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NEWS BULLETIN

January 29, 2004 --- Vol. 10, No. 12January 2004

Kerr-McGee files for North Slope unit

According to company spokeswoman Debbie Schramm Kerr-McGee Oil & Gas filed a unit application with the state of Alaska today for the acreage it recently acquired from Armstrong Alaska on the North Slope. (See story in the Jan. 11 edition of Petroleum News.)

The Houston independent bought a 70 percent interest from Armstrong and took over operatorship of the 12,000 acre Northwest Milne prospect where the companies are drilling one to three exploration wells this winter. In a Jan. 28 conference call Dave Hager, Kerr-McGee’s senior vice president of exploration and production, said his company viewed the North Slope as a low-cost basin with huge reserve potential. He said Kerr-McGee’s first well at Northwest Milne is expected to cost $7-10 million.

“We think that given that type of cost, we get significant reserve exposure on lower risk prospects for a low entry cost,” Hager said, adding that more acreage divestitures are likely in Alaska, which will provide his company with more acquisition opportunities. Alaska’s government, he said, is interested in getting “more companies like ourselves up there to kick off the next generation of prospecting.”

Kerr-McGee, like Pioneer Natural Resources before it, entered the North Slope under the guidance of Armstrong Alaska, an affiliate of Denver-based Armstrong Oil & Gas. According to Armstrong Vice President Stu Gustafson, Armstrong identifies and acquires North Slope prospects and then puts together a comparatively low-cost exploration, development and production program prior to seeking majority partners as operators.

Kerr-McGee participated in a table-top oil spill drill in late January with its oil spill response contractor Alaska Chadux, the U.S. Minerals Management Service, the Alaska Department of Environmental Conservation and the U.S. Coast Guard. “I understand the drill went very well,” Kerr-McGee’s Schramm told Petroleum News. “Care for the environment and safety are high priorities for us.”

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