Pogo Acquires West Texas Oil & Gas Assets for $208 Million

Pogo Producing Company has entered into a definitive stock purchase agreement with a private company to acquire certain oil and natural gas properties, primarily located in west Texas, for a total consideration of $208 million, including approximately $35 million of assumed debt. The acquisition is expected to be immediately accretive to Pogo's earnings, cash flow, production and reserves per share. Pogo expects to finance the acquisition with available cash and bank debt and anticipates that this corporate transaction will close on or about December 21, 2004.

Through this purchase, Pogo will be acquiring an estimated 90 billion cubic feet of gas equivalent proven reserves (bcfe) yielding current production of 16.5 million cubic feet of natural gas equivalent per day. Pogo will become the operator of a significant portion of these properties covering over 50,000 leasehold acres. The proven reserves have a current reserves-to- production index of 15 years. Budgeting plans for these properties will involve an active drilling program of over 100 wells to be drilled during 2005 and 2006.

Pogo's Chairman and Chief Executive Officer, Paul G. Van Wagenen, said, "This transaction continues to highlight Pogo's efforts to pursue value- creating domestic acquisitions that have considerable drill-bit potential. These particular long-lived assets bolster our growing Western United States Region and fit well with an ongoing strategy of acquiring high quality North American reserves. The acquisition features repeatable low-risk development drilling, many recompletion opportunities and significant exploratory drilling potential. Beyond the proven reserves, Pogo believes that these properties additionally contain approximately 100 bcfe of very high quality probable reserves available for immediate exploitation. Thus, we hope to more than double the current daily production rate from these properties by the end of 2005."

In conjunction with this acquisition, Pogo has acquired costless natural gas collars covering 10 million cubic feet of gas per day for 2005 and 2006. Pogo entered into collars of $6.00 by $9.25/mcf for 2005, and $5.75 by $8.27/mcf for 2006. Pogo has also entered into costless crude oil collars covering 5,000 barrels of oil per day for 2005 with collars of $40.00 by $62.50/barrel.