Kerr-McGee to Acquire Oryx Energy

Kerr-McGee Corp. agreed to buy Oryx Energy Co., an oil exploration company, for $3.14 billion, creating the nation’s fourth-largest independent energy producer. Kerr-McGee, an Oklahoma City-based oil and chemical company with $1.7 billion in 1997 revenue, would assume $1.3 billion in debt in the deal, the latest in a string of mergers in the industry. Falling returns from oil and natural gas sales are pushing companies to find partners who can help them cut costs or get financing. Dallas-based Oryx has $2.1 billion in assets, including oil and gas properties in the Gulf of Mexico and the North Sea, where Kerr-McGee also has extensive holdings. That should allow Kerr-McGee to cut costs in those fields by consolidating operations. Under the agreement, Oryx shareholders will receive 0.369 of a share of newly issued Kerr-McGee common stock for each share held, valuing Oryx at $17.32 a share, a 51% premium over Wednesday’s closing price of $11.50. Kerr-McGee said it will eliminate an undetermined number of jobs after the acquisition and consolidate Oryx’s offices in Oklahoma City. The companies expect the deal to result in savings of more than $100 million a year and will add to earnings and cash flow in 1999 and thereafter. Luke Corbett, chairman and chief executive of Kerr-McGee, will be chief executive of the new company, and Oryx Chairman Robert Keiser will serve as chairman. On the New York Stock Exchange, Kerr-McGee shares fell $4.19 to close at $42.75 as investors reacted to the expense of the buyout. Oryx shares rose $3.31 to $14.81, also on the NYSE.