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Kerr-McGee quits coal
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June 8, 1998: 12:40 p.m. ET
Oil and gas producer sells remaining coal operations for $600 million
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NEW YORK (CNNfn) - In two separate deals, Kerr-McGee Corp. said Monday it has agreed to sell its coal-mining operations for $600 million cash, effectively completing its exit from the coal business.
The Oklahoma City-based oil and natural gas exploration company said that Kennecott Energy and Coal Co. has agreed to purchase Kerr-McGee's Jacobs Ranch Mine in the Powder River Basin of Wyoming for $400 million. Kennecott is a wholly-owned U.S. subsidiary of Rio Pinto PLC.
Separately, Kerr-McGee said it is selling its Galatia Mine in the Illinois Basin to American Coal Co. The Galatia Mine deal is expected to close by June 30. The Jacobs Ranch sale is still awaiting final regulatory approval.
"Upon completion of this process the company will be completely focused on further growing its worldwide oil and gas and titanium pigment operations," said Luke Corbett, Kerr-McGee's chairman and chief executive officer.
As the news broke Monday, shares of Kerr-McGee (KMG) slid 1-1/8 to 61-13/16.
Kerr-McGee, once the seventh-largest U.S. coal producer, announced plans earlier this year to get out of the coal business. It plans to focus on its core businesses in oil and gas production in China, the Gulf of Mexico, Indonesia and the North Sea and on its principal chemical business, titanium dioxide pigments.
In February, Kerr-McGee sold some non-core chemical lines, a move it followed by the spin-off in March of its forest products operations.
The Jacobs Ranch is located about 50 miles southeast of Gillette, Wyo., Kennecott's base. The Ranch has current lease reserves of 240 million tons of recoverable coal, with further potential reserves of 900 million tons. The operation currently is limited to 39 million tons of production a year.
Jacobs Ranch already has committed all of its production for 1998 and the next two years to contract buyers. Seventy percent of its production is committed through the year 2003.
Kennecott Energy is one of the five largest coal producers in the U.S., with over 1 billion tons of recoverable coal spread across operations in Wyoming, Colorado and Montana.
Kennecott officials said the Jacobs Ranch mine would enhance its group of low-sulfur, highly productive surface coal operations crucial to its energy utility business. 
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Kennecott Energy
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