Recipient email addresses will not be used in mailing lists or redistributed.
Use semicolon to separate each address, limit to 20 addresses.
characters you see
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
Already a customer?
Don't want to see this again?
Accept our to continue to Moodys.com:
AND SCROLL DOWN!
By clicking “I AGREE” [at the end of this document],
you indicate that you understand and intend these terms and conditions to be
the legal equivalent of a signed, written contract and equally binding, and
that you accept such terms and conditions as a condition of viewing any and all
Moody’s information that becomes accessible to you [after clicking “I AGREE”] (the
“Information”). References herein to “Moody’s” include Moody’s
Corporation, Inc. and each of its subsidiaries and affiliates.
Terms of One-Time Website Use
you have entered into an express written contract with Moody’s to the contrary,
you agree that you have no right to use the Information in a commercial or
public setting and no right to copy it, save it, print it, sell it, or publish
or distribute any portion of it in any form.
acknowledge and agree that Moody’s credit ratings: (i) are current opinions of
the future relative creditworthiness of securities and address no other risk; and
(ii) are not statements of current
or historical fact or recommendations to purchase, hold or sell particular
securities. Moody’s credit ratings and
publications are not intended for retail investors, and it would be reckless
and inappropriate for retail investors to use Moody’s credit ratings and
publications when making an investment decision. No
warranty, express or implied, as the accuracy, timeliness, completeness,
merchantability or fitness for any particular purpose of any Moody’s credit
rating is given or made by Moody’s in any form whatsoever.
3. To the extent permitted by law, Moody’s and its directors,
officers, employees, representatives, licensors and suppliers disclaim
liability for: (i) any indirect, special, consequential, or incidental losses
or damages whatsoever arising from or in connection with use of the
Information; and (ii) any direct or compensatory damages caused to any person
or entity, including but not limited to by any negligence (but excluding fraud
or any other type of liability that by law cannot be excluded) on the part of
Moody’s or any of its directors, officers, employees, agents, representatives,
licensors or suppliers, arising from or in connection with use of the
4. You agree to read [and
be bound by] the more detailed disclosures regarding Moody’s ratings and the
limitations of Moody’s liability included in the Information.
5. You agree that any disputes relating to this agreement or your use of
the Information, whether sounding in contract, tort, statute or otherwise,
shall be governed by the laws of the State of New York and shall be subject to
the exclusive jurisdiction of the courts of the State of New York located in
the City and County of New York, Borough of Manhattan.
29 Mar 2004
MOODY'S AFFIRMS DEBT RATINGS OF KERR-McGEE CORPORATION (Sr. Unsecured at Baa3); CHANGES RATINGS OUTLOOK TO NEGATIVE
Approximately $3.5 billion of debt securities affected.
New York, March 29, 2004 -- Moody's Investors Service affirmed the debt ratings of Kerr-McGee
Corporation (Baa3 senior unsecured) and changed the ratings outlook to
negative from stable. The change in outlook was prompted by certain
operating and financial results in 2003 that did not meet Moody's stated
expectations which were derived directly from management's projections.
Our action also considers the company's strategy and near term opportunities
to address several of the issues contributing to the outlook change.
Moody's outlined several key ratings drivers in its previous press release
on May 6, 2003 that would be necessary to maintain a stable outlook,
many of which were not achieved during 2003. These included;
(i) reducing the company's adjusted debt relative to its proved developed
reserve base, (ii) improving cash operating costs (LOE, transportation
and SG&A), (iii) improving finding and development costs,
and (iv) maintaining a flat production profile in 2003 with a modest increase
in 2004. While these metrics did not meet expectations, Moody's
notes the company did slightly improve its proved developed reserve life
(from 5.2 years to 5.3 years) and the chemicals business
continues to be a source of modest free cash flow ($100 million
- $200 million) despite relatively weak fundamentals.
In 2003, Kerr-McGee (KMG) reduced debt by approximately $250
million but proved developed reserves also fell by approximately 70 MMBOE,
due to a combination of asset sales and the migration of only 27MMBOE
of proved undeveloped reserves to proved developed. This resulted
in an increase in adjusted debt relative to proved developed reserves
to approximately $7.60/BOE - before any allocation
to the chemicals business - compared to approximately $7.00/BOE
at the end of 2002. Moody's also considered the leverage on KMG's
total proved reserve base, after including future development and
abandonment costs, which yielded $6.75/BOE vs.
$6.30/BOE in 2002. Moody's notes the company has
a very high percentage of proved undeveloped reserves, approximately
50%, however a portion of them appear to be relatively low
cost given the difference between the debt per proved developed BOE and
the debt plus future development costs per total proved BOE.
Moody's continues to consider KMG's leverage high for an investment
grade E&P company and expects improvement in 2004. The company
has approximately 85% of 2004's projected oil production hedged
and approximately 75% of projected natural gas production hedged,
both at fairly high price levels, thereby reducing exposure to lower
commodity prices (but also limiting the upside if very strong commodity
prices persist for the balance of the year). The company has targeted
debt reduction of $550 million in 2004, which includes $330
million of DECS that Moody's has already removed from its leverage calculation
since KMG can satisfy the obligation with 8.4 million shares of
Devon common stock it already owns. Therefore, debt reduction
will likely be modest, about $220 million, and leverage
relative to the proved developed reserve base will be a function of KMG's
success in converting proved undeveloped reserves to proved developed.
Nevertheless, KMG's leverage continues to put negative pressure
on the rating. Moody's believes this is particularly important
given the company's strategic focus, namely large deepwater exploration
and development success. KMG needs a larger, stable base
of production to provide adequate financial flexibility to fund this type
of activity through commodity price cycles.
Moody's also cited the company's cost structure in its outlook change.
Total cash operating costs, including LOE, transportation,
and SG&A increased slightly in 2003. While production costs
decreased, from $5.15/BOE to $4.45/BOE,
SG&A (including transportation costs) increased from $2.06/BOE
to $2.91/BOE. As a result, total cash operating
costs increased modestly from $7.21/BOE in 2002 to $7.36/BOE
in 2003. Moody's notes the increase in SG&A was primarily driven
by a combination of workforce reduction/severance charges and environmental
charges. The restructuring charges are not expected to be recurring
and environmental costs have been trending down, which is expected
to continue. Therefore, Moody's expects KMG's cash operating
costs to improve in 2004.
The outlook change further considers KMG's 2003 finding and development
costs as well as expectations for 2004. KMG's all sources F&D
costs did improve last year compared to the extremely poor results posted
in 2002 and were also towards the lower end of the range management gave
as guidance, however, it's important to consider the components
that generated these results. KMG's production for the year was
approximately 99MMBOE and reserves added through extensions and discoveries
totaled 102MMBOE, yielding a drill-bit only reserve replacement
ratio of 103%. Of the 102MMBOE added, 94MMBOE were
proved undeveloped, of which 67MMBOE were attributable to one deepwater
GOM discovery - Constitution - expected to commence production
in mid-2006. The net result was a one-year all sources
F&D cost of $9.17/BOE, which is high relative
to most investment grade independent E&P companies. More importantly,
given the high proportion of proved undeveloped reserves already booked
(including Constitution), Moody's expects a significant portion
of KMG's 2004 upstream capital spending budget of approximately $900
million to be spent on proved undeveloped reserves, which will not
result in additional BOE's being booked. Therefore, the company
is particularly dependent upon material exploration success during 2004
in order to generate F&D costs comparable with its investment grade
KMG did meet its production forecast in 2003, averaging 271MBOE/D
for the year. While this was consistent with Moody's expectations
for a stable outlook, the revised guidance for 2004 is not.
The company's production trend was expected to be up modestly in 2004,
and after considering asset sales and small acquisitions the revised target
of 260MBOE/D is about 4-5% lower than management's previous
estimates. Moody's notes, however, there does appear
to be reasonably good visibility supporting the current production forecast.
KMG exited 2003 producing 254MBOE/D and production levels in January and
February were above the average expected for the full year. While
production levels are expected to vary somewhat during the course of 2004,
the continued ramp-up of production at Gunnison and the commencing
of production at Red Hawk (expected in mid-2004) and Bohai Bay
(end of 2004) are projected to account for the majority of incremental
production needed to offset natural field decline rates during the year
and provide modest production growth in 2005.
Finally, KMG has good near-term liquidity. Debt maturities
of $245 million in 2004 ($100 million in June and $145
million in July) are targeted for repayment. Given the current
commodity price environment, KMG's hedge position, and the
$142 million of cash the company had on the balance sheet at year-end
KMG will be well positioned to repay this debt and build cash to repay
a portion of the $460 million in debt maturities coming due in
2005. In addition, the company has an undrawn committed bank
credit facilities totaling $1.35 billion consisting of a
$700 million 364-day revolver that matures in November 2004
and a $650 million 5-year revolver due in January 2006.
Over the near term, Moody's will continue to assess KMG's progress
in achieving the following: (i) reducing total adjusted debt relative
to proved developed reserves, (ii) lowering total cash operating
costs, (iii) improving F&D costs and total full-cycle
costs, (iv) meeting or exceeding 2004 production targets,
and (v) continued improvement in the proved developed reserve life.
In addition, Moody's expects a continued downward trend in environmental
costs with no material change in the company's contingent liabilities
and also expects KMG's chemicals business to continue to generate
positive free cash flow of $100 million to $200 million
per year with an improving near to medium term trend. If KMG is
unsuccessful in achieving these objectives or Moody's deems positive trends
to be unsustainable, we will review the company's ratings for a
possible downgrade. Conversely, successfully achieving these
objectives with sustainable trends will likely result in a change in outlook
Ratings affirmed include: Kerr-McGee Corporation's senior
unsecured notes, medium-term notes, and debentures
at Baa3; its convertible subordinated debentures at Ba1; its
bank debt at Baa3; its shelf registration for senior unsecured securities
at (P)Baa3; its subordinated shelf at (P)Ba1, and its preferred
stock shelf at (P)Ba2. Kerr-McGee Credit LLC's commercial
paper rating, guaranteed by Kerr-McGee Corporation,
Kerr-McGee Corporation is a global energy and chemicals producer.
Its principal businesses are oil and gas exploration and production,
and the production of titanium dioxide pigment, which is principally
used in coatings and plastics. The company's headquarters are in
Oklahoma City, OK.
Corporate Finance Group
Moody's Investors Service
John C. Cassidy
VP - Senior Credit Officer
Corporate Finance Group
No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.
CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND ITS RATINGS AFFILIATES (“MIS”) ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MOODY’S PUBLICATIONS MAY INCLUDE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY’S OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. CREDIT RATINGS AND MOODY’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY’S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.
MOODY’S CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS OR MOODY’S PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.
ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.
CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.
All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY’S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing the Moody’s publications.
To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.
To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.
NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.
Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any rating, agreed to pay to Moody’s Investors Service, Inc. for ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and MIS also maintain policies and procedures to address the independence of MIS’s ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com
under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”
Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.
Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.
MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any rating, agreed to pay to MJKK or MSFJ (as applicable) for ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.
MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.