Looking ahead to 2004, Kerr-McGee Corp. said total capital expenditures for the company next year are budgeted at $915 million with an additional $300 million for worldwide exploration expense.
Oil and natural gas production volumes are projected to average 260,000 boe/d in 2004.
In the breakdown, Oklahoma City-based Kerr-McGee’s capital budget for 2004 oil and gas operations is approximately $800 million. Of this, approximately $330 million is allocated to the Gulf of Mexico, $180 million to the North Sea, $155 million to U.S. onshore, $125 million to other international projects, and $10 million to technology enhancements.
“Our 2004 capital program has been developed with a continued emphasis on strict financial discipline,” said Luke R. Corbett, Kerr-McGee CEO. “This reduced program still provides sufficient funds to profitably grow our two core businesses through truly value-adding projects, while we continue to focus on debt reduction. Our enhanced oil and gas hedging program and ongoing cost-control efforts will allow us to operate within our projected cash flow in 2004, while reducing debt by more than $500 million. This plan still offers us the ability to return approximately $180 million in dividends to our shareholders.”
The $300 million for worldwide exploration expense is expected to fund the drilling of approximately 50 exploratory wells, including 10 to 15 in the deepwater Gulf of Mexico, five to seven on the Gulf of Mexico shelf, four to six in the North Sea, 15 to 20 onshore United States and seven to 11 in other international areas, including three to four in deep water. The company noted that approximately 20% of the budgeted $300 million expense is a noncash charge for the amortization of nonproducing leasehold costs.
Kerr-McGee expects daily production volumes for 2004 to average approximately 130,000 barrels of oil and 785 MMcf of gas, with approximately 50% of oil volumes and approximately 90% of gas volumes coming from the United States. Remaining volumes will primarily be derived from the U.K. sector of the North Sea.
“Our primary focus is to maximize the value created through our capital expenditures, not merely provide production volumes,” said Dave Hager, Kerr-McGee senior vice president responsible for oil and gas exploration and production. “Our capital projects for 2004 will include the initial planning for our 100%-owned Constitution field in the deepwater gulf. We also expect to complete our two ongoing developments in the deepwater gulf at Gunnison and Red Hawk, and achieve initial production in Bohai Bay, China. All of these projects are on schedule and within budget.”
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