Pogo Sells 50% Stake in Gulf of Mexico Assets to Mitsui

Pogo Producing Company has entered into a definitive agreement to sell an undivided 50 percent of each and all of its Gulf of Mexico oil and gas leasehold interests to Mitsui & Co., Ltd., Mitsui & Co. (U.S.A.), Inc. and Mitsui Oil Exploration Co., Ltd. (together "Mitsui") for $500 million in cash. The transaction is expected to close during June, subject to customary closing conditions.

Pogo expects to use the proceeds from this sale of Gulf of Mexico properties in the funding of Pogo's acquisition of Latigo Petroleum, Inc., which was announced on April 17, 2006. The Latigo acquisition involves properties in the Permian Basin of west Texas and southeastern New Mexico and in the Texas panhandle area of the Anadarko Basin. Today's Gulf of Mexico sale, combined with the Latigo acquisition, marks a very significant step in solidifying Pogo's onshore North American focus. Pogo will retain the remaining 50% interest in each of its present Gulf of Mexico properties, which will then represent, after these two transactions, slightly more than 6% of Pogo's total proven reserves. Nevertheless, that relatively modest remaining outer continental shelf presence maintains some production capacity and retains the possibility to participate, to some extent, in any significant future discovery which might be made on those offshore blocks.

This sale of 50 percent interest in Pogo's Gulf of Mexico assets is approximately equivalent to net production capacity, without any reduction due to continuing hurricane damage related curtailments, of 8,000 barrels per day of oil and 24 million cubic feet per day of natural gas, and, according to independent engineering estimates as of December 31, 2005, approximately 143 billion cubic feet of net estimated proven oil and gas reserves expressed in natural gas equivalents.

Separately, and importantly, Pogo announced that it will work together with Mitsui, on a non-exclusive basis, to seek further opportunities for the purpose of jointly acquiring interests in oil and natural gas assets in various basins across the United States and Canada. Paul G. Van Wagenen, Chairman and Chief Executive Officer of Pogo, stated, "We are extremely pleased to make this announcement, as well as the sale of half of our stake in the Gulf of Mexico to Mitsui. Mitsui is a large, financially powerful company that we have come to know and greatly respect as a result of the 2005 sale to Mitsui of some of Pogo's assets in the Gulf of Thailand. Today's announcement marks a milestone in enhancing investment value and minimizing risk for Pogo's shareholders. Pogo is a determined and disciplined asset buyer, and we look forward to working closely with Mitsui to realize continued growth in North America."