Kerr-McGee Implements Strategic Plan with North Sea Sale

Kerr-McGee reports that a wholly owned affiliate has entered into purchase and sale agreements to sell all of the company's North Sea operations for approximately US$3.5 billion in cash, and the assumption by the purchasers of all related abandonment obligations, which had a carrying value of $182 million at June 30, 2005, and the assumption of all related derivative liabilities totaling $175 million after taxes. The agreements are subject to approval from appropriate government agencies and customary closing conditions. The transactions include:

    -- The sale of interests in four nonoperated fields and related
       exploratory acreage and facilities to Centrica plc for approximately
       US$566 million (318.6 million pounds sterling)

    -- The sale of all remaining North Sea assets through the sale of 100% of
       the stock of Kerr-McGee (G.B.) Ltd. and other affiliated entities to
       Maersk Olie og Gas AS, a subsidiary of A.P. Moller -- Maersk A/S, for
       US$2.95 billion

The North Sea assets include proved reserves of approximately 231 million barrels of oil equivalent (BOE) at June 30, 2005, and produced a daily average of approximately 77,700 BOE during the second quarter of 2005, representing approximately 21% of Kerr-McGee's total production during that period.

"These transactions enhance our strategic plan to high grade our oil and gas portfolio to focus on assets that have the greatest growth opportunities," said Luke R. Corbett, Kerr-McGee chairman and chief executive officer. "Market valuations and the tax-efficient nature of these transactions led us to the decision to divest of all of our North Sea operations, maximizing the value of these assets to our stockholders. Divestiture of the North Sea assets will facilitate the company's plan to spend a reduced amount of capital while achieving a higher per-share production growth rate."

These transactions, which will be deemed effective as of July 1, 2005, are expected to be completed by early in the fourth quarter. At closings, Kerr- McGee will receive cash proceeds of approximately $3.5 billion and expects net after-tax cash proceeds will be approximately $3.1 billion. The company plans to use all net proceeds to reduce debt.

Kerr-McGee's strategic plan to high grade its asset portfolio also includes the divestiture of its Gulf of Mexico shelf properties and selected U.S. onshore properties. Data rooms currently are open to prospective buyers. The total combined divestitures are now expected to represent approximately 25% to 30% of the company's proved reserves as of Dec. 31, 2004, and approximately 30% to 35% of its projected 2005 average pre-divestment production of approximately 360,000 BOE per day. In addition, the company is proceeding with the separation of its chemical business through a dual track process as a sale or IPO/spinoff. The company expects to complete the chemical separation and the majority of the divestments prior to year end.

"Our remaining oil and gas property portfolio will be weighted toward longer-life, less capital-intensive properties, with a large inventory of repeatable low-risk development projects, while still providing high-potential exploration prospects for future per-share growth," said Dave Hager, Kerr- McGee chief operating officer. "We are accelerating development drilling activities at our two large resource plays, located in the Rockies in the Wattenberg and Greater Natural Buttes areas, by approximately 20%. We also are focusing our exploratory program on high-impact targets in the deepwater Gulf of Mexico and other select proven hydrocarbon basins."

Kerr-McGee has an established record of success in the Wattenberg and Greater Natural Buttes areas where it has identified more than 10,000 projects to unlock more than 400 million BOE of potential resources. The company plans to complete projects annually that are expected to provide more than 60% of its projected production replacement. Additionally, the company expects to drill 8 to 12 high-potential new-field wildcats per year.

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