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Fitch: Kerr-McGee view still negative
The outlook remains negative for Kerr-McGee Corp. following the announcement of its 2004 financial and operational results, though and outlook resolution may come in the near term, according to Fitch ratings.
Fitch currently rates Kerr-McGee's senior unsecured notes BBB and convertible subordinated debentures at BBB-.
According to Fitch, Kerr-McGee's 2004 results were somewhat conflicting. The company's financial results were good as it generated more than $2.5 billion of EBITDA, which provided interest coverage above 10 times and debt to EBITDA of about 1.5x. Furthermore, management delivered on its promise to use excess cash flow to reduce debt and to improve the company's debt to reserve ratios.
As encouraging as the financial results and outlook were, Fitch said Kerr-McGee's reserve report was equally disappointing. During 2004, the company acquired about 282 million barrels of oil equivalent through the Westport transaction. Kerr-McGee's organic replacement, which consists of positive and negative revisions and extensions, was about 24 million barrels of oil equivalent. While total reserve replacement was over 250% for the year, replacement from successful exploration and development efforts was under 25%.
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