Led by the sizable decline in natural gas and oil prices, Kerr-McGee Corp. reported drastically lower third quarter earnings when compared to the same period a year ago. Including charges for special items, the company posted net income of $26 million ($0.27 per share) for the quarter, compared with $265 million ($2.57 per share) during the same quarter in 2000.

The company said that exploration and production operating profit dropped from $406 million during the year ago period to $217 million for the third quarter. Kerr-McGee said lower oil and gas prices accounted for more than 90% of the operating profit decline.

Kerr-McGee also attributed the earnings drop to heavy one-time special charges. The company recorded $86 million ($0.81 per share) in after-tax special charges for the quarter, consisting of $51 million for environmental costs, $33 million for asset impairment due to the shut-in of the North Sea Hutton field and an additional $2 million in miscellaneous items including costs associated with the third-quarter acquisition of HS Resources Inc. (see Daily GPI, May15). Excluding special charges, the company posted earnings of $112 million ($1.08 per share) during the third quarter, compared to $266 million ($2.58 per share) for the same period last year.

In contrast to the company’s sharp drop in earnings, Kerr-McGee said its production levels for gas showed significant increases on the quarter, due in part to the addition of HS Resources, effective Aug. 1. The company reported that its daily natural gas sales averaged 654 MMcf, up 24% from the prior-year quarter. However, the average sales price of $2.74/Mcf was $1.45 lower than the 2000 quarter. Oil production averaged 193,800 b/d on the quarter, slightly less than the 201,000 b/d in the prior-year quarter. Oil prices also experienced a drop, averaging $23.40 per barrel, a decrease of $5.83 per barrel from the same quarter last year.

“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 CEO. “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.”

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