Moody's upgrades Kerr-McGee

Moody's Investors Service said it upgraded Kerr-McGee Corp.'s long-term debt ratings to Ba2 from Ba3. The outlook is stable. This concludes the rating review begun on Jan. 30, which reflected improved operating performance and reduced financial risk following repayment of $4.25 billion in term loans borrowed in 2005.

The agency said the upgrade reflects Kerr-McGee's improved portfolio durability and re-investment risk, primarily as measured by finding and development costs, based on the company's transformation from a predominantly offshore, international, exploration strategy to an onshore North American (primarily Rocky Mountains) natural gas exploitation focus.

The upgrade also considers Kerr-McGee's lower financial risk in terms of leverage and cash flow coverage, the agency said, which are expected to continue to improve over the near to medium term.

Moody's noted that the ratings are tempered by the company's use of excess cash flow, including additional capex, for stock buyback plans and event risk from possible acquisitions.

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