OKLAHOMA CITY, Oct. 24 /PRNewswire/ -- Kerr-McGee Corp. (NYSE: KMG) reports $112 million ($1.08 per diluted share) of net income before special items for the 2001 third quarter, compared with $266 million ($2.58 per share) in the same 2000 quarter. The company also recorded $86 million (81 cents per share) of after-tax third-quarter special charges comprised of $51 million for environmental remediation, $33 million for asset impairment relating to the shut-in of the North Sea Hutton field, and $2 million relating to a chemical employee severance program and certain transition costs associated with the third-quarter acquisition of HS Resources, Inc. This resulted in net income of $26 million (27 cents per share) in the 2001 third quarter, compared with $265 million ($2.57 per share) in the prior-year quarter.
For the nine months ended Sept. 30, 2001, net income excluding special items and accounting changes was $541 million ($5.24 per share), compared with $664 million ($6.63 per share) in 2000. Including after-tax special items and accounting changes totaling $5 million (4 cents per share), net income for the first nine months of 2001 was $536 million ($5.20 per share), compared with $560 million ($5.62 per share) in the 2000 period.
Third-quarter operating profit excluding special items was $226 million, compared with $461 million in the 2000 period. Third-quarter exploration and production operating profit was $217 million, compared to $406 million in the year-ago period. The primary reason for the decrease was the sharp decline in both oil and gas prices from a year ago, accounting for more than 90% of the drop in operating profit. Natural gas volumes rose significantly in the quarter due primarily to additional volumes from the HS Resources acquisition effective Aug. 1, 2001. Other revenues also increased due to trading and marketing activities associated with the acquired entity. Both of these increases partially offset the price declines. Exploration expense also declined from the 2000 quarter, partially offsetting lower crude oil sales volumes and higher costs for lease operating expense, overhead, and depreciation, depletion and amortization related to the acquisition.
"Our total oil and gas production volumes increased nearly 5% from the prior-year quarter, and we are poised to see further growth," said Luke R. Corbett, Kerr-McGee chairman and chief executive officer. "Initial production from our 100%-owned Leadon field in the North Sea is expected next month, and will be followed by first production from the Nansen and Boomvang fields in the deepwater Gulf of Mexico. Development of our Gunnison field, also in the deepwater gulf, will help support future production increases."
Daily oil production averaged 193,800 barrels, slightly less than the 201,000 barrels in the prior-year quarter. Oil realizations averaged $23.40 per barrel, a decrease of $5.83 per barrel from the 2000 quarter.
Daily natural gas sales averaged 654 million cubic feet, up 24% from the prior-year quarter. The average sales price of $2.74 per thousand cubic feet was $1.45 lower than the 2000 quarter.
Chemical's operating profit was $9 million, down from $56 million in the 2000 quarter. Consistent with most of the chemical industry, the company saw its titanium dioxide pigment sales volumes fall steadily throughout the quarter, with prices also declining from year-ago levels. Market conditions worsened after the Sept. 11 terrorist attacks. As a result, the company reduced production rates, and margins declined further. The company continues to review its operations to best position itself to remain competitive in the current environment.
Third-quarter nonoperating items include a foreign currency loss of $12 million ($9 million after-tax), compared with $7 million in pretax gains a year earlier. The company also recorded $23 million in net realized and unrealized nonoperating gains on derivatives acquired in the HS Resources acquisition. Equity income losses of $3 million were recorded in the 2001 quarter, compared with income of $6 million in the 2000 period.
Net interest expense of $42 million compares with $44 million a year ago, reflecting the drop in interest rates and higher capitalized interest as the company nears completion of its Leadon and Skene projects in the North Sea.
Sales for the third quarter were $884 million, down 20% from $1.1 billion a year ago. For the nine months ended Sept. 30, sales were $2.9 billion, down from $3 billion in the 2000 period.
Capital expenditures excluding acquisitions for the third quarter were $507 million, compared with $206 million in the previous year's third quarter. For the first nine months, capital expenditures excluding acquisitions were $1.4 billion, compared with $441 million in the 2000 period.
Kerr-McGee will conduct a conference call today at 11 a.m. ET to discuss the results of operations for the third quarter and expectations for the future. Interested parties may listen to the call via Kerr-McGee's website at www.kerr-mcgee.com or by calling 212-896-6011.
Kerr-McGee is an Oklahoma City-based energy and inorganic chemical company with worldwide operations and $10.7 billion in assets.
(Statements in this news release regarding the company's or management's intentions, beliefs or expectations, or that otherwise speak to future events, including timing of project start-up, future production volumes and benefits of review of operations, 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, timing and volumes of production, operational reviews, 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 or implied in this news release.)