Kerr-McGee To Acquire HS Resources

Kerr-McGee Corp. announced that it has signed a definitive agreement with HS Resources, Inc. to acquire all of the outstanding shares of HS Resources in a transaction valued at $1.7 billion, including the assumption of approximately $450 million of debt. The agreement, unanimously approved by boards of directors of both companies, provides that Kerr-McGee will pay $66 for each share of HS Resources' common stock. The payment consists of 70% cash and 30% Kerr-McGee common stock that will be issued at a fixed exchange ratio of .9404 shares for each share of HS Resources' common stock.

Through this transaction, Kerr-McGee will acquire proved reserves of 1.3 trillion cubic feet of natural gas equivalent, at a cost of approximately $1.10 per thousand cubic feet of proved gas equivalent, and gas gathering, undeveloped acreage and other assets valued at approximately $300 million. The acquired reserves, which are predominately natural gas located in the Denver-Julesburg Basin of northeastern Colorado, will increase Kerr-McGee's proved U.S. natural gas reserves by 77% and increase the company's reserve life for U.S. natural gas by about two years. Kerr-McGee's total proved reserves will increase by 20%.

"The addition of these long-lived natural gas reserves, concentrated near one of the fastest growing energy markets in the U.S., creates another core operating area for our company that provides significant growth opportunities," said Luke R. Corbett, Kerr-McGee chairman and chief executive officer. "These properties also offer the potential to add more than 500 billion cubic feet from probable reserves through identified projects that have a proven track record of success. HS Resources has a focused exploration program onshore in the Gulf coast that supplements Kerr-McGee's high-potential deepwater prospect inventory. This transaction dovetails with our strategy to build a balanced portfolio of quality oil and gas assets that offers meaningful upside potential."

After closing the transaction, Kerr-McGee's total daily production volumes are expected to increase about 15% with daily production of U.S. natural gas increasing more than 45%. Total unit lifting costs are expected to decrease about 6%. The company expects the transaction to be immediately accretive to both earnings and cash flow per share.

"We plan to retain substantially all of HS Resources' operating personnel at their existing offices," added Corbett. "The combination of quality assets and their disciplined and successful exploration and production team further enhances the value of this transaction to Kerr-McGee." The transaction, which is contingent upon approval by HS Resources' shareholders and other customary closing conditions, is expected to be completed during the third quarter of this year. Following completion of the transaction, one of the co-founders of HS Resources is expected to join the Kerr-McGee board of directors.


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