1,870.3 $1,143.1
------ ------ -------- --------
Costs and Expenses
Costs and operating expenses 347.4 268.1 624.4 493.5
Selling, general and administrative expenses 59.5 62.5 107.5 115.2
Depreciation and depletion 168.1 157.1 338.7 288.3
Exploration, including dry holes and
amortization of undeveloped leases 44.8 40.6 88.8 69.4
Taxes, other than income taxes 28.2 17.3 58.4 32.6
Provision for environmental remediation and
restoration of inactive sites, net of
reimbursements 88.0 - 90.0 -
Purchased in-process research and development 32.5 - 32.5 -
Merger costs - - - 155.1
Interest and debt expense 56.1 45.8 113.3 90.5
------ ------ -------- --------
Total Costs and Expenses 824.6 591.4 1,453.6 1,244.6
------ ------ -------- --------
170.1 63.1 416.7 (101.5)
Other Income 13.5 14.0 42.1 28.0
------ ------ -------- --------
Income (Loss) before Income Taxes 183.6 77.1 458.8 (73.5)
Taxes on Income (73.7) (31.8) (163.7) 12.3
------ ------ -------- --------
Income (Loss) before Change in Accounting Principle 109.9 45.3 295.1 (61.2)
Cumulative Effect of Change in Accounting Principle
(net of benefit for income taxes of $2.2) - - - (4.1)
------ ------ -------- --------
Net Income (Loss) $109.9 $ 45.3 $ 295.1 $ (65.3)
====== ====== ======== ========
Net Income (Loss) per Common Share
Basic -
Income before cumulative effect of change
in accounting principle $ 1.17 $ .52 $ 3.19 $ (.71)
Cumulative effect of change in accounting
principle - - - (.05)
------ ------ -------- --------
Total $ 1.17 $ .52 $ 3.19 $ (.76)
====== ====== ======== ========
Diluted -
Income before cumulative effect of change
in accounting principle $ 1.11 $ .52 $ 3.02 $ (.71)
Cumulative effect of change in accounting
principle - - - (.05)
------ ------ -------- --------
Total $ 1.11 $ .52 $ 3.02 $ (.76)
====== ====== ======== ========
The accompanying notes are an integral part of this statement.
</TABLE>
<TABLE>
<CAPTION>
KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
June 30, December 31,
(Millions of dollars) 2000 1999
----------------------------
<S> <C> <C>
ASSETS
------
Current Assets
Cash $ 114.6 $ 266.6
Notes and accounts receivable 631.0 500.9
Inventories 359.1 280.9
Deposits and prepaid expenses 106.6 112.2
---------- ----------
Total Current Assets 1,211.3 1,160.6
---------- ----------
Property, Plant and Equipment 12,238.9 11,049.3
Less reserves for depreciation,
depletion and amortization 7,147.2 6,964.4
---------- ----------
5,091.7 4,084.9
---------- ----------
Investments and Other Assets 916.6 653.7
---------- ----------
$ 7,219.6 $ 5,899.2
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities
Short-term borrowings $ 4.8 $ 9.0
Accounts payable 335.5 403.7
Long-term debt due within one year 171.5 20.1
Other current liabilities 541.4 407.3
---------- ----------
Total Current Liabilities 1,053.2 840.1
---------- ----------
Long-Term Debt 2,627.2 2,496.0
---------- ----------
Deferred Credits and Reserves 1,398.6 1,070.7
---------- ----------
Stockholders' Equity
Common stock, par value $1 - 300,000,000
shares authorized, 101,162,872 shares issued at
6-30-00 and 93,494,186 shares issued at 12-31-99 101.2 93.5
Capital in excess of par value 1,642.6 1,284.0
Preferred stock purchase rights .9 .5
Restricted stock 5.0 .2
Retained earnings 769.6 576.0
Accumulated other comprehensive income 105.2 45.4
Common shares in treasury, at cost - 6,931,990
shares at 6-30-00 and 7,010,790 at 12-31-99 (383.4) (387.8)
Deferred compensation (100.5) (119.4)
---------- ----------
Total Stockholders' Equity 2,140.6 1,492.4
---------- ----------
$ 7,219.6 $ 5,899.2
========== ==========
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>
<TABLE>
<CAPTION>
KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
Six Months Ended
June 30,
(Millions of dollars) 2000 1999
--------------------------
<S> <C> <C>
Operating Activities
--------------------
Net income (loss) $ 295.1 $ (65.3)
Adjustments to reconcile net income to net cash
provided by operating activities -
Depreciation, depletion and amortization 364.7 309.9
Dry hole costs 36.2 22.8
Deferred income taxes (44.8) 12.3
Purchased in-process research and development 32.5 -
Provision for environmental remediation and
restoration of inactive sites, net of
reimbursement 90.0 -
(Gain) loss on sale and retirement of assets .9 (3.0)
Noncash items affecting net income 25.6 160.2
Other net cash used in operating activities (128.5) (362.1)
--------- -------
Net Cash Provided by Operating Activities 671.7 74.8
--------- -------
Investing Activities
--------------------
Capital expenditures (254.3) (274.3)
Acquisitions (999.4) (54.4)
Other investing activities 4.4 (18.4)
--------- -------
Net Cash Used in Investing Activities (1,249.3) (347.1)
--------- -------
Financing Activities
--------------------
Issuance of long-term debt 924.2 940.6
Repayment of long-term debt (788.6) (538.7)
Increase (decrease) in short-term borrowings (4.1) 15.9
Issuance of common stock 370.2 1.3
Dividends paid (81.3) (60.6)
Other financing activities - (41.7)
--------- -------
Net Cash Provided by Financing Activities 420.4 316.8
--------- -------
Effects of Exchange Rate Changes on Cash and Cash Equivalents 5.2 (7.1)
--------- -------
Net Increase (Decrease) in Cash and Cash Equivalents (152.0) 37.4
Cash and Cash Equivalents at Beginning of Period 266.6 121.0
--------- -------
Cash and Cash Equivalents at End of Period $ 114.6 $ 158.4
========= =======
The accompanying notes are an integral part of this statement.
</TABLE>
KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
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.
B. Effective January 1, 1999, the company adopted Statement of Position (SOP)
No. 98-5, "Reporting on the Costs of Start-Up Activities." The SOP requires
costs of start-up activities to be expensed as incurred. Unamortized
start-up costs at the beginning of the year were required to be recognized
as cumulative effect of a change in accounting principle, which increased
the 1999 six-month after-tax loss by $4.1 million.
In June 1998, the Financial Accounting Standards Board issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities." The
statement requires recording all derivative instruments as assets or
liabilities, measured at fair value. The standard is effective for fiscal
years beginning after June 15, 2000. The company is currently evaluating
the impact the standard will have on the company's results of operations;
however, management believes it will not be material due to the limited
amount of derivative and hedging activities in which the company currently
engages.
C. Net cash provided by operating activities reflects cash payments for income
taxes and interest as follows:
Six Months Ended
June 30,
(Millions of dollars) 2000 1999
-------------------------
Income tax payments $126.3 $ 53.7
Less refunds received (24.2) (58.5)
------ ------
Net income tax payments (refunds) $102.1 $ (4.8)
====== ======
Interest payments $ 98.8 $ 96.6
====== ======
D. During the second quarter of 2000 and 1999, comprehensive income was $122.3
million and $44.3 million, respectively. For the six months ended June 30,
2000 and 1999, comprehensive income (loss) was $354.9 million and $(80.5)
million, respectively.
The company has certain investments that are considered to be available for
sale. The company also has debt that is exchangeable into equity securities
of an investee that are considered 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 had no securities
classified as held to maturity or trading at June 30, 2000, or December 31,
1999. At June 30, 2000, and December 31, 1999, available for sale
securities for which fair value can be determined are as follows:
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
--------------------------------- -------------------------------
Gross Gross
Unrealized Unrealized
Fair Holding Fair Holding
Value Cost Gain (Loss) Value Cost Gain
----- ----- ----------- ----- ----- ----------
<S> <C> <C> <C> <C> <C> <C>
Equity securities $557.4 208.8 $348.6 $327.2 $208.8 $118.4
Exchangeable debt 472.4 330.3 (142.1) 327.2 330.3 3.1
U.S. government obligations -
Maturing within one year 2.4 2.4 - 4.7 4.7 -
Maturing between one year
and four years 4.2 4.3 (.1) 11.1 10.9 .2
------ ------
Total $206.4 $121.7
====== ======
</TABLE>
E. Investments in equity affiliates totaled $59.1 million at June 30, 2000,
and $59 million at December 31, 1999. Equity income related to the
investments is included in Other Income in the Consolidated Statement of
Income and totaled $7.9 million and $4.8 million for the three months ended
June 30, 2000 and 1999, respectively. For the first six months of 2000,
equity income totaled $13.5 million, compared with $7.1 million for the
same 1999 period.
F. The following tables set forth the computation of basic and diluted
earnings (loss) per share (EPS) for the three-month and six-month periods
ended June 30, 2000 and 1999.
<TABLE>
<CAPTION>
For the Three Months Ended June 30,
-----------------------------------------------------------------------
2000 1999
-------------------------------- -------------------------------
(In millions, except Per-Share Per-Share
per-share amounts) Income Shares Income Income Shares Income
------ ------ --------- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS $109.9 94.2 $1.17 $45.3 86.4 $.52
===== ====
Effect of Dilutive Securities:
5 1/4% convertible debentures 5.3 9.8 - -
7 1/2% convertible debentures 2.3 1.7 - -
Stock options - .2 - -
------ ----- ----- ----
Diluted EPS $117.5 105.9 $1.11 $45.3 86.4 $.52
====== ===== ===== ===== ==== ====
</TABLE>
<TABLE>
<CAPTION>
For the Six Months Ended June 30,
-----------------------------------------------------------------------
2000 1999
-------------------------------- -------------------------------
(In millions, except Per-Share Per-Share
per-share amounts) Income Shares Income Loss Shares Loss
------ ------ --------- ---- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS $295.1 92.4 $3.19 $(65.3) 86.4 $(.76)
===== =====
Effect of Dilutive Securities:
5 1/4% convertible debentures 8.3 7.6 - -
7 1/2% convertible debentures 4.6 1.7 - -
Stock options - .2 - -
------ ----- ------ ----
Diluted EPS $308.0 101.9 $3.02 $(65.3) 86.4 $(.76)
====== ===== ===== ====== ==== =====
</TABLE>
G. CONTINGENCIES
West Chicago, Illinois
In 1973, a wholly owned subsidiary, Kerr-McGee Chemical Corporation, now
Kerr-McGee Chemical LLC (Chemical), closed the facility in West Chicago,
Illinois, that processed thorium ores. Historical operations had resulted
in low-level radioactive contamination at the facility and in the
surrounding areas. In 1979, Chemical filed a plan with the Nuclear
Regulatory Commission (NRC) to decommission the facility. In 1990, the NRC
transferred jurisdiction over the facility to the State of Illinois (the
State). Following is the current status of various matters associated with
the closed facility.
Closed Facility - In 1994, Chemical, the City of West Chicago (the City)
and the State reached agreement on the initial phase of the decommissioning
plan for the closed West Chicago facility, and Chemical began shipping
material from the site to a licensed permanent disposal facility.
In February 1997, Chemical executed an agreement with the City covering the
terms and conditions for completing the final phase of decommissioning
work. The State has indicated approval of the agreement and has issued
license amendments authorizing much of the work. Chemical expects most of
the work to be completed within the next four years, leaving principally
only groundwater remediation and/or monitoring for subsequent years.
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 Chemical as decommissioning costs are
incurred. Chemical 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.
Vicinity Areas - The United States Environmental Protection Agency (EPA)
has listed four areas in the vicinity of the closed West Chicago facility
on the National Priority List promulgated by EPA under authority of the
Comprehensive Environmental Response, Compensation, and Liability Act of
1980 (CERCLA) and has designated Chemical as a potentially responsible
party in these four areas. Two of the four areas presently are being
studied to determine the extent of contamination and the nature of any
remedy. These two areas are known as the Sewage Treatment Plant and Kress
Creek. The scope of the required cleanup for these two areas has not been
determined. EPA previously issued unilateral administrative orders for the
other two areas (known as the residential areas and Reed-Keppler Park),
which require Chemical to conduct removal actions to excavate contaminated
soils and ship the soils elsewhere for disposal. Without waiving any of its
rights or defenses, Chemical is conducting the work required by the two
orders. Chemical has substantially completed the required excavation and
restoration work at the park site, and will be monitoring the site pending
final EPA approval.
Judicial Proceedings - In December 1996, a lawsuit was filed against the
company and Chemical 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. In August 2000, the court approved a settlement that resolves the
litigation on a class-wide basis.
Government Reimbursement - Pursuant to Title X of the Energy Policy Act of
1992 (Title X), the U.S. Department of Energy is obligated to reimburse
Chemical 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 1998 to increase the
amount authorized for reimbursement to $140 million plus inflation
adjustments. Through June 30, 2000, Chemical has been reimbursed
approximately $88 million under Title X. These reimbursements are provided
by congressional appropriations.
Other Matters
The company and/or its subsidiaries are parties to a number of legal and
administrative proceedings involving environmental and/or other matters
pending in various courts or agencies. These include proceedings associated
with facilities currently or previously owned, operated or used by the
company, its subsidiaries, and/or their predecessors, and include claims
for personal injuries and property damages. The company's current and
former operations also involve management of regulated materials and are
subject to various environmental laws and regulations. These laws and
regulations will obligate the company and/or its subsidiaries to clean up
various sites at which petroleum and other hydrocarbons, chemicals,
low-level radioactive substances and/or other materials have been disposed
of or released. Some of these sites have been designated Superfund sites by
EPA pursuant to CERCLA.
The company provides for costs related to contingencies when a loss is
probable and the amount is reasonably estimable. It is not possible for the
company to reliably estimate the amount and timing of all future
expenditures related to environmental and legal matters and other
contingencies because:
* some sites are in the early stages of investigation and other
sites may be identified in the future;
* cleanup requirements are difficult to predict at sites where
remedial investigations have not been completed or final decisions
have not been made regarding cleanup requirements, technologies or
other factors that bear on cleanup costs;
* environmental laws frequently impose joint and several liability
on all potentially responsible parties, and it can be difficult to
determine the number and financial condition of other potentially
responsible parties and their shares of responsibility for cleanup
costs; and
* environmental laws and regulations are continually changing and
court proceedings are inherently uncertain.
As of June 30, 2000, the company has reserves totaling $268 million for
cleaning up and remediating environmental sites, reflecting the reasonably
estimable costs for addressing these sites. This includes $138 million for
the West Chicago sites. Cumulative expenditures at all environmental sites
through June 30, 2000, total $724 million. Management believes, after
consultation with general counsel, that currently the company has reserved
adequately for the reasonably estimable costs of contingencies. However,
additions to the reserves may be required as additional information is
obtained that enables the company to better estimate its liabilities,
including liability at sites now under review, though the company cannot
now reliably estimate the amount of future additions to the reserves.
H. During the second quarter of 2000, the company finalized the agreements
with Kemira Oyj of Finland to purchase its titanium dioxide pigment
operations in Savannah, Georgia, and Botlek, Netherlands, for $403 million.
The acquisitions were accounted for under the purchase method of accounting
for business combinations.
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition.
Comparison of 2000 Results with 1999 Results
CONSOLIDATED OPERATIONS
Second-quarter 2000 net income totaled $109.9 million, compared with $45.3
million for the same 1999 period. Net income for the first six months of 2000
totaled 295.1 million, compared with a net loss of $65.3 million a year earlier.
Operating profit increased 152% or $201.5 million in the 2000 second quarter,
compared with the same 1999 period. Significantly higher crude oil and natural
gas sales prices contributed to the increase in operating profit, together with
lower titanium dioxide pigment production costs and higher pigment sales
volumes. Partially offsetting were the write-off of purchased in-process
research and development associated with the acquisition of the Savannah, Ga.,
pigment plant, higher production costs and exploration expense for the
exploration and production operations, lower pigment sales prices and lower
natural gas sales volumes. Operating profit for the first six months of 2000
totaled $662.4 million, compared with $183.8 million for the same 1999 period.
The increase in operating profit was due to higher crude oil and natural gas
sales prices, higher pigment sales volumes and lower pigment production costs,
partially offset by higher production costs, depreciation and depletion and
exploration expenses for the exploration and production operations, purchased
in-process research and development and lower pigment sales prices.
Other expense for the second quarter of 2000 totaled $150.4 million, compared
with $55.4 million in the same 1999 period. The increase was primarily due to
the environmental provision for inactive sites, costs associated with chemical
facility closings and product line discontinuations and higher net interest
expense, partially offset by higher foreign currency transaction gains and
higher equity income. Other expense for the first six months of 2000 was $203.6
million, compared with $257.3 million for the same 1999 period. This decrease
was due primarily to 1999 merger costs, higher foreign currency transaction
gains and higher equity income, partially offset by higher environmental
provision, costs associated with the chemical facility closings and product line
discontinuations, higher net interest expense and higher litigation provisions.
The income tax provision was $73.7 million for the 2000 second quarter, compared
with $31.8 million for the 1999 period. The income tax provision for the first
six months of 2000 was $163.7 million, compared with an income tax benefit of
$12.3 million for the 1999 period. The income tax benefit for the first six
months of 1999 included a $44.6 million tax benefit related to the $155.1
million in merger costs.
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 second quarter and the first six months of 2000, compared with the same
periods last year.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
(Millions of dollars) 2000 1999 2000 1999
------------------------- --------------------------
<S> <C> <C> <C> <C>
Sales
Exploration and production $664.2 $419.8 $1,302.3 $ 705.6
Chemicals - Pigment 276.2 175.5 460.8 325.6
Chemicals - Other 54.2 59.1 107.1 111.7
------ ------ -------- --------
994.6 654.4 1,870.2 1,142.9
All other .1 .1 .1 .2
------ ------ -------- --------
Total Sales $994.7 $654.5 $1,870.3 $1,143.1
====== ====== ======== ========
Operating Profit
Exploration and production 324.5 98.6 616.6 121.8
Chemicals - Pigment 6.0 30.1 38.3 56.7
Chemicals - Other 3.5 3.8 7.5 5.3
------ ------ -------- --------
Total Operating Profit 334.0 132.5 662.4 183.8
Other Expense (150.4) (55.4) (203.6) (257.3)
------ ------ -------- --------
Income (Loss) before Income Taxes 183.6 77.1 458.8 (73.5)
Taxes on Income (73.7) (31.8) (163.7) 12.3
------ ------ -------- --------
Income (Loss) before Change
in Accounting Principle 109.9 45.3 295.1 (61.2)
Cumulative Effect of Change in Accounting
Principle, Net of Income Taxes - - - (4.1)
------ ------ -------- --------
Net Income (Loss) $109.9 $ 45.3 $ 295.1 $ (65.3)
====== ====== ======== ========
</TABLE>
Exploration and Production -
Operating profit for the second quarter of 2000 was $324.5 million, compared
with $98.6 million for the same 1999 period. Operating profit for the first six
months of 2000 and 1999 was $616.6 million and $121.8 million, respectively. The
increase in operating profit for both 2000 periods was due to higher crude oil
and natural gas sales prices, partially offset by higher production costs,
higher depreciation and depletion, higher exploration expense and lower natural
gas sales volumes. Partially offsetting the second-quarter increase in operating
profit were lower crude oil sales volumes and higher general and administrative
expense. The higher operating profit for the six-month period also reflects
higher crude oil sales volumes and lower general and administrative expense.
Revenues were $664.2 million and $419.8 million for the three months ended June
30, 2000 and 1999, respectively, and $1,302.3 million and $705.6 million for the
first six months of 2000 and 1999, respectively. The following table shows the
company's average crude oil and natural gas sales prices and volumes for both
the second quarter and first six months of 2000 and 1999.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
------------------------- ------------------------
<S> <C> <C> <C> <C>
Crude oil and condensate sales
(thousands of bbls/day)
Domestic
Offshore 57.4 61.7 57.5 56.0
Onshore 16.6 18.8 17.1 18.9
North Sea 117.8 112.0 120.9 103.2
Other International 14.9 15.5 14.4 16.0
------ ------ ------ ------
Total 206.7 208.0 209.9 194.1
====== ====== ====== ======
Average crude oil sales price (per barrel)
Domestic
Offshore $25.52 $13.93 $25.47 $12.06
Onshore 27.76 15.82 27.74 13.51
North Sea 26.35 15.18 26.41 13.57
Other International 25.02 12.99 24.54 10.84
Average $26.14 $14.81 $26.14 $13.01
Natural gas sold (MMCF/day)
Domestic
Offshore 296 376 295 362
Onshore 176 172 173 168
North Sea 71 43 70 51
------ ------ ------ ------
Total 543 591 538 581
====== ====== ====== ======
Average natural gas sales price (per MCF)
Domestic
Offshore $3.56 $2.16 $3.08 $1.93
Onshore 3.71 2.18 3.28 1.90
North Sea 1.90 2.28 2.00 2.42
Average $3.40 $2.28 $3.00 $2.10
</TABLE>
Chemicals - Pigment
Second-quarter 2000 operating profit was $6 million on revenues of $276.2
million, compared with operating profit of $30.1 million on revenues of $175.5
million for the same 1999 period. For the first six months of 2000 and 1999,
operating profit was $38.3 million and $56.7 million, respectively, on revenues
of $460.8 million and $325.6 million, respectively. Operating profit for both
2000 periods was negatively impacted by $32.5 million of purchased in-process
research and development and $5 million transition-related expenses associated
with the acquisition of two pigment plants from Kemira Oyj. Excluding these
special items, operating profit for the second quarter and first six months of
2000 was $43.5 million and $75.8 million, respectively. Excluding special items,
the increase in operating profit for both 2000 periods was due to lower per-unit
production costs and higher sales volumes, partially offset by lower sales
prices.
Chemicals - Other
Operating profit in the 2000 second quarter was $3.5 million on revenues of
$54.2 million, compared with operating profit of $3.8 million on revenues of
$59.1 million for the 1999 period. For the first six months of 2000 and 1999,
operating profit was $7.5 million and $5.3 million, respectively, on revenues of
$107.1 million and $111.7 million, respectively. Higher electrolytic product
sales prices were the primary reason for the increase in operating profit for
the first six months of 2000 period compared with the same 1999 period.
Financial Condition
At June 30, 2000, the company's net working capital position was $158.1 million,
compared with $192.1 million at June 30, 1999, and $320.5 million at December
31, 1999. The current ratio was 1.2 to 1 at both June 30, 2000, and June 30,
1999, compared with 1.4 to 1 at December 31, 1999. The company's percentage of
net debt (debt less cash) to capitalization was 55% at June 30, 2000, compared
with 60% at December 31, 1999.
The company had unused lines of credit and revolving credit facilities of $1,324
million at June 30, 2000. Of this amount, $885 million and $264 million can be
used to support commercial paper borrowings of Kerr-McGee Credit LLC and
Kerr-McGee Oil (U.K.) PLC, respectively.
Cash capital expenditures for the first six months of 2000, excluding
acquisitions, totaled $254.3 million, compared with $274.3 million for the same
period last year. Exploration and production expenditures, principally in the
Gulf of Mexico and North Sea, were 87% of the 2000 total. Chemical - pigment
expenditures were 10% of the 2000 total. Chemical - other and corporate incurred
the remaining 3% of the expenditures. Management anticipates that the cash
requirements for the next several years can be provided through internally
generated funds and selective borrowings.
Forward-Looking Information
Statements in this quarterly report regarding the company's or management's
intentions, beliefs or expectations are forward-looking statements within the
meaning of the Securities Litigation Reform Act. Future results and developments
discussed in these statements may be affected by numerous factors and risks,
such as the accuracy of the assumptions that underlie the statements, the
success of the oil and gas exploration and production program, drilling risks,
the market value of Kerr-McGee's products, uncertainties in interpreting
engineering data, demand for consumer products for which Kerr-McGee's businesses
supply raw materials, general economic conditions, and other factors and risks
discussed in the company's SEC filings. Actual results and developments may
differ materially from those expressed in this quarterly report.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The United States Environmental Protection Agency (EPA) has notified
the company's wholly owned subsidiary, Kerr-McGee Chemical
Corporation, now Kerr-McGee Chemical LLC (Chemical), that it is a
potentially responsible party at a Superfund site located in New
Jersey. EPA has alleged the site was once owned and operated by a
predecessor of Chemical. Although EPA has not selected a final
remedy, EPA has preliminarily estimated that cleanup costs at the
site may exceed $100 million. Chemical is evaluating possible
defenses to any claim by EPA for response costs. The company has not
provided a reserve for the site as it is not possible to reliably
estimate whatever liability Chemical may have for the cleanup because
of uncertainties regarding Chemical's connection to the site and
EPA's selection of a remedy. See Note G. to the consolidated
financial statements in this Form 10-Q.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits -
Exhibit No.
-----------
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 August 11, 2000 By: (Deborah A. Kitchens)
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Deborah A. Kitchens
Vice President and Controller
and Chief Accounting Officer
