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 March 31, 2004

                                       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 April 30,
2004: 101,394,560.


<PAGE>


                             KERR-McGEE CORPORATION


                                      INDEX


                          PART I. FINANCIAL INFORMATION


Item 1.  Financial Statements                                               PAGE
                                                                            ----

     Consolidated Statement of Income for the Three Months Ended
     March 31, 2004 and 2003                                                   1

     Consolidated Balance Sheet at March 31, 2004 and December 31, 2003        2

     Consolidated Statement of Cash Flows for the Three Months Ended
     March 31, 2004 and 2003                                                   3

     Notes to Consolidated Financial Statements                                4

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations                                            28

Item 3.  Quantitative and Qualitative Disclosures about Market Risk           34

Item 4.  Controls and Procedures                                              36

Forward - Looking Information                                                 36


                           PART II. OTHER INFORMATION

Item 1.  Legal Proceedings                                                    37

Item 6.  Exhibits and Reports on Form 8-K                                     37

SIGNATURE                                                                     39


<PAGE>

                         PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

                 KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES
                        CONSOLIDATED STATEMENT OF INCOME
                                   (UNAUDITED)
                                                            Three Months Ended
                                                                March 31,
                                                          ---------------------
(Millions of dollars, except per-share amounts)             2004           2003
--------------------------------------------------------------------------------

Revenues                                                  $1,116.3     $1,099.6
                                                          --------     --------

Costs and Expenses
  Costs and operating expenses                               403.0        384.4
  Selling, general and administrative expenses                83.6         70.9
  Shipping and handling expenses                              37.7         32.0
  Depreciation and depletion                                 190.3        189.6
  Accretion expense                                            6.6          6.2
  Impairments on assets held for use                          13.2          5.1
  Loss (gain) associated with assets held for sale             3.4         (5.2)
  Exploration, including dry holes and
    amortization of undeveloped leases                        50.6        140.5
  Taxes, other than income taxes                              28.4         25.4
  Provision for environmental remediation and
    restoration, net of reimbursements                         (.8)        17.3
  Interest and debt expense                                   57.0         65.0
                                                          --------     --------
      Total Costs and Expenses                               873.0        931.2
                                                          --------     --------

                                                             243.3        168.4
Other Income (Expense)                                         (.3)         1.7
                                                          --------     --------

Income from Continuing Operations before Income Taxes        243.0        170.1
Provision for Income Taxes                                   (90.8)       (65.9)
                                                          --------     --------

Income from Continuing Operations                            152.2        104.2
Income from Discontinued Operations (net of income
  tax provision)                                                 -           .4
Cumulative Effect of Change in Accounting Principle,
  (net of tax benefit of $18.2)                                  -        (34.7)
                                                          --------     --------

Net Income                                                $  152.2     $   69.9
                                                          ========     ========

Income (Loss) per Common Share
  Basic -
    Continuing operations                                 $   1.52     $   1.04
    Cumulative effect of accounting change                       -         (.34)
                                                          --------     --------

      Total                                               $   1.52     $    .70
                                                          ========     ========
  Diluted -
    Continuing operations                                 $   1.41     $    .99
    Cumulative effect of accounting change                       -         (.31)
                                                          --------     --------

      Total                                               $   1.41     $    .68
                                                          ========     ========

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

The accompanying notes are an integral part of this statement.


<PAGE>

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

                                                        March 31,   December 31,
(Millions of dollars)                                        2004           2003
--------------------------------------------------------------------------------

ASSETS
------
Current Assets
  Cash                                                  $   143.5     $   142.0
  Accounts receivable                                       525.0         583.3
  Inventories                                               411.9         393.4
  Investment in equity securities                           490.5         509.8
  Deposits, prepaid expenses and other assets               119.4         127.6
  Current assets associated with properties held
    for disposal                                               .4            .4
                                                        ---------     ---------
    Total Current Assets                                  1,690.7       1,756.5
                                                        ---------     ---------

Property, Plant and Equipment                            14,518.4      14,353.2
  Less reserves for depreciation, depletion and
    amortization                                         (7,190.9)     (6,886.1)
                                                        ---------     ---------
                                                          7,327.5       7,467.1
                                                        ---------     ---------

Investments and Other Assets                                553.7         564.7
Goodwill                                                    357.0         357.3
Long-Term Assets Associated with Properties Held
  for Disposal                                               12.3          28.3
                                                        ---------     ---------

      Total Assets                                      $ 9,941.2     $10,173.9
                                                        =========     =========

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities
  Accounts payable                                      $   398.3     $   475.5
  Long-term debt due within one year                        475.7         574.3
  Taxes on income                                            89.2         126.6
  Taxes, other than income taxes                             39.3          36.5
  Accrued liabilities                                     1,059.8       1,018.7
                                                        ---------     ---------
    Total Current Liabilities                             2,062.3       2,231.6
                                                        ---------     ---------

Long-Term Debt                                            3,005.9       3,081.2
                                                        ---------     ---------

Deferred Income Taxes                                     1,276.6       1,258.7
Asset Retirement Obligations                                388.3         384.6
Other Deferred Credits and Reserves                         547.0         566.0
Long-Term Liabilities Associated with Properties
  Held for Disposal                                          11.1          16.0
                                                        ---------     ---------
                                                          2,223.0       2,225.3
                                                        ---------     ---------
Stockholders' Equity
  Common stock, par value $1 - 300,000,000 shares
    authorized, 101,458,368 shares issued at 3-31-04
    and 100,892,354 shares issued at 12-31-03               101.5         100.9
  Capital in excess of par value                          1,734.7       1,708.3
  Preferred stock purchase rights                             1.0           1.0
  Retained earnings                                       1,033.8         927.2
  Accumulated other comprehensive loss                     (148.4)        (45.4)
  Common shares in treasury, at cost - 60,056 shares
    at 3-31-04 and 31,924 at 12-31-03                        (2.9)         (1.6)
  Deferred compensation                                     (69.7)        (54.6)
                                                        ---------     ---------
    Total Stockholders' Equity                            2,650.0       2,635.8
                                                        ---------     ---------

      Total Liabilities and Stockholders' Equity        $ 9,941.2     $10,173.9
                                                        =========     =========

The  "successful  efforts"  method of accounting for oil and gas exploration and
production   activities  has  been  followed  in  preparing  these  consolidated
financial statements.

The accompanying notes are an integral part of this statement.


<PAGE>

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

                                                            Three Months Ended
                                                                March 31,
                                                          ---------------------

(Millions of dollars)                                        2004          2003
-------------------------------------------------------------------------------

Operating Activities
--------------------
Net income                                                $ 152.2       $  69.9
Adjustments to reconcile net income to net cash
  provided by operating activities -
    Depreciation, depletion and amortization                203.1         206.7
    Accretion expense                                         6.6           6.2
    Impairments on assets held for use                       13.2           5.1
    Loss associated with assets held for sale                 3.4            .9
    Dry hole costs                                            8.1         104.6
    Deferred income taxes                                    73.1          32.1
    Provision for environmental remediation and
      restoration, net of reimbursements                      (.8)         17.3
    Cumulative effect of change in accounting principle         -          34.7
    Noncash items affecting net income                       33.9          28.2
    Other net cash used in operating activities            (218.2)       (184.0)
                                                          -------       -------
        Net Cash Provided by Operating Activities           274.6         321.7
                                                          -------       -------
Investing Activities
--------------------
Capital expenditures                                       (161.7)       (201.4)
Dry hole costs                                               (8.1)       (104.6)
Proceeds from sales of assets                                 3.6         185.4
Other investing activities                                   34.5         (10.0)
                                                          -------       -------
        Net Cash Used in Investing Activities              (131.7)       (130.6)
                                                          -------       -------
Financing Activities
--------------------
Issuance of long-term debt                                      -          31.5
Repayment of long-term debt                                (102.0)       (184.0)
Issuance of common stock                                      5.5             -
Dividends paid                                              (45.4)        (45.2)
Other financing activities                                      -           (.4)
                                                          -------       -------
        Net Cash Used in Financing Activities              (141.9)       (198.1)
                                                          -------       -------

Effects of Exchange Rate Changes on Cash and
  Cash Equivalents                                             .5          (2.2)
                                                          -------       -------

Net Increase (Decrease) in Cash and Cash Equivalents          1.5          (9.2)

Cash and Cash Equivalents at Beginning of Period            142.0          89.9
                                                          -------       -------

Cash and Cash Equivalents at End of Period                $ 143.5       $  80.7
                                                          =======       =======

The accompanying notes are an integral part of this statement.


<PAGE>


                 KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2004


A.   Basis of Presentation and Accounting Policies

     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,   these  condensed  financial  statements  should  be  read  in
     conjunction with the financial statements and the notes thereto included in
     the company's latest annual report on Form 10-K.

     Business Segments
     -----------------

     The company has three  reportable  segments:  oil and gas  exploration  and
     production, production and marketing of titanium dioxide pigment (chemicals
     - pigment),  and production and marketing of other  chemicals  (chemicals -
     other).  Other chemicals include the company's  electrolytic  manufacturing
     and marketing operations and forest products treatment business.

     Employee Stock Option Plans
     ---------------------------

     The company  accounts for its stock option plans under the  intrinsic-value
     method permitted by Accounting Principles Board Opinion No. 25, "Accounting
     for Stock  Issued  to  Employees."  Accordingly,  no  stock-based  employee
     compensation  cost is  reflected  in net income for the  issuance  of stock
     options  under the  company's  plans,  since all options  were  fixed-price
     options with an exercise  price equal to the market value of the underlying
     common stock on the date of grant.

     Statement of Financial  Accounting Standards (FAS) No. 123, "Accounting for
     Stock-Based Compensation," prescribes a fair-value method of accounting for
     employee stock options under which  compensation  expense is measured based
     on the  estimated  fair  value  of  stock  options  at the  grant  date and
     recognized  over the period of time that the options  vest.  The  following
     table  illustrates  the effect on net income and earnings per share had the
     company  applied  the  fair-value  recognition  provisions  of  FAS  123 to
     stock-based employee compensation.

                                                            Three Months Ended
                                                                March 31,
     (Millions of dollars,                                 --------------------
     except per share amounts)                               2004          2003
     ---------------------------------------------------------------------------
     Net income as reported                                $152.2         $69.9
      Less stock-based compensation expense determined
       using a fair-value method, net of taxes               (3.4)         (4.0)
                                                           ------         -----
     Pro forma net income                                  $148.8         $65.9
                                                           ======         =====

     Net income per share -
      Basic -
       As reported                                         $ 1.52         $ .70
       Pro forma                                             1.48           .66

      Diluted -
       As reported                                         $ 1.41         $ .68
       Pro forma                                             1.38           .64


     Reclassifications
     -----------------

     Certain  reclassifications  have  been  made to the  prior  year  financial
     statements  to conform  with the current  year  presentation.  In the third
     quarter of 2003, the company began reporting the net marketing fee received
     from sales of  nonequity  North Sea crude oil  marketed  on behalf of other
     partners in revenues. Prior to the 2003 third quarter, the company reported
     purchases and sales of nonequity crude oil on a gross basis.


B.   Derivatives

     The company is exposed to risk from  fluctuations  in crude oil and natural
     gas prices,  foreign currency exchange rates, and interest rates. To reduce
     the impact of these risks on earnings and to increase the predictability of
     its cash flow, from time to time the company enters into certain derivative
     contracts,  primarily  swaps and  collars  for a portion of its oil and gas
     production,  forward  contracts  to buy and sell  foreign  currencies,  and
     interest rate swaps.

     The company periodically enters into financial derivative  instruments that
     generally fix the commodity  prices to be received for a portion of its oil
     and gas production in the future.  At March 31, 2004 and December 31, 2003,
     the outstanding commodity-related derivatives accounted for as hedges had a
     net current  liability  fair value of $311.9  million  and $167.8  million,
     respectively. The fair value of these derivative instruments was determined
     based on prices  actively  quoted,  generally NYMEX and Dated Brent prices.
     The  company had  after-tax  deferred  losses of $199.4  million and $106.3
     million in  accumulated  other  comprehensive  loss  associated  with these
     contracts  at March 31,  2004 and  December  31,  2003,  respectively.  The
     company expects to reclassify  these losses into earnings during 2004, when
     the associated  hedged  production  occurs  (assuming no further changes in
     fair-market value of the contracts).  During the first quarter of 2004, the
     company realized losses on settlement of $29.4 million on U.S. oil hedging,
     $23.5 million on North Sea oil hedging and $8.5 million on U.S. natural gas
     hedging.  During the first quarter of 2003, the company  realized losses on
     contract settlements of $32.8 million on U.S. oil hedging, $28.5 million on
     North Sea oil hedging and $55.4 million on U.S. natural gas hedging. Losses
     for hedge  ineffectiveness are recognized as a reduction to revenues in the
     Consolidated  Statement  of  Income  and were not  material  for the  first
     quarter of 2004 or 2003.

     Between  March  31,  2004 and  April 6,  2004,  the  company  entered  into
     additional  financial  derivative  instruments  in the form of  fixed-price
     swaps and costless  collars  relating to specified  quantities of projected
     2004, 2005 and 2006 crude oil and natural gas production volumes.  The 2005
     and 2006  derivatives  have been  designated  as  hedges  of the  company's
     expected  future  production;  however,  a  portion  of the 2004  contracts
     currently  do not  qualify for hedge  accounting  since  Kerr-McGee's  U.S.
     production  from August through  December 2004 is either already hedged or,
     in the case of Rocky Mountain production, does not have corresponding basis
     swaps in place  to make the  hedges  highly  effective.  As a  result,  the
     company will recognize  mark-to-market gains and losses in earnings for the
     non-hedge  quantities  beginning  in the  second  quarter  of 2004.  If the
     Westport  Resources  Corporation  merger  (discussed  in Note K  below)  is
     consummated, these contracts may qualify for hedge accounting treatment and
     be designated as hedges in future periods.

     In addition to the company's  hedging  program,  Kerr-McGee  Rocky Mountain
     Corp. holds certain gas basis swaps settling between 2004 and 2008. Through
     December  2003,  the company  treated  these gas basis  swaps as  non-hedge
     derivatives,  and changes in fair value were  recognized  in  earnings.  On
     December 31, 2003, the company  designated  those swaps settling in 2004 as
     hedges since the basis swaps have been coupled with natural gas fixed-price
     swaps,  while the remainder settling between 2005 and 2008 will continue to
     be treated as non-hedge  derivatives.  At March 31, 2004, these derivatives
     are recorded at their fair value of $14.6  million,  of which $1 million is
     recorded as a current asset and $13.6 million is recorded in  investments -
     other  assets.  At December 31, 2003,  these  derivatives  were recorded at
     their fair  value of $22.7  million,  of which the  company  recorded  $7.7
     million in current  assets and $14.9 million in investments - other assets.
     The net  losses  associated  with  these  non-hedge  derivatives  were  not
     material for the first quarter of 2004 or 2003.

     The company's marketing subsidiary,  Kerr-McGee Energy Services Corporation
     (KMES)  markets  natural gas  (primarily  equity  gas) in the Denver  area.
     Existing  contracts  for the physical  delivery of gas at fixed prices have
     not been  designated as hedges and are marked to market in accordance  with
     FAS 133.  KMES also has entered into natural gas swaps and basis swaps that
     offset  its  fixed-price  risk  on  physical  contracts.  These  derivative
     contracts  lock in the  margins  associated  with the  physical  sale.  The
     company believes that risk associated with these derivatives is minimal due
     to the creditworthiness of the counterparties.  The net asset fair value of
     these  derivative  instruments  was not material at March 31, 2004 or 2003.
     The fair  values of the  outstanding  derivative  instruments  at March 31,
     2004,  were based on prices  actively  quoted.  During the first quarter of
     2004,  the net gain  associated  with these  derivative  contracts  was not
     material.  For the 2003 first  quarter,  net losses  associated  with these
     contracts  totaled $9.8 million,  of which $10.8 million loss was reflected
     as a reduction of revenue and $1 million gain was included in other income.
     The gains or losses on these derivative  contracts are substantially offset
     by the fixed prices realized on the physical sale of the natural gas.

     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, and sales of euro) have been
     designated  and  have  qualified  as  cash  flow  hedges  of the  company's
     anticipated  future cash flow needs for a portion of its  operating  costs,
     capital  expenditures and raw material  purchases.  These forward contracts
     generally have  durations of less than three years.  At March 31, 2004, the
     outstanding foreign exchange  derivative  contracts accounted for as hedges
     had a net asset fair value of $24  million,  of which the company  recorded
     $22.2  million in current  assets,  $5.9 million in  investments  and other
     assets, and $4.1 million in current liabilities.  Changes in the fair value
     of these contracts are recorded in accumulated other comprehensive loss and
     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, when the hedged assets are
     depreciated  in the  case of a  hedge  of  capital  expenditures  and  when
     finished inventory is sold in the case of a hedged raw material  purchase).
     At March 31,  2004,  the company had an  after-tax  deferred  gain of $18.2
     million in accumulated other comprehensive loss related to these contracts.
     In the first quarter of 2004, the company  reclassified $4 million of gains
     on forward contracts from accumulated other comprehensive loss to operating
     expenses in the Consolidated Statement of Income. Of the existing net gains
     at March 31,  2004,  approximately  $14 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 first
     quarter, and no ineffectiveness was recognized.

     Selected  pigment  receivables  have been  sold in an asset  securitization
     program at their  equivalent  U.S. dollar value at the date the receivables
     were sold. The company is collection  agent and retains the risk of foreign
     currency  rate  changes  between  the  date of sale and  collection  of the
     receivables.   Under  the  terms  of  the  asset  securitization  agreement
     restructured  in July 2003,  the company is required to enter into  forward
     contracts for the value of the  euro-denominated  receivables sold into the
     program to  mitigate  its  foreign  currency  risk.  Gains or losses on the
     forward  contracts  are  recognized  currently  in  earnings  and  were not
     material  for the first  quarter  of 2004.  No such  gains or  losses  were
     recorded in the 2003 first quarter.

     The  company has  entered  into other  forward  contracts  to sell  foreign
     currencies that will be collected as a result of pigment sales  denominated
     in foreign  currencies.  These contracts have not been designated as hedges
     even though they do protect the company  from  changes in foreign  currency
     rates.  The estimated fair value of these contracts was immaterial at March
     31, 2004 and December 31, 2003.

     The company  issued 5 1/2% notes  exchangeable  for common  stock (DECS) in
     August 1999,  which allow each holder to receive  between .85 and 1.0 share
     of Devon common stock or, at the company's  option, an equivalent amount of
     cash at maturity in August 2004.  As of April 30, 2004,  Devon common stock
     was trading at $61.20 per share.  Embedded  options in the DECS provide the
     company a floor price on Devon's  common stock of $33.19 per share (the put
     option).  The company  also has the right to retain up to 15% of the shares
     if Devon's  stock price is greater  than $39.16 per share (the DECS holders
     have an embedded call option on 85% of the shares).  If Devon's stock price
     at  maturity  is greater  than  $33.19  per share but less than  $39.16 per
     share,   the  company's  right  to  retain  Devon  stock  will  be  reduced
     proportionately.  The company is not  entitled to retain any Devon stock if
     the price of Devon  stock at  maturity  is less than or equal to $33.19 per
     share. Using the Black-Scholes  valuation model, the company recognizes any
     gains or losses  resulting  from  changes  in the fair value of the put and
     call options in other income.  At March 31, 2004 and December 31, 2003, the
     net  liability  fair value of the  embedded put and call options was $161.3
     million and $154.9 million,  respectively.  The company  recorded losses of
     $6.4 million and $16.2 million during the three months ended March 31, 2004
     and 2003, respectively,  in other income for the changes in the fair values
     of the put and call options.  The  fluctuation  in the value of the put and
     call derivative financial instruments will generally offset the increase or
     decease in the market value of the Devon stock  classified as trading.  The
     fair  value of the 8.4  million  shares  of  Devon  classified  as  trading
     securities  was  $490.5  million  at March 31,  2004,  and $483  million at
     December 31, 2003.  During the first quarter of 2004 and 2003,  the company
     recorded unrealized gains of $7.5 million and $19.6 million,  respectively,
     in  other  income  for  the  changes  in fair  value  of the  Devon  shares
     classified  as  trading.   The  company  also  held  certain  Devon  shares
     classified  as   available-for-sale   securities,   which  were   partially
     liquidated  in December  2003,  with the  remaining  shares sold in January
     2004. The  available-for-sale  Devon shares were in excess of the number of
     shares the  company  believes  will be  required  to  extinguish  the DECS;
     however, should the price of Devon stock fall below $39.16 per share at the
     maturity  of the DECS,  the company  would be  required to either  purchase
     additional  Devon shares to settle the DECS or settle a portion of the DECS
     with cash. The DECS and the derivative  liability  associated with the call
     option are classified as current  liabilities in the  Consolidated  Balance
     Sheet as of March 31, 2004 and December 31, 2003.

     In connection  with the issuance of $350 million 5.375% notes due April 15,
     2005, the company  entered into an interest rate swap  arrangement 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  .875%.  During  February  2004,  the  company
     reviewed  the  composition  of  its  outstanding   debt  and  entered  into
     additional interest rate swaps,  converting an aggregate of $566 million in
     fixed-rate debt to variable-rate  debt. Under the interest rate swaps, $150
     million of 6.625% notes due October 15, 2007,  will pay a variable  rate of
     LIBOR plus 3.35%;  $109 million of 8.125% notes due October 15, 2005,  will
     pay a variable  rate of LIBOR plus 5.86%;  and $307 million of 5.875% notes
     due  September 15, 2006,  will pay a variable rate of LIBOR plus 3.1%.  The
     company  considers  these  swaps to be a hedge  against  the change in fair
     value of the related debt as a result of interest rate  changes.  The asset
     fair  value of the  company's  interest  rate  swaps at March 31,  2004 and
     December 31, 2003, was $24.2 million and $15.1 million,  respectively.  Any
     gain or loss on the swaps is offset by a comparable  gain or loss resulting
     from recording  changes in the fair value of the related debt. The critical
     terms of the swaps  match the terms of the debt;  therefore,  the swaps are
     considered highly effective and no hedge ineffectiveness has been recorded.
     As a result of the swap arrangements, the company recognized a reduction in
     interest  expense of $4.3 million and $2.7 million in the first  quarter of
     2004 and 2003, respectively.


C.   Discontinued Operations, Asset Disposals and Asset Impairments

     During the first quarter of 2002, the company approved a plan to dispose of
     its  exploration and production  operations in Kazakhstan.  The divestiture
     decision was made as part of the company's  strategic  plan to  rationalize
     noncore oil and gas  properties.  The results of the  company's  Kazakhstan
     operations have been reported separately as discontinued  operations in the
     accompanying Consolidated Statement of Income.

     On March  31,  2003,  the  company  completed  the  sale of its  Kazakhstan
     operations for $168.6  million in cash,  recognizing a loss on sale of $6.1
     million  during the first quarter of 2003.  The loss on sale is reported as
     part of discontinued  operations.  In connection with the sale, the company
     recorded an $18.6 million settlement liability for the net cash flow of the
     Kazakhstan  operations  from the effective  date of the  transaction to the
     closing date. The settlement liability was paid during the third quarter of
     2003.  The net  proceeds  received  by the  company  were  used  to  reduce
     outstanding debt.

     For the three  months  ended March 31,  2003,  revenues  applicable  to the
     discontinued  operations totaled $5.6 million and pretax income totaled $.4
     million (including the loss on sale of $6.1 million).

     In connection with the company's  divestiture program,  certain exploration
     and  production  segment  assets  have been  identified  for  disposal  and
     classified as held for sale.  During the first quarter of 2004, the company
     recorded  losses  totaling  $3.4  million  related to assets held for sale,
     reflecting  the  difference  between  the  estimated  sales  prices for the
     individual  properties or group of properties,  less the costs to sell, and
     the carrying amount of the net assets.

     The  company   expects  to  complete  the   divestiture  of  its  remaining
     held-for-sale  assets in 2004. The assets and  liabilities of  discontinued
     operations  and  other  assets  held  for  sale  have  been  classified  as
     Assets/Liabilities  Associated  with  Properties  Held for  Disposal in the
     Consolidated Balance Sheet.

     Impairment  losses  totaling $13.2 million and $5.1 million were recognized
     in the first  quarter of 2004 and 2003,  respectively,  for certain  assets
     used in  operations  that  are not  considered  held  for  sale.  The  2004
     impairments  related  primarily  to  a  U.S.  Gulf  of  Mexico  field  that
     experienced  premature water breakthrough and ceased production sooner than
     expected.

     During 2003, the company  selectively  marketed its 100%-owned Leadon field
     to third parties.  Although no divestiture negotiations are currently under
     way, the company  continues to review its options with respect to the field
     and,  particularly,   the  associated  floating  production,   storage  and
     offloading  (FPSO)  facility.  Management  presently  intends  to  continue
     operating and  producing  the field until such time as the  operating  cash
     flow generated by the field does not support continued  production or until
     a higher value option is identified. Given the significant value associated
     with the FPSO relative to the size of the entire project,  the company will
     continue to pursue a long-term  solution  that  achieves  maximum value for
     Leadon - which may include  disposing of the field,  monetizing the FPSO by
     selling  it  as a  development  option  for  a  third-party  discovery,  or
     redeployment  in other  company  operations.  As of  March  31,  2004,  the
     carrying value of the Leadon field assets  totaled $364 million.  Given the
     uncertainty  concerning  possible outcomes,  it is reasonably possible that
     the  company's  estimate  of future  cash flows  from the Leadon  field and
     associated  fair value  could  change in the near term due to,  among other
     things,  (i) unfavorable  changes in commodity  prices or operating  costs,
     (ii) a  production  profile  that  declines  more  rapidly  than  currently
     anticipated,  and/or  (iii)  unsuccessful  results of  continued  marketing
     activities or failure to locate a strategic buyer (or suitable redeployment
     opportunity).  Accordingly,  management  anticipates  that the Leadon field
     will be subject to periodic  impairment review until such time as the field
     is abandoned or sold. If future cash flows or fair value decrease from that
     presently  estimated,  an  additional  write-down of the Leadon field could
     occur in the future.

     Capitalized  costs  associated  with  exploratory  wells may be  charged to
     earnings  in a future  period  if  management  determines  that  commercial
     quantities of hydrocarbons have not been discovered. At March 31, 2004, the
     company had capitalized costs of approximately $157 million associated with
     such ongoing  exploration  activities,  primarily in the deepwater  Gulf of
     Mexico, Alaska and China.

     In January,  the company began production  through a new high  productivity
     oxidation  line at its  Savannah  plant.  It is  expected  that once  fully
     commissioned,   this  process   will  allow  for   improved   manufacturing
     efficiencies,  lower  operating  expenses and lower  capital  requirements.
     Separately,  during  the  quarter  the  company  idled  one of two  sulfate
     production lines at its Savannah facility due to high inventory levels.

     The company will continue to evaluate the  performance of the new oxidation
     line and will have a better understanding of how the Savannah site might be
     reconfigured  to exploit its  capabilities by the latter part of 2004. This
     reconfiguration could include redeployment and/or idling of certain assets,
     and reduction of the future  useful life of other assets,  resulting in the
     acceleration of depreciation expense.


D.   Cash Flow Information

     Net cash provided by operating activities reflects cash payments for income
     taxes and interest as follows:

                                                            Three Months Ended
                                                                 March 31,
                                                           --------------------
     (Millions of dollars)                                   2004          2003
     ---------------------------------------------------------------------------

     Income tax payments                                   $ 52.8        $ 60.0
     Less refunds received                                    (.8)        (14.7)
                                                           ------        ------
        Net income tax payments                            $ 52.0        $ 45.3
                                                           ======        ======

     Interest payments                                     $101.4        $ 79.2
                                                           ======        ======

     Noncash items  affecting net income included in the  reconciliation  of net
     income to net cash provided by operating activities include the following:

                                                              Three Months Ended
                                                                  March 31,
                                                              ------------------
      (Millions of dollars)                                     2004       2003
      --------------------------------------------------------------------------

     Incentive compensation provisions                         $18.3      $ 7.4
     Increase in fair value of trading securities (1)           (7.5)     (19.6)
     Increase in fair value of embedded options in
        the DECS (1)                                             6.4       16.2
     Net losses on equity method investments                     8.3        6.1
     Net periodic postretirement expense                         6.5        5.9
     Net periodic pension credit for qualified plan             (5.3)      (9.4)
     Litigation reserve provisions                                 -        6.5
     All other (2)                                               7.2       15.1
                                                               -----     ------
        Total                                                  $33.9     $ 28.2
                                                               =====     ======

     Other net cash used in operating  activities in the Consolidated  Statement
     of Cash Flows consists of the following:

                                                             Three Months Ended
                                                                 March 31,
                                                            -------------------
     (Millions of dollars)                                     2004        2003
     ---------------------------------------------------------------------------

     Decrease due to changes in working capital accounts    $(184.3)    $(165.9)
     Environmental expenditures                               (18.6)       (9.5)
     All other (2)                                            (15.3)       (8.6)
                                                            -------     -------
        Total                                               $(218.2)    $(184.0)
                                                            =======     =======

     Information about noncash investing and financing  activities not reflected
     in the Consolidated Statement of Cash Flows follows:

                                                              Three Months Ended
                                                                    March 31,
                                                              ------------------
     (Millions of dollars)                                        2004      2003
     ---------------------------------------------------------------------------

     Noncash investing activities
       Increase in fair value of trading securities (1)         $  7.5     $19.6
       Decrease in property related to Gunnison operating
        lease agreement (3)                                      (82.6)        -

     Noncash financing activities
       Reduction in debt related to Gunnison operating
        lease agreement (3)                                      (75.3)        -
       Increase in fair value of embedded options in
         the DECS (1)                                              6.4      16.2

     (1) See Note B for a discussion of the accounting for the DECS.
     (2) No other individual item is material to total cash flows from
         operations.
     (3) See Note H for a discussion of the Gunnison Synthetic Trust.


E.   Comprehensive Income and Financial Instruments

     Comprehensive income for the three months ended March 31, 2004 and 2003, is
     as follows:

                                                             Three Months Ended
                                                                  March 31,
                                                             ------------------
     (Millions of dollars)                                      2004       2003
     ---------------------------------------------------------------------------

     Net income                                               $152.2     $ 69.9
     Unrealized gains on securities                                -        2.3
     Reclassification of unrealized gains on available-
       for-sale securities included in net income               (5.4)         -
     Change in fair value of cash flow hedges                  (90.9)     (15.7)
     Foreign currency translation adjustment                    (7.0)      11.0
     Other                                                        .3         .8
                                                              ------     ------
         Comprehensive income                                 $ 49.2     $ 68.3
                                                              ======     ======

     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 March 31,  2004 or
     December   31,   2003.   At  March  31,  2004  and   December   31,   2003,
     available-for-sale securities for which fair value could be determined were
     as follows:

<TABLE>
<CAPTION>
                                                    March 31, 2004                       December 31, 2003
                                           -------------------------------        -------------------------------
                                                                     Gross                                  Gross
                                                                Unrealized                             Unrealized
                                            Fair                   Holding         Fair                   Holding
     (Millions of dollars)                 Value       Cost           Gain        Value      Cost            Gain
     ------------------------------------------------------------------------------------------------------------
<S>                                         <C>        <C>             <C>        <C>        <C>            <C>

     Equity securities                      $  -       $  -            $ -        $26.8      $9.8           $8.3  (1)
     U.S. government obligations             2.4        2.4              -          3.9       3.9              -
                                                                       ---                                  ----
         Total                                                         $ -                                  $8.3
                                                                       ===                                  ====
</TABLE>

     (1) This amount includes $8.6 million of gross unrealized hedging losses on
         15% of the exchangeable debt at the time of adoption of FAS 133.

     The equity  securities  represent the company's  investment in Devon Energy
     Corporation  common  stock.  During  January  2004,  the  company  sold its
     remaining  Devon shares  classified as available for sale for a pretax gain
     of $9 million.  Proceeds from the January sales totaled $27.4 million.  The
     cost of the  shares  sold  and the  amount  of the gain  reclassified  from
     accumulated  other  comprehensive  income were determined using the average
     cost of the shares  held.  The  company  also  received  proceeds  of $11.5
     million in January 2004 related to sales of Devon shares in December  2003,
     with a 2004 settlement date.


F.   Equity Affiliates

     Investments in equity affiliates  totaled $120.4 million at March 31, 2004,
     and $123.1 million at December 31, 2003.  Pretax equity loss related to the
     investments  is included in other income in the  Consolidated  Statement of
     Income and totaled $8.3 million and $6.1 million for the three months ended
     March 31, 2004 and 2003, respectively.


G.   Work Force Reduction, Restructuring Provisions and Exit Activities

     In  September  2003,  the  company  announced  a program to reduce its U.S.
     nonbargaining work force through both voluntary retirements and involuntary
     terminations.  As a result of the  program,  the  company's  eligible  U.S.
     nonbargaining work force was reduced by approximately 9%, or 271 employees.
     Qualifying  employees  terminated  under this program  became  eligible for
     enhanced  benefits under the company's  pension and  postretirement  plans,
     along with severance payments.  The program was substantially  completed by
     the end of 2003,  with certain  retiring  employees  staying into the first
     half of 2004 for  transition  purposes.  In connection  with the work force
     reduction,  the company  recognized a pretax charge of $56.4 million during
     the latter half of 2003,  of which $34.2  million was for  curtailment  and
     special termination benefits associated with the company's retirement plans
     and $22.2 million was for severance-related  costs. The remaining provision
     for severance-related  costs is included in the restructuring reserve table
     below. Of the severance-related  provision of $22.2 million,  $16.4 million
     has been paid through the first quarter of 2004, with $5.8 remaining in the
     accrual at March 31, 2004.

     During 2003, the company's chemical - pigment operating unit provided $60.8
     million  pretax for costs  associated  with the  closure  of its  synthetic
     rutile plant in Mobile,  Alabama.  Included in the $60.8 million were $14.1
     million for the cumulative effect of change in accounting principle related
     to the  recognition of an asset  retirement  obligation,  $15.2 million for
     accelerated depreciation,  $14.9 million for other shut-down related costs,
     $10.5  million for  severance  benefits  and $6.1  million for benefit plan
     curtailment  costs. The provision for severance benefits is included in the
     restructuring reserve table below (see Note N for a discussion of the asset
     retirement obligation).  Of the total $10.5 million severance accrual, $8.6
     million has been paid through the first quarter of 2004.  Approximately 135
     employees  will  ultimately be  terminated  in  connection  with this plant
     closure, of which 117 had been terminated as of March 31, 2004.

     During 2002, the company's  chemical - other  operating unit provided $16.5
     for costs  associated with its plans to exit the forest products  business.
     The  company  provided an  additional  $5.1  million in 2003 for  severance
     benefits  associated  with exiting the forest products  business,  of which
     $1.6  million was  recorded  during the first  quarter of 2003.  During the
     first quarter of 2004, the company  provided an additional $1.2 million for
     dismantlement  and  closure  costs.  These  costs  on a  pretax  basis  are
     reflected in costs and operating expenses in the Consolidated  Statement of
     Income. Included in the total provision of $22.8 million were $16.7 million
     for  dismantlement and closure costs, and $6.1 million for severance costs.
     Of the total provision,  $12.1 million has been paid through the 2004 first
     quarter and $10.1  million  remained in the accrual at March 31,  2004.  In
     connection  with the plant closures,  252 employees will be terminated,  of
     which 187 had been terminated as of March 31, 2004.

     In 2001,  the company's  chemical - pigment  operating  unit provided $31.8
     million  pretax related to the closure of a plant in Antwerp,  Belgium.  Of
     this total  accrual,  $26.9  million  had been paid  through the 2004 first
     quarter and $4.6 million  remained in the accrual at March 31,  2004.  As a
     result of this plant closure, 121 employees were terminated.

     Also in 2001, the company's  chemical - other operating unit provided $11.9
     million  in  pretax  costs  for  the  discontinuation  of  manganese  metal
     production at its Hamilton, Mississippi,  facility. Of the total provision,
     $10.9  million has been paid through the 2004 first  quarter and $1 million
     remained  in the  accrual  at  March  31,  2004,  for pond  closure  costs.
     Completion of the  remaining  action of pond closure may take from three to
     10 years, depending on environmental constraints.

     The  provisions,   payments,  adjustments  and  reserve  balances  for  the
     three-month period ended March 31, 2004, are included in the table below.

                                                                  Dismantlement
                                                                            and
     (Millions of dollars)              Total        Severance          Closure
     ---------------------------------------------------------------------------

     December 31, 2003                 $ 39.1           $ 26.5            $12.6
       Provisions                         1.2                -              1.2
       Payments                         (16.8)           (13.8)            (3.0)
       Adjustments                        (.1)             (.3)              .2
                                       ------           ------            -----
     March 31, 2004                    $ 23.4           $ 12.4            $11.0
                                       ======           ======            =====

H.   Debt

     As of March 31, 2004,  long-term  debt due within one year  consists of the
     following.

                                                                       March 31,
     (Millions of dollars)                                                  2004
     ---------------------------------------------------------------------------

     5 1/2% Exchangeable Notes (DECS) due August 2, 2004,
       net of unamortized discount of $2.6 million                        $327.7
     8.375% Notes due July 15, 2004                                        145.0
     Guaranteed Debt of Employee Stock Ownership Plan 9.61%
       Notes due in installments through January 2, 2005                     3.0
                                                                          ------
                 Total                                                    $475.7
                                                                          ======

     During 2001, the company entered into a leasing arrangement with Kerr-McGee
     Gunnison  Trust  (Gunnison  Synthetic  Trust) for the  construction  of the
     company's share of a platform to be used in the development of the Gunnison
     field, in which the company has a 50% working interest.  Under the terms of
     the agreement, the company financed its share of construction costs for the
     platform  under a synthetic  lease  credit  facility  between the trust and
     groups of financial  institutions for up to $157 million,  with the company
     making lease  payments  sufficient  to pay interest at varying rates on the
     notes.  Construction  of the platform was completed in December 2003,  with
     the  company's  share of  construction  costs  totaling  $149  million.  On
     December  31,  2003,  $65.6  million of the  synthetic  lease  facility was
     converted to a leveraged  lease  structure,  whereby the company  leases an
     interest in the platform under an operating lease agreement from a separate
     business trust.

     Both the Gunnison  Synthetic  Trust and the new  operating  lease trust are
     considered   variable  interest  entities  under  the  provisions  of  FASB
     Interpretation  No. 46,  "Consolidation  of Variable Interest Entities - an
     Interpretation  of ARB No. 51." As such, the company is required to analyze
     its  relationship  with each trust to determine  whether the company is the
     primary  beneficiary and, if so, required to consolidate the trusts.  Based
     on the analyses  performed,  the company is not the primary  beneficiary of
     the operating lease trust;  however, the company was considered the primary
     beneficiary of the Gunnison  Synthetic  Trust.  Accordingly,  the remaining
     assets and  liabilities of the Gunnison  Synthetic  Trust were reflected in
     the  company's  Consolidated  Balance  Sheet at December  31,  2003,  which
     included $82.6 million in property,  plant and  equipment,  $3.8 million in
     accrued  liabilities,  $75.3 million in long-term debt, and $3.5 million in
     minority interest.  On January 15, 2004, the remaining $82.6 million of the
     synthetic lease facility was converted to a leveraged lease structure,  and
     the related lessor trust is not subject to consolidation.  As a result, the
     associated   property  and  debt  are  not   reflected  in  the   company's
     Consolidated Balance Sheet at March 31, 2004.


I.   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
     periods ended March 31, 2004 and 2003.
<TABLE>
<CAPTION>
                                                           For the Three Months Ended March 31,
                                      --------------------------------------------------------------------------------
                                                      2004                                       2003
                                      ------------------------------------        ------------------------------------

                                       Income from                                Income from
     (In millions, except               Continuing               Per-Share         Continuing                Per-Share
     per-share amounts)                 Operations     Shares       Income         Operations      Shares       Income
     -----------------------------------------------------------------------------------------------------------------
<S>                                         <C>         <C>          <C>               <C>         <C>           <C>

     Basic EPS                              $152.2      100.3        $1.52             $104.2      100.1         $1.04
                                                                     =====                                       =====
       Effect of dilutive securities:
         5 1/4% convertible
           debentures                          5.3        9.8                             5.3        9.8
         Restricted stock                        -        1.0                               -         .7
         Stock options                           -         .2                               -          -
                                            ------      -----                          ------      -----
     Diluted EPS                            $157.5      111.3        $1.41             $109.5      110.6         $ .99
                                            ======      =====        =====             ======      =====         =====
</TABLE>

     Under the 2002 Long-Term  Incentive  Plan, the company may grant  incentive
     opportunities in the form of stock,  stock options and  performance-related
     awards to key  employees.  During the first  quarter of 2004,  the  company
     granted  438,000  shares of restricted  common stock with a grant date fair
     value  of  $49.45  per  share.   Deferred  compensation  of  $21.7  million
     associated  with the  restricted  stock issuance will be amortized over the
     three year vesting period.


J.   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.  On July 30, 2003, the company  restructured the existing accounts
     receivable   monetization  program  to  include  the  sale  of  receivables
     originated  by the  company's  European  chemical  operations.  The maximum
     availability under the new program is $165 million.  Under the terms of the
     program,  selected  qualifying  customer  accounts  receivable  may be sold
     monthly to a special-purpose entity (SPE), which in turn sells an undivided
     ownership  interest  in  the  receivables  to  a  third-party  multi-seller
     commercial paper conduit sponsored by an independent financial institution.
     The company  sells,  and retains an interest in, excess  receivables to the
     SPE as  over-collateralization  for the  program.  The  company's  retained
     interest  in  the  SPE's   receivables  is  classified  in  trade  accounts
     receivable in the  accompanying  Consolidated  Balance Sheet.  The retained
     interest is  subordinate  to, and  provides  credit  enhancement  for,  the
     conduit's ownership interest in the SPE's receivables,  and is available to
     the conduit to pay  certain  fees or expenses  due to the  conduit,  and to
     absorb credit losses incurred on any of the SPE's  receivables in the event
     of termination.  However, the company believes that the risk of credit loss
     is  very  low  since  its  bad-debt   experience  has   historically   been
     insignificant.  The company retains servicing responsibilities and receives
     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 no obligations  for any recourse  actions on
     the sold  receivables.  The  company  also  holds  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  $236.8  million  and  $156.8  million  of  its  pigment
     receivables  during the first quarter of 2004 and 2003,  respectively.  The
     sale of the receivables  resulted in pretax losses of $1.4 million and $1.1
     million during the first quarter of 2004 and 2003, 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, net of
     the   company's    retained    interest   in    receivables    serving   as
     over-collateralization,  totaled  $165  million at both March 31,  2004 and
     December 31, 2003.


K.   Business Combination

     On April 7,  2004,  the  company  announced  plans to merge  with  Westport
     Resources  Corporation  (Westport) in a transaction valued at approximately
     $3.4 billion.  The merger agreement,  unanimously  approved by the board of
     directors of both  companies,  provides  that  Westport  stockholders  will
     receive .71 shares of  Kerr-McGee  common  stock for each  common  share of
     Westport. As a result, Kerr-McGee expects to issue approximately 49 million
     new shares to Westport's  stockholders (including shares that may be issued
     upon  exercise of  outstanding  stock  options) and will assume  Westport's
     outstanding debt of approximately $1 billion. The transaction is subject to
     approval by the stockholders of both companies,  as well as other customary
     closing  conditions.  If  approved,  the  transaction  is  expected  to  be
     consummated  in the third  quarter of 2004,  shortly  after the  companies'
     respective stockholder meetings.


L.   Condensed Consolidating Financial Information

     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 in parity with all of the  company's  other  unsecured
     and  unsubordinated  indebtedness.  Kerr-McGee  Chemical  Worldwide LLC and
     Kerr-McGee   Rocky  Mountain   Corporation   have   guaranteed  the  notes.
     Additionally, Kerr-McGee Corporation has guaranteed all indebtedness of its
     subsidiaries,  including  the  indebtedness  assumed in the  purchase of HS
     Resources.  As a result of these  guarantee  arrangements,  the  company is
     required to present condensed consolidating financial information.  The top
     holding  company is  Kerr-McGee  Corporation.  The  guarantor  subsidiaries
     include  Kerr-McGee  Chemical  Worldwide LLC and Kerr-McGee  Rocky Mountain
     Corporation in 2004 and 2003.

     The following tables present condensed  consolidating financial information
     for (a)  Kerr-McGee  Corporation,  the parent  company,  (b) the  guarantor
     subsidiaries,  and (c) the  non-guarantor  subsidiaries  on a  consolidated
     basis.

<PAGE>
<TABLE>
                 Kerr-McGee Corporation and Subsidiary Companies
                   Condensed Consolidating Statement of Income
                    For the Three Months Ended March 31, 2004
<CAPTION>
                                                                                    Non-
                                                  Kerr-McGee     Guarantor     Guarantor
(Millions of dollars)                            Corporation  Subsidiaries  Subsidiaries   Eliminations  Consolidated
---------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>           <C>           <C>           <C>          <C>
Revenues                                                $  -        $210.9        $905.4        $     -      $1,116.3
                                                      ------        ------        ------        -------      --------
Costs and Expenses
  Costs and operating expenses                             -         109.7         293.7            (.4)        403.0
  Selling, general and administrative expenses             -            .1          83.5              -          83.6
  Shipping and handling expenses                           -           1.7          36.0              -          37.7
  Depreciation and depletion                               -          30.0         160.3              -         190.3
  Accretion expense                                        -            .7           5.9              -           6.6
  Impairments on assets held for use                       -            .9          12.3              -          13.2
  Loss associated with assets held for sale                -             -           3.4              -           3.4
  Exploration, including dry holes and
    amortization of undeveloped leases                     -           3.6          47.0              -          50.6
  Taxes, other than income taxes                           -           8.3          20.1              -          28.4
  Provision for environmental remediation
    and restoration, net of reimbursements                 -           (.8)            -              -           (.8)
  Interest and debt expense                             27.5           9.2          69.3          (49.0)         57.0
                                                      ------        ------        ------        -------      --------
      Total Costs and Expenses                          27.5         163.4         731.5          (49.4)        873.0
                                                      ------        ------        ------        -------      --------

                                                       (27.5)         47.5         173.9           49.4         243.3
Other Income (Expense)                                 270.5          (6.6)         29.1         (293.3)          (.3)
                                                      ------        ------        ------        -------      --------
Income from Continuing Operations
   before Income Taxes                                 243.0          40.9         203.0         (243.9)        243.0
Provision for Income Taxes                             (90.8)        (14.4)        (77.6)          92.0         (90.8)
                                                      ------        ------        ------        -------      --------

Net Income                                            $152.2        $ 26.5        $125.4        $(151.9)     $  152.2
                                                      ======        ======        ======        =======      ========
</TABLE>
<TABLE>
                 Kerr-McGee Corporation and Subsidiary Companies
                   Condensed Consolidating Statement of Income
                    For the Three Months Ended March 31, 2003

<CAPTION>
                                                                                    Non-
                                                  Kerr-McGee     Guarantor     Guarantor
(Millions of dollars)                            Corporation  Subsidiaries  Subsidiaries   Eliminations  Consolidated
---------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>           <C>           <C>           <C>          <C>

Revenues                                              $    -        $153.8        $947.9        $  (2.1)     $1,099.6
                                                      ------        ------        ------        -------      --------
Costs and Expenses
  Costs and operating expenses                             -          71.5         315.5           (2.6)        384.4
  Selling, general and administrative expenses             -           7.1          63.8              -          70.9
  Shipping and handling expenses                           -           2.6          29.4              -          32.0
  Depreciation and depletion                               -          29.9         159.7              -         189.6
  Accretion expense                                        -            .6           5.6              -           6.2
  Impairments on assets held for use                       -             -           5.1              -           5.1
  Gain associated with assets held for sale                -             -          (5.2)             -          (5.2)
  Exploration, including dry holes and
    amortization of undeveloped leases                     -           3.9         136.6              -         140.5
  Taxes, other than income taxes                          .1           5.5          19.8              -          25.4
  Provision for environmental remediation
    and restoration, net of reimbursements                 -           5.1          12.2              -          17.3
  Interest and debt expense                             28.9           8.3          72.9          (45.1)         65.0
                                                      ------        ------        ------        -------      --------
      Total Costs and Expenses                          29.0         134.5         815.4          (47.7)        931.2
                                                      ------        ------        ------        -------      --------

                                                       (29.0)         19.3         132.5           45.6         168.4
Other Income                                           146.6            .6          29.9         (175.4)          1.7
                                                      ------        ------        ------        -------      --------
Income from Continuing Operations
   before Income Taxes                                 117.6          19.9         162.4         (129.8)        170.1
Provision for Income Taxes                             (47.7)         (4.2)        (61.2)          47.2         (65.9)
                                                      ------        ------        ------        -------      --------
Income from Continuing Operations                       69.9          15.7         101.2          (82.6)        104.2
Income (Loss) from Discontinued Operations,
     net of tax                                            -          12.0         (11.6)             -            .4
Cumulative Effect of Change in Accounting
    Principle, net of tax                                  -          (1.3)        (33.4)             -         (34.7)
                                                      ------        ------        ------        -------      --------
Net Income                                            $ 69.9        $ 26.4        $ 56.2        $ (82.6)     $   69.9
                                                      ======        ======        ======        =======      ========
</TABLE>
<PAGE>

<TABLE>
                 Kerr-McGee Corporation and Subsidiary Companies
                      Condensed Consolidating Balance Sheet
                                 March 31, 2004
<CAPTION>
                                                                                    Non-
                                                  Kerr-McGee     Guarantor     Guarantor
(Millions of dollars)                            Corporation  Subsidiaries  Subsidiaries   Eliminations  Consolidated
---------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>           <C>           <C>           <C>            <C>
ASSETS
------
Current Assets
  Cash                                              $    2.9      $      -      $  140.6      $       -      $  143.5
  Intercompany receivables                             710.5          28.1       1,735.2       (2,473.8)            -
  Accounts receivable                                      -          72.4         452.6              -         525.0
  Inventories                                              -           4.6         407.3              -         411.9
  Deposits, prepaid expenses and other assets            2.5          16.0         591.4              -         609.9
  Current assets associated with properties
    held for disposal                                      -             -            .4              -            .4
                                                    --------      --------      --------      ---------      --------
      Total Current Assets                             715.9         121.1       3,327.5       (2,473.8)      1,690.7

Property, Plant and Equipment - Net                        -       1,974.5       5,353.0              -       7,327.5
Investments in and Advances to Subsidiaries          4,009.5         584.3             -       (4,593.8)            -
Investments and Other Assets                             9.8          91.9         531.6          (79.6)        553.7
Goodwill                                                   -         346.3          10.7              -         357.0
Long-Term Assets Associated with Properties
  Held for Disposal                                        -             -          12.3              -          12.3
                                                    --------      --------      --------      ---------      --------
       Total Assets                                 $4,735.2      $3,118.1      $9,235.1      $(7,147.2)     $9,941.2
                                                    ========      ========      ========      =========      ========

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities
  Intercompany borrowings                           $   66.4      $  594.7      $1,741.5      $(2,402.6)     $      -
  Accounts payable                                      45.6          43.0         309.7              -         398.3
  Long-term debt due within one year                       -             -         475.7              -         475.7
  Other current liabilities                              3.4         166.8       1,018.2            (.1)      1,188.3
                                                    --------      --------      --------      ---------      --------
       Total Current Liabilities                       115.4         804.5       3,545.1       (2,402.7)      2,062.3

Investments by and Advances from Parent                    -             -         702.9         (702.9)            -
Long-Term Debt                                       1,829.4             -       1,176.5              -       3,005.9
Deferred Credits and Reserves                           (5.9)        675.0       1,554.4            (.5)      2,223.0
Stockholders' Equity                                 2,796.3       1,638.6       2,256.2       (4,041.1)      2,650.0
                                                    --------      --------      --------      ---------      --------
     Total Liabilities and Stockholders' Equity     $4,735.2      $3,118.1      $9,235.1      $(7,147.2)     $9,941.2
                                                    ========      ========      ========      =========      ========
</TABLE>
<PAGE>

<TABLE>
                 Kerr-McGee Corporation and Subsidiary Companies
                      Condensed Consolidating Balance Sheet
                                December 31, 2003
<CAPTION>
                                                                                    Non-
                                                  Kerr-McGee     Guarantor     Guarantor
 (Millions of dollars)                           Corporation  Subsidiaries  Subsidiaries   Eliminations  Consolidated
---------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>           <C>           <C>           <C>           <C>
ASSETS
------
Current Assets
  Cash                                              $    2.2      $      -      $  139.8      $      -      $   142.0
  Intercompany receivables                             795.3         (26.7)      2,110.5       (2,879.1)            -
  Accounts receivable                                      -         125.2         458.1              -         583.3
  Inventories                                              -           5.4         388.0              -         393.4
  Deposits, prepaid expenses and other assets              -          17.9         619.5              -         637.4
  Current assets associated with properties
    held for disposal                                      -             -            .4              -            .4
                                                    --------      --------      --------      ---------     ---------
      Total Current Assets                             797.5         121.8       3,716.3       (2,879.1)      1,756.5
                                                    --------      --------      --------      ---------     ---------

Property, Plant and Equipment - Net                        -       1,975.3       5,491.8              -       7,467.1
Investments in and Advances to Subsidiaries          3,948.5         519.6             -       (4,468.1)            -
Investments and Other Assets                            10.2          96.0         537.6          (79.1)        564.7
Goodwill                                                   -         346.4          10.9              -         357.3
Long-Term Assets Associated with Properties
  Held for Disposal                                        -             -          28.3              -          28.3
                                                    --------      --------      --------      ---------     ---------
       Total Assets                                 $4,756.2      $3,059.1      $9,784.9      $(7,426.3)    $10,173.9
                                                    ========      ========      ========      =========     =========

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities
  Intercompany borrowings                           $   68.6      $  563.4      $2,182.9      $(2,814.9)    $       -
  Accounts payable                                      45.4          38.9         391.2              -         475.5
  Long-term debt due within one year                       -             -         574.3              -         574.3
  Other current liabilities                             36.8         173.2         971.8              -       1,181.8
                                                    --------      --------      --------      ---------     ---------
      Total Current Liabilities                        150.8         775.5       4,120.2       (2,814.9)      2,231.6
                                                    --------      --------      --------      ---------     ---------

Investments by and Advances from Parent                    -             -         617.9         (617.9)            -
Long-Term Debt                                       1,829.3             -       1,251.9              -       3,081.2
Deferred Credits and Reserves                           (5.9)        678.3       1,554.8           (1.9)      2,225.3
Stockholders' Equity                                 2,782.0       1,605.3       2,240.1       (3,991.6)      2,635.8
                                                    --------      --------      --------      ---------     ---------
     Total Liabilities and Stockholders' Equity     $4,756.2      $3,059.1      $9,784.9      $(7,426.3)    $10,173.9
                                                    ========      ========      ========      =========     =========
</TABLE>
<PAGE>
<TABLE>
                 Kerr-McGee Corporation and Subsidiary Companies
                 Condensed Consolidating Statement of Cash Flows
                    For the Three Months Ended March 31, 2004

<CAPTION>
                                                                                    Non-
                                                  Kerr-McGee     Guarantor     Guarantor
(Millions of dollars)                            Corporation  Subsidiaries  Subsidiaries   Eliminations  Consolidated
---------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>            <C>          <C>            <C>           <C>
Operating Activities
--------------------
Net income                                           $ 152.2        $ 26.5       $ 125.4        $(151.9)      $ 152.2
Adjustments to reconcile net income to net cash
  provided by (used in) operating activities -
    Depreciation, depletion and amortization               -          32.8         170.3              -         203.1
    Accretion expense                                      -            .7           5.9              -           6.6
    Impairments on assets held for use                     -            .9          12.3              -          13.2
    Loss associated with properties held for sale          -            .1           3.3              -           3.4
    Dry hole costs                                         -             -           8.1              -           8.1
    Deferred income taxes                                  -           6.0          67.1              -          73.1
    Equity in earnings of subsidiaries                (156.7)          3.9             -          152.8             -
    Provision for environmental remediation
      and restoration, net of reimbursements               -           (.8)            -              -           (.8)
    Noncash items affecting net income                   (.1)          9.6          24.4              -          33.9
    Other net cash used in operating activities        (35.4)         42.8        (225.6)             -        (218.2)
                                                     -------        ------       -------        -------       -------
        Net Cash Provided by (Used in)
          Operating Activities                         (40.0)        122.5         191.2             .9         274.6
                                                     -------        ------       -------        -------       -------

Investing Activities
--------------------
Capital expenditures                                       -         (33.7)       (128.0)             -        (161.7)
Dry hole costs                                             -             -          (8.1)             -          (8.1)
Proceeds from sales of assets                              -            .2           3.4              -           3.6
Other investing activities                                 -           (.1)         34.6              -          34.5
                                                     -------        ------       -------        -------       -------
        Net Cash Used in Investing
          Activities                                       -         (33.6)        (98.1)             -        (131.7)
                                                     -------        ------       -------        -------       -------

Financing Activities
--------------------
Increase (decrease) in intercompany
  notes payable                                         80.6         (88.9)          8.7            (.4)            -
Repayment of long-term debt                                -             -        (102.0)             -        (102.0)
Issuance of common stock                                 5.5             -             -              -           5.5
Dividends paid                                         (45.4)            -             -              -         (45.4)
Other financing activities                                 -             -            .5            (.5)            -
                                                     -------        ------       -------        -------       -------
        Net Cash Provided by (Used in)
          Financing Activities                          40.7         (88.9)        (92.8)           (.9)       (141.9)
                                                     -------        ------       -------        -------       -------

Effects of Exchange Rate Changes on Cash
   and Cash Equivalents                                    -             -            .5              -            .5
Net Increase in Cash and Cash Equivalents                 .7             -            .8              -           1.5
Cash and Cash Equivalents at Beginning of Period         2.2             -         139.8              -         142.0
                                                     -------        ------       -------        -------       -------
Cash and Cash Equivalents at End of Period           $   2.9        $    -       $ 140.6        $     -       $ 143.5
                                                     =======        ======       =======        =======       =======
</TABLE>
<PAGE>
<TABLE>
                 Kerr-McGee Corporation and Subsidiary Companies
                 Condensed Consolidating Statement of Cash Flows
                    For the Three Months Ended March 31, 2003
<CAPTION>
                                                                                    Non-
                                                  Kerr-McGee     Guarantor     Guarantor
(Millions of dollars)                            Corporation  Subsidiaries  Subsidiaries   Eliminations  Consolidated
---------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>            <C>          <C>             <C>          <C>
Operating Activities
--------------------
Net income                                           $  69.9        $ 26.4       $  56.2         $(82.6)      $  69.9
Adjustments to reconcile net income to net cash
  provided by (used in) operating activities -
    Depreciation, depletion and amortization               -          30.3         176.4              -         206.7
    Accretion expense                                      -            .6           5.6              -           6.2
    Impairments on assets held for use                     -             -           5.1              -           5.1
    Loss associated with assets held for sale              -             -            .9              -            .9
    Dry hole costs                                         -             -         104.6              -         104.6
    Deferred income taxes                                  -          23.7           8.4              -          32.1
    Equity in earnings of subsidiaries                 (76.5)         19.8             -           56.7             -
    Provision for environmental remediation
      and restoration, net of reimbursements               -           5.1          12.2              -          17.3
    Cumulative effect of change in
      accounting principle                                 -           1.3          33.4              -          34.7
    Noncash items affecting net income                    .4           3.1          24.7              -          28.2
    Other net cash used in operating activities        (29.8)        (69.5)        (84.7)             -        (184.0)
                                                     -------        ------       -------         ------       -------
       Net Cash Provided by (Used in)
          Operating Activities                         (36.0)         40.8         342.8          (25.9)        321.7
                                                     -------        ------       -------         ------       -------
Investing Activities
--------------------
Capital expenditures                                       -         (31.7)       (169.7)             -        (201.4)
Dry hole costs                                             -             -        (104.6)             -        (104.6)
Proceeds from sales of assets                              -             -         185.4              -         185.4
Other investing activities                                 -             -         (10.0)             -         (10.0)
                                                     -------        ------       -------         ------       -------
        Net Cash Used in Investing
          Activities                                       -         (31.7)        (98.9)             -        (130.6)
                                                     -------        ------       -------         ------       -------
Financing Activities
--------------------
Increase (decrease) in intercompany
  notes payable                                         81.4          (9.1)        (72.3)             -             -
Issuance of long-term debt                                 -             -          31.5              -          31.5
Repayment of long-term debt                                -             -        (184.0)             -        (184.0)
Dividends paid                                         (45.2)            -         (26.3)          26.3         (45.2)
Other financing activities                                .2             -           (.2)           (.4)          (.4)
                                                     -------        ------       -------         ------       -------
        Net Cash Provided by (Used in)
          Financing Activities                          36.4          (9.1)       (251.3)          25.9        (198.1)
                                                     -------        ------       -------         ------       -------

Effects of Exchange Rate Changes on Cash
   and Cash Equivalents                                    -             -          (2.2)             -          (2.2)
                                                     -------        ------       -------         ------       -------
Net Increase (Decrease) in Cash and Cash
   Equivalents                                            .4             -          (9.6)             -          (9.2)
Cash and Cash Equivalents at Beginning of
   Period                                                2.5             -          87.4              -          89.9
                                                     -------        ------       -------         ------       -------
Cash and Cash Equivalents at End of Period           $   2.9        $    -       $  77.8         $    -       $  80.7
                                                     =======        ======       =======         ======       =======
</TABLE>
<PAGE>


M.   Contingencies

     West Chicago, Illinois

     In 1973, the company's chemical  affiliate  (Chemical) closed a facility in
     West  Chicago,  Illinois,  that  processed  thorium  ores  for the  federal
     government and for certain commercial purposes.  Historical  operations had
     resulted in  low-level  radioactive  contamination  at the  facility and in
     surrounding  areas.  The original  processing  facility is regulated by the
     State of Illinois (the State),  and four vicinity  areas are  designated as
     Superfund sites on the National Priorities List (NPL).

     Closed  Facility - Pursuant  to  agreements  reached in 1994 and 1997 among
     Chemical,  the City of West Chicago (the City) and the State  regarding the
     decommissioning   of  the  closed  West  Chicago  facility,   Chemical  has
     substantially  completed  the  excavation  of  contaminated  soils  and has
     shipped the bulk of those soils to a licensed disposal facility. Removal of
     the remaining  materials is expected to be  substantially  completed by the
     end of  2004,  leaving  principally  surface  restoration  and  groundwater
     monitoring and/or remediation for subsequent years.  Surface restoration is
     expected to be completed in 2004,  except for areas  designated  for use in
     connection  with the Kress  Creek and Sewage  Treatment  Plant  remediation
     discussed  below.  The long-term  scope,  duration and cost of  groundwater
     monitoring  and/or  remediation are uncertain because it is not possible to
     reliably  predict  how  groundwater  conditions  have been  affected by the
     excavation and removal work.

     Vicinity Areas - The Environmental  Protection Agency (EPA) has listed four
     areas in the  vicinity of the closed West  Chicago  facility on the NPL and
     has designated  Chemical as a Potentially  Responsible Party (PRP) in these
     four areas.  Chemical has substantially  completed remedial work for two of
     the areas (known as the Residential Areas and Reed-Keppler Park). The other
     two NPL sites,  known as Kress Creek and the Sewage  Treatment  Plant,  are
     contiguous   and  involve  low  levels  of  insoluble   thorium   residues,
     principally in streambanks and streambed sediments,  virtually all within a
     floodway.   Chemical  has  reached  an  agreement  in  principle  with  the
     appropriate federal and state agencies and local communities  regarding the
     characterization  and  cleanup  of the sites,  past and  future  government
     response  costs,  and the waiver of natural  resource  damage  claims.  The
     agreement in principle is expected to be  incorporated in a consent decree,
     which must be agreed to by the  appropriate  federal and state agencies and
     local  communities  and then entered by a federal court.  Court approval is
     expected  in  2004.   Chemical   has   already   conducted   an   extensive
     characterization  of Kress Creek and the Sewage Treatment Plant and, at the
     request of EPA, Chemical is conducting limited additional  characterization
     that is expected  to be  completed  in 2004.  The  cleanup  work,  which is
     expected  to take  about  four  years to  complete  following  entry of the
     consent decree,  will require  excavation of contaminated  soils and stream
     sediments,  shipment of excavated materials to a licensed disposal facility
     and restoration of affected areas.

     Financial  Reserves  - As of March 31,  2004,  the  company  had  remaining
     reserves of $94 million for costs related to West Chicago.  Although actual
     costs may exceed current  estimates,  the amount of any increase  cannot be
     reasonably estimated at this time. The amount of the reserve is not reduced
     by reimbursements expected from the federal government under Title X of the
     Energy Policy Act of 1992 (Title X) (discussed below).

     Government  Reimbursement  - Pursuant  to Title X, the U.S.  Department  of
     Energy (DOE) is obligated to reimburse Chemical for certain decommissioning
     and cleanup  costs  incurred in  connection  with the West Chicago sites in
     recognition  of the fact that about 55% of the  facility's  production  was
     dedicated  to  U.S.  government   contracts.   The  amount  authorized  for
     reimbursement  under Title X is $365  million plus  inflation  adjustments.
     That  amount is  expected  to cover  the  government's  full  share of West
     Chicago cleanup costs. Through March 31, 2004, Chemical had been reimbursed
     approximately $215 million under Title X.

     Reimbursements under Title X are provided by congressional  appropriations.
     Historically,  congressional  appropriations have lagged Chemical's cleanup
     expenditures.  As of  March  31,  2004,  the  government's  share  of costs
     incurred  by  Chemical   but  not  yet   reimbursed   by  the  DOE  totaled
     approximately  $66 million.  The company  believes receipt of the remaining
     arrearage in due course following additional  congressional  appropriations
     is  probable  and  has  reflected  the  arrearage  as a  receivable  in the
     financial statements.  The company expects to receive reimbursement for the
     remainder  of  this  receivable  by the end of  2006,  and  will  recognize
     recovery of the government's share of future remediation costs for the West
     Chicago sites as Chemical incurs the costs.

     Henderson, Nevada

     In 1998,  Chemical decided to exit the ammonium  perchlorate  business.  At
     that time,  Chemical  curtailed  operations and began  preparation  for the
     shutdown of the associated production facilities in Henderson, Nevada, that
     produced ammonium  perchlorate and other related  products.  Manufacture of
     perchlorate compounds began at Henderson in 1945 in facilities owned by the
     U.S.  government.  The U.S. Navy expanded production  significantly in 1953
     when it completed  construction  of a plant for the manufacture of ammonium
     perchlorate.  The Navy continued to own the ammonium  perchlorate  plant as
     well as other associated production equipment at Henderson until 1962, when
     the  plant  was  purchased  by a  predecessor  of  Chemical.  The  ammonium
     perchlorate  produced  at the  Henderson  facility  was used  primarily  in
     federal  government  defense  and  space  programs.  Perchlorate  has  been
     detected in nearby Lake Mead and the Colorado River.

     Chemical  began  decommissioning  the facility and  remediating  associated
     perchlorate  contamination,  including surface impoundments and groundwater
     when it decided to exit the  business in 1998.  In 1999 and 2001,  Chemical
     entered  into  consent  orders with the Nevada  Division  of  Environmental
     Protection  that require  Chemical to implement  both interim and long-term
     remedial measures to capture and remove perchlorate from groundwater.

     In 1999,  Chemical  initiated the interim measures  required by the consent
     orders.  Construction of a long-term  remediation  system is  substantially
     complete,  and the system is in its startup phase.  It is anticipated  that
     this system will be fully  operational by mid-2004.  The scope and duration
     of  groundwater  remediation  will be driven  in the long term by  drinking
     water standards,  which to date have not been formally established by state
     or federal regulatory authorities. EPA and other federal and state agencies
     currently are evaluating the health and environmental risks associated with
     perchlorate as part of the process for ultimately  setting a drinking water
     standard. One state agency, the California  Environmental Protection Agency
     (CalEPA),  has  set a  public  health  goal  for  perchlorate,  which  is a
     preliminary step to setting a drinking water standard.  However, a drinking
     water  standard  has  not  yet  been  established.  The  resolution  of the
     regulatory matters could materially affect the scope,  duration and cost of
     the long-term groundwater remediation that Chemical is required to perform.

     Financial  Reserves - Remaining  reserves for Henderson totaled $17 million
     as of March 31, 2004.  As noted above,  the long-term  scope,  duration and
     cost of groundwater  remediation are uncertain and,  therefore,  additional
     costs may be incurred in the future.  However, the amount of any additional
     costs cannot be reasonably estimated at this time.

     Government  Litigation - In 2000, Chemical initiated litigation against the
     United States seeking contribution for response costs. The suit is based on
     the fact that the  government  owned  the  plant in the early  years of its
     operation,  exercised  significant control over production at the plant and
     the sale of products produced at the plant, and was the largest consumer of
     products  produced at the plant.  The litigation is in the discovery stage.
     Although the outcome of the litigation is uncertain,  Chemical  believes it
     is likely to recover a portion of its costs from the government. The amount
     and  timing  of  any  recovery  cannot  be  estimated  at  this  time  and,
     accordingly,  the  company  has not  recorded  a  receivable  or  otherwise
     reflected in the  financial  statements  any  potential  recovery  from the
     government.

     Insurance  -  In  2001,   Chemical   purchased  a  10-year,   $100  million
     environmental   cost  cap  insurance   policy  for  groundwater  and  other
     remediation at Henderson. The insurance policy provides coverage only after
     Chemical exhausts a self-insured retention of approximately $61 million and
     covers only those costs  incurred to achieve a cleanup  level  specified in
     the policy. As noted above, federal and state agencies have not established
     a drinking water standard and, therefore,  it is possible that Chemical may
     be required to achieve a cleanup level more  stringent than that covered by
     the  policy.  If so,  the  amount  recoverable  under the  policy  could be
     affected.

     Through  March 31, 2004,  Chemical had incurred  expenditures  of about $65
     million that it believes can be applied to the self-insured  retention.  In
     April 2004,  Chemical  reached an agreement  in  principle  with one of its
     vendors to  reimburse  Chemical  approximately  $6 million for a portion of
     Chemical's  costs.  Reimbursement  from the vendor will effectively  reduce
     Chemical's  out-of-pocket costs and,  therefore,  will reduce the amount of
     expenditures  that  Chemical  believes  can be applied to the  self-insured
     retention to $59 million.  The company believes that the remaining  reserve
     of $17 million at March 31,  2004,  also will qualify  under the  insurance
     policy,  which would  exhaust the  self-insured  retention and result in an
     insurance  reimbursement  of  about  $15  million  based  on  current  cost
     estimates.  The company believes that the reimbursements of $6 million from
     Chemical's  vendor and $15 million under the insurance  policy are probable
     and,  accordingly,  the company has recorded  receivables  in the financial
     statements totaling $21 million.

     Milwaukee, Wisconsin

     In 1976,  Chemical  closed a  wood-treatment  facility  it had  operated in
     Milwaukee,  Wisconsin.  Operations at the facility prior to its closure had
     resulted in the  contamination  of soil and  groundwater  at and around the
     site with creosote and other substances used in the wood-treatment process.
     In  1984,  EPA  designated  the  Milwaukee  wood-treatment  facility  as  a
     Superfund site under CERCLA,  listed the site on the NPL and named Chemical
     a PRP.  Chemical  executed  a consent  decree in 1991 that  required  it to
     perform  soil  and   groundwater   remediation  at  and  below  the  former
     wood-treatment area and to address a tributary creek of the Menominee River
     that had become contaminated as a result of the wood-treatment  operations.
     Actual remedial activities were deferred until after the decree was finally
     entered in 1996 by a federal court in Milwaukee.

     Groundwater  treatment  was  initiated  in  1996 to  remediate  groundwater
     contamination below and in the vicinity of the former  wood-treatment area.
     It is not possible to reliably  predict how groundwater  conditions will be
     affected by the soil remediation and groundwater treatment;  therefore,  it
     is not known how long groundwater treatment will continue.  Soil cleanup of
     the former  wood-treatment  area began in 2000 and was  completed  in 2002.
     Also in 2002,  terms for  addressing  the tributary  creek were agreed upon
     with EPA,  after which  Chemical  began the  implementation  of a remedy to
     reroute  the creek and to  remediate  associated  sediment  and stream bank
     soils, which is expected to take about four more years.

     As of March 31, 2004, the company had remaining reserves of $10 million for
     the costs of the remediation  work described  above.  Although actual costs
     may  exceed  current  estimates,  the  amount  of any  increases  cannot be
     reasonably estimated at this time.

     Cushing, Oklahoma

     In 1972,  an  affiliate of the company  closed a petroleum  refinery it had
     operated  near  Cushing,  Oklahoma.  Prior to  closing  the  refinery,  the
     affiliate also had produced  uranium and thorium fuel and metal at the site
     pursuant to licenses  issued by the Atomic  Energy  Commission  (AEC).  The
     uranium  and  thorium  operations  commenced  in 1962 and were shut down in
     1966, at which time the affiliate decommissioned and cleaned up the portion
     of the facility  related to uranium and thorium  operations  to  applicable
     standards.  The refinery also was cleaned up to applicable standards at the
     time of closing.

     Subsequent  regulatory  changes required more extensive  remediation at the
     site. In 1990,  the  affiliate  entered into a consent  agreement  with the
     State of Oklahoma to  investigate  the site and take  appropriate  remedial
     actions  related to petroleum  refining and uranium and thorium  residuals.
     Investigation  and  remediation  of  hydrocarbon   contamination  is  being
     performed  with  oversight  of the  Oklahoma  Department  of  Environmental
     Quality. Soil remediation to address hydrocarbon  contamination is expected
     to continue for about four more years.  The long-term  scope,  duration and
     cost of groundwater  remediation are uncertain and,  therefore,  additional
     costs may be incurred in the future.  Additionally,  in 1993, the affiliate
     received a decommissioning  license from the Nuclear Regulatory  Commission
     (NRC),  the  successor to AEC's  licensing  authority,  to perform  certain
     cleanup of uranium  and  thorium  residuals.  This work is  expected  to be
     substantially completed in 2004.

     As of March 31, 2004, the company had remaining reserves of $15 million for
     the costs of the ongoing  remediation  and  decommissioning  work described
     above.  Although actual costs may exceed current  estimates,  the amount of
     any increases cannot be reasonably estimated at this time.

     Mobile, Alabama

     In June  2003,  Chemical  ceased  operations  at its  facility  in  Mobile,
     Alabama,  which  Chemical  had used to produce  feedstock  for its titanium
     dioxide  plants.   Operations  prior  to  closure  had  resulted  in  minor
     contamination   of  groundwater   adjacent  to  surface   impoundments.   A
     groundwater recovery system was installed prior to closure and continues in
     operation  as  required  under  Chemical's   National  Pollutant  Discharge
     Elimination  System (NPDES)  permit.  Future  remediation  work,  including
     groundwater recovery,  closure of the impoundments and other minor work, is
     expected to be substantially completed in about five years. As of March 31,
     2004, the company had remaining  reserves of $11 million.  Although  actual
     costs may exceed current  estimates,  the amount of any increases cannot be
     reasonably estimated at this time.

     New Jersey Wood-Treatment Site

     In 1999,  EPA  notified  Chemical  and its  parent  company  that they were
     potentially  responsible  parties  at a former  wood-treatment  site in New
     Jersey that has been listed by EPA as a Superfund  site. At that time,  the
     company knew little  about the site as neither  Chemical nor its parent had
     ever owned or operated  the site.  A  predecessor  of Chemical had been the
     sole stockholder of a company that owned and operated the site. The company
     that owned the site already had been  dissolved  and the site had been sold
     to a  third  party  before  Chemical  became  affiliated  with  the  former
     stockholder in 1964. EPA has preliminarily estimated that cleanup costs may
     reach $120 million or more.

     There are substantial uncertainties about Chemical's responsibility for the
     site, and Chemical is evaluating  possible defenses to any claim by EPA for
     response  costs.  EPA has not  articulated  the  factual and legal basis on
     which EPA  notified  Chemical  and its  parent  that  they are  potentially
     responsible  parties.  The EPA  notification  may be based  on a  successor
     liability  theory  premised  on the  1964  transaction  pursuant  to  which
     Chemical became affiliated with the former  stockholder of the company that
     had owned and operated the site. Based on available  historical records, it
     is uncertain  whether  and, if so, under what terms the former  stockholder
     assumed liabilities of the dissolved company. Moreover, as noted above, the
     site had been sold to a third party and the company that owned and operated
     the site had been dissolved  before  Chemical  became  affiliated with that
     company's  stockholder.  In addition,  there appear to be other potentially
     responsible parties,  though it is not known whether the other parties have
     received  notification from EPA. EPA has not ordered Chemical or its parent
     to perform work at the site and is instead  performing the work itself. The
     company has not  recorded a reserve  for the site as it is not  possible to
     reliably  estimate whatever  liability  Chemical or its parent may have for
     the cleanup because of the  aforementioned  uncertainties and the existence
     of other potentially responsible parties.

     Forest Products Litigation

     Between  1999 and 2001,  Chemical  and its parent  company were named in 22
     lawsuits in three  states  (Mississippi,  Louisiana  and  Pennsylvania)  in
     connection  with present and former forest products  operations  located in
     those states (in Columbus, Mississippi; Bossier City, Louisiana; and Avoca,
     Pennsylvania).  The lawsuits  sought 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.

     Chemical  executed  settlement  agreements,  which are  expected to resolve
     substantially all of the Louisiana, Pennsylvania and Columbus, Mississippi,
     lawsuits  described above.  Accordingly most of the suits have been, or are
     expected to be, dismissed.  The company believes that the resolution of the
     claims that remain  outstanding with respect to forest products  operations
     in Columbus, Mississippi; Bossier City, Louisiana; and Avoca, Pennsylvania,
     described above will not have a material adverse effect on the company.

     Following  the  adoption by the  Mississippi  legislature  of tort  reform,
     plaintiffs' lawyers filed many new lawsuits across the state of Mississippi
     in  advance  of  the  reform's   effective  date.  On  December  31,  2002,
     approximately  245 lawsuits were filed against  Chemical and its affiliates
     on behalf of  approximately  4,600  claimants in connection with Chemical's
     Columbus,  Mississippi,  operations,  seeking  recovery  on legal  theories
     substantially  similar to those advanced in the litigation described above.
     Substantially  all of these lawsuits have been removed to the U.S. District
     Court for the Northern District of Mississippi,  and the company is seeking
     to consolidate these lawsuits for pretrial and discovery purposes. Chemical
     and its affiliates  believe the lawsuits are without  substantial merit and
     are  vigorously  defending  against  them.  The company has not  provided a
     reserve  for the  lawsuits  because  it  cannot  reasonably  determine  the
     probability of a loss, and the amount of loss, if any, cannot be reasonably
     estimated.

     On December 31, 2002,  and June 13, 2003,  two lawsuits  were filed against
     Chemical  in  connection  with a former  wood-treatment  plant  located  in
     Hattiesburg,  Mississippi,  and the plaintiffs'  lawyers also have asserted
     similar  claims on behalf of other persons not named in the  lawsuits.  The
     lawsuits and other  claims seek  recovery on legal  theories  substantially
     similar to those  advanced  in the  litigation  described  above.  Chemical
     resolved the majority of these claims  pursuant to a settlement  reached in
     April  2003,  which has  resulted  in  aggregate  payments  by  Chemical of
     approximately $600,000. Chemical and its affiliates believe that claims not
     resolved  pursuant to the Hattiesburg  settlements are without  substantial
     merit and are vigorously defending against such claims.

     The  company  believes  that  the  resolution  of the  claims  that  remain
     outstanding  with  respect  to the  follow-on  litigation  will  not have a
     material adverse effect on the company's  financial condition or results of
     operations.

     Other Matters

     The  company  and/or its  affiliates  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's  affiliates  and/or  their  predecessors,  some of which  include
     claims for  personal  injuries  and  property  damages.  Current and former
     operations of the company's affiliates also involve management of regulated
     materials and are subject to various  environmental  laws and  regulations.
     These laws and regulations will obligate the company's  affiliates to clean
     up various  sites at which  petroleum  and other  hydrocarbons,  chemicals,
     low-level   radioactive   substances   and/or  other  materials  have  been
     contained,  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's  affiliates
     operate.

     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, among other reasons:

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

        o remediation activities vary significantly in duration,  scope and cost
          from site to site depending on the mix of unique site characteristics,
          applicable technologies and regulatory agencies involved;

        o 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;

        o 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 respective shares of responsibility for
          cleanup costs;

        o environmental laws and regulations,  as well as enforcement  policies,
          are  continually  changing,  and the outcome of court  proceedings and
          discussions with regulatory agencies are inherently uncertain;

        o 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;

        o unanticipated  construction problems and weather conditions can hinder
          the completion of environmental remediation;

        o the inability to implement a planned engineering design or use planned
          technologies  and  excavation  methods  may require  revisions  to the
          design of remediation  measures,  which delay remediation and increase
          costs; and

        o the identification of additional areas or volumes of contamination and
          changes  in  costs  of  labor,   equipment  and  technology   generate
          corresponding changes in environmental remediation costs.

     As of March 31, 2004,  the company had reserves  totaling  $241 million for
     cleaning up and remediating  environmental sites, reflecting the reasonably
     estimable costs for addressing  these sites.  This includes $94 million for
     the West Chicago sites, $17 million for the Henderson, Nevada, site and $33
     million for forest products sites. Additionally,  as of March 31, 2004, the
     company had litigation reserves totaling  approximately $30 million for the
     reasonably   estimable  losses   associated  with  litigation.   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  liabilities at
     sites now under review, though the company cannot now reliably estimate the
     amount of future additions to the reserves.


N.   Asset Retirement Obligations

     The company adopted FAS 143, "Accounting for Asset Retirement Obligations,"
     on January 1, 2003, which resulted in an increase in net property of $107.9
     million,  an increase in  abandonment  liabilities  of $160.8 million and a
     decrease in  deferred  income tax  liabilities  of $18.2  million.  The net
     impact of these  changes  resulted  in an  after-tax  charge to earnings of
     $34.7 million to recognize the cumulative effect of retroactively  applying
     the new  accounting  standard.  Additionally  in January 2003,  the company
     announced its plan to close the synthetic rutile plant in Mobile,  Alabama,
     by the end of 2003.  Since the plant had a determinate  closure  date,  the
     company also accrued an abandonment  liability associated with its plans to
     decommission the Mobile facility.

     A summary of the  changes  in the asset  retirement  obligation  during the
     first three months of 2004 is included in the table below.

     (Millions of dollars)
     ---------------------------------------------------------------------------

     Balance, December 31, 2003                                          $420.9
       Accretion expense                                                    6.6
       Abandonment expenditures                                            (3.0)
       Changes in estimates, including timing                              (2.1)
                                                                         ------
     Balance, March 31, 2004                                              422.4
       Less:  current asset retirement obligation                         (23.0)
       Less:  asset retirement obligation classified as
          held for disposal                                               (11.1)
                                                                         ------
     Long-term asset retirement obligation                               $388.3
                                                                         ======


O.   Employee Benefit Plans

     The  company  has both  noncontributory  and  contributory  defined-benefit
     retirement plans and  company-sponsored  contributory  postretirement plans
     for health care and life  insurance.  Most  employees are covered under the
     company's retirement plans, and substantially all U.S. employees may become
     eligible for the postretirement benefits if they reach retirement age while
     working  for the  company.  During the first  quarter of 2004,  the company
     contributed $3.2 million to the U.S.  nonqualified  and foreign  retirement
     plans, and $2.5 million to its U.S. postretirement plan. Kerr-McGee expects
     to contribute $2 million to its U.S.  nonqualified  retirement  plans, $6.4
     million   to  its   foreign   retirement   plans  and  $14.4  to  its  U.S.
     postretirement  plan during 2004. No contributions are expected in 2004 for
     the U.S. qualified retirement plan.

     In December  2003,  the FASB  issued FAS 132  (revised  2003),  "Employers'
     Disclosures about Pensions and Other Postretirement Benefits." FAS 132 does
     not change the  measurement  or  recognition  provisions  for  pension  and
     postretirement plans; however,  certain additional disclosures are required
     by the new standard, including the interim disclosure below.

     Total costs recognized for employee  retirement and postretirement  benefit
     plans for the first quarter of 2004 and 2003 were as follows:
<TABLE>
<CAPTION>
                                                                                                Postretirement
                                                                Retirement Plans             Health and Life Plans
                                                            ------------------------         ---------------------
                                                               Three Months Ended             Three Months Ended
                                                                   March 31,                      March 31,
                                                            ------------------------         ---------------------
     (Millions of dollars)                                   2004               2003         2004             2003
     -------------------------------------------------------------------------------------------------------------
<S>                                                         <C>               <C>            <C>              <C>
     Net periodic cost -
      Service cost                                          $ 7.1             $  6.4         $ .7             $1.1
      Interest cost                                          18.2               18.2          4.7              5.4
      Expected return on plan assets                        (29.3)             (30.4)           -                -
      Net amortization -
         Prior service cost                                   2.1                2.2           .4               .1
         Net actuarial (gain) loss                            1.0               (2.5)          .7                -
                                                            -----              -----         ----             ----
             Total                                          $ (.9)            $ (6.1)        $6.5             $6.6
                                                            =====             ======         ====             ====
</TABLE>

     The following assumptions were used in estimating the net periodic expense:
<TABLE>
<CAPTION>

                                                    Three Months Ended                    Three Months Ended
                                                      March 31, 2004                         March 31, 2003
                                              ---------------------------------      -------------------------------
                                              United States       International      United States     International
     ---------------------------------------------------------------------------------------------------------------
<S>                                                     <C>         <C>                       <C>         <C>
     Discount rate                                      6.25%        5.25 - 5.5%              6.75%       5.5 - 5.75%
     Expected return on plan assets                      8.5        5.75 - 7.25               8.5         5.75 - 7.0
     Rate of compensation increases                      4.5          2.0 - 5.0               4.5          2.5 - 6.5
</TABLE>

     On  December 8, 2003,  the  Medicare  Prescription  Drug,  Improvement  and
     Modernization Act of 2003 ("the Act") was signed into law. The Act expanded
     Medicare to include,  for the first time,  coverage for prescription drugs.
     Kerr-McGee  expects that this legislation  will eventually  reduce the cost
     associated  with its  retiree  medical  programs.  However,  at this point,
     Kerr-McGee's  investigation into its options in response to the legislation
     is  preliminary  and guidance  from  various  governmental  and  regulatory
     agencies  concerning the requirements that must be met to obtain these cost
     reductions, as well as the manner in which such savings should be measured,
     has not yet been issued.

     Because of various uncertainties  surrounding Kerr-McGee's response to this
     legislation and the appropriate  accounting methodology for this event, the
     company has elected to defer  financial  recognition  of the impact of this
     legislation until the FASB issues final accounting  guidance.  When issued,
     the final guidance could require the company to change previously  reported
     information.  This one-time deferral election is permitted under FASB Staff
     Position No. 106-1,  "Accounting and Disclosure Requirements Related to the
     Medicare Prescription Drug, Improvement and Modernization Act of 2003." The
     net periodic  postretirement  benefit cost reflected above does not reflect
     the effects of the Act on the plan.


P.   Business Segments

     Following  is a summary of revenues  and  operating  profit for each of the
     company's business segments for the first quarter of 2004 and 2003.

                                                         Three Months Ended
                                                              March 31,
                                                     --------------------------
     (Millions of dollars)                             2004               2003
     ---------------------------------------------------------------------------

     Revenues
      Exploration and production                     $  833.8          $  795.9
      Chemicals - Pigment                               252.4             253.3
      Chemicals - Other                                  30.0              50.3
                                                     --------          --------
                                                      1,116.2           1,099.5
      All other                                            .1                .1
                                                     --------          --------
          Total Revenues                             $1,116.3          $1,099.6
                                                     ========          ========

     Operating Profit (Loss)
      Exploration and production                     $  329.9          $  272.2
      Chemicals - Pigment                                 7.2               7.4
      Chemicals - Other                                  (6.8)            (10.0)
                                                     --------          --------
          Total Operating Profit                        330.3             269.6

     Other Expense                                      (87.3)            (99.5)
                                                     --------          --------

     Income from Continuing Operations
      Before Income Taxes                               243.0             170.1
     Provision for Income Taxes                         (90.8)            (65.9)
                                                     --------          --------

     Income from Continuing Operations                  152.2             104.2

     Discontinued Operations, Net of Income Taxes           -                .4

     Cumulative Effect of Change in Accounting
      Principle, Net of Income Taxes                        -             (34.7)
                                                     --------          --------

     Net Income                                      $  152.2          $   69.9
                                                     ========          ========


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

     Comparison of 2004 Results with 2003 Results

     First-quarter  2004  income  from  continuing   operations  totaled  $152.2
     million,  compared with $104.2 million for the same 2003 period. Net income
     for  the  2004  first  quarter  was  $152.2  million,  compared  with  2003
     first-quarter net income of $69.9 million.

     First-quarter  2004  operating  profit was $330.3  million,  compared  with
     first-quarter 2003 operating profit of $269.6 million, an increase of $60.7
     million between periods.  Higher  operating profit resulted  primarily from
     higher realized oil and gas sales prices, slightly higher natural gas sales
     volumes and lower  exploration  costs,  partially offset by lower crude oil
     sales volumes and higher other operating costs.

     The first-quarter  2004 other expense totaled $87.3 million,  compared with
     expense of $99.5  million in the same 2003  period.  The decrease is due in
     part to a decrease in  environmental  and  litigation  provisions  of $13.7
     million,  lower net interest  expense of $7.9  million,  and a 2004 gain on
     sale of trading securities of $9 million, partially offset by a net foreign
     currency  transaction  loss of $2 million versus a net gain of $3.4 million
     in the same 2003 period and higher general and administrative costs of $6.8
     million.  The $7.9 million decrease in net interest expense between periods
     resulted primarily from lower average  outstanding debt balances during the
     first  quarter of 2004 as compared  with the prior year,  together  with an
     increase  in  interest  savings  from  the  company's  interest  rate  swap
     agreements.

     Income  tax  expense  for the  first  quarter  of 2004  was  $90.8  million
     resulting in an effective tax rate of 37.4%,  compared with $65.9  million,
     or 38.7%, in the same 2003 period.

     Segment Operations

     Exploration and Production

     Oil and gas sales revenues,  production  statistics and average prices from
     continuing operations are shown in the following table.

                                                              Three Months Ended
                                                                   March 31,
                                                              ------------------
                                                                2004       2003
     ---------------------------------------------------------------------------

     Revenues -
       Crude oil and condensate sales                          $361.3     $405.4
       Natural gas sales                                        371.3      323.1
       Gas marketing activities                                  81.7       59.8
       Other                                                     19.5        7.6
                                                               ------     ------
                 Total                                         $833.8     $795.9
                                                               ======     ======

     Production -
       Crude oil and condensate (thousands of barrels per day)    143        165
       Natural gas (MMcf per day)                                 763        761

       Total equivalent barrels of oil (thousands of barrels
          per day)                                                270        292

     Average prices -
       Crude oil and condensate (per barrel) (a)               $27.30     $26.97
       Natural gas (per Mcf) (a)                               $ 5.35     $ 4.71

     (a) The effect of the company's oil and gas  commodity  hedging  program is
         included in the average  sales  prices  shown  above.  During the first
         quarter of 2004,  hedging  activity  reduced the average sales price of
         crude  oil and  natural  gas by  $4.00  per  barrel  and  $.12 per Mcf,
         respectively.  For the first quarter of 2003,  hedging activity reduced
         the  average  sales  price of crude  oil and  natural  gas by $4.08 per
         barrel and $.81 per Mcf, respectively.

     Crude Oil  Revenues  - Oil  revenues  declined  $44.1  million in the first
     quarter of 2004 as  compared  to the same  period in 2003,  primarily  as a
     result of lower production,  offset in part by slightly higher realized oil
     prices.  The  average  realized  price for oil  improved  $0.33 per barrel,
     resulting in an increase of $4.2 million in oil  revenues,  while lower oil
     production reduced revenues by $48.3 million.

     The oil  production  decline was primarily due to the 2003  divestiture  of
     various noncore properties combined with lower production  generated in the
     North Sea area.  As part of the  company's  effort to improve  the  overall
     quality of its asset portfolio,  targeting high-cost,  noncore assets, 2003
     property sales were completed in the U.S.  onshore  region,  Gulf of Mexico
     shelf and the U.K.  North Sea, as well as the South China Sea. In addition,
     production  from  new  fields  in the  North  Sea  area,  such as  Tullich,
     contributed  at peak rates in the first quarter of 2003.  Production  rates
     for these new fields declined for the same period in 2004.

     Natural Gas Revenues - Natural gas revenues  increased by $48.2  million in
     the first quarter of 2004 compared with the same 2003 period as a result of
     a $0.64 per Mcf, or 14%, increase in the average realized price for natural
     gas. Gas  production  volumes of 763 MMcf per day were slightly above first
     quarter 2003 gas production rates. The Gunnison field in the deepwater Gulf
     of Mexico,  which  began  production  late in the  fourth  quarter of 2003,
     helped offset production declines that resulted from divestiture activities
     and other U.S onshore field declines.

     Operating  Profit - Revenues,  operating costs and expenses,  and marketing
     activities associated with the exploration and production segment are shown
     in the following table.

                                                          Three Months Ended
                                                               March 31,
                                                       ------------------------
                                                        2004              2003
     ---------------------------------------------------------------------------

     Revenues, excluding marketing revenues            $752.1            $736.1
                                                       ------            ------
     Operating costs and expenses:
        Lifting Costs:
          Lease Operating Expense                      $ 88.9            $ 87.9
          Production Taxes                               15.1              14.4
                                                       ------            ------
                  Total Lifting Costs                   104.0             102.3

     Depreciation and Depletion                         161.7             156.7
     Accretion Expense                                    6.6               6.2
     Impairments on Assets Held for Use                  13.2               5.1
     Loss (Gain) on Assets Held for Sale                  3.4              (5.2)
     General and Administrative Expense                  31.2              22.0
     Transportation Expense                              26.8              21.7
     Exploration Expense                                 50.6             140.5
     Gas Gathering, Pipeline and Other Expenses          24.9              15.8
                                                       ------            ------
        Total Operating Costs and Expenses              422.4             465.1
                                                       ------            ------
          Net, excluding marketing activities           329.7             271.0
     Marketing - Gas Marketing Revenues                  81.7              59.8
     Marketing - Gas Purchase Costs (including
       transportation)                                  (81.5)            (58.6)
                                                       ------            ------

             Total Operating Profit                    $329.9            $272.2
                                                       ======            ======

     Lease Operating  Expense - Lease operating expense was $88.9 million in the
     first  quarter of 2004,  a $1 million  increase  over the first  quarter of
     2003. On a per-unit  basis,  lease operating  expense  increased by 8% from
     $3.32 per BOE in 2003 to $3.58 per BOE in 2004. The increase is a result of
     higher lease operating expenses in the Gulf of Mexico relating primarily to
     the Gunnison  development  and additional  well  work-over  activity in the
     Rocky Mountain Wattenberg field, as well as higher U.K. expenses due to the
     impact of foreign currency exchange rates on expenses.  These increases are
     offset  in part  by  lower  operating  expenses  in the  U.S.  onshore  and
     international   areas  due  to  the   divestiture  of  noncore,   high-cost
     properties.

     Transportation Costs - In the first quarter of 2004,  transportation costs,
     representing  the costs paid to third-party  providers to transport oil and
     gas production,  increased $5.1 million from the first quarter of 2003. The
     increase in  transportation  expense  resulted  from higher  transportation
     costs  associated with new deepwater Gulf of Mexico  producing  fields,  as
     well as increased costs in the U.K. North Sea.

     Depreciation, Depletion and Amortization (DD&A) - DD&A expense increased $5
     million in the first quarter of 2004,  representing  a 3% increase over the
     same 2003 period. On a per-unit basis, DD&A increased from $5.93 per BOE in
     2003 to $6.52 per BOE in 2004.  Higher DD&A unit costs  resulted  primarily
     from  increases  in the  U.K.  North  Sea area  due to a  reduction  in the
     expected  life-of-field  facility  salvage  values on  certain  fields.  In
     addition,  first quarter DD&A expense in the U.K. North Sea was impacted by
     downward revisions of oil and gas reserves on certain fields which occurred
     at year-end 2003.

     General and Administrative  Expenses - General and administrative  expenses
     were higher in the first  quarter of 2004,  increasing by $9.2 million over
     the same period in 2003.  The  increase is  primarily  the result of higher
     employee-based compensation and pension costs, together with lower overhead
     charge-outs for U.S. onshore properties due to 2003 divestitures.

     Exploration Expense - Exploration expense decreased by $89.9 million in the
     first quarter of 2004  compared  with 2003,  primarily as a result of lower
     dry hole costs of $96.5  million  and lower  amortization  of  nonproducing
     leasehold  expense of $4.3 million.  Partially  offsetting  these decreases
     were higher  geological and  geophysical  project costs of $8.4 million and
     additional exploration staffing expense of $3 million. Exploration staffing
     levels were  increased  during 2003 in support of the  company's  worldwide
     exploration  efforts  and  continued  development  of  the  company's  high
     potential prospect inventory.

     Capitalized  costs  associated  with  exploratory  wells may be  charged to
     earnings  in a future  period  if  management  determines  that  commercial
     quantities of hydrocarbons have not been discovered. At March 31, 2004, the
     company had capitalized costs of approximately $157 million associated with
     such ongoing  exploration  activities,  primarily in the deepwater  Gulf of
     Mexico, Alaska and China.

     Asset  Impairments  and Gain (Loss) on Sale of Assets - Kerr-McGee  records
     impairment losses when performance  analysis indicates that future net cash
     flows  from  production  will not be  sufficient  to recover  the  carrying
     amounts of the related assets. In general,  such write-downs often occur on
     mature  properties  that are nearing the end of their  productive  lives or
     cease production sooner than anticipated.  Asset impairment losses recorded
     in the first  quarter of 2004  associated  with assets held for use totaled
     $13.2 million.  The 2004  impairments  related  primarily to a U.S. Gulf of
     Mexico  field that  experienced  premature  water  breakthrough  and ceased
     production  sooner  than  expected.  Asset  impairment  losses in the first
     quarter 2003 totaled $5.1 million. For a discussion regarding the status of
     the  company's  Leadon  field  in the  U.K.  North  Sea,  see Note C to the
     accompanying Consolidated Financial Statements.

     The  company  recognized  a loss on sale of assets of $3.4  million  in the
     first quarter of 2004 associated primarily with oil and gas properties held
     for sale in the U.S. Gulf of Mexico shelf.  From time to time,  the company
     may  identify  other  oil and gas  properties  to be  disposed  of that are
     considered noncore or nearing the end of their productive lives.

     Gas Marketing Activities - In the Rocky Mountain producing area, Kerr-McGee
     purchases  third-party  natural  gas for  aggregation  and  sale  with  the
     company's  own  production  from  the  Wattenberg  field  in  Colorado.  In
     addition,  Kerr-McGee has purchased  transportation  capacity to markets in
     the Midwest to facilitate sale of its natural gas in market regions outside
     the immediate  vicinity of its  production.  This  activity  began with the
     company's  acquisition  of HS  Resources  in August 2001 and has  increased
     since that time.

     Marketing  revenue  increased  $21.9  million in the first  quarter of 2004
     compared with the same period in 2003. The increase is primarily the result
     of higher purchase and resale of natural gas in the Rocky Mountain area and
     higher natural gas prices.  Gas purchase costs  increased $22.9 million for
     the same period.

     Chemicals - Pigment

     Operating profit for the first quarter of 2004 was $7.2 million on revenues
     of $252.4  million,  compared  with  operating  profit of $7.4  million  on
     revenues of $253.3 million for the same 2003 period. Average selling prices
     increased 2% due to stronger foreign currencies between periods while total
     revenues  decreased  $0.9  million  due to slightly  lower  sales  volumes.
     Pricing gains over the prior-year quarter were offset by manufacturing cost
     increases,  also due to stronger foreign currencies and increased operating
     expenses.

     In January,  the company began production  through a new high  productivity
     oxidation  line at its  Savannah  plant.  It is  expected  that once  fully
     commissioned,   this  process   will  allow  for   improved   manufacturing
     efficiencies,  lower  operating  expenses and lower  capital  requirements.
     Separately,  during  the  quarter  the  company  idled  one of two  sulfate
     production lines at its Savannah facility due to high inventory levels.

     The company will continue to evaluate the  performance of the new oxidation
     line and by the latter part of 2004 will have a better understanding of how
     the Savannah site might be reconfigured to exploit its  capabilities.  This
     reconfiguration  could include  redeployment of certain  assets,  idling of
     certain  assets and  reduction of the future  useful life of other  assets,
     resulting in the acceleration of depreciation expense.

     Chemicals - Other

     Operating  loss in the 2004 first  quarter was $6.8  million on revenues of
     $30 million,  compared with an operating loss of $10 million on revenues of
     $50.3  million in the same 2003 period.  The decrease in revenues  from the
     prior-year  quarter was  primarily  due to the exit of the forest  products
     business.  The decrease in operating  loss was  primarily due to a 2003 net
     environmental  provision of $11 million for ammonium perchlorate related to
     the company's Henderson,  Nevada,  operations (see Note M). This was offset
     in  part by  increased  charges  of $5.3  million  in 2004  for the  forest
     products operations related to increases in dismantlement and environmental
     costs,  combined with operating  losses in the  electrolytic  operations of
     $2.4 million.

     The  company's  Henderson,  Nevada,  manufacturing  plant,  which  had been
     temporarily shut down in the third quarter of 2003,  resumed  operations in
     December  2003 as demand  for U.S.  electrolytic  manganese  dioxide  (EMD)
     product   increased.   The  company   withdrew  its  previously  filed  EMD
     anti-dumping petition in February 2004 as market conditions improved.

     Financial Condition

     At March 31,  2004,  the  company's  net  working  capital  position  was a
     negative $371.6  million,  compared with a negative $235.5 million at March
     31, 2003,  and a negative  $475.1 million at December 31, 2003. The current
     ratio was .8 to 1 at March 31, 2004, December 31, 2003, and March 31, 2003.
     The  negative  working  capital  position  is 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 to lower borrowing costs.

     The company's percentage of net debt (debt less cash) to capitalization was
     56% at March 31,  2004,  compared  with 57% at December 31, 2003 and 59% at
     March 31, 2003.  The decrease  from December 31, 2003,  resulted  primarily
     from reduced debt balances and an increase in stockholders'  equity for the
     period.  The  company  had  unused  lines of credit  and  revolving  credit
     facilities of $1.4 billion at March 31, 2004. Of this amount,  $870 million
     can be used to support commercial paper borrowings of Kerr-McGee Credit LLC
     and  $490  million  can  be  used  to  support  European  commercial  paper
     borrowings of Kerr-McGee (G.B.) PLC, Kerr-McGee  Chemical GmbH,  Kerr-McGee
     Pigments (Holland) B.V. and Kerr-McGee  International ApS.  Currently,  the
     size of the company's  commercial paper program totals $1.2 billion,  which
     can be issued based on market  conditions.  Long-term debt  obligations due
     within one year of $475.7 million consist primarily of $145 million, 8.375%
     notes due July 15,  2004 and  $330.3  million  (face  value),  5 1/2% notes
     exchangeable  for common stock due August 2, 2004. As discussed  below, the
     notes  exchangeable  for common  stock may be settled in either Devon stock
     or, at the company's option, an equivalent amount of cash.

     As of March 31, 2004, the company's  senior unsecured debt was rated BBB by
     Standard & Poor's and Fitch and Baa3 by Moody's.  The company believes that
     it has the ability to provide for its  operational  needs and its long- and
     short-term  capital  programs  through its operating  cash flow  (partially
     protected by the company's hedging program), borrowing capacity and ability
     to raise  capital.  Should  operating  cash flow  decline,  the company may
     reduce its capital expenditures program,  borrow under its commercial paper
     program and/or consider selective long-term borrowings or equity issuances.
     Kerr-McGee's  commercial  paper programs are backed by the revolving credit
     facilities currently in place.

     The company holds  derivative  financial  instruments  that require  margin
     deposits if unrealized  losses exceed limits  established  with  individual
     counterparty  institutions.  From time to time, the company may be required
     to  advance  cash  to  its   counterparties   to  satisfy   margin  deposit
     requirements. Between January 1, 2004 and May 6, 2004, margin calls totaled
     $12.3  million,  of which $7.6 million had been refunded to the company and
     $4.7 million remained outstanding as of May 6, 2004.

     The company  issued 5 1/2% notes  exchangeable  for common  stock (DECS) in
     August 1999,  which allow each holder to receive  between .85 and 1.0 share
     of Devon common stock or, at the company's  option, an equivalent amount of
     cash at maturity in August 2004.  As of April 30, 2004,  Devon common stock
     was trading at $61.20 per share.  Embedded  options in the DECS provide the
     company a floor price on Devon's  common stock of $33.19 per share (the put
     option).  The company  also has the right to retain up to 15% of the shares
     if Devon's  stock price is greater  than $39.16 per share (the DECS holders
     have an embedded call option on 85% of the shares).  If Devon's stock price
     at  maturity  is greater  than  $33.19  per share but less than  $39.16 per
     share,   the  company's  right  to  retain  Devon  stock  will  be  reduced
     proportionately.  The company is not  entitled to retain any Devon stock if
     the price of Devon  stock at  maturity  is less than or equal to $33.19 per
     share. Using the Black-Scholes  valuation model, the company recognizes any
     gains or losses  resulting  from  changes  in the fair value of the put and
     call options in other income.  At March 31, 2004 and December 31, 2003, the
     net  liability  fair value of the  embedded put and call options was $161.3
     million and $154.9 million,  respectively.  The company  recorded losses of
     $6.4 million and $16.2 million during the three months ended March 31, 2004
     and 2003, respectively,  in other income for the changes in the fair values
     of the put and call options.  The  fluctuation  in the value of the put and
     call derivative financial instruments will generally offset the increase or
     decease in the market value of the Devon stock  classified as trading.  The
     fair  value of the 8.4  million  shares  of  Devon  classified  as  trading
     securities  was  $490.5  million  at March 31,  2004,  and $483  million at
     December 31, 2003.  During the first quarter of 2004 and 2003,  the company
     recorded  unrealized gains of $7.5 million and $19.6 million, respectively,
     in  other  income  for  the  changes  in fair  value  of the  Devon  shares
     classified  as  trading.   The  company  also  held  certain  Devon  shares
     classified  as   available-for-sale   securities,   which  were   partially
     liquidated  in December  2003,  with the  remaining  shares sold in January
     2004. The  available-for-sale  Devon shares were in excess of the number of
     shares the  company  believes  will be  required  to  extinguish  the DECS;
     however, should the price of Devon stock fall below $39.16 per share at the
     maturity  of the DECS,  the company  would be  required to either  purchase
     additional  Devon shares to settle the DECS or settle a portion of the DECS
     with cash. The DECS and the derivative  liability  associated with the call
     option are classified as current  liabilities in the  Consolidated  Balance
     Sheet as of March 31, 2004 and December 31, 2003.

     Operating activities provided net cash of $274.6 million in the first three
     months of 2004,  compared with $321.7 million for the same 2003 period. The
     $47.1 million  decrease in operating cash flow between periods  resulted in
     part from a $28.9  million  increase in taxes and interest  paid during the
     first  quarter of 2004. The remaining  decrease resulted from other working
     capital changes. For the first quarter of 2004, capital spending, including
     dry hole costs,  totaled  $169.8  million and dividends  paid totaled $45.4
     million,  which  compares  with  $274.6  million  of net cash  provided  by
     operating  activities  during the same period.  Excess operating cash flow,
     proceeds  from the sale of Devon  stock of $38.9  million  and  other  cash
     inflows were used to fund the company's net reduction in long-term  debt of
     $102 million in the 2004 first quarter.

     Capital expenditures for the first three months of 2004, excluding dry hole
     costs,  totaled  $161.7  million,  compared  with  $201.4  million  for the
     comparable prior-year period.  Exploration and production expenditures were
     85% of the  first  quarter  2004  total  expenditures.  Chemical  - pigment
     expenditures  were 12% of the total,  while  chemical - other and corporate
     incurred  the  remaining  3%  of  the  first-quarter   2004   expenditures.
     Management  anticipates  that the cash  requirements  for the next  several
     years can be provided  through  internally  generated  funds and  selective
     borrowings.

     On April 7,  2004,  the  company  announced  plans to merge  with  Westport
     Resources  Corporation  (Westport) in a transaction valued at approximately
     $3.4 billion.  The merger agreement,  unanimously  approved by the board of
     directors of both  companies,  provides  that  Westport  stockholders  will
     receive .71 shares of  Kerr-McGee  common  stock for each  common  share of
     Westport. As a result, Kerr-McGee expects to issue approximately 49 million
     new shares to Westport's  stockholders (including shares that may be issued
     upon exercise of outstanding stock options).  The transaction is subject to
     approval by the stockholders of both companies,  as well as other customary
     closing  conditions.  If  approved,  the  transaction  is  expected  to  be
     consummated  in the third  quarter of 2004,  shortly  after the  companies'
     respective stockholder meetings.

     Westport's  December  31,  2003  proved oil and gas  reserves  totaled  297
     million  barrels of oil  equivalent,  consisting  primarily  of natural gas
     reserves  located in North  America.  Kerr-McGee  believes  the merger will
     create a more balanced portfolio of oil and gas assets for future growth by
     combining Westport's lower-risk, predominantly U.S. onshore properties with
     Kerr-McGee's existing asset portfolio.

     In connection  with the proposed  Westport  merger,  Kerr-McGee will assume
     Westport's  outstanding  debt on the  effective  date of the merger.  As of
     December 31, 2003, Westport's long-term debt consisted of $700 million face
     value,  8  1/4%  Senior  Subordinated  Notes  due  2011  and  $262  million
     outstanding   under  Westport's   revolving   credit  facility.   Following
     completion of the merger,  Kerr-McGee is considering  calling  Westport's 8
     1/4% Senior  Subordinated  Notes and issuing  Kerr-McGee  debt in a similar
     amount.  Kerr-McGee's  decision to pursue such transactions will depend, in
     part,  on  prevailing  interest  rates  and  market  conditions   following
     completion  of the merger,  and there can be no assurance  that the company
     will pursue such transactions.


     Item 3. Quantitative and Qualitative Disclosures about Market Risk.

     The company is exposed to market risk fluctuations in crude oil and natural
     gas prices.  To increase the  predictability  of its cash flows and support
     capital  expenditure plans, the company initiated a hedging program in 2002
     and  periodically  enters  into  financial   derivative   instruments  that
     generally  fix the  commodity  prices to be  received  for a portion of the
     company's  oil and gas  production  in the future.  At March 31, 2004,  the
     company had outstanding  contracts to hedge a total of 13.8 million barrels
     of North Sea crude oil  production,  14.2 million barrels of domestic crude
     oil production  and 157.2 million MMBtu of domestic  natural gas production
     for the period from April through  December  2004.  The net liability  fair
     value of the  hedge  contracts  outstanding  at March 31,  2004,  was $59.7
     million for North Sea crude oil,  $79.4 million for domestic  crude oil and
     $172.8 million for domestic natural gas.

     At March 31, 2004,  the following  commodity-related  derivative  contracts
     were outstanding related to the company's 2004 hedging program:

<TABLE>
<CAPTION>
                                                                                         Average
                                                                                           Daily            Average
     Contract Type (1)                                                Period              Volume              Price
     --------------------------------------------------------------------------------------------------------------
<S>                                                            <C>                       <C>                <C>
     Natural Gas Hedges                                                                    MMBtu            $/MMBtu
     ------------------                                                                    -----            -------

     Fixed-price swaps (NYMEX)                                     Q2 - 2004             565,000              $4.74
                                                               Q3, Q4 - 2004             575,000              $4.75

     Basis swaps (CIG and Northwest)                           Q2, Q3 - 2004              55,000              $.047
                                                                   Q4 - 2004              41,739              $.038

     Crude Oil Hedges                                                                        Bbl              $/Bbl
     ----------------                                                                        ---              -----

     Fixed-price swaps (WTI)                                       Q2 - 2004              54,300             $28.23
                                                                   Q3 - 2004              50,915             $27.75
                                                                   Q4 - 2004              50,015             $28.29

     Fixed-price swaps (Brent)                                     Q2 - 2004              51,800             $26.27
                                                                   Q3 - 2004              46,850             $26.45
                                                                   Q4 - 2004              52,000             $26.71

     Natural Gas (non-hedge contracts)
     ---------------------------------
     Basis swaps (Northwest)                                            2005              35,000              $0.31
                                                                        2006              35,000              $0.31
                                                                        2007              35,000              $0.31
                                                                        2008              17,473              $0.25
</TABLE>


     (1) These  contracts  may be subject to margin calls above  certain  limits
         established with individual counterparty institutions.

     Prior to  entering  into the merger  agreement  with  Westport,  Kerr-McGee
     entered  into  additional  financial  derivative  transactions  relating to
     specified  amounts of projected  2004,  2005 and 2006 crude oil and natural
     gas  production  volumes.  From March 31, 2004 through  April 6, 2004,  the
     following derivative contracts were added.
<TABLE>
<CAPTION>
                                                                                       Average
                                                                                         Daily              Average
     Contract Type (1)                                              Period              Volume                Price
     --------------------------------------------------------------------------------------------------------------
<S>                                                      <C>                           <C>          <C>

     Natural Gas Hedges                                                                  MMBtu              $/MMBtu
     ------------------                                                                  -----              -------

     Fixed-price swaps (NYMEX)                           Aug. - Sept. 2004              61,967                $5.96
                                                                 Q4 - 2004              93,207                $5.96

     Costless collars (NYMEX)                                         2005             280,000        $5.00 - $6.25
                                                                      2006             340,000        $4.75 - $5.51

     Crude Oil Hedges                                                                      Bbl                $/Bbl
     ----------------                                                                      ---                -----

     Fixed-price swaps (WTI)                                     Aug. 2004               5,000               $32.60
                                                         Sept. - Dec. 2004               9,000               $32.60

     Costless collars (WTI)                                           2005              14,000      $28.50 - $31.89
                                                                      2006              19,000      $27.00 - $30.58

     Natural Gas (non-hedge contracts)                                                   MMBtu              $/MMBtu
     ---------------------------------                                                   -----              -------

     Fixed-price swaps (NYMEX) (2)                       Aug. - Sept. 2004             123,033                $5.96
                                                                 Q4 - 2004              91,793                $5.96

     Crude Oil (non-hedge contracts)                                                       Bbl                $/Bbl
     -------------------------------                                                       ---                -----

     Fixed-price swaps (WTI) (2)                               Aug. - 2004               4,000               $32.60
</TABLE>

     (1) These  contracts  may be subject to margin calls above  certain  limits
         established with individual counterparty institutions.

     (2) These  2004  swaps  will be  treated  as  non-hedge  derivatives  since
         Kerr-McGee's  U.S.  production  from August - December 2004  (excluding
         Westport  volumes)  is either  already  hedged or, in the case of Rocky
         Mountain  production,  does not have corresponding basis swaps in place
         to make the hedges  highly  effective.  As a result,  even though these
         derivatives  effectively  reduce  commodity price risk for the combined
         company's expected production, Kerr-McGee will recognize mark-to-market
         gains and losses in earnings for the non-hedge  quantities  through the
         end of 2004 (or until such time as the  derivatives  qualify  for hedge
         accounting  treatment)  rather  than  deferring  such  amounts in other
         comprehensive income. For purposes of Kerr-McGee's 2004 annual results,
         this  interim  period  mark-to-market  accounting  merely  represents a
         timing difference since, under either approach, all gains and losses on
         the swaps will be recognized in earnings by year end.

     Periodically,  the company  enters into  forward  contracts to buy and sell
     foreign  currencies.  Certain of these  contracts  (purchases of Australian
     dollars and British  pound  sterling  and certain  sales of euro) have been
     designated  and  have  qualified  as  cash  flow  hedges  of the  company's
     operating and capital expenditure  requirements.  These 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.

     Following  are  the  notional  amounts  at  the  contract  exchange  rates,
     weighted-average  contractual  exchange rates and estimated contract values
     for open contracts at March 31, 2004 to purchase (sell) foreign currencies.
     Contract values are based on the estimated forward exchange rates in effect
     at quarter-end. All amounts are U.S. dollar equivalents.
<TABLE>
<CAPTION>

                                                                                                          Estimated
     (Millions of dollars,                            Notional           Weighted-Average                  Contract
     except average contract rates)                     Amount              Contract Rate                     Value
     --------------------------------------------------------------------------------------------------------------
<S>                                                    <C>                         <C>                       <C>
     Open contracts at March 31, 2004 -
         Maturing in 2004 -
              British pound sterling                   $ 178.6                     1.6903                    $189.4
              Australian dollar                           28.2                      .5359                      38.5
              Euro                                      (103.7)                    1.1939                     (93.4)
              British pound sterling                       (.8)                    1.7863                       (.8)
              New Zealand dollar                           (.7)                     .6535                       (.7)
              Japanese yen                                 (.7)                     .0090                       (.8)
         Maturing in 2005 -
              British pound sterling                      76.7                     1.5995                      83.7
</TABLE>


     Item 4. Controls and Procedures.

     As of the end of the  period  covered by this  report,  an  evaluation  was
     carried  out  under  the  supervision  and  with the  participation  of the
     company's  management,  including  its Chief  Executive  Officer  and Chief
     Financial Officer,  of the effectiveness of the design and operation of the
     company's  disclosure controls and procedures pursuant to Exchange Act Rule
     13a-15.  Based on that  evaluation,  the Chief Executive  Officer and Chief
     Financial  Officer  concluded  that the company's  disclosure  controls and
     procedures  are  effective in alerting  them in a timely manner to material
     information   relating  to  the   company   (including   its   consolidated
     subsidiaries)  required  to be  included  in  the  company's  periodic  SEC
     filings.  There  were no  significant  changes  in the  company's  internal
     controls or in other factors that could significantly affect these controls
     subsequent to the date of their evaluation.


                           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,  the
     financial  resources of competitors,  changes in laws and regulations,  the
     ability  to respond  to  challenges  in  international  markets,  including
     changes in currency exchange rates, political or economic conditions, trade
     and regulatory matters, general economic conditions,  and other factors and
     risks identified in the Risk Factors section of the company's Annual Report
     on Form 10-K and other 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) In 2002, Tiwest Pty Ltd, an  Australian  joint venture that produces
            titanium  dioxide  and  in  which  Chemical  indirectly  has  a  50%
            interest,  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  concerned an alleged  chlorine
            release at the facility. Tiwest defended the proceeding in the Court
            of Petty Sessions,  Perth, Western Australia, and on March 26, 2004,
            the Court  found in favor of Tiwest.  Accordingly,  this  matter has
            been resolved, subject to any appeal of the Court's decision.

        (b) For a  discussion  of other  legal  proceedings  and  contingencies,
            reference is made to Note M to the Consolidated Financial Statements
            included in Part I, Item 1. of this Form 10-Q, which is incorporated
            herein by reference.


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

        (a) Exhibits -

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

                   2.1   Agreement  and  Plan of  Merger,  dated  as of April 6,
                         2004, among Kerr-McGee Corporation, Kerr-McGee (Nevada)
                         LLC  and  Westport  Resources  Corporation,   filed  as
                         Exhibit 99.1 to the  company's  Current  Report on Form
                         8-K dated  April 8, 2004,  and  incorporated  herein by
                         reference.

                   3.1   Amended and restated  Certificate of  Incorporation  of
                         Kerr-McGee  Corporation,  filed as  Exhibit  4.1 to the
                         company's Registration Statement on Form S-4 dated June
                         28, 2001, and incorporated herein by reference.

                   3.2   Amended and restated Bylaws of Kerr-McGee  Corporation,
                         filed as Exhibit 3.2 to the company's  Annual Report on
                         Form 10-K for the year ended  December  31,  2003,  and
                         incorporated herein by reference.

                  10.1   Voting  Agreement,  dated as of April  6,  2004,  among
                         Kerr-McGee  Corporation,  Belfer Corp.,  Renee Holdings
                         Partnership,  L.P., Vantz Limited Partnership,  LDB Two
                         Corp.,  Belfer Two Corp., Liz Partners,  L.P., filed as
                         Exhibit 99.2 to the  company's  Current  Report on Form
                         8-K dated  April 8, 2004,  and  incorporated  herein by
                         reference.

                  10.2   Voting  Agreement,  dated as of April  6,  2004,  among
                         Kerr-McGee Corporation and EQT Investments, LLC., filed
                         as Exhibit 99.3 to the company's Current Report on Form
                         8-K dated  April 8, 2004,  and  incorporated  herein by
                         reference.

                  10.3   Voting  Agreement,  dated as of April  6,  2004,  among
                         Kerr-McGee Corporation and Medicor Foundation, filed as
                         Exhibit 99.4 to the  company's  Current  Report on Form
                         8-K dated  April 8, 2004,  and  incorporated  herein by
                         reference.

                  10.4   Voting  Agreement,  dated as of April  6,  2004,  among
                         Kerr-McGee  Corporation and Westport Energy LLC., filed
                         as Exhibit 99.5 to the company's Current Report on Form
                         8-K dated  April 8, 2004,  and  incorporated  herein by
                         reference.

                  10.5   Voting  Agreement,  dated as of April  6,  2004,  among
                         Kerr-McGee  Corporation  and Donald D.  Wolf,  filed as
                         Exhibit 99.6 to the  company's  Current  Report on Form
                         8-K dated  April 8, 2004,  and  incorporated  herein by
                         reference.

                  10.6   Registration  Rights  Agreement,  dated  as of April 6,
                         2004,  among  Kerr-McGee  Corporation,  Westport Energy
                         LLC, Medicor Foundation and EQT Investments, LLC, filed
                         as Exhibit 99.7 to the company's Current Report on Form
                         8-K dated  April 8, 2004,  and  incorporated  herein by
                         reference.

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

                  31.1   Certification  pursuant to Securities Exchange Act Rule
                         15d-14(a),  as adopted  pursuant  to Section 302 of the
                         Sarbanes-Oxley Act of 2002.

                  31.2   Certification  pursuant to Securities Exchange Act Rule
                         15d-14(a),  as adopted  pursuant  to Section 302 of the
                         Sarbanes-Oxley Act of 2002.

                  32.1   Certification  pursuant to 18 U.S.C.  Section  1350, as
                         adopted  pursuant to Section 906 of the  Sarbanes-Oxley
                         Act of 2002.

                  32.2   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 -

            The following  Current Reports on Form 8-K were filed by the company
            during the quarter ended March 31, 2004:

                  o      Current  Report dated  January 21,  2004,  announcing a
                         conference call to discuss the company's fourth-quarter
                         2003 financial and operating results,  and expectations
                         for the future.

                  o      Current  Report dated  January 28,  2004,  announcing a
                         security  analyst  meeting  to  discuss  the  company's
                         financial  and  operating  results for 2003 and certain
                         expectations for oil and natural gas production volumes
                         for the year 2004.

                  o      Current  Report dated January 28, 2004,  announcing the
                         company  had posted on its  website a table  containing
                         hedge guidance for 2003 and 2004 oil and gas derivative
                         instruments.

                  o      Current  Report dated January 28, 2004,  announcing the
                         company had posted on its website a table  containing a
                         reconciliation  of GAAP to Adjusted  Net Income for the
                         year-to-date   and  quarterly   fiscal   periods  ended
                         December 31, 2003.

                  o      Current  Report dated January 28, 2004,  announcing the
                         company's fourth-quarter 2003 earnings.

                  o      Current Report dated January 30, 2004,  announcing that
                         the company  would  present at the Credit  Suisse First
                         Boston Energy Conference on February 4, 2004.

                  o      Current Report dated February 11, 2004, announcing that
                         the company  will  webcast its  executive  briefing for
                         investors and security analysts on February 18, 2004.

                  o      Current  Report dated  February 19, 2004,  announcing a
                         conference  call  to  discuss  the  company's   interim
                         first-quarter 2004 financial and operating  activities,
                         and expectations for the future.

                  o      Current  Report  dated  March 19,  2004,  announcing  a
                         conference  call  to  discuss  the  company's   interim
                         first-quarter 2004 financial and operating  activities,
                         and expectations for the future.

                  o      Current  Report dated March 24, 2004,  announcing  that
                         the  company  would  present at the Howard  Weil Energy
                         Conference on March 29, 2004.




                                    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:  May 7, 2004                       By:  /s/ John M. Rauh
            -----------                            -----------------------------
                                                   John M. Rauh
                                                   Vice President and Controller
                                                   and Chief Accounting Officer