updated 4/14/2005 9:39:34 AM ET 2005-04-14T13:39:34

Oil and gas company Kerr-McGee Corp. said Thursday its board authorized a tender offer to buy back up to $4 billion of the company’s common stock, at a price between $85 and $92 per share.

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The minimum tender price reflects a 15 percent premium over Wednesday’s NYSE closing stock price of $73.97. Kerr-McGee said it expects to launch the tender offer on or about April 18. The company currently has about 163.4 million shares outstanding.

The company said it expects the share repurchase to add to earnings and cash flow per share.

“With the proceeds from the separation of the chemical business, divestitures of selected oil and gas assets, and cash flow, which has been underpinned by an expanded hedging program for 2005 through 2007, we expect to be able to reduce debt in the range of about $3.5 billion to $4.5 billion during the next two years,” said Chairman and CEO Luke R. Corbett.

Kerr-McGee estimates the potential divestiture of oil and gas properties valued at $2 billion to $2.5 billion. The divestitures are expected to include shorter-life properties located on the Gulf of Mexico shelf, in the British sector of the North Sea and in certain U.S. onshore areas.

The targeted divestitures are expected to represent about 20 percent to 25 percent of current production and about 10 percent to 15 percent of proved reserves.

The tender offer replaces the initial $1 billion share repurchase program announced on March 8. Under the initial program, the company repurchased $250 million of Kerr-McGee shares in the open market.

Kerr-McGee has obtained commitments from JP Morgan and Lehman Brothers Inc. to finance the tender offer and ongoing working capital needs. The company said it expects its credit rating to be lowered for the near term as a result of the increased financing levels.

In addition, Kerr-McGee’s board of directors has decided to lower the dividend on the company’s common stock to 20 cents per share, compared with the 45-cent dividend paid Jan. 3. The dividend is expected to be revised for the quarter ending June 30.

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