Anadarko Completes Kerr-McGee Acquisition

Anadarko Petroleum Corp. on Thursday announced it has completed the acquisition of Kerr-McGee Corp.

Kerr-McGee stockholders of record as of the close of business Thursday will receive $70.50 in cash for each share of Kerr-McGee common stock they own. Trading in Kerr-McGee common stock on the New York Stock Exchange terminated as of the close of trading Thursday.

In connection with the transaction, Anadarko anticipates it will guarantee the outstanding publicly held indebtedness of Kerr-McGee.

"The Kerr-McGee transaction makes Anadarko one of the leading companies in the deepwater Gulf of Mexico and in the Rockies, two of the fastest-growing oil and natural gas producing regions in North America," Anadarko Chairman, President and CEO Jim Hackett said. "Kerr-McGee's outstanding deepwater holdings and long-lived onshore natural gas plays, combined with the skill sets their employees add to our organization, bolster Anadarko's core competencies in high-impact exploration and unconventional resource development. This acquisition, along with the midstream and unconventional assets to be acquired in the Western Gas Resources transaction that we expect to close later this month, should result in a post-divestiture enterprise capable of delivering more robust and predictable results."

Hackett said Anadarko is conducting a thorough review of the consolidated assets to select divestiture candidates, with the dual goals of paring acquisition-related debt and optimizing the portfolio.

"We have identified assets that could produce up to $10 billion in after-tax proceeds. This includes our Canadian holdings, which have already been moved to discontinued operations with the expectation of divestiture before year-end," he said. "We plan to provide detailed operational and financial guidance for the restructured Anadarko during the fourth quarter.

"We expect that Anadarko's post-divestiture portfolio will be more capital efficient, delivering growth with a lower cash flow reinvestment requirement," Hackett said. "That efficiency should translate into increased free cash flow that can more quickly restore balance sheet strength and further increase shareholder value by limiting the level of future equity issuances."


Charles A. Meloy joins Anadarko's executive management team as Senior Vice President of Gulf of Mexico and International Operations. Meloy was previously Vice President of Exploration and Production at Kerr-McGee Corp.

"One of the key components of the acquisitions of Kerr-McGee and, eventually, Western Gas Resources is the talented workforce who will be joining our ranks," Hackett said. "Chuck Meloy has led an accomplished career at Kerr-McGee and its predecessor companies. We are very pleased he will be joining the Anadarko team to lead an important part of our business going forward."

Meloy joins the following Anadarko executives, some of whom are taking on new roles in the combined organization.

    --  Robert P. Daniels, Senior Vice President, Worldwide

    --  Karl F. Kurz, Senior Vice President, North America Operations,
        Midstream and Marketing

    --  Mark L. Pease, Senior Vice President, E&P Technology &

    --  Robert K. Reeves, Senior Vice President, Corporate Affairs and

    --  R. A. Walker, Senior Vice President, Finance & Chief Financial

Luke R. Corbett, formerly Chairman and CEO of Kerr-McGee Corp., has been appointed to Anadarko's Board of Directors.


Anadarko has acquired Kerr-McGee Corp. in an all-cash transaction totaling $16.4 billion, or $70.50 per Kerr-McGee share, plus the assumption of net debt and other liabilities estimated at $1.6 billion.

Kerr-McGee's year-end 2005 proved reserves totaled 898 million BOE, of which approximately 62 percent was natural gas. Proven undeveloped reserves represented 30 percent of the total. Production in 2006 was expected to be about 92 million BOE, with natural gas representing approximately 60 percent of the total. Anadarko expects to ultimately recover more than 3.1 billion BOE on the Kerr-McGee properties, at a full-cycle cost, in today's environment, of approximately $39.2 billion ($12.40 per BOE), including the acquisition cost.

Kerr-McGee's largest property concentrations are in the deepwater Gulf of Mexico and onshore in the Rockies. Gulf of Mexico properties include 504 deepwater blocks encompassing seven operated and three non-operated producing fields, five operated and three non-operated discoveries in various stages of development, and four additional prospects that should be drilled this year. These assets are supported by Kerr-McGee's extensive "hub-and-spoke" infrastructure, which offers highly cost-effective future development potential. In Colorado, Kerr-McGee holds 451,000 net acres in the Wattenberg natural gas play, located partially on the Land Grant, where Anadarko owns the royalty interest. In Utah, Kerr-McGee holds 237,000 net acres in the Uinta basin's prolific Greater Natural Buttes gas play.

In addition to its extensive, rapidly growing U.S. portfolio, Kerr-McGee produces oil and is continuing to develop and explore offshore China, is pursuing the development of discoveries and continuing to explore on the North Slope of Alaska and offshore Brazil, and is exploring offshore Australia, West Africa and the islands of Trinidad and Tobago.


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