UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                    FORM 10-Q

              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                For the Quarterly Period Ended September 30, 2002

                                       OR

              [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                        For the Transition Period from        to
                                                       ------    ------

                         Commission File Number 1-16619


                             KERR-McGEE CORPORATION
             (Exact Name of Registrant as Specified in its Charter)



                  Delaware                      73-1612389
       (State or Other Jurisdiction of       (I.R.S. Employer
       Incorporation or Organization)       Identification No.)


                Kerr-McGee Center, Oklahoma City, Oklahoma 73125
              (Address of Principal Executive Offices and Zip Code)

        Registrant's telephone number, including area code (405) 270-1313


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                               Yes   X      No
                                    ---

Number of shares of common stock, $1.00 par value, outstanding as of
September 30, 2002: 100,377,804.

<PAGE>

                         PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.
<TABLE>

                 KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES
                      CONSOLIDATED STATEMENT OF OPERATIONS
                                   (UNAUDITED)
<CAPTION>

                                                                         Three Months Ended                 Nine Months Ended
                                                                            September 30,                     September 30,
 (Millions of dollars, except per-share amounts)                         2002             2001             2002             2001
                                                                    ------------     ------------     ------------     -------------
<S>                                                                  <C>              <C>              <C>              <C>
Sales                                                                $   984.4        $   863.7        $ 2,714.9        $ 2,825.2
                                                                    ------------     ------------     ------------     -------------

Costs and Expenses
     Costs and operating expenses                                        412.3            330.1          1,156.2            932.9
     Selling, general and administrative expenses                         61.0             57.9            238.1            161.5
     Shipping and handling expenses                                       32.1             29.2             86.3             84.6
     Depreciation and depletion                                          184.6            179.6            575.4            502.5
     Asset impairment                                                     24.0             47.3            181.5             60.5
     Exploration, including dry holes and
          amortization of undeveloped leases                              70.2             45.5            148.9            137.4
     Taxes, other than income taxes                                       28.8             25.6             83.4             88.4
     Provision for environmental remediation and restoration,
          net of recoveries                                              (20.0)            78.4             70.4             82.1
     Interest and debt expense                                            68.4             47.7            207.7            129.5
                                                                    ------------     ------------     ------------     -------------
                Total Costs and Expenses                                 861.4            841.3          2,747.9          2,179.4
                                                                    ------------     ------------     ------------     -------------

                                                                         123.0             22.4            (33.0)           645.8
Other Income (Expense)                                                   (14.1)             2.8            (52.0)           197.7
                                                                    ------------     ------------     ------------     -------------

Income (Loss) before Income Taxes                                        108.9             25.2            (85.0)           843.5
Provision for Income Taxes                                              (195.7)            (7.9)          (181.2)          (311.0)
                                                                    ------------     ------------     ------------     -------------

Income (Loss) from Continuing Operations                                 (86.8)            17.3           (266.2)           532.5
Income from Discontinued Operations (net of income tax provision
     (benefit) of $ .7 and $6.7 for the third quarter of 2002 and
     2001, respectively, and $(23.8) and $17.5 for the first nine
     months of 2002 and 2001, respectively)                                 .4              9.0            127.3             23.8
Cumulative Effect of Change in Accounting Principle
     (net of benefit for income taxes of $10.8)                              -                -                -            (20.3)
                                                                    ------------     ------------     ------------     -------------

Net Income (Loss)                                                    $   (86.4)       $    26.3        $  (138.9)       $   536.0
                                                                    ============     ============     ============     =============

Income (Loss) per Common Share
     Basic -
          Continuing operations                                      $   (.86)        $    .18         $   (2.65)       $    5.54
          Discontinued operations                                           -              .09              1.27              .25
          Cumulative effect of change in accounting principle               -                -                 -             (.21)
                                                                    ------------     ------------     ------------     -------------

                   Total                                             $   (.86)        $    .27         $   (1.38)       $    5.58
                                                                    ============     ============     ============     =============
     Diluted -
          Continuing operations                                      $   (.86)        $    .18         $   (2.65)       $    5.17
          Discontinued operations                                           -              .09              1.27              .22
          Cumulative effect of change in accounting principle               -                -                 -             (.19)
                                                                    ------------     ------------     ------------     -------------

                   Total                                             $   (.86)        $    .27         $   (1.38)       $    5.20
                                                                    ============     ============     ============     =============

Dividends Declared per Common Share                                  $    .45         $    .45         $    1.35        $    1.35
                                                                    ============     ============     ============     =============

The accompanying notes are an integral part of this statement.
</TABLE>
<PAGE>

<TABLE>

                 KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES
                           CONSOLIDATED BALANCE SHEET
                                   (UNAUDITED)
<CAPTION>

                                                                                          September 30,      December 31,
(Millions of dollars)                                                                         2002               2001
                                                                                        ---------------    --------------

<S>                                                                                       <C>                <C>
ASSETS
------
Current Assets
     Cash                                                                                 $    142.3         $     91.3
     Accounts receivable                                                                       563.3              421.0
     Inventories                                                                               369.1              428.7
     Deposits, prepaid expenses and other assets                                               113.0              351.1
     Current assets associated with properties held for disposal                                73.1               75.4
                                                                                        ---------------    --------------
               Total Current Assets                                                          1,260.8            1,367.5
                                                                                        ---------------    --------------

Property, Plant and Equipment                                                               13,565.0           13,402.7
     Less reserves for depreciation, depletion and amortization                             (6,033.9)          (6,024.8)
                                                                                        ---------------    --------------
                                                                                             7,531.1            7,377.9
                                                                                        ---------------    --------------

Investments and Other Assets                                                                 1,012.8              784.1
Goodwill                                                                                       355.4              354.8
Long-term Assets Associated with Properties Held for Disposal                                  670.0            1,076.6
                                                                                        ---------------    --------------

               Total Assets                                                               $ 10,830.1         $ 10,960.9
                                                                                        ===============    ==============

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities
     Accounts payable                                                                     $    624.3         $    619.5
     Short-term borrowings                                                                        .2                8.4
     Long-term debt due within one year                                                          5.8               26.4
     Other current liabilities                                                                 634.1              475.5
     Current liabilities associated with properties held for disposal                           47.4               45.5
                                                                                        ---------------    --------------
               Total Current Liabilities                                                     1,311.8            1,175.3
                                                                                        ---------------    --------------

Long-Term Debt                                                                               4,260.3            4,539.4
                                                                                        ---------------    --------------

Deferred Income Taxes                                                                        1,342.0            1,387.3
Other Deferred Credits and Reserves                                                            784.5              645.9
Long-Term Liabilities Associated with Properties Held for Disposal                             226.6               38.9
                                                                                        ---------------    --------------
                                                                                             2,353.1            2,072.1
                                                                                        ---------------    --------------
Stockholders' Equity
     Common stock, par value $1 - 300,000,000 shares
          authorized, 100,385,103 shares issued at 9-30-02
          and 100,186,350 shares issued at 12-31-01                                            100.4              100.2
     Capital in excess of par value                                                          1,687.3            1,676.6
     Preferred stock purchase rights                                                             1.0                1.0
     Retained earnings                                                                       1,268.5            1,542.6
     Accumulated other comprehensive loss                                                      (82.2)             (64.2)
     Common shares in treasury, at cost - 7,299 shares
          at 9-30-02 and 1,020 at 12-31-01                                                       (.4)               (.1)
     Deferred compensation                                                                     (69.7)             (82.0)
                                                                                        ---------------    --------------
               Total Stockholders' Equity                                                    2,904.9            3,174.1
                                                                                        ---------------    --------------

               Total Liabilities and Stockholders' Equity                                 $ 10,830.1         $ 10,960.9
                                                                                        ===============    ==============

The "successful efforts" method of accounting for oil and gas exploration and
production activities has been followed in preparing this balance sheet.

The accompanying notes are an integral part of this statement.
</TABLE>
<PAGE>

<TABLE>

                 KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (UNAUDITED)
<CAPTION>

                                                                             Nine Months Ended
                                                                               September 30,
(Millions of dollars)                                                       2002               2001
                                                                      -------------      -------------
<S>                                                                    <C>                <C>
Operating Activities
--------------------
Net income (loss)                                                      $   (138.9)        $    536.0
Adjustments to reconcile net income or loss to net cash
  provided by operating activities -
    Depreciation, depletion and amortization                                630.1              549.7
    Asset impairment                                                        207.6               60.5
    Dry hole costs                                                           48.8               43.6
    Deferred income taxes                                                   126.3              147.1
    Provision for environmental remediation and
      restoration, net of recoveries                                         80.0               82.1
    Gain on exploration and production divestitures                        (108.6)                 -
    (Gain) loss on sale and retirement of assets                              2.7               (3.6)
    Noncash items affecting net income or loss                              116.8             (151.8)
    Other net cash provided by (used in) operating activities                77.7              (49.7)
                                                                      -------------      -------------
        Net Cash Provided by Operating Activities                         1,042.5            1,213.9
                                                                      -------------      -------------

Investing Activities
--------------------
Capital expenditures                                                       (886.2)          (1,349.2)
Dry hole expense                                                            (48.8)             (43.6)
Proceeds from exploration and production divestitures                       412.0                  -
Acquisitions                                                                (23.8)            (980.8)
Other investing activities                                                    8.8              (47.3)
                                                                      -------------      -------------
        Net Cash Used in Investing Activities                              (538.0)          (2,420.9)
                                                                      -------------      -------------

Financing Activities
--------------------
Issuance of long-term debt                                                  783.0            1,703.0
Repayment of long-term debt                                              (1,092.4)            (416.2)
Decrease in short-term borrowings                                            (8.2)              (3.3)
Issuance of common stock                                                      5.4               31.8
Dividends paid                                                             (135.4)            (127.9)
                                                                      -------------      -------------
        Net Cash Provided by (Used in) Financing Activities                (447.6)           1,187.4
                                                                      -------------      -------------

Effects of Exchange Rate Changes on Cash and Cash Equivalents                (5.9)              (2.9)
                                                                      -------------      -------------

Net Increase (Decrease) in Cash and Cash Equivalents                         51.0              (22.5)

Cash and Cash Equivalents at Beginning of Period                             91.3              144.0
                                                                      -------------      -------------

Cash and Cash Equivalents at End of Period                             $    142.3         $    121.5
                                                                      =============      =============

The accompanying notes are an integral part of this statement.
</TABLE>

<PAGE>

                 KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2002

A.      Basis of Presentation

        The condensed financial statements included herein have been prepared by
        the company, without audit, pursuant to the rules and regulations of the
        Securities  and Exchange  Commission  and, in the opinion of management,
        include all adjustments,  consisting only of normal recurring  accruals,
        necessary to present  fairly the resulting  operations for the indicated
        periods.  Certain information and footnote disclosures normally included
        in  financial   statements   prepared  in  accordance   with  accounting
        principles  generally  accepted in the United States have been condensed
        or omitted pursuant to such rules and regulations.  Although the company
        believes  that the  disclosures  are  adequate  to make the  information
        presented not misleading, it is suggested that these condensed financial
        statements be read in conjunction with the financial  statements and the
        notes  thereto  included in the  company's  latest annual report on Form
        10-K. Presentation of the 2001 amounts has been changed to be consistent
        with  the  presentation  of the oil and gas  operations  in  Kazakhstan,
        Indonesia and Australia as discontinued in 2002 (see note D).

        On August 1, 2001,  the company  completed  the  acquisition  of all the
        outstanding shares of common stock of HS Resources, Inc., an independent
        oil and gas  exploration  and  production  company.  To  accomplish  the
        acquisition,  the company  organized  and formed a new holding  company,
        Kerr-McGee   Holdco,   which  later   changed  its  name  to  Kerr-McGee
        Corporation.  All  the  outstanding  shares  of  the  former  Kerr-McGee
        Corporation were cancelled, and the same number of shares were issued by
        the new holding company.  The former Kerr-McGee  Corporation was renamed
        Kerr-McGee Operating Corporation and is now a wholly owned subsidiary of
        the holding company, along with Kerr-McGee Rocky Mountain Corporation
        (formerly HS Resources).

B.      Derivatives

        In June 1998, the Financial  Accounting Standards Board issued Statement
        No. 133, "Accounting for Derivative  Instruments and Hedging Activities"
        (FAS 133).  The statement as amended  requires  recording all derivative
        instruments as assets or liabilities, measured at fair value. Kerr-McGee
        adopted this standard on January 1, 2001, by recording the fair value of
        all the foreign currency  forward  purchase and sales contracts,  and by
        separating and recording the fair value of the options  associated  with
        the company's debt  exchangeable  for stock of Devon Energy  Corporation
        (Devon)  presently owned by the company.  In adopting the standard,  the
        company  recognized  a net  expense  of $20.3  million in the 2001 first
        quarter  as a  cumulative  effect of the  accounting  change.  Also,  in
        accordance  with FAS 133,  the company  chose to  reclassify  85% of the
        Devon shares owned to "trading"  from the  "available for sale" category
        of  investments.  On January 1, 2001, the company  recognized  after-tax
        income  totaling  $117.9 million for the unrealized  appreciation on the
        Devon  shares  reclassified  to  trading.   The  portion  of  the  stock
        investment  now  classified  as  "trading" is  marked-to-market  through
        income each month.

        In  March  2002,  the  company  hedged  a  portion  of its  oil  and gas
        production  for the period April  through  December 2002 to increase the
        predictability  of  its  cash  flows  and  support   additional  capital
        projects.  Excluding the Denver-Julesburg  Basin production,  the hedges
        outstanding  at  September  30,  2002,  cover  approximately  61% of the
        expected  remaining  2002 oil  production  (57% of the  total  worldwide
        expected  remaining  2002  oil  production)  and  approximately  47%  of
        expected  remaining  2002 U.S.  gas  production  (34% of the total  U.S.
        expected  remaining  2002 gas  production).  These  positions  have been
        designated  and  qualify  as  cash  flow  hedges  of a  portion  of 2002
        production.

        The  production  hedging  transactions  are in the form of  fixed  price
        swaps.  The hedges cover  30,000  barrels of oil per day of domestic oil
        production at an average  price of $24.09 per barrel and 60,000  barrels
        of oil per day of North Sea oil production at an average price of $23.17
        per barrel.  The company also entered into price swaps covering  250,000
        MMBtu per day of domestic  natural gas production at an average price of
        $3.10 per  MMBtu.  The price  swaps will be  settled  using the  closing
        prices on the New York  Mercantile  Exchange  (NYMEX) for domestic light
        sweet crude and natural gas, and the  International  Petroleum  Exchange
        (IPE) for Brent crude.

        The following table sets forth the company's outstanding oil and natural
        gas hedging contracts executed in 2002 and their fair value at September
        30, 2002.
<TABLE>
<CAPTION>

                                                                                         U.S. Natural Gas
                          North Sea Oil Hedging            U.S. Oil Hedging                   Hedging
      (Millions of     -----------------------------  ----------------------------  -----------------------------
        dollars)          Notional       Liability      Notional       Liability      Notional       Liability
                          Volumes          Fair          Volumes          Fair         Volumes          Fair
      2002                 (Bbls)          Value         (Bbls)          Value         (MMBtu)         Value
      ---------------  ---------------  ------------  --------------   -----------  --------------  -------------
      <S>                <C>                <C>        <C>                <C>        <C>                 <C>
      October            1,860,000          $(10.4)      930,000          $ (5.9)     7,750,000          $ (4.6)
      November           1,800,000           (10.0)      900,000            (5.7)     7,500,000            (7.8)
      December           1,860,000           (10.2)      930,000            (5.7)     7,750,000            (9.4)
                       ---------------  ------------  --------------   -----------  --------------  -------------

      Total              5,520,000          $(30.6)    2,760,000          $(17.3)    23,000,000          $(21.8)
                       ===============  ============  ==============   ===========  ==============  =============
</TABLE>

        The changes in fair value of these contracts are recorded in accumulated
        other  comprehensive  loss to the extent the hedges are  effective.  The
        amounts in accumulated other  comprehensive  loss, $69.1 million loss at
        September  30, 2002,  will be  recognized in earnings when the contracts
        are settled under the terms of the swap agreements.  The company expects
        to  reclassify  all of the  existing  net  losses  (assuming  no further
        changes in fair market value of the  contracts)  at September  30, 2002,
        into  earnings  during the next  quarter.  Losses from the 2002  hedging
        program  totaling $33 million and $58.2  million were  recognized in the
        2002 third  quarter and in the first nine months of 2002,  respectively.
        These  losses  offset the prices  realized on the  physical  sale of the
        crude  oil  and  natural  gas.  The  losses  for  hedge  ineffectiveness
        recognized in other income were $1 million in the 2002 third quarter and
        $1.2 million for the nine months.

        In May 2002, the company began  accounting for certain of its previously
        existing derivative  instruments as hedges against fluctuating commodity
        prices  for its  Denver-Julesburg  Basin  natural  gas  production.  The
        company has in place through October 2002 natural gas fixed-price  swaps
        totaling  110,000  MMBtu per day at an average price of $2.82 per MMBtu.
        The fixed-price swaps cover  approximately 19% of the expected remaining
        2002 gas  production  from the  Denver-Julesburg  Basin (5% of the total
        U.S.  expected  remaining 2002 gas production) and will be settled using
        the closing price on NYMEX.  In connection with these fixed price swaps,
        the company also entered  into natural gas basis swaps  covering  75,000
        MMBtu per day through  October 2002. The fixed price and basis swaps had
        a net asset fair value of $.1 million at  September  30,  2002,  and the
        company had deferred gains  totaling $2.7 million in  accumulated  other
        comprehensive  income  associated  with  these  contracts.  The  company
        expects to  reclassify  the entire  amount of these gains  (assuming  no
        further  changes in fair market value of the contracts) into earnings by
        the end of October 2002.  During the 2002 third  quarter,  a $14 million
        gain was recognized related to contracts that settled during the period,
        and for the  first  nine  months  of  2002,  a $17.6  million  gain  was
        recognized.  These gains offset the prices realized on the physical sale
        of the natural gas. The amount of the hedge  ineffectiveness in the 2002
        third quarter and nine months was immaterial.

        As discussed in the company's  2001 Form 10-K, the company is also party
        to other commodity  contracts that have not been accounted for as hedges
        and are  recorded  at their fair market  value on the balance  sheet and
        marked-to-market through income each month. The net fair market value of
        these  commodity-related  derivatives  was  a  $37.8  million  asset  at
        September  30,  2002.  The net gain  associated  with these  derivatives
        totaled  $1.6  million  in the third  quarter  of 2002 and a net loss of
        $25.6 million in the first nine months of 2002.

        From time to time, the company enters into forward  contracts to buy and
        sell  foreign  currencies.  Certain  of these  contracts  (purchases  of
        Australian  dollars and British pound sterling) have been designated and
        have qualified as cash flow hedges of the company's  anticipated  future
        cash flow needs for a portion of its capital  expenditures and operating
        costs.  These forward  contracts  generally  have durations of less than
        three years. The resulting  changes in fair value of these contracts are
        recorded in  accumulated  other  comprehensive  loss. The estimated fair
        value of these  contracts at September 30, 2002,  was recorded as a $5.9
        million   liability.   The  $9.3  million  loss  in  accumulated   other
        comprehensive loss at September 30, 2002, will be recognized in earnings
        in the periods during which the hedged  forecasted  transactions  affect
        earnings (i.e.,  when the forward contracts close in the case of a hedge
        of operating  costs and when the hedged  assets are  depreciated  in the
        case of a hedge of capital expenditures).  In the third quarter and nine
        months of 2002, the company  reclassified $1.4 million and $3.8 million,
        respectively,  of losses on forward  contracts  from  accumulated  other
        comprehensive loss to operating expenses in the income statement. Of the
        existing net losses at September  30, 2002,  approximately  $3.8 million
        will be reclassified  into earnings during the next 12 months,  assuming
        no  further  changes  in fair  value of the  contracts.  No hedges  were
        discontinued during the third quarter,  and since forward exchange rates
        are used to measure the derivative values and the forward contracts have
        not been closed early, ineffectiveness was not material.

        The company has entered  into other  forward  contracts  to sell foreign
        currencies,  which  will be  collected  as a  result  of  pigment  sales
        denominated in foreign currencies,  primarily European currencies. These
        contracts have not been designated as hedges even though they do protect
        the company from changes in foreign currency rate changes. The estimated
        fair value of these contracts was immaterial.  Almost all of the pigment
        receivables have been sold in an asset  securitization  program at their
        equivalent  U.S.  dollar  value at the date the  receivables  were sold.
        However,  the company retains the risk of foreign  currency rate changes
        between the date of sale and collection of the receivables.

        In  connection  with the  issuance of $350  million of 5.375%  notes due
        April 15, 2005, the company entered into an interest rate swap agreement
        in  April  2002.  The  terms of the  agreement  effectively  change  the
        interest the company will pay on the debt until  maturity from the fixed
        rate to a variable  rate of LIBOR plus 87.5 basis  points.  The  company
        considers the swap to be a hedge against the change in fair value of the
        debt as a result of interest rate changes.  The estimated  fair value of
        the  interest  rate swap was  recorded  as an asset of $25.1  million at
        September  30, 2002.  The company  recognized  a $2.1  million  interest
        expense  reduction  in the 2002 third  quarter  and $3.9  million in the
        first nine months of 2002 from the swap arrangement.

        During  October  2002,  the company began adding to its existing oil and
        gas hedging  positions  and expects to continue  its oil and gas hedging
        program in 2003. See Item 3.  Quantitative  and Qualitative  Disclosures
        about Market Risk.

C.      Goodwill and Intangible Assets

        In June 2001, the Financial  Accounting Standards Board issued Statement
        of   Financial   Accounting   Standards   (FAS)   No.   141,   "Business
        Combinations," and FAS 142, "Goodwill and Other Intangible  Assets." FAS
        141 requires all business  combinations  initiated  after  September 30,
        2001, to be accounted for under the purchase method. The company adopted
        FAS 141 for its acquisition of HS Resources. The company adopted FAS 142
        on January 1, 2002, for all goodwill and other intangible  assets.  This
        statement changes the accounting for goodwill and intangible assets that
        have  indefinite  useful  lives  from  an  amortization   method  to  an
        impairment  approach.  The  nonamortization  provisions of this standard
        were  immediately  applicable  for any goodwill  acquired after June 30,
        2001.  The company has completed its 2002  impairment  test for goodwill
        and indefinite lived intangibles, with no impairment being indicated.

        The  acquired  intangible  assets  and  goodwill  of the  company  as of
        September 30, 2002, were as follows:
<TABLE>
<CAPTION>

                                                                     Gross
                                                                   Carrying       Accumulated
     (Millions of dollars)                                          Amount        Amortization
                                                                   ---------      ------------
     <S>                                                            <C>                   <C>
     Amortized intangible assets:
          Proprietary seismic library (10-year life) and other      $    2.1              $ .2
          Marketing intangible assets (5-year life)                     16.9               3.6
                                                                   ---------      ------------
               Total                                                $   19.0              $3.8
                                                                   =========      ============

                                                                   Carrying
                                                                    Amount
                                                                   ---------
     Unamortized intangible assets:
          Intellectual properties associated
               with pigment manufacturing processes                 $   52.1

          Goodwill                                                  $  355.4
</TABLE>


        Amortization of purchased intangibles for each of the next five years is
        estimated to be $5.1 million in 2003, $3.4 million in 2004, $3.4 million
        in 2005,  $.9 million in 2006 and $.4 million in 2007.  Of the  goodwill
        recorded on the  balance  sheet of the company at  September  30,  2002,
        $346.8 million relates to the exploration  and production  segment,  and
        $8.6 million relates to the chemical pigment segment. For the first nine
        months of 2002,  the chemical  pigment  segment  goodwill  increased $.8
        million as a result of foreign currency translation gains.

        The following table presents net income (loss) for each period exclusive
        of   amortization   expense   recognized  in  such  periods  related  to
        intangibles and goodwill, which are no longer amortized.
<TABLE>
<CAPTION>

                                             Three Months Ended         Nine Months Ended
                                                 September 30,             September 30,
     (Millions of dollars)                     2002       2001           2002        2001
                                              -------    ------        -------     ------
       <S>                                    <C>         <C>          <C>         <C>
       Reported net income (loss)             $(86.4)     $26.3        $(138.9)    $536.0
       Add back intangible amortization,
            net of tax                             -        1.3              -        2.5
                                              ------      -----        -------     ------
       Adjusted net income (loss)             $(86.4)     $27.6        $(138.9)    $538.5
                                              ======      =====        =======     ======
</TABLE>

        Diluted earnings per share for the third quarter of 2001 would have been
        1 cent per share  higher or 28 cents,  and for the first nine  months of
        2001  would  have been 2 cents per share  higher,  or $5.22,  if the new
        standard had been applied in 2001.

D.      Discontinued Operations and Asset Impairments

        In August 2001, the Financial Accounting Standards Board issued FAS 144,
        "Accounting  for  Impairment or Disposal of Long-Lived  Assets." FAS 144
        supersedes FAS 121,  "Accounting for the Impairment of Long-Lived Assets
        and for  Long-Lived  Assets to be  Disposed  Of," and the portion of the
        Accounting  Principles Board Opinion No. 30 that deals with the disposal
        of a business  segment.  The company adopted the statement on January 1,
        2002.

        During  the  second  quarter  of 2002,  the  company  approved a plan to
        dispose of its exploration  and production  interest in the Jabung block
        of Sumatra,  Indonesia.  During the first  quarter of 2002,  the company
        approved a plan to dispose of its exploration and production  operations
        in Kazakhstan and of its interest in the Bayu-Undan  project in the East
        Timor Sea offshore Australia.  The results of these operations have been
        reported   separately  as  discontinued   operations  in  the  company's
        Consolidated Statement of Operations for both 2002 and 2001. On June 13,
        2002, the company completed the sale of its interest in the Jabung block
        in  Sumatra  for  $170.7  million  in cash with $11  million  contingent
        purchase price pending government approval of the LPG project.  The sale
        resulted in a pretax gain of $72.5  million  (excluding  the  contingent
        purchase).  On May 3,  2002,  the  company  completed  the  sale  of its
        interest in the Bayu-Undan  project for $132.3 million in cash. The sale
        resulted in a pretax gain of $34.8 million. The net proceeds received by
        the company were used to reduce outstanding debt.

        Revenues applicable to the discontinued  operations totaled $4.6 million
        and $19.8  million for the three  months  ended  September  30, 2002 and
        2001,  respectively,  and $29.8  million and $55.3  million for the nine
        months ended September 30, 2002 and 2001, respectively.

        As part of the company's  strategic plan to divest  non-core oil and gas
        properties,  certain U.S., North Sea, Kazakhstan and Ecuador oil and gas
        assets held for disposal were evaluated and deemed  impaired  during the
        2002  second and third  quarters.  The  impairment  losses  reflect  the
        difference  between  the  estimated  sales  prices  for  the  individual
        properties  or group  of  properties,  less  the  cost to sell,  and the
        carrying  amount of the net assets.  The amount of the  impairment  loss
        associated  with the U.S.,  North Sea and  Ecuador  assets held for sale
        totaled $36.8  million in the 2002 third quarter and $183.4  million for
        the first nine  months of 2002.  These  amounts  are  reported  as asset
        impairment in the Consolidated Statement of Operations.  Also during the
        2002 third  quarter,  the company  reversed a portion of the  impairment
        loss  recognized  in the  2002  second  quarter  as a result  of  higher
        estimates  for sales  prices on certain  U.S.  onshore  properties  than
        originally  estimated.  A total of $30.1  million was reversed  from the
        previous  quarter's   impairment  charge  and  was  reflected  in  asset
        impairment in the Consolidated  Statement of Operations.  The impairment
        associated  with the  disposal of the  Kazakhstan  assets is reported as
        part of discontinued operations, which includes an asset impairment loss
        of $1.4 million in the 2002 third quarter and $26.1 million in the first
        nine months of 2002.

        Impairment provisions have also been made for a Gulf of Mexico field and
        a northwest  North Sea field that the company does not currently plan to
        dispose  of since the  current  estimate  of future  cash flows from the
        properties  were less than the carrying value of the assets.  Impairment
        losses to write down these two  properties  to fair value  totaled $17.3
        million in the 2002 third  quarter  and $28.2  million  during the first
        nine  months  of 2002  and are  reported  as  asset  impairments  in the
        Consolidated Statements of Operations.

        The assets and liabilities of all the discontinued  operations and other
        assets being held for sale have been reclassified as  Assets/Liabilities
        Associated with Properties Held for Disposal in the Consolidated Balance
        Sheet.

E.      Income Tax and Interest Payments

        Net cash  provided by operating  activities  reflects  cash payments for
        income taxes and interest as follows:
                                                        Nine Months Ended
                                                          September 30,
        (Millions of dollars)                           2002         2001
                                                      -------       ------

        Income tax payments                           $  69.3       $344.3
        Less refunds received                          (264.3)       (19.0)
                                                      -------       ------
        Net income tax payments (refunds)             $(195.0)      $325.3
                                                      =======       ======

        Interest payments                             $ 217.0       $130.2
                                                      =======       ======

F.      Financial Instruments and Comprehensive Income

        The third-quarter 2002  comprehensive loss was $120.6 million,  compared
        with  comprehensive  income of $30.6  million  in the  prior-year  third
        quarter.   For  the  first  nine  months  ended   September   30,  2002,
        comprehensive  loss was  $156.9  million,  compared  with  comprehensive
        income of $476.5 million in the same 2001 period.

        The company has certain  investments that are considered to be available
        for sale.  These financial  instruments are carried in the  Consolidated
        Balance Sheet at fair value, which is based on quoted market prices. The
        company had no  securities  classified  as held to maturity at September
        30, 2002, or December 31, 2001. At September 30, 2002,  and December 31,
        2001,   available-for-sale  securities  for  which  fair  value  can  be
        determined were as follows:
<TABLE>
<CAPTION>

                                                     September 30, 2002                      December 31, 2001
                                                -----------------------------        -------------------------------
                                                                     Gross                                   Gross
                                                                   Unrealized                             Unrealized
                                                Fair                Holding           Fair                  Holding
     (Millions of dollars)                      Value    Cost         Gain           Value      Cost         Loss
                                                -----    ----      ----------        -----      ----      ----------


      <S>                                        <C>     <C>         <C>   <C>        <C>       <C>          <C>    <C>
      Equity securities                          $73.3   $31.9       $13.4 (1)        $58.7     $31.9        $(1.2) (1)
      U.S. government obligations -
        Maturing within one year                    -        -           -              2.9       2.9            -
        Maturing between one year
         and four years                            1.5     1.5           -              1.7       1.7            -
                                                                     -----                                   -----
             Total                                                   $13.4                                   $(1.2)
                                                                     =====                                   =====

        (1) These amounts include $28 million of gross unrealized hedging losses
            on 15% of the exchangeable debt at the time of adoption of FAS 133.
</TABLE>

G.      Equity Affiliates

        Investments in equity affiliates totaled $120.1 million at September 30,
        2002, and $101 million at December 31, 2001.  Equity loss related to the
        investments is included in Other Income in the Consolidated Statement of
        Operations  and  totaled  $4.8  million  and $2.6  million for the three
        months ended  September 30, 2002 and 2001,  respectively.  For the first
        nine months of 2002,  the equity loss totaled  $20.5  million,  compared
        with a loss of $3.6 million for the same 2001 period.

H.      Earnings Per Share

        The  following  table sets forth the  computation  of basic and  diluted
        earnings per share (EPS) from continuing  operations for the three-month
        and nine-month periods ended September 30, 2002 and 2001.
<TABLE>
<CAPTION>

                                                             For the Three Months Ended September 30,
                                         ---------------------------------------------------------------------------------
                                                         2002                                         2001
                                         -------------------------------------        ------------------------------------
                                            Loss                                        Income
                                            from                                         from
     (In millions, except                Continuing                  Per-Share        Continuing                 Per-Share
     per-share amounts)                  Operations      Shares        Loss           Operations     Shares       Income
                                         ----------      ------      ---------        ----------     ------      ---------

     <S>                                     <C>          <C>           <C>               <C>          <C>         <C>
     Basic EPS                               $(86.8)      100.4         $(.86)            $17.3        98.5        $.18
                                                                        =====                                      ====

     Effect of Dilutive Securities:
      5 1/4% convertible debentures               -           -                               -           -
      Stock options                               -           -                               -           -
                                             ------      ------                           -----      ------
     Diluted EPS                             $(86.8)      100.4         $(.86)            $17.3        98.5        $.18
                                             ======      ======         =====             =====      ======        ====

</TABLE>
<TABLE>
<CAPTION>

                                                              For the Nine Months Ended September 30,
                                         ---------------------------------------------------------------------------------
                                                         2002                                         2001
                                         -------------------------------------        ------------------------------------
                                            Loss                                        Income
                                            from                                         from
     (In millions, except                Continuing                  Per-Share        Continuing                 Per-Share
     per-share amounts)                  Operations      Shares        Loss           Operations     Shares       Income
                                         ----------      ------      ---------        ----------     ------      ---------

     <S>                                    <C>           <C>          <C>               <C>          <C>         <C>
     Basic EPS                              $(266.2)      100.3        $(2.65)           $532.5        96.1       $5.54
                                                                       ======                                     =====

     Effect of Dilutive Securities:
      5 1/4% convertible debentures               -           -                            16.0         9.8
      Stock options                               -           -                               -          .2
                                            -------      ------        ------            ------       -----       -----
     Diluted EPS                            $(266.2)      100.3        $(2.65)           $548.5       106.1       $5.17
                                            =======      ======        ======            ======       =====       =====
</TABLE>

I.      Accounts Receivable Sales

        In December 2000, the company began an accounts receivable  monetization
        program for its pigment business  through the sale of selected  accounts
        receivable    with   a   three-year,    credit-insurance-backed    asset
        securitization program. The company retained servicing  responsibilities
        and subordinated  interests and will receive a servicing fee of 1.07% of
        the receivables sold for the period of time outstanding, generally 60 to
        120 days. No recourse  obligations  were recorded  since the company has
        very  limited   obligations  for  any  recourse   actions  on  the  sold
        receivables.  The  collection of the  receivables  is insured,  and only
        receivables  that qualify for credit insurance can be sold. A portion of
        the insurance is reinsured by the company's captive  insurance  company.
        However,  the company  believes that the risk of insurance  loss is very
        low since its bad-debt  experience has historically been  insignificant.
        The company also received preference stock in the special-purpose entity
        equal  to  3.5%  of  the  receivables  sold.  The  preference  stock  is
        essentially a retained  deposit to provide further credit  enhancements,
        if needed,  but otherwise  recoverable  by the company at the end of the
        program.

        The  company  sold  $199.2  million  and $152.6  million of its  pigment
        receivables during the third quarter of 2002 and 2001, respectively. The
        sale of the  receivables  resulted in pretax  losses of $1.2 million and
        $2.3 million  during the third  quarter of 2002 and 2001,  respectively.
        During the first nine months of 2002 and 2001,  the company  sold $485.1
        million and $460.5 million,  respectively,  of its pigment  receivables.
        The sale of the  receivables  resulted in pretax  losses of $3.5 million
        and $6.9  million  during  the  first  nine  months  of 2002  and  2001,
        respectively.  The losses were equal to the difference in the book value
        of the receivables  sold and the total of cash and the fair value of the
        deposit retained by the special-purpose  entity. The outstanding balance
        on  receivables  sold totaled  $114.3 million at September 30, 2002, and
        $96.1 million at December 31, 2001.

J.      Income Taxes

        The  reported  amount of income tax  expense  attributable  to loss from
        continuing operations for the first nine months of 2002 differs from the
        amount that would be computed  using the U.S.  Federal  income tax rate.
        The primary  reasons for the  difference  and related tax effects are as
        follow:

                                                               Income
        (Millions of dollars)                                   Tax
                                                              Expense
                                                              -------
        U.S. statutory rate - 35%                             $  29.8
           U.K. tax rate change                                (146.4)
           Reversal of deferred tax asset associated
              with U.K. properties held for sale                (51.6)
           U.K. petroleum revenue tax                           (19.5)
           All other                                              6.5
                                                              -------
                                                              $ 181.2
                                                              =======


        On July 24, 2002, the United Kingdom  government made certain changes to
        its existing tax laws. Under one of these changes,  companies will pay a
        supplementary corporate tax charge of 10% on profits from their U.K. oil
        and gas production. This is in addition to the current 30% corporate tax
        on  these  profits.   The  U.K.  government  has  also  accelerated  tax
        depreciation  for  capital  investments  in  U.K.  upstream  activities.
        Finally,  the U.K.  government,  subject  to  consultation,  intends  to
        abolish North Sea royalty.  It is  anticipated  that royalty will not be
        abolished  until after 2002.  The catch-up  adjustment  for the tax rate
        changes  increased  the  company's  2002  third-quarter   provision  for
        deferred  income  taxes by $137.6  million and the current  provision on
        operations for the first two quarters of 2002 by $8.8 million.

K.      Condensed Consolidating Financial Information

        In connection  with the  acquisition of HS Resources,  a holding company
        structure  was  implemented  (see  Note A. for a  discussion  of the new
        organization).

        On  October 3,  2001,  Kerr-McGee  Corporation  issued  $1.5  billion of
        long-term notes in a public offering.  The notes are general,  unsecured
        obligations  of the company and rank on parity with all of the company's
        other unsecured and unsubordinated  indebtedness.  Kerr-McGee  Operating
        Corporation and Kerr-McGee  Rocky Mountain  Corporation  have guaranteed
        the notes.  Additionally,  Kerr-McGee  Corporation  has  guaranteed  all
        indebtedness of its subsidiaries,  including the indebtedness assumed in
        the  purchase  of  HS  Resources.   As  a  result  of  these   guarantee
        arrangements, the company is required to present condensed consolidating
        financial information.

        The following condensed consolidating financial information presents the
        statement of  operations  for the third quarter and first nine months of
        2002 and 2001,  the balance sheet as of September 30, 2002, and December
        31, 2001,  and the  statement of cash flows for the first nine months of
        2002 and 2001, for (a) Kerr-McGee Corporation,  the holding company, (b)
        the guarantor subsidiaries,  and (c) the non-guarantor subsidiaries on a
        consolidated basis.

<TABLE>

                     Kerr-McGee Corporation and Subsidiaries
                 Condensed Consolidating Statement of Operations
                  For the Three Months Ended September 30, 2002

<CAPTION>

                                                Kerr-McGee        Guarantor        Non-Guarantor
  (Millions of dollars)                         Corporation      Subsidiaries       Subsidiaries       Eliminations     Consolidated
                                               --------------    -------------     --------------     -------------    -------------

  <S>                                              <C>               <C>                <C>               <C>              <C>
  Sales                                            $     -           $  80.6            $1,008.1          $(104.3)         $ 984.4
                                               --------------    -------------     --------------     -------------    -------------

  Costs and Expenses
    Costs and operating expenses                         -              27.2               489.8           (104.7)           412.3
    Selling, general and administrative
      expenses                                           -              17.3                43.7                -             61.0
    Shipping and handling expenses                       -               1.3                30.8                -             32.1
    Depreciation and depletion                           -              30.2               154.4                -            184.6
    Asset impairment                                     -                 -                24.0                -             24.0
    Exploration, including dry holes and
      amortization of undeveloped leases                 -               2.2                68.0                -             70.2
    Taxes, other than income taxes                      .1               4.8                23.9                -             28.8
    Provision for environmental remediation
      and restoration, net of recoveries                 -             (25.8)                5.8                -            (20.0)
    Interest and debt expense                         29.0              64.4                25.1            (50.1)            68.4
                                               --------------    -------------     --------------     -------------    -------------
        Total Costs and Expenses                      29.1             121.6               865.5           (154.8)           861.4
                                               --------------    -------------     --------------     -------------    -------------

                                                     (29.1)            (41.0)              142.6             50.5            123.0
  Other Income (Expense)                              (1.2)            159.0                (4.1)          (167.8)           (14.1)
                                               --------------    -------------     --------------     -------------    -------------
  Income (Loss) before Income Taxes                  (30.3)            118.0               138.5           (117.3)           108.9
  Benefit (Provision) for Income Taxes                 9.9            (199.7)             (205.6)           199.7           (195.7)
                                               --------------    -------------     --------------     -------------    -------------
  Income (Loss) from Continuing Operations           (20.4)            (81.7)              (67.1)            82.4            (86.8)
  Income from Discontinued Operations,
       net of tax                                        -                 -                  .4                -               .4
                                               --------------    -------------     --------------     -------------    -------------
  Net Income (Loss)                                $ (20.4)          $ (81.7)           $  (66.7)         $  82.4          $ (86.4)
                                               ==============    =============     ==============     =============    =============
</TABLE>
<PAGE>


<TABLE>

                     Kerr-McGee Corporation and Subsidiaries
                 Condensed Consolidating Statement of Operations
                  For the Three Months Ended September 30, 2001

<CAPTION>

                                                Kerr-McGee        Guarantor        Non-Guarantor
  (Millions of dollars)                         Corporation      Subsidiaries       Subsidiaries       Eliminations     Consolidated
                                               --------------    -------------     --------------     -------------    -------------

  <S>                                              <C>               <C>                <C>               <C>              <C>
  Sales                                            $     -           $  (2.2)           $  931.3          $ (65.4)         $ 863.7
                                               --------------    -------------     --------------     -------------    -------------

  Costs and Expenses
    Costs and operating expenses                         -               1.2               394.5            (65.6)           330.1
    Selling, general and administrative
      expenses                                           -              14.4                43.6              (.1)            57.9
    Shipping and handling expenses                       -                 -                29.2                -             29.2
    Depreciation and depletion                           -               2.1               177.5                -            179.6
    Asset impairment                                     -                 -                47.3                -             47.3
    Exploration, including dry holes and
      amortization of undeveloped leases                 -                 -                45.5                -             45.5
    Taxes, other than income taxes                       -                .9                24.7                -             25.6
    Provision for environmental remediation
      and restoration                                    -              78.4                   -                -             78.4
    Interest and debt expense                          6.6              50.0                33.8            (42.7)            47.7
                                               --------------    -------------     --------------     -------------    -------------
        Total Costs and Expenses                       6.6             147.0               796.1           (108.4)           841.3
                                               --------------    -------------     --------------     -------------    -------------

                                                      (6.6)           (149.2)              135.2             43.0             22.4
  Other Income (Expense)                            (125.6)            172.5                45.8            (89.9)             2.8
                                               --------------    -------------     --------------     -------------    -------------
  Income (Loss) before Income Taxes                 (132.2)             23.3               181.0            (46.9)            25.2
  Benefit (Provision) for Income Taxes                38.5             (17.7)              (46.4)            17.7             (7.9)
                                               --------------    -------------     --------------     -------------    -------------
  Income (Loss) from Continuing Operations           (93.7)              5.6               134.6            (29.2)            17.3
  Income from Discontinued Operations,
       net of tax                                        -                 -                 9.0                -              9.0
                                               --------------    -------------     --------------     -------------    -------------
  Net Income (Loss)                                $ (93.7)          $   5.6            $  143.6          $ (29.2)         $  26.3
                                               ==============    =============     ==============     =============    =============
</TABLE>
<PAGE>


<TABLE>

                     Kerr-McGee Corporation and Subsidiaries
                 Condensed Consolidating Statement of Operations
                  For the Nine Months Ended September 30, 2002

<CAPTION>

                                                Kerr-McGee        Guarantor        Non-Guarantor
  (Millions of dollars)                         Corporation      Subsidiaries       Subsidiaries       Eliminations     Consolidated
                                               --------------    -------------     --------------     -------------    -------------

  <S>                                              <C>               <C>               <C>                <C>             <C>
  Sales                                            $     -           $ 235.5           $2,732.8           $(253.4)        $2,714.9
                                               --------------    -------------     --------------     -------------    -------------

  Costs and Expenses
    Costs and operating expenses                         -              76.9            1,333.7            (254.4)         1,156.2
    Selling, general and administrative
      expenses                                           -             118.0              120.1                 -            238.1
    Shipping and handling expenses                       -               3.9               82.4                 -             86.3
    Depreciation and depletion                           -              94.3              481.1                 -            575.4
    Asset impairment                                     -               3.1              178.4                 -            181.5
    Exploration, including dry holes and
      amortization of undeveloped leases                 -               7.4              141.5                 -            148.9
    Taxes, other than income taxes                      .1              14.6               68.7                 -             83.4
    Provision for environmental remediation
      and restoration, net of recoveries                 -              48.0               22.4                 -             70.4
    Interest and debt expense                         84.1             193.2               81.5            (151.1)           207.7
                                               --------------    -------------     --------------     -------------    -------------
        Total Costs and Expenses                      84.2             559.4            2,509.8            (405.5)         2,747.9
                                               --------------    -------------     --------------     -------------    -------------

                                                     (84.2)           (323.9)             223.0             152.1            (33.0)
  Other Income (Expense)                            (245.7)            368.3               21.1            (195.7)           (52.0)
                                               --------------    -------------     --------------     -------------    -------------
  Income (Loss) before Income Taxes                 (329.9)             44.4              244.1             (43.6)           (85.0)
  Benefit (Provision) for Income Taxes               117.6            (167.0)            (298.8)            167.0           (181.2)
                                               --------------    -------------     --------------     -------------    -------------
  Income (Loss) from Continuing Operations          (212.3)           (122.6)             (54.7)            123.4           (266.2)
  Income from Discontinued Operations,
       net of tax                                        -                 -              127.3                 -            127.3
                                               --------------    -------------     --------------     -------------    -------------
  Net Income (Loss)                                $(212.3)          $(122.6)          $   72.6           $ 123.4         $ (138.9)
                                               ==============    =============     ==============     =============    =============
</TABLE>
<PAGE>


<TABLE>

                     Kerr-McGee Corporation and Subsidiaries
                 Condensed Consolidating Statement of Operations
                  For the Nine Months Ended September 30, 2001

<CAPTION>

                                                Kerr-McGee        Guarantor        Non-Guarantor
  (Millions of dollars)                         Corporation      Subsidiaries       Subsidiaries       Eliminations     Consolidated
                                               --------------    -------------     --------------     -------------    -------------

  <S>                                              <C>              <C>                <C>                <C>             <C>
  Sales                                            $     -          $   (6.4)          $3,105.2           $(273.6)        $2,825.2
                                               --------------    -------------     --------------     -------------    -------------

  Costs and Expenses
    Costs and operating expenses                         -               3.3             1204.0            (274.4)           932.9
    Selling, general and administrative
      expenses                                           -              41.8              119.7                 -            161.5
    Shipping and handling expenses                       -                 -               84.6                 -             84.6
    Depreciation and depletion                           -               6.2              496.3                 -            502.5
    Asset impairment                                     -                 -               60.5                 -             60.5
    Exploration, including dry holes and
      amortization of undeveloped leases                 -                .1              137.3                 -            137.4
    Taxes, other than income taxes                       -               4.3               84.1                 -             88.4
    Provision for environmental remediation
      and restoration, net of recoveries                 -              82.1                  -                 -             82.1
    Interest and debt expense                          6.6             148.9              104.9            (130.9)           129.5
                                               --------------    -------------     --------------     -------------    -------------
        Total Costs and Expenses                       6.6             286.7            2,291.4            (405.3)         2,179.4
                                               --------------    -------------     --------------     -------------    -------------

                                                      (6.6)           (293.1)             813.8             131.7            645.8
  Other Income (Expense)                            (125.6)          1,161.0              132.0            (969.7)           197.7
                                               --------------    -------------     --------------     -------------    -------------
  Income (Loss) before Income Taxes                 (132.2)            867.9              945.8            (838.0)           843.5
  Benefit (Provision) for Income Taxes                (3.0)           (332.2)            (308.0)            332.2           (311.0)
                                               --------------    -------------     --------------     -------------    -------------
  Income (Loss) from Continuing Operations          (135.2)            535.7              637.8            (505.8)           532.5
  Income from Discontinued Operations,
       net of tax                                        -                 -               23.8                 -             23.8
  Cumulative Effect of Change in Accounting
       Principle, net of tax                             -             (21.0)                .7                 -            (20.3)
                                               --------------    -------------     --------------     -------------    -------------
  Net Income (Loss)                                $(135.2)         $  514.7           $  662.3           $(505.8)        $  536.0
                                               ==============    =============     ==============     =============    =============
</TABLE>
<PAGE>

<TABLE>

                     Kerr-McGee Corporation and Subsidiaries
                      Condensed Consolidating Balance Sheet
                               September 30, 2002

<CAPTION>

                                                 Kerr-McGee        Guarantor       Non-Guarantor
  (Millions of dollars)                          Corporation     Subsidiaries       Subsidiaries       Eliminations     Consolidated
                                                 ------------    -------------     --------------     -------------    -------------
  <S>                                             <C>               <C>              <C>              <C>                <C>
  ASSETS
  ------
  Current Assets
    Cash                                          $      -          $    2.2         $   140.1        $        -         $   142.3
    Intercompany receivables                         911.1             165.1           1,432.2          (2,508.4)                -
    Notes and accounts receivable                        -              60.6             502.7                 -             563.3
    Inventories                                          -               7.2             361.9                 -             369.1
    Deposits, prepaid expenses and other assets          -              55.7              59.1              (1.8)            113.0
    Current assets associated with properties
      held for disposal                                  -                 -              73.1                 -              73.1
                                                 ------------    -------------     -------------    ---------------    -------------
        Total Current Assets                         911.1             290.8           2,569.1          (2,510.2)          1,260.8

  Property, Plant and Equipment, net                     -           2,011.9           5,519.2                 -           7,531.1
  Investments and Other Assets                        12.2             835.3             244.7             (79.4)          1,012.8
  Goodwill                                               -             346.8               8.6                 -             355.4
  Long-term Assets Associated with Properties
    Held for Disposal                                    -               1.5             668.5                 -             670.0
  Investments in and Advances to Subsidiaries      1,388.1           4,254.0           2,003.4          (7,645.5)                -
                                                 ------------    -------------     -------------    ---------------    -------------
         Total Assets                             $2,311.4          $7,740.3         $11,013.5        $(10,235.1)        $10,830.1
                                                 ============    =============     =============    ===============    =============

  LIABILITIES AND STOCKHOLDERS' EQUITY
  ------------------------------------
  Current Liabilities
    Accounts payable                              $   45.2          $   64.9         $   514.2        $        -         $   624.3
    Short-term borrowings                                -                .2                 -                 -                .2
    Intercompany borrowings                              -           1,399.4           1,064.9          (2,464.3)                -
    Long-term debt due within one year                   -               5.8                 -                 -               5.8
    Other current liabilities                         (2.3)           (204.3)            842.5              (1.8)            634.1
    Current liabilities associated with
      properties held for disposal                       -                 -              47.4                 -              47.4
                                                 ------------    -------------     -------------    ---------------    -------------
        Total Current Liabilities                     42.9           1,266.0           2,469.0          (2,466.1)          1,311.8

  Long-Term Debt                                   1,847.1           1,980.1             433.1                 -           4,260.3

  Deferred Credits and Reserves                          -           1,207.7             919.8              (1.0)          2,126.5
  Long-term Liabilities Associated with
    Properties Held for Disposal                         -                 -             226.6                 -             226.6
  Investments by and Advances from Parent                -                 -             808.1            (808.1)                -
  Stockholders' Equity                               421.4           3,286.5           6,156.9          (6,959.9)          2,904.9
                                                 ------------    -------------     -------------    ---------------    -------------
      Total Liabilities and Stockholders'
         Equity                                   $2,311.4          $7,740.3         $11,013.5        $(10,235.1)        $10,830.1
                                                 ============    =============     =============    ===============    =============
</TABLE>

<PAGE>


<TABLE>

                     Kerr-McGee Corporation and Subsidiaries
                      Condensed Consolidating Balance Sheet
                                December 31, 2001

<CAPTION>

                                                 Kerr-McGee        Guarantor       Non-Guarantor
  (Millions of dollars)                          Corporation     Subsidiaries       Subsidiaries       Eliminations     Consolidated
                                                 ------------    -------------     --------------     -------------    -------------
  <S>                                             <C>               <C>              <C>              <C>                <C>
  ASSETS
  ------
  Current Assets
    Cash                                          $      -          $    3.5         $    87.8        $        -         $    91.3
    Intercompany receivables                       1,001.1            (524.0)          1,866.3          (2,343.4)                -
    Notes and accounts receivable                        -              41.5             379.5                 -             421.0
    Inventories                                          -               4.1             424.6                 -             428.7
    Deposits, prepaid expenses and other assets          -              49.4              78.8             222.9             351.1
    Current assets associated with properties
      held for disposal                                  -                 -              75.4                 -              75.4
                                                 ------------    -------------     -------------    ---------------    -------------
        Total Current Assets                       1,001.1            (425.5)          2,912.4          (2,120.5)          1,367.5
                                                 ------------    -------------     -------------    ---------------    -------------

  Property, Plant and Equipment, net                     -           2,067.3           5,310.6                 -           7,377.9
  Investments and Other Assets                        12.0             641.3             190.4             (59.6)            784.1
  Goodwill                                               -             347.1               7.7                 -             354.8
  Long-term Assets Associated with Properties
    Held for Disposal                                    -               5.8           1,070.8                 -           1,076.6
  Investments in and Advances to Subsidiaries      2,322.4           5,042.5           1,709.1          (9,074.0)                -
                                                 ------------    -------------     -------------    ---------------    -------------
         Total Assets                             $3,335.5          $7,678.5         $11,201.0        $(11,254.1)        $10,960.9
                                                 ============    =============     =============    ===============    =============

  LIABILITIES AND STOCKHOLDERS' EQUITY
  ------------------------------------
  Current Liabilities
    Accounts payable                              $   45.1          $   94.9         $   479.5        $        -         $   619.5
    Short-term borrowings                                -               0.3               8.1                 -               8.4
    Intercompany borrowings                              -           1,316.3           1,026.9          (2,343.2)                -
    Long-term debt due within one year                   -              23.2               3.2                 -              26.4
    Other current liabilities                         34.0            (185.7)            392.5             234.7             475.5
    Current liabilities associated with
      properties held for disposal                       -                 -              45.5                 -              45.5
                                                 ------------    -------------     -------------    ---------------    -------------
        Total Current Liabilities                     79.1           1,249.0           1,955.7          (2,108.5)          1,175.3

  Long-Term Debt                                   1,497.0           2,016.4           1,026.0                 -           4,539.4

  Deferred Credits and Reserves                          -             952.9           1,070.4               9.9           2,033.2
  Long-term Liabilities Associated with
    Properties Held for Disposal                         -                 -              38.9                 -              38.9
  Investments by and Advances from Parent                -              35.6             954.7            (990.3)                -
  Stockholders' Equity                             1,759.4           3,424.6           6,155.3          (8,165.2)          3,174.1
                                                 ------------    -------------     -------------    ---------------    -------------
      Total Liabilities and Stockholders'
        Equity                                    $3,335.5          $7,678.5         $11,201.0        $(11,254.1)        $10,960.9
                                                 ============    =============     =============    ===============    =============
</TABLE>

<PAGE>

<TABLE>

                     Kerr-McGee Corporation and Subsidiaries
                 Condensed Consolidating Statement of Cash Flows
                  For the Nine Months Ended September 30, 2002

<CAPTION>

                                                   Kerr-McGee       Guarantor      Non-Guarantor
(Millions of dollars)                             Corporation     Subsidiaries      Subsidiaries     Eliminations    Consolidated
                                                  -------------   --------------   ---------------   -------------   ------------
<S>                                                  <C>              <C>              <C>               <C>              <C>
Operating Activities
--------------------
Net income (loss)                                    $(212.3)         $(122.6)         $   72.6          $ 123.4          $(138.9)
Adjustments to reconcile net income or loss to
  net cash provided by operating activities -
     Depreciation, depletion and amortization              -             96.3             533.8                -            630.1
     Asset impairment                                      -                -             207.6                -            207.6
     Equity in earnings of subsidiaries                194.7            (72.3)                -           (122.4)               -
     Dry hole costs                                        -               .1              48.7                -             48.8
     Deferred income taxes                                 -             12.8             113.5                -            126.3
     Provision for environmental remediation
       and restoration, net of recoveries                  -             57.6              22.4                -             80.0
     (Gain) loss on sale and retirement of assets          -               .1            (106.0)               -           (105.9)
     Noncash items affecting net income or loss           .2             44.0              72.6                -            116.8
     Other net cash provided by (used in)
        operating activities                           (36.5)            51.1              63.0               .1             77.7
                                                 --------------   -------------    ---------------   -------------    ------------
           Net Cash Provided by (Used in)
             Operating Activities                      (53.9)            67.1           1,028.2              1.1          1,042.5
                                                 --------------   -------------    ---------------   -------------    ------------

Investing Activities
--------------------
Capital expenditures                                       -           (142.1)           (744.1)               -           (886.2)
Dry hole expense                                           -              (.1)            (48.7)               -            (48.8)
Proceeds from exploration and production
  divestitures                                             -              2.5             409.5                -            412.0
Acquisitions                                               -                -             (23.8)               -            (23.8)
Other investing activities                                 -             31.4             (22.6)               -              8.8
                                                 --------------   -------------    ---------------   -------------    ------------
           Net Cash Used in Investing
             Activities                                    -           (108.3)           (429.7)               -           (538.0)
                                                 --------------   -------------    ---------------   -------------    ------------

Financing Activities
--------------------
Issuance of long-term debt                             350.0                -             433.0                -            783.0
Repayment of long-term debt                                -            (63.2)         (1,029.2)               -         (1,092.4)
Decrease in short-term borrowings                          -                -              (8.2)               -             (8.2)
Increase (decrease) in intercompany
  notes payable                                       (165.7)           103.1              63.7             (1.1)               -
Issuance of common stock                                 5.0                -                .4                -              5.4
Dividends paid                                        (135.4)               -                 -                -           (135.4)
                                                 --------------   -------------    ---------------   -------------    ------------
           Net Cash Provided by (Used in)
             Financing Activities                       53.9             39.9            (540.3)            (1.1)          (447.6)
                                                 --------------   -------------    ---------------   -------------    ------------

Effects of Exchange Rate Changes on Cash
   and Cash Equivalents                                    -                -              (5.9)               -             (5.9)
                                                 --------------   -------------    ---------------   -------------    ------------
Net Increase (Decrease) in Cash and Cash
   Equivalents                                             -             (1.3)             52.3                -             51.0
Cash and Cash Equivalents at Beginning of
   Period                                                  -              3.5              87.8                -             91.3
                                                 --------------   -------------    ---------------   -------------    ------------
Cash and Cash Equivalents at End of Period           $     -          $   2.2          $  140.1          $     -          $ 142.3
                                                 ==============   =============    ===============   =============    ============
</TABLE>

<PAGE>

<TABLE>

                     Kerr-McGee Corporation and Subsidiaries
                 Condensed Consolidating Statement of Cash Flows
                  For the Nine Months Ended September 30, 2001

<CAPTION>

                                                   Kerr-McGee       Guarantor      Non-Guarantor
(Millions of dollars)                             Corporation     Subsidiaries      Subsidiaries      Eliminations    Consolidated
                                                  -------------   --------------   ---------------    -------------   ------------
<S>                                                  <C>              <C>              <C>                <C>              <C>
Operating Activities
--------------------
Net income (loss)                                    $(131.3)         $ 517.0          $  508.2           $(357.9)         $ 536.0
  Adjustments to reconcile net income or loss to
    net cash provided by operating activities -
     Depreciation, depletion and amortization              -              6.2             543.5                 -            549.7
     Asset impairment                                      -                -              60.5                 -             60.5
     Equity in earnings of subsidiaries                124.7           (483.3)                -             358.6                -
     Dry hole costs                                        -                -              43.6                 -             43.6
     Deferred income taxes                                 -            327.1            (180.0)                -            147.1
     Provision for environmental remediation
       and restoration, net of recoveries                  -             82.1                 -                 -             82.1
     Gain on sale and retirement of assets                 -             (3.6)                -                 -             (3.6)
     Noncash items affecting net income or loss            -           (164.5)             12.7                 -           (151.8)
     Other net cash provided by (used in)
        operating activities                             6.6            (49.9)             (5.7)              (.7)           (49.7)
                                                 --------------   -------------    ---------------    -------------    ------------
           Net Cash Provided by Operating
             Activities                                    -            231.1             982.8                 -          1,213.9
                                                 --------------   -------------    ---------------    -------------    ------------

Investing Activities
--------------------
Capital expenditures                                       -             (7.3)         (1,341.9)                -         (1,349.2)
Dry hole expense                                           -                -             (43.6)                -            (43.6)
Acquisitions                                          (956.9)               -             (23.9)                -           (980.8)
Other investing activities                                 -              6.0             (53.3)                -            (47.3)
                                                 --------------   -------------    ---------------    -------------    ------------
           Net Cash Used in Investing
             Activities                               (956.9)            (1.3)         (1,462.7)                -         (2,420.9)
                                                 --------------   -------------    ---------------    -------------    ------------

Financing Activities
--------------------
Issuance of long-term debt                             900.0            200.0             603.0                 -          1,703.0
Repayment of long-term debt                                -           (342.0)            (74.2)                -           (416.2)
Decrease in short-term borrowings                          -                -              (3.3)                -             (3.3)
Increase (decrease) in intercompany
  notes payable                                         56.9              8.2             (65.1)                -                -
Issuance of common stock                                   -             31.8                 -                 -             31.8
Dividends paid                                             -           (127.9)                -                 -           (127.9)
                                                 --------------   -------------    ---------------    -------------    ------------
           Net Cash Provided by (Used in)
             Financing Activities                      956.9           (229.9)            460.4                 -          1,187.4
                                                 --------------   -------------    ---------------    -------------    ------------

Effects of Exchange Rate Changes on Cash
   and Cash Equivalents                                    -                -              (2.9)                -             (2.9)
                                                 --------------   -------------    ---------------    -------------    ------------
Net Decrease in Cash and Cash
   Equivalents                                             -              (.1)            (22.4)                -            (22.5)
Cash and Cash Equivalents at Beginning of
   Period                                                  -              2.6             141.4                 -            144.0
                                                 --------------   -------------    ---------------    -------------    ------------
Cash and Cash Equivalents at End of Period           $     -          $   2.5          $  119.0           $     -          $ 121.5
                                                 ==============   =============    ===============    =============    ============
</TABLE>
<PAGE>


L.      Contingencies

        West Chicago, Illinois

        In 1973, a wholly owned subsidiary, Kerr-McGee Chemical Corporation, now
        Kerr-McGee  Chemical LLC (Chemical),  closed a facility in West Chicago,
        Illinois, that processed thorium ores for the federal government and for
        certain  commercial  purposes.  Historical  operations  had  resulted in
        low-level   radioactive   contamination  at  the  facility  and  in  the
        surrounding  areas.  In 1979,  Chemical  filed a plan  with the  Nuclear
        Regulatory  Commission (NRC) to decommission the facility.  In 1990, the
        NRC transferred  jurisdiction over the facility to the State of Illinois
        (the  State).  Following  is  the  current  status  of  various  matters
        associated with this former operation.

        Closed Facility - In 1994, Chemical, the City of West Chicago (the City)
        and  the  State   reached   agreement  on  the  initial   phase  of  the
        decommissioning plan for the closed West Chicago facility,  and Chemical
        began shipping material from the site to a licensed  permanent  disposal
        facility. In February 1997, Chemical executed an agreement with the City
        covering  the terms and  conditions  for  completing  the final phase of
        decommissioning  work. The State indicated approval of the agreement and
        issued license amendments authorizing the work. Chemical expects most of
        the work to be completed within the next two years,  leaving principally
        only groundwater remediation and/or monitoring for subsequent years.

        Vicinity  Areas - The U.S.  Environmental  Protection  Agency  (EPA) has
        listed four areas in the vicinity of the closed West Chicago facility on
        the National  Priority List (NPL)  promulgated by EPA under authority of
        the Comprehensive  Environmental Response,  Compensation,  and Liability
        Act of  1980  (CERCLA)  and has  designated  Chemical  as a  potentially
        responsible  party  in  these  four  areas.  The EPA  issued  unilateral
        administrative  orders  for two of the areas  (known as the  residential
        areas and Reed-Keppler  Park), which require Chemical to conduct removal
        actions to excavate  contaminated soils and ship the soils elsewhere for
        disposal.  Without  waiving any of its rights or  defenses,  Chemical is
        conducting  the work  required by the two orders.  Pursuant to approvals
        granted by the State, soils excavated from these properties are returned
        to the  former  facility  where they are  processed  for  shipment  to a
        permanent  disposal  facility.   Chemical  has  completed  the  required
        excavation  and  restoration   work  at  the  park  site.  Work  at  the
        residential  sites is expected to be substantially  completed by the end
        of 2002.

        The other two NPL sites  known as the Sewage  Treatment  Plant and Kress
        Creek involve low levels of insoluble thorium residues in riverbanks and
        bottom sediments,  virtually all within a floodway.  Contaminated  areas
        are dedicated mostly to recreational  uses and are part of existing park
        lands and a forest  preserve.  Chemical  has  substantially  completed a
        thorough  characterization  of  these  two  sites,  and now has  reached
        conceptual  agreement with local  governmental  authorities on a cleanup
        plan.  The  cleanup  plan  currently  is being  reviewed  by EPA.  It is
        expected  that EPA will  approve the plan in 2003 and that the work will
        take about  four  years to  complete.  The  agreement  is subject to the
        resolution of certain matters,  including agreements regarding potential
        natural resource damages and government oversight costs, and is expected
        to be incorporated in a consent decree that will address the outstanding
        issues.  The  consent  decree must be approved by the EPA and the State,
        and then entered by a federal  court.  During the third quarter of 2002,
        the  company  added $84  million  to its  reserves  for West  Chicago in
        connection with the cleanup agreement.  The $84 million reserve reflects
        the  company's  estimate  of the costs to  implement  and  complete  the
        agreement,  and is not reduced for the government's  share under Title X
        (discussed below).

        Government  Reimbursement - Pursuant to Title X of the Energy Policy Act
        of 1992 (Title X), the U.S.  Department  of Energy (DOE) is obligated to
        reimburse  Chemical  for certain  decommissioning  and cleanup  costs in
        recognition of the fact that about 55% of the facility's  production was
        dedicated to United States government contracts.  Title X was amended in
        the  third  quarter  of 2002  to  increase  the  amount  authorized  for
        reimbursement  to $365 million plus  inflation  adjustments.  The amount
        authorized  for  reimbursement  under  Title X is  expected to cover the
        government's full share of West Chicago cleanup costs. Through September
        30, 2002, Chemical has been reimbursed  approximately $156 million under
        Title X.

        Reimbursements   under   Title   X   are   provided   by   congressional
        appropriations.  Historically,  congressional appropriations have lagged
        Chemical's cleanup expenditures. At September 30, 2002, the government's
        share of costs  incurred by Chemical but not yet  reimbursed  by the DOE
        totaled  approximately  $103  million.  As a  result  of  the  increased
        authorizations, this arrearage has been reflected as a receivable in the
        company's September 30, 2002, financial statements. The company believes
        receipt of the remaining $103 million in due course following additional
        congressional  appropriations  is probable.  The company will  recognize
        recovery of the government's  share of future  remediation  costs on the
        West Chicago sites as the company incurs the costs.

        Henderson, Nevada

        In 1998, the company's  Chemical  subsidiary  closed certain  production
        facilities in Henderson,  Nevada, that produced ammonium perchlorate and
        other  related  products.  The ammonium  perchlorate  plant was built in
        1953,  and was owned by the  United  States  Navy which  contracted  for
        operations  until  1962,  when  it was  purchased  by a  predecessor  of
        Chemical.  The  ammonium  perchlorate  was  used  primarily  in  federal
        government defense and space programs.

        At the time of closure,  Chemical began  decommissioning and remediating
        associated perchlorate contamination, including surface impoundments and
        groundwater. In 1999 and 2001, Chemical entered into consent orders with
        the Nevada Department of Environmental  Protection that require Chemical
        to implement a long-term remedial system for groundwater treatment.  The
        long-term groundwater remediation system is based on new technology, and
        start-up  difficulties  have been  encountered.  Chemical  currently  is
        evaluating   possible   solutions   as  well  as  possible   alternative
        technologies.

        Decommissioning  and remediation  costs are estimated to total about $97
        million, of which about $76 million has been spent through September 30,
        2002.  At  September  30, 2002,  the  company's  environmental  reserves
        included $21 million for Henderson, which is principally for groundwater
        remediation.  Because  of the  uncertainties  associated  with  the  new
        technology,  it is reasonably possible that additions to the reserve may
        be  required in the future,  but the amount of any  additions  cannot be
        estimated  at  this  time.   However,   any  additional   provision  for
        groundwater  remediation is not expected to exceed about $7 million, the
        amount the company  believes is necessary to exhaust the self  retention
        Chemical has remaining on a 10-year $100 million  insurance  policy that
        caps  the  company's   exposure  for  cost  overruns   associated   with
        groundwater  remediation.  The amount of  additional  costs in excess of
        current reserves that is necessary to exhaust the  self-retention  could
        be greater,  however,  as application of the insurance policy to various
        components of groundwater  remediation costs is a matter currently under
        discussion with the insurance carrier.

        In 2000,  Chemical  initiated  litigation against the United States Navy
        seeking  contribution for remediation costs (Kerr-McGee  Chemical LLC v.
        United States, No.  1:00CV01285 EGS (D.D.C.)).  The litigation is in the
        early stages of  discovery.  Although the outcome of the  litigation  is
        uncertain,  the company believes Chemical is likely to recover a portion
        of its costs from the  government.  The amount of any recovery cannot be
        estimated at this time and, accordingly,  the company has not recorded a
        receivable  or  otherwise  reflected  in the  financial  statements  any
        potential recovery from the government.

        Forest Products

        Chemical  operates a forest products  business that treats railroad ties
        with wood  preservatives.  Chemical  currently  operates wood  treatment
        plants in five states and has  formerly  owned  wood-treating  plants in
        other  states.  Wood  preservatives  and  other  substances  used in the
        wood-treatment  process are or may be present at some of these sites and
        require  cleanup.  Costs  associated  with the  cleanup  activities  are
        accrued when losses are probable and costs are reasonably estimable.

        New Jersey site - The U.S. EPA notified the company and Chemical on July
        6, 1999,  they were  potentially  responsible  parties at a former  wood
        treatment  site in New  Jersey  that  has  been  listed  by the EPA as a
        Superfund site. At that time, the company and Chemical knew little about
        the site since  neither the company nor  Chemical  had owned or operated
        the site. The site had been owned and operated by a  predecessor,  which
        had sold the site to a third party  before  Chemical  became  affiliated
        with the  predecessor  in 1964.  EPA has  preliminarily  estimated  that
        cleanup costs may reach $120 million or more.

        There are substantial  uncertainties about Chemical's  connection to and
        responsibility  for  the  site,  and  Chemical  is  evaluating  possible
        defenses to any claim by EPA for response costs. EPA has not articulated
        the  factual  and legal  basis on which EPA  notified  the  company  and
        Chemical  that they are  potentially  responsible  parties.  The company
        assumes the EPA  notification is based on a successor  liability  theory
        premised on an acquisition made in 1964. However, as noted above, before
        the 1964  transaction,  the site had been sold to a third  party and the
        subsidiary  that owned and  operated  the site had been  dissolved.  The
        company  believes  that  Chemical  should  not be  responsible  for  the
        liabilities of the predecessor's dissolved subsidiaries.

        The CERCLA statute does not expressly  provide for successor  liability,
        and the  company  believes  that  the  application  of the  doctrine  of
        corporate  successor  liability  in  this  instance  would  violate  due
        process. In addition,  there appear to be other potentially  responsible
        parties though the other parties may not have received  notification  by
        the EPA. EPA has not ordered the company to perform work at the site and
        is instead  performing  the work itself.  The company has not provided a
        reserve for the site as it is not possible to reliably estimate whatever
        liability  the company or Chemical  may have for the cleanup  because of
        the aforementioned  uncertainties and the existence of other potentially
        responsible parties.

        Litigation - The company and Chemical  have been named in 22 lawsuits in
        three states  (Mississippi,  Louisiana and  Pennsylvania)  in connection
        with present and former forest  products  operations.  The lawsuits seek
        recovery under a variety of common law and statutory  legal theories for
        personal  injuries and property damages  allegedly caused by exposure to
        and/or   release  of  creosote   and  other   substances   used  in  the
        wood-treatment  process.  Some of the  lawsuits  are  filed on behalf of
        specifically  named  individual  plaintiffs,  while others purport to be
        filed on behalf of classes of allegedly  similarly situated  plaintiffs.
        Lead lawyers for the plaintiffs claim that in the aggregate about 10,000
        persons are involved or otherwise  represented  as  plaintiffs  in these
        cases.

        During the third  quarter of 2002,  the  company and  Chemical  executed
        settlement   agreements  to  settle  five  of  seven  cases  pending  in
        connection  with  Chemical's  Columbus,  Mississippi,   operations.  The
        agreements  require  payments  by  Chemical of up to $44 million for the
        benefit of about 5,500  individually-named  plaintiffs  who are eligible
        under the  agreements  to sign  releases.  In addition,  the  agreements
        require Chemical to pay up to an additional $6 million from any recovery
        in certain  insurance  litigation  that the company and  Chemical  filed
        against their insurance carriers.  The insurance litigation is discussed
        below.  The agreements  also include a class action  settlement fund for
        the benefit of a class of residents who do not sign individual  releases
        and who do not choose to opt out of the class settlement. The agreements
        require  payments by Chemical  totaling a minimum of $3.25 million and a
        maximum of $7.5 million for the benefit of the class. The precise amount
        of Chemical's  obligations under the agreements depends on the number of
        class members who submit proof of claim forms.  Although, the settlement
        agreements  are expected to resolve  substantially  all of the Columbus,
        Mississippi,  claims, the settlements will not resolve the claims of any
        class  members  who may opt out of the class  settlement  nor  claims by
        class members arising in the future for currently  unmanifested personal
        injuries. The settlements also do not cover two cases known as Maranatha
        Faith Center v. Kerr-McGee and Jamison v.  Kerr-McGee,  which involve 27
        plaintiffs who allege property damage and/or personal injury arising out
        of the Columbus, Mississippi, operations. Chemical is
        vigorously defending the two remaining lawsuits.

        The  implementation  of the  Mississippi  settlements  is progressing as
        expected.  Individually-named  plaintiffs  have delivered  approximately
        5,000 releases pursuant to the agreements, and the parties currently are
        in the process of evaluating the releases and  addressing  exceptions to
        the agreed upon form and otherwise ensuring the legal sufficiency of the
        releases.  At September  30, 2002,  Chemical  already has paid about $34
        million of the $44 million  maximum  required under the  agreements.  No
        payments will be made to the class  settlement fund unless and until the
        court has certified the class and approved the settlement.

        Also during the third quarter of 2002, the company and Chemical executed
        settlement  agreements  to settle all seven cases  pending in Louisiana.
        The agreements  require payment by Chemical of up to $12 million for the
        benefit of about 3,300 individually-named  plaintiffs who sign releases.
        In addition,  the agreements require Chemical to pay up to an additional
        $5 million  from any  recovery  in the  insurance  litigation  mentioned
        above.  The agreements  also include a class action  settlement fund for
        the benefit of a class of residents who do not sign individual  releases
        and who do not choose to opt out of the class settlement. The agreements
        require  payments  by  Chemical  totaling a minimum of $1 million  and a
        maximum of $2.5 million for the benefit of the class. The precise amount
        of Chemical's  obligations under the Louisiana agreements will depend on
        the number of plaintiffs  who sign and deliver  individual  releases and
        the  number of class  members  who  submit  proof of claims  forms.  The
        agreements  are expected to resolve  substantially  all of the claims in
        the Louisiana litigation, though they will not resolve the claims of any
        class members who may opt out of the class.

        The  implementation  of the  Louisiana  settlements  is  progressing  as
        expected.  Individually-named  plaintiffs  have delivered  approximately
        2,600 releases pursuant to the agreements.  The parties currently are in
        the process of evaluating the releases and addressing  exceptions to the
        agreed upon form and  otherwise  ensuring the legal  sufficiency  of the
        releases.  At September 30, 2002,  Chemical had not yet paid any portion
        of the $12 million maximum required under the agreements.  On October 1,
        2002,  Chemical  paid  $.5  million  pursuant  to the  settlements,  and
        Chemical expects to pay an as-yet undetermined  portion of the remainder
        by year  end.  No  payments  will be made to the class  settlement  fund
        unless  and until the court has  certified  the class and  approved  the
        settlement, which is not expected to occur until sometime in 2003.

        The  Mississippi  and Louisiana  settlements  are subject to a number of
        conditions,  including  the  signing  and  delivery of releases by named
        plaintiffs  and court  approval  of  various  matters.  Portions  of the
        settlement agreements,  including  certification of the settlement class
        and approval of the class settlement,  require court approval.  Although
        court approval is not certain, the company and Chemical expect to obtain
        court approval in due course. It is expected that some class members may
        opt out of the  settlements  and  pursue  individual  claims.  It is not
        expected that the number of potential  class members who opt out will be
        large  numbers  or that  the  claims  they may  pursue  will  result  in
        additional losses that are material in amount. The company is continuing
        to vigorously  defend eight cases in Pennsylvania  and the two remaining
        cases in Mississippi, pending any settlement of these remaining cases.

        Insurance  Litigation - The company and Chemical  filed suit against its
        insurance carriers to recover losses associated with the forest products
        litigation.  The company  believes that it has valid claims  against its
        insurers;  however,  the  prospects  for recovery are  uncertain and the
        litigation is in its very early stages. Accordingly, the company has not
        recorded a receivable or otherwise reflected in its financial statements
        any potential recovery form the insurance litigation.

        Financial  Reserves - The company  previously  established a $70 million
        reserve in  connection  with the  forest  products  litigation.  Through
        September 30, 2002, Chemical had paid approximately $34 million pursuant
        to the settlement  agreements (and through November 7, 2002, had paid on
        additional $4 million).  At September 30, 2002, the company's  remaining
        reserves for the forest  products  litigation  totaled $36 million.  The
        company  believes  the  reserve  is  adequate  to  cover  the  potential
        liability associated with these matters.  However,  although the company
        believes that the  likelihood  of a material  increase in the reserve is
        remote,  there is no assurance  that the company will not be required to
        adjust the reserve in the future in light of the inherent  uncertainties
        associated with litigation.

        Other Matters

        The company and/or its subsidiaries are parties to a number of legal and
        administrative  proceedings involving environmental and/or other matters
        pending  in  various  courts  or  agencies.  These  include  proceedings
        associated with facilities  currently or previously  owned,  operated or
        used by the company,  its subsidiaries,  and/or their predecessors,  and
        include claims for personal injuries and property damages. The company's
        current and former  operations  also  involve  management  of  regulated
        materials and are subject to various environmental laws and regulations.
        These  laws  and  regulations  will  obligate  the  company  and/or  its
        subsidiaries  to  cleanup  various  sites at which  petroleum  and other
        hydrocarbons,  chemicals,  low-level radioactive substances and/or other
        materials  have been  disposed of or released.  Some of these sites have
        been  designated  Superfund  sites by EPA  pursuant  to CERCLA.  Similar
        environmental  regulations  exist in  foreign  countries  in  which  the
        company and/or its subsidiaries  operate.  Environmental  regulations in
        the North Sea are particularly stringent.

        The company provides for costs related to  contingencies  when a loss is
        probable and the amount is reasonably estimable.  It is not possible for
        the  company to  reliably  estimate  the amount and timing of all future
        expenditures  related  to  environmental  and  legal  matters  and other
        contingencies because:

           *  some  sites  are  in  the early stages of investigation, and other
              sites may be identified in the future;

           *  cleanup  requirements  are  difficult  to  predict  at sites where
              remedial investigations have not been completed or final decisions
              have not been made regarding cleanup requirements, technologies or
              other factors that bear on cleanup costs;

           *  environmental  laws  frequently impose joint and several liability
              on all potentially responsible parties, and it can be difficult to
              determine the  number and financial condition of other potentially
              responsible parties and their share of  responsibility for cleanup
              costs;

           *  environmental  laws  and regulations are continually changing, and
              court proceedings are inherently uncertain;

           *  some  legal  matters  are  in the early stages of investigation or
              proceeding  or  their  outcomes  otherwise  may  be  difficult  to
              predict, and other legal matters may be identified in the future;

           *  revisions to the remedial design;

           *  unanticipated construction problems;

           *  identification of additional areas or volumes of contamination;

           *  inability to implement a planned engineering design or use planned
              technologies and excavation methods;

           *  changes in costs of labor, equipment and/or technology; and

           *  weather conditions.


        At September  30, 2002,  the company had reserves  totaling $289 million
        for cleaning up and  remediating  environmental  sites,  reflecting  the
        reasonably  estimable  costs for addressing  these sites.  This includes
        $119  million for the West  Chicago  sites,  $21 million for  Henderson,
        Nevada,   and  $37  million  for  forest  products   sites.   Cumulative
        expenditures  at all  environmental  sites  through  September 30, 2002,
        total $1.005 billion  (before  considering  government  reimbursements).
        Additionally, at September 30, 2002, the company had litigation reserves
        totaling  approximately $82 million for the reasonably  estimable losses
        associated  with  litigation.  This  includes $36 million for the forest
        products  litigation  described  above and $16 million for a  litigation
        settlement  negotiated  in  1999  involving  a  former  forest  products
        operation  located in  Hattiesburg,  Mississippi,  for which  payment is
        expected to be made in the fourth quarter of 2002.  Management believes,
        after consultation with general counsel,  that currently the company has
        reserved adequately for the reasonably  estimable costs of environmental
        matters and other contingencies.  However, additions to the reserves may
        be required as  additional  information  is  obtained  that  enables the
        company to better estimate its liabilities, including liability at sites
        now under review,  though the company  cannot now reliably  estimate the
        amount of future additions to the reserves.

M.      Business Segments

        Following  is a summary  of sales and  operating  profit for each of the
        company's  business segments for the third quarter and first nine months
        of 2002 and 2001.

<TABLE>
<CAPTION>

                                                     Three Months Ended                 Nine Months Ended
                                                        September 30,                     September 30,
(Millions of dollars)                               2002            2001(a)            2002            2001(a)
                                                -------------    -------------    --------------    ----------
<S>                                               <C>              <C>              <C>               <C>
Sales
  Exploration and production                      $  664.6         $  581.8         $ 1,813.8         $1,953.2
  Chemicals - Pigment                                266.8            234.4             748.1            727.6
  Chemicals - Other                                   53.0             47.5             152.9            144.2
                                                -------------    -------------    -------------     ----------
                                                     984.4            863.7           2,714.8          2,825.0
  All other                                              -                -                .1               .2
                                                -------------    -------------    -------------     ----------
      Total Sales                                 $  984.4         $  863.7         $ 2,714.9         $2,825.2
                                                =============    =============    =============     ==========

Operating Profit
  Exploration and production                      $  170.7         $  158.8         $   333.4         $  861.8
  Chemicals - Pigment                                 18.9              3.5              20.7             65.8
  Chemicals - Other                                   (7.7)             3.0              (5.2)           (16.5)
                                                -------------    -------------    -------------     ----------
      Total Operating Profit                         181.9            165.3             348.9            911.1

Other Expense (b)                                    (73.0)          (140.1)           (433.9)           (67.6)
                                                -------------    -------------    -------------     ----------

Income (Loss) from Continuing Operations
  before Income Taxes                                108.9             25.2             (85.0)           843.5
Provision for Income Taxes                          (195.7)            (7.9)           (181.2)          (311.0)
                                                -------------    -------------    -------------     ----------

Income (Loss) from Continuing Operations             (86.8)            17.3            (266.2)           532.5

Discontinued Operations, Net of Income
  Taxes                                                 .4              9.0             127.3             23.8

Cumulative Effect of Change in Accounting
  Principle, Net of Income Taxes                         -                -                 -            (20.3)
                                                -------------    -------------    -------------     ----------
Net Income (Loss)                                 $  (86.4)        $   26.3         $  (138.9)        $  536.0
                                                =============    =============    =============     ==========
</TABLE>

(a) Includes operating results of HS Resources beginning August 1, 2001.

(b) The 2002 third  quarter and  nine  months  include  pretax  charges of $92.8
    million and $183.2 million,  respectively,  for environmental provisions and
    $2  million  and  $72  million,  respectively,  for  litigation  provisions.
    Partially  offsetting  these charges is a Department of Energy mill tailings
    credit totaling $112.8 million in the 2002 third quarter (see note L). These
    amounts  are  included as  corporate  provisions  since the items  relate to
    former  operations  that are not  part of the  company's  current  operating
    activities.  The third quarter and nine months of 2001 include $78.4 million
    and  $82.1  million,  respectively,  for  environmental  provisions,  net of
    recoveries.  The first  nine  months of 2001 also  includes a gain of $181.4
    million  associated  with  the  reclassification  of 85%  of  the  corporate
    investment in Devon common stock to "trading"  from the "available for sale"
    category of investments


Item 2.  Management's  Discussion  and  Analysis  of Results of  Operations  and
         Financial Condition.

Comparison of 2002 Results with 2001 Results

Third-quarter  2002 loss  from  continuing  operations  totaled  $86.8  million,
compared  with  income  of $17.3  million  for the same 2001  period.  Loss from
continuing  operations  for the first nine  months of 2002 was  $266.2  million,
compared  with income of $532.5  million for the same 2001 period.  The net loss
for the 2002 third quarter was $86.4 million,  compared with 2001  third-quarter
net income of $26.3 million. For the first nine months of 2002, the net loss was
$138.9  million,  compared  with net  income of $536  million  for the same 2001
period.

Third-quarter  2002  operating  profit was $181.9  million,  up 10% from  $165.3
million in the 2001 quarter.  The increase in the 2002  third-quarter  operating
profit was primarily due to higher chemical  operating profit,  lower impairment
of oil and gas assets,  partially  offset by lower  exploration  and  production
operating  profit  (excluding  effects of asset  impairments  and  environmental
provisions) and higher  environmental  provisions  relating to operating  sites.
Operating  profit  for the first nine  months of 2002  totaled  $348.9  million,
compared  with  $911.1  million  in the same 2001  period.  The 62%  decline  in
operating  profit  was  primarily  due to  lower  operating  results  from  both
exploration and production and chemical business units, higher impairment of oil
and gas assets, and higher environmental provisions relating to operating sites.
Partially  offsetting the decrease were lower chemical asset impairment  charges
and the 2001 special charge for termination of manganese metal production at the
company's Hamilton, Miss., electrolytic chemical plant.

The third-quarter  2002 other expense totaled $73 million,  compared with $140.1
million  in the same 2001  period.  During the 2002 third  quarter  the  company
recorded income of $112.8 million relating to the anticipated U.S. Department of
Energy's  (DOE)  reimbursement  for certain  decommissioning  and cleanup  costs
incurred  by  the  company  (see  note  L).   Excluding   this  item,  the  2002
third-quarter other expense totaled $185.8 million, compared with $140.1 million
in 2001.  This increase was primarily due to higher net interest  expense ($21.3
million)  resulting  from  increased  debt  balances,  higher  foreign  currency
transaction  losses ($11.4  million),  and higher  environmental  provisions for
former plant sites ($8.6 million).

Other  expense  for the first nine months of 2002 was $433.9  million,  compared
with $67.6  million for the same 2001 period.  Benefiting  other  expense in the
first  nine  months  of 2002 was the  anticipated  DOE  reimbursement  of $112.8
million,  and  benefiting  other  expense  in the same 2001  period was a pretax
special gain of $181.4 million  associated with the  reclassification  of 85% of
the company's  investment in Devon common stock to "trading" from "available for
sale" (see note B). Excluding these special items, the increase in other expense
for the first  nine  months of 2002 was  primarily  due to higher  net  interest
expense ($83.4  million),  2002  litigation  provisions  ($72  million),  higher
environmental  provisions ($16.7 million),  higher foreign currency  transaction
losses ($33.2  million),  higher losses on derivative  instruments ($30 million)
and higher losses on equity affiliates ($16.9 million).

The  income  tax  expense  for the third  quarter  of 2002 was  $195.7  million,
compared  with $7.9 million in the same 2001 period.  The provision for the 2002
third quarter  included $146.4 million tax expense for the effects of the United
Kingdom  (U.K.) tax law  changes  (see note J),  and $7.2  million  tax  expense
associated  with net  environmental  reductions  due to the  recognition  of the
government's  portion of cleanup costs incurred at certain sites.  The provision
for the 2001  third  quarter  included  $42.4  million  tax  benefit  related to
environmental  provisions,  asset  impairment and costs associated with employee
severance and merger.  For the first nine months of 2002, the income tax expense
was $181.2  million,  compared with $311 million in 2001. The income tax expense
for the first nine months of 2002 included $146.4 million for the effects of the
U.K.  tax law  changes  as well as a $49.6  tax  benefit  primarily  related  to
litigation  reserves and environmental  provisions.  Excluding the tax effect on
these special items, the decrease in the provisions for both 2002 periods is due
to lower income.

SEGMENT OPERATIONS

Exploration and Production -

Operating profit for the third quarter of 2002 was $170.7 million, compared with
$158.8  million for the same 2001 period.  The increase in operating  profit was
primarily  due to higher crude oil and natural gas sales volumes of $52 million,
lower asset  impairment of $23.3 million and higher  natural gas sales prices of
$8.9 million,  partially  offset by higher  production  costs of $34.6  million,
higher exploration  expense of $24.7 million,  higher depreciation and depletion
expense of $5.1 million and higher  environmental  provisions  of $2.7  million.
Operating  profit for the first nine months of 2002 and 2001 was $333.4  million
and $861.8 million, respectively. The decrease in operating profit was primarily
due to lower  natural  gas and crude oil sales  prices of $404  million,  higher
asset impairment of $134.2 million, higher depreciation and depletion expense of
$73.9 million,  higher  production  costs of $69.6 million,  higher  exploration
expense of $11.5 million and higher  environmental  provisions of $11.3 million,
partially  offset by higher  natural  gas and crude oil sales  volumes of $193.3
million.  The increase in the 2002 third quarter and nine month production costs
was  primarily  due to the  Nansen,  Boomvang  and Leadon  properties  beginning
production  in 2002 and the  additional  costs in 2002  for the  Rocky  Mountain
properties   (formerly  HS  Resources   properties  acquired  in  August  2001).
Depreciation  and depletion  expense  increased  during both 2002 periods due to
higher production volumes from the Rocky Mountain properties.

Revenues  were $664.6  million and $581.8  million  for the three  months  ended
September  30, 2002 and 2001,  respectively,  and $1,813.8  million and $1,953.2
million for the first nine months of 2002 and 2001, respectively.  The following
table shows the  company's  average  crude oil and natural gas sales  prices and
volumes for both the third quarter and first nine months of 2002 and 2001.

<TABLE>
<CAPTION>

                                                        Three Months Ended               Nine Months Ended
                                                          September 30,                    September 30,
                                                      2002            2001(a)          2002            2001(a)
                                                   ------------     ------------    ------------    -------------
<S>                                                     <C>              <C>             <C>              <C>
Crude oil and condensate sales
(thousands of bbls/day)
  Domestic
      Offshore                                            50.5             55.6            52.7             55.8
      Onshore                                             30.1             25.8            29.5             21.4
  North Sea                                              104.9             93.9           104.7            100.9
  Other International                                      8.0              9.1             8.4              9.0
                                                   ------------     ------------    ------------    -------------
            Total continuing operations                  193.5            184.4           195.3            187.1
  Discontinued operations                                  2.3              9.3             5.6              8.4
                                                   ------------     ------------    ------------    -------------
            Total                                        195.8            193.7           200.9            195.5
                                                   ============     ============    ============    =============

Average crude oil sales price (per barrel) (b)
  Domestic
      Offshore                                          $22.95           $22.32          $21.11           $23.39
      Onshore                                            23.04            23.24           21.01            24.98
  North Sea                                              23.68            24.22           21.96            25.17
  Other International                                    23.57            22.16           21.37            22.08
  Average for continuing operations                      23.38            23.41           21.56            24.47
  Discontinued operations                               $20.89           $23.13          $19.62           $24.09

Natural gas sold (MMcf/day)
  Domestic
      Offshore                                             305              273             267              284
      Onshore                                              389              323             384              217
  North Sea                                                 95               58              98               63
                                                   ------------     ------------    ------------    -------------
            Total                                          789              654             749              564
                                                   ============     ============    ============    =============

Average natural gas sales price (per Mcf) (b)
  Domestic
      Offshore                                           $3.20            $2.97           $3.02            $4.95
      Onshore                                             2.70             2.79            2.73             4.27
  North Sea                                               1.85             1.37            2.17             2.27
  Average                                                $2.79            $2.74           $2.76            $4.39
</TABLE>


(a)    Includes operating results of HS Resources beginning August 1, 2001.

(b)    The  effects  of  the  2002 hedging  program  decreased the average crude
       oil sales prices from continuing  operations by $1.75 and $.93 per barrel
       during  the third  quarter  and nine  months of 2002,  respectively,  and
       increased  the average  natural gas sales prices by $.17 and $.04 per Mcf
       during the third quarter and nine months of 2002, respectively.

During the 2002 second quarter,  the company  announced that the Leadon field in
the  North  Sea  was  operating  at  lower  volumes  than  initially  projected.
Commissioning of the production facilities,  mechanical  malfunctions,  drilling
problems and reserve performance have all contributed to the lower than expected
results.  During the third quarter the company was evaluating possible solutions
for  addressing  the  primary  performance  issues.  Once these  activities  are
completed,  the  production  performance  and the  value  of the  field  will be
re-evaluated.  The Leadon field in the North Sea achieved  first oil in November
2001. The company's investment in the Leadon field totals $881.8 million.

Chemicals - Pigment

Third-quarter  2002  operating  profit was $18.9  million on  revenues of $266.8
million,  compared with  operating  profit of $3.5 million on revenues of $234.4
million  for the same 2001  period.  For the first nine months of 2002 and 2001,
operating profit was $20.7 million and $65.8 million,  respectively, on revenues
of $748.1 million and $727.6 million,  respectively.  Revenues  increased in the
third quarter due to higher sales volumes of $44.2 million,  partially offset by
lower pigment  sales prices of $11.9  million.  Pigment sales volumes  increased
26,200 tonnes in the 2002 third quarter, compared with the same 2001 period. The
increase in  operating  profit in the 2002 third  quarter was  primarily  due to
higher  revenues,  partially  offset by higher costs of sales of $23.6  million.
Revenues  increased  in the first  nine  months due to higher  sales  volumes of
$114.1 million, partially offset by lower sales prices of $93.6 million. Pigment
sales volumes increased 62,700 tonnes in the first nine months of 2002, compared
with the same 2001 period.  The decline in  operating  profit for the first nine
months  of 2002 was  primarily  due to higher  costs of sales of $76.3  million,
partially offset by higher revenues.

Chemicals - Other

Operating  loss in the 2002 third  quarter  was $7.7  million on revenues of $53
million,  compared  with  operating  profit of $3 million on  revenues  of $47.5
million in the same 2001 period.  The decrease in operating profit was primarily
due to 2002  environmental  provisions,  partially offset by higher results from
forest products operations. Operating loss for the first nine months of 2002 was
$5.2 million on revenues of $152.9  million,  compared with an operating loss of
$16.5  million  on  revenues  of $144.2  million  in the same 2001  period.  The
improved  2002 results were  primarily due to a 2001 charge of $24.9 million for
the  termination  of  manganese  metal  production,  partially  offset  by  2002
environmental  provisions  of $16.9  million and  improved  results  from forest
products operations.

Financial Condition

At September 30, 2002, the company's net working capital position was a negative
$51 million, compared with a negative $22.4 million at September 30, 2001, and a
positive  $192.2 million at December 31, 2001. The current ratio was 1.0 to 1 at
both  September 30, 2002 and 2001,  compared with 1.2 to 1 at December 31, 2001.
The  negative  working  capital at both  September  30,  2002 and 2001,  was not
indicative of a lack of liquidity as the company  maintains  sufficient  current
assets to settle current  liabilities  when due.  Additionally,  the company has
sufficient unused lines of credit and revolving credit facilities,  as discussed
below.  Current  asset  balances  are  minimized  as one way to finance  capital
expenditures and lower borrowing costs.

The company's  percentage of net debt (debt less cash) to capitalization was 59%
at September  30,  2002,  compared  with 59% at December  31,  2001,  and 54% at
September 30, 2001.  The increase from  September 30, 2001,  resulted  primarily
from higher debt  balances  and lower  equity due to the net loss and  dividends
paid in 2002.  The  company  had  unused  lines of credit and  revolving  credit
facilities  of $1,471.1  million at  September  30, 2002.  Of this amount,  $870
million can be used to support  commercial paper borrowings of Kerr-McGee Credit
LLC and $435 million can be used to support European commercial paper borrowings
of  Kerr-McGee  (G.B.)  PLC,  Kerr-McGee  Chemical  GmbH,   Kerr-McGee  Pigments
(Holland)  B.V. and  Kerr-McGee  International  ApS.  Currently  the size of the
company's commercial paper program is up to a total of $1.2 billion which can be
issued based on market conditions.

Operating  activities  provided  net cash of $1,042.5  million in the first nine
months of 2002.  The cash  provided by operating  activities  and proceeds  from
exploration  and  production  divestitures  in the first nine months of 2002 was
sufficient to pay the company's  capital  expenditures of $886.2 million,  repay
the net  reduction  in  long-term  debt of $309.4  million and pay  dividends of
$135.4 million.

Capital expenditures for the first nine months of 2002, excluding dry hole costs
and acquisitions, totaled $886.2 million, compared with $1,349.2 million for the
same period last year.  This decrease is due to the completion of major projects
(Leadon,  Boomvang and Nansen) since September 2001.  Exploration and production
expenditures,  principally  in the Gulf of Mexico and North Sea, were 88% of the
2002 total.  Chemical - pigment expenditures were 6% of the 2002 total. Chemical
- other and corporate incurred the remaining 6% of the expenditures.  Management
anticipates  that  the  cash  requirements  for the next  several  years  can be
provided through internally generated funds and selective borrowings.

Item 3.  Quantitative and Quantitative Disclosures about Market Risk.

In  March  2002,  the  company  hedged  a  portion  of its oil and  natural  gas
production  for  the  period  April  through   December  2002  to  increase  the
predictability of its cash flows and support  additional  capital projects since
the derivative  contracts fix the commodity prices to be received in the future.
At September 30, 2002, the company had outstanding contracts to hedge a total of
5.5  million  barrels  of North Sea crude  production,  2.8  million  barrels of
domestic  crude oil  production  and 23 million  MMBtu of  domestic  natural gas
production.  The fair value of the hedge contracts  outstanding at September 30,
2002,  was a liability of $30.6  million for North Sea crude oil,  $17.3 million
for domestic crude oil and $21.8 million for domestic natural gas.

During  October  2002,  the company  began  adding to its  existing  oil and gas
hedging  positions and expects to continue its oil and gas hedging  program into
2003.  These hedges will provide greater  certainty for cash flows.  The company
expects  to  hedge  approximately  50% of its oil and gas  production  in  2003.
Additionally,  the company  plans to enter into basis hedges for Rocky  Mountain
gas to achieve more predictable net realizations.

Through October 29, 2002, the following contracts have been added:

                                                                         Volume
                                                           Average     (MMBtuD)/
            Contract Type               Period              Price        (BOPD)
------------------------------    -------------------   -------------  ---------
 Fixed-price gas swaps             Nov. - Dec. 2002      $    4.32        130
 Fixed-price gas swaps                   2003            $    4.08        140
 Costless collar-gas                     2003           $3.50 - $5.26      55
 Fixed-price oil  (WTI)                  2003            $   26.03       3,500
 Fixed-price oil  (Brent)                2003            $   25.03       6,500

 Basis hedges - Rocky Mountain    Nov. 02 - March 03     $     .97         20


Item 4.  Controls and Procedures.

Within the 90 days prior to the date of this report,  an evaluation  was carried
out  under  the  supervision  and  with  the   participation  of  the  company's
management,  including its Chief Executive Officer and Chief Financial  Officer,
of the  effectiveness  of the design and operation of the  company's  disclosure
controls and  procedures  pursuant to Exchange Act Rule 13a-14.  Based upon that
evaluation,  the Chief Executive  Officer and Chief Financial  Officer concluded
that the company's  disclosure  controls and  procedures are effective in timely
alerting them to material  information  relating to the company  (including  its
consolidated subsidiaries) required to be included in the company's periodic SEC
filings.  There were no significant changes in our internal controls or in other
factors that could significantly affect these controls subsequent to the date of
their evaluation.

Critical Accounting Policies

Preparation of financial  statements in conformity  with  accounting  principles
generally  accepted in the United States requires  management to make estimates,
judgments  and  assumptions   that  affect  the  reported   amounts  of  assets,
liabilities,  revenues and expenses, and the disclosure of contingent assets and
liabilities. However, the accounting principles used by the company generally do
not change the company's reported cash flows or liquidity. Generally, accounting
rules do not involve a selection among alternatives,  but involve a selection of
the appropriate  policies for applying the basic  principles.  Interpretation of
the existing  rules must be done and  judgments  made on how the  specifics of a
given rule apply to the company.

The more  significant  reporting  areas impacted by  management's  judgments and
estimates  are crude oil and  natural  gas  reserve  estimation,  impairment  of
assets,  site  dismantlement,  environmental  remediation,  litigation  and  tax
accruals.  Management's  judgments  and  estimates  in these  areas are based on
information  available  from  both  internal  and  external  sources,  including
engineers,  legal counsel,  environmental  studies and historical  experience in
similar  matters.  Actual  amounts could differ from the estimates as additional
information becomes known.

Oil and Gas Reserves

The estimates of oil and gas reserves are prepared by the  company's  geologists
and  engineers.  Only proved oil and gas reserves are included in any  financial
statement disclosure.  The Securities and Exchange Commission has defined proved
reserves as the estimated  quantities of crude oil,  natural gas and natural gas
liquids which  geological  and  engineering  data  demonstrate  with  reasonable
certainty to be recoverable in future years from known reservoirs under existing
economic and  operating  conditions.  Even though the company's  geologists  and
engineers are knowledgeable and follow  authoritative  guidelines for estimating
reserves,   they  must  make  a  number  of  subjective   assumptions  based  on
professional  judgments in  developing  the  estimates.  Reserve  estimates  are
updated  at least  annually  and  consider  recent  production  levels and other
technical information about each field.  Revisions in the estimated reserves may
be necessary due to reservoir  performance,  new drilling,  sales price and cost
changes,  technological  advances,  new geological or geophysical data, or other
economic  factors.  The company  cannot  predict the amounts or timing of future
reserve revisions.

Depreciation  rates are determined based on these reserve quantity estimates and
the capitalized  costs of producing  properties.  As the estimated  reserves are
adjusted,  the  depreciation  expense for a property  will  change,  assuming no
change in production  volumes or the costs  capitalized.  Reserves are the basis
for  accumulating the estimated costs for the  dismantlement  and removal of the
company's  oil and  gas  production  and  related  facilities.  Such  costs  are
presently  accumulated  over the estimated  life of the facilities by use of the
unit-of-production  method. Estimated reserves may also be used as the basis for
calculating  the expected  future cash flows from a property,  which are used to
determine  whether  that  property  may be  impaired.  Reserves are also used to
estimate the supplemental  disclosure of the standardized  measure of discounted
future net cash flows relating to its oil and gas producing activities.  Changes
in the estimated  reserves are  considered  changes in estimates for  accounting
purposes and are reflected on a prospective basis.

Successful Efforts Method of Accounting

The company has elected to utilize the  successful  efforts method of accounting
for  its  oil  and  gas  exploration  and  development  activities.  Exploration
expenses,  including  geological and geophysical costs,  rentals and exploratory
dry holes, are charged against income as incurred. Costs of successful wells and
related  production  equipment and  developmental  dry holes are capitalized and
amortized  by  field  using  the  unit-of-production  method  as oil  and gas is
produced.  The  successful  efforts method  reflects the inherent  volatility in
exploring  for and  producing  oil and gas.  The  accounting  method  may  yield
significantly different operating results than the full cost method.

Impairment of Assets

All long-lived assets are monitored for potential  impairment when circumstances
indicate that the carrying value of the asset may be greater than its future net
cash flows. The evaluations  involve a significant  amount of judgment since the
results are based on estimated future events,  such as inflation  rates,  future
sales prices for oil, gas or chemicals,  future costs to produce these products,
estimates of future oil and gas reserves to be recovered and the timing thereof,
the economic and  regulatory  climates,  and other  factors.  The need to test a
property for  impairment may result from  significant  declines in sales prices,
unfavorable adjustments to oil and gas reserves, and changes in environmental or
abandonment  regulations.  Assets held for sale are reviewed for impairment when
the company approves the plan to sell. Estimates of anticipated sales prices are
highly judgmental and subject to material revision in future periods. Because of
the uncertainty inherent in these factors, the company cannot predict when or if
future impairment charges will be recorded.

Environmental Remediation, Litigation and Other Contingency Reserves

Kerr-McGee   management   makes  judgments  and  estimates  in  accordance  with
applicable  accounting  rules when it  establishes  reserves  for  environmental
remediation,  litigation  and  other  contingent  matters.  Provisions  for such
matters are charged to expense  when it is  probable  that a liability  has been
incurred  and  reasonable  estimates  of the  liability  can be made.  It is not
possible for management to reliably estimate the amount and timing of all future
expenditures related to environmental, legal or other contingent matters because
of continually changing laws and regulations,  inherent uncertainties associated
with  court and  regulatory  proceedings  as well as  cleanup  requirements  and
related work, the possible existence of other potentially  responsible  parties,
and the changing political and economic environment.  For these reasons,  actual
environmental,  litigation and other  contingency  costs can vary  significantly
from the company's  estimates.  For additional  information about contingencies,
refer to Note L.

Tax Accruals

The company has operations in several  countries around the world and is subject
to income and other  similar  taxes in these  countries.  The  estimation of the
amounts of income tax to be recorded by the company involves  interpretation  of
complex  tax  laws  and  regulations,  evaluation  of tax  audit  findings,  and
assessment  of how  the  foreign  taxes  effect  domestic  taxes.  Although  the
company's  management  believes its tax accruals are adequate,  differences  may
occur in the future depending on the resolution of pending and new tax matters.

The above  description  of the  company's  critical  accounting  policies is not
intended to be an all-inclusive  discussion of the uncertainties  considered and
estimates  made by management in applying  accounting  principles  and policies.
Results may vary  significantly if different  policies were used or required and
if new or different information becomes known to management.

                           Forward-Looking Information

Statements in this  quarterly  report  regarding  the company's or  management's
intentions,  beliefs or expectations,  or that otherwise speak to future events,
are  "forward-looking  statements"  within the meaning of the Private Securities
Litigation  Reform Act of 1995.  Future  results and  developments  discussed in
these  statements  may be affected by  numerous  factors and risks,  such as the
accuracy of the assumptions that underlie the statements, the success of the oil
and gas exploration and production program,  drilling risks, the market value of
Kerr-McGee's  products,  uncertainties in interpreting  engineering data, demand
for consumer  products for which  Kerr-McGee's  businesses supply raw materials,
general  economic  conditions,  and other  factors  and risks  discussed  in the
company's SEC filings.  Actual results and  developments  may differ  materially
from those expressed in this quarterly report.

                           PART II - OTHER INFORMATION

Item 1.      Legal Proceedings.

    (a)      On September  17, 2002  the  company  made  a voluntary  disclosure
             to  the  U.S.   Department   of  Commerce   that  the  company  had
             inadvertently   violated  Export   Administration   Regulations  by
             shipping  elemental boron over a four-year period without an export
             license.  The amount of any monetary fine is  uncertain.  It is not
             possible to  determine  whether a fine or penalty may be imposed in
             connection with this voluntary disclosure,  as such matters involve
             the exercise of judgment by the responsible  administrative agency.
             In light of the inadvertent nature of the violations, the fact that
             the  company   maintains   corporate   compliance   programs   that
             effectively  detected the  violations,  and the fact that  Chemical
             voluntarily    reported   the   violations   to   the   appropriate
             administrative  agency,  the company  believes  that the  resulting
             fines and penalties,  if any, should not be  significant.  Although
             the possible  fines and penalties  are not certain of  calculation,
             the  company  believes  the  likely  range of  possible  fines  and
             penalties is from zero to $1 million.

    (b)      For a  discussion  of  contingencies,  reference is made to (1) the
             Environmental  Matters  section  of  Management's   Discussion  and
             Analysis  in the  2001  Annual  Report  to  Stockholders,  which is
             incorporated by reference in Item 7 of the 2001 Form 10-K, (2) note
             L to the consolidated financial statements included herein, and (3)
             Item 3 of the  company's  2001 Annual  Report on Form 10-K,  all of
             which are incorporated herein by reference.


Item 6.      Exhibits and Reports on Form 8-K.

    (a)      Exhibits -

             Exhibit No
             ----------

                 99.1      Certification  Pursuant to 18 U.S.C. Section 1350, as
                           Adopted Pursuant to Section 906 of the Sarbanes-Oxley
                           Act of 2002.

                 99.2      Certification  Pursuant to 18 U.S.C. Section 1350, as
                           Adopted Pursuant to Section 906 of the Sarbanes-Oxley
                           Act of 2002.


    (b)      Reports on Form 8-K -

             On  August  19,  2002,  the  company  filed a  report  on Form  8-K
             announcing a conference  call to discuss its interim  third-quarter
             2002 financial and operating  activities and  expectations  for the
             future.



                                    SIGNATURE

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.



                             KERR-McGEE CORPORATION



  Date:  November 8, 2002                By: /s/ John M. Rauh
         ----------------                   ----------------------------------
                                             John M. Rauh
                                                 Vice President and Controller
                                                 and Chief Accounting Officer


<PAGE>


                                 CERTIFICATIONS

I, Luke R. Corbett, certify that:

        1.   I have reviewed this quarterly report on Form 10-Q;

        2.   Based  on  my  knowledge,  this  quarterly  report does not contain
             any untrue statement of a material fact or omit to state a material
             fact  necessary  to make  the  statements  made,  in  light  of the
             circumstances under which such statements were made, not misleading
             with respect to the period covered by this quarterly report;

        3.   Based  on  my   knowledge,  the  financial  statements,  and  other
             financial  information  included in this quarterly  report,  fairly
             present in all material respects the financial  condition,  results
             of  operations  and cash flows of the  issuer as of,  and for,  the
             periods presented in this quarterly report;

        4.   The  company's   other  certifying  officers and  I are responsible
             for establishing and maintaining disclosure controls and procedures
             (as  defined  in  Exchange  Act Rules  13a-14 and  15d-14)  for the
             company and we have:

               i. designed  such  disclosure  controls  and procedures to ensure
                  that material information  relating to the company,  including
                  its consolidated subsidiaries, is made known to them by others
                  within those entities, particularly during the period in which
                  this quarterly report is being prepared;

              ii. evaluated  the  effectiveness  of  the   company's  disclosure
                  controls and  procedures  as of a date within 90 days prior to
                  the filing  date of this  quarterly  report  (the  "Evaluation
                  Date"); and

             iii. presented in this quarterly report our conclusions about the
                  effectiveness of the disclosure controls and procedures  based
                  on our evaluation as of the Evaluation Date;

        5.   The  company's  other  certifying  officers  and  I have disclosed,
             based on our most recent evaluation,  to the company's auditors and
             the audit committee of the company's board of directors (or persons
             fulfilling the equivalent function):

               i. all significant  deficiencies  in  the  design or operation of
                  internal  controls which could adversely  affect the company's
                  ability to record,  process,  summarize  and report  financial
                  data  and  have  identified  for the  company's  auditors  any
                  material weaknesses in internal controls; and

              ii. any  fraud, whether or not material, that involves  management
                  or  other  employees  who  have  a  significant  role  in  the
                  company's internal controls; and

        6.   The company's  other  certifying  officers and  I have indicated in
             this quarterly report whether or not there were significant changes
             in internal  controls or in other factors that could  significantly
             affect internal controls  subsequent to the date of our most recent
             evaluation,   including  any  corrective  actions  with  regard  to
             significant deficiencies and material weaknesses.



                                         /s/Luke R. Corbett
                                         -----------------------
                                         Luke R. Corbett
                                         Chief Executive Officer
                                         November 8, 2002


<PAGE>

                                 CERTIFICATIONS

I, Robert M. Wohleber, certify that:

        1.   I have reviewed this quarterly report on Form 10-Q;

        2.   Based  on  my  knowledge,  this  quarterly  report does not contain
             any untrue statement of a material fact or omit to state a material
             fact  necessary  to make  the  statements  made,  in  light  of the
             circumstances under which such statements were made, not misleading
             with respect to the period covered by this quarterly report;

        3.   Based  on  my   knowledge,  the  financial  statements,  and  other
             financial  information  included in this quarterly  report,  fairly
             present in all material respects the financial  condition,  results
             of  operations  and cash flows of the  issuer as of,  and for,  the
             periods presented in this quarterly report;

        4.   The  company's  other  certifying  officers and  I  are responsible
             for establishing and maintaining disclosure controls and procedures
             (as  defined  in  Exchange  Act Rules  13a-14 and  15d-14)  for the
             company and we have:

               i. designed  such  disclosure  controls and  procedures to ensure
                  that material information  relating to the company,  including
                  its consolidated subsidiaries, is made known to them by others
                  within those entities, particularly during the period in which
                  this quarterly report is being prepared;

              ii. evaluated  the  effectiveness  of  the  company's   disclosure
                  controls and  procedures  as of a date within 90 days prior to
                  the filing  date of this  quarterly  report  (the  "Evaluation
                  Date"); and

             iii. presented  in  this  quarterly report  our  conclusions  about
                  the  effectiveness  of the disclosure  controls and procedures
                  based on our evaluation as of the Evaluation Date;

        5.   The  company's  other  certifying  officers and  I  have disclosed,
             based on our most recent evaluation,  to the company's auditors and
             the audit committee of the company's board of directors (or persons
             fulfilling the equivalent function):

               i. all  significant  deficiencies  in  the design or operation of
                  internal  controls which could adversely  affect the company's
                  ability to record,  process,  summarize  and report  financial
                  data  and  have  identified  for the  company's  auditors  any
                  material weaknesses in internal controls; and

              ii. any  fraud, whether or not material, that involves  management
                  or  other  employees  who  have  a  significant  role  in  the
                  company's internal controls; and

        6.   The  company's other  certifying  officers  and I have indicated in
             this quarterly report whether or not there were significant changes
             in internal  controls or in other factors that could  significantly
             affect internal controls  subsequent to the date of our most recent
             evaluation,   including  any  corrective  actions  with  regard  to
             significant deficiencies and material weaknesses.


                                         /s/Robert M. Wohleber
                                         -----------------------
                                         Robert M. Wohleber
                                         Chief Financial Officer
                                         November 8, 2002