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Kerr-McGee Identifies Significant Potential in the Rockies and Brazil; Extends Production Growth Through 2008

Posted on: Thursday, 19 January 2006, 09:00 CST

OKLAHOMA CITY, Jan. 19 /PRNewswire-FirstCall/ -- Kerr-McGee Corp. today made several major announcements in conjunction with the company's executive briefing in New York. The company announced it has:

-- Identified potential resources totaling more than 6 trillion cubic feet of natural gas equivalent (TCFe) in the Rocky Mountains -- Raised the estimated resource range of the Chinook discovery offshore Brazil to 250 million barrels of oil equivalent (BOE) to 450 million BOE -- Extended identified organic production growth through 2008 at a compounded average growth rate of 5% to 9% -- Developed a plan to distribute shares of Tronox Class B common stock in first-quarter 2006 -- Replaced 150% of production from continuing operations in 2005, at a Finding Development and Acquisitions (FD&A) cost of less than $11.85 per BOE -- Increased its percent of proved developed reserves to 70%

"These accomplishments demonstrate that we are effectively executing our strategy as a pure-play exploration and production company, and every program in our company is focused on improving returns," said Luke R. Corbett, Kerr- McGee chairman and chief executive officer. "We believe that we have the right assets, opportunities, people and strategy to deliver increasing value to our shareholders."

Expanding potential in the Rockies

As part of Kerr-McGee's strategy, the company executed specific programs and accelerated development activities in the U.S. onshore in 2005. As a result of this strategy, Kerr-McGee has nearly tripled the amount of identified potential resources in its two large natural gas resource plays in the Rocky Mountain region to more than 6 TCFe.

In the Greater Natural Buttes area of eastern Utah, the company has identified a net unbooked resource potential of 4.7 TCFe compared to the previous estimate of 1.8 TCFe.

"Since acquiring this field in 2004, we have worked to define the field's identified resource potential," said Dave Hager, Kerr-McGee chief operating officer. "Kerr-McGee has booked less than one TCFe as proven, which means we have the potential for a five-fold increase to existing proved reserves in this field alone. We are accelerating activity to achieve that increase and to capitalize on the vast opportunities in the Wasatch and Mesa Verde formations, which are present throughout our acreage position."

In the Wattenberg field in northeastern Colorado, Kerr-McGee has tripled its unbooked net resource potential. The increase from 0.5 TCFe to 1.5 TCFe is primarily due to Kerr-McGee's successful pilot program for downspacing, which contributed to the Colorado Oil and Gas Conservation Commission's approval of an amendment to Rule 318A. The amendment permits about 2,500 additional wells throughout 27 townships in the heart of Kerr-McGee's acreage within the Wattenberg field. The increased resources also reflect identified tri-frac opportunities throughout the field.

Growing discovery in Brazil

Kerr-McGee completed its full-field reservoir simulation at the Chinook discovery in the shallow-water block BM-C-7 offshore Brazil. As a result, the company has identified much greater resource potential and has increased the estimated resource range of the field to 250 million to 450 million BOE. The previous range was 150 million to 250 million BOE.

"This is an exciting and meaningful opportunity for Kerr-McGee," said Hager. "The Chinook field has outstanding rock quality, and its potential could expand as we continue our appraisal program to delineate the full extent of the reservoir."

Kerr-McGee owns a 50% working interest in the 133,000-acre block located in approximately 350 feet of water, approximately 125 miles southeast of Rio de Janeiro. Economic evaluations for various development scenarios of the field are under way.

Extending organic production growth

Kerr-McGee also extended its estimated organic production growth through 2008 at a compounded annual growth rate of 5% to 9%. The production growth comes from activities already in progress including the acceleration of exploitation projects in the Rockies and deepwater development projects at Constitution and Ticonderoga, Independence Hub and Blind Faith. The volumes do not include any potential production from existing discoveries in Brazil and Alaska.

Distributing Tronox stock

Kerr-McGee announced it expects to submit a plan to its board of directors to distribute the remaining shares of Tronox Class B common stock to existing shareholders before the end of the first quarter.

Through the initial public offering (IPO) of Tronox Incorporated last November, Kerr-McGee received approximately $800 million on a tax-free basis for approximately 45% of the stock. Kerr-McGee has retained approximately 22.5 million shares that have a 120-day lockup, which expires on March 22, 2006.

Replacing production at a lower cost

Based on preliminary results for 2005, Kerr-McGee replaced approximately 150% of its production from continuing operations at an FD&A cost of less than $11.85 per BOE. Kerr-McGee added 165 million BOE in 2005 -- an increase of approximately 27% over prior estimates. The percent of proved developed reserves has increased to approximately 70% of total reserves. The results are preliminary pending closing of the company's reserve and financial books.

Other developments

The company moved up the anticipated first oil from its Ticonderoga field in the deepwater Gulf of Mexico. Kerr-McGee now expects to begin production in the first quarter. The volumes will be processed through Kerr-McGee's Constitution spar located on Green Canyon block 680, approximately 190 miles south of New Orleans, La. The company expects production from the Constitution and Ticonderoga fields to ramp up as additional wells come on line throughout 2006.

Kerr-McGee also confirmed the estimated resources at its Nikaitchuq discovery on the North Slope of Alaska. The company's gross estimated resource range is 100 million to 200 million BOE. The company continues to work toward sanctioning and also with the state of Alaska and its partners on issues including royalty relief, permitting and unitization. Kerr-McGee owns a 70% working interest in Nikaitchuq and is the operator.

Following the release of the company's 2005 financial results on Jan. 25, 2006, Kerr-McGee expects to begin the previously announced $1 billion stock repurchase program. As part of the program, Kerr-McGee expects to repurchase approximately 10 million shares in the open market.

The company's senior management team will be discussing these announcements and others during today's executive briefing in New York. The executive briefing begins at 8 a.m. EST. The webcast is open to interested parties at http://www.kerr-mcgee.com/. It also will be archived on the company's website for approximately 30 days.

Kerr-McGee is an Oklahoma City-based oil and natural gas exploration and production company focused in the U.S. onshore, deepwater Gulf of Mexico and select proven world-class hydrocarbon basins. In February, Kerr-McGee will celebrate 50 years listed on the NYSE under the ticker symbol "KMG." For more information on Kerr-McGee, visit http://www.kerr-mcgee.com/.

Statements in this news release 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 U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements include those statements preceded by, followed by or that otherwise include the words "believes,""expects,""anticipates,""intends,""estimates,""projects,""target,""budget,""goal,""plans,""objective,""outlook,""should," or similar words. In addition, any statements regarding possible commerciality, development plans, capacity expansions, drilling of new wells, ultimate recoverability of reserves, future production rates, cash flows and changes in any of the foregoing are forward-looking statements. 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, the price of oil and gas, drilling risks, uncertainties in interpreting engineering data, demand for consumer products for which Kerr- McGee's oil and gas business supplies 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 in areas where Kerr-McGee operates, 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 U.S. Securities and Exchange Commission filings. Actual results and developments may differ materially from those expressed or implied in this news release.

The United States Securities and Exchange Commission permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves. We use certain terms in this release, such as "resources,""estimated resource range,""resource potential" and "potential resources," that the SEC's guidelines strictly prohibit us from including in filings with the SEC. Investors are urged to consider closely the disclosures and risk factors in our Forms 10-K and 10-Q, File No. 1-16619, available from Kerr-McGee's offices or web site, http://www.kerr-mcgee.com/. You can also obtain these forms from the SEC by calling 1-800-SEC-0330.

Media contact: John Christiansen Direct: 405-270-3995 Cell: 405-406-6574 jchristiansen@kmg.com Investor contacts: Rick Buterbaugh John Kilgallon Direct: 405-270-3561 Direct: 405-270-3521

First Call Analyst: FCMN Contact:

Photo: http://www.newscom.com/cgi-bin/prnh/20060118/DAKERRMCGEELOGOAP Archive: http://photoarchive.ap.org/PRN Photo Desk, photodesk@prnewswire.com

Kerr-McGee Corp.

CONTACT: Media - John Christiansen, +1-405-270-3995, or +1-405-406-6574,jchristiansen@kmg.com, Investor - Rick Buterbaugh. +1-405-270-3561, or JohnKilgallon, +1-405-270-3521, all of Kerr-McGee Corp.

Web site: http://www.kerr-mcgee.com/

Source: PRNewswire-FirstCall

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