A wholly owned subsidiary of W&T Offshore Inc., Houston, (NYSE: WTI) plans to acquire a wholly owned subsidiary of Oklahoma City-based Kerr-McGee Oil & Gas Corp. (NYSE: KMG) which owns substantially all of the Gulf of Mexico conventional shelf properties of Kerr-McGee base consideration of $1.3 billion in cash. The transaction is expected to close in the second quarter of 2006. Kerr-McGee expects to receive after-tax cash proceeds of approximately $925 million, which will be used for general corporate purposes, including partially funding its stock repurchase program and reducing debt. "The sale of the shelf assets is the final step in our announced strategy to divest of lower-growth, shorter-lived properties and focus on higher-impact opportunities," says Dave Hager, Kerr-McGee chief operating officer. "Our remaining oil and natural gas portfolio is weighted toward longer-life, less capital-intensive properties where we have a growing inventory of low-risk development projects. Upon completion of this transaction, Kerr-McGee's property portfolio will be well positioned to deliver consistent, repeatable per-share growth from our assets, which include two large natural gas resource plays in the Rockies, attractive infrastructure in the deepwater gulf and a growing inventory of high-potential exploratory prospects." The properties to be acquired are on the outer continental shelf and in state waters of the US Gulf of Mexico. W&T estimates the properties have proved reserves of approximately 362 billion cubic feet of gas equivalent (74% gas; 72% are proved developed). The properties' probable and possible reserves are expected to be an additional 650 billion cubic feet of gas equivalent. Before Hurricanes Katrina and Rita, the properties were producing approximately 230 million cubic feet of gas equivalent per day. Currently, the properties are producing approximately 150 million cubic feet of gas equivalent per day. The properties include interests in approximately 100 fields on 249 offshore blocks (including 83 undeveloped blocks) across the Western, Central and Eastern Gulf of Mexico, primarily in water depths of less than 1,000 feet. W&T Offshore plans to operate 36 of the producing fields with working interests, which represents 66% of the net production and 60% of the net reserves. Upon closing of the transaction, the company is expected to be one of the top three gross acreage holders in the Gulf of Mexico, with approximately 2.3 million gross acres. "As we told the market when we went public last year, one of our objectives was to put the Company in a position to do larger transactions, and today we have demonstrated that we can do a large transaction," says Tracy W. Krohn, chairman and chief executive of W&T. "We are very excited about this transaction and the opportunities that come with it. The spread of properties across the Gulf of Mexico and upside potential fit in nicely with our core expertise. Our team has identified more than 95 exploration prospects related to these properties and our review is still in the early stages of evaluation." W&T expects to finance this transaction with bank debt and cash on hand.

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