Kerr-McGee Corp. has set aside more than half of its $860 million capital budget this year for exploration and development projects on- and offshore the United States, with $385 million earmarked for Gulf of Mexico deepwater projects and another $200 million for onshore.

The remainder of this year’s capital budget includes $275 million for international projects, with $170 million budgeted for the North Sea and the rest for other international developments. Average daily oil and natural gas production is expected to be 270,000 boe.

“We have an active exploration program focused on growing our core areas, particularly the deepwater Gulf of Mexico,” said CEO Luke R. Corbett. “We continue to explore new high-potential prospects in global deepwater trends. In addition, our capital budget will fund ongoing projects, including deepwater Gulf of Mexico developments at the Gunnison and Red Hawk fields and the development of Block 04/36 in Bohai Bay, China.”

The Kerr-McGee-operated Gunnison area, located in water more than 3,100 feet deep, is being developed with a truss spar, capitalizing on the success of truss spar developments at the Nansen and Boomvang fields. Initial production at Gunnison is expected during the first quarter of 2004, with peak gross production of about 60,000 boe/d by 2005.

Red Hawk, located in 5,300 feet of water, is being developed using the world’s first cell spar. This technology reduces the reserve threshold needed for an economical development in deep waters. First production from Red Hawk is expected in the second quarter of 2004, with peak gross production reaching 120 MMcf/d by the third quarter of 2004.

Kerr-McGee, which uses “successful efforts” accounting, also has budgeted $250 million for worldwide exploration expense. The money will fund the drilling of 30-45 exploratory wells, including 10 to 15 in the deepwater Gulf of Mexico, five to seven in the North Sea, six to eight onshore in the United States and 10 to 15 in other international areas. Adjusted for divestitures, average daily oil and gas production volumes are expected to mirror 2002 volumes. Oil production will make up approximately 55% of the production volumes; the remainder will come from natural gas production.

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