June 23, 2006 --- Vol. 12, No. 34June 2006

Anadarko to acquire Kerr-McGee and Western Gas Resources

Anadarko Petroleum said today it has agreed to acquire Kerr-McGee and Western Gas Resources in separate all-cash transactions totaling $21.1 billion, plus the assumption of debt estimated at $2.2 billion.

“We are creating a combined company with industry-leading positions in the deepwater Gulf of Mexico and the Rockies, two of the fastest-growing oil and natural gas producing regions in North America,” Anadarko Chairman, President and CEO Jim Hackett said in a press release June 23.

“The core assets being acquired strongly complement Anadarko’s existing properties, providing the scale and focus needed to deliver more robust, predictable and efficient growth. Kerr-McGee’s outstanding deepwater holdings and skill sets will elevate Anadarko into the top echelon of deepwater operators. Similarly, Kerr-McGee’s long-lived natural gas resource plays in Colorado and Utah, along with Western Gas Resources’ in Wyoming, will combine with Anadarko’s assets to make us one of the largest producers in several of the most prolific basins in the Rockies.”

Hackett said the transactions are consistent with Anadarko’s strategy, which is built around the company’s core competencies in unconventional resource development and high-impact exploration.

“Two years ago, we unveiled a strategy that included a solid North American foundation of onshore resource plays, a growing deepwater Gulf of Mexico program and an expanding international portfolio,” he said. “Kerr-McGee and Western Gas Resources strengthen Anadarko’s position on all three counts, with captured growth projects that are consistent with our core skill sets. The transactions enable us to create a more focused operating strategy with a larger and lower-risk asset base.”

Hackett said Anadarko will conduct a thorough review Kerr-McGee and Western’s assets with an eye on selling those that are “non-core.” The objective will be to both reduce acquisition-related debt and refocus the portfolio.

Anadarko will finance the acquisitions through a $24 billion, 364-day committed acquisition facility provided by UBS, Credit Suisse and Citigroup. The company plans to use proceeds from asset sales, free cash flow from operations and the issuance of equity to reduce debt over the next 18 to 24 months.

“We also expect cost reductions as we consolidate certain administrative functions, but the biggest synergies are expected to come from combining the complementary assets of the three companies and the skills of their employees. In today’s tight labor markets, gaining qualified people is a bigger focus than achieving cost savings through consolidation,” Hackett said.

Anadarko has agreed to acquire Kerr-McGee in an all-cash transaction totaling $16.4 billion, or $70.50 per Kerr-McGee share, plus the assumption of net debt and other liabilities estimated at $1.6 billion.

Anadarko has agreed to acquire Western Gas in an all-cash transaction totaling $4.7 billion, or $61 per Western Gas Resources share, plus the assumption of debt and other liabilities estimated at $600 million.

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