Future of chemical division still uncertain for Kerr-McGee

Wednesday, June 22nd 2005, 3:31 pm

By: News On 6

OKLAHOMA CITY (AP) _ Kerr-McGee Corp.'s two-pronged approach to separating its chemical division from the rest of the company is progressing as planned, the Oklahoma City-based company said Wednesday.

The energy firm will be reviewing final bids for the chemical business in the next several weeks, Rick Butterbaugh, vice president of investor relations, told investors during a conference call.

At the same time, Kerr-McGee is preparing for a possible initial public offering of the chemical unit, to be called New-Co Chemical Inc., and has filed an initial registration statement with the Securities and Exchange Commission. It had sales last year of $1.3 billion and would be the world's third largest producers of titanium dioxide, a pigment used in a variety of plastics, paper and other products to improve whiteness, brightness and opacity.

If it proceeds with the IPO approach, Kerr-McGee would either spin off to its existing shareholders all of the Class B shares of New-Co Chemical or give them the option of exchanging Kerr-McGee shares for New-Co Chemical shares. Fresh capital for New-Co Chemical would come from the sale of new Class A shares. The amount and price of the Class A shares have yet to be determined.

Kerr-McGee announced earlier this year that it would either sell or spin-off its chemical operations. Chairman Luke R. Corbett said at a shareholders' meeting last month that the company would know the fate of the chemical division by the end of the year.

Butterbaugh said the company was still on track and would continue pursuing both options.

The changes came about after billionaire investor Carl C. Icahn snapped up enough shares to become the company's top shareholder and began making recommendations.

Kerr-McGee followed Icahn's recommendation to sell or spin-off the chemical division, but rejected his plan for advanced sale of oil.

The company later sued Icahn and his associates, claiming breach of federal antitrust laws and violation of the company's bylaws. In a settlement, Kerr-McGee agreed to buy back $4 billion in stock and pay a 15 percent premium for those shares.

Also Wednesday, the company updated its forecast of total oil and gas production for the second quarter and for the year. Butterbaugh said second-quarter volumes are projected in the range of 351,500 to 369,800 barrels of oil equivalent per day.

The company said its offshore oil volumes are meeting or exceeding projected levels, but onshore natural gas volumes have been negatively impacted by gas plant interruptions in the Rockies as well as well problems in its southern division. The company temporarily shut in a small number of production facilities in the Gulf of Mexico due to tropical storm Arlene, but all production has been restored to pre-storm levels.

Shares of Kerr-McGee rose 13 cents to $75.69 a share in afternoon trading on the New York Stock Exchange. The stock has traded between $50.49 and $83.30 a share in the last 52 weeks.

Kerr-McGee said it plans to release its second-quarter results on July 27.