----

**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**FORM      10-Q**

**      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)**

**OF      THE SECURITIES EXCHANGE ACT OF 1934**

**OR**

**      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)**

**OF      THE SECURITIES EXCHANGE ACT OF 1934**

**KERR-McGEE      CORPORATION**

| Delaware                                       | 73-1612389                         |
|------------------------------------------------|------------------------------------|
| (State                or Other Jurisdiction of | (I.R.S.                Employer    |
| Incorporation                or Organization)  | Identification                No.) |

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|                                                                                                                                      | **KERR-McGEE                CORPORATION**                                                                                                                             |   |
|-------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                      |                                                                                                                                                                  |   |
|                                                                                                                                      | **INDEX**                                                                                                                                                             |   |
|                                                                                                                                      |                                                                                                                                                                  | PAGE   |
| **PART                I - FINANCIAL INFORMATION**                                                                                         |                                                                                                                                                                  |
|                                                                                                                                      |                                                                                                                                                                  |   |
| Item                1. Financial Statements                                                                                               |                                                                                                                                                                  |
|                                                                                                                                      |                                                                                                                                                                  |   |
|                                                                                                                                      | Condensed                Consolidated Statement of Income for the Three and Six Months Ended                June                30, 2005 and 2004                     | 1      |
|                                                                                                                                      |                                                                                                                                                                  |   |
|                                                                                                                                      | Condensed                Consolidated Balance Sheet at June 30, 2005 and December 31,                2004                                                             | 2      |
|                                                                                                                                      |                                                                                                                                                                  |   |
|                                                                                                                                      | Condensed                Consolidated Statement of Cash Flows for the Six Months Ended June                30,                2005 and 2004                           | 3      |
|                                                                                                                                      |                                                                                                                                                                  |   |
|                                                                                                                                      | Condensed                Consolidated Statement of Comprehensive Income and Stockholders’ Equity                for the Six Months Ended June 30, 2005 and 2004 | 4      |
|                                                                                                                                      |                                                                                                                                                                  |   |
|                                                                                                                                      | Notes                to Condensed Consolidated Financial Statements                                                                                                   | 5      |
|                                                                                                                                      |                                                                                                                                                                  |   |
| Item              2. Management's Discussion and Analysis of Financial Condition              and              Results of Operations | 34                                                                                                                                                               |
|                                                                                                                                      |                                                                                                                                                                  |   |
| Item                3. Quantitative and Qualitative Disclosures about Market                Risk                                          | 53                                                                                                                                                                    |
|                                                                                                                                      |                                                                                                                                                                  |   |
| Item                4. Controls and Procedures                                                                                            | 56                                                                                                                                                                    |
|                                                                                                                                      |                                                                                                                                                                  |   |
| Forward-Looking                Information                                                                                                | 56                                                                                                                                                                    |
|                                                                                                                                      |                                                                                                                                                                  |
|                                                                                                                                      |                                                                                                                                                                  |
| **PART                II - OTHER INFORMATION**                                                                                            |                                                                                                                                                                  |
|                                                                                                                                      |                                                                                                                                                                  |   |
| Item                1. Legal Proceedings                                                                                                  | 56                                                                                                                                                                    |
|                                                                                                                                      |                                                                                                                                                                  |
| Item                2. Unregistered Sales of Equity Securities and Use of                Proceeds                                         | 57                                                                                                                                                                    |
|                                                                                                                                      |                                                                                                                                                                  |
| Item                4. Submission of Matters to a Vote of Security Holders                                                                | 57                                                                                                                                                                    |
|                                                                                                                                      |                                                                                                                                                                  |
| Item                6. Exhibits                                                                                                           | 58                                                                                                                                                                    |
|                                                                                                                                      |                                                                                                                                                                  |   |
| SIGNATURE                                                                                                                                 | 59                                                                                                                                                                    |
|                                                                                                                                      |                                                                                                                                                                  |   |
|                                                                                                                                      |                                                                                                                                                                  |

----

**PART      I - FINANCIAL INFORMATION**

**Item      1. Financial Statements**

**KERR-McGEE      CORPORATION AND SUBSIDIARY COMPANIES**

**CONDENSED      CONSOLIDATED STATEMENT OF INCOME**

**(UNAUDITED)**

|                                                                                                                   |   | Three                Months Ended |      | Six                Months Ended |   |
|------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|-----------|---------------------------------|--------|
|                                                                                                                   |   | June                30,           |      | June                30,         |   |
| (Millions                of dollars, except per-share amounts)                                                         |   | **2005**                          |      | 2004                            |   | **2005** |   | 2004 |   |
|                                                                                                                   |   |                              |      |                            |   |   |   |   |   |
| **Revenues**                                                                                                           |   | **$**                             | **1,850** |                            | $      | 1,091 |   | **$** | **3,567** |   | $ | 2,200 |   |
|                                                                                                                   |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| **Costs                and Expenses**                                                                                  |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| Costs                and operating expenses                                                                            |   |                              | **556**   |                            |   | 428 |   |   | **1,077** |   |   | 823 |   |
| Selling,                general and administrative expenses                                                            |   |                              | **110**   |                            |   | 78 |   |   | **202** |   |   | 159 |   |
| Shipping                and handling expenses                                                                          |   |                              | **50**    |                            |   | 38 |   |   | **98** |   |   | 76 |   |
| Depreciation                and depletion                                                                              |   |                              | **308**   |                            |   | 191 |   |   | **618** |   |   | 381 |   |
| Accretion                expense                                                                                       |   |                              | **8**     |                            |   | 6 |   |   | **17** |   |   | 13 |   |
| Asset                impairments                                                                                       |   |                              | **1**     |                            |   | 1 |   |   | **5** |   |   | 14 |   |
| (Gain)                loss an sale of assets                                                                      |   |                              | **(24**   | **)**                           |   | 4 |   |   | **(46** | **)** |   | 7 |   |
|                    Exploration,              including dry holes and amortization             |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
|                   of undeveloped leases                                                                      |   |                              | **121**   |                            |   | 65 |   |   | **184** |   |   | 116 |   |
| Taxes,                other than income taxes                                                                          |   |                              | **45**    |                            |   | 28 |   |   | **92** |   |   | 56 |   |
|       Provision              for              environmental remediation and restoration, |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| net                of reimbursements                                                                                   |   |                              | **2**     |                            |   | 4 |   |   | **26** |   |   | 3 |   |
| Interest                and debt expense                                                                               |   |                              | **81**    |                            |   | 56 |   |   | **142** |   |   | 113 |   |
| Total                Costs and Expenses                                                                                |   |                              | **1,258** |                            |   | 899 |   |   | **2,415** |   |   | 1,761 |   |
|                                                                                                                   |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
|                                                                                                                   |   |                              | **592**   |                            |   | 192 |   |   | **1,152** |   |   | 439 |   |
| **Other                Income (Expense)**                                                                              |   |                              | **(9**    | **)**                           |   | (7 | ) |   | **(10** | **)** |   | (7 | ) |
|                                                                                                                   |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| **Income                from Continuing Operations before Income Taxes**                                               |   |                              | **583**   |                            |   | 185 |   |   | **1,142** |   |   | 432 |   |
| **Provision                for Income Taxes**                                                                          |   |                              | **(211**  | **)**                           |   | (71 | ) |   | **(415** | **)** |   | (163 | ) |
|                                                                                                                   |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| **Income                from Continuing Operations**                                                                   |   |                              | **372**   |                            |   | 114 |   |   | **727** |   |   | 269 |   |
| **Loss                from Discontinued Operations**                                                                   |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| **(net                of income tax benefit of $1, $2, $1 and $3,                respectively)**                       |   |                              | **(2**    | **)**                           |   | (3 | ) |   | **(2** | **)** |   | (6 | ) |
|                                                                                                                   |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| **Net                Income**                                                                                          |   | **$**                             | **370**   |                            | $      | 111 |   | **$** | **725** |   | $ | 263 |   |
|                                                                                                                   |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| **Income                (Loss) per Common Share**                                                                      |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| Basic                -                                                                                                 |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| Continuing                operations                                                                                   |   | **$**                             | **2.64**  |                            | $      | 1.11 |   | **$** | **4.92** |   | $ | 2.64 |   |
| Discontinued                operations                                                                                 |   |                              | **(.01**  | **)**                           |   | (.04 | ) |   | **(.01** | **)** |   | (.06 | ) |
| Net                income                                                                                              |   | **$**                             | **2.63**  |                            | $      | 1.07 |   | **$** | **4.91** |   | $ | 2.58 |   |
|                                                                                                                   |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| Diluted                -                                                                                               |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| Continuing                operations                                                                                   |   | **$**                             | **2.61**  |                            | $      | 1.05 |   | **$** | **4.79** |   | $ | 2.48 |   |
| Discontinued                operations                                                                                 |   |                              | **(.01**  | **)**                           |   | (.04 | ) |   | **(.01** | **)** |   | (.06 | ) |
| Net                income                                                                                              |   | **$**                             | **2.60**  |                            | $      | 1.01 |   | **$** | **4.78** |   | $ | 2.42 |   |
|                                                                                                                   |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| **Dividends                Declared per Common Share**                                                                 |   | **$**                             | **.05**   |                            | $      | .45 |   | **$** | **.50** |   | $ | .90 |   |
|                                                                                                                   |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
|                                                                                                                   |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
|                                                                                                                   |   |                              |      |                            |   |   |   |   |   |   |   |   |   |

----

**KERR-McGEE      CORPORATION AND SUBSIDIARY COMPANIES**

**CONDENSED      CONSOLIDATED BALANCE SHEET**

**(UNAUDITED)**

|                                                                                             |   | **June                  30,** |       | December                  31, |   |
|--------------------------------------------------------------------------------------------------|--------|-------------------------------|------------|-------------------------------|--------|
| (Millions                  of dollars)                                                           |   | **2005**                      |       | 2004                          |   |
|                                                                                             |   |                          |       |                          |   |
| **ASSETS**                                                                                       |   |
| **Current                  Assets**                                                              |   |                          |       |                          |   |
| Cash                  and cash equivalents                                                       |   | **$**                         | **324**    |                          | $      | 76 |   |
| Accounts                  receivable                                                             |   |                          | **1,024**  |                          |   | 963 |   |
| Inventories                                                                                      |   |                          | **362**    |                          |   | 329 |   |
| Derivatives                  and other current assets                                            |   |                          | **216**    |                          |   | 195 |   |
| Deferred                  income taxes                                                           |   |                          | **337**    |                          |   | 324 |   |
| Assets                  associated with properties held for sale                                 |   |                          | **36**     |                          |   | - |   |
| **Total                  Current Assets**                                                        |   |                          | **2,299**  |                          |   | 1,887 |   |
|                                                                                             |   |                          |       |                          |   |   |   |
| **Property,                  Plant and Equipment**                                               |   |                          | **17,745** |                          |   | 18,984 |   |
| **Less                  reserves for depreciation, depletion and                  amortization** |   |                          | **(7,423** | **)**                         |   | (8,157 | ) |
|                                                                                             |   |                          | **10,322** |                          |   | 10,827 |   |
|                                                                                             |   |                          |       |                          |   |   |   |
| **Investments,                  Derivatives and Other Assets**                                   |   |                          | **614**    |                          |   | 508 |   |
| **Goodwill                  and Other Intangible Assets**                                        |   |                          | **1,280**  |                          |   | 1,288 |   |
| **Assets                  Associated with Properties Held for Sale**                             |   |                          | **662**    |                          |   | 8 |   |
|                                                                                             |   |                          |       |                          |   |   |   |
| **Total                  Assets**                                                                |   | **$**                         | **15,177** |                          | $      | 14,518 |   |

| **LIABILITIES                  AND STOCKHOLDERS' EQUITY**                          |   |
|------------------------------------------------------------------------------------|--------|
| **Current                  Liabilities**                                           |   |   |   |   |   |   |   |
| Accounts                  payable                                                  |   | **$** | **546** |   | $ | 644 |   |
| Long-term                  debt due within one year                                |   |   | **131** |   |   | 463 |   |
| Income                  taxes payable                                              |   |   | **161** |   |   | 201 |   |
| Derivative                  liabilities                                            |   |   | **800** |   |   | 372 |   |
| Accrued                  liabilities                                               |   |   | **811** |   |   | 825 |   |
| Liabilities                  associated with properties held for sale              |   |   | **19** |   |   | - |   |
| **Total                  Current Liabilities**                                     |   |   | **2,468** |   |   | 2,505 |   |
|                                                                               |   |   |   |   |   |   |   |
| **Long-Term                  Debt**                                                |   |   | **6,825** |   |   | 3,236 |   |
|                                                                               |   |   |   |   |   |   |   |
| **Noncurrent                  Liabilities**                                        |   |   |   |   |   |   |   |
| Deferred                  income taxes                                             |   |   | **2,203** |   |   | 2,177 |   |
| Asset                  retirement obligations                                      |   |   | **475** |   |   | 503 |   |
| Derivative                  liabilities                                            |   |   | **585** |   |   | 208 |   |
| Other                                                                              |   |   | **592** |   |   | 571 |   |
| Liabilities                  associated with properties held for sale              |   |   | **67** |   |   | - |   |
| **Total                  Noncurrent Liabilities**                                  |   |   | **3,922** |   |   | 3,459 |   |
|                                                                               |   |   |   |   |   |   |   |
| **Contingencies                  and Commitments (Notes 13 and 14)**               |   |   |   |   |   |   |   |
|                                                                               |   |   |   |   |   |   |   |
| **Stockholders'                  Equity**                                          |   |   |   |   |   |   |   |
| Common                  stock, par value $1 - 500,000,000 and 300,000,000 shares   |   |   |   |   |   |   |   |
| authorized,                  118,523,627 and 152,049,127 shares issued at          |   |   |   |   |   |   |   |
| June                  30, 2005 and December 31, 2004, respectively                 |   |   | **119** |   |   | 152 |   |
| Capital                  in excess of par value                                    |   |   | **3,580** |   |   | 4,205 |   |
| Preferred                  stock purchase rights                                   |   |   | **1** |   |   | 2 |   |
| Retained                  earnings (accumulated deficit)                           |   |   | **(770** | **)** |   | 1,102 |   |
| Accumulated                  other comprehensive loss                              |   |   | **(641** | **)** |   | (79 | ) |
| Common                  shares in treasury, at cost - 3,355,596 and 159,856 shares |   |   |   |   |   |   |   |
| at                  June 30, 2005 and December 31, 2004, respectively              |   |   | **(261** | **)** |   | (8 | ) |
| Deferred                  compensation                                             |   |   | **(66** | **)** |   | (56 | ) |
| **Total                  Stockholders' Equity**                                    |   |   | **1,962** |   |   | 5,318 |   |
|                                                                               |   |   |   |   |   |   |   |
| **Total                  Liabilities and Stockholders’ Equity**              |   | **$** | **15,177** |   | $ | 14,518 |   |

----

**KERR-McGEE        CORPORATION AND SUBSIDIARY COMPANIES**

**CONDENSED      CONSOLIDATED STATEMENT OF CASH FLOWS**

**(UNAUDITED)**

|                                                                                            |   | Six                Months Ended |       |
|-------------------------------------------------------------------------------------------------|--------|---------------------------------|------------|
|                                                                                            |   | June                30,         |       |
| (Millions                of dollars)                                                            |   | **2005**                        |       | 2004 |   |
|                                                                                            |   |                            |       |   |   |
| **Cash                Flows from Operating Activities**                                         |   |                            |       |   |   |
| Net                income                                                                       |   | **$**                           | **725**    |   | $ | 263 |   |
| Adjustments                to reconcile net income to net cash                                  |   |                            |       |   |   |   |   |
| provided                by operating activities -                                               |   |                            |       |   |   |   |   |
| Depreciation,                depletion and amortization                                         |   |                            | **650**    |   |   | 407 |   |
| Deferred                income taxes                                                            |   |                            | **265**    |   |   | 111 |   |
| Dry                hole expense                                                                 |   |                            | **91**     |   |   | 26 |   |
| Asset                impairments                                                                |   |                            | **5**      |   |   | 14 |   |
| (Gain)                loss on sale of assets                                                    |   |                            | **(46**    | **)** |   | 7 |   |
| Accretion                expense                                                                |   |                            | **17**     |   |   | 13 |   |
| Provision                for environmental remediation and restoration,                         |   |                            |       |   |   |   |   |
| net                of reimbursements                                                            |   |                            | **27**     |   |   | 7 |   |
| Other                noncash items affecting net income                                         |   |                            | **128**    |   |   | 29 |   |
| Changes                in assets and liabilities                                                |   |                            | **(284**   | **)** |   | (169 | ) |
| **Net                Cash Provided by Operating Activities**                                    |   |                            | **1,578**  |   |   | 708 |   |
|                                                                                            |   |                            |       |   |   |   |   |
| **Cash                Flows from Investing Activities**                                         |   |                            |       |   |   |   |   |
| Capital                expenditures                                                             |   |                            | **(808**   | **)** |   | (433 | ) |
| Dry                hole costs                                                                   |   |                            | **(75**    | **)** |   | (26 | ) |
| Acquisitions,                net of cash acquired (1)                                           |   |                            | **-**      |   |   | 43 |   |
| Proceeds                from sales of assets                                                    |   |                            | **63**     |   |   | 3 |   |
| Proceeds                from sale of investments                                                |   |                            | **-**      |   |   | 39 |   |
| Other                investing activities                                                       |   |                            | **(21**    | **)** |   | (26 | ) |
| **Net                Cash Used in Investing Activities**                                        |   |                            | **(841**   | **)** |   | (400 | ) |
|                                                                                            |   |                            |       |   |   |   |   |
| **Cash                Flows from Financing Activities**                                         |   |                            |       |   |   |   |   |
| Issuance                of common stock                                                         |   |                            | **159**    |   |   | 7 |   |
| Purchases                of treasury stock                                                      |   |                            | **(250**   | **)** |   | - |   |
| Shares                repurchased under the tender offer                                        |   |                            | **(3,975** | **)** |   | - |   |
| Dividends                paid                                                                   |   |                            | **(142**   | **)** |   | (91 | ) |
| Repayment                of debt                                                                |   |                            | **(392**   | **)** |   | (347 | ) |
| Proceeds                from borrowings                                                         |   |                            | **4,250**  |   |   | 86 |   |
| Credit                Agreement financing costs                                                 |   |                            | **(58**    | **)** |   | - |   |
| Settlement                of Westport derivatives                                               |   |                            | **(80**    | **)** |   | - |   |
| **Net                Cash Used in Financing Activities**                                        |   |                            | **(488**   | **)** |   | (345 | ) |
|                                                                                            |   |                            |       |   |   |   |   |
| **Effects                of Exchange Rate Changes on Cash and Cash                Equivalents** |   |                            | **(1**     | **)** |   | - |   |
| **Net                Increase (Decrease) in Cash and Cash Equivalents**                         |   |                            | **248**    |   |   | (37 | ) |
| **Cash                and Cash Equivalents at Beginning of Period**                             |   |                            | **76**     |   |   | 142 |   |
| **Cash                and Cash Equivalents at End of Period**                                   |   | **$**                           | **324**    |   | $ | 105 |   |

| (1)   | In                  June 2004, the company completed a merger with Westport Resources                  Corporation (Westport). In exchange for Westport’s common stock and                  options, Kerr-McGee issued stock valued at $2.4 billion, options                  valued at                  $34 million and assumed debt of $1 billion, for a total of $3.5                  billion                  (net of $43 million of cash                  acquired). |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**KERR-McGEE        CORPORATION AND SUBSIDIARY COMPANIES**

**CONDENSED      CONSOLIDATED STATEMENT OF COMPREHENSIVE **

**INCOME      AND STOCKHOLDERS' EQUITY **

**(UNAUDITED)**

| (Millions                of dollars)               |   | CommonStock |    | Capital                inExcess                ofPar                Value |   | RetainedEarnings(Accumulated                Deficit) |   | AccumulatedOtherComprehensiveLoss |      | TreasuryStock |   | DeferredCompensationand                Other |   | TotalStockholders'Equity |     |
|----------------------------------------------------|--------|-------------|---------|---------------------------------------------------------------------------|--------|------------------------------------------------------|--------|-----------------------------------|-----------|---------------|--------|----------------------------------------------|--------|--------------------------|----------|
| **Balance                at December 31, 2003**    |   | **$**       | **101** |                                                                      | **$**  | **1,708**                                            |   | **$**                             | **927**   |          | **$**  | **(45**                                      | **)**  | **$**                    | **(2**   | **)** | **$** | **(53** | **)** | **$** | **2,636** |   |
| Comprehensive                Income:               |   |        |    |                                                                      |   |                                                 |   |                              |      |          |   |                                         |   |                     |     |   |   |   |   |   |   |   |
| Net                income                          |   |        | -       |                                                                      |   | -                                                    |   |                              | 263       |          |   | -                                            |   |                     | -        |   |   | - |   |   | 263 |   |
| Other                comprehensive loss            |   |        | -       |                                                                      |   | -                                                    |   |                              | -         |          |   | (200                                         | )      |                     | -        |   |   | - |   |   | (200 | ) |
| Comprehensive                income                |   |        |    |                                                                      |   |                                                 |   |                              |      |          |   |                                         |   |                     |     |   |   |   |   |   | 63 |   |
| Westport                merger                     |   |        | 49      |                                                                      |   | 2,402                                                |   |                              | -         |          |   | -                                            |   |                     | -        |   |   | (3 | ) |   | 2,448 |   |
| Exercise                of stock options           |   |        | 1       |                                                                      |   | 10                                                   |   |                              | -         |          |   | -                                            |   |                     | -        |   |   | - |   |   | 11 |   |
| Restricted                stock activity           |   |        | -       |                                                                      |   | 22                                                   |   |                              | -         |          |   | -                                            |   |                     | (3       | ) |   | (14 | ) |   | 5 |   |
| ESOP                deferred compensation          |   |        | -       |                                                                      |   | -                                                    |   |                              | -         |          |   | -                                            |   |                     | -        |   |   | 3 |   |   | 3 |   |
| Tax                benefit from stock-based awards |   |        | -       |                                                                      |   | 2                                                    |   |                              | -         |          |   | -                                            |   |                     | -        |   |   | - |   |   | 2 |   |
| Dividends                declared ($.90 per share) |   |        | -       |                                                                      |   | -                                                    |   |                              | (91       | )             |   | -                                            |   |                     | -        |   |   | - |   |   | (91 | ) |
| **Balance                at June 30, 2004**        |   | **$**       | **151** |                                                                      | **$**  | **4,144**                                            |   | **$**                             | **1,099** |          | **$**  | **(245**                                     | **)**  | **$**                    | **(5**   | **)** | **$** | **(67** | **)** | **$** | **5,077** |   |
|                                               |   |        |    |                                                                      |   |                                                 |   |                              |      |          |   |                                         |   |                     |     |   |   |   |   |   |   |   |
| **Balance                at December 31, 2004**    |   | **$**       | **152** |                                                                      | **$**  | **4,205**                                            |   | **$**                             | **1,102** |          | **$**  | **(79**                                      | **)**  | **$**                    | **(8**   | **)** | **$** | **(54** | **)** | **$** | **5,318** |   |
| Comprehensive                Income:               |   |        |    |                                                                      |   |                                                 |   |                              |      |          |   |                                         |   |                     |     |   |   |   |   |   |   |   |
| Net                income                          |   |        | -       |                                                                      |   | -                                                    |   |                              | 725       |          |   | -                                            |   |                     | -        |   |   | - |   |   | 725 |   |
| Other                comprehensive loss            |   |        | -       |                                                                      |   | -                                                    |   |                              | -         |          |   | (562                                         | )      |                     | -        |   |   | - |   |   | (562 | ) |
| Comprehensive                income                |   |        |    |                                                                      |   |                                                 |   |                              |      |          |   |                                         |   |                     |     |   |   |   |   |   | 163 |   |
| Shares                issued upon conversion       |   |        |    |                                                                      |   |                                                 |   |                              |      |          |   |                                         |   |                     |     |   |   |   |   |   |   |   |
| of                5.25% debentures                 |   |        | 10      |                                                                      |   | 583                                                  |   |                              | -         |          |   | -                                            |   |                     | -        |   |   | - |   |   | 593 |   |
| Purchases                of treasury shares        |   |        | -       |                                                                      |   | -                                                    |   |                              | -         |          |   | -                                            |   |                     | (250     | ) |   | - |   |   | (250 | ) |
| Shares                repurchased and retired      |   |        | (47     | )                                                                         |   | (1,410                                               | )      |                              | (2,517    | )             |   | -                                            |   |                     | -        |   |   | (1 | ) |   | (3,975 | ) |
| Exercise                of stock options           |   |        | 3       |                                                                      |   | 156                                                  |   |                              | -         |          |   | -                                            |   |                     | -        |   |   | - |   |   | 159 |   |
| Restricted                stock activity           |   |        | 1       |                                                                      |   | 25                                                   |   |                              | -         |          |   | -                                            |   |                     | (3       | ) |   | (13 | ) |   | 10 |   |
| ESOP                deferred compensation          |   |        | -       |                                                                      |   | -                                                    |   |                              | -         |          |   | -                                            |   |                     | -        |   |   | 3 |   |   | 3 |   |
| Tax                benefit from stock-based awards |   |        | -       |                                                                      |   | 21                                                   |   |                              | -         |          |   | -                                            |   |                     | -        |   |   | - |   |   | 21 |   |
| Dividends                declared ($.50 per share) |   |        | -       |                                                                      |   | -                                                    |   |                              | (80       | )             |   | -                                            |   |                     | -        |   |   | - |   |   | (80 | ) |
| **Balance                at June 30, 2005**        |   | **$**       | **119** |                                                                      | **$**  | **3,580**                                            |   | **$**                             | **(770**  | **)**         | **$**  | **(641**                                     | **)**  | **$**                    | **(261** | **)** | **$** | **(65** | **)** | **$** | **1,962** |   |
|                                               |   |        |    |                                                                      |   |                                                 |   |                              |      |          |   |                                         |   |                     |     |   |   |   |   |   |   |   |

----

**KERR-McGEE      CORPORATION AND SUBSIDIARY COMPANIES**

**NOTES      TO      CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**JUNE      30,      2005**

| **1.** | **The                Company, Basis of Presentation and Accounting                Policies** |
|--------|----------------------------------------------------------------------------------------------|

**The      Company**

| ·   | In                March 2005, the company’s Board of Directors (the Board) authorized                management to pursue alternatives for the separation of the chemical                business, including a spinoff or sale. The company is actively pursuing                both separation alternatives and expects to determine the timing                and                manner of separation during the third quarter of 2005. As of August                5,                2005, criteria for reporting the results of the chemical business                unit as                discontinued operations had not been                met. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Concurrent                with the decision to pursue the separation of the chemical business,                the                Board authorized a share repurchase program initially set at $1 billion,                with an expectation to expand the program as the chemical business                separation proceeded.                The                company repurchased 3.1 million shares of its common stock at an                aggregate                cost of $250 million under this program before its termination in                connection with the Board's approval of the tender offer discussed                below. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | In                April 2005, the company announced its decision to divest of lower-growth,                shorter-life and higher-decline oil and gas properties.  In                connection with the divestiture program, in June 2005, the company                identified for sale certain oil and gas properties onshore in the                United                States and in the U.K. sector of the North Sea.  In August                2005, the                company entered into agreements to sell all of its North Sea                operations.  Information about these transactions in                provided in                Notes 6 and 17.  In addition, the company is considering for                divestiture other selected U.S. onshore properties and Gulf of Mexico                shelf properties.  The total combined divestitures are expected                to                represent approximately 25% to 30% of the company's proved reserves                at                December 31, 2004 and up to 35% of its average daily production for                the                first six months of 2005.  However, the actual impact of any                divestitures may differ materially from management’s estimates due to                a change in market conditions or in the composition of the properties                to                be divested, as well as other                factors. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | On                April 14, 2005, the company announced its intention to commence a                modified                "Dutch Auction" self tender offer for its common stock with an aggregate                purchase cost of up to $4 billion. Under the tender offer, which                was                completed in May 2005, the company repurchased 46.7 million of its                shares                at $85 per share, which represented 29% of shares outstanding at                March 31,                2005. Note 12 provides additional information regarding this transaction.                The tender offer was financed with the net proceeds of borrowings,                which                are discussed in Note 8, and cash on hand. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | In                May 2005, the Board approved a recommendation to revise the company’s                dividend policy to a level consistent with that of other pure-play                exploration and production companies. Starting with the second quarter                of                2005, the annual dividend was reduced from $1.80 to $.20 per                share. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Basis      of Presentation**

**Accounting      Policies**

***Repurchases      and Retirements of Capital Stock***

***Asset      Exchanges***

***Employee      Stock-Based Compensation***
*      -*
** **

----

|                                                               |   | Three                Months Ended |     | Six                Months Ended |   |
|--------------------------------------------------------------------|--------|-----------------------------------|----------|---------------------------------|--------|
|                                                               |   | June                30,           |     | June                30,         |   |
| (Millions                of dollars, except per-share amounts)     |   | **2005**                          |     | 2004                            |   | **2005** |   | 2004 |   |
|                                                               |   |                              |     |                            |   |   |   |   |   |
| Net                income, as reported                             |   | **$**                             | **370**  |                            | $      | 111 |   | **$** | **725** |   | $ | 263 |   |
| Add:                stock-based employee compensation expense      |   |                              |     |                            |   |   |   |   |   |   |   |   |   |
| included                in reported net income, net of taxes       |   |                              | **4**    |                            |   | 2 |   |   | **13** |   |   | 6 |   |
| Deduct:                stock-based compensation expense determined |   |                              |     |                            |   |   |   |   |   |   |   |   |   |
| using                a fair-value method, net of taxes             |   |                              | **(6**   | **)**                           |   | (6 | ) |   | **(22** | **)** |   | (13 | ) |
| Pro                forma net income                                |   | **$**                             | **368**  |                            | $      | 107 |   | **$** | **716** |   | $ | 256 |   |
|                                                               |   |                              |     |                            |   |   |   |   |   |   |   |   |   |
| Net                income per share -                              |   |                              |     |                            |   |   |   |   |   |   |   |   |   |
| Basic                -                                             |   |                              |     |                            |   |   |   |   |   |   |   |   |   |
| As                reported                                         |   | **$**                             | **2.63** |                            | $      | 1.07 |   | **$** | **4.91** |   | $ | 2.58 |   |
| Pro                forma                                           |   |                              | **2.61** |                            |   | 1.03 |   |   | **4.85** |   |   | 2.51 |   |
|                                                               |   |                              |     |                            |   |   |   |   |   |   |   |   |   |
| Diluted                -                                           |   |                              |     |                            |   |   |   |   |   |   |   |   |   |
| As                reported                                         |   | **$**                             | **2.60** |                            | $      | 1.01 |   | **$** | **4.78** |   | $ | 2.42 |   |
| Pro                forma                                           |   |                              | **2.56** |                            |   | .98 |   |   | **4.68** |   |   | 2.36 |   |

|   | Assumptions                  | Weighted-Average              |
|--------|------------------------------|-------------------------------|
|   | Risk-Free                    | Expected                      | Expected | Expected | Fair                Value of |
|   | Interest                Rate | Dividend                Yield | Life                (years) | Volatility | Options                Granted |
| 2005   | 3.9%                         | 3.5%                          | 6.0 | 27.4% | $12.50 |
| 2004   | 3.5                          | 3.6                           | 5.8 | 22.6 | 8.63 |
|   |                         |                          |   |   |   |

| **2.** | **Comprehensive                Income** |
|--------|-----------------------------------------|

|                                                            |   | Three                Months Ended |    | Six                Months Ended |   |
|-----------------------------------------------------------------|--------|-----------------------------------|---------|---------------------------------|--------|
|                                                            |   | June                30,           |    | June                30,         |   |
| (Millions                of dollars)                            |   | **2005**                          |    | 2004                            |   | **2005** |   | 2004 |   |
|                                                            |   |                              |    |                            |   |   |   |   |   |
| Net                income                                       |   | **$**                             | **370** |                            | $      | 111 |   | **$** | **725** |   | $ | 263 |   |
| After-tax                changes in:                            |   |                              |    |                            |   |   |   |   |   |   |   |   |   |
| Loss                on cash flow hedges                         |   |                              | **(89** | **)**                           |   | (94 | ) |   | **(548** | **)** |   | (185 | ) |
| Foreign                currency translation adjustments         |   |                              | **(16** | **)**                           |   | (3 | ) |   | **(14** | **)** |   | (10 | ) |
| Unrealized                loss on available-for-sale securities |   |                              | **-**   |                            |   | - |   |   | **-** |   |   | (5 | ) |
| Comprehensive                income                             |   | **$**                             | **265** |                            | $      | 14 |   | **$** | **163** |   | $ | 63 |   |

----

| **3.** | **Derivative                Instruments** |
|--------|-------------------------------------------|

|                                               |   | **As                of June 30, 2005**   |    |
|----------------------------------------------------|--------|------------------------------------------|---------|
|                                               |   | **Derivative                Fair Value** |    |   |   |
|                                               |   | **Current**                              |    | **Long-Term** |   | **Current** |   | **Long-Term** |   | **Deferred                Gain** |   |
| (Millions                of dollars)               |   | **Asset**                                |    | **Asset** |   | **Liability** |   | **Liability** |   | **(Loss)                in AOCI****(1)** |   |
| Oil                and gas commodity derivatives - |   |                                     |    |   |   |   |   |   |   |   |   |
| Kerr-McGee                positions                |   | **$**                                    | **68**  |   | **$** | **34** |   | **$** | **(673** | **)** | **$** | **(564** | **)** | **$** | **(702** | **)** |
| Acquired                Westport positions         |   |                                     | **-**   |   |   | **-** |   |   | **(120** | **)** |   | **(18** | **)** |   | **(18** | **)** |
| Cash                collateral                     |   |                                     | **24**  |   |   | **-** |   |   | **-** |   |   | **-** |   |   | **-** |   |
| Gas                marketing-related derivatives   |   |                                     | **6**   |   |   | **-** |   |   | **(6** | **)** |   | **-** |   |   | **-** |   |
| Foreign                currency forward contracts  |   |                                     | **7**   |   |   | **-** |   |   | **-** |   |   | **-** |   |   | **13** |   |
| Interest                rate swaps                 |   |                                     | **-**   |   |   | **-** |   |   | **(1** | **)** |   | **(3** | **)** |   | **-** |   |
| Other                derivatives                   |   |                                     | **3**   |   |   | **-** |   |   | **-** |   |   | **-** |   |   | **2** |   |
| Total                derivative contracts          |   | **$**                                    | **108** |   | **$** | **34** |   | **$** | **(800** | **)** | **$** | **(585** | **)** | **$** | **(705** | **)** |

|                                               |   | As                of December 31, 2004 |   |
|----------------------------------------------------|--------|----------------------------------------|--------|
|                                               |   | Derivative                Fair Value   |   |   |   |
|                                               |   | Current                                |   | Long-Term |   | Current |   | Long-Term |   | Deferred                Gain |   |
| (Millions                of dollars)               |   | Asset                                  |   | Asset |   | Liability |   | Liability |   | (Loss)                in AOCI(1) |   |
| Oil                and gas commodity derivatives - |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Kerr-McGee                positions                |   | $                                      | 54     |   | $ | 12 |   | $ | (235 | ) | $ | (188 | ) | $ | (167 | ) |
| Acquired                Westport positions         |   |                                   | 1      |   |   | 1 |   |   | (123 | ) |   | (16 | ) |   | (7 | ) |
| Gas                marketing-related derivatives   |   |                                   | 6      |   |   | 2 |   |   | (6 | ) |   | (2 | ) |   | - |   |
| Foreign                currency forward contracts  |   |                                   | 20     |   |   | - |   |   | (6 | ) |   | - |   |   | 16 |   |
| Interest                rate swaps                 |   |                                   | 4      |   |   | - |   |   | (1 | ) |   | (2 | ) |   | - |   |
| Other                derivatives                   |   |                                   | 3      |   |   | - |   |   | (1 | ) |   | - |   |   | 1 |   |
|                                               |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                derivative contracts          |   | $                                      | 88     |   | $ | 15 |   | $ | (372 | ) | $ | (208 | ) | $ | (157 | ) |

----

|                                                                        |   | **Three                Months Ended** |     | Three                Months Ended |   |
|-----------------------------------------------------------------------------|--------|---------------------------------------|----------|-----------------------------------|--------|
|                                                                        |   | **June                30, 2005**      |     | June                30, 2004      |   |
|                                                                        |   |                                  |     | **Costs                and**      |   | **Other                Income** |   |   |   | Costs                and |   | Other                Income |   |
|                                                                        |   | **Revenues**                          |     | **Expenses**                      |   | **(Expense)** |   | Revenues |   | Expenses |   | (Expense) |   |
| Hedge                Activity:                                              |   |                                  |     |                              |   |   |   |   |   |   |   |   |   |
|                    Oil and gas commodity derivatives         |   | **$**                                 | **(78**  | **)**                             | **$**  | **-** |   | **$** | **-** |   | $ | (156 | ) | $ | - |   | $ | - |   |
|                     Foreign currency contracts               |   |                                  | **-**    |                              |   | **(1** | **)** |   | **-** |   |   | - |   |   | 4 |   |   | - |   |
|                    Interest rate swaps                       |   |                                  | **-**    |                              |   | **(1** | **)** |   | **-** |   |   | - |   |   | 5 |   |   | - |   |
|                    Other derivatives                         |   |                                  | **-**    |                              |   | **1** |   |   | **-** |   |   | - |   |   | 1 |   |   | - |   |
|                    Loss on hedge ineffectiveness             |   |                                  | **(35**  | **)**                             |   | **-** |   |   | **-** |   |   | - |   |   | - |   |   | - |   |
| Total                hedging contracts                                      |   |                                  | **(113** | **)**                             |   | **(1** | **)** |   | **-** |   |   | (156 | ) |   | 10 |   |   | - |   |
|                                                                        |   |                                  |     |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Nonhedge                Activity:                                           |   |                                  |     |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                    Oil and gas commodity derivatives -       |   |                                  |     |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Kerr-McGee                positions                                         |   |                                  | **6**    |                              |   | **-** |   |   | **-** |   |   | (10 | ) |   | - |   |   | 2 |   |
| Acquired                Westport positions                                  |   |                                  | **6**    |                              |   | **-** |   |   | **-** |   |   | 15 |   |   | - |   |   | - |   |
| Gas                marketing-related derivatives                            |   |                                  | **2**    |                              |   | **-** |   |   | **-** |   |   | 2 |   |   | - |   |   | - |   |
| DECS                call option (1)                                    |   |                                  | **-**    |                              |   | **-** |   |   | **-** |   |   | - |   |   | - |   |   | (66 | ) |
| Other                derivatives                                            |   |                                  | **-**    |                              |   | **-** |   |   | **(1** | **)** |   | - |   |   | - |   |   | - |   |
|                    Total                nonhedge contracts   |   |                                  | **14**   |                              |   | **-** |   |   | **(1** | **)** |   | 7 |   |   | - |   |   | (64 | ) |
|                                                                        |   |                                  |     |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                    Total                derivative contracts |   | **$**                                 | **(99**  | **)**                             | **$**  | **(1** | **)** | **$** | **(1** | **)** | $ | (149 | ) | $ | 10 |   | $ | (64 | ) |

|                                                                        |   | **Six                Months Ended** |     | Six                Months Ended |   |
|-----------------------------------------------------------------------------|--------|-------------------------------------|----------|---------------------------------|--------|
|                                                                        |   | **June                30, 2005**    |     | June                30, 2004    |   |
|                                                                        |   |                                |     | **Costs                and**    |   | **Other                Income** |   |   |   | Costs                and |   | Other                Income |   |
|                                                                        |   | **Revenues**                        |     | **Expenses**                    |   | **(Expense)** |   | Revenues |   | Expenses |   | (Expense) |   |
| Hedge                Activity:                                              |   |                                |     |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                    Oil and gas commodity derivatives         |   | **$**                               | **(115** | **)**                           | **$**  | **-** |   | **$** | **-** |   | $ | (217 | ) | $ | - |   | $ | - |   |
|     Foreign                currency contracts           |   |                                | **(1**   | **)**                           |   | **-** |   |   | **-** |   |   | - |   |   | 8 |   |   | - |   |
|                    Interest rate swaps                       |   |                                | **-**    |                            |   | **-** |   |   | **-** |   |   | - |   |   | 9 |   |   | - |   |
|                    Other derivatives                         |   |                                | **-**    |                            |   | **1** |   |   | **-** |   |   | - |   |   | 1 |   |   | - |   |
|                    Loss on hedge ineffectiveness             |   |                                | **(44**  | **)**                           |   | **-** |   |   | **-** |   |   | (1 | ) |   | - |   |   | - |   |
| Total                hedging contracts                                      |   |                                | **(160** | **)**                           |   | **1** |   |   | **-** |   |   | (218 | ) |   | 18 |   |   | - |   |
|                                                                        |   |                                |     |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Nonhedge                Activity:                                           |   |                                |     |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                    Oil and gas commodity derivatives -       |   |                                |     |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Kerr-McGee                positions                                         |   |                                | **14**   |                            |   | **-** |   |   | **-** |   |   | (10 | ) |   | - |   |   | 2 |   |
| Acquired                Westport positions                                  |   |                                | **(53**  | **)**                           |   | **-** |   |   | **-** |   |   | 15 |   |   | - |   |   | - |   |
| Gas                marketing-related derivatives                            |   |                                | **4**    |                            |   | **-** |   |   | **-** |   |   | 4 |   |   | - |   |   | (1 | ) |
| DECS                call option (1)                                    |   |                                | **-**    |                            |   | **-** |   |   | **-** |   |   | - |   |   | - |   |   | (72 | ) |
| Other                derivatives                                            |   |                                | **-**    |                            |   | **-** |   |   | **1** |   |   | - |   |   | - |   |   | (1 | ) |
|                    Total                nonhedge contracts   |   |                                | **(35**  | **)**                           |   | **-** |   |   | **1** |   |   | 9 |   |   | - |   |   | (72 | ) |
|                                                                        |   |                                |     |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                    Total                derivative contracts |   | **$**                               | **(195** | **)**                           | **$**  | **1** |   | **$** | **1** |   | $ | (209 | ) | $ | 18 |   | $ | (72 | ) |

|   | (1) | Other                income (expense) for the three- and six-month periods ended June                30, 2004                also includes unrealized gains on Devon Energy Corporation common                stock of                $66 million and $74 million,                respectively. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **4.** | **Accounts                Receivable Sales** |
|--------|----------------------------------------------|

----

| **5.** | **Inventories** |
|--------|-----------------|

|                                             |   | **June                30,** |    | December                31, |   |
|--------------------------------------------------|--------|-----------------------------|---------|-----------------------------|--------|
| (Millions                of dollars)             |   | **2005**                    |    | 2004                        |   |
|                                             |   |                        |    |                        |   |
| Chemicals                and other products      |   | **$**                       | **249** |                        | $      | 236 |   |
| Materials                and supplies            |   |                        | **103** |                        |   | 85 |   |
| Crude                oil and natural gas liquids |   |                        | **10**  |                        |   | 8 |   |
| Total                                            |   | **$**                       | **362** |                        | $      | 329 |   |

| **6.** | **Exchanges,                Divestitures and Impairments of                Assets** |
|--------|-------------------------------------------------------------------------------------|

***Assets      Held for Sale -***

----

***Exchanges      of Assets***

***Exploratory      Drilling Costs***

***Asset      Impairments***

| **7.** | **Income                Taxes** |
|--------|---------------------------------|

----

| ·   | As                discussed in Note 6, during the second quarter of 2005 the company                recognized an income tax benefit of $27 million and tax expense of                $11                million related to certain oil and gas properties held for sale,                resulting                in a corresponding increase (decrease) in the second-quarter effective                tax                rate of (4.6%) and 1.9%, respectively. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Income                tax expense of $12 million recognized in connection with the repatriation                of $200 million in foreign earnings increased the effective tax rate                by                2.1%. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **8.** | **Debt** |
|--------|----------|

|                                                                                                                            |   | **June                30,** |      |  December                31, |   |
|---------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|-----------|-----------------------------------|--------|
| (Millions                of dollars)                                                                                            |   | **2005**                    |      | 2004                              |   |
|  Debentures              -                                                                                                 |   |                        |      |                              |   |   |   |
| 5.25%                Convertible subordinated debentures due February 15, 2010                                                  |   |                        |      |                              |   |   |   |
| (convertible                at $61.08 per share, subject to certain adjustments)                                                |   | **$**                       | **-**     |                              | $      | 600 |   |
| 7%                Debentures due November 1, 2011, net of unamortized debt                                                      |   |                        |      |                              |   |   |   |
| discount                of $74 and $77 (14.25% effective rate)                                                                  |   |                        | **176**   |                              |   | 173 |   |
| 7.125%                Debentures due October 15, 2027                                                                           |   |                        | **150**   |                              |   | 150 |   |
|  Notes              payable              -                                                                                 |   |                        |      |                              |   |   |   |
| 5.375%                Notes due April 15, 2005 (includes a premium of $4 in 2004                                                |   |                        |      |                              |   |   |   |
| for                fair value hedge adjustment)                                                                                 |   |                        | **-**     |                              |   | 354 |   |
| 8.125%                Notes due October 15, 2005, net of discount of $1 for fair                                                |   |                        |      |                              |   |   |   |
| value                hedge adjustment in both 2005 and 2004                                                                     |   |                        | **108**   |                              |   | 108 |   |
| 5.875%                Notes due September 15, 2006 (5.89% effective rate)                                                       |   |                        | **307**   |                              |   | 307 |   |
| 6.625%                Notes due October 15, 2007, net of discount of $3 and $2                                                  |   |                        |      |                              |   |   |   |
| for                fair value hedge adjustment                                                                                  |   |                        | **147**   |                              |   | 148 |   |
| 6.875%                Notes due September 15, 2011, net of unamortized debt                discount                             |   |                        |      |                              |   |   |   |
| of                $1 in both 2005 and 2004 (6.90% effective rate)                                                               |   |                        | **674**   |                              |   | 674 |   |
| 6.95%                Notes due July 1, 2024, net of unamortized debt discount of $5                                             |   |                        |      |                              |   |   |   |
| in                both 2005 and 2004 (7.02% effective rate)                                                                     |   |                        | **645**   |                              |   | 645 |   |
| 7.875%                Notes due September 15, 2031, net of unamortized debt                                                     |   |                        |      |                              |   |   |   |
| discount                of $1 and $2 (7.91% effective rate)                                                                     |   |                        | **499**   |                              |   | 498 |   |
|  Term              Loans              -                                                                                    |   |                        |      |                              |   |   |   |
| Variable                rate Tranche X term loan due May 24, 2007 (1)                                                           |   |                        | **2,000** |                              |   | - |   |
| Variable                rate Tranche B term loan due in installments through May 24, 2011                (1)                (2) |   |                        | **2,250** |                              |   | - |   |
|                                                                                                                            |   |                        |      |                              |   |   |   |
|  Commercial              paper                                                                                             |   |                        |  -   |                              |   |  41 |   |
|  Guaranteed              Debt of Employee Stock Ownership Plan 9.61% Notes                                                 |   |                        |      |                              |   |   |   |
| due                in installments through January 2, 2005                                                                      |   |                        | **-**     |                              |   | 1 |   |
|                                                                                                                            |   |                        | **6,956** |                              |   | 3,699 |   |
|  Long-term              debt              due within one year                                                              |   |                        | (131      | )                            |   |  (463 | )  |
|                                                                                                                            |   |                        |      |                              |   |   |   |
| Total                                                                                                                           |   | **$**                       | **6,825** |                              | $      | 3,236 |   |

| (1)   | The                term loans are subject to certain mandatory prepayment provisions,                as more                fully described below. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | The                scheduled principal payments on the Tranche B term loan are as follows:                twenty quarterly payments of approximately $6 million commencing                September                30, 2005, followed by four payments of approximately $534 million                quarterly commencing September 30, 2010 through the maturity                date. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                               |   |                  Scheduled |   |
|----------------------------------------------------|--------|---------------------------------|--------|
| (Millions                of dollars)               |   | Maturities                (1)   |   |
|                                               |   |                            |   |
| Six                months ending December 31, 2005 |   | $                               | 119    |   |
| 2006                                               |   |                            | 329    |   |
| 2007                                               |   |                            | 2,169  |   |
| 2008                                               |   |                            | 23     |   |
| 2009                                               |   |                            | 23     |   |
| 2010                                               |   |                            | 1,080  |   |
| Thereafter                                         |   |                            | 3,213  |   |
| Total                                              |   | $                               | 6,956  |   |

| (1)   | These                amounts are inclusive of the unamortized discount on issuance of                $81                million and the discount arising from fair value hedge adjustments                of $4                million. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                               |                    |   | Applicable                Interest Rate Margin |
|------------------------------------|-------------------------|--------|------------------------------------------------|
|                               |                    |   | **At                June 30, 2005**            |   | Over                the Term |
|                               | Maturity                |   | **ABR**                                        |   | **Eurodollar** |   | ABR |   | Eurodollar |
| Revolving                Facility  | May                2010 |   | **1.25%**                                      |   | **2.25%** |   | 0.25                - 1.25% |   | 1.25                - 2.25% |
| Tranche                X Term Loan | May                2007 |   | **1.25%**                                      |   | **2.25%** |   | 1.25% |   | 2.25% |
| Tranche                B Term Loan | May                2011 |   | **1.50%**                                      |   | **2.50%** |   | 1.25                - 1.50% |   | 2.25                - 2.50% |

***Revolving      Facility***

***Tranche      X and Tranche B Term Loans***

| ·   | As                long as the Tranche X loan is outstanding, 50% of the net cash proceeds,                as defined, of certain equity                issuances; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | 100%                  of the net cash proceeds, as defined, from incurrence of certain                  indebtedness; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------|

| ·   | Subject                to certain exceptions, 100% of the net cash proceeds, as defined,                from                asset disposals; and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Annually,                a specified percentage of excess cash flow, as defined, ranging from                zero                to 50%. This prepayment requirement is reduced or eliminated upon                repayment of the Tranche X loan and the achievement of a Consolidated                Leverage Ratio below specified thresholds. Excess cash flow as calculated                under the Credit Agreement is reduced by mandatory prepayments made                with                the net cash proceeds from asset disposals. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Guarantee      and Collateral Provisions***

***Debt      Covenants***

| ·   | Consolidated                Leverage Ratio of no more than 4:1 in 2005, 3.75:1 in 2006 and 3.50:1                thereafter |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------|

| ·   | Consolidated                Interest Coverage Ratio over a specified period of at least                3:1 |
|--------------------|------------------------------------------------------------------------------------------------------------|

| ·   | Asset                Coverage Ratio of more than 1.25:1 in 2005, 1.50:1 in 2006 and 1.75:1                thereafter |
|--------------------|----------------------------------------------------------------------------------------------------------------------|

| **9.** | **Exit                or Disposal Activities** |
|--------|------------------------------------------------|

|                                        |   | Dismantlement              |   | Personnel |   |   |   |
|---------------------------------------------|--------|----------------------------|--------|-----------|--------|--------|--------|
| (Millions                of dollars)        |   | and                Closure |   | Costs     |   | Total  |   |
|                                        |   |                       |   |      |   |   |   |
| Balance                at December 31, 2004 |   | $                          | 10     |      | $      | 8      |   | $ | 18 |   |
| Provisions                                  |   |                       | 1      |      |   | 8      |   |   | 9 |   |
| Payments                / Adjustments       |   |                       | (3     | )         |   | (3     | )      |   | (6 | ) |
| Balance                at June 30, 2005     |   | $                          | 8      |      | $      | 13     |   | $ | 21 |   |

----

| **10.** | **Employee                Stock-Based Compensation and Benefit                Plans** |
|---------|---------------------------------------------------------------------------------------|

***Stock-Based      Compensation***

***Retirement      and Postretirement Benefits***

|                                          |   |                              |    | Postretirement                       |   |
|-----------------------------------------------|--------|-----------------------------------|---------|--------------------------------------|--------|
|                                          |   | Retirement                Plans   |    | Health                and Life Plans |   |
|                                          |   | Three                Months Ended |    | Three                Months Ended    |   |
|                                          |   | June                30,           |    | June                30,              |   |
| (Millions                of dollars)          |   | **2005**                          |    | 2004                                 |   | **2005** |   | 2004 |   |
| Net                periodic cost -            |   |                              |    |                                 |   |   |   |   |   |   |   |   |   |
| Service                cost                   |   | **$**                             | **9**   |                                 | $      | 7 |   | **$** | **1** |   | $ | - |   |
| Interest                cost                  |   |                              | **17**  |                                 |   | 18 |   |   | **4** |   |   | 5 |   |
| Expected                return on plan assets |   |                              | **(26** | **)**                                |   | (29 | ) |   | **-** |   |   | - |   |
| Net                amortization -             |   |                              |    |                                 |   |   |   |   |   |   |   |   |   |
| Prior                service cost             |   |                              | **2**   |                                 |   | 2 |   |   | **(1** | **)** |   | 1 |   |
| Net                actuarial loss             |   |                              | **2**   |                                 |   | 1 |   |   | **1** |   |   | 1 |   |
| Total                net periodic cost        |   | **$**                             | **4**   |                                 | $      | (1 | ) | **$** | **5** |   | $ | 7 |   |

----

|                                          |   |                            |    | Postretirement                       |   |
|-----------------------------------------------|--------|---------------------------------|---------|--------------------------------------|--------|
|                                          |   | Retirement                Plans |    | Health                and Life Plans |   |
|                                          |   | Six                Months Ended |    | Six                Months Ended      |   |
|                                          |   | June                30,         |    | June                30,              |   |
| (Millions                of dollars)          |   | **2005**                        |    | 2004                                 |   | **2005** |   | 2004 |   |
| Net                periodic cost -            |   |                            |    |                                 |   |   |   |   |   |   |   |   |   |
| Service                cost                   |   | **$**                           | **18**  |                                 | $      | 14 |   | **$** | **2** |   | $ | 1 |   |
| Interest                cost                  |   |                            | **35**  |                                 |   | 36 |   |   | **8** |   |   | 10 |   |
| Expected                return on plan assets |   |                            | **(52** | **)**                                |   | (58 | ) |   | **-** |   |   | - |   |
| Net                amortization -             |   |                            |    |                                 |   |   |   |   |   |   |   |   |   |
| Prior                service cost             |   |                            | **4**   |                                 |   | 4 |   |   | **(2** | **)** |   | 1 |   |
| Net                actuarial loss             |   |                            | **3**   |                                 |   | 2 |   |   | **2** |   |   | 2 |   |
| Total                net periodic cost        |   | **$**                           | **8**   |                                 | $      | (2 | ) | **$** | **10** |   | $ | 14 |   |
|                                          |   |                            |    |                                 |   |   |   |   |   |   |   |   |   |
|                                          |   |                            |    |                                 |   |   |   |   |   |   |   |   |   |

| **11.** | **Earnings                Per Share** |
|---------|---------------------------------------|

|                                          |   | Three                Months Ended June 30, |    |
|-----------------------------------------------|--------|--------------------------------------------|---------|
|                                          |   |                                       |    | **2005** |   |   |   |   |   | 2004 |   |   |   |
|                                          |   | **Income                from**             |    | **Weighted-** |   |   |   | Income                from |   | Weighted- |   |   |   |
| (In                millions, except           |   | **Continuing**                             |    | **Average** |   | **Per-Share** |   | Continuing |   | Average |   | Per-Share |   |
| per-share                amounts)             |   | **Operations**                             |    | **Shares** |   | **Income** |   | Operations |   | Shares |   | Income |   |
|                                          |   |                                       |    |   |   |   |   |   |   |   |   |   |   |
| Basic                earnings per share       |   | **$**                                      | **372** |   |   | **141** |   | **$** | **2.64** |   | $ | 114 |   |   | 104 |   | $ | 1.11 |   |
| Effect                of dilutive securities: |   |                                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 5.25%                convertible debentures   |   |                                       | **-**   |   |   | **-** |   |   |   |   |   | 6 |   |   | 10 |   |   |   |   |
| Restricted                stock               |   |                                       | **-**   |   |   | **1** |   |   |   |   |   | - |   |   | 1 |   |   |   |   |
| Stock                options                  |   |                                       | **-**   |   |   | **1** |   |   |   |   |   | - |   |   | - |   |   |   |   |
| Diluted                earnings per share     |   | **$**                                      | **372** |   |  | **143** |   | **$** | **2.61** |   | $ | 120 |   |  | 115 |   | $ | 1.05 |   |

|                                          |   | Six                Months Ended June 30, |    |
|-----------------------------------------------|--------|------------------------------------------|---------|
|                                          |   |                                     |    | **2005** |   |   |   |   |   | 2004 |   |   |   |
|                                          |   | **Income                from**           |    | **Weighted-** |   |   |   | Income                from |   | Weighted- |   |   |   |
| (In                millions, except           |   | **Continuing**                           |    | **Average** |   | **Per-Share** |   | Continuing |   | Average |   | Per-Share |   |
| per-share                amounts)             |   | **Operations**                           |    | **Shares** |   | **Income** |   | Operations |   | Shares |   | Income |   |
|                                          |   |                                     |    |   |   |   |   |   |   |   |   |   |   |
| Basic                earnings per share       |   | **$**                                    | **727** |   |   | **148** |   | **$** | **4.92** |   | $ | 269 |   |   | 102 |   | $ | 2.64 |   |
| Effect                of dilutive securities: |   |                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 5.25%                convertible debentures   |   |                                     | **4**   |   |   | **3** |   |   |   |   |   | 11 |   |   | 10 |   |   |   |   |
| Restricted                stock               |   |                                     | **-**   |   |   | **1** |   |   |   |   |   | - |   |   | 1 |   |   |   |   |
| Stock                options                  |   |                                     | **-**   |   |   | **1** |   |   |   |   |   | - |   |   | - |   |   |   |   |
| Diluted                earnings per share     |   | **$**                                    | **731** |   |   | **153** |   | **$** | **4.79** |   | $ | 280 |   |   | 113 |   | $ | 2.48 |   |

----

| **12.** | **Capital                Stock** |
|---------|----------------------------------|

|                                                             |   | Common |        | Treasury |   |
|------------------------------------------------------------------|--------|--------|-------------|----------|--------|
| (Thousands                of shares)                             |   | Stock  |        | Stock    |   |
|                                                             |   |   |        |     |   |
|  Balance              at              December 31, 2003     |   |   | 100,892     |     |   |  32 |   |
| Shares                issued in Westport merger                  |   |   | 48,949      |     |   | - |   |
| Exercise                of stock options                         |   |   | 268         |     |   | - |   |
| Issuance                of restricted stock                      |   |   | 448         |     |   | - |   |
| Forfeiture                of restricted stock                    |   |   | -           |     |   | 74 |   |
| Balance                at June 30, 2004                          |   |   | 150,557     |     |   | 106 |   |
|                                                             |   |   |        |     |   |   |   |
| Balance                at December 31, 2004                      |   |   | **152,049** |     |   | **160** |   |
| Exercise                of stock options                         |   |   | **2,935**   |     |   | **-** |   |
| Issuance                of restricted stock                      |   |   | **450**     |     |   | **-** |   |
| Forfeiture                of restricted stock                    |   |   | **-**       |     |   | **51** |   |
| Shares                issued upon conversion of 5.25% debentures |   |   | **9,818**   |     |   | **-** |   |
| Purchases                of treasury shares                      |   |   | **-**       |     |   | **3,145** |   |
| Shares                repurchased and retired                    |   |   | **(46,728** | **)**    |   | **-** |   |
| Balance                at June 30, 2005                          |   |   | **118,524** |     |   | **3,356** |   |

----

| **13.** | **Contingencies** |
|---------|-------------------|

|                                        |   |                        |   | Reserves                for    |   |           |   |
|---------------------------------------------|--------|-----------------------------|--------|--------------------------------|--------|----------------|--------|
|                                        |   | Reserves                for |   | Environmental                  |   | Reimbursements |   |
| (Millions                of dollars)        |   | Litigation                  |   | Remediation                (1) |   | Receivable     |   |
|                                        |   |                        |   |                           |   |           |   |
| Balance                at December 31, 2004 |   | $                           | 39     |                           | $      | 255            |   | $ | 94 |   |
| Provisions                / Accruals        |   |                        | -      |                           |   | 48             |   |   | 21 |   |
| Payments                / Settlements       |   |                        | (15    | )                              |   | (22            | )      |   | (69 | ) |
| Balance                at June 30, 2005     |   | $                           | 24     |                           | $      | 281            |   | $ | 46 |   |

| (1)   | Provisions                for environmental remediation include $1 million related to the company’s                former forest products operations reflected in the Condensed Consolidated                Statement of Income as a component of loss from discontinued operations,                net of taxes. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

Management      believes, after consultation with its internal legal counsel, that currently      the      company has reserved adequately for the reasonably estimable costs of      environmental matters and other contingencies. However, additions to the      reserves may be required as additional information is obtained that enables      the      company to better estimate its liabilities, including liabilities at sites      now      under review, though the company cannot now reliably estimate a range of future      additions to the reserves for any individual site or for all sites collectively.      Following are discussions regarding certain environmental sites and litigation.      Reserves for each environmental site are based on assumptions regarding the      volumes of contaminated soils and groundwater involved, as well as associated      excavation, transportation and disposal costs.

| ·   | some                sites are in the early stages of investigation, and other sites may                be                identified in the future; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | remediation                activities vary significantly in duration, scope and cost from site                to                site depending on the mix of unique site characteristics, applicable                technologies and regulatory agencies                involved; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | cleanup                requirements are difficult to predict at sites where remedial                investigations have not been completed or final decisions have not                been                made regarding cleanup requirements, technologies or other factors                that                bear on cleanup costs; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | environmental                laws frequently impose joint and several liability on all potentially                responsible parties, and it can be difficult to determine the number                and                financial condition of other potentially responsible parties and                their                respective shares of responsibility for cleanup                costs; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | environmental                laws and regulations, as well as enforcement policies, are continually                changing, and the outcome of court proceedings and discussions with                regulatory agencies are inherently                uncertain; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | some                legal matters are in the early stages of investigation or proceeding                or                their outcomes otherwise may be difficult to predict, and other legal                matters may be identified in the                future; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | unanticipated                construction problems and weather conditions can hinder the completion                of                environmental remediation; the inability to implement a planned                engineering design or use planned technologies and excavation methods                may                require revisions to the design of remediation measures, resulting                in                delayed remediation and increased costs; and the identification of                additional areas or volumes of contamination and changes in costs                of                labor, equipment and technology generate corresponding changes in                environmental remediation costs. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Environmental      Matters**

**Henderson,      Nevada**

***Financial      Reserves***

***Litigation***
* *

----

***Insurance***
* *

**West        Chicago, Illinois**

***Closed      Facility***
* *

***Vicinity      Areas***

***Financial      Reserves***
*      -*

***Government      Reimbursement***
* *

----

**Milwaukee,      Wisconsin**

***Financial      Reserves***

**New      Jersey Wood-Treatment Site**

**Cushing,      Oklahoma**

----

***Financial      Reserves***

**Ambrosia        Lake, New Mexico**

From      the late 1950s until 1988, affiliates of the company operated a uranium mining      and milling operation at Ambrosia Lake near Grants, New Mexico, pursuant to      a      license issued by the AEC (now the NRC). When the operation was sold to an      unaffiliated third party in 1989, an affiliate of the company retained      responsibility for certain environmental conditions existing at the site,      including mill tailings, selected ponds and groundwater contamination related      to      the mill tailings and unlined ponds. Since 1989, the unaffiliated current owner      of the site has been decommissioning the site pursuant to the license issued      by      the NRC. Mill tailings, certain impacted surface soils and selected pond      sediments have been consolidated in an onsite containment unit, and groundwater      treatment has been ongoing. Under terms of the sales agreement, which included      provisions capping the liability of the current owner, the company’s affiliate      became obligated to solely fund the remediation for the items described above      when total expenditures exceeded $30 million, which occurred in late 2000.      A      request to cease groundwater treatment has been under review by the NRC since      2001. In addition, a decommissioning plan for remaining impacted soil was      submitted by the current owner to the NRC in January 2005 and is currently      under review. If approved, the soil decommissioning plan would take two to      three      years to complete. The State of New Mexico has recently raised issues about      certain non-radiological constituents in the groundwater at the site. The      request to cease groundwater treatment, which is being reviewed by the NRC,      will      be amended to address these non-radiological constituents. Discussions regarding      these issues are ongoing, and resolution of them could affect remediation costs      and/or delay ultimate site closure. In addition to those remediation activities      described above, for which reserves have been established as described below,      the current owner is investigating soil contamination potentially caused by      past      discharge of mine water from the site, for which no reserve has been      established.

***Financial      Reserves***

**Los      Angeles County, California**

***Financial      Reserves***

----

**Other      Sites**

**Litigation      and Claims**

**Coal      Supply Contract**

**CNR        Contract**

**Forest      Products Litigation**

----

**Kemira**

**Other        Matters**

| **14.** | **Commitments** |
|---------|-----------------|

----

| **15.** | **Business                Segments** |
|---------|--------------------------------------|

|                                                       |   | Three                Months Ended |      | Six                Months Ended |   |
|------------------------------------------------------------|--------|-----------------------------------|-----------|---------------------------------|--------|
|                                                       |   | June                30,           |      | June                30,         |   |
| (Millions                of dollars)                       |   | **2005**                          |      | 2004                            |   | **2005** |   | 2004 |   |
|                                                       |   |                              |      |                            |   |   |   |   |   |
| **Revenues**                                               |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| Exploration                and production                  |   | **$**                             | **1,494** |                            | $      | 765 |   | **$** | **2,877** |   | $ | 1,599 |   |
| Chemical                - Pigment                          |   |                              | **331**   |                            |   | 303 |   |   | **642** |   |   | 555 |   |
| Chemical                - Other                            |   |                              | **25**    |                            |   | 23 |   |   | **48** |   |   | 46 |   |
| Total                Revenues                              |   | **$**                             | **1,850** |                            | $      | 1,091 |   | **$** | **3,567** |   | $ | 2,200 |   |
|                                                       |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| **Operating                Profit (Loss)**                 |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| Exploration                and production                  |   | **$**                             | **686**   |                            | $      | 263 |   | **$** | **1,341** |   | $ | 593 |   |
| Chemical                - Pigment                          |   |                              | **32**    |                            |   | 14 |   |   | **64** |   |   | 21 |   |
| Chemical                - Other                            |   |                              | **2**     |                            |   | - |   |   | **(7** | **)** |   | (3 | ) |
| Total                Operating Profit                      |   |                              | **720**   |                            |   | 277 |   |   | **1,398** |   |   | 611 |   |
|                                                       |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| Interest                and debt expense                   |   |                              | **(81**   | **)**                           |   | (56 | ) |   | **(142** | **)** |   | (113 | ) |
| Corporate                expenses                          |   |                              | **(45**   | **)**                           |   | (26 | ) |   | **(89** | **)** |   | (57 | ) |
| Provision                for environmental remediation and |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| restoration,                net of reimbursements (1)      |   |                              | **(2**    | **)**                           |   | (3 | ) |   | **(15** | **)** |   | (2 | ) |
| Other                income (expense) (2)                  |   |                              | **(9**    | **)**                           |   | (7 | ) |   | **(10** | **)** |   | (7 | ) |
|                                                       |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| Income                from Continuing Operations           |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| before                Income Taxes                         |   | **$**                             | **583**   |                            | $      | 185 |   | **$** | **1,142** |   | $ | 432 |   |

| (1)   | Includes                provisions, net of reimbursements, related to sites with no ongoing                operations or various businesses in which the company’s affiliates are no                longer engaged; for example, the refining and marketing of oil and                gas and                associated petroleum products, and the mining and processing of uranium                and thorium. See Note 13. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | The                company owns a 50% interest in Avestor, a joint venture involved                in the                production of lithium-metal-polymer batteries, and accounts for its                investment under the equity method. The company’s equity in the net losses                of Avestor was $8 million and $10 million during the three months                ended                June 30, 2005 and 2004, respectively, and $15 million and $19 million                during the six months ended June 30, 2005 and 2004, respectively.                The                carrying value of the company’s investment in Avestor at June 30, 2005 and                December 31, 2004, was $82 million and $60 million,                respectively. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| **16.** | **Condensed                Consolidating Financial                Information** |
|---------|---------------------------------------------------------------------------------|

**Kerr-McGee      Corporation and Subsidiary Companies**

**Condensed      Consolidating Statement of Income**

**For      the Three Months Ended June 30, 2005**

|                                                                                   |   |  Kerr-McGee |   |  Guarantor |   | Non-Guarantor |   |         |   |         |   |
|----------------------------------------------------------------------------------------|--------|------------------|--------|-----------------|--------|---------------|--------|--------------|--------|--------------|--------|
| (Millions                of dollars)                                                   |   | Corporation      |   | Subsidiaries    |   | Subsidiaries  |   | Eliminations |   | Consolidated |   |
|                                                                                   |   |             |   |            |   |          |   |         |   |         |   |
| **Revenues**                                                                           |   | $                | -      |            | $      | 274           |   | $            | 1,576  |         | $      | - |   | $ | 1,850 |   |
|                                                                                   |   |             |   |            |   |          |   |         |   |         |   |   |   |   |   |   |
| **Costs                and Expenses**                                                  |   |             |   |            |   |          |   |         |   |         |   |   |   |   |   |   |
| Costs                and operating expenses                                            |   |             | -      |            |   | 168           |   |         | 389    |         |   | (1 | ) |   | 556 |   |
| Selling,                general and administrative expenses                            |   |             | -      |            |   | -             |   |         | 110    |         |   | - |   |   | 110 |   |
| Shipping                and handling expenses                                          |   |             | -      |            |   | 3             |   |         | 47     |         |   | - |   |   | 50 |   |
| Depreciation                and depletion                                              |   |             | -      |            |   | 30            |   |         | 278    |         |   | - |   |   | 308 |   |
| Accretion                expense                                                       |   |             | -      |            |   | -             |   |         | 8      |         |   | - |   |   | 8 |   |
| Asset                impairments                                                       |   |             | -      |            |   | -             |   |         | 1      |         |   | - |   |   | 1 |   |
| Gain on                sale of assets                                             |   |             | -      |            |   | -             |   |         | (24    | )            |   | - |   |   | (24 | ) |
|     Exploration,              including dry holes and amortization |   |             |   |            |   |          |   |         |   |         |   |   |   |   |   |   |
| of                undeveloped leases                                                   |   |             | -      |            |   | 2             |   |         | 119    |         |   | - |   |   | 121 |   |
| Taxes,                other than income taxes                                          |   |             | -      |            |   | 7             |   |         | 38     |         |   | - |   |   | 45 |   |
| Provision                for environmental remediation                                 |   |             |   |            |   |          |   |         |   |         |   |   |   |   |   |   |
| and                restoration, net of reimbursements                                  |   |             | -      |            |   | 3             |   |         | (1     | )            |   | - |   |   | 2 |   |
| Interest                and debt expense                                               |   |             | 72     |            |   | 3             |   |         | 101    |         |   | (95 | ) |   | 81 |   |
| Total                Costs and Expenses                                                |   |             | 72     |            |   | 216           |   |         | 1,066  |         |   | (96 | ) |   | 1,258 |   |
|                                                                                   |   |             |   |            |   |          |   |         |   |         |   |   |   |   |   |   |
|                                                                                   |   |             | (72    | )               |   | 58            |   |         | 510    |         |   | 96 |   |   | 592 |   |
| **Other                Income (Expense)**                                              |   |             | 424    |            |   | 120           |   |         | 160    |         |   | (713 | ) |   | (9 | ) |
| **Income                from Continuing Operations**                                   |   |             |   |            |   |          |   |         |   |         |   |   |   |   |   |   |
| **before                Income Taxes**                                                 |   |             | 352    |            |   | 178           |   |         | 670    |         |   | (617 | ) |   | 583 |   |
| **Benefit                (Provision) for Income Taxes**                                |   |             | 18     |            |   | (21           | )      |         | (208   | )            |   | - |   |   | (211 | ) |
| **Income                from Continuing Operations**                                   |   |             | 370    |            |   | 157           |   |         | 462    |         |   | (617 | ) |   | 372 |   |
| **Loss                from Discontinued Operations,**                                  |   |             |   |            |   |          |   |         |   |         |   |   |   |   |   |   |
| **net                of taxes**                                                        |   |             | -      |            |   | -             |   |         | (2     | )            |   | - |   |   | (2 | ) |
| **Net                Income**                                                          |   | $                | 370    |            | $      | 157           |   | $            | 460    |         | $      | (617 | ) | $ | 370 |   |
|                                                                                   |   |             |   |            |   |          |   |         |   |         |   |   |   |   |   |   |

----

**Kerr-McGee      Corporation and Subsidiary Companies**

**Condensed      Consolidating Statement of Income**

**For      the Three Months Ended June 30, 2004**

|                                                                                       |   |  Kerr-McGee |   |  Guarantor |   | Non-Guarantor |   |         |   |         |   |
|--------------------------------------------------------------------------------------------|--------|------------------|--------|-----------------|--------|---------------|--------|--------------|--------|--------------|--------|
| (Millions                of dollars)                                                       |   | Corporation      |   | Subsidiaries    |   | Subsidiaries  |   | Eliminations |   | Consolidated |   |
|                                                                                       |   |             |   |            |   |          |   |         |   |         |   |
| **Revenues**                                                                               |   | $                | -      |            | $      | 216           |   | $            | 875    |         | $      | - |   | $ | 1,091 |   |
|                                                                                       |   |             |   |            |   |          |   |         |   |         |   |   |   |   |   |   |
| **Costs                and Expenses**                                                      |   |             |   |            |   |          |   |         |   |         |   |   |   |   |   |   |
| Costs                and operating expenses                                                |   |             | -      |            |   | 109           |   |         | 320    |         |   | (1 | ) |   | 428 |   |
| Selling,                general and administrative expenses                                |   |             | 1      |            |   | -             |   |         | 77     |         |   | - |   |   | 78 |   |
| Shipping                and handling expenses                                              |   |             | -      |            |   | 2             |   |         | 36     |         |   | - |   |   | 38 |   |
| Depreciation                and depletion                                                  |   |             | -      |            |   | 30            |   |         | 161    |         |   | - |   |   | 191 |   |
| Accretion                expense                                                           |   |             | -      |            |   | -             |   |         | 6      |         |   | - |   |   | 6 |   |
| Asset                impairments                                                           |   |             | -      |            |   | -             |   |         | 1      |         |   | - |   |   | 1 |   |
| Loss on                sale of assets                                                 |   |             | -      |            |   | -             |   |         | 4      |         |   | - |   |   | 4 |   |
| Exploration,                including dry holes and                                        |   |             |   |            |   |          |   |         |   |         |   |   |   |   |   |   |
|                       amortization of undeveloped leases     |   |             | -      |            |   | 3             |   |         | 62     |         |   | - |   |   | 65 |   |
| Taxes,                other than income taxes                                              |   |             | -      |            |   | 9             |   |         | 19     |         |   | - |   |   | 28 |   |
| Provision                for environmental remediation                                     |   |             |   |            |   |          |   |         |   |         |   |   |   |   |   |   |
|                       and restoration, net of reimbursements |   |             | -      |            |   | 7             |   |         | (3     | )            |   | - |   |   | 4 |   |
| Interest                and debt expense                                                   |   |             | 26     |            |   | 10            |   |         | 70     |         |   | (50 | ) |   | 56 |   |
|       Total                Costs and Expenses                |   |             | 27     |            |   | 170           |   |         | 753    |         |   | (51 | ) |   | 899 |   |
|                                                                                       |   |             |   |            |   |          |   |         |   |         |   |   |   |   |   |   |
|                                                                                       |   |             | (27    | )               |   | 46            |   |         | 122    |         |   | 51 |   |   | 192 |   |
| **Other                Income (Expense)**                                                  |   |             | 206    |            |   | 16            |   |         | 21     |         |   | (250 | ) |   | (7 | ) |
| **Income                from Continuing Operations**                                       |   |             |   |            |   |          |   |         |   |         |   |   |   |   |   |   |
| **before                Income Taxes**                                                     |   |             | 179    |            |   | 62            |   |         | 143    |         |   | (199 | ) |   | 185 |   |
| **Provision                for Income Taxes**                                              |   |             | (68    | )               |   | (23           | )      |         | (56    | )            |   | 76 |   |   | (71 | ) |
| **Income                from Continuing Operations**                                       |   |             | 111    |            |   | 39            |   |         | 87     |         |   | (123 | ) |   | 114 |   |
| **Loss                from Discontinued Operations,**                                      |   |             |   |            |   |          |   |         |   |         |   |   |   |   |   |   |
| **net                of taxes**                                                            |   |             | -      |            |   | -             |   |         | (3     | )            |   | - |   |   | (3 | ) |
| **Net                Income**                                                              |   | $                | 111    |            | $      | 39            |   | $            | 84     |         | $      | (123 | ) | $ | 111 |   |
|                                                                                       |   |             |   |            |   |          |   |         |   |         |   |   |   |   |   |   |

----

**Kerr-McGee      Corporation and Subsidiary Companies**

**Condensed      Consolidating Statement of Income**

**For      the Six Months Ended June 30, 2005**

|                                                                              |   |  Kerr-McGee |   |  Guarantor |   | Non-Guarantor |   |         |   |         |   |
|-----------------------------------------------------------------------------------|--------|------------------|--------|-----------------|--------|---------------|--------|--------------|--------|--------------|--------|
| (Millions                of dollars)                                              |   | Corporation      |   | Subsidiaries    |   | Subsidiaries  |   | Eliminations |   | Consolidated |   |
|                                                                              |   |             |   |            |   |          |   |         |   |         |   |
| **Revenues**                                                                      |   | $                | -      |            | $      | 554           |   | $            | 3,013  |         | $      | - |   | $ | 3,567 |   |
|                                                                              |   |             |   |            |   |          |   |         |   |         |   |   |   |   |   |   |
| **Costs                and Expenses**                                             |   |             |   |            |   |          |   |         |   |         |   |   |   |   |   |   |
| Costs                and operating expenses                                       |   |             | -      |            |   | 324           |   |         | 754    |         |   | (1 | ) |   | 1,077 |   |
| Selling,                general and administrative expenses                       |   |             | -      |            |   | -             |   |         | 202    |         |   | - |   |   | 202 |   |
| Shipping                and handling expenses                                     |   |             | -      |            |   | 6             |   |         | 92     |         |   | - |   |   | 98 |   |
| Depreciation                and depletion                                         |   |             | -      |            |   | 58            |   |         | 560    |         |   | - |   |   | 618 |   |
| Accretion                expense                                                  |   |             | -      |            |   | 1             |   |         | 16     |         |   | - |   |   | 17 |   |
| Asset                impairments                                                  |   |             | -      |            |   | -             |   |         | 5      |         |   | - |   |   | 5 |   |
| Gain on                sale of assets                                        |   |             | -      |            |   | -             |   |         | (46    | )            |   | - |   |   | (46 | ) |
|                  Exploration, including dry holes and amortization |   |             |   |            |   |          |   |         |   |         |   |   |   |   |   |   |
| of                undeveloped leases                                              |   |             | -      |            |   | 4             |   |         | 180    |         |   | - |   |   | 184 |   |
| Taxes,                other than income taxes                                     |   |             | -      |            |   | 16            |   |         | 76     |         |   | - |   |   | 92 |   |
| Provision                for environmental remediation                            |   |             |   |            |   |          |   |         |   |         |   |   |   |   |   |   |
| and                restoration, net of reimbursements                             |   |             | -      |            |   | 16            |   |         | 10     |         |   | - |   |   | 26 |   |
| Interest                and debt expense                                          |   |             | 114    |            |   | 9             |   |         | 197    |         |   | (178 | ) |   | 142 |   |
| Total                Costs and Expenses                                           |   |             | 114    |            |   | 434           |   |         | 2,046  |         |   | (179 | ) |   | 2,415 |   |
|                                                                              |   |             |   |            |   |          |   |         |   |         |   |   |   |   |   |   |
|                                                                              |   |             | (114   | )               |   | 120           |   |         | 967    |         |   | 179 |   |   | 1,152 |   |
| **Other                Income (Expense)**                                         |   |             | 814    |            |   | 130           |   |         | 218    |         |   | (1,172 | ) |   | (10 | ) |
| **Income                from Continuing Operations**                              |   |             |   |            |   |          |   |         |   |         |   |   |   |   |   |   |
| **before                Income Taxes**                                            |   |             | 700    |            |   | 250           |   |         | 1,185  |         |   | (993 | ) |   | 1,142 |   |
| **Benefit                (Provision) for Income Taxes**                           |   |             | 25     |            |   | (42           | )      |         | (398   | )            |   | - |   |   | (415 | ) |
| **Income                from Continuing Operations**                              |   |             | 725    |            |   | 208           |   |         | 787    |         |   | (993 | ) |   | 727 |   |
| **Loss                from Discontinued Operations,**                             |   |             |   |            |   |          |   |         |   |         |   |   |   |   |   |   |
| **net                of taxes**                                                   |   |             | -      |            |   | -             |   |         | (2     | )            |   | - |   |   | (2 | ) |
| **Net                Income**                                                     |   | $                | 725    |            | $      | 208           |   | $            | 785    |         | $      | (993 | ) | $ | 725 |   |
|                                                                              |   |             |   |            |   |          |   |         |   |         |   |   |   |   |   |   |

**Kerr-McGee      Corporation and Subsidiary Companies**

**Condensed      Consolidating Statement of Income**

**For      the Six Months Ended June 30, 2004**

|                                                                 |   |  Kerr-McGee |   |  Guarantor |   | Non-Guarantor |   |         |   |         |   |
|----------------------------------------------------------------------|--------|------------------|--------|-----------------|--------|---------------|--------|--------------|--------|--------------|--------|
| (Millions                of dollars)                                 |   | Corporation      |   | Subsidiaries    |   | Subsidiaries  |   | Eliminations |   | Consolidated |   |
|                                                                 |   |             |   |            |   |          |   |         |   |         |   |
| **Revenues**                                                         |   | $                | -      |            | $      | 427           |   | $            | 1,773  |         | $      | - |   | $ | 2,200 |   |
|                                                                 |   |             |   |            |   |          |   |         |   |         |   |   |   |   |   |   |
| **Costs                and Expenses**                                |   |             |   |            |   |          |   |         |   |         |   |   |   |   |   |   |
| Costs                and operating expenses                          |   |             | -      |            |   | 219           |   |         | 605    |         |   | (1 | ) |   | 823 |   |
| Selling,                general and administrative expenses          |   |             | 1      |            |   | -             |   |         | 158    |         |   | - |   |   | 159 |   |
| Shipping                and handling expenses                        |   |             | -      |            |   | 4             |   |         | 72     |         |   | - |   |   | 76 |   |
| Depreciation                and depletion                            |   |             | -      |            |   | 60            |   |         | 321    |         |   | - |   |   | 381 |   |
| Accretion                expense                                     |   |             | -      |            |   | 1             |   |         | 12     |         |   | - |   |   | 13 |   |
| Asset                impairments                                     |   |             | -      |            |   | 1             |   |         | 13     |         |   | - |   |   | 14 |   |
| Loss on                sale of assets                           |   |             | -      |            |   | -             |   |         | 7      |         |   | - |   |   | 7 |   |
|                  Exploration, including dry holes and |   |             |   |            |   |          |   |         |   |         |   |   |   |   |   |   |
| amortization                of undeveloped leases                    |   |             | -      |            |   | 7             |   |         | 109    |         |   | - |   |   | 116 |   |
| Taxes,                other than income taxes                        |   |             | -      |            |   | 17            |   |         | 39     |         |   | - |   |   | 56 |   |
| Provision                for environmental remediation               |   |             |   |            |   |          |   |         |   |         |   |   |   |   |   |   |
| and                restoration, net of reimbursements                |   |             | -      |            |   | 6             |   |         | (3     | )            |   | - |   |   | 3 |   |
| Interest                and debt expense                             |   |             | 54     |            |   | 19            |   |         | 139    |         |   | (99 | ) |   | 113 |   |
| Total                Costs and Expenses                              |   |             | 55     |            |   | 334           |   |         | 1,472  |         |   | (100 | ) |   | 1,761 |   |
|                                                                 |   |             |   |            |   |          |   |         |   |         |   |   |   |   |   |   |
|                                                                 |   |             | (55    | )               |   | 93            |   |         | 301    |         |   | 100 |   |   | 439 |   |
| **Other                Income (Expense)**                            |   |             | 477    |            |   | 9             |   |         | 50     |         |   | (543 | ) |   | (7 | ) |
| **Income                from Continuing Operations**                 |   |             |   |            |   |          |   |         |   |         |   |   |   |   |   |   |
| **before                Income Taxes**                               |   |             | 422    |            |   | 102           |   |         | 351    |         |   | (443 | ) |   | 432 |   |
| **Benefit                (Provision) for Income Taxes**              |   |             | (159   | )               |   | (37           | )      |         | (135   | )            |   | 168 |   |   | (163 | ) |
| **Income                from Continuing Operations**                 |   |             | 263    |            |   | 65            |   |         | 216    |         |   | (275 | ) |   | 269 |   |
| **Loss                from Discontinued Operations,**                |   |             |   |            |   |          |   |         |   |         |   |   |   |   |   |   |
| **net                of taxes**                                      |   |             | -      |            |   | -             |   |         | (6     | )            |   | - |   |   | (6 | ) |
| **Net                Income**                                        |   | $                | 263    |            | $      | 65            |   | $            | 210    |         | $      | (275 | ) | $ | 263 |   |
|                                                                 |   |             |   |            |   |          |   |         |   |         |   |   |   |   |   |   |

----

**Kerr-McGee      Corporation and Subsidiary Companies**

**Condensed      Consolidating Balance Sheet**

**June      30, 2005**

|                                                               |   |  Kerr-McGee |   |  Guarantor |   | Non-Guarantor |   |         |   |         |   |
|--------------------------------------------------------------------|--------|------------------|--------|-----------------|--------|---------------|--------|--------------|--------|--------------|--------|
| (Millions                of dollars)                               |   | Corporation      |   | Subsidiaries    |   | Subsidiaries  |   | Eliminations |   | Consolidated |   |
|                                                               |   |             |   |            |   |          |   |         |   |         |   |
| **ASSETS**                                                         |   |
| **Current                Assets**                                  |   |             |   |            |   |          |   |         |   |         |   |
| Cash                and cash equivalents                           |   | $                | 1      |            | $      | -             |   | $            | 323    |         | $      | - |   | $ | 324 |   |
| Intercompany                receivables                            |   |             | 70     |            |   | -             |   |         | -      |         |   | (70 | ) |   | - |   |
| Accounts                receivable                                 |   |             | -      |            |   | 127           |   |         | 897    |         |   | - |   |   | 1,024 |   |
| Inventories                                                        |   |             | -      |            |   | 2             |   |         | 360    |         |   | - |   |   | 362 |   |
| Derivatives                and other current assets                |   |             | 1      |            |   | 7             |   |         | 208    |         |   | - |   |   | 216 |   |
| Deferred                income taxes                               |   |             | -      |            |   | 33            |   |         | 304    |         |   | - |   |   | 337 |   |
| Assets                associated with properties held for sale     |   |             | -      |            |   | -             |   |         | 36     |         |   | - |   |   | 36 |   |
| Total                Current Assets                                |   |             | 72     |            |   | 169           |   |         | 2,128  |         |   | (70 | ) |   | 2,299 |   |
|                                                               |   |             |   |            |   |          |   |         |   |         |   |   |   |   |   |   |
| **Property,                Plant and Equipment - Net**             |   |             | -      |            |   | 1,962         |   |         | 8,360  |         |   | - |   |   | 10,322 |   |
| **Investment                in Subsidiaries**                      |   |             | 6,516  |            |   | 688           |   |         | -      |         |   | (7,204 | ) |   | - |   |
| **Investments,                Derivatives and Other Assets**       |   |             | 70     |            |   | 20            |   |         | 604    |         |   | (80 | ) |   | 614 |   |
| **Goodwill                and Other Intangible Assets**            |   |             | -      |            |   | 350           |   |         | 930    |         |   | - |   |   | 1,280 |   |
| **Assets                Associated with Properties Held for Sale** |   |             | -      |            |   | -             |   |         | 662    |         |   | - |   |   | 662 |   |
| **Total                Assets**                                    |   | $                | 6,658  |            | $      | 3,189         |   | $            | 12,684 |         | $      | (7,354 | ) | $ | 15,177 |   |
|                                                               |   |             |   |            |   |          |   |         |   |         |   |   |   |   |   |   |

| **LIABILITIES                AND STOCKHOLDERS' EQUITY**             |   |
|---------------------------------------------------------------------|--------|
| **Current                Liabilities**                              |   |   |   |   |   |   |   |   |   |   |   |
| Intercompany                borrowings                              |   | $ | 20 |   | $ | 505 |   | $ | 1,394 |   | $ | (1,919 | ) | $ | - |   |
| Accounts                payable                                     |   |   | 6 |   |   | 44 |   |   | 496 |   |   | - |   |   | 546 |   |
| Long-term                debt due within one year                   |   |   | 23 |   |   | - |   |   | 108 |   |   | - |   |   | 131 |   |
| Derivative                liabilities                               |   |   | - |   |   | 6 |   |   | 794 |   |   | - |   |   | 800 |   |
| Accrued                liabilities                                  |   |   | 18 |   |   | 206 |   |   | 748 |   |   | - |   |   | 972 |   |
| Liabilities                associated with properties held for sale |   |   | - |   |   | - |   |   | 19 |   |   | - |   |   | 19 |   |
| Total                Current Liabilities                            |   |   | 67 |   |   | 761 |   |   | 3,559 |   |   | (1,919 | ) |   | 2,468 |   |
|                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Long-Term                Debt**                                   |   |   | 6,352 |   |   | - |   |   | 473 |   |   | - |   |   | 6,825 |   |
| **Noncurrent                Liabilities**                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deferred                income taxes                                |   |   | (5 | ) |   | 480 |   |   | 1,728 |   |   | - |   |   | 2,203 |   |
| Derivative                liabilities                               |   |   | - |   |   | 1 |   |   | 584 |   |   | - |   |   | 585 |   |
| Other                noncurrent liabilities                         |   |   | - |   |   | 230 |   |   | 838 |   |   | (1 | ) |   | 1,067 |   |
| Liabilities                associated with properties held for sale |   |   | - |   |   | - |   |   | 67 |   |   | - |   |   | 67 |   |
| Total                Noncurrent Liabilities                         |   |   | (5 | ) |   | 711 |   |   | 3,217 |   |   | (1 | ) |   | 3,922 |   |
|                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Stockholders'                Equity**                             |   |   | 244 |   |   | 1,717 |   |   | 5,435 |   |   | (5,434 | ) |   | 1,962 |   |
|                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total                Liabilities and Stockholders' Equity**       |   | $ | 6,658 |   | $ | 3,189 |   | $ | 12,684 |   | $ | (7,354 | ) | $ | 15,177 |   |

----

**Kerr-McGee      Corporation and Subsidiary Companies**

**Condensed      Consolidating Balance Sheet**

**December      31, 2004**

|                                                               |   |  Kerr-McGee |   |  Guarantor |   | Non-Guarantor |   |         |   |         |   |
|--------------------------------------------------------------------|--------|------------------|--------|-----------------|--------|---------------|--------|--------------|--------|--------------|--------|
| (Millions                of dollars)                               |   | Corporation      |   | Subsidiaries    |   | Subsidiaries  |   | Eliminations |   | Consolidated |   |
|                                                               |   |             |   |            |   |          |   |         |   |         |   |
| **ASSETS**                                                         |   |
| **Current                Assets**                                  |   |             |   |            |   |          |   |         |   |         |   |  |   |   |   |   |
| Cash                and cash equivalents                           |   | $                | 2      |            | $      | -             |   | $            | 74     |         | $      | - |   | $ | 76 |   |
| Intercompany                receivables                            |   |             | -      |            |   | -             |   |         | 58     |         |   | (58 | ) |   | - |   |
| Accounts                receivable                                 |   |             | -      |            |   | 206           |   |         | 757    |         |   | - |   |   | 963 |   |
| Inventories                                                        |   |             | -      |            |   | 5             |   |         | 324    |         |   | - |   |   | 329 |   |
| Derivatives                and other current assets                |   |             | 4      |            |   | 24            |   |         | 167    |         |   | - |   |   | 195 |   |
| Deferred                income taxes                               |   |             | 2      |            |   | 13            |   |         | 309    |         |   | - |   |   | 324 |   |
| Total                Current Assets                                |   |             | 8      |            |   | 248           |   |         | 1,689  |         |   | (58 | ) |   | 1,887 |   |
|                                                               |   |             |   |            |   |          |   |         |   |         |   |  |   |   |   |   |
| **Property,                Plant and Equipment - Net**             |   |             | -      |            |   | 1,947         |   |         | 8,880  |         |   | - |   |   | 10,827 |   |
| **Investment                in Subsidiaries**                      |   |             | 6,306  |            |   | 645           |   |         | -      |         |   | (6,951 | ) |   | - |   |
| **Investments,                Derivatives and Other Assets**       |   |             | 17     |            |   | 24            |   |         | 547    |         |   | (80 | ) |   | 508 |   |
| **Goodwill                and Other Intangible Assets**            |   |             | -      |            |   | 351           |   |         | 937    |         |   | - |   |   | 1,288 |   |
| **Assets                Associated with Properties Held for Sale** |   |             | -      |            |   | -             |   |         | 8      |         |   | - |   |   | 8 |   |
|                                                               |   |             |   |            |   |          |   |         |   |         |   |   |   |   |   |   |
| **Total                Assets**                                    |   | $                | 6,331  |            | $      | 3,215         |   | $            | 12,061 |         | $      | (7,089 | ) | $ | 14,518 |   |
|                                                               |   |             |   |            |   |          |   |         |   |         |   |   |   |   |   |   |

| **LIABILITIES                AND STOCKHOLDERS' EQUITY**       |   |
|---------------------------------------------------------------|--------|
| **Current                Liabilities**                        |   |   |   |   |   |   |   |   |   |   |   |
| Intercompany                borrowings                        |   | $ | 68 |   | $ | 598 |   | $ | 1,189 |   | $ | (1,855 | ) | $ | - |   |
| Accounts                payable                               |   |   | 68 |   |   | 55 |   |   | 521 |   |   | - |   |   | 644 |   |
| Long-term                debt due within one year             |   |   | 354 |   |   | - |   |   | 109 |   |   | - |   |   | 463 |   |
| Derivative                liabilities                         |   |   | 6 |   |   | 71 |   |   | 295 |   |   | - |   |   | 372 |   |
| Accrued                liabilities                            |   |   | 10 |   |   | 203 |   |   | 813 |   |   | - |   |   | 1,026 |   |
| Total                Current Liabilities                      |   |   | 506 |   |   | 927 |   |   | 2,927 |   |   | (1,855 | ) |   | 2,505 |   |
|                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Long-Term                Debt**                             |   |   | 2,125 |   |   | - |   |   | 1,111 |   |   | - |   |   | 3,236 |   |
|                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Noncurrent                Liabilities**                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deferred                income taxes                          |   |   | (2 | ) |   | 545 |   |   | 1,634 |   |   | - |   |   | 2,177 |   |
| Derivative                liabilities                         |   |   | - |   |   | 59 |   |   | 149 |   |   | - |   |   | 208 |   |
| Other                noncurrent liabilities                   |   |   | - |   |   | 224 |   |   | 853 |   |   | (3 | ) |   | 1,074 |   |
| Total                Noncurrent Liabilities                   |   |   | (2 | ) |   | 828 |   |   | 2,636 |   |   | (3 | ) |   | 3,459 |   |
|                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Stockholders'                Equity**                       |   |   | 3,702 |   |   | 1,460 |   |   | 5,387 |   |   | (5,231 | ) |   | 5,318 |   |
|                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total                Liabilities and Stockholders' Equity** |   | $ | 6,331 |   | $ | 3,215 |   | $ | 12,061 |   | $ | (7,089 | ) | $ | 14,518 |   |
|                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

**Kerr-McGee      Corporation and Subsidiary Companies**

**Condensed      Consolidating Statement of Cash Flows**

**For      the Six Months Ended June 30, 2005**

|                                                                |   |        |   |         |   | Non-         |   |         |   |         |   |
|---------------------------------------------------------------------|--------|-------------|--------|--------------|--------|--------------|--------|--------------|--------|--------------|--------|
|                                                                |   | Kerr-McGee  |   | Guarantor    |   | Guarantor    |   |         |   |         |   |
| (Millions                of dollars)                                |   | Corporation |   | Subsidiaries |   | Subsidiaries |   | Eliminations |   | Consolidated |   |
|                                                                |   |        |   |         |   |         |   |         |   |         |   |
| **Cash                Flows from Operating Activities**             |   |        |   |         |   |         |   |         |   |         |   |   |   |   |   |   |
| Net                income                                           |   | $           | 725    |         | $      | 208          |   | $            | 785    |         | $      | (993 | ) | $ | 725 |   |
| Adjustments                to reconcile net income to net cash      |   |        |   |         |   |         |   |         |   |         |   |   |   |   |   |   |
| provided                by (used in) operating activities-          |   |        |   |         |   |         |   |         |   |         |   |   |   |   |   |   |
| Depreciation,                depletion and amortization             |   |        | -      |         |   | 59           |   |         | 591    |         |   | - |   |   | 650 |   |
| Deferred                income taxes                                |   |        | (2     | )            |   | 1            |   |         | 266    |         |   | - |   |   | 265 |   |
| Dry                hole expense                                     |   |        | -      |         |   | -            |   |         | 91     |         |   | - |   |   | 91 |   |
| Asset                impairments                                    |   |        | -      |         |   | -            |   |         | 5      |         |   | - |   |   | 5 |   |
| Gain on                sale of assets                          |   |        | -      |         |   | -            |   |         | (46    | )            |   | - |   |   | (46 | ) |
| Accretion                expense                                    |   |        | -      |         |   | 1            |   |         | 16     |         |   | - |   |   | 17 |   |
| Provision                for environmental remediation              |   |        |   |         |   |         |   |         |   |         |   |   |   |   |   |   |
| and                restoration, net of reimbursements               |   |        | -      |         |   | 16           |   |         | 11     |         |   | - |   |   | 27 |   |
| Equity                in earnings of subsidiaries                   |   |        | (771   | )            |   | (130         | )      |         | -      |         |   | 901 |   |   | - |   |
| Other                noncash items affecting net income             |   |        | (17    | )            |   | 38           |   |         | 13     |         |   | 94 |   |   | 128 |   |
| Changes                in assets and liabilities                    |   |        | 11     |         |   | 53           |   |         | (346   | )            |   | (2 | ) |   | (284 | ) |
| Net                Cash Provided by (Used in)                       |   |        |   |         |   |         |   |         |   |         |   |   |   |   |   |   |
| Operating                Activities                                 |   |        | (54    | )            |   | 246          |   |         | 1,386  |         |   | - |   |   | 1,578 |   |
|                                                                |   |        |   |         |   |         |   |         |   |         |   |   |   |   |   |   |
| **Cash                Flows from Investing Activities**             |   |        |   |         |   |         |   |         |   |         |   |   |   |   |   |   |
| Capital                expenditures                                 |   |        | -      |         |   | (66          | )      |         | (742   | )            |   | - |   |   | (808 | ) |
| Dry                hole costs                                       |   |        | -      |         |   | -            |   |         | (75    | )            |   | - |   |   | (75 | ) |
| Proceeds                from sales of assets                        |   |        | -      |         |   | -            |   |         | 63     |         |   | - |   |   | 63 |   |
| Other                investing activities                           |   |        | -      |         |   | -            |   |         | (21    | )            |   | - |   |   | (21 | ) |
| Net                Cash Used in Investing Activities                |   |        | -      |         |   | (66          | )      |         | (775   | )            |   | - |   |   | (841 | ) |
|                                                                |   |        |   |         |   |         |   |         |   |         |   |   |   |   |   |   |
| **Cash                Flows from Financing Activities**             |   |        |   |         |   |         |   |         |   |         |   |   |   |   |   |   |
| Issuance                of common stock                             |   |        | 159    |         |   | -            |   |         | -      |         |   | - |   |   | 159 |   |
| Purchases                of treasury stock                          |   |        | (250   | )            |   | -            |   |         | -      |         |   | - |   |   | (250 | ) |
| Shares                repurchased under the tender offer            |   |        | (3,975 | )            |   | -            |   |         | -      |         |   | - |   |   | (3,975 | ) |
| Dividends                paid                                       |   |        | (142   | )            |   | -            |   |         | -      |         |   | - |   |   | (142 | ) |
| Repayment                of debt                                    |   |        | (350   | )            |   | -            |   |         | (42    | )            |   | - |   |   | (392 | ) |
| Proceeds                from borrowings                             |   |        | 4,250  |         |   | -            |   |         | -      |         |   | - |   |   | 4,250 |   |
| Credit                Agreement financing costs                     |   |        | (58    | )            |   | -            |   |         | -      |         |   | - |   |   | (58 | ) |
| Increase                (decrease) in intercompany                  |   |        |   |         |   |         |   |         |   |         |   |   |   |   |   |   |
| notes                payable                                        |   |        | 419    |         |   | (180         | )      |         | (239   | )            |   | - |   |   | - |   |
| Settlement                of Westport derivatives                   |   |        | -      |         |   | -            |   |         | (80    | )            |   | - |   |   | (80 | ) |
| Net                Cash Provided by (Used in)                       |   |        |   |         |   |         |   |         |   |         |   |   |   |   |   |   |
| Financing                Activities                                 |   |        | 53     |         |   | (180         | )      |         | (361   | )            |   | - |   |   | (488 | ) |
|                                                                |   |        |   |         |   |         |   |         |   |         |   |   |   |   |   |   |
| **Effects                of Exchange Rate Changes on Cash**         |   |        |   |         |   |         |   |         |   |         |   |   |   |   |   |   |
| **and                Cash Equivalents**                             |   |        | -      |         |   | -            |   |         | (1     | )            |   | - |   |   | (                1 | ) |
| **Net                Increase in Cash and Cash Equivalents**        |   |        | (1     | )            |   | -            |   |         | 249    |         |   | - |   |   | 248 |   |
| **Cash                and Cash Equivalents at Beginning of Period** |   |        | 2      |         |   | -            |   |         | 74     |         |   | - |   |   | 76 |   |
| **Cash                and Cash Equivalents at End of Period**       |   | $           | 1      |         | $      | -            |   | $            | 323    |         | $      | - |   | $ | 324 |   |
|                                                                |   |        |   |         |   |         |   |         |   |         |   |   |   |   |   |   |

----

**Kerr-McGee      Corporation and Subsidiary Companies**

**Condensed      Consolidating Statement of Cash Flows**

**For      the Six Months Ended June 30, 2004**

|                                                                |   |        |   |         |   | Non-         |   |         |   |         |   |
|---------------------------------------------------------------------|--------|-------------|--------|--------------|--------|--------------|--------|--------------|--------|--------------|--------|
|                                                                |   | Kerr-McGee  |   | Guarantor    |   | Guarantor    |   |         |   |         |   |
| (Millions                of dollars)                                |   | Corporation |   | Subsidiaries |   | Subsidiaries |   | Eliminations |   | Consolidated |   |
|                                                                |   |        |   |         |   |         |   |         |   |         |   |
| **Cash                Flows from Operating Activities**             |   |        |   |         |   |         |   |         |   |         |   |   |   |   |   |   |
| Net                income                                           |   | $           | 263    |         | $      | 65           |   | $            | 210    |         | $      | (275 | ) | $ | 263 |   |
| Adjustments                to reconcile net income to net cash      |   |        |   |         |   |         |   |         |   |         |   |   |   |   |   |   |
| provided                by (used in) operating activities -         |   |        |   |         |   |         |   |         |   |         |   |   |   |   |   |   |
| Depreciation,                depletion and amortization             |   |        | -      |         |   | 64           |   |         | 343    |         |   | - |   |   | 407 |   |
| Deferred                income taxes                                |   |        | 15     |         |   | 8            |   |         | 88     |         |   | - |   |   | 111 |   |
| Dry                hole expense                                     |   |        | -      |         |   | -            |   |         | 26     |         |   | - |   |   | 26 |   |
| Asset                impairments                                    |   |        | -      |         |   | 1            |   |         | 13     |         |   | - |   |   | 14 |   |
| Loss                on sale of assets                               |   |        | -      |         |   | -            |   |         | 7      |         |   | - |   |   | 7 |   |
| Accretion                expense                                    |   |        | -      |         |   | 1            |   |         | 12     |         |   | - |   |   | 13 |   |
| Provision                for environmental remediation              |   |        |   |         |   |         |   |         |   |         |   |   |   |   |   |   |
| and                restoration, net of reimbursements               |   |        | -      |         |   | 7            |   |         | -      |         |   | - |   |   | 7 |   |
| Equity                in losses (earnings) of subsidiaries          |   |        | (272   | )            |   | (4           | )      |         | -      |         |   | 276 |   |   | - |   |
| Other                noncash items affecting net income             |   |        | -      |         |   | -            |   |         | 29     |         |   | - |   |   | 29 |   |
| Changes                in assets and liabilities                    |   |        | (30    | )            |   | 12           |   |         | (150   | )            |   | (1 | ) |   | (169 | ) |
| Net                Cash Provided by (Used in)                       |   |        |   |         |   |         |   |         |   |         |   |   |   |   |   |   |
| Operating                Activities                                 |   |        | (24    | )            |   | 154          |   |         | 578    |         |   | - |   |   | 708 |   |
|                                                                |   |        |   |         |   |         |   |         |   |         |   |   |   |   |   |   |
| **Cash                Flows from Investing Activities**             |   |        |   |         |   |         |   |         |   |         |   |   |   |   |   |   |
| Capital                expenditures                                 |   |        | -      |         |   | (67          | )      |         | (366   | )            |   | - |   |   | (433 | ) |
| Dry                hole costs                                       |   |        | -      |         |   | -            |   |         | (26    | )            |   | - |   |   | (26 | ) |
| Proceeds                from sale of investments                    |   |        | -      |         |   | -            |   |         | 39     |         |   | - |   |   | 39 |   |
| Proceeds                from sales of assets                        |   |        | -      |         |   | -            |   |         | 3      |         |   | - |   |   | 3 |   |
| Other                investing activities                           |   |        | (16    | )            |   | -            |   |         | 33     |         |   | - |   |   | 17 |   |
| Net                Cash Used in Investing Activities                |   |        | (16    | )            |   | (67          | )      |         | (317   | )            |   | - |   |   | (400 | ) |
|                                                                |   |        |   |         |   |         |   |         |   |         |   |   |   |   |   |   |
|                                                                |   |        |   |         |   |         |   |         |   |         |   |   |   |   |   |   |
| **Cash                Flows from Financing Activities**             |   |        |   |         |   |         |   |         |   |         |   |   |   |   |   |   |
| Issuance                of common stock                             |   |        | 7      |         |   | -            |   |         | -      |         |   | - |   |   | 7 |   |
| Repayment                of debt                                    |   |        | -      |         |   | -            |   |         | (347   | )            |   | - |   |   | (347 | ) |
| Proceeds                from borrowings                             |   |        | -      |         |   | -            |   |         | 86     |         |   | - |   |   | 86 |   |
| Increase                (decrease) in intercompany                  |   |        |   |         |   |         |   |         |   |         |   |   |   |   |   |   |
| notes                payable                                        |   |        | 125    |         |   | (87          | )      |         | (38    | )            |   | - |   |   | - |   |
| Dividends                paid                                       |   |        | (91    | )            |   | -            |   |         | -      |         |   | - |   |   | (91 | ) |
| Net                Cash Provided by (Used in)                       |   |        |   |         |   |         |   |         |   |         |   |   |   |   |   |   |
| Financing                Activities                                 |   |        | 41     |         |   | (87          | )      |         | (299   | )            |   | - |   |   | (345 | ) |
|                                                                |   |        |   |         |   |         |   |         |   |         |   |   |   |   |   |   |
| **Effects                of Exchange Rate Changes on Cash**         |   |        |   |         |   |         |   |         |   |         |   |   |   |   |   |   |
| **   and                Cash Equivalents**           |   |        | -      |         |   | -            |   |         | -      |         |   | - |   |   | - |   |
| **Net                Increase in Cash and Cash Equivalents**        |   |        | 1      |         |   | -            |   |         | (38    | )            |   | - |   |   | (37 | ) |
| **Cash                and Cash Equivalents at Beginning of Period** |   |        | 2      |         |   | -            |   |         | 140    |         |   | - |   |   | 142 |   |
| **Cash                and Cash Equivalents at End of Period**       |   | $           | 3      |         | $      | -            |   | $            | 102    |         | $      | - |   | $ | 105 |   |
|                                                                |   |        |   |         |   |         |   |         |   |         |   |   |   |   |   |   |

| **17.** | **Subsequent                  Event** |
|---------|---------------------------------------|

| ·   | The                  sale of the company’s interests in four non-operated fields and related                  exploratory acreage and facilities in the North Sea,                  and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                  sale of all remaining North Sea operations through the sale of                  the stock                  of Kerr-McGee (G.B.) Ltd., the company’s wholly-owned subsidiary, and                  other affiliated entities. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                    |   | June                  30, |   |
|-----------------------------------------|--------|---------------------------|--------|
| (Millions                  of dollars)  |   | 2005                      |   |
|                                    |   |                      |   |
| Current                  Assets         |   | $                         | 342    |   |
| Long-Term                  Assets       |   |                      | 1,742  |   |
| Current                  Liabilities    |   |                      | (365   | ) |
| Noncurrent                  Liabilities |   |                      | (702   | ) |
| Net                  Investment         |   | $                         | 1,017  |   |
|                                    |   |                      |   |   |

----

| **Item                2.** | **Management’s                Discussion and Analysis of Financial Condition and Results of                Operations.** |
|----------------------------|--------------------------------------------------------------------------------------------------------------------------------|

**Overview      and Recent Developments**

***Separation        of the Chemical Business***
* *
* *

***Divestitures        of Oil and Gas Assets***
* *
* *

| ·   | The                  sale of the company’s interests in four non-operated fields and related                  exploratory acreage and facilities in the North Sea,                  and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                  sale of all remaining North Sea operations through the sale of                  the stock                  of Kerr-McGee (G.B.) Ltd., the company’s wholly-owned subsidiary, and                  other affiliated entities. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

***Repurchases      of Common Stock and Related Financing***
*      -*

*Results      of Consolidated Operations*
*Financial      Condition and Liquidity *

***Expanded      Hedging Program***
* *
* *
*Quantitative      and Qualitative Disclosures about Market Risk*

***Revised      Dividend Policy***
* *
* *

----

**Results      of Consolidated Operations**

|                                                               |   | Three                Months Ended |      | Six                Months Ended |    |
|--------------------------------------------------------------------|--------|-----------------------------------|-----------|---------------------------------|---------|
|                                                               |   | June                30,           |      | June                30,         |    |
| (Millions                of dollars)                               |   | **2005**                          |      | 2004                            |    | **Percent                Change** |   | **2005** |   | 2004 |   | **Percent                Change** |   |
| Revenues                                                           |   | **$**                             | **1,850** |                            | $       | 1,091 |   |   | **70** | **%** | **$** | **3,567** |   | $ | 2,200 |   |   | **62** | **%** |
|                                                               |   |                              |      |                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Segment                operating profit (1)                -       |   |                              |      |                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Exploration                and production                          |   | $                            | **686**   |                            | $  | 263 |   |   | **161** | **%** | $  | **1,341** |   | $  | 593 |   |   | **126** | **%** |
|                                                               |   |                              |      |                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Chemical                -                                          |   |                              |      |                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Pigment                                                            |   |                              | **32**    |                            |    | 14 |   |   |   |   |   | **64** |   |   | 21 |   |   |   |   |
| Other                                                              |   |                              | **2**     |                            |    | - |   |   |   |   |   | **(7** | **)** |   | (3 | ) |   |   |   |
| Total                Chemical                                      |   |                              | **34**    |                            |    | 14 |   |   | **143** | **%** |   | **57** |   |   | 18 |   |   | **217** | **%** |
|                                                               |   |                              |      |                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                segment operating profit                      |   |                              | **720**   |                            |    | 277 |   |   | **160** | **%** |   | **1,398** |   |   | 611 |   |   | **129** | **%** |
|                                                               |   |                              |      |                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                and debt expense                           |   |                              | **(81**   | **)**                           |    | (56 | ) |   |   |   |   | **(142** | **)** |   | (113 | ) |   |   |   |
| Corporate                expenses                                  |   |                              | **(45**   | **)**                           |    | (26 | ) |   |   |   |   | **(89** | **)** |   | (57 | ) |   |   |   |
| Environmental                provisions, net of reimbursements     |   |                              | **(2**    | **)**                           |    | (3 | ) |   |   |   |   | **(15** | **)** |   | (2 | ) |   |   |   |
|                                                               |   |                              | **592**   |                            |    | 192 |   |   |   |   |   | **1,152** |   |   | 439 |   |   |   |   |
|                                                               |   |                              |      |                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                income (expense)                              |   |                              | **(9**    | **)**                           |    | (7 | ) |   |   |   |   | **(10** | **)** |   | (7 | ) |   |   |   |
| Provision                for income taxes                          |   |                              | **(211**  | **)**                           |    | (71 | ) |   |   |   |   | **(415** | **)** |   | (163 | ) |   |   |   |
|                                                               |   |                              |      |                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                from continuing operations                   |   |                              | **372**   |                            |    | 114 |   |   | **226** | **%** |   | **727** |   |   | 269 |   |   | **170** | **%** |
| Loss                from discontinued operations, net of taxes (2) |   |                              | **(2**    | **)**                           |    | (3 | ) |   |   |   |   | **(2** | **)** |   | (6 | ) |   |   |   |
| Net                Income                                          |   | **$**                             | **370**   |                            | $       | 111 |   |   | **233** | **%** | **$** | **725** |   | $ | 263 |   |   | **176** | **%** |
|                                                               |   |                              |      |                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                Income per Common Share:                        |   |                              |      |                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                              |   | **$**                             | **2.63**  |                            | $       | 1.07 |   |   | **146** | **%** | **$** | **4.91** |   | $ | 2.58 |   |   | **90** | **%** |
| Diluted                                                            |   |                              | **2.60**  |                            |    | 1.01 |   |   | **157** | **%** |   | **4.78** |   |   | 2.42 |   |   | **98** | **%** |
|                                                               |   |                              |      |                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

| (1)   | Segment                operating profit represents results of continuing operations before                considering general corporate expenses, interest and debt expense,                environmental provisions related to sites with no ongoing operations                or                businesses in which the company’s affiliates are no longer engaged, other                income (expense) and income taxes. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | Loss                from discontinued operations reflects results of the company’s former                forest products operations. Criteria for classification of the forest                products business as discontinued operations were met in the fourth                quarter of 2004. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Second      Quarter 2005 vs. Second Quarter 2004**

***General***
*Results      of Operations by Segment *
* *

***Revenues***

----

|                                                                        |   | Three                Months Ended June 30, |   |
|-----------------------------------------------------------------------------|--------|--------------------------------------------|--------|
| (Millions                of dollars)                                        |   | 2005                                       |   | 2005                vs. 2004 |   | 2004 |   |
|                                                                        |   |                                       |   |   |   |   |   |
| ***Revenues***                                                              |   | $                                          | 1,850  |   | $ | 759 |   | $ | 1,091 |   |
| Increase                (decrease) in:                                      |   |                                       |   |   |   |   |   |   |   |   |
| Oil                and gas sales revenues due to changes in realized prices |   |                                       |   |   | $ | 434 |   |   |   |   |
| Oil                and gas sales revenues due to volume changes             |   |                                       |   |   |   | 264 |   |   |   |   |
| Other                exploration and production segment revenues            |   |                                       |   |   |   | 31 |   |   |   |   |
| Pigment                sales revenues due to changes in realized prices     |   |                                       |   |   |   | 48 |   |   |   |   |
| Pigment                sales revenues due to volume changes                 |   |                                       |   |   |   | (20 | ) |   |   |   |
| Other                chemical segment revenues                              |   |                                       |   |   |   | 2 |   |   |   |   |
| **Total                change in revenues**                                 |   |                                       |   |   | $ | 759 |   |   |   |   |

***Interest      and Debt Expense***
*Financial      Condition and Liquidity.*

***Corporate      Expenses***
*Obligations      and Commitments*

***Provision      for Income Taxes***

| ·   | As                discussed under *Overview                and Recent Developments*,                the company has identified for sale certain oil and gas properties                in the                U.K. sector of the North Sea. One of the packages identified for                sale                would result in the sale of the company’s investment in the stock of a                foreign subsidiary. Upon concluding that such sale was likely to                occur,                the company recognized a tax benefit of $27 million related to the                difference between the book and tax bases of its investment in the                subsidiary. Additionally, as discussed under *Financial                Condition and Liquidity*                below, provisions of the new credit agreement require us to use 100%                of                the net cash proceeds from sales of certain assets for debt repayment.                Because proceeds from the sale of U.K. oil and gas properties will                be                remitted to the United States for debt repayment, in connection with                classifying such properties as held for sale, the company recognized                $11                million of U.S. deferred income tax expense on foreign earnings previously                intended to have been indefinitely reinvested overseas (in addition                to a                previously established liability for U.S. income taxes on U.K. earnings                of                $59 million). The $27 million tax benefit and the $11 million provision                resulted in a corresponding increase (decrease) in the second-quarter                2005                effective tax rate of (4.6%) and 1.9%,                respectively. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | As                discussed below, in the second quarter of 2005 we recognized income                tax                expense of $12 million associated with the repatriation of foreign                earnings under the provisions of the American Jobs Creation Act of                2004,                which increased the effective tax rate by                2.1%. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Year-to-Date      2005 vs. Year-to-Date 2004**

***General***
*Results      of Operations by Segment*

***Revenues***
*Results      of Operations by Segment*

|                                                                          |   | Six                  Months Ended June 30, |   |
|-------------------------------------------------------------------------------|--------|--------------------------------------------|--------|
| (Millions                  of dollars)                                        |   | 2005                                       |   | 2005                  vs. 2004 |   | 2004 |   |
|                                                                          |   |                                       |   |   |   |   |   |
| ***Revenues***                                                                |   | $                                          | 3,567  |   | $ | 1,367 |   | $ | 2,200 |   |
| Increase                  (decrease) in:                                      |   |                                       |   |   |   |   |   |   |   |   |
| Oil                  and gas sales revenues due to changes in realized prices |   |                                       |   |   | $ | 733 |   |   |   |   |
| Oil                  and gas sales revenues due to volume changes             |   |                                       |   |   |   | 519 |   |   |   |   |
| Other                  exploration and production segment revenues            |   |                                       |   |   |   | 26 |   |   |   |   |
| Pigment                  sales revenues due to changes in realized prices     |   |                                       |   |   |   | 80 |   |   |   |   |
| Pigment                  sales revenues due to volume changes                 |   |                                       |   |   |   | 7 |   |   |   |   |
| Other                  chemical segment revenues                              |   |                                       |   |   |   | 2 |   |   |   |   |
| **Total                  change in revenues**                                 |   |                                       |   |   | $ | 1,367 |   |   |   |   |

***Interest      and Debt Expense***
*Financial      Condition and Liquidity*

----

***Corporate      Expenses***
*Obligations      and Commitments *

***Provision      for Income Taxes***

**Results        of Operations by Segment - **

**Exploration      and Production**

**Segment      Operating Profit **

|                                                                         |   | Three                Months Ended |      | Six                Months Ended |   |
|------------------------------------------------------------------------------|--------|-----------------------------------|-----------|---------------------------------|--------|
|                                                                         |   | June                30,           |      | June                30,         |   |
| (Millions                of dollars)                                         |   | **2005**                          |      | 2004                            |   | **2005** |   | 2004 |   |
|                                                                         |   |                              |      |                            |   |   |   |   |   |
| Revenues,                excluding marketing revenues                        |   | **$**                             | **1,356** |                            | $      | 678 |   | **$** | **2,607** |   | $ | 1,430 |   |
|                                                                         |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| Operating                costs and expenses:                                 |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| Lifting                costs:                                                |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| Lease                operating expense                                       |   |                              | **146**   |                            |   | 82 |   |   | **288** |   |   | 171 |   |
| Production                and ad valorem taxes                               |   |                              | **34**    |                            |   | 18 |   |   | **64** |   |   | 33 |   |
| Total                lifting costs                                           |   |                              | **180**   |                            |   | 100 |   |   | **352** |   |   | 204 |   |
|                                                                         |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
|                   Depreciation, depletion and amortization         |   |                              | **278**   |                            |   | 160 |   |   | **559** |   |   | 322 |   |
|                   Accretion expense                                |   |                              | **8**     |                            |   | 7 |   |   | **17** |   |   | 13 |   |
|                   Asset impairments                                |   |                              | **1**     |                            |   | 1 |   |   | **5** |   |   | 14 |   |
|                   (Gain) loss associated with assets held for sale |   |                              | **(24**   | **)**                           |   | 4 |   |   | **(46** | **)** |   | 7 |   |
|                   General and administrative expense               |   |                              | **43**    |                            |   | 35 |   |   | **73** |   |   | 66 |   |
|                   Transportation expense                           |   |                              | **36**    |                            |   | 25 |   |   | **71** |   |   | 52 |   |
|                   Exploration expense                              |   |                              | **121**   |                            |   | 65 |   |   | **184** |   |   | 116 |   |
|                   Gas gathering, pipeline and other expenses       |   |                              | **27**    |                            |   | 19 |   |   | **52** |   |   | 44 |   |
| Total                operating costs and expenses                            |   |                              | **670**   |                            |   | 416 |   |   | **1,267** |   |   | 838 |   |
|                                                                         |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| Operating                profit, excluding net marketing margin              |   |                              | **686**   |                            |   | 262 |   |   | **1,340** |   |   | 592 |   |
|                                                                         |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| Marketing                - Gas sales revenues                                |   |                              | **138**   |                            |   | 87 |   |   | **270** |   |   | 169 |   |
| Marketing                - Gas purchase costs (including transportation)     |   |                              | **(138**  | **)**                           |   | (86 | ) |   | **(269** | **)** |   | (168 | ) |
| Net                marketing margin                                          |   |                              | **-**     |                            |   | 1 |   |   | **1** |   |   | 1 |   |
|                                                                         |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| Total                Operating Profit                                        |   | **$**                             | **686**   |                            | $      | 263 |   | **$** | **1,341** |   | $ | 593 |   |

----

**Revenues      **

|                                                                      |   | Three                Months Ended |      | Six                months Ended |   |
|---------------------------------------------------------------------------|--------|-----------------------------------|-----------|---------------------------------|--------|
|                                                                      |   | June                30,           |      | June                30,         |   |
| (Millions                of dollars, except per-unit amounts)             |   | **2005**                          |      | 2004                            |   | **2005** |   | 2004 |   |
| Revenues                -                                                 |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| Crude                oil and condensate sales                             |   | **$**                             | **700**   |                            | $      | 338 |   | **$** | **1,379** |   | $ | 699 |   |
| Natural                gas sales                                          |   |                              | **653**   |                            |   | 317 |   |   | **1,260** |   |   | 688 |   |
| Gas                marketing activities                                   |   |                              | **138**   |                            |   | 87 |   |   | **270** |   |   | 169 |   |
| Other                revenues                                             |   |                              | **26**    |                            |   | 18 |   |   | **51** |   |   | 39 |   |
| Nonhedge                derivative gains (losses)                         |   |                              | **12**    |                            |   | 5 |   |   | **(39** | **)** |   | 5 |   |
| Loss                on hedge ineffectiveness                              |   |                              | **(35**   | **)**                           |   | - |   |   | **(44** | **)** |   | (1 | ) |
|                  Total                                               |   | **$**                             | **1,494** |                            | $      | 765 |   | **$** | **2,877** |   | $ | 1,599 |   |
|                                                                      |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| Production                -                                               |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| Crude                oil and condensate (thousands of barrels per day):   |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| U.S.                Gulf of Mexico                                        |   |                              | **60**    |                            |   | 57 |   |   | **61** |   |   | 57 |   |
| U.S.                onshore                                               |   |                              | **36**    |                            |   | 20 |   |   | **36** |   |   | 19 |   |
| North                Sea                                                  |   |                              | **62**    |                            |   | 64 |   |   | **65** |   |   | 66 |   |
| China                                                                     |   |                              | **17**    |                            |   | - |   |   | **19** |   |   | - |   |
|                         Total     |   |                              | **175**   |                            |   | 141 |   |   | **181** |   |   | 142 |   |
|                                                                      |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| Natural                gas (million cubic feet per day):                  |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| U.S.                Gulf of Mexico                                        |   |                              | **452**   |                            |   | 314 |   |   | **432** |   |   | 321 |   |
| U.S.                onshore                                               |   |                              | **571**   |                            |   | 334 |   |   | **584** |   |   | 328 |   |
| North                Sea                                                  |   |                              | **95**    |                            |   | 92 |   |   | **95** |   |   | 102 |   |
|                         Total     |   |                              | **1,118** |                            |   | 740 |   |   | **1,111** |   |   | 751 |   |
|                                                                      |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| Total                equivalent barrels of oil (thousands of boe per day) |   |                              | **361**   |                            |   | 264 |   |   | **366** |   |   | 267 |   |
|                                                                      |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| Average                sales prices (excluding hedges) -                  |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| Crude                oil and condensate (per barrel):                     |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| U.S.                Gulf of Mexico                                        |   | **$**                             | **47.26** |                            | $      | 35.31 |   | **$** | **46.12** |   | $ | 34.15 |   |
| U.S.                onshore                                               |   |                              | **44.26** |                            |   | 32.43 |   |   | **42.68** |   |   | 31.33 |   |
| North                Sea                                                  |   |                              | **48.24** |                            |   | 34.19 |   |   | **46.84** |   |   | 32.06 |   |
| China                                                                     |   |                              | **42.85** |                            |   | - |   |   | **40.46** |   |   | - |   |
|                         Average   |   |                              | **46.55** |                            |   | 34.40 |   |   | **45.07** |   |   | 32.80 |   |
|                                                                      |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| Natural                gas (per thousand cubic feet):                     |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| U.S.                Gulf of Mexico                                        |   | **$**                             | **7.11**  |                            | $      | 6.23 |   | **$** | **6.84** |   | $ | 6.01 |   |
| U.S.                onshore                                               |   |                              | **6.54**  |                            |   | 5.63 |   |   | **6.11** |   |   | 5.57 |   |
| North                Sea                                                  |   |                              | **4.54**  |                            |   | 3.61 |   |   | **5.35** |   |   | 4.05 |   |
|                         Average   |   |                              | **6.60**  |                            |   | 5.63 |   |   | **6.33** |   |   | 5.55 |   |
|                                                                      |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
|                                                                      |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| Average                realized sales prices (including hedges) -         |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| Crude                oil and condensate (per barrel):                     |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| U.S.                Gulf of Mexico                                        |   | **$**                             | **42.55** |                            | $      | 28.08 |   | **$** | **41.96** |   | $ | 28.42 |   |
| U.S.                onshore                                               |   |                              | **39.56** |                            |   | 25.50 |   |   | **38.51** |   |   | 25.68 |   |
| North                Sea                                                  |   |                              | **45.10** |                            |   | 26.40 |   |   | **44.27** |   |   | 26.45 |   |
| China                                                                     |   |                              | **42.85** |                            |   | - |   |   | **40.46** |   |   | - |   |
|                         Average   |   |                              | **42.90** |                            |   | 26.97 |   |   | **41.93** |   |   | 27.14 |   |
|                                                                      |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| Natural                gas (per thousand cubic feet):                     |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| U.S.                Gulf of Mexico                                        |   | **$**                             | **6.91**  |                            | $      | 5.16 |   | **$** | **6.77** |   | $ | 5.42 |   |
| U.S.                onshore                                               |   |                              | **6.35**  |                            |   | 4.58 |   |   | **6.04** |   |   | 4.96 |   |
| North                Sea                                                  |   |                              | **4.54**  |                            |   | 3.61 |   |   | **5.35** |   |   | 4.05 |   |
|                         Average   |   |                              | **6.42**  |                            |   | 4.70 |   |   | **6.27** |   |   | 5.03 |   |

----

***Crude      Oil Sales Revenues and Production***

***Natural      Gas Sales Revenues and Production***

***Other      Revenues***

***Hedge      Ineffectiveness and Nonhedge Derivative Losses***

----

*Quantitative      and Qualitative Disclosures about Market Risk.*

**Lease      Operating Expense**

**Production      and Ad Valorem Taxes**

**Depreciation,      Depletion and Amortization (DD&A)**

----

**Asset      Impairments and Gain/Loss on Sales of Assets**

**General      and Administrative Expense**

*Obligations      and Commitments *
*.*

**Transportation      Expense**

----

**Exploration      Expense**

|                                              |   | Three                Months Ended |    | Six                Months Ended |   |
|---------------------------------------------------|--------|-----------------------------------|---------|---------------------------------|--------|
|                                              |   | June                30,           |    | June                30,         |   |
| (Millions                of dollars)              |   | **2005**                          |    | 2004                            |   | **2005** |   | 2004 |   |
|                                              |   |                              |    |                            |   |   |   |   |   |
| Exploration                costs (1)              |   | **$**                             | **18**  |                            | $      | 16 |   | **$** | **30** |   | $ | 26 |   |
| Geological                and geophysical costs   |   |                              | **16**  |                            |   | 18 |   |   | **32** |   |   | 38 |   |
| Dry                hole expense                   |   |                              | **71**  |                            |   | 18 |   |   | **91** |   |   | 26 |   |
| Amortization                of undeveloped leases |   |                              | **16**  |                            |   | 13 |   |   | **32** |   |   | 26 |   |
| Sales                of unproved properties       |   |                              | **-**   |                            |   | - |   |   | **(1** | **)** |   | - |   |
| Total                exploration expense          |   | **$**                             | **121** |                            | $      | 65 |   | **$** | **184** |   | $ | 116 |   |

| (1)   | Exploration                costs include delay rentals, cost of retaining and carrying unproved                properties and exploration department                overhead. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Gas      Marketing Activities**

----

**Results      of Operations by Segment - **

**Chemical**

|                                               |   | Three                Months Ended |    | Six                Months Ended |   |
|----------------------------------------------------|--------|-----------------------------------|---------|---------------------------------|--------|
|                                               |   | June                30,           |    | June                30,         |   |
| (Millions                of dollars)               |   | **2005**                          |    | 2004                            |   | **2005** |   | 2004 |   |
|                                               |   |                              |    |                            |   |   |   |   |   |
| Revenues                -                          |   |                              |    |                            |   |   |   |   |   |   |   |   |   |
| Pigment                                            |   | **$**                             | **331** |                            | $      | 303 |   | **$** | **642** |   | $ | 555 |   |
| Other                                              |   |                              | **25**  |                            |   | 23 |   |   | **48** |   |   | 46 |   |
| Total                                              |   | **$**                             | **356** |                            | $      | 326 |   | **$** | **690** |   | $ | 601 |   |
|                                               |   |                              |    |                            |   |   |   |   |   |   |   |   |   |
| Operating                profit (loss) -           |   |                              |    |                            |   |   |   |   |   |   |   |   |   |
| Pigment                                            |   | **$**                             | **32**  |                            | $      | 14 |   | **$** | **64** |   | $ | 21 |   |
| Other                                              |   |                              | **2**   |                            |   | - |   |   | **(7** | **)** |   | (3 | ) |
| Total                                              |   | **$**                             | **34**  |                            | $      | 14 |   | **$** | **57** |   | $ | 18 |   |
|                                               |   |                              |    |                            |   |   |   |   |   |   |   |   |   |
| Titanium                dioxide pigment production |   |                              |    |                            |   |   |   |   |   |   |   |   |   |
| (thousands                of tonnes)               |   |                              | **130** |                            |   | 143 |   |   | **264** |   |   | 279 |   |

**Chemical      - Pigment**

----

**Chemical      - Other**

**Financial      Condition and Liquidity**

|                                                                    |   | **June                30,** |                        | December                31, |   |
|-------------------------------------------------------------------------|--------|-----------------------------|-----------------------------|-----------------------------|--------|
| (Millions                of dollars)                                    |   | **2005**                    |                        | 2004                        |   |
|                                                                    |   |                        |                        |                        |   |
| Current                ratio (1)                                        |   |                        | **0.9                to 1** |                        |   | 0.8                to 1 |   |
| Cash                and cash equivalents                                |   | **$**                       | **324**                     |                        | $      | 76 |   |
| Debt                repayment obligations due within one year           |   |                        | **131**                     |                        |   | 463 |   |
| Unused                capacity under bank and revolving lines of credit |   |                        | **1,230**                   |                        |   | 1,550 |   |
| Total                debt                                               |   |                        | **6,956**                   |                        |   | 3,699 |   |
| Stockholders’                equity                               |   | **$**                       | **1,962**                   |                        | $      | 5,318 |   |
| Debt                to total capitalization (2)                         |   |                        | **78**                      | **%**                       |   | 41 | % |

| (1)   | Represents a                ratio of current assets to current                liabilities.  |
|-----------------|-------------------------------------------------------------------------------------------------------|

| (2)   | Total                capitalization is determined as total debt plus stockholders'                equity. |
|-----------------|-----------------------------------------------------------------------------------------------------------|

|                                                          |   | Six                Months Ended |      |
|---------------------------------------------------------------|--------|---------------------------------|-----------|
|                                                          |   | June                30,         |      |
| (Millions                of dollars)                          |   | **2005**                        |      | 2004 |   |
|                                                          |   |                            |      |   |   |
| Net                cash provided by operating activities      |   | **$**                           | **1,578** |   | $ | 708 |   |
| Capital                expenditures, including dry hole costs |   | **$**                           | **(883**  | **)** | $ | (459 | ) |

*Overview      and Recent Developments*
*Quantitative      and Qualitative Disclosures about Market Risk.*

----

|                                                          |   | Increase                (Decrease) in |   |
|---------------------------------------------------------------|--------|---------------------------------------|--------|
| (Millions                of dollars)                          |   | Total                Debt             |   | Total                Equity |   |
| Repayment                of debt                              |   | $                                     | (392   | ) | $ | - |   |
| Conversion                of 5.25% debentures to common stock |   |                                  | (600   | ) |   | 593 |   |
| Exercises                of employee stock options            |   |                                  | -      |   |   | 159 |   |
| Gross                proceeds from borrowings                 |   |                                  | 4,250  |   |   | - |   |
| Repurchases                of common stock                    |   |                                  | -      |   |   | (4,225 | ) |

***Repurchases      of Common Stock and Related Financing***
*Overview      and Recent Developments*

----

|                               |                    |   | Applicable                Interest Rate Margin |
|------------------------------------|-------------------------|--------|------------------------------------------------|
|                               |                    |   | **At                June 30, 2005**            |   | Over                the Term |
|                               | Maturity                |   | **ABR**                                        |   | **Eurodollar** |   | ABR |   | Eurodollar |
| Revolving                Facility  | May                2010 |   | **1.25%**                                      |   | **2.25%** |   | 0.25                - 1.25% |   | 1.25                - 2.25% |
| Tranche                X Term Loan | May                2007 |   | **1.25%**                                      |   | **2.25%** |   | 1.25% |   | 2.25% |
| Tranche                B Term Loan | May                2011 |   | **1.50%**                                      |   | **2.50%** |   | 1.25                - 1.50% |   | 2.25                - 2.50% |

*** ***

| ·   | As                long as the Tranche X loan is outstanding, 50% of the net cash proceeds,                as defined, of certain equity                issuances; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | 100%                of the net cash proceeds, as defined, from incurrence of certain                indebtedness; |
|--------------------|-------------------------------------------------------------------------------------------------------------------|

| ·   | Subject                to certain exceptions, 100% of the net cash proceeds, as defined,                from                asset disposals; and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Annually,                a specified percentage of excess cash flow, as defined, ranging from                zero                to 50%. This prepayment requirement is reduced or eliminated upon                repayment of the Tranche X loan and the achievement of a Consolidated                Leverage Ratio below specified thresholds. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*** ***

| ·   | Consolidated                Leverage Ratio of no more than 4:1 in 2005, 3.75:1 in 2006 and 3.50:1                thereafter |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------|

| ·   | Consolidated                Interest Coverage Ratio over a specified period of at least                3:1 |
|--------------------|------------------------------------------------------------------------------------------------------------|

| ·   | Asset                Coverage Ratio of more than 1.25:1 in 2005, 1.50:1 in 2006 and 1.75:1                thereafter |
|--------------------|----------------------------------------------------------------------------------------------------------------------|

----

***Credit      Ratings***

|                                           | March                31, 2005 |   | June                30, 2005 |
|------------------------------------------------|-------------------------------|--------|------------------------------|
| Standard                & Poor’s     | BBB-                          |   | BB+                          |
| Moody’s                Investors Service | Baa3                          |   | Ba3                          |

**Cash      Flows**

|                                                                    |   | Six                Months                Ended |      |       |   |
|-------------------------------------------------------------------------|--------|------------------------------------------------|-----------|------------|--------|
|                                                                    |   | June                30,                        |      | Percentage |   |
| (Millions                of                dollars)                     |   | **2005**                                       |      | 2004       |   | Change |   |
| Net                cash                provided by operating activities |   | **$**                                          | **1,578** |       | $      | 708 |   |   | 123 | % |
| Net                cash used                in investing activities     |   |                                           | **(841**  | **)**      |   | (400 | ) |   | 110 | % |
| Net                cash used                in financing activities     |   |                                           | **(488**  | **)**      |   | (345 | ) |   | 41 | % |

----

***Operating      Activities***
** - **
*Results of Operations by Segment - Exploration and      Production*
*Credit Ratings*

***Investing      Activities***
*** ***

|                                                                                          |   | Six                Months                Ended |     |
|-----------------------------------------------------------------------------------------------|--------|------------------------------------------------|----------|
|                                                                                          |   | June                30,                        |     |
| (Millions                of                dollars)                                           |   | **2005**                                       |     | 2004 |   |
| Capital                expenditures -                                                         |   |                                           |     |   |   |   |   |
|                  Exploration and production (including dry hole costs)                   |   | **$**                                          | **(843** | **)** | $ | (410 | ) |
|                  Chemical - Pigment                                                      |   |                                           | **(28**  | **)** |   | (38 | ) |
|                  Chemical - Other                                                        |   |                                           | **(3**   | **)** |   | (5 | ) |
|                  Corporate and other                                                     |   |                                           | **(9**   | **)** |   | (6 | ) |
|                     Total capital expenditures (including dry hole costs) |   |                                           | **(883** | **)** |   | (459 | ) |
| Acquisitions,                net of cash acquired                                             |   |                                           | **-**    |   |   | 43 |   |
| Proceeds                from                dispositions of assets                            |   |                                           | **63**   |   |   | 42 |   |
| Other                investing activities                                                     |   |                                           | **(21**  | **)** |   | (26 | ) |
| Total                net                cash used in investing activities                     |   | **$**                                          | **(841** | **)** | $ | (400 | ) |

*Overview      and Recent Developments*
*Financial      Condition and Liquidity - Tranche X and Tranche B Term Loans*

----

***Financing      Activities***

|                                                                    |   | Six                Months Ended |       |
|-------------------------------------------------------------------------|--------|---------------------------------|------------|
|                                                                    |   | June                30,         |       |
| (Millions                of dollars)                                    |   | **2005**                        |       | 2004 |   |
|                                                                    |   |                            |       |   |   |
| Proceeds                of borrowings, net of related transaction costs |   | **$**                           | **4,192**  |   | $ | 86 |   |
| Cash                received upon exercises of employee stock options   |   |                            | **159**    |   |   | 7 |   |
| Repurchases                of common stock, including transaction costs |   |                            | **(4,225** | **)** |   | - |   |
| Payment                of dividends                                     |   |                            | **(142**   | **)** |   | (91 | ) |
| Repayment                of debt                                        |   |                            | **(392**   | **)** |   | (347 | ) |
| Settlement                of Westport derivatives                       |   |                            | **(80**    | **)** |   | - |   |
|                   Total cash used in financing activities     |   | **$**                           | **(488**   | **)** | $ | (345 | ) |

*Repurchases of Common Stock and Related      Financing*

**Obligations      and Commitments**

*Financial      Condition and Liquidity*
* *
*Interest      Rate Risk*

----

*Overview      and Recent Developments*

**New/Revised      Accounting Standards**

----

| **Item                3.** | **Quantitative                and Qualitative Disclosures about Market                Risk.** |
|----------------------------|-----------------------------------------------------------------------------------------------|

**Commodity      Price Risk**

|                                       |   | **July                    - December 2005**        |                              | **2006**                                         |   | **2007**                                           |            |
|--------------------------------------------|--------|----------------------------------------------------|-----------------------------------|--------------------------------------------------|--------|----------------------------------------------------|-----------------|
|                                       |   | AverageContract                    Price($/Barrel) |                              | Average                    Daily Volume(Barrels) |   | AverageContract                    Price($/Barrel) |            | Average                    Daily Volume(Barrels) |   | AverageContract                    Price($/Barrel) |   | Average                    Daily Volume(Barrels) |   |
| **Crude                    Oil (WTI) -**   |   |                                               |                              |                                             |   |                                               |            |   |   |   |   |   |   |
| **Hedge:**                                 |   |                                               |                              |                                             |   |                                               |            |   |   |   |   |   |   |   |   |   |   |   |   |
| Fixed                    price swaps       |   | $                                                  | 29.23                             |                                             |   | 3,000                                              |  (a)  |   | - |   |   | - |   |   | - |   |   | - |   |
|                                       |   | $                                                  | 50.62                             |                                             |   | 18,500                                             |            | $ | 53.14 |   |   | 18,781 |   | $ | 51.45 |   |   | 27,250 |   |
|                                       |   |                                               |                              |                                             |   |                                               |            |   |   |   |   |   |   |   |   |   |   |   |   |
| Costless                    collars        |   | $                                                  | 28.50                    - $31.89 |                                             |   | 14,000                                             |  (b)       | $ | 27.00                    - $30.58 |   |   | 19,000 |  (b) |   | - |   |   | - |   |
|                                       |   | $                                                  | 42.40                    - $57.75 |                                             |   | 24,000                                             |            | $ | 45.00                    - $65.58 |   |   | 18,288 |   | $ | 45.00                    - $61.43 |   |   | 18,000 |   |
|                                       |   |                                               |                              |                                             |   |                                               |            |   |   |   |   |   |   |   |   |   |   |   |   |
| **Nonhedge:**                              |   |                                               |                              |                                             |   |                                               |            |   |   |   |   |   |   |   |   |   |   |   |   |
| Three-way                    collars(1)    |   | $                                                  | 25.00                    - $28.23 |                                             |   | 5,000                                              |  (a)       | $ | 25.00                    - $28.65 |   |   | 2,000 |  (a) |   | - |   |   | - |   |
| Three-way                    average floor |   | $                                                  | 20.93                             |                                             |   |                                               |            | $ | 20.88 |   |   |   |   |   |   |   |   |   |   |
|                                       |   |                                               |                              |                                             |   | 64,500                                             |            |   |   |   |   | 58,069 |   |   |   |   |   | 45,250 |   |
|                                       |   |                                               |                              |                                             |   |                                               |            |   |   |   |   |   |   |   |   |   |   |   |   |
| **Crude                    Oil (Brent) -** |   |                                               |                              |                                             |   |                                               |            |   |   |   |   |   |   |   |   |   |   |   |   |
| **Hedge:**                                 |   |                                               |                              |                                             |   |                                               |            |   |   |   |   |   |   |   |   |   |   |   |   |
| Fixed                    price swaps       |   | $                                                  | 45.85                             |                                             |   | 24,250                                             |            | $ | 53.05 |   |   | 12,512 |   | $ | 49.91 |   |   | 12,750 |   |
|                                       |   |                                               |                              |                                             |   |                                               |            |   |   |   |   |   |   |   |   |   |   |   |   |
| Costless                    collars   |   | $                                                  | 39.67                    - $53.68 |                                             |   | 23,250                                             |            | $ | 43.00                    - $62.51 |   |   | 30,512 |   | $ | 43.00                    - $60.11 |   |   | 12,750 |   |
|                                       |   |                                               |                              |                                             |   | 47,500                                             |            |   |   |   |   | 43,024 |   |   |   |   |   | 25,500 |   |
|                                       |   |                                               |                              |                                             |   |                                               |            |   |   |   |   |   |   |   |   |   |   |   |   |
|                                       |   |                                               |                              |                                             |   |                                               |            |   |   |   |   |   |   |   |   |   |   |   |   |

| (a)   | Acquired                in the Westport merger. |
|-----------------|-------------------------------------------------|

| (b)   | Placed                by Kerr-McGee in connection with the Westport                merger. |
|-----------------|--------------------------------------------------------------------------------------------|

| (1)   | These                derivatives function similar to a costless collar, with the exception                that                if the WTI price falls below the three-way floor, the company loses                price                protection. For example, the company only has $4.07/barrel of price                protection if the WTI price falls below $20.93/barrel in the case                of its                2005 crude oil three-way collars ($25.00 -                $20.93). |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                       |   | **July                - December 2005**       |                        | **2006**                                   |   | **2007**                                      |      |
|--------------------------------------------|--------|-----------------------------------------------|-----------------------------|--------------------------------------------|--------|-----------------------------------------------|-----------|
|                                       |   | AverageContract                Price($/MMBtu) |                        | Average                Daily Volume(MMBtu) |   | AverageContract                Price($/MMBtu) |      | Average                Daily Volume(MMBtu) |   | AverageContract                Price($/MMBtu) |   | Average                Daily Volume(MMBtu) |   |
| **Natural                Gas (NYMEX) -**   |   |                                          |                        |                                       |   |                                          |      |   |   |   |   |   |   |
| **Hedge:**                                 |   |                                          |                        |                                       |   |                                          |      |   |   |   |   |   |   |   |   |   |   |   |   |
| Fixed                price swaps           |   | $                                             | 4.42                        |                                       |   | 55,000                                        |  (a) |   | - |   |   | - |   |   | - |   |   | - |   |
|                                       |   | $                                             | 7.18                        |                                       |   | 267,631                                       |      | $ | 7.53 |   |   | 196,000 |   | $ | 7.03 |   |   | 265,000 |   |
|                                       |   |                                          |                        |                                       |   |                                          |      |   |   |   |   |   |   |   |   |   |   |   |   |
| Costless                collars            |   | $                                             | 5.00                - $6.25 |                                       |   | 280,000                                       |  (b) | $ | 4.75                - $ 5.50 |   |   | 340,000 |  (b) |   | **-** |   |   | **-** |   |
|                                       |   | $                                             | 6.38                - $8.62 |                                       |   | 297,712                                       |      | $ | 6.00                - $10.80 |   |   | 197,000 |   | $ | 6.00                - $9.03 |   |   | 265,000 |   |
|                                       |   |                                          |                        |                                       |   |                                          |      |   |   |   |   |   |   |   |   |   |   |   |   |
| **Nonhedge:**                              |   |                                          |                        |                                       |   |                                          |      |   |   |   |   |   |   |   |   |   |   |   |   |
| Costless                collars       |   | $                                             | 4.09                - $5.57 |                                       |   | 60,000                                        |  (a) |   | - |   |   | - |   |   | - |   |   | - |   |
|                                       |   |                                          |                        |                                       |   |                                          |      |   |   |   |   |   |   |   |   |   |   |   |   |
| Three-way                collars (1)       |   |                                          | -                           |                                       |   | -                                             |      | $ | 4.00                - $6.00 |   |   | 20,000 |  (a) |   | - |   |   | - |   |
| Three-way                average floor     |   |                                          |                        |                                       |   |                                          |      | $ | 3.04 |   |   |   |   |   |   |   |   |   |   |
|                                       |   |                                          |                        |                                       |   | 960,343                                       |      |   |   |   |   | 753,000 |   |   |   |   |   | 530,000 |   |
|                                       |   |                                          |                        |                                       |   |                                          |      |   |   |   |   |   |   |   |   |   |   |   |   |
| **Basis                Swaps vs. NYMEX -** |   |                                          |                        |                                       |   |                                          |      |   |   |   |   |   |   |   |   |   |   |   |   |
| **Hedge:**                                 |   |                                          |                        |                                       |   |                                          |      |   |   |   |   |   |   |   |   |   |   |   |   |
| CIG                (2)                     |   | $                                             | 0.65                        |                                       |   | 71,794                                        |      | $ | 0.85 |   |   | 1,233 |   |   | - |   |   | - |   |
| NWPL                (3)                    |   | $                                             | 0.63                        |                                       |   | 66,726                                        |      | $  | 0.79 |   |   | 4,932 |   |   | - |   |   | - |   |
| HSC (4)                               |   | $                                             | 0.13                        |                                       |   | 46,794                                        |      |   | - |   |   | - |   |   | - |   |   | - |   |
|                                       |   |                                          |                        |                                       |   |                                          |      |   |   |   |   |   |   |   |   |   |   |   |   |
| **Nonhedge:**                              |   |                                          |                        |                                       |   |                                          |      |   |   |   |   |   |   |   |   |   |   |   |   |
| CIG                                        |   | $                                             | 0.73                        |                                       |   | 80,218                                        |      | $ | 0.39 |   |   | 20,000 |   | $ | 0.39 |   |   | 20,000 |  (5) |
| NWPL                                       |   | $                                             | 0.68                        |                                       |   | 5,014                                         |      | $ | 0.20 |   |   | 15,000 |   | $ | 0.20 |   |   | 15,000 |  (6) |
| HSC                                        |   | $                                             | 0.18                        |                                       |   | 26,685                                        |      |   | - |   |   | - |   |   | - |   |   | - |   |
|                                       |   |                                          |                        |                                       |   |                                          |      |   |   |   |   |   |   |   |   |   |   |   |   |
|                                       |   |                                          |                        |                                       |   |                                          |      |   |   |   |   |   |   |   |   |   |   |   |   |

| (a)   | Acquired                in the Westport merger. |
|-----------------|-------------------------------------------------|

| (b)   | Placed                by Kerr-McGee in connection with the Westport                merger. |
|-----------------|--------------------------------------------------------------------------------------------|

| (1)   | These                derivatives function similar to a costless collar, with the exception                that                if the NYMEX price falls below the three-way floor, the company loses                price protection. For example, the company only has $.96/MMBtu of                price                protection if the NYMEX price falls below $3.04/MMBtu in the case                of its                2006 natural gas three-way collars ($4.00 -                $3.04). |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | Colorado                Interstate Gas pipeline index. |
|-----------------|--------------------------------------------------------|

| (3)   | Northwest                Pipeline Rocky Mountain index. |
|-----------------|---------------------------------------------------------|

| (4)   | Houston                Ship Channel index. |
|-----------------|--------------------------------------------|

| (5)   | These                basis swaps continue until June 30,                2008. |
|-----------------|-------------------------------------------------------------------------------|

| (6)   | These                basis swaps continue until December 31,                2008. |
|-----------------|-----------------------------------------------------------------------------------|

----

**Interest      Rate Risk**

*Financial      Condition and Liquidity *

|                                                   |   | Years                of Maturity |   |   |   |   |   | Fair   |   |
|--------------------------------------------------------|--------|----------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                   |   |                             |   |   |   |   |   |   |   |   |   | There- |   |   |   | Value                at |   |
| (Millions                of dollars)                   |   | 2005                             |   | 2006   |   | 2007   |   | 2008   |   | 2009 |   | after |   | Total                (2) |   | 6/30/05 |   |
|                                                   |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Fixed-rate                debt -                       |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Principal                amount                        |   | $                                | -      |   | $      | -      |   | $      | -      |   | $ | - |   | $ | - |   | $ | 2,225 |   | $ | 2,225 |   | $ | 2,348 |   |
| Weighted-average                                       |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| interest                rate                           |   |                             | -      |   |   | -      |   |   | -      |   |   | - |   |   | - |   |   | 7.15 | % |   | 7.15 | % |   |   |   |
|                                                   |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Variable-rate                debt (1)                - |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Principal                amount                        |   | $                                | 120    |   | $      | 329    |   | $      | 2,172  |   | $ | 23 |   | $ | 23 |   | $ | 2,149 |   | $ | 4,816 |   | $ | 4,816 |   |
| Weighted-average                                       |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| interest                rate                           |   |                             | 8.75   | %      |   | 6.46   | %      |   | 5.43   | % |   | 5.79 | % |   | 5.79 | % |   | 5.79 | % |   | 5.75 | % |   |   |   |

| (1)   | Includes                fixed-rate debt with interest rate swaps to variable                rate. |
|-----------------|---------------------------------------------------------------------------------------------------|

| (2)   | Principal                amounts represent future payments and exclude the unamortized discount                on                issuance of $81 million and the discount arising from fair value                hedge                adjustments of $4 million. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Foreign      Currency Exchange Rate Risk**

| (Millions                of dollars,             |   | Notional |   | Weighted-Average             |   |
|--------------------------------------------------|--------|----------|--------|------------------------------|--------|
| except                average contract rates)    |   | Amount   |   | Contract                Rate |   |
|                                             |   |     |   |                         |   |
| Open                contracts at June 30, 2005 - |   |     |   |                         |   |   |   |
| Maturing                in 2005 -                |   |     |   |                         |   |   |   |
| British                pound sterling            |   | $        | 90     |                         |   | 1.6980 |   |
| Euro                                             |   |     | 67     |                         |   | 1.2934 |   |
| Australian                dollar                 |   |     | 5      |                         |   | .7509 |   |
| Euro                                             |   |     | (102   | )                            |   | 1.3100 |   |
| Maturing                in 2006 -                |   |     |   |                         |   |   |   |
| Australian                dollar                 |   |     | 2      |                         |   | .7629 |   |
| Euro                                             |   |     | (9     | )                            |   | 1.2850 |   |

----

**Item      4. Controls and Procedures**

**Forward-Looking      Information**

**PART      II - OTHER INFORMATION**

**Item      1.**
**Legal      Proceedings.**

|   | A. | In                2002, Tiwest Pty. Ltd., an Australian joint venture that produces                titanium dioxide and in which Chemical indirectly has a 50% interest,                received a complaint and notice of violation from the Department                of                Environmental Waters and Catchment Protection in Western Australia                alleging violations of the Australian Environmental Protection Act                (1986).                This matter concerned an alleged chlorine release at the facility.                Tiwest                Pty. Ltd. defended the proceeding in the Court of Petty Sessions,                Perth, Western Australia, and on March 26, 2004, the Court                found in                favor of Tiwest Pty. Ltd. The Department appealed the Court's                decision, and, on June 30, 2005, the Supreme Court of Western Australia                dismissed the Department’s appeal. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | B. | On                September 15, 2004, the Missouri Attorney General issued to                Kerr-McGee Chemical LLC, a notice of violation of the Missouri Clean                Water                Act. The notice alleges the discharge of untreated contaminants from                Kerr-McGee Chemical LLC's plant in Springfield, Missouri to the City                of                Springfield sanitation system and the Little Sac River. The Attorney                General is requesting a civil penalty of $375,000, the performance                of an                environmental assessment and natural resource damages, which the                Missouri                Department of Natural Resources currently estimates to be $500,000.                The                contractor performing the decommissioning work at the plant at the                time of                the alleged discharge has acknowledged its contractual obligation                to                indemnify Kerr-McGee Chemical LLC for costs, damages or fines resulting                from its actions. An agreement in principle has been reached with                the                State of Missouri to resolve this matter, and the contractor has                agreed to                pay all amounts due under the                agreement. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | C. | For                a discussion of other legal proceedings and contingencies, reference                is                made to Note 13 to the Condensed Consolidated Financial Statements                included in Item 1, Part I of this quarterly report on Form 10-Q,                which is                incorporated herein by reference. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Item      2.**
**Unregistered      Sales of Equity Securities and Use of Proceeds.**

|                            |   |                                                |       |                                            |   |                                                                                                                              |   |                                                                                                                                              |       |
|---------------------------------|--------|-----------------------------------------------------|------------|-------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| Period                          |   | Total                Number of Shares Purchased (a) |       | Average                Price Paid per Share (a) |   | Total                Number of Shares Purchased as Part of Publicly Announced Plans or                Programs                (b) |   | Maximum                Approximate Dollar Value of Shares that May Yet Be Purchased Under                the                Plans or Programs (b) |       |
|                            |   |                                                |       |                                            |   |                                                                                                                              |   |                                                                                                                                              |       |
| April                1-30, 2005 |   |                                                | 5,050      |                                            | $      | 52.06                                                                                                                             |   |                                                                                                                                              | -          |   | $ | - |   |
| May                1-31, 2005   |   |                                                | 46,744,739 |                                            |   | 84.99                                                                                                                             |   |                                                                                                                                              | 46,727,763 |   |   | - |   |
| June                1-30, 2005  |   |                                                | 23,386     |                                            |   | 74.15                                                                                                                             |   |                                                                                                                                              | -          |   |   | - |   |
| Total                           |   |                                                | 46,773,175 |                                            | $      | 84.99                                                                                                                             |   |                                                                                                                                              | 46,727,763 |   | $ | - |   |

| (a)   | Includes                24,200 shares purchased in the open market for the matching contributions                to Kerr-McGee Corporation Savings Investment Plan, 21,212 shares                delivered                to the company by the employees in satisfaction of withholding taxes                and                upon forfeiture of restricted shares and 46.7 million shares purchased                in                connection with the tender offer discussed                below. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b)   | On                April 18, 2005, the company commenced a modified "Dutch Auction"                self                tender offer to repurchase 43.5 million shares of its common stock                at a                price not lower than $85 or higher than $92 per share. The terms                of the                tender offer provided for the company to determine the lowest per-share                price within the range that would enable it to buy up to $4 billion                of its                common stock based on the number of shares tendered and the prices                specified by the tendering stockholders. Under the tender offer,                which                expired on May 18, 2005, approximately 138.9 million shares were                properly                tendered and not withdrawn at a price of $85 per share. Since the                number                of shares tendered exceeded 43.5 million, purchases of shares by                the                company were made based on a proration factor of 33.64%. In accordance                with applicable securities laws, the company exercised its right                to                increase the number of shares purchased pursuant to the tender offer                by                3.2 million shares, which resulted in repurchasing 46.7 million shares                of                common stock at $85 per share, for an aggregate cost of approximately                $4                billion (including transaction costs of approximately $3 million).                All of                the shares repurchased under the tender offer were retired                immediately. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Item      4.**
**Submission      of Matters to a Vote of Security Holders.**

| (1)   | Stockholders                ratified the appointment of Ernst & Young LLP as the company’s                independent auditors for 2005. There were 135,863,830 votes for the                proposal; 1,920,696 votes against the proposal; and 8,231,648                abstentions. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | Stockholders                approved the 2005 Long Term Incentive Plan. There were 125,938,919                votes                for the proposal; 18,758,075 votes against the proposal; and 8,882,318                abstentions. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3)   | Stockholders                approved an amendment to the Amended and Restated Certification of                Incorporation to increase the authorized number of shares of common                stock                from 300,000,000 to 500,000,000. There were 125,938,919 votes for                the                proposal; 11,609,107 votes against the proposal; and 8,468,139                abstentions. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4)   | Stockholders                did not approve a stockholder proposal to establish an Office of                the Board                of Directors. There were 10,094,397 votes for the proposal; 97,170,448                votes against the proposal; and 8,923,532                abstentions. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| (5)   | The                  following directors were elected with the following vote                  totals. |
|-----------------|--------------------------------------------------------------------------------------------------------|

|                                |   | Votes                   |   | Votes     |
|-------------------------------------|--------|-------------------------|--------|-----------|
|                                |   | In                Favor |   | Withheld  |
| William                F. Wallace   |   | 139,760,561             |   | 8,332,992 |
| Ian                L. White-Thomson |   | 139,731,797             |   | 8,361,756 |

**Item      6.**
**Exhibits.      **

|   | Exhibit                No. |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|--------|----------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | 3.1                        | Amended                and Restated Certificate of Incorporation of Kerr-McGee Corporation,                filed                as Exhibit 4.1 to the company's Registration Statement on Form S-4/A                dated                June 18, 2001, and incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | 3.2                        | Certificate                of Amendment to Amended and Restated Certificate of Incorporation,                filed                as Exhibit 3.1 to the company’s Current Report on Form 8-K dated May 12,                2005, and incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | 3.3                        | Amended                and Restated ByLaws of Kerr-McGee Corporation, filed as Exhibit 3.1                to the                company’s Current Report on Form 8-K dated April 14, 2005, and                incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | 10.1                       | Guarantee                and Collateral and Collateral Trust Agreement, dated May 24,                2005,                made by Kerr-McGee Corporation and certain of its subsidiaries, in                favor                of JPMorgan Chase Bank, N.A., as Collateral Agent, filed                as Exhibit 99.1 to the                company’s Current Report on Form 8-K dated May 27, 2005, and incorporated                herein by reference.                                                                                                                                                                                                                                                                                                                                                              |
|   |                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | 10.2                       | Credit                Agreement, dated May 18, 2005, by and among Kerr-McGee Corporation,                the several lenders from time to time parties thereto, JPMorgan Chase                Bank, N.A., as Administrative Agent and Collateral Agent, Lehman                Commercial Paper Inc., as Syndication Agent, and The Royal                Bank of                Scotland PLC, ABN Amro Bank N.V., Bank of America, N.A., Calyon New                York                Branch and Citicorp North America, Inc., as Documentation                Agents and                the several lenders from time to time parties thereto, filed as                Exhibit 99.1 to the Company's Form 8-K filed May 19,                2005,                and incorporated herein by reference. |
|   |                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | 10.3                       | Retirement                Benefit Preservation Agreement, dated July 18, 2005, between Kerr-McGee                Corporation and Luke R. Corbett, filed as Exhibit 99.2 to                the                company’s Current Report on Form 8-K dated July 18, 2005, and incorporated                herein by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | 10.4                       | Retirement                Benefit Preservation Agreement, dated July 18, 2005, between Kerr-McGee                Corporation and Kenneth W. Crouch, filed as Exhibit 99.3 to                the                company’s Current Report on Form 8-K dated July 18, 2005, and incorporated                herein by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | 31.1                       | Certification                pursuant to Securities Exchange Act Rule 15d-14(a), as adopted pursuant                to                Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | 31.2                       | Certification                pursuant to Securities Exchange Act Rule 15d-14(a), as adopted pursuant                to                Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | 32.1                       | Certification                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section                906 of                the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | 32.2                       | Certification                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section                906 of                the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |

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**SIGNATURE**

**KERR-McGEE      CORPORATION**

| Date: August                8, 2005 | By:    | /s/                John M. Rauh              |
|------------------------------------------|--------|----------------------------------------------|
|                                     |   | John                M. Rauh                  |
|                                     |   | Vice                President and Controller |
|                                     |   | and                Chief Accounting Officer  |