Abandoned chemical engineering projects, an exit from its forestry business and other asset impairments pushed Oklahoma City-based independent Kerr-McGee Corp. to a loss in the fourth quarter of 2002. For Occidental Petroleum Corp., however, strong production volumes and higher commodity prices helped the Los Angeles-based independent move into the black for the quarter.

At Kerr-McGee, the fourth quarter loss was $335.4 million (minus $3.34/share diluted), compared with a loss of $56.2 million (minus 57 cents) for the same period of 2001. Continuing operations losses after taxes included asset impairments of $380.7 million, $11.3 million to exit forest products, and a charge of $7.7 million related to abandoned chemical engineering projects. Asset impairments included a $335 million charge related to the Leadon field in the North Sea.

“We made substantial progress on our divestiture program of noncore oil and gas assets and on reducing debt,” said CEO Luke R. Corbett. “These moves enable us to further reduce our operating costs in 2003 and better focus our activities within our core operating areas.” Corbett said that the company’s oil and gas production volumes are “on track” while operating costs for both oil and gas and chemical operations were down.

Exploration and production operations lost $458.1 million in the fourth quarter, compared with operating profit of $60.1 million for 4Q01. Operating losses overall totaled $472.9 million, compared with a $27.6 million loss for 4Q01. Variances were mostly because of asset impairments, higher exploration costs and lower crude oil sales volumes, partially offset by higher oil and gas sales prices and higher natural gas sales volumes. Costs of up to $15 million associated with exploration wells started in 2002 and currently drilling could be added to the fourth-quarter exploration expense, if they are unsuccessful, the company warned.

Daily sales of natural gas averaged 792 MMcf in the fourth quarter. Excluding the impact of property divestitures, gas sales from continuing operations were up about 15% from the same 2001 period. The average sales price for the 2002 fourth quarter was $3.49/Mcf, which included the impact of hedges already in place.

Meanwhile, Occidental Petroleum saw its fourth quarter net income move to profit, reversing losses of a year earlier. The company reported fourth-quarter income of $322 million (85 cents/share), compared with a net loss of $247 million (minus 66 cents) for 4Q01. In 2001, Occidental had a $240 million after-tax charge, reflecting the effect of the agreement to sell its interest in Equistar. Net income at year-end 2002 was $989 million ($2.63/share), compared with $1.154 billion ($3.10) for 2001.

Dr. Ray R. Irani, Occidental’s CEO, noted that in 2002, the company exceeded its combined oil and natural gas production forecast, and in the fourth quarter, averaged 518,000 boe/d — 7.5% higher than in 4Q01. The company is on target to meet or exceed a 2003 forecast of 525,000 boe/d, Irani added. Oil and gas segment and core earnings were $490 million for 4Q02, compared with $166 million in 4Q01, with last year’s increase coming on higher commodity prices and higher production volumes.

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