Oklahoma City-based Kerr-McGee Corp. on Thursday became the latest independent to commission a third-party review of its proved and probable reserves. Until now, the producer had been one of the few in its peer group, which includes Anadarko Petroleum Corp. and Pioneer Natural Resources Corp., to not use a third party to review its reserves bookings on a regular basis.

Kerr-McGee has one of the highest proportions in its peer group of proved undeveloped oil and gas reserves at about 50%. This category of reserves is considered more risky in terms of possible downward revisions, but energy experts note that proved undeveloped reserves are important for drilling success, and a high percentage is not necessarily a cause for concern. The proved undeveloped category was at the heart of Royal Dutch/Shell Group’s and El Paso Corp.’s massive reserve downgrades this year.

Kerr-McGee contracted with Netherland, Sewell & Associates Inc. (NSAI), which specializes in reservoir engineering, modeling and economics, as well as the delivery of operational, geological, geophysical and petrophysical consulting services to the upstream energy industry.

As part of its review, NSAI will examine procedures, methodology and reserve calculations for Kerr-McGee’s major fields, which constitute approximately 50% of the company’s total proved reserve base prior to the Kerr-McGee and Westport Resources Corp. merger. In 2005, Kerr-McGee plans to expand third-party reviews to cover approximately 75% of its total proved reserve base, including its top 25 to 30 fields.

“We are confident in the procedures we follow for estimating reserves, and we believe this relationship with NSAI will provide our stakeholders with additional assurance of the accuracy of our reserve estimates,” said CEO Luke R. Corbett.

Dave Hager, a senior vice president, added that the company continually reviews reserve estimates “and believe our independent consultants will find our reservoir engineers and geoscientists are using methods that result in accurate reserve assessments.”

Some of Kerr-McGee’s proved reserves have been evaluated by independent experts, including those acquired through the recent merger with Westport. In addition, Ryder Scott Co. reviewed the geoscience and engineering data and verified Kerr-McGee’s approach to the assessment of reserves for its 100%-owned Constitution field in the deepwater Gulf of Mexico.

In a recent UBS energy survey, Kerr-McGee was faulted for its high undeveloped reserves, but noted that the producer had been among the most successful in avoiding revisions to its reserve numbers. The survey, which ranked Kerr-McGee 10th among 17 producers, ranked companies in terms of their accounting, with 1 representing the most conservative and 17 the most aggressive.

“Our centralized reserve management team ensures we have up-to- date U.S. Securities and Exchange Commission guidance and use consistent processes throughout the company,” said Hager. “At least once a year, all of our major fields are reviewed by this team, with at least 80% of our total proved reserve base internally reviewed on an annual basis.”

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