Kerr-McGee Corp. moved closer Monday toward becoming a pure-play oil and natural gas producer after completing the initial public offering (IPO) of its chemicals unit, Tronox Inc. Combined with recent asset sales, the Oklahoma City-based explorer used the proceeds to pay off $4.25 billion in loans issued earlier this year, dropping its debt to $2.6 billion.

“We have been quickly and efficiently executing our strategic plan to transition the company into a pure-play oil and natural gas exploration and production company…,” said CEO Luke R. Corbett. “Through the separation of the chemical business and by capitalizing on high commodity prices through divesting our shorter-life, lower-growth properties, we have created a financially strong entity with an enviable mix of sustainable U.S. onshore development assets and high-potential exploration opportunities worldwide.”

Kerr-McGee received $800 million from the completion of the IPO of Tronox’s Class A common stock and related debt financing transactions, and it will continue to control ownership through Class B common stock. The producer plans to consolidate the results of Tronox, including Tronox’s debt of $550 million, in its financial statements, until the expected distribution of the remaining shares to Kerr-McGee shareholders in 2006 through a spin off or split off.

“We believe the implied value of the chemical business through an IPO to be superior to the value of a direct sale of this entity,” said Corbett. “In addition, the ultimate distribution of the remaining shares will allow Kerr-McGee stockholders to participate in the upside opportunities of Tronox.”

Kerr-McGee continues to evaluate bids relating to the sale of its Gulf of Mexico shelf properties. Once the offshore assets are sold, more than 95% of its oil and gas reserves will be located in the United States, with 60% in gas. The company expects to increase production at a compound annual growth rate in the range of 5-9% through 2007.

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