Kerr-McGee Capitalizes on Deepwater Hub With Satellite Discovery

Kerr-McGee announced further deepwater Gulf of Mexico success with a discovery at East Breaks 599. Kerr-McGee estimates that the field has potential resources in the range of 10 million to 20 million barrels of oil equivalent (BOE). The field will be developed as a subsea tieback to the Kerr-McGee-operated Boomvang production hub, located approximately three miles south on East Breaks block 643. East Breaks 599, located in 3,220 feet of water, is operated by Kerr-McGee with a 33.34% interest. Kerr-McGee's partners in East Breaks 599 are Amerada Hess and Marubeni Oil & Gas (USA) Inc., each with a 33.33% interest.

The East Breaks 599 well, spud on May 27th by Diamond Offshore's semisub, Ocean Voyager, was drilled to a total measured depth of 9,142 feet and encountered more than 135 net feet of high-quality oil pay in several sands. The well will be temporarily abandoned for completion in early 2006.

"Our deepwater hub-and-spoke strategy for developing core areas continues to add value through satellite successes such as the East Breaks 599 discovery," said Dave Hager, Kerr-McGee senior vice president responsible for oil and gas exploration and production. "We plan additional satellite exploration in the East Breaks area, with a four-well exploratory program at Northwest Nansen near our Nansen production hub. We expect to spud the first well later this summer and estimate that the combined resource potential for the four fault blocks is in the range of 20 million to 50 million BOE."

The exploratory well at the Chilkoot prospect, located on Green Canyon block 320, is noncommercial based on results to date. Well data is being evaluated and upon completion, additional appraisal will be considered. The well, drilled to a company-record measured depth of 32,023 feet, is being temporarily abandoned and will be considered for future re-entry or sidetrack. Chilkoot is the deepest penetration in western Green Canyon and the data obtained is important to the geological understanding in this under-explored area where Kerr-McGee holds interests in approximately 35 blocks. Kerr-McGee operates Chilkoot with a 33.33% interest.

The rig will be moved from Chilkoot to the Conquest prospect, located on Green Canyon block 767 in the company's Constitution corridor. Following the Conquest appraisal, the company expects to spud the West Covington prospect on Green Canyon block 765. Kerr-McGee operates Conquest and West Covington with 50% working interests. Conquest and West Covington have an estimated gross resource potential in the range of 90 million to 240 million BOE and could add significant value in the Constitution area. The Constitution hub, which includes the development of Ticonderoga through a subsea tieback, is Kerr- McGee's sixth-operated deepwater hub in the Gulf of Mexico. First production is expected in mid-2006.

Kerr-McGee estimates its second-quarter exploration expense will be approximately $135 million, which includes an approximate $18 million charge related to Chilkoot.

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