December 21, 2005
Mr. Robert M. Wohleber
Chief Financial Officer
Kerr-McGee Corporation
Kerr-Mc-Gee Center
Oklahoma City, OK 73125
Re: Kerr-McGee Corporation
Form 10-K for Fiscal Year Ended December 31, 2004
Filed March 14, 2005
File No. 001-16619
Dear Mr. Wohleber:
We have reviewed your filing and have the following
comments.
We have limited our review of your filings to those issues we have
addressed in our comments. Where indicated, we think you should
revise your document in response to these comments. If you
disagree,
we will consider your explanation as to why our comment is
inapplicable or a revision is unnecessary. Please be as detailed
as
necessary in your explanation. In some of our comments, we may
ask
you to provide us with information so we may better understand
your
disclosure. After reviewing this information, we may raise
additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
Form 10-K for the Fiscal Year Ended December 31, 2004
Developed and Undeveloped Acreage, page 4
1. We note that the geographical distribution of your net
developed
acreage differs greatly from that of your net undeveloped acreage.
We note that the majority of your net developed acreage is
primarily
concentrated in the United States and Europe, while your net
undeveloped acreage is primarily located in the Asia-Pacific,
Africa
and Other areas. Please expand your management`s discussion and
analysis, capital resources and liquidity disclosure to explain to
investors the extent to which the geographical distribution of
your
operations is expected to change based on your current investment
in
developed and undeveloped acreage. Consider providing a time
horizon over which this change could take place as well as a
discussion of the additional risks associated with operating in
different countries and operating environments (e.g., political,
on
versus off shore, primarily oil versus gas and other geological
and
development factors).
Management`s Discussion and Analysis of Financial Condition and
Results of Operations, page 30
Exploration and Production, page 32
2. We note your disclosure that you "Replaced 280% of 2004
production
largely as a result of the Westport merger;" and that you realized
an
"exploration-based production replacement of only 34%." Due to
the
variable components of this ratio, please revise your discussion
to
address each of the following, without limitation.
* Describe how the ratio is calculated. We would expect the
information used to calculate this ratio to be derived directly
from
the line items disclosed in the reconciliation of beginning and
ending proved reserve quantities, which is required to be
disclosed
by paragraph 11 of SFAS 69.
* Identify the status of the proved reserves that have been added
(e.g., proved developed vs. proved undeveloped). It is not
appropriate to calculate this ratio using:
o non-proved reserve quantities, or,
o proved reserve additions that include both proved reserve
additions
attributable to consolidated entities and investments accounted
for
using the equity method.
* Identify the reasons why proved reserves were added.
o The reconciliation of beginning and ending proved reserves,
referred to above, includes several line items that could be
identified as potential sources of proved reserve additions.
Explain
to investors the nature of the reserve additions, and whether or
not
the historical sources of reserve additions are expected to
continue,
and the extent to which external factors outside of managements`
control impact the amount of reserve additions from that source
from
period to period.
* Explain the nature of and the extent to which uncertainties
still
exist with respect to newly discovered reserves, including, but
not
limited to regulatory approval, changes in oil and gas prices, the
availability of additional development capital and the
installation
of additional infrastructure.
* Indicate the time horizon of when the reserve additions are
expected to be produced to provide investors a better
understanding
of when these reserve additions could ultimately be converted to
cash
inflows.
* Disclose how management uses this measure.
* Disclose the limitations of this measure.
Liquidity and capital resources, page 30
3. Please expand your managements` discussion and analysis to
explain
how the age and decline rate composition of your upstream asset
portfolio is expected to impact your cash flows in future periods.
Also, identify the extent to which recent changes in the quantity
of
your proved reserves/capacity as a result of acquisitions and
dispositions have changed the expected amount and/or timing of
cash
flows for next year and beyond.
Financial Statements
Note 1. The Company and Significant Accounting Policies
Goodwill and Other Intangible assets, page 85
4. We note that your second quarter 2004 goodwill impairment test
did
not result in an impairment charge. Please clarify i) when you
test
goodwill for impairment on an annual basis by reporting unit and
ii)
whether or not it is the same date each year. Refer to paragraph
26
of SFAS 142. In addition, please clarify whether or not the
goodwill
resulting from your June 2004 acquisition of Westport was tested
for
impairment as part of your second quarter 2004 goodwill impairment
test.
Note 27. Segment Information, page 128
5. Please expand your disclosure to state the factors used to
identify your reportable segments and whether or not operating
segments have been aggregated as required by paragraph 26(a) of
SFAS
131.
Note 29. Costs Incurred in Crude Oil and Natural Gas Activities,
page
138
6. We note your inclusion of asset retirement obligations and your
footnote (4), which states that "Asset retirement costs represent
the
noncash increase in property, plant and equipment recognized when
initially recording liability for abandonment obligations
(discounted) associated with the company`s oil and gas wells and
platforms." Please remove the asset retirement obligations line
item
as there is no provision for this line item in paragraph 21 and
Illustration 2 of SFAS 69. Refer to our February 2004 industry
letter at
http://www.sec.gov/divisions/corpfin/guidance/oilgasletter.htm.
Note 33. Standardized Measure of and Reconciliation of Changes in
Discounted Future Net Cash Flows (Unaudited), page 146
7. We note your footnote (2), which states that "Estimated future
net
cash flows before income tax expense, discounted at 10%, totaled
approximately $17.0 billion, $13.2 billion and $10.3 billion, for
2004, 2003 and 2002, respectively." As there is no provision for
this measure in paragraph 30 and Illustration 5 of SFAS 69, this
presentation appears to be a non-GAAP measure. Please explain how
you have or intend to comply with the requirements of Item 10(e)
of
Regulation S-K and/or Regulation G. Clarify whether the measure
is a
liquidity or a performance measure. Refer to Release Number 33-
8176:
Conditions for Use of Non-GAAP Financial Measures, located at
http://www.sec.gov/rules/final/33-8176.htm.
Exhibits 31.1 and 31.2
8. We note that the wording of your certifications pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 does not precisely
match the language set forth in the Act. In this regard, your
certifications include references throughout the certification to
the
annual report. Refer to Item 601(b)(31) of Regulation S-K for the
exact text of the required Section 302 certification, and amend
your
exhibits as appropriate. This comment also applies to you Forms
10-
Q.
Closing Comments
As appropriate, please amend your filing and respond to
these
comments within 10 business days or tell us when you will provide
us
with a response. You may wish to provide us with marked copies of
the amendment to expedite our review. Please furnish a cover
letter
with your amendment that keys your responses to our comments and
provides any requested information. Detailed cover letters
greatly
facilitate our review. Please understand that we may have
additional
comments after reviewing your amendment and responses to our
comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing includes all information required under the Securities
Exchange Act of 1934 and that they have provided all information
investors require for an informed investment decision. Since the
company and its management are in possession of all facts relating
to
a company`s disclosure, they are responsible for the accuracy and
adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
You may contact Jennifer Goeken at (202) 551-3721 if you have
questions regarding comments on the financial statements and
related
matters. Please contact me at (202) 551-3683 with any other
questions.
Sincerely,
Jill S. Davis
Branch Chief
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Mr. Robert M. Wohleber
Kerr-McGee Corporation
December 21, 2005
Page 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
100 F Street, NE
WASHINGTON, D.C. 20549-7010
DIVISION OF
CORPORATION FINANCE
MAIL STOP 7010