While affirming Kerr-McGee Corp.’s ‘BBB’ long-term corporate credit and senior unsecured ratings and its ‘A-2’ short-term corporate credit and commercial paper ratings, Standard & Poor’s Ratings Services (S&P) said Monday that the company’s outlook was revised to stable from positive.

The credit rating agency pointed out that the Oklahoma City-based exploration and production company has about $4 billion in debt outstanding. “The outlook revision reflects Standard & Poor’s expectations that Kerr-McGee’s deleveraging to a credit profile commensurate with a higher rating is not likely to be achieved in the near term,” said S&P’s credit analyst John Thieroff. “Although the company achieved meaningful debt reduction during 2002 through asset sales, the recent $335 million writedown of the company’s Leadon field in the U.K. North Sea highlights the challenges Kerr-McGee faces in deleveraging through organic growth.”

S&P said the ratings of Kerr-McGee reflect an above-average business position in the “volatile” exploration and production segment of the oil and gas industry, partially offset by a moderately aggressive financial profile. In comparison to other independent producers, “Kerr-McGee has a large, diverse set of properties with significant growth opportunities,” Thieroff added.

The agency found that the company has focused considerable efforts on deepwater exploration and development in recent years, which “has added some risk” to its business profile. The company also faces “significant financial risk” resulting from heavy capital spending requirements and “significant debt leverage.”

Kerr-McGee’s stability rating reflects S&P’s expectation that the company has addressed its primary areas of operational concern and that production targets for the intermediate term will be met or exceeded. The agency added that it also expects deleveraging to remain a priority and that aggressive growth objectives will not impede progress toward that goal.

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