Kerr-McGee Increases 2002 Budget by 15%
Kerr-McGee Corp. has increased its capital budget for exploration and production development projects by 15%, or $120 million, to approximately $900 million. The additional capital will be spent primarily in the United States on identified projects in the Denver-Julesburg Basin and the Gulf Coast.
The company has hedged a portion of its production for the period April through December 2002 to increase the predictability of its cash flows and support additional capital projects. The hedges cover approximately 44% of expected remaining 2002 oil production and approximately 38% of expected remaining 2002 U.S. gas production.
The hedging transactions are in the form of fixed price swaps. The hedges cover 30,000 barrels per day of U.S. oil production at an average price of $24.09 per barrel and 60,000 barrels per day of North Sea oil production at an average price of $23.17 per barrel. The company also entered into price swaps covering 250 million cubic feet of U.S. natural gas production at an average price of $3.10 per thousand cubic feet. The price swaps will be settled using the closing prices on the New York Mercantile Exchange (NYMEX) for light sweet crude, Brent and natural gas delivered to the Henry Hub.
The company, through its acquisition of HS Resources, Inc., assumed various derivative contracts covering approximately 100 million cubic feet per day of natural gas from the Denver-Julesburg Basin for the April through October 2002 period at an average price of approximately $2.65 per thousand cubic feet.
"The recent run up in oil and gas commodity prices has created a strategic opportunity for the company to lock in an additional 40% of our remaining 2002 production volumes at prices significantly above our previous expectations, thus increasing the predictability of our cash flow," said Luke R. Corbett, Kerr-McGee chairman and chief executive officer. "This allows us to increase capital expenditures on proven, identified projects that should enhance our expected production volumes in 2003. It also supports our continued plans for debt reduction in 2002."