Kerr-McGee Establishes 4th Hub in Deepwater Gulf of Mexico

Kerr-McGee reports that the Gunnison field in the deepwater Gulf of Mexico achieved first production from the first of three subsea wells. The other two subsea wells are expected to begin production by year-end, with daily production from all three subsea wells projected at approximately 5,000 barrels of oil and 125 million cubic feet (MMcf) of gas by mid-January 2004. Production is expected to ramp up to a peak daily rate of approximately 30,000 barrels of oil and 180 MMcf of gas by year-end 2004 as seven dry-tree wells are completed.

Kerr-McGee operates Gunnison with 50% interest. Its partners are Nexen Inc., 30% interest, and Cal Dive International, Inc., 20% interest.

The Gunnison facility, named the Kerr-McGee Global Producer VII, is the company's third truss spar system, located in 3,150 feet of water in Garden Banks block 668. The Gunnison field, covering blocks 667, 668 and 669, was developed within budget and ahead of schedule, with first production achieved less than 26 months after the development was sanctioned. The Gunnison facility has daily processing capacity of 40,000 barrels of oil and 200 MMcf of gas.

"We are very proud of the exceptional efforts of our exploration and production teams that have allowed the Gunnison project to achieve first production ahead of schedule," said Dave Hager, Kerr-McGee senior vice president responsible for oil and gas exploration and production.

"Utilization of the truss spar, similar to our Nansen and Boomvang spars, reduced development costs, accelerated first production, enhances operating efficiencies and provides excess capacity for future satellite developments in the greater Gunnison area."

Kerr-McGee holds interests in more than 40 blocks in the greater Gunnison area. The company expects to drill two to four satellites in the Gunnison area in the next year. Drilling activities are currently under way at the Dawson Deep prospect on Garden Banks block 625. Kerr-McGee operates Dawson Deep with 25% interest for partners McMoRan Oil & Gas Co., 50%; Nexen, 15%; and Cal Dive, 10%.

Continuing its tradition of implementing innovative technological solutions for development of oil and gas resources, Kerr-McGee is developing its Red Hawk field in 5,300 feet of water in the gulf using the world's first cell spar. The cell spar, the third generation of the spar systems, further reduces the reserve threshold for economical development of deepwater fields. The Red Hawk development, operated by Kerr-McGee with 50% interest, is within budget and on schedule for first production in mid-2004. Peak production of 120 MMcf of gas per day is expected during the third quarter of 2004. Devon Energy Corp. holds the remaining 50% interest.

"Kerr-McGee's success in the deepwater gulf continues with our Constitution, Merganser, Vortex and East Breaks blocks 686 and 598 discoveries," Hager said. "The discoveries on blocks 686 and 598 will be developed as subsea tiebacks to Boomvang, with first production at block 686 expected in the first quarter of 2004 and block 598 in the third quarter of 2004. In addition, we will continue our evaluation of development options for Constitution, Merganser and Vortex and embark on a focused exploration program that includes approximately 50 exploratory wells -- 10 to 15 in the deepwater gulf."