Kerr-McGee ( KMG) swung to a third-quarter continuing operations profit, as higher oil and gas prices offset the effect of Gulf Coast hurricanes. The Oklahoma City, Okla., energy exploration company made $53 million, or 46 cents a share, from continuing operations, reversing the year-ago continuing operations loss of $24 million, or 16 cents a share. Revenue rose to $1.21 billion from $1.2 billion a year earlier. Including all items, earnings rose to $3.09 a share from a nickel a year ago. "Kerr-McGee's major operated facilities in the Gulf of Mexico sustained no structural damage from Hurricanes Katrina and Rita, which is directly attributable to the outstanding efforts of our development and operations teams and our use of innovative technology," the company said. "However, our production in the third quarter was curtailed by damage to pipelines and third-party infrastructure. Currently, we are producing approximately 75% of our pre-hurricane levels in the Gulf of Mexico. We will continue to bring additional production on line as pipelines and infrastructure allow." Due to the Gulf of Mexico curtailments discussed above, the company's physical deliveries to certain sales indices are expected to be insufficient to cover the associated derivative contracts in place for the fourth quarter of 2005. Accordingly, the company recognized a third-quarter after-tax charge of $66.8 million, associated with certain fourth-quarter 2005 derivative contracts assigned to the Gulf of Mexico where deliveries to specific sales indices are expected to be less than the associated-hedged volumes. The company believes that it is probable that deliveries in the Gulf of Mexico will resume in sufficient volumes to match its remaining 2006 and 2007 derivative contracts by January 2006. The company also recognized an after-tax loss of $137.7 million in the third quarter for hedge ineffectiveness. This represents the excess of the mark-to-market loss associated with all outstanding derivative contracts accounted for as hedges, over the expected higher revenues the company will receive on its future sales of oil and natural gas.