Kerr-McGee ties chargeoff to North Sea, gulf shelf properties

Jan. 6, 2003
Kerr-McGee Corp. plans to take fourth quarter after-tax noncash charges of $335 million related to Leadon field in the UK North Sea and $50 million in connection with other UK North Sea and Gulf of Mexico shelf fields.

HOUSTON, Jan. 6 -- Kerr-McGee Corp. plans to take fourth quarter after-tax noncash charges of $335 million related to Leadon field in the UK North Sea and $50 million in connection with other UK North Sea and Gulf of Mexico shelf fields.

Leadon, on blocks 09/14a and 09/14b, has produced 8 million boe through 2002 and has 30 million boe remaining. Early water breakthrough and reservoir compartmentalization have led to lower production volumes than originally anticipated.

To maximize cash flow from Leadon, the company is considering alternatives that include continued production using existing infrastructure, a subsea tieback to another host structure such as Kerr-McGee operated Gryphon field, or sale of Leadon. Subsea tieback would allow for redeployment or sale of the Kerr-McGee Global Producer III FPSO.

The other $50 million charge relates to several older gulf shelf properties and Buckland and South Gryphon fields in the UK North Sea.

Kerr-McGee said it will close the year with proved reserves of about 1 billion boe. Divestiture of noncore properties reduced reserves by about 315 million boe. Negative revisions were 120 million boe related to Leadon and the other UK and gulf fields, and production was 115 million boe in 2002. The company expects to add reserves of 70 million boe.