|Kerr-McGee: Bulging inventory at last of the elite |
Upstream, April 20
By Robert Smith
William Featherston at UBS Warburg pretty much says it all about Kerr-McGee at number nine.
"Kerr-McGee is completing a turnaround with one of the most impressive records of high-potential exploration success over the last two years, an attractive organic growth profile and substantial exploration growth potential."
Over the last four years, the company has sold its low-return businesses -- nuclear fuels, offshore rigs, refining and marketing, coal and selected chemicals -- in order to focus on its E&P operations.
Kerr-McGee acquired Oryx Energy in 1999, picking up 32 million deep-water acres (17 million net). Its exploration strategy has paid off with six discoveries in excess of 100 million barrels of oil equivalent, according to Featherston.
"Kerr-McGee has considerable inventories of discoveries to develop, providing the company with built-in reserves, production and cash flow growth," he says. "Additionally, with the aid of record oil prices, Kerr-McGee has restored a healthy balance sheet." At of the end of 2000, the company had proven reserves of 1.1 billion barrels of oil equivalent.
It has a 2001 capex budget of $205 million for exploration for which it hopes to get 25 to 30 wells -- eight to 10 in the Gulf of Mexico, three to five in the North Sea and 14 to 17 distributed among Australia, Brazil, China, Indonesia and west Africa, according to Bruce Lanni, an analyst with AG Edwards.
"Given the current inventory of prospects, this level of drilling appears achievable through to at least the end of 2005," he says. Luke Corbett, Kerr-McGee chief executive since 1997, is credited with doubling the company's assets to $7.7 billion.