Kerr-McGee Outlines 2003 Capital Plan
Kerr-McGee is budgeting approximately $1 billion for capital expenditures and $250 million in exploration expenses for 2003. Average daily oil and gas production is expected to be approximately 270,000 barrels of oil equivalent.
The capital budget for 2003 oil and gas operations is $860 million. Of this, approximately $385 million is allocated to the Gulf of Mexico, $170 million to the North Sea, $200 million to U.S. onshore and $105 million to other international projects.
"We have an active exploration program focused on growing our core areas, particularly the deepwater Gulf of Mexico," said Luke R. Corbett, Kerr-McGee chairman and chief executive officer. "We continue to explore new high- potential prospects in global deepwater trends. In addition, our capital budget will fund ongoing projects, including deepwater Gulf of Mexico developments at the Gunnison and Red Hawk fields and the development of block 04/36 in Bohai Bay, China."
The Kerr-McGee-operated Gunnison area, located in water depths greater than 3,100 feet, is being developed with a truss spar. The Gunnison development capitalizes on the success of truss spar developments at the Nansen and Boomvang fields. Initial production at Gunnison is expected during the first quarter of 2004, with peak gross production of about 60,000 barrels of oil equivalent per day expected to be achieved in 2005.
Red Hawk, located in 5,300 feet of water, is being developed using the world's first cell spar. This innovative spar technology reduces the reserve threshold needed for an economical development in deep waters. First production from Red Hawk is expected in the second quarter of 2004, with peak gross production reaching 120 million cubic feet of gas per day during the third quarter of 2004.
In Bohai Bay, Kerr-McGee is developing three discoveries in block 04/36 using a centrally located floating production, storage and offloading facility, along with fixed platforms for dry wellheads. Initial production is expected by the end of 2004.
The company, which utilizes successful efforts accounting, also is budgeting $250 million for worldwide exploration expense, which is expected to fund the drilling of 30 to 45 exploratory wells, including 10 to 15 in the deepwater Gulf of Mexico, five to seven in the North Sea, six to eight onshore United States and 10 to 15 in other international areas.
Average daily oil and gas production volumes are expected to be consistent with 2002 volumes, adjusted for divestitures. Oil production is expected to make up approximately 55% of the production volumes, with the remainder coming from natural gas production.
Capital expenditures for chemical operations are budgeted at approximately $130 million in 2003. Changes in oxidation technology will continue to increase capacity at the company's chloride pigment plants. The Hamilton, Miss. plant's capacity will reach 225,000 tons by the end of 2003, up from approximately 200,000 tons at year-end 2002. The Savannah, Ga. chloride plant is expected to produce 110,000 tons annually by year-end 2003, up from 85,000 tons.
"The capital budget for our chemical operations supplements the groundwork laid in 2002 to improve the efficiency and cost-effectiveness of our global pigment business," Corbett said. "Because of our investment in process and technology upgrades to the chloride oxidization technology, we expect to achieve increased capacity at lower costs."
Corporate capital expenditures are budgeted at approximately $20 million.