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Kerr-McGee Increases Production Estimates and Expands Capital Program

Posted on: Tuesday, 9 May 2006, 15:01 CDT

OKLAHOMA CITY, May 9 /PRNewswire-FirstCall/ -- The Kerr-McGee Corp. board of directors today approved additional capital for the 2006 program, which the company expects to have an immediate positive impact on production growth through 2008. The board approved $170 million of additional capital for the acceleration of drilling activities in the U.S. onshore and infrastructure expansions in the Uinta Basin of eastern Utah.

"The additional capital supports our strategic plan to accelerate development activities and production in the U.S. onshore, and maximize the value of our vast inventory of low-risk growth projects," said David A. Hager, Kerr-McGee chief operating officer. "The board's actions today enable us to increase the number of rigs operating in the Greater Natural Buttes area of eastern Utah and the Wattenberg field in northeastern Colorado as well as maintain the current three-rig program in the South Texas and Gulf Coast areas. As a result of the acceleration, we are increasing our estimated compound annual growth rate for production to 7% to 12% through 2008."

Increased Production Growth (previously 5% - 9%) Year Previous Guidance Revised Guidance (thousand barrels of oil (MBOE/d) equivalent per day MBOE/d) 2006 235 - 250 240 - 255 2007 245 - 280 265 - 300 2008 265 - 300 280 - 320 Increased expected compound annual growth rate to 7% to 12% through 2008.

An updated and detailed breakout of expected 2006 quarterly production volumes by product and by region can be found on the company's website at http://kerr-mcgee.com/ir/guidance.htm .

The approved capital expansion provides $60 million for drilling activities in the Greater Natural Buttes area, in the Uinta Basin, which is expected to increase the number of gross wells drilled in 2006, to 275 up from 220 previously. As a result of Kerr-McGee's efforts to clearly define the field's estimated resource potential, the company identified a net unbooked resource potential of approximately 4.7 trillion cubic feet of natural gas equivalent (TCFE). Since that time, experimentation with new drill bits and drilling techniques has allowed the company to drill faster and more efficiently. As it continues to accelerate production in the Greater Natural Buttes area, the company plans to tender bids for two new rigs to be built each year for the next three to four years, bringing the total number of Kerr- McGee operated rigs in the area to 15, from the current number of eight. The company currently has an approximate one-year inventory of approved permits and is receiving between 20 and 25 additional permits each month, while drilling approximately 15 wells per month.

Approximately $50 million of capital will be dedicated for upgrades to the infrastructure in the Uinta Basin, which includes the construction of a 250- million-cubic-feet-per-day (MMcf/d) natural gas processing plant that is expandable to 500 MMcf/d, and the upgrading of the company's natural gas gathering system. These improvements would enable Kerr-McGee to bring the product to market more efficiently and cost effectively as additional volumes are produced from the accelerated development program.

In the Wattenberg field, the approved plan makes $25 million available to fund additional drilling activities. This plan also includes tendering bids for one to two new rigs each year through 2007, which would increase the total number of operated rigs to eight to ten from the current number of five rigs. The additional drilling activity is expected to begin in the fall and provide for 1% to 3% annual production growth from the field in 2007.

In the southern region, the capital expansion provides $35 million for additional drilling activities in the Frost and Braulia fields of South Texas where the company has recently drilled eight successful wells. The company now plans to drill 15 to 18 additional wells in this area in 2006, which are expected to have an immediate benefit on 2006 production volumes.

"Our program in the U.S. onshore has extremely strong economics and by expanding the capital program, we will be able to increase organic growth, near- and long-term production rates and enhance our capacity to deliver FD&A (finding, development and acquisition) costs that are very competitive," said Hager. "The acceleration of the program will be accretive to reserves, cash flow and production on a debt-adjusted per-share basis."

In addition to the $170 million of capital for drilling and infrastructure onshore in the U.S., the board of directors also approved $80 million of additional capital dedicated to the deepwater Gulf of Mexico for ongoing exploration and development projects including appraisal work on the recently announced natural gas discovery at Claymore in Atwater Valley block 140.

Funding for the expanded capital program is expected to come from internally generated cash flow. The company also anticipates completing its previously announced $1 billion share repurchase program and the repayment of an additional $300 million of debt by year end.

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. 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 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, drilling risks, uncertainties in interpreting engineering data, 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 "estimated 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

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: John Christiansen, +1-405-270-3995, or cell, +1-405-406-6574,or jchristiansen@kmg.com , or investors, Rick Buterbaugh, +1-405-270-3561, orJohn Kilgallon, +1-405-270-3521, all of Kerr-McGee Corp.

Web site: http://www.kerr-mcgee.com/http://kerr-mcgee.com/ir/guidance.htm

Source: PRNewswire-FirstCall

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