Kerr-McGee Corp. increased its capital budget for exploration and production development projects by 15%, or $120 million, to $900 million, to concentrate more on identified projects in the Denver-Julesburg Basin and the Gulf Coast.

The company also said recent price increases prompted it to hedge a portion of its production for the period April through December 2002 to increase the predictability of its cash flows and support additional capital projects. The hedges cover 44% of expected remaining 2002 oil production and 38% of expected remaining 2002 U.S. gas production.

“The recent run up in oil and gas commodity prices has created a strategic opportunity for the company to lock in an additional 40% of our remaining 2002 production volumes at prices significantly above our previous expectations, thus increasing the predictability of our cash flow,” said CEO Luke R. Corbett. “This allows us to increase capital expenditures on proven, identified projects that should enhance our expected production volumes in 2003. It also supports our continued plans for debt reduction in 2002.”

The hedging transactions are in the form of fixed price swaps. They cover 30,000 b/d of U.S. oil production at an average price of $24.09/bbl and 60,000 b/d of North Sea oil production at an average price of $23.17/bbl. The company also entered into price swaps covering 250 MMcf/d of U.S. gas production at an average price of $3.10/Mcf.

The company, through its acquisition of HS Resources, Inc., assumed various derivative contracts covering 100 MMcf/d of natural gas from the Denver-Julesburg Basin for the April through October 2002 period at an average price of approximately $2.65/Mcf.

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