The attached is being filed pursuant to Rule 425 under the Securities Act
of 1933 and is part of "Endeavors," a quarterly publication that will be
distributed to employees and selected external audiences. The attached is the
section that discusses the company's acquisition of HS Resources. It does not
constitute an offer for the sale of securities. Shareholders of HS Resources,
Inc. and other investors are urged to read the proxy statement/prospectus in the
registration statement on Form S-4 filed on May 30, 2001 by Kerr-McGee Holdco,
Inc. in connection with the merger and all the amendments thereto. These
materials will contain important information about HS Resources, Inc.,
Kerr-McGee Corporation, the merger, the people soliciting proxies relating to
the merger, their interests in the merger and related matters.
In addition to the registration statement containing the proxy
statement/prospectus filed in connection with the merger, HS Resources, Inc. and
Kerr-McGee file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission. You may read and
copy any reports, statements or other information filed by HS Resources, Inc. or
Kerr-McGee Corporation at the SEC Public Reference Rooms at 450 Fifth Street,
N.W., Washington, D.C. 20549 or at any of the SEC's other public reference rooms
in New York and Chicago. Please call the SEC at (800) SEC-0330 for further
information on the public reference rooms. Kerr-McGee Corporation's and HS
Resources, Inc.'s filings with the SEC are also available to the public from
commercial document-retrieval services and at the web site maintained by the SEC
at www.sec.gov. Free copies of the proxy statement/prospectus, and these other
documents may also be obtained from Kerr-McGee by directing a request through
the investor relations portion of Kerr-McGee's website at Kerr-McGee.com or by
mail to Kerr-McGee Corporation, Investor Relations, P.O. Box 25861, Oklahoma
City, OK 713125.
Statements in this document regarding the company's or management's
intentions, beliefs or expectations including the number of ultimate prospects,
timing and order for drilling prospects, timing of installation of production
facilities and first production and timing of completion of the merger are
"forward-looking statements" within the meaning of the Securities Litigation
Reform Act. Future results and developments discussed in these statements may be
affected by numerous factors and risks, such as the accuracy of the assumptions
that underlie the statements, the risk that the businesses will not be
integrated successfully, the success of the oil and gas exploration and
production program, the price of oil and gas, drilling risks, uncertainties in
interpreting engineering data, demand for consumer products for which
Kerr-McGee's oil and gas business supplies raw materials, general economic
conditions, and other factors and risks discussed in the company's SEC filings.
Actual results and developments may differ materially from those expressed or
implied in this document.
This first issue of Kerr-McGee's new magazine features major endeavors in
three main regions of our company's oil and gas business: onshore United States,
the Gulf of Mexico and the North Sea. We also highlight some of the end products
of our chemical business.
Balancing our portfolio of worldwide oil and gas assets is an ongoing
effort. We look at the oil-gas ratio of our reserve base, geographic
distribution of our assets and potential reward versus risk. In May, we
announced an acquisition valued at $1.7 billion that will greatly enhance this
balance. In a transaction expected to close in the third quarter, Kerr-McGee
will acquire HS Resources, a natural gas producer.
The acquisition will add 1.3 trillion cubic feet of natural gas equivalent
in proved reserves, increasing Kerr-McGee's U.S. gas reserves by 77% and daily
U.S. gas production by 45%. The geographic balance will tilt toward the United
States after the acquisition, increasing domestic reserves to 51% of total
reserves.
In addition, we will create a new core area of operations for our company
in one of the nation's fastest-growing markets, at a time of rising demand for
natural gas. Nearly all of the proved reserves involved in the transaction are
concentrated in the Wattenberg field northeast of Denver. The very low risk of
exploiting these well-defined resources will balance our high-potential
deepwater exploration program and reduce Kerr-McGee's average cost of producing
a barrel of oil equivalent by about 6%.
Clearly, this acquisition will add value for our company. We also add value
by bringing large projects on stream very quickly in core areas. In the North
Sea, the multifield Leadon development is scheduled to start production late
this year, less than two years after we drilled the discovery well. Kerr-McGee
has 100% interest in the Leadon-area fields located in a familiar North Sea
quadrant where we have operated for 16 years.
In the Gulf of Mexico, we are developing the deepwater Nansen and Boomvang
fields with innovative truss spar production systems. When installed only 9
miles apart in about 3,700 feet of water, these spars will form the hub of a new
operating area for our company. We have identified other exciting prospects on
nearby leases. With infrastructure in place, future discoveries can be developed
even faster and at lower cost.
In our chemical business, we focus on titanium dioxide, a white pigment
that most of us see, touch and eat every day. It's in paint, plastics, paper and
many products found on grocery store shelves. Kerr-McGee markets about 16% of
the titanium dioxide pigment used around the world. In all of Kerr-McGee's
operations, nothing is more important than the safety of people and the
protection of the natural environment. I take great pride in the recognition we
have earned in these areas and congratulate our employees on their many
achievements. Two of our most recent safety and environmental honors are
featured in this publication.
Luke R. Corbett
Chairman and Chief Executive Officer
PORTFOLIO BALANCE
$1.7 billion acquisition to increase Kerr-McGee's natural gas production
and reserves
In the Wattenberg field northeast of Denver, formations rich in natural gas
underlie farmland and rolling prairie. For nearly 20 years, the field's largest
operator, HS Resources, has been building ownership and an unparalleled
understanding of the field's gas-bearing sands by methodically analyzing data on
thousands of wells. The company's technical and operational people know exactly
what to expect when drilling a new well or recompleting an existing one to tap
additional reserves. Their approach has made field exploitation and production
as predictable as an efficient manufacturing operation.
For Kerr-McGee, this unique operation represented a very attractive
opportunity to increase domestic natural gas reserves and production and to
balance its overall oil and gas portfolio. On May 14, the company announced an
agreement to acquire HS Resources in a deal valued at $1.7 billion. The
transaction - subject to approval by HS Resources stockholders and customary
closing conditions - is expected to close in the third quarter.
"An amazing number of opportunities are available in this field," said
Lonny Towell, Kerr-McGee vice president of acquisitions. "That's what makes it
such a valuable addition to our portfolio. HS Resources has identified more than
10,000 projects to optimize future value. These include new wells, deepening of
existing wells, recompletions and stimulating production by fracturing a
producing formation. Each is defined precisely on a schedule that shows in
detail the work required, the costs and the expectations. They're accomplishing
500 to 600 of these per year."
To enhance operating and cost control, HS Resources has extended its
operations to field services, gas gathering and gas processing in an area
covering more than 600 square miles. The wells are producing from up to six
reservoirs 4,000 to 8,000 feet below the surface.
"HS Resources can move quickly because they use both their own and
contractors' equipment," Towell said. "They are relentless in their efforts to
control costs. Rather than shopping for the standard, they set the standard in
well service."
The predictable geology, the very low risk and the proved reserves of 1.3
trillion cubic feet of natural gas equivalent involved in the transaction
provide the right balance for Kerr-McGee's reserve base and extensive portfolio
of high-potential deepwater and international prospects. Kerr-McGee's reserves
currently consist of 64% oil and 36% natural gas. Upon closing of the deal, this
ratio will change to 57% oil, 43% natural gas. In the critical North American
market, Kerr-McGee's natural gas production will increase to 59% of the product
mix as domestic gas sales rise by more than 45%.
"This acquisition will increase the life of Kerr-McGee's domestic natural
gas reserves by about two years," said Kenneth Crouch, senior vice president,
oil and gas exploration and production. "The Wattenberg assets offer the
potential to add more than 800 billion cubic feet of gas from probable and
possible reserves. In addition, HS Resources has a successful exploration
program along the gulf coast of Texas and Louisiana that will supplement
Kerr-McGee's existing onshore operations in that area." Kerr-McGee's onshore
group is operating primarily in Texas, New Mexico and Oklahoma. "The
exploitation of the Wattenberg field reflects a remarkable level of efficiency,"
Crouch said. "The employees of HS Resources will bring valuable, highly
specialized expertise to our onshore operations, and we look forward to
welcoming them into Kerr-McGee.
The operations of HS Resources are concentrated in the Wattenberg field of the
Denver-Julesburg basin and in the gulf coast region.
Forward-Looking Information
This publication contains forward-looking statements regarding the company's or
management's intentions, beliefs or expectations within the meaning of the
Securities Litigation Reform Act. Future results and developments discussed in
these statements may be affected by numerous factors and risks, such as the
accuracy of the assumptions that underlie the statements, the success of the oil
and gas exploration and production program, drilling risks, the market value of
Kerr-McGee's products, uncertainties in interpreting engineering data, demand
for consumer products for which Kerr-McGee's businesses supply raw materials,
general economic conditions, and other factors and risks discussed in the
company's SEC filings. Actual results and developments may differ materially
from those expressed or implied in this document.
This publication also contains information about the proposed acquisition of HS
Resources, Inc., by Kerr-McGee in a transaction involving the creation of a new
holding company. Investors are urged to read the S-4 Registration Statement
filed by the newly created holding company, Kerr-McGee Holdco, Inc., with the
Securities and Exchange Commission.