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Kerr-McGee sells assets to appease Icahn

Kerr-McGee Corp, the US oil and gas company that ended a proxy battle with billionaire Carl Icahn in April, agreed to sell its North Sea energy assets for US$3.5 billion to reduce debt and increase shareholder returns.

Kerr-McGee sold North Sea assets including 10 fields in production to AP Moeller-Maersk A/S, the world's largest container-shipping company, for US$2.95 billion, the Oklahoma City-based company said yesterday in a statement on PR Newswire. The company also sold holdings in four fields to Centrica Plc, the UK's largest energy supplier, for about US$566 million.

Kerr-McGee chief executive Luke Corbett in April agreed to sell less profitable units and buy back shares to boost the stock price and end a proxy fight with Icahn and a group of investors that bought 7.7 percent of the company. Kerr-McGee, which got a fifth of its oil output from the fields sold, plans to use all the proceeds from the sales to cut debt.

"Divestiture of the North Sea assets will facilitate the company's plan to spend a reduced amount of capital while achieving a higher per-share production growth rate," Kerr-McGee said in the statement.

The company's UK holdings produced about 77,700 barrels of oil equivalent daily in the second quarter. The assets being sold include proven reserves of approximately 231 million barrels of oil equivalent as of the end of June.

JP Morgan Chase & Co and Lehman Brothers Holdings Inc advised Kerr-McGee. Citigroup Inc advised Maersk.

Kerr-McGee will get about US$3.1 billion in cash after tax from the sales, which are scheduled to be completed in the fourth quarter, it said.

The company, which claims to have drilled the world's first commercial oil well out of sight of land in 1947, had its credit ratings cut to junk from investment grade after announcing on April 14 that it would buy back US$4 billion in stock at a 15 percent markup.

The buyback helped swell the company's debt to US$7 billion.

Icahn and investor Barry Rosenstein, who were campaigning for seats on the company's board, ended their fight after the buyback.

Kerr-McGee is also trying to sell a chemicals plant and fields in the Gulf of Mexico.

Maersk expects the acquisition to have a "modest, but positive" effect on its results for this year, based on current oil prices, the company said in a separate statement to the Copenhagen Exchange.

"This will strengthen the company both in terms of earnings, but also strategically," Stig Frederiksen, an analyst at HSH Gudme in Copenhagen, said regarding Maersk.

Maersk on Friday secured control of 95.6 percent of Royal P&O Nedlloyd NV allowing it to complete its 2.3 billion-euro (US$2.8 billion) takeover of the Rotterdam-based company.

Centrica will add about 1.1 billion thermal units of gas, enough to meet 2 percent of Centrica's gas customer demand, by acquiring from Kerr-McGee the interests in the Andrew, Brae, Buckland and Skene fields, Centrica said yesterday in another statement. The assets also increase Centrica's holdings by 11 million barrels of oil.
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