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February
14, 2006
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(Date
of Report - Date of earliest event
reported)
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KERR-McGEE
CORPORATION
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(Exact
name of registrant as specified in its
charter)
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Delaware
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1-16619
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73-1612389
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(State
of Incorporation)
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(Commission
File Number)
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(IRS
Employer Identification No.)
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123
Robert S. Kerr Avenue
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Oklahoma
City, Oklahoma
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73102
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(Address
of principal executive offices)
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(Zip
Code)
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(405) 270-1313
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(Registrant's
telephone number)
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Item
2.02
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Results
of Operations and Financial Condition
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As
part of Kerr-McGee’s continuing review of fourth-quarter results (included
in its preliminary earnings release dated January 25, 2006), the
Company
determined that natural gas basis differentials for its Southern
region
were greater than previously estimated and that the ineffectiveness
on
crude oil derivatives increased due to wider basis differentials.
Consequently, the Company is updating its preliminary results to
reflect
that revenues were reduced by $46.2 million, to $1,718.1 million
and
$5,870.6 million for the fourth-quarter and full-year 2005, respectively.
Associated production taxes also have been reduced by $1.4 million,
resulting in total taxes other than income taxes of $60.3 million
and
$201.7 million for the fourth-quarter and full-year 2005, respectively.
After taking into account the associated reduction in income tax
expense
of $15.7 million, the impact of these updates reduces income from
continuing operations by $29.1 million to $376.4 million and $946.4
million for the fourth-quarter and full-year 2005,
respectively.
Approximately
35% of the Company’s Southern region production is operated by others. Due
to timing of actual receipts, the Company accrues estimated revenues
based
on historical basis differentials or the difference between the spot
price
at a specific natural gas delivery location (such as Henry Hub) and
the
price of the nearest delivery month NYMEX futures contract. Historically,
basis differentials in the Company’s Southern region have approximated
$.70 per million British thermal unit (mmbtu) below the quoted nearest
delivery month NYMEX price which correlated with the Henry Hub price
for
physical delivery. When forming its estimates of average realized
prices
for fourth-quarter natural gas sales, the Company had already increased
its estimate of basis differentials to approximately $2.50 per mmbtu
for
the fourth quarter due to changing market conditions.
Following
hurricanes Katrina and Rita, industry-wide natural gas production
from the
Gulf of Mexico and gulf coast areas was significantly curtailed.
The
Company believes that increased speculative trading activities of
NYMEX
natural gas futures during the fourth quarter resulted in NYMEX prices
increasing to a higher level than the Henry Hub price for physical
deliveries. The disconnect between NYMEX and Henry Hub prices further
expanded the basis differentials actually realized by the Company
during
the fourth quarter in its Southern region to approximately $4.00
per
mmbtu.
Since
year-end 2005, NYMEX prices have declined and the difference between
the
NYMEX price and the Henry Hub spot price has been substantially mitigated.
While this has caused basis differentials to narrow relative to the
fourth-quarter levels, price differentials to the NYMEX natural gas
futures price remain wider than normal. The Company expects that
basis
differentials will continue to be volatile and, therefore, we will
provide
information on basis differentials during our regular monthly interim
and
quarterly conference calls.
The
Company has updated its Preliminary
Historical Financial and Operating Information
and Preliminary
Reconciliation of Reported to Adjusted Income from Continuing
Operations
included under the investor relations section of its website (www.kerr-mcgee.com)
to reflect the impact of the items, discussed above, on fourth-quarter
and
year-to-date results. Any financial information released prior to
filing
the Company's annual report on Form 10-K is considered preliminary
and may
change due to circumstances in existence at Dec. 31, 2005 that may
not be
known at the time the preliminary information is
released.
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SIGNATURES
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Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
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KERR-MCGEE
CORPORATION
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By:
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(John
M. Rauh)
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John
M. Rauh
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Vice
President and Controller
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Dated:
February 14, 2006
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