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 June 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 June 30,
2002: 100,375,455.



<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            Six Months Ended
                                                                                June 30,                     June 30,
(Millions of dollars, except per-share amounts)                          2002            2001          2002             2001
                                                                       --------       --------       --------         --------

<S>                                                                    <C>              <C>          <C>              <C>
Sales                                                                  $  932.0         $919.3       $1,730.5         $1,961.5
                                                                       --------         ------       --------         --------

Costs and Expenses
  Costs and operating expenses                                            384.9          297.2          743.9            602.8
  Selling, general and administrative expenses                            121.6           55.9          177.1            103.6
  Shipping and handling expenses                                           25.1           26.0           54.2             55.4
  Depreciation and depletion                                              187.6          160.9          390.8            322.9
  Asset impairment                                                        157.5              -          157.5             13.2
  Exploration, including dry holes and
    amortization of undeveloped leases                                     46.8           42.1           78.7             91.9
  Taxes, other than income taxes                                           28.2           29.9           54.6             62.8
  Provision for environmental remediation and restoration,
    net of reimbursements                                                  88.0              -           90.4              3.7
  Interest and debt expense                                                68.6           37.0          139.3             81.8
                                                                       --------         ------       --------         --------
      Total Costs and Expenses                                          1,108.3          649.0        1,886.5          1,338.1
                                                                       --------         ------       --------         --------
                                                                         (176.3)         270.3         (156.0)           623.4
Other Income (Expense)                                                    (14.1)          (6.4)         (37.9)           194.9
                                                                       --------         ------       --------         --------
Income (Loss) before Income Taxes                                        (190.4)         263.9         (193.9)           818.3
Benefit (Provision) for Income Taxes                                       12.7          (97.8)          14.5           (303.1)
                                                                       --------         ------       --------         --------
Income (Loss) from Continuing Operations                                 (177.7)         166.1         (179.4)           515.2
Income from Discontinued Operations (net of income tax
  provision (benefit) of $(29.1) and $6.4 for the second
  quarter of 2002 and 2001, respectively, and $(24.5) and
  $10.9 for the first six months of 2002 and 2001, respectively)          119.7            8.9          126.9             14.8
Cumulative Effect of Change in Accounting Principle
  (net of benefit for income taxes of $10.8)                                  -              -              -            (20.3)
                                                                       --------         ------       --------         --------
Net Income (Loss)                                                      $  (58.0)        $175.0       $  (52.5)        $  509.7
                                                                       ========         ======       ========         ========

Net Income (Loss) per Common Share
     Basic -
          Continuing operations                                        $  (1.77)        $ 1.75       $  (1.79)        $  5.43
          Discontinued operations                                          1.19            .09           1.27             .15
          Cumulative effect of change in accounting principle                 -              -              -            (.21)
                                                                       --------         ------       --------         -------
                   Total                                               $   (.58)        $ 1.84       $   (.52)        $  5.37
                                                                       ========         ======       =========        =======

     Diluted -
          Continuing operations                                        $  (1.77)        $ 1.63       $  (1.79)        $  4.97
          Discontinued operations                                          1.19            .08           1.27             .14
          Cumulative effect of change in accounting principle                 -              -              -            (.19)
                                                                       --------         ------       --------         -------
                   Total                                               $   (.58)        $ 1.71       $   (.52)        $  4.92
                                                                       ========         ======       ========         =======

Dividends Declared per Common Share                                    $    .45         $  .45       $    .90         $   .90
                                                                       ========         ======       ========         =======

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

<TABLE>

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

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

ASSETS
------
<S>                                                                             <C>              <C>
Current Assets
  Cash                                                                          $   143.1        $    91.3
  Accounts receivable                                                               547.3            421.0
  Inventories                                                                       399.9            428.7
  Deposits, prepaid expenses and other assets                                       122.7            351.1
  Current assets associated with properties held for disposal                       102.4             75.4
                                                                                ---------        ---------
     Total Current Assets                                                         1,315.4          1,367.5
                                                                                ---------        ----------

Property, Plant and Equipment                                                    13,942.8         13,402.7
  Less reserves for depreciation, depletion and amortization                     (6,377.6)        (6,024.8)
                                                                                ---------        ---------
                                                                                  7,565.2          7,377.9
                                                                                ---------        ---------

Investments and Other Assets                                                        920.5            784.1
Goodwill                                                                            355.7            354.8
Long-term Assets Associated with Properties Held for Disposal                       741.1          1,076.6
                                                                                ---------        ---------
     Total Assets                                                               $10,897.9        $10,960.9
                                                                                =========        =========

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities
  Accounts payable                                                              $   654.9        $   619.5
  Short-term borrowings                                                                .2              8.4
  Long-term debt due within one year                                                  7.5             26.4
  Other current liabilities                                                         695.3            475.5
  Current liabilities associated with properties held for disposal                   41.9             45.5
                                                                                ---------        ---------
     Total Current Liabilities                                                    1,399.8          1,175.3
                                                                                ---------        ---------

Long-Term Debt                                                                    4,359.0          4,539.4
                                                                                ---------        ---------

Deferred Income Taxes                                                             1,181.5          1,387.3
Other Deferred Credits and Reserves                                                 734.7            645.9
Long-Term Liabilities Associated with Properties Held for Disposal                  159.2             38.9
                                                                                ---------        ---------
                                                                                  2,075.4          2,072.1
                                                                                ---------        ---------
Stockholders' Equity
  Common stock, par value $1 - 300,000,000 shares
    authorized, 100,383,638 shares issued at 6-30-02
    and 100,186,350 shares issued at 12-31-01                                       100.4            100.2
  Capital in excess of par value                                                  1,687.4          1,676.6
  Preferred stock purchase rights                                                     1.0              1.0
  Retained earnings                                                               1,400.1          1,542.6
  Accumulated other comprehensive loss                                              (48.0)           (64.2)
  Common shares in treasury, at cost - 8,183 shares
    at 6-30-02 and 1,020 at 12-31-01                                                  (.5)             (.1)
  Deferred compensation                                                             (76.7)           (82.0)
                                                                                ---------        ---------
     Total Stockholders' Equity                                                   3,063.7          3,174.1
                                                                                ---------        ---------
       Total Liabilities and Stockholders' Equity                               $10,897.9        $10,960.9
                                                                                =========        =========
</TABLE>

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>

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

                                                                               Six Months Ended
                                                                                   June 30,
(Millions of dollars)                                                        2002              2001
                                                                         ---------           -------

Operating Activities
--------------------
<S>                                                                         <C>              <C>
Net income (loss)                                                           $(52.5)          $ 509.7
Adjustments to reconcile net income to net cash
  provided by operating activities -
    Depreciation, depletion and amortization                                 426.1             353.3
    Asset impairment                                                         182.2              13.2
    Dry hole costs                                                            15.3              30.7
    Deferred income taxes                                                   (100.1)             56.2
    Provision for environmental remediation and
      restoration, net of reimbursement                                       90.4               3.7
    Gain on exploration and production divestitures                         (108.1)                -
    Loss on sale and retirement of assets                                      2.0               1.1
    Noncash items affecting net income                                       109.1            (146.3)
    Other net cash provided by operating activities                          164.7              37.8
                                                                         ---------           -------
      Net Cash Provided by Operating Activities                              729.1             859.4
                                                                         ---------           -------

Investing Activities
--------------------
Capital expenditures                                                        (626.0)           (855.3)
Dry hole expense                                                             (15.3)            (30.7)
Proceeds from exploration and production divestitures                        292.0                 -
Acquisitions                                                                     -             (23.8)
Other investing activities                                                   (21.6)            (25.9)
                                                                         ---------           -------
      Net Cash Used in Investing Activities                                 (370.9)           (935.7)
                                                                         ---------           -------

Financing Activities
--------------------
Issuance of long-term debt                                                   842.2             419.8
Repayment of long-term debt                                               (1,047.9)           (240.2)
Increase (decrease) in short-term borrowings                                  (8.2)              1.4
Issuance of common stock                                                       4.9              31.7
Dividends paid                                                               (90.2)            (85.1)
                                                                         ---------           -------
      Net Cash Provided by (Used in) Financing Activities                   (299.2)            127.6
                                                                         ---------           -------

Effects of Exchange Rate Changes on Cash and Cash Equivalents                 (7.2)              1.4
                                                                         ---------           -------

Net Increase in Cash and Cash Equivalents                                     51.8              52.7

Cash and Cash Equivalents at Beginning of Period                              91.3             144.0
                                                                         ---------           -------
Cash and Cash Equivalents at End of Period                               $   143.1           $ 196.7
                                                                         =========           =======

The accompanying notes are an integral part of this statement.

</TABLE>


                 KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 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  Kazakhstan,  Indonesian  and Australian oil and gas
       operations 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 June 30,
       2002  cover   approximately  55%  of  the  expected  remaining  2002  oil
       production  (52% of the  total  worldwide  expected  remaining  2002  oil
       production) and approximately 45% of expected remaining 2002 domestic gas
       production  (33%  of the  total  domestic  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 June 30,
       2002.
<TABLE>
<CAPTION>

                                                                                     Domestic Natural Gas
       (Millions of         North Sea Oil Hedging        Domestic Oil Hedging                Hedging
         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>
       July               1,860,000        $(4.5)       930,000         $(2.6)      7,750,000       $(1.4)
       August             1,860,000         (4.5)       930,000          (2.6)      7,750,000        (1.1)
       September          1,800,000         (4.0)       900,000          (2.4)      7,500,000        (1.3)
       October            1,860,000         (3.8)       930,000          (2.2)      7,750,000        (1.6)
       November           1,800,000         (3.4)       900,000          (1.9)      7,500,000        (3.8)
       December           1,860,000         (3.2)       930,000          (1.8)      7,750,000        (6.0)
                         ----------    ----------     ---------       ---------    ----------    ---------

       Total             11,040,000       $(23.4)     5,520,000        $(13.5)     46,000,000       $(15.2)
                         ==========    ==========     =========       =========    ==========    =========
</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, $52.1 million loss at
       June 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 at June 30, 2002, into earnings
       during the next 12 months,  assuming  no further  changes in fair  market
       value of the  contracts.  A total of $25.2 million loss was recognized in
       the 2002 second  quarter  related to contracts  that  settled  during the
       period. This loss offsets the prices realized on the physical sale of the
       crude oil and natural gas. The amount of hedge ineffectiveness recognized
       in the 2002 second quarter was immaterial.

       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 37% of the expected remaining 2002
       gas  production  from  the  Denver-Julesburg  Basin  (10%  of  the  total
       worldwide  expected  remaining 2002 gas  production)  and will be settled
       using the  closing  price on NYMEX.  Associated  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 $5.6  million  at June 30,  2002.  At
       June 30, 2002,  the company had deferred  gains totaling $15.3 million in
       accumulated other  comprehensive  income associated with these contracts.
       The company  expects to reclassify  the entire amount of these gains into
       earnings by the end of October 2002,  assuming no further changes in fair
       market value of the  contracts.  During the 2002 second  quarter,  a $3.6
       million gain was recognized  related to contracts that settled during the
       period.  The  amount  of the  hedge  ineffectiveness  in the 2002  second
       quarter 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 $28 million asset at June 30,
       2002. The net loss associated with these derivatives totaled $2.3 million
       in the second  quarter of 2002 and $27.2  million in the first six 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 June 30, 2002, was recorded as a $3.5 million
       liability.  The $3.5 million loss in accumulated other comprehensive loss
       at June 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 second quarter of 2002,  the company  reclassified
       $.4  million  of losses  on  forward  contracts  from  accumulated  other
       comprehensive loss to operating expenses in the income statement.  Of the
       existing net losses at June 30, 2002,  approximately $2.6 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 second 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 recorded as a $.1 million asset. 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 $7.1 million at June 30, 2002.  The
       company  recognized a $1.8 million interest expense reduction in the 2002
       second quarter from the swap arrangement.

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 June 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 June 30,
       2002, were as follows:

                                                       Gross
                                                     Carrying       Accumulated
     (Millions of dollars)                            Amount        Amortization
                                                     --------       ------------

     Amortized intangible assets:
       Proprietary seismic library (10-year life)      $ 2.0                $.1
       Customer list (5-year life)                       1.0                 .1
       Patents (life of patent)                           .1                  -
                                                       -----                ---
         Total                                         $ 3.1                $.2
                                                       =====                ===

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

       Goodwill                                      $355.7

       Amortization of purchased  intangibles for each of the next five years is
       estimated  to be $.4  million.  Of the  goodwill  recorded on the balance
       sheet of the  company at June 30,  2002,  $347.1  million  relates to the
       exploration  and  production  segment,  and $8.6  million  relates to the
       chemical pigment segment.  For the first six months of 2002, the chemical
       pigment  segment  goodwill  increased  $.9 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          Six Months Ended
                                                            June 30,                  June 30,
       (In millions, except per-share amounts)        2002          2001           2002        2001
                                                     ------        ------         ------      ------
       <S>                                           <C>           <C>            <C>         <C>
       Reported net income (loss)                    $(58.0)       $175.0         $(52.5)     $509.7
       Add back intangible amortization,
            net of tax                                    -            .6              -         1.2
                                                     ------        ------         ------      ------
       Adjusted net income (loss)                    $(58.0)       $175.6         $(52.5)     $510.9
                                                     ======        ======         ======      ======
</TABLE>

       Diluted  earnings  per share for the  second  quarter  of 2001 would have
       remained unchanged and for the first six months of 2001 would have been 1
       cent per share  higher or $4.93 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  in
       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 $73.3  million.  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 $10 million
       and $20.2  million  for the three  months  ended June 30,  2002 and 2001,
       respectively,  and $25.2  million  and $35.5  million  for the six months
       ended June 30, 2002 and 2001, respectively.

       As part of the company's  strategic  plan to divest  non-core oil and gas
       properties, certain domestic, North Sea and Kazakhstan oil and gas assets
       held for disposal  were  evaluated  and deemed  impaired  during the 2002
       second quarter.  The impairment losses reflect the difference between the
       estimated   sales  prices  for  the  individual   property  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 domestic
       and North Sea assets  totaled  $146.6  million  and is  reported as 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
       $24.7  million.  Also during the second  quarter of 2002, the oil and gas
       assets associated with a field located in the northwest area of the North
       Sea that the company does not currently plan to dispose of were deemed to
       be impaired  because the assets were no longer  expected to recover their
       net book value  through  future cash flows.  Expectations  of future cash
       flows  were lower than  those  previously  forecasted.  The amount of the
       impairment  loss  associated with this asset totaled $10.9 million and is
       reported as asset impairment in the Consolidated Statement 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:

                                                      Six Months Ended
                                                          June 30,
       (Millions of dollars)                          2002          2001
                                                   -------        ------
       Income tax payments                         $  48.9        $297.0
       Less refunds received                        (253.4)        (18.8)
                                                   -------        ------
       Net income tax payments (refunds)           $(204.5)       $278.2
                                                   =======        ======

       Interest payments                           $ 128.6        $ 87.4
                                                   =======        ======

F.     Financial Instruments and Comprehensive Income

       The second-quarter 2002 comprehensive income was $23.5 million,  compared
       with $166.7 million in the prior-year  second quarter.  For the first six
       months  ended  June  30,  2002,  comprehensive  loss was  $36.3  million,
       compared  with  comprehensive  income of $445.9  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 June 30,
       2002,  or December  31,  2001.  At June 30, 2002 and  December  31, 2001,
       available-for-sale securities for which fair value can be determined were
       as follows:
<TABLE>
<CAPTION>

                                                          June 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                          $74.8    $31.9       $14.9 (1)        $58.7     $31.9      $ (1.2) (1)
       U.S. government obligations -
         Maturing within one year                   2.2      2.2           -              2.9       2.9           -
         Maturing between one year
           and four years                           1.5      1.5           -              1.7       1.7           -
                                                                       -----                                 ------
             Total                                                     $14.9                                 $(1.2)
                                                                       =====                                 ======
</TABLE>

       (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.

G.     Equity Affiliates

       Investments in equity affiliates totaled $109.6 million at June 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 $4.6 million and $2.6 million for the three months
       ended June 30, 2002 and 2001,  respectively.  For the first six months of
       2002, the equity loss totaled $15.7 million  compared with a loss of $1.0
       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 six-month periods ended June 30, 2002 and 2001.
<TABLE>
<CAPTION>

                                                                For the Three Months Ended June 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                              $(177.7)      100.3        $(1.77)            $166.1       95.0        $1.75
                                                                       =========                                     =====

       Effect of Dilutive Securities:
         5 1/4% convertible debentures              -           -                              5.3        9.8
         7 1/2% convertible debentures              -           -                              2.2        1.6
         Stock options                              -           -                                -         .4
                                           ----------      ------                       ----------     ------
       Diluted EPS                            $(177.7)      100.3        $(1.77)            $173.6      106.8        $1.63
                                           ==========      ======      =========        ==========     ======        =====

</TABLE>
<TABLE>
<CAPTION>

                                                                 For the Six Months Ended June 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                              $(179.4)      100.3        $(1.79)            $515.2       94.8       $5.43
                                                                       =========                                    =====

       Effect of Dilutive Securities:
         5 1/4% convertible debentures              -           -                             10.7        9.8
         7 1/2% convertible debentures              -           -                              4.3        1.6
         Stock options                              -           -                                -         .4
                                           -----------     ------                       ----------     ------
       Diluted EPS                            $(179.4)      100.3        $(1.79)            $530.2      106.6       $4.97
                                           ===========     ======      =========        ==========     ======       =====
</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 also  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  $151.7  million  and  $155  million  of  its  pigment
       receivables during the second quarter of 2002 and 2001, respectively. The
       sale of the receivables  resulted in pretax losses of $1.2 million and $2
       million during the second quarter of 2002 and 2001, respectively.  During
       the first six months of 2002 and 2001,  the company  sold $285.9  million
       and $307.8 million, respectively, of its pigment receivables. The sale of
       the  receivables  resulted  in  pretax  losses of $2.2  million  and $4.6
       million during the first six 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  $103.6  million at June 30, 2002,  and $96.1 million at December
       31, 2001.

J.     Tax Law Change

       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.  It is estimated  that the effect of the tax changes in
       2002  will  increase  the  company's  2002  third  quarter  international
       provision for deferred income taxes by approximately $140 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  now   required  to  present   condensed
       consolidating  financial  information.  Since  neither  the  new  holding
       company nor any guarantee  arrangement existed during the first or second
       quarter of 2001, comparative  consolidating  financial information is not
       presented.

       The following condensed  consolidating financial information presents the
       balance  sheet as of June 30, 2002,  the related  statement of operations
       for the  second  quarter  and first six months of 2002,  and the  related
       statement  of cash  flows  for the  first  six  months  of 2002,  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 June 30, 2002

<CAPTION>

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

  <S>                                                <C>              <C>             <C>             <C>               <C>
  Sales                                              $   .1           $78.4           $913.7          $ (60.2)          $932.0
                                                -----------    ------------    -------------     ------------     ------------

  Costs and Expenses
    Costs and operating expenses                          -            22.0            423.4            (60.5)           384.9
    Selling, general and administrative
      expenses                                            -            86.7             34.9                -            121.6
    Shipping and handling expenses                        -             (.4)            25.5                -             25.1
    Depreciation and depletion                            -            31.9            155.7                -            187.6
    Asset impairment                                      -             3.2            154.3                -            157.5
    Exploration, including dry holes and
      amortization of undeveloped leases                  -             3.2             43.6                -             46.8
    Taxes, other than income taxes                      (.1)            3.8             24.5                -             28.2
    Provision for environmental remediation
      and restoration                                     -            73.8             14.2                -             88.0
    Interest and debt expenses                         28.1            64.2             28.3            (52.0)            68.6
                                                -----------    ------------    -------------     ------------     ------------
        Total Costs and Expenses                       28.0           288.4            904.4           (112.5)         1,108.3

                                                      (27.9)         (210.0)             9.3             52.3           (176.3)
  Other Income (Loss)                                (180.9)          118.8              9.4             38.6            (14.1)
                                                -----------    ------------    -------------     ------------     ------------
  Income (Loss) before Income Taxes                  (208.8)          (91.2)            18.7             90.9           (190.4)
  Benefit (Provision) for Income Taxes                 72.6            38.8            (59.9)           (38.8)            12.7
                                                -------------  -------------   -------------     ------------     ------------
  Income (Loss) from Continuing Operations           (136.2)          (52.4)           (41.2)            52.1           (177.7)
  Income from Discontinued Operations,
       net of tax                                         -               -            119.7                -            119.7
                                                -------------  -------------   -------------     ------------     ------------
  Net Income (Loss)                                 $(136.2)         $(52.4)          $ 78.5           $ 52.1         $  (58.0)
                                                =============  =============   ==============    ============     ============
</TABLE>

<PAGE>
<TABLE>



                     Kerr-McGee Corporation and Subsidiaries
                 Condensed Consolidating Statement of Operations
                        For the Six Months June 30, 2002

<CAPTION>

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

  <S>                                             <C>                 <C>             <C>              <C>              <C>
  Sales                                         $         -         $ 154.9         $1,724.7         $ (149.1)        $1,730.5
                                                -----------    ------------    -------------     ------------     ------------

  Costs and Expenses
    Costs and operating expenses                          -            49.7            843.9           (149.7)           743.9
    Selling, general and administrative
      expenses                                            -           100.7             76.4                -            177.1
    Shipping and handling expenses                        -             2.6             51.6                -             54.2
    Depreciation and depletion                            -            64.1            326.7                -            390.8
    Asset Impairment                                      -             3.2            154.3                -            157.5
    Exploration, including dry holes and
      amortization of undeveloped leases                  -             5.2             73.5                -             78.7
    Taxes, other than income taxes                        -             9.8             44.8                -             54.6
    Provision for environmental remediation
      and restoration                                     -            73.8             16.6                -             90.4
    Interest and debt expenses                         55.1           128.8             56.4           (101.0)           139.3
                                                -----------    ------------    -------------     ------------     ------------
        Total Costs and Expenses                       55.1           437.9          1,644.2           (250.7)         1,886.5

                                                      (55.1)         (283.0)            80.5            101.6           (156.0)
  Other Income (Loss)                                (244.5)          209.3             25.2            (27.9)           (37.9)
                                                -----------    ------------    -------------     ------------     ------------
  Income (Loss) before Income Taxes                  (299.6)          (73.7)           105.7             73.7           (193.9)
  Benefit (Provision) for Income Taxes                107.7            32.7            (93.2)           (32.7)            14.5
                                                -----------    ------------    -------------     ------------     ------------
  Income (Loss) from Continuing Operations           (191.9)          (41.0)            12.5             41.0           (179.4)
  Income from Discontinued Operations,
       net of tax                                         -               -            126.9                -            126.9
                                                -----------    ------------    -------------     ------------     ------------
  Net Income (Loss)                                 $(191.9)         $(41.0)          $139.4          $  41.0           $(52.5)
                                                ===========    ============    =============     ============     ============

</TABLE>



<PAGE>

<TABLE>

                     Kerr-McGee Corporation and Subsidiaries
                      Condensed Consolidating Balance Sheet
                                  June 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                                           $      -       $    2.3        $   140.8      $        -         $  143.1
    Intercompany receivables                          984.4           44.5          1,385.1        (2,414.0)               -
    Notes and accounts receivable                         -           37.3            510.5             (.5)           547.3
    Inventories                                           -            7.4            392.5               -            399.9
    Deposits, prepaid expenses                            -           62.6             61.9            (1.8)           122.7
    Current assets associated with properties
      held for disposal                                   -            1.1            101.3               -            102.4
                                                -----------    ------------   -------------    -------------    -------------
        Total Current Assets                          984.4          155.2          2,592.1        (2,416.3)         1,315.4

  Property, Plant and Equipment, net                      -        2,048.5          5,516.7               -          7,565.2
  Other Assets                                         12.5          763.1            227.3           (82.4)           920.5
  Goodwill                                                -          347.1              8.6               -            355.7
  Long-term Assets Associated with Properties
    Held for Disposal                                     -            2.5            738.6               -            741.1
  Investments in and Advances to Subsidiaries       1,416.2        4,549.1          1,848.2        (7,813.5)               -
                                                -----------    ------------   -------------   --------------    -------------
         Total Assets                              $2,413.1       $7,865.5        $10,931.5      $(10,312.2)        $10,897.9
                                                ===========    ============   =============   ==============    =============

  LIABILITIES AND STOCKHOLDERS' EQUITY
  Current Liabilities
    Accounts payable                               $   45.2       $   68.3        $   541.4      $        -         $  654.9
    Short-term borrowings                                 -             .2                -               -               .2
    Intercompany borrowings                               -        1,377.3          1,041.6        (2,418.9)               -
    Long-term debt due within one year                    -            7.5                -               -              7.5
    Other current liabilities                          27.4         (107.3)           777.0            (1.8)           695.3
    Current liabilities associated with
      properties held for disposal                        -              -             41.9               -              41.9
                                                -----------    -----------    -------------   --------------    -------------
        Total Current Liabilities                      72.6        1,346.0          2,401.9        (2,420.7)          1,399.8

  Long-Term Debt                                    1,847.1        2,019.7            492.2               -           4,359.0
  Deferred Credits and Reserves                           -        1,097.8            819.1             (.7)          1,916.2
  Long-term Liabilities Associated with
    Properties Held for Disposal                          -              -            159.2               -             159.2
  Investments by and Advances from Parent                 -              -            826.9          (826.9)                -
  Stockholders' Equity                                493.4        3,402.0          6,232.2        (7,063.9)          3,063.7
                                                ------------   -----------    -------------   --------------    --------------
      Total Liabilities and Stockholders'
        Equity                                     $2,413.1       $7,865.5        $10,931.5      $(10,312.2)        $10,897.9
                                                ============   ===========    =============   ==============    ==============

</TABLE>

<PAGE>
<TABLE>


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

<CAPTION>



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

Operating Activities
--------------------
<S>                                                  <C>               <C>              <C>                <C>           <C>
Net income (loss)                                    $(191.9)          $ (41.0)         $    139.4         $ 41.0        $   (52.5)
Adjustments to reconcile net income (loss) to
  net cash provided by operating activities -
    Depreciation, depletion and amortization               -              65.3               360.8              -            426.1
    Asset impairment                                       -               3.2               179.0              -            182.2
    Equity in earnings of subsidiaries                 180.2            (139.3)                  -          (40.9)               -
    Dry hole costs                                         -                 -                15.3              -             15.3
    Deferred income taxes                                  -             (37.6)              (62.5)             -           (100.1)
    Provision for environmental remediation
      and restoration of inactive sites                    -              73.8                16.6              -             90.4
    Gain on sale and retirement of assets                  -              (1.3)             (104.8)             -           (106.1)
    Noncash items affecting income                       0.1              68.2                40.8              -            109.1
    Other net cash provided by (used in)
        operating activities                            (7.2)            118.0                53.4             .5            164.7
                                                 -------------    -------------       -------------   -------------    -----------
           Net Cash Provided by (Used in)
             Operating Activities                      (18.8)            109.3               638.0             .6            729.1
                                                 -------------    -------------       -------------   -------------    -----------

Investing Activities
--------------------
Capital expenditures                                       -            (77.2)             (548.8)              -           (626.0)
Dry hole expense                                           -                -               (15.3)              -            (15.3)
Exploration and production divestitures                    -                -               292.0               -            292.0
Other investing activities                                 -             (3.3)              (18.3)              -            (21.6)
                                                 -------------    -------------       -------------   -------------    -----------
           Net Cash Used in Investing
             Activities                                    -            (80.5)             (290.4)              -           (370.9)
                                                 -------------    -------------       -------------   -------------    -----------

Financing Activities
--------------------
Issuance of long-term debt                             350.0                -               492.2              -             842.2
Repayment of long-term debt                                -            (18.7)           (1,029.2)             -          (1,047.9)
Increase (decrease) short-term borrowings                  -                -                (8.2)             -              (8.2)
Increase (decrease) in intercompany notes
  payable                                             (245.9)           (11.3)              257.8            (.6)                -
Issuance of common stock                                 4.9                -                   -              -               4.9
Dividends paid                                         (90.2)               -                   -              -             (90.2)
                                                 -------------    -------------       -------------   -------------    -----------
           Net Cash Provided by (Used in)
             Financing Activities                       18.8            (30.0)             (287.4)           (.6)           (299.2)
                                                 -------------    -------------       -------------   -------------    -----------
Effects of Exchange Rate Changes on Cash
   and Cash Equivalents                                    -                -                (7.2)             -              (7.2)
                                                 -------------    -------------       -------------   -------------    -----------
Net Increase (Decrease) in Cash and Cash
   Equivalents                                             -             (1.2)               53.0              -              51.8
Cash and Cash Equivalents at Beginning of
   Period                                                  -              3.5                87.8              -              91.3
                                                 -------------    -------------       -------------   -------------    -----------
Cash and Cash Equivalents at End of Period           $     -           $  2.3           $   140.8          $   -         $   143.1
                                                 =============    =============       =============   =============    ===========
</TABLE>

<PAGE>


L.     Contingencies

       West Chicago, Illinois

       In 1973, a wholly owned subsidiary,  Kerr-McGee Chemical Corporation, now
       Kerr-McGee Chemical LLC (Chemical),  closed the facility in West Chicago,
       Illinois, that processed thorium ores. 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 the closed facility.

       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 has indicated  approval of the agreement
       and has issued license amendments  authorizing much of 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.

       In 1992,  the State enacted  legislation  imposing an annual  storage fee
       equal to $2 per cubic foot of  byproduct  material  located at the closed
       facility,  which  cannot  exceed $26  million  per year.  Initially,  all
       storage fee payments were reimbursed to Chemical as decommissioning costs
       were  incurred.  Chemical was fully  reimbursed for all storage fees paid
       pursuant to this  legislation.  In June 1997, the legislation was amended
       to provide that future storage fee  obligations  are to be offset against
       decommissioning costs incurred but not yet reimbursed.

       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  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.  Chemical  has  completed  the required
       excavation and  restoration  work at the park site and will be monitoring
       the site pending final EPA  approval.  Work at the  residential  sites is
       expected to be substantially complete by the end of 2002.

       The other two areas (known as the Sewage Treatment Plant and Kress Creek)
       currently are being studied to determine the extent of contamination, and
       Chemical  is in  discussions  with  the  relevant  authorities  regarding
       cleanup requirements. Chemical has indicated a willingness to undertake a
       cleanup of the final two sites subject to various  conditions,  including
       the  continued  reimbursement  of the  government's  share of  costs  for
       cleaning up the West  Chicago  sites.  If these  conditions  are met, the
       costs of  cleanup  for these two sites  are not  expected  to exceed  the
       additional federal funding, as more fully 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  much of the  facility's  production  was
       dedicated to United States government  contracts.  Title X was amended in
       1998 to increase the amount  authorized for reimbursement to $140 million
       plus  inflation  adjustments.  Through June 30,  2002,  Chemical has been
       reimbursed approximately $146 million under Title X. These reimbursements
       are provided by congressional appropriations.

       Historically,  congressional  authorizations  under  Title X have  lagged
       Chemical's cleanup  expenditures.  At June 30, 2002, the amount of claims
       filed by Chemical but not yet reimbursed by the DOE totaled approximately
       $96  million.  The  Congress  has  passed a bill  that  would  bring  the
       congressional  authorizations current as well as authorize  reimbursement
       for the  government's  share  of  future  costs.  The bill  currently  is
       awaiting the President's signature.

       Forest Products

       The forest  products  business of Chemical treats railroad ties with wood
       preservatives.  Chemical  currently operates wood treatment plants in six
       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.

       The EPA has notified Chemical that it is a potentially  responsible party
       at a former wood treatment site in New Jersey that has been listed by the
       EPA as a  Superfund  site.  EPA has  alleged  the site was once owned and
       operated by a predecessor of Chemical.  EPA has  preliminarily  estimated
       that cleanup  costs may  approximate  $120  million or more.  Chemical is
       evaluating  possible defenses to any claim by EPA for response costs. The
       company has not  provided a reserve for the site as it is not possible to
       reliably  estimate whatever  liability  Chemical may have for the cleanup
       because of uncertainties regarding Chemical's connection to the site.

       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.

       The company has  reached an  agreement  to settle five of the seven cases
       pending in  Mississippi.  The  settlements  address  approximately  6,000
       claims asserted  against the company in  Mississippi.  The settlements do
       not cover the  remaining  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 a site near
       the  company's  Mississippi  operation.  In addition,  the company has an
       agreement in principle to settle all of the cases  pending in  Louisiana.
       This agreement addresses  approximately 3,000 claims asserted against the
       company  in  Louisiana.  The  settlements  are  subject  to a  number  of
       conditions,  including  the signing of releases by a specified  number of
       claimants  and court  approval of various  matters.  The company  also is
       seeking to resolve the cases filed in Pennsylvania  and the two remaining
       cases in Mississippi,  and pending any resolution is vigorously defending
       those cases.

       The company  established a $70 million reserve for the above  settlements
       and the estimated  liability for the  remaining  cases,  making the total
       reserve  for  litigation  related to forest  products  $86  million.  The
       company believes the reserve is adequate to cover the potential liability
       associated  with these  matters.  In light of the inherent  uncertainties
       associated  with  litigation,  however,  there is no  assurance  that the
       company will not be required to adjust the reserve in the future.

       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 clean up  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; and

             *   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.

       As of June 30, 2002,  the company had reserves  totaling $224 million for
       cleaning  up  and  remediating   environmental   sites,   reflecting  the
       reasonably  estimable costs for addressing these sites. This includes $46
       million for the West  Chicago  sites and $39 million for forest  products
       sites.  Cumulative  expenditures at all environmental  sites through June
       30, 2002,  total $977  million.  Also at June 30,  2002,  the company had
       litigation   reserves  totaling   approximately   $115  million  for  the
       reasonably estimable losses associated with litigation, including the $86
       million for former forest products operations. 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 second quarter and first six months
       of 2002 and 2001.
<TABLE>
<CAPTION>


                                                        Three Months Ended                    Six Months Ended
                                                             June 30,                             June 30,
(Millions of dollars)                                    2002           2001                 2002           2001
                                                     --------          ------             --------        --------

<S>                                                   <C>              <C>                <C>             <C>
Sales
  Exploration and production                          $ 614.6          $624.6             $1,149.2        $1,371.4
  Chemicals - Pigment                                   264.8           245.0                481.3           493.2
  Chemicals - Other                                      52.4            49.6                 99.8            96.7
                                                      -------          ------             --------        ---------
                                                        931.8           919.2              1,730.3         1,961.3
  All other                                                .2              .1                   .2              .2
                                                      -------          ------             --------        --------
      Total Sales                                     $ 932.0          $919.3             $1,730.5        $1,961.5
                                                      =======          ======             ========        ========

Operating Profit
  Exploration and production                          $  44.0          $299.2             $  162.7        $  703.0
  Chemicals - Pigment                                    13.3            25.9                  1.8            62.3
  Chemicals - Other                                      (1.1)            3.6                  2.5           (19.5)
                                                      -------          ------             --------        --------
      Total Operating Profit                             56.2           328.7                167.0           745.8

Other Income (Expense) (1)                             (246.6)          (64.8)              (360.9)           72.5
                                                      -------          ------             --------        --------

Income (Loss) from Continuing Operations
  before Income Taxes                                  (190.4)          263.9               (193.9)          818.3
Benefit (Provision) for Income Taxes                     12.7           (97.8)                14.5          (303.1)
                                                      -------          ------             --------        --------

Income (Loss) from Continuing Operations               (177.7)          166.1               (179.4)          515.2

Discontinued Operations, Net of Income
  Taxes                                                 119.7             8.9                126.9            14.8

Cumulative Effect of Change in Accounting
  Principle, Net of Income Taxes                            -               -                    -           (20.3)
                                                      -------          ------             --------        --------
  Net Income (Loss)                                   $ (58.0)         $175.0             $  (52.5)       $   509.7
                                                      =======          ======             ========        =========

</TABLE>

(1)    The  2002  second   quarter  and  six months  include  pretax  charges of
       $73.8 million for environmental provisions and $70 million for litigation
       provisions.  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 first six months of 2001  includes a
       gain of $181.4 million associated with the reclassification of 85% of the
       corporate  investment in Devon common stock to "trading" from  "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

Second-quarter  2002 loss from  continuing  operations  totaled $177.7  million,
compared  with  income of $166.1  million  for the same 2001  period.  Loss from
continuing  operations  for the first six  months  of 2002 was  $179.4  million,
compared  with income of $515.2  million for the same 2001 period.  The net loss
for the 2002 second quarter was $58 million,  compared with 2001  second-quarter
net income of $175 million.  For the first six months of 2002,  the net loss was
$52.5  million,  compared  with net income of $509.7  million  for the same 2001
period.

Second-quarter  2002 operating  profit was $56.2  million,  down 83% from $328.7
million in the 2001 quarter.  Operating  profit for the 2002 second  quarter was
impacted by special charges totaling $172 million,  including $157.5 million for
impairment of oil and gas assets,  mainly  non-core assets held for sale that do
not meet the criteria for discontinued operations, and $14.2 million relating to
environmental  provisions for operating sites.  Excluding these special charges,
the decrease in operating  profit was primarily due to lower crude oil,  natural
gas and pigment sales prices,  higher depreciation expense, and higher operating
expense for the  exploration  and production  unit,  partially  offset by higher
crude oil,  natural gas and pigment  sales  volumes and lower  pigment  per-unit
production costs.

Operating  profit  for the first six months of 2002 was $167  million,  compared
with $745.8  million in the same 2001 period.  Operating  profit was  negatively
impacted by higher asset  impairment  charges;  lower crude oil, natural gas and
pigment sales prices;  higher depreciation expense; and higher operating expense
for the exploration and production  unit,  partially offset by higher crude oil,
natural gas and pigment sales volumes and lower exploration expense.

The  second-quarter  2002 other expense  totaled $246.6  million,  compared with
$64.8  million in the same 2001 period.  In July 2002, a review of the company's
environmental   remediation  projects  was  completed  and  additional  reserves
totaling  $73.8  million  were  determined  to be necessary to provide for costs
related to  activities at former plant sites.  Also in the 2002 second  quarter,
the company agreed to settle certain forest products litigation claims for which
$70 million in reserves  were  provided.  Excluding  these items,  other expense
totaled  $102.8  million in the  second  quarter  of 2002,  compared  with $64.8
million in 2001.  The increase in the 2002 second  quarter was  primarily due to
higher net interest  expense  resulting from increased debt balances and foreign
currency  transaction losses,  compared with gains in 2001,  partially offset by
gains on derivative instruments.

Other expense for the first six months of 2002 was $360.9 million, compared with
other income of $72.5 million for the same 2001 period. For the first six months
of 2002,  other expense  included  special  pretax  charges of $73.8 million for
environmental  provisions  and $70 million for litigation  reserves.  Benefiting
other income in the first six months of 2001 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 six
months  of 2002 was  primarily  due to  higher  net  interest  expense,  foreign
currency  transaction losses compared with 2001 gains, higher losses from equity
affiliates and losses on derivative instruments compared with 2001 gains.

The  income  tax  benefit  for the  second  quarter  of 2002 was $12.7  million,
compared  with tax  expense of $97.8  million in the same 2001  period.  For the
first six months of 2002,  the income tax  benefit was $14.5  million,  compared
with tax expense of $303.1 million in 2001. The income tax benefit for both 2002
periods included a $55.3 million tax benefit related to environmental provisions
and litigation reserves. The provision for the first six months of 2001 included
$63.5 million of tax expense related to the reclassification of the Devon common
stock.  Excluding the tax effect on these items,  the decrease in provisions for
both 2002 periods is due primarily to lower income.

SEGMENT OPERATIONS

Exploration and Production -

Operating  profit for the second quarter of 2002 was $44 million,  compared with
$299.2  million  for the same 2001  period.  Operating  profit for the first six
months of 2002 and 2001 was $162.7 million and $703 million,  respectively.  The
decrease in  operating  profit in both 2002 periods was  primarily  due to lower
crude oil and  natural  gas sales  prices,  higher  depreciation  and  depletion
expense,  and higher operating  costs,  partially offset by higher crude oil and
natural gas sales  volumes.  In addition,  partially  offsetting  the decline in
operating profit for the first six months of 2002 was lower exploration  expense
compared with the same period in 2001.

Revenues were $614.6  million and $624.6 million for the three months ended June
30, 2002 and 2001,  respectively,  and $1,149.2 million and $1,371.4 million for
the first six 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 second quarter and first six months of 2002 and 2001.

<TABLE>
<CAPTION>

                                                        Three Months Ended                Six Months Ended
                                                             June 30,                         June 30,
                                                      2002             2001            2002             2001
                                                   ------------     ------------    ------------    -------------

 <S>                                                     <C>            <C>              <C>               <C>
 Crude oil and condensate sales
 (thousands of bbls/day)
   Domestic
       Offshore                                           54.3            55.6             53.8             56.0
       Onshore                                            29.4            18.5             29.3             19.1
   North Sea                                              98.0            99.3            104.5            104.4
   Other International                                     8.5             8.8              8.6              8.9
                                                        ------          ------           ------           ------
             Total continuing operations                 190.2           182.2            196.2            188.4
   Discontinued operations                                 5.6             8.7              7.3              8.0
                                                        ------          ------           ------           ------
             Total                                       195.8           190.9            203.5            196.4
                                                        ======          ======           ======           ======

 Average crude oil sales price (per barrel)
   Domestic
       Offshore                                         $22.19           $22.85          $20.23           $23.94
       Onshore                                           21.54            24.68           19.95            26.17
   North Sea                                             22.74            26.37           21.08            25.61
   Other International                                   23.82            21.30           20.34            22.04
   Average for continuing operations                     22.44            24.88           20.65            25.00
   Discontinued operations                              $21.35           $25.44          $19.42           $24.66

 Natural gas sold (MMcf/day)
   Domestic
       Offshore                                            253              297             248              289
       Onshore                                             379              162             381              162
   North Sea                                                99               64             100               66
                                                        ------          -------          ------           ------
             Total                                         731              523             729              517
                                                        ======          =======          ======           ======

 Average natural gas sales price (per Mcf)
   Domestic
       Offshore                                          $3.32            $4.81           $2.91            $5.90
       Onshore                                            3.02             4.42            2.75             5.77
   North Sea                                              1.81             2.11            2.32             2.68
   Average                                               $2.96            $4.36           $2.74            $5.45
</TABLE>


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  reservoir  performance  have all  contributed  to the lower  than
expected results.  The company is currently  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 $877 million.

Chemicals - Pigment

Second-quarter  2002  operating  profit was $13.3  million on revenues of $264.8
million,  compared  with  operating  profit of $25.9 million on revenues of $245
million  for the same 2001  period.  For the first six  months of 2002 and 2001,
operating profit was $1.8 million and $62.3 million,  respectively,  on revenues
of $481.3 million and $493.2 million,  respectively.  Revenues  increased in the
second quarter of 2002 due to higher pigment sales volumes,  partially offset by
lower pigment sales prices.  The decline in operating  profit in the 2002 second
quarter was primarily due to higher costs of pigment sales,  partially offset by
higher  revenues.  Revenues for the first six months of 2002 decreased  compared
with  the  same  2001  period,  primarily  due to lower  pigment  sales  prices,
partially  offset by higher  pigment  sales  volumes.  The decline in  operating
profit for the first six months of 2002 was primarily due to lower  revenues and
higher pigment costs of sales.

Chemicals - Other

Operating  loss in the 2002 second quarter was $1.1 million on revenues of $52.4
million,  compared  with  operating  profit of $3.6 million on revenues of $49.6
million in the same 2001  period.  Operating  profit for the first six months of
2002 was $2.5 million on revenues of $99.8  million,  compared with an operating
loss of $19.5 million on revenues of $96.7 million in the same 2001 period.  The
2002 second quarter  includes a special charge of $7 million  associated with an
increase in environmental provisions at Henderson,  Nev. Impacting the first six
months  of 2001  was a $24.9  million  special  charge  for the  termination  of
manganese  metal  production  at the  Hamilton,  Miss.,  electrolytic  facility.
Excluding  these  special  charges,  operating  profit  for  both  2002  periods
increased primarily due to improved results from the forest products operations.
The company is considering options for exiting the forest products business.

Financial Condition

At June 30, 2002,  the  company's  net working  capital  position was a negative
$84.4  million,  compared with a negative  $136 million at June 30, 2001,  and a
positive  $192.2  million at December 31, 2001. The current ratio was .9 to 1 at
both June 30, 2002 and 2001,  compared  with 1.2 to 1 at December 31, 2001.  The
negative working capital at both June 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 58%
at June 30, 2002,  compared  with 59% at December 31, 2001,  and 43% at June 30,
2001. The increase from June 30, 2001,  resulted  primarily from the acquisition
of HS  Resources.  The company had unused lines of credit and  revolving  credit
facilities of $1,462.2  million at June 30, 2002.  Of this amount,  $870 million
can be used to support  commercial paper borrowings of Kerr-McGee Credit LLC and
$420 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.

In April 2002,  the company  issued $350  million of 5.375%  notes due April 15,
2005. See note B regarding the interest rate swap associated with this debt. The
proceeds  received  by  the  company  were  used  to  repay  various  short-term
borrowings.

Operating activities provided net cash of $729.1 million in the first six months
of 2002. The cash provided by operating activities and proceeds from exploration
and  production  divestitures  in the first six months of 2002 was sufficient to
pay the company's capital expenditures of $626 million,  repay the net reduction
in long-term debt of $205.7 million and pay dividends of $90.2 million.

Capital  expenditures for the first six months of 2002, excluding dry hole costs
and  acquisitions,  totaled $626 million,  compared with $855.3  million for the
same period last year. Exploration and production  expenditures,  principally in
the Gulf of Mexico and North Sea, were 91% of the 2002 total. Chemical - pigment
expenditures were 6% of the 2002 total.  Chemical - other and corporate incurred
the  remaining  3% of the  expenditures.  Management  anticipates  that the cash
requirements  for the next  several  years can be  provided  through  internally
generated funds and selective borrowings.

Commodity 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.  The
company  hedged  a total  of  16.5  million  barrels  of  North  Sea  crude  oil
production,  8.3  million  barrels of  domestic  crude oil  production  and 68.8
million MMBtu of domestic  natural gas  production.  The fair value of the hedge
contracts  outstanding  at June 30, 2002,  was a liability of $23.4  million for
North Sea crude oil,  $13.5 million for domestic crude oil and $15.2 million for
domestic natural gas.

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, tax law changes, 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.  The company and its wholly owned subsidiary Kerr-McGee Chemical,
             LLC are involved in litigation in connection with current and
             former forest products operations. See Item 3 of the company's 2001
             Annual Report on Form 10-K, which is incorporated herein by
             reference, for additional information on this and other
             contingencies.

             The company has reached an agreement to settle five of the seven
             cases pending in Mississippi. The settlements address approximately
             6,000 claims asserted against the company in Mississippi. The
             settlements do not cover the remaining 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 a site near the company's
             Mississippi operation. In addition, the company has an agreement in
             principle to settle all of the cases pending in Louisiana. This
             agreement addresses approximately 3,000 claims asserted against the
             company in Louisiana. The settlements are subject to a number of
             conditions, including the signing of releases by a specified number
             of claimants and court approval of various matters. The company
             also is seeking to resolve the cases filed in Pennsylvania and the
             two remaining cases in Mississippi, and pending any resolution is
             vigorously defending those cases.

             The company established a $70 million reserve for the above
             settlements and the estimated liability for the remaining cases,
             making the total reserve for litigation related to forest products
             $86 million. The company believes the reserve is adequate to cover
             the potential liability associated with these matters. In light of
             the inherent uncertainties associated with litigation, however,
             there is no assurance that the company will not be required to
             adjust the reserve in the future.

         B.  The company's wholly owned chemical subsidiary operates through an
             indirect subsidiary the downstream portion of an Australian joint
             venture. The joint venture, known as Tiwest Pty Ltd, engages in the
             production of titanium dioxide pigment. The company has a 50%
             interest in the joint venture. The joint venture received a
             complaint and notice of violation from the Department of
             Environmental Waters and Catchment Protection in Western Australia
             alleging violations of the Environmental Protection Act (1986).
             This matter currently is pending in the Court of Petty Sessions,
             Perth, Western Australia, and concerns a chlorine release at the
             facility. The liability of the joint venture and the amount of any
             monetary fine are uncertain. As currently filed, the maximum fine
             is $625,000 (Australian dollars), and is not expected to have a
             material adverse effect on the company.

         C.  For a discussion of contingencies, reference is made to 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. See also
             note L to the consolidated financial statements included herein.
             Reference is also made to Item 3 of the company's 2001 Annual
             Report on Form 10-K and Part II Item 1 of the company's 2002 First
             Quarter Report on Form 10-Q, which are incorporated herein by
             reference.

Item 4.      Submission of Matters to a Vote of Security Holders

        (a)  The 2002 annual meeting of stockholders was held on May 14, 2002.

        (b)  Directors elected at the 2002 annual meeting were the following:

                  Matthew R. Simmons
                  Nicholas J. Sutton
                  Ian L. White-Thomson

             Directors whose term of office continues after the 2002 annual
             meeting were the following:

                  William E. Bradford                         Martin C. Jischke
                  Luke R. Corbett                             William C. Morris
                  Sylvia A. Earle                             Leroy C. Richie
                  David C. Genever-Watling                    Farah M. Walters

        (c)  The following matters were voted upon at the annual meeting:

             (1)  Following are the directors elected at the 2002 annual meeting
                  and the tabulation of votes Related to each nominee.

                                                                Votes
                                          Affirmative           Withheld
                                          -----------           --------

                Matthew R. Simmons         82,459,084          4,158,950
                Nicholas J. Sutton         82,274,536          4,343,498
                Ian L. White-Thomson       82,423,701          4,194,333

             (2) The stockholders ratified the appointment of Ernst & Young LLP
                 as independent public Accountants for  2002. Affirmative  votes
                 were 84,810,166; negative votes were 2,890,135, and abstentions
                 were 131,558.

             (3) The stockholders approved the 2002 Annual Incentive
                 Compensation Plan. Affirmative Votes were 82,298,008; negative
                 votes were 3,703,230, and abstentions were 301,061.

             (4) The stockholders approved the 2002 Long Term Incentive Plan.
                 Affirmative votes were 67,905,999; negative votes were
                 10,300,044, and abstentions were 418,576.

             (5) The  stockholders approved  the Amendment of  the Amended and
                 Restated Certificate of  Incorporation of  Kerr-McGee Operating
                 Corporation. Affirmative votes were 72,457,276; negative votes
                 were 5,674,492 and abstentions were 492,852.

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

        (a)  Exhibits -

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

               10.1 The 2002 Annual Incentive Compensation Plan effective
                    May 14,2002.

               10.2 The 2002 Long Term Incentive Plan effective May 14, 2002.

               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 May 21, 2002, the company filed a report on Form 8-K announcing
             a conference call to discuss its interim second-quarter 2002
             financial and operating activities and expectations for the future.

             On June 20, 2002, the company filed a report on Form 8-K announcing
             a conference call to discuss its interim second-quarter 2002
             financial and operating activities and expectations for the future.

             On July 22, 2002, the company filed a report on Form 8-K announcing
             a conference call to discuss its second-quarter 2002 financial and
             operating results 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:  August 9, 2002                   By:/s/ John M. Rauh
         --------------                      ----------------------------------
                                                John M. Rauh
                                                Vice President and Controller
                                                and Chief Accounting Officer