SUN ENERGY PARTNERS LP, SC 13E3, 1999-03-26

SUN ENERGY PARTNERS LP
SC 13E3, 1999-03-26
CRUDE PETROLEUM & NATURAL GAS

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Schedule 13E-3
Rule 13e-3 Transaction Statement
(Pursuant to Section 13(e) of the Securities Exchange Act of 1934)

SUN ENERGY PARTNERS, L.P.
(Name of the Issuer)

SUN ENERGY PARTNERS, L.P.
KERR-McGEE CORPORATION
KERR-McGEE L.P. CORPORATION
KERR-McGEE ENERGY CORPORATION
(Name of Person(s) Filing Statement)

DEPOSITARY UNITS
(Title of Class of Securities)

866719107
(CUSIP Number of Class of Securities)

Russell G. Horner, Jr., Esq.
Senior Vice President, General Counsel
and Corporate Secretary
Kerr-McGee Corporation
123 Robert S. Kerr Avenue
Oklahoma City, Oklahoma 73102
Telephone: (405) 270-1313

(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of
Person(s) Filing Statement)

Copy to:

David Chapnick, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Telephone: (212) 455-2000
<PAGE>
<PAGE>

This statement is filed in connection with (check the appropriate box):

a. [x] The filing of solicitation materials or an information statement
subject to Regulation 14A, Regulation 14C or Rule 13e-3(c) under
the Securities Exchange Act of 1934.
b. [ ] The filing of a registration statement under the Securities Act of
1933.
c. [ ] A tender offer.
d. [ ] None of the above.

Check the following box if the soliciting materials or information statement
referred to in checking box (a) are preliminary copies: [ x ]

Calculation of Filing Fee

Transaction Valuation Amount of Filing Fee

$34,094,812<F1> $6,818.96

[x] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form or
Schedule and the date of its filing.

Amount Previously Paid: $6,818.96
Form or Registration No.: Preliminary Schedule 14C
Filing party: Sun Energy Partners, L.P.
Date Filed: March 25, 1999

[FN]
<F1> For purposes of calculation of the filing fee only. The amount assumes
7,543,100 limited partnership units, representing all limited partnership
units other than limited partnership units owned by Kerr-McGee Corporation
and its affiliates, will be converted into the right to receive $4.52 per
unit in cash.

-2-
<PAGE>
<PAGE>

This Rule 13e-3 Transaction Statement on Schedule 13E-3 relates to the
merger of Sun Energy Partners, L.P., a Delaware limited partnership ("Sun
Energy Partners"), with Kerr-McGee Energy Corporation, a Delaware corporation
("Kerr-McGee Energy") and a wholly owned subsidiary of Kerr-McGee L.P.
Corporation. Kerr-McGee L.P. Corporation is a Delaware corporation and a
wholly owned subsidiary of Kerr-McGee Corporation, a Delaware corporation
("Kerr-McGee Corporation").

On March 9, 1999, Sun Energy Partners and Kerr-McGee Energy entered into
an Agreement and Plan of Merger, pursuant to which Sun Energy Partners will
be merged with Kerr-McGee Energy and holders of limited partnership units
(other than Kerr-McGee Corporation and its affiliates) will receive $4.52 per
unit in cash, without interest. A copy of the Agreement and Plan of Merger
is attached as Appendix A to the Information Statement filed by Sun Energy
Partners with the Securities and Exchange Commission on the date hereof
pursuant to Regulation 14C under the Securities Exchange Act of 1934. A copy
of the Information Statement is attached hereto as Exhibit (d).

The information set forth in the Information Statement is incorporated
in its entirety by reference. The following is a summary cross-reference
sheet pursuant to General Instruction F of Schedule 13E-3, showing the
location in the Information Statement of the information required by Schedule
13E-3.

-3-
<PAGE>
<PAGE>

SCHEDULE 13E-3 ITEM CAPTION IN INFORMATION STATEMENT

Item 1. Issuer and Class of
Security Subject to
the Transaction

(a), (b) Cover Page and "Introduction"

(c), (d) "Price Range of Depositary Units; Cash
Distributions"

(e) Not applicable

(f) "Introduction" and "Special Factors --
Background"

Item 2. Identity and
Background

(a)-(d); (g) Cover Page; "Available Information";
"Introduction" and Schedule 1

(e), (f) None

Item 3. Past Contacts, "Special Factors -- Background"; "Special
Transactions or Factors -- Purpose and Structure of the
Negotiations Merger" and "Certain Contacts and
(a), (b) Transactions with Affiliates"

Item 4. Terms of the Cover Page; "Introduction" and "The Merger"
Transaction
(a), (b)

Item 5. Plans or Proposals of "Special Factors -- Purpose and Structure
the Issuer or of the Merger" and "Special Factors --
Affiliate Effect of the Merger on the Market for
(a)-(g) Units; NYSE Listing and Securities Exchange
Act Registration"
Item 6. Source and Amounts of
Funds or Other
Considerations
(a) "Special Factors -- Financing of the
Merger"

(b) "Fees and Expenses"

(c), (d) Not Applicable

-4-
<PAGE>
<PAGE>

Item 7. Purpose(s), "Introduction"; "Special Factors --
Alternatives, Reasons Background"; "Special Factors -- Purpose
and Effects and Structure of the Merger"; "Special
(a)-(d) Factors -- Terms of the Merger; Conflicts
of Interest"; "Special Factors -- Reasons
for the Merger"; "Special Factors --
Alternative Transactions Considered";
"Special Factors -- Fairness of the
Merger"; "Special Factors -- Effect of the
Merger on the Market for Units; NYSE
Listing and Exchange Act Registration";
"Special Factors -- Certain Federal Income
Tax Consequences" and "The Merger --
Effects of the Merger"

Item 8. Fairness of the "Introduction"; "Special Factors --
Transaction Background "; "Special Factors -- Purpose
(a)-(f) and Structure of the Merger"; "Special
Factors -- Terms of the Merger; Conflicts
of Interest"; "Special Factors -- Reasons
for the Merger"; "Special Factors --
Fairness of the Merger" and "Special
Factors -- Opinion of Financial Advisor to
the Board of Directors of Kerr-McGee
Corporation"

Item 9. Reports, Opinions, "Special Factors -- Background"; "Special
Appraisals and Certain Factors -- Fairness of the Merger" and
Negotiations "Special Factors -- Opinion of Financial
(a)-(c) Advisor to the Board of Directors of Kerr-
McGee Corporation"

Item 10. Interest in Securities "Introduction" and "Special Factors --
of the Issuer Background"
(a), (b)

Item 11. Contracts, Arrangements "The Merger"
or Understandings with
Respect to the Issuer's
Securities

-5-
<PAGE>
<PAGE>

Item 12. Present Intention and "Special Factors -- Background" and
Recommendation of Certain "Special Factors -- Purpose and Structure
Persons with Regard to of the Merger"
the Transaction
(a), (b)

Item 13. Other Provisions of the
Transaction
(a) "Special Factors No Appraisal Rights"

(b) "Special Factors -- Other Unit Holder
Rights"

Item 14. Financial Information
(a) "Selected Financial Data -- Sun Energy
Partners" and Part II to Information
Statement

(b) Not Applicable

Item 15. Persons and Assets
Employed,
Retained or
Utilized
(a), (b) Not Applicable

Item 16. Additional Information Information Statement in its entirety

Item 17. Material to be filed as
Exhibits
(a), (e), (f) Not Applicable
(b) Appendix B
(c) Appendix A
(d) Information Statement in its entirety

ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION

(a), (b) The information set forth on the cover page and under
"Introduction" in the Information Statement is incorporated herein by
reference.

-6-
<PAGE>
<PAGE>

(c), (d) The information set forth under "Price Range of Depositary
Units; Cash Distributions" in the Information Statement is incorporated
herein by reference.

(e) Not applicable.

(f) The information set forth under "Introduction" and "Special Factors
- -- Background" in the Information Statement is incorporated herein by
reference.

ITEM 2. IDENTITY AND BACKGROUND

(a)-(d); (g) The information set forth on the cover page and under
"Available Information"; "Introduction"; and Schedule 1 in the Information
Statement is incorporated herein by reference.

(e), (f) During the last 5 years, none of Kerr-McGee Corporation, Kerr-
McGee L.P., Kerr-McGee Energy, and Sun Energy Partners, nor, to the best
knowledge of Kerr-McGee Corporation, Kerr-McGee L.P. and Kerr-McGee Energy,
any of the persons listed in Schedule 1 to the Information Statement (1) has
been convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors) or (2) was a party to a civil proceeding of a judicial
or administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
further violations of, or prohibiting activities subject to, federal or state
securities laws or finding any violation of such laws.

ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS

(a), (b) The information set forth under "Special Factors --
Background"; "Special Factors -- Purpose and Structure of the Merger" and
"Certain Contacts and Transactions with Affiliates" in the Information
Statement is incorporated herein by reference.

ITEM 4. TERMS OF THE TRANSACTION

(a), (b) The information set forth on the cover page and under
"Introduction" and "The Merger" in the Information Statement is incorporated
herein by reference.

ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE

(a)-(g) The information set forth under "Special Factors -- Purpose and
Structure of the Merger" and "Special Factors -- Effect of the Merger on the
Market for Units; NYSE Listing and Securities Exchange Act Registration" in
the Information Statement is incorporated herein by reference.

-7-
<PAGE>
<PAGE>

ITEM 6. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATIONS

(a) The information set forth under "Special Factors -- Financing of
the Merger" in the Information Statement is incorporated herein by reference.

(b) The information set forth under "Fees and Expenses" in the
Information
Statement is incorporated herein by reference.

(c), (d) Not applicable.

ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS

(a)-(d) The information set forth under "Introduction"; "Special
Factors -- Background"; "Special Factors -- Purpose and Structure of the
Merger"; "Special Factors -- Terms of the Merger; Conflicts of Interest";
"Special Factors -- Reasons for the Merger"; "Special Factors -- Alternative
Transactions Considered"; "Special Factors -- Fairness of the Merger";
"Special Factors -- Effect of the Merger on the Market for Units; NYSE
Listing and Exchange Act Registration"; "Special Factors -- Certain Federal
Income Tax Consequences" and "The Merger -- Effects of the Merger" in the
Information Statement is incorporated herein by reference.

ITEM 8. FAIRNESS OF THE TRANSACTION

(a)-(f) The information set forth under "Introduction"; "Special
Factors -- Background"; "Special Factors -- Purpose and Structure of the
Merger"; "Special Factors -- Terms of the Merger; Conflicts of Interest";
"Special Factors -- Reasons for the Merger"; "Special Factors -- Fairness of
the Merger" and "Special Factors -- Opinion of Financial Advisor to the Board
of Directors of Kerr-McGee Corporation" in the Information Statement is
incorporated herein by reference.

ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS

(a)-(c) The information set forth under "Special Factors --
Background"; "Special Factors -- Fairness of the Merger", "Special Factors --
Opinion of Financial Advisor to the Board of Directors of Kerr-McGee
Corporation" and "Information Concerning Sun Energy Partners -- Inspection
Rights if Unit Holders" in the Information Statement is incorporated herein
by reference.

ITEM 10. INTEREST IN SECURITIES OF THE ISSUER

(a), (b) The information set forth under "Introduction" and "Special
Factors -- Background" in the Information Statement is incorporated herein by
reference.

-8-
<PAGE>
<PAGE>

ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH
RESPECT TO THE ISSUER'S SECURITIES

The information set forth under "The Merger" in the Information
Statement is incorporated herein by reference.

ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN
PERSONS WITH REGARD TO THE TRANSACTION

(a), (b) The information set forth under "Special Factors -- Background"
and "Special Factors -- Purpose and Structure of the Merger" in the
Information Statement is incorporated herein by reference.

ITEM 13. OTHER PROVISIONS OF THE TRANSACTION

(a) The information set forth under "Special Factors -- No Appraisal
Rights" in the Information Statement is incorporated herein by reference.

(b) The information set forth under "Special Factors -- Other Unit
Holder Rights" in the Information Statement is incorporated herein by
reference.

ITEM 14. FINANCIAL INFORMATION

(a) The information set forth under "Selected Financial Data -- Sun
Energy Partners" in the Information Statement and in Sun Energy Partners'
Annual Report on Form 10-K for the year ended December 31, 1998, which is
Part II in the Information Statement is incorporated herein by reference.

(b) Not applicable.

ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED

(a), (b) Not applicable.

ITEM 16. ADDITIONAL INFORMATION

The information set forth in the Information Statement is incorporated
herein by reference in its entirety.

-9-
<PAGE>
<PAGE>

ITEM 17. MATERIALS TO BE FILED AS EXHIBITS

(a) Not applicable.
(b)(1) Opinion of Lehman Brothers Inc. (included as Appendix B to
Exhibit (d)).
(b)(2) Lehman Brothers Inc. Presentation to the Board of Directors of
Kerr-McGee Corporation on March 9, 1999
(c) Agreement and Plan of Merger dated as of March 9, 1999
between Sun Energy Partners, L.P. and Kerr-
McGee Energy Corporation (included as Appendix
A to Exhibit (d)).
(d) Information Statement of Sun Energy Partners, L.P.
dated [_______], 1999.
(e) Not applicable.
(f) Not applicable.

____________________
* Previously filed.

-10-
<PAGE>
<PAGE>

SIGNATURES

After due inquiry and to the best knowledge and belief of the
undersigned, the undersigned certify that the information set forth in this
statement is true, complete and correct.

KERR-McGEE CORPORATION

By: /S/ Tom J. McDaniel
_______________________________
Name: Tom J. McDaniel
Title: Vice Chairman

KERR-McGEE L.P. CORPORATION

By: /s/ Russell G. Horner, Jr.
_______________________________
Name: Russell G. Horner, Jr.
Title: Vice President

KERR-McGEE ENERGY CORPORATION

By: /s/ Russell G. Horner, Jr.
_______________________________
Name: Russell G. Horner, Jr.
Title: Vice President

SUN ENERGY PARTNERS, L.P.

By: Kerr-McGee Corporation, its managing
general partner

By: /s/ Tom J. McDaniel
______________________________
Name: Tom J. McDaniel
Title: Vice Chairman

March 26, 1999

-11-
<PAGE>
<PAGE>

EXHIBIT INDEX

____________________
* Previously filed.

-12-

<PAGE>

EXHIBIT (b)(2)

Confidential

Presentation to:
Kerr McGee's Board of Directors

March 9, 1999

LEHMAN BROTHERS
<PAGE>
<PAGE>

Fairness Opinion Summary

Situation Overview
. Sun formed Sun Energy Partners L.P. ("SLP") in 1985 to take advantage
of several aspects of the Tax Reform Act of 1986; in 1988, Sun E&P was
spun off as Oryx
- Initial offering price was $25.20 per Unit, 8 million units were
offered to the public
- Current trading price is $4.06 per Unit
- Currently, 7.5 million Units are publicly traded (1.8% of all
partnership interests)
. All of Oryx's domestic operations were conducted through SLP
- Include onshore and offshore operations (390 MMBOE of proved
reserves)
- Oryx employees and management operated SLP, which does not have any
of its own employees
. Kerr-McGee has assumed this role following the merger
. Initially, income generated by SLP funded capital expenditures and
cash distributions; however, over time lower oil and gas prices forced
Oryx to purchase additional Units to fund capital expenditures
- Diluted public shareholder interest from an initial 2.7% to current
1.8%
. Policy was terminated in 1994
- Cash distributions were terminated altogether beginning in the
fourth quarter of 1997
. KMG is proposing a roll-up to effectively eliminate the publicly-held
units
- Without the roll-up, KMG will experience additional costs for
accounting and administrative support to separately account for SLP
and to maintain SLP as a separate reporting company with the SEC
. Oryx had periodically considered a roll-up transaction to
achieve these synergies
- Also, KMG stock will not benefit from the small float attributable
to the publicly-held units

Fairness Opinion Summary

Overview of SLP Operations

. GEOGRAPHY OF PROVED RESERVES(390 MMBOE)
55.5% Onshore, 45.5% Gulf of Mexico

. GAS/OIL RESERVE SPLIT
(R/1998E P = 9.3 years)
46.4% Gas, 53.6% Oil

. COMPOSITION OF PROVED RESERVES
41.8% Proved Underdeveloped, 53.6% Proved
Developed Producing and 4.6% Proved
Developed Non-Producing

. HISTORICAL AND ESTIMATED DAILY PRODUCTION
1995 = 129 MBoepd, 1996 = 132 MBoepd, 1997 = 134 MBoepd,
1998 = 115 MBoepd, 1999E = 115 MBoepd, 2000E = 118 MBoepd,
2001E = 126 MBoepd, 2002E = 140 MBoepd and
2003E = 162 MBoepd

Fairness Opinion Summary

Relevant Roll-up Precedent Transactions
<TABLE>
<CAPTION>

Premium Premium Premium
Value of Majority of 1 Day Prior 5-Days Prior 30-Days Prior
Target Public Date Transaction Minority to Announ. to Announ. to Announ.
Name Ownership Consideration Effective ($MM) SH Vote? Date Date Date
------ --------- ------------- --------- ----------- ----------- ----------- ------------ -------------

<S> <C> <C> <C> <C> <C> <C> <C> <C>
Valero Natural Gas Partners LP. 53% Cash 5/31/94 $117.37 No 18.0% 32.6% 36.3%
Enserch Exploration Partners. . 13% Cash and Stock 10/16/89 $136.50 No 1.1% 2.2% 18.2%
Diamond Shamrock Offshore . . . 13% Cash 4/25/94 $330.37 No (3.0%) (0.3%) 5.5%
Santa Fe Energy Partners LP . . 8% Cash 9/27/93 $ 28.30 No 1.0% 1.0% 27.0%

High 18.0% 32.6% 36.3%
Low (3.0%) (0.3%) 5.5%
Median 1.0% 1.6% 22.6%

</TABLE>

Fairness Opinion Summary

Transaction Structure
. As Managing General Partner and owner of 98.2% of SLP Units, KMG will
effect a roll-up the publicly-held Units
- KMG will form "Newco" to merge with SLP
- In the proposed merger, each of the publicly-held Units will be
converted into the right to receive $4.52 in cash
- No approval of the public holders is necessary
- Public holders do not possess appraisal rights

. CURRENT STRUCTURE
. KMG = 98% ownership of SLP, Public = 2% Ownership of SLP
- SLP and Newco merge
<Graphic Chart>

. STRUCTURE AFTER ROLL-UP
. KMG = 100% Ownership of SLP

Fairness Opinion Summary

Unit Price and Volume Since Inception of SLP

. TRADING AND VOLUME HISTORY OF SLP
DECEMBER 3, 1985 - MARCH 8, 1999

. PERCENTAGE OF TOTAL SLP VOLUME TRADED AT VARIOUS PRICES
DECEMBER 3, 1985 - MARCH 8, 1999

Trading Price per Unit. . . . . . $20 - $25 $15 - $20 $10 - $15 $5 - $10 $4 - $5 $3 - $4 <$3
--------- --------- --------- -------- ------- ------- ---
Percentage of Total Volume. . . . 9.7% 17.8% 17.4% 30.0% 18.0% 6.6% 0.3%

</TABLE>

Fairness Opinion Summary

Analysis of Historical Partnership Unit Prices
<TABLE>
<CAPTION>
SUMMARY OF TRADING PRICES OF SLP AND PREMIUMS
Premium at
Proposed
Price
Price of $4.52
----- --------

<S> <C> <C>
Close (3/8/99) . . . . . . . . . . . . . . . . $4.06 11.3%
5-Day Average . . . . . . . . . . . . . . . . . $4.08 10.9%
10-Day Average . . . . . . . . . . . . . . . . $3.92 15.3%
20-Day Average . . . . . . . . . . . . . . . . $3.82 18.4%
30-Day Average . . . . . . . . . . . . . . . . $3.86 17.1%
60-Day Average . . . . . . . . . . . . . . . . $3.64 24.2%
120-Day Average . . . . . . . . . . . . . . . . $3.56 27.0%
240-Day Average . . . . . . . . . . . . . . . . $3.63 24.4%
360-Day Average . . . . . . . . . . . . . . . . $3.98 13.6%
October 14, 1998<F1> . . . . . . . . . . . . . . $3.00 50.7%

<FN>
<F1> Day prior to announcement of merger between Kerr-McGee and Oryx.
</TABLE>

Fairness Opinion Summary

E&P LP Roll-Up Premium Analysis

<TABLE>
<CAPTION>
Price as of Day(s) Prior to
Transaction Announcement
---------------------------

One-Day 5-Days 30-Days

<S> <C> <C> <C>
Comparable Roll-up Premiums:
---------------------------
Median . . . . . . . . . . 1.0% 1.6% 22.6%
High . . . . . . . . . . . 18.0% 32.6% 36.3%
Low . . . . . . . . . . . (3.0%) (0.3%) 5.5
Implied SLP Unit Price:
----------------------
Median . . . . . . . . . . $4.10 $4.06 $ 4.83
High . . . . . . . . . . . $4.79 $5.30 $ 5.37
Low . . . . . . . . . . . $3.94 $3.99 $ 4.15
Premiums at $4.52: . . . . . 11.3% 13.0% 14.8%

</TABLE>

Fairness Opinion Summary

. SLP
DECEMBER 31, 1995 - MARCH 8, 1999
Trading and Volume History vs. $4.52

Fairness Opinion Summary

PARTNERSHIP SUMMARY VALUATION ANALYSIS ($MM)
Preliminary
Enterprise Value Range
----------------------

<S> <C> <C> <C>
Discounted Cash Flow Analysis . . . . . $1,750 -- $2,150
Comparable Company Trading Analysis . . $1,750 -- $2,250
Comparable Transactions Analysis . . . $1,800 -- $2,350
Going Concern Analysis . . . . . . . . $1,850 -- $2,200
Segment Valuation Analysis . . . . . . $1,700 -- $2,200
Preliminary Reference Enterprise
Value Range $1,750 -- $2,150
Net Debt . . . . . . . . . . . . . . ($32)
Preliminary Reference Equity
Value range $1,718 -- $2,118
Partnership Units Outstanding . . . . . 421.2
Preliminary Reference Equity
Value Range per Unit . . . . . . . $4.08 -- $5.03
Current Unit Price (3/8/99) . . . . . . $4.06
Percent Premium/(Discount) . . . . 0.4% -- 23.8%
Public Unit Price on Day before
KMG/ORX Merger Announcement
(10/14/98). . . . . . . . . . . . . . $3.00
Percent Premium/(Discount) . . . . . 36.0% -- 67.6%
Public Liquidation Value at Book Value
(12/31/98) . . . . . . . . . . . . $2.52

</TABLE>

Fairness Opinion Summary

Preliminary Reference
Equity Value Range
Per Unit
---------------------

Discounted Cash Flow $4.08 to $5.03
Comparable Company Trading Analysis $4.08 to $5.27
Comparable Transactions Analysis $4.20 to $5.50
Going Concern Analysis $4.32 to $5.15
Segment Valuation Analysis $3.96 to $5.15

. Public Liquidation at Book Value
per unit is $2.52

. Proposed Transaction
value per unit is $4.52

Fairness Opinion Summary

Summary Implied Multiples

IMPLIED MULTIPLES
Multiples on
Transaction Value
-----------------

Proposed SLP KMG/ORX
Merger Merger<F1>
------------ ---------

<S> <C> <C> <C> <C> <C>
Preliminary Reference Enterprise $1,750 -- $2,150 $1,936 $3,164
Value Range ($MM)

Per Unit $4.08 -- 5.03 $ 4.52 N.A.

SLP
Data
----

EBITDE ($MM):
1998 . . . . . . $331 5.3x -- 6.5x 5.8x $511/6.2x
1999E. . . . . . $328 5.3x -- 6.6x 5.9x $598/5.3x
2000E. . . . . . $379 4.6x -- 5.7x 5.1x N.A.

SEC Value:
Pre-Tax($MM) . . $1,278 1.4x -- 1.7x 1.5x $2,940/1.1x

Proved Reserves:
$/BOE (6:1). . . 390 $4.49 -- $5.52 $4.96 604<F2>/$5.24
$/Mcfe(6:1). . . 2,338 $0.75 -- $0.92 $0.83 3,624<F2>/$0.87

<FN>
<F1> Based on KMG's closing share price on 10/14/98 (the day before the
announcement of the merger) and estimated amounts as of that date.
<F2> Estimate of 12/31/98 proved reserves as of 10/14/98 (the day before the
announcement of the merger).
</TABLE>

<PAGE>

EXHIBIT (d)

SCHEDULE 14C
(Rule 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the Securities
Exchange Act of 1934

Check the appropriate box:
/X/ Preliminary information / / Confidential, for use of
statement the Commission only (as
permitted by Rule 14c-
5(d)(2))

/ / Definitive information statement

Sun Energy Partners, L.P.
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):

/ / No fee required.
/X/ Fee computed on table below per Exchange Act Rules 14c-5(g)
and 0-11.

(1) Title of each class of securities to which transaction
applies: Depositary Units

(2) Aggregate number of securities to which transaction applies:
7,543,100

(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the amount on
which the filing fee is calculated and state how it was determined):
$4.52 per unit ($34,094,812 total)

(4) Proposed maximum aggregate value of transaction: $34,094,812

(5) Total fee paid: $6,818.96

/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date of
its filing.

(1) Amount Previously Paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:

PRELIMINARY COPY

SUN ENERGY PARTNERS, L.P.
123 ROBERT S. KERR AVENUE
OKLAHOMA CITY, OKLAHOMA 73102

------------------------------------------
INFORMATION STATEMENT
------------------------------------------

TO: Holders of Limited Partnership Units of Sun Energy Partners, L.P.:

Pursuant to an Agreement and Plan of Merger dated as of
March 9, 1999 between Sun Energy Partners and Kerr-McGee Energy
Corporation, a Delaware corporation which is an indirect wholly owned
subsidiary of Kerr-McGee Corporation, a Delaware corporation, Kerr-McGee
Energy will be merged into Sun Energy Partners and each outstanding
partnership unit of Sun Energy Partners (other than units held by Kerr-
McGee Corporation and its affiliates) will be converted solely into the
right to receive $4.52 in cash per unit, without interest. As a result,
Sun Energy Partners will become an indirect wholly-owned subsidiary of
Kerr-McGee Corporation

The merger has been approved by Kerr-McGee Corporation,
as the managing general partner of Sun Energy Partners, and by Kerr-McGee
Energy. Kerr-McGee Corporation, as the holder of 100% of the general
partnership interests and of 94.16% of the limited partnership units of
Sun Energy Partners, has executed a written consent approving the merger.
The merger does not require the vote or consent of any other unit holder.

No meeting of unit holders will be held to consider
approval of the merger or the merger agreement and no vote or consent of
unit holders is being solicited.

We are not asking you for a proxy and you are requested
not to send us a proxy.

THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON
THE FAIRNESS OR MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR
ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
---------------------
The date of this Information Statement is _________, 1999.

AVAILABLE INFORMATION

Sun Energy Partners is subject to the informational
requirements of the Securities Exchange Act of 1934 and, in accordance
therewith, files reports and other information with the Securities and
Exchange Commission. Such reports and other information filed with the
Commission can be inspected and copied at the public reference facility
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and should also be available for
inspection and copying at the regional offices of the Commission located
at 7 World Trade Center, New York, New York 10048 and Northwest Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies can also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates.

Kerr-McGee Energy, Kerr-McGee Corporation, Kerr-McGee
L.P. Corporation (a Delaware corporation which is a wholly owned direct
subsidiary of Kerr-McGee Corporation and the direct parent of Kerr-McGee
Energy) and Sun Energy Partners have filed with the Commission a Rule
13e-3 Transaction Statement under the Securities Exchange Act in
connection with the merger. This Information Statement also constitutes
a part of such Rule 13e-3 Transaction Statement. The Rule 13e-3
Transaction Statement and any amendments thereto, including exhibits
filed as a part thereof, are available for inspection and copying as set
forth above.

DOCUMENTS CONSTITUTING THIS INFORMATION STATEMENT

This Information Statement consists of the following
two parts: (1) this document and (2) Sun Energy Partners' Annual Report on
Form 10-K for the year ended December 31, 1998 attached as Part II hereof.

No person is authorized to give any information or to
make any representation not contained in this Information Statement and,
if given or made, such information or representation should not be relied
upon as having been authorized.

TABLE OF CONTENTS

Page

AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . 2
DOCUMENTS CONSTITUTING THIS INFORMATION STATEMENT . . . . . . . . . . . 2
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
PRICE RANGE OF DEPOSITARY UNITS; CASH DISTRIBUTIONS . . . . . . . . . . 6
SPECIAL FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Background . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Purpose and Structure of the Merger . . . . . . . . . . . . . 9
Terms of the Merger; Conflicts of Interest . . . . . . . . . . 9
Reasons for the Merger . . . . . . . . . . . . . . . . . . . 10
Alternative Transactions Considered . . . . . . . . . . . . 11
Fairness of the Merger . . . . . . . . . . . . . . . . . . . 12
Opinion of Financial Advisor to the Board of Directors of
Kerr-McGee Corporation . . . . . . . . . . . . . . . . . 14
Effect of the Merger on the Market for Units; NYSE Listing
and Securities Exchange Act Registration . . . . . . . . 22
Financing of the Merger . . . . . . . . . . . . . . . . . . 22
No Appraisal Rights . . . . . . . . . . . . . . . . . . . . 23
Other Unit Holder Rights . . . . . . . . . . . . . . . . . . 23
Certain United States Federal Income Tax Consequences . . . 24
Accounting Treatment . . . . . . . . . . . . . . . . . . . . 25
Pending Litigation . . . . . . . . . . . . . . . . . . . . . 25
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Terms of the Merger . . . . . . . . . . . . . . . . . . . . 25
CERTAIN CONTACTS AND TRANSACTIONS WITH AFFILIATES . . . . . . . . . . 28
SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . 29
Sun Energy Partners . . . . . . . . . . . . . . . . . . . . 29
Kerr-McGee Energy . . . . . . . . . . . . . . . . . . . . . 29
FEES AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . 30
REGULATORY APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . 30

SCHEDULE 1 - DIRECTORS AND EXECUTIVE OFFICERS OF KERR-McGEE
CORPORATION, KERR-McGEE L.P. CORPORATION AND KERR-McGEE
ENERGY CORPORATION

APPENDIX A - AGREEMENT AND PLAN OF MERGER DATED AS OF MARCH 9, 1999
BETWEEN SUN ENERGY PARTNERS, L.P. AND KERR-McGEE ENERGY
CORPORATION

APPENDIX B - OPINION OF LEHMAN BROTHERS INC.

Part II - Sun Energy Partners' Annual Report on Form 10-K
for the year ended December 31, 1998

INTRODUCTION

This Information Statement is being furnished in connection
with the merger to holders of record as of the close of business on
________, 1999 of limited partnership units of Sun Energy Partners,
including holders of depositary units represented by depositary receipts.
As of the date of this Information Statement, there are 129,171,100
limited partnership units outstanding held by approximately [1,423] unit
holders of record, of which 121,628,000 or approximately 94.16% are owned
by Kerr-McGee Corporation. In addition, Kerr-McGee Corporation holds 100%
of the general partnership interest in Sun Energy Partners, for a
combined total interest of approximately 98.2%.

Sun Energy Partners is engaged in the oil and gas exploration
and production business in the United States. Kerr-McGee Corporation is
an energy and chemical company with worldwide operations. Kerr-McGee
L.P. is a wholly owned subsidiary of Kerr-McGee Corporation formed for
the purpose of holding a limited partner interest in Sun Energy Partners
following the merger and has not conducted any other business. Kerr-
McGee Energy is a wholly owned subsidiary of Kerr-McGee L.P. formed for
the purpose of effecting the merger and has not conducted any other
business.

The principal executive offices of Sun Energy Partners, Kerr-
McGee Corporation, Kerr-McGee L.P. and Kerr-McGee Energy are each located
at 123 Robert S. Kerr Avenue, Oklahoma City, Oklahoma 73102, and the
telephone number of each at such address is (405) 270-1313.

---------------------

PRICE RANGE OF DEPOSITARY UNITS; CASH DISTRIBUTIONS

The depositary units are listed and traded on the New York
Stock Exchange under the symbol SLP. The following table sets forth, for
the periods indicated, the reported high and low sales prices for the
depositary units.

First Quarter . . . . . . . . $5 5/8 $ 4 3/8 $4 3/4 $4 $ __ $ __
Second Quarter . . . . . . . $5 3/8 $ 4 1/4 $4 1/2 $3 5/16 $ __<F1> $ __<F1>
Third Quarter . . . . . . . . $6 1/16 $ 5 1/8 $3 15/16 $2 9/16
Fourth Quarter . . . . . . . $5 5/8 $ 4 1/4 $4 1/16 $2 3/4
<FN>

<F1> Through ______, 1999.
</TABLE>

On October 14, 1998, the last full trading day prior to
the announcement of the merger of Oryx Energy Corporation, the prior
managing general partner of Sun Energy Partners, into Kerr-McGee
Corporation, the high and low sales prices for the depositary units on
the New York Stock Exchange were $3 and $213/16, respectively. On March

8, the last full trading day prior to the announcement of the Sun Energy
Partners merger, the high and low sales prices for the depositary units
were $4 1/8 and $4, respectively. On __________, 1999, the last trading
day prior to the distribution of this Information Statement, the high and
low sales prices for the depositary units were $___ and $___,
respectively. Unit holders are urged to obtain a current market
quotation for the depositary units.

Since January 1, 1997, the quarterly cash distributions
per unit paid to unit holders were as follows:

<TABLE>
<CAPTION>
1997 1998 1999
--- --- ---
<S> <C> <C> <C>
First Quarter . . . . . . . $.15 $.02 __
Second Quarter . . . . . . . .08 - __<F1>
Third Quarter . . . . . . . . .02 -
Fourth Quarter . . . . . . . - -

<FN>
<F1> Through ______, 1999.
</TABLE>

Sun Energy Partners funds its capital outlays from
internally generated funds, including cash proceeds from asset sales, and
makes distributions of only that cash remaining after such outlays. Any
such distributions will fluctuate due to oil and gas prices, production
volumes, operating costs and the timing and amount of capital
expenditures and divestment proceeds.

SPECIAL FACTORS

Background

Sun Energy Partners was formed in 1985 to succeed to all the
domestic oil and gas business and all the domestic oil and gas properties
and related assets of Sun Exploration and Production Company, a wholly-
owned subsidiary of Sun Company, Inc., and certain of its affiliates. In
1988, Sun Company spun off Sun Exploration to Sun Company's stockholders,
resulting in Sun Exploration becoming a publicly traded company
independent of Sun Company. Thereafter, Sun Exploration changed its name
to Oryx Energy Company.

Oryx conducted substantially all of its domestic oil and gas
exploration and production business through Sun Energy Partners and
through operating limited partnerships in which Sun Energy Partners holds
a 99% interest as the sole limited partner and Oryx held a 1% interest as
the general partner.

On October 14, 1998, Kerr-McGee Corporation and Oryx entered
into an Agreement and Plan of Merger, pursuant to which, among other
things, Oryx would be merged into Kerr-McGee Corporation (Kerr-McGee
Corporation prior to the Oryx merger is referred to as "Old Kerr-McGee")
and each share of Oryx common stock outstanding immediately prior to the
Oryx merger and a related reverse stock split by Oryx would be converted
into 0.369 shares of Kerr-McGee common stock (the "Oryx merger"). In the

course of the negotiations relating to the Oryx merger, Kerr-McGee
Corporation considered whether to seek to effect the Sun Energy Partners
merger simultaneously with the Oryx merger. To avoid complicating and
possibly delaying the Oryx merger, Kerr-McGee Corporation decided to
defer consideration of the Sun Energy Partners merger until after the
completion of the Oryx merger.

On February 26, 1999, Oryx was merged into Old Kerr-McGee and
Kerr-McGee Corporation became the managing general partner of and
succeeded to Oryx's general and limited partnership interests in Sun
Energy Partners and the operating partnerships.

Kerr-McGee Corporation, in its capacity as managing general
partner of Sun Energy Partners, retained Lehman Brothers Inc. as
financial advisor in connection with the consideration of the Sun Energy
Partners merger. Prior to a meeting of the Kerr-McGee Corporation board
of directors on March 9, 1999, Lehman Brothers preliminarily advised Kerr-
McGee Corporation of its view that cash consideration in the range of $4.08
to $5.03 per unit would be fair to the public unit holders from a financial
point of view. At the March 9 board of directors of meeting, management
of Kerr-McGee Corporation recommended that the board of directors
authorize the merger on behalf of Kerr-McGee Corporation as managing
general partner of Sun Energy Partners. Management further recommended
that, notwithstanding the deterioration of oil and gas prices following
the announcement on October 14, 1998 of the Oryx merger, the board of
directors set the Sun Energy Partners merger consideration at $4.52 per
unit. This was a level that would give the public unit holders a
premium over the $3.00 closing trading price of a depositary unit on
October 14, 1998 equal to the 50.7% premium received by Oryx stockholders
in the Oryx merger (based on the closing trading prices of Oryx common
stock and Kerr-McGee common stock on October 14, 1998, and the exchange
ratio in the Oryx merger).

Lehman Brothers presented its analysis regarding the transaction
and then delivered its opinion that the cash consideration of $4.52 per unit
was fair to the public unit holders from a financial point of view. After
discussion, the non-employee members of the Kerr-McGee Corporation board of
directors, acting for Kerr-McGee Corporation as managing general partner of
Sun Energy Partners, resolved to approve the merger and the merger agreement
and to set the merger consideration at $4.52 per unit. (For a description of
the qualifications of Lehman Brothers, the reasons Lehman Brothers was
selected by Kerr-McGee Corporation to act as financial advisor, recent
material relationships and contacts between Lehman Brothers and Kerr-McGee
Corporation, and other matters regarding Lehman Brothers' opinion, see
"-- Opinion of Financial Advisor to the Board of Directors of Kerr-McGee
Corporation".)

Kerr-McGee Energy also authorized the merger and the merger
agreement and Kerr-McGee Energy and Sun Energy Partners entered into the
merger agreement. Kerr-McGee Corporation, as the holder of 100% of the
general partnership interests and 94.16% of the outstanding limited
partnership units of Sun Energy Partners, executed a written consent
approving the merger and the merger agreement.

Purpose and Structure of the Merger

The purpose of the merger is for Kerr-McGee Corporation to
acquire the approximately 1.8% equity interest in Sun Energy Partners it
does not already hold. Kerr-McGee Corporation wants to avoid potential
conflicts of interest that otherwise might arise out of the fact that
Kerr-McGee Corporation and Sun Energy Partners operate in some of the same
areas of the United States. Kerr-McGee Corporation also believes that having
a minority ownership interest in Sun Energy Partners will limit its
flexibility in operating and growing its business. In addition,
Kerr-McGee Corporation is endeavoring to avoid the administrative costs
and burdens of separate financial and tax accounting, reporting and
disclosure requirements for Sun Energy Partners.

Because Kerr-McGee Corporation owns all of the outstanding
general partnership interests and 94.16% of all outstanding limited
partnership units of Sun Energy Partners, under the Sun Energy Partners
partnership agreement and Delaware law, Kerr-McGee Corporation has the
right to approve the merger and the merger agreement with respect to Sun
Energy Partners without the consent of any other unit holder.

Kerr-McGee Energy expects that the merger will be consummated on
[insert date that is 20 days after the mailing date] or as promptly as
practicable thereafter, assuming that the conditions to the merger set
forth in the merger agreement have been satisfied or waived. See "The
Merger -- Terms of the Merger."

Kerr-McGee Corporation is considering the possibility of an
internal reorganization following the merger, including possibly merging
Sun Energy Partners into another subsidiary of Kerr-McGee Corporation, or
distributing Sun Energy Partners' assets to another Kerr-McGee
Corporation subsidiary. Otherwise, and except as described above, Kerr-
McGee Corporation, Kerr-McGee Energy and Sun Energy Partners have no
present plans or proposals that would relate to or result in: any
extraordinary corporate transaction, such as a merger, reorganization or
liquidation, involving Sun Energy Partners or its subsidiaries; a sale or
transfer of a material amount of assets of Sun Energy Partners or its
subsidiaries; any change in Sun Energy Partners' management; any material
change in Sun Energy Partners' distribution rate or policy or
indebtedness or capitalization; or any other material change in Sun
Energy Partners' structure or business.

Terms of the Merger; Conflicts of Interest

Kerr-McGee Corporation, as managing general partner of Sun
Energy Partners, has determined the terms of the merger, including the
consideration to be received by the public unit holders for their limited
partnership units. In determining the terms of the merger, Kerr-McGee
Corporation considered its fiduciary duty to its stockholders, its
business objective of consolidating Oryx's oil and gas exploration and
production business with that of Old Kerr-McGee and its duty as managing
general partner to structure a transaction that is fair to the public
unit holders. The directors and officers of Kerr-McGee Corporation have
a fiduciary duty to manage Kerr-McGee Corporation in the best interests
of its stockholders. At the same time, Kerr-McGee Corporation, as the
managing general partner of Sun Energy Partners, has a duty to manage Sun
Energy Partners in a manner that is fair to the public unit holders.

Accordingly, Kerr-McGee Corporation has a potential conflict of interest
in determining the terms of the merger. As described below in "-- No
Appraisal Rights," the partnership agreement provides that, when the
managing general partner has a conflict of interest in determining a
course of conduct for Sun Energy Partners, the managing general partner
should consider the relative interests of the parties to the conflict,
the benefits and burdens relating to such interests, customary industry
practice and generally accepted accounting and engineering principles.
Consistent with these provisions, the non-employee members of the
Kerr-McGee Corporation board of directors, acting for Kerr-McGee
Corporation in its capacity as managing general partner of Sun Energy
Partners, determined the merger consideration and approved the merger and
the merger agreement. In addition, the Kerr-McGee Corporation board of
directors received an opinion from its financial advisor that the merger
consideration is fair to the public unit holders from a financial point
of view.

Although Kerr-McGee Corporation believes that the terms of the
merger are fair to the public unit holders, such terms are not the result
of arms-length negotiations. No special committee or other entity was
formed or engaged to negotiate on behalf of the public unit holders,
although, as previously discussed, the merger and the merger agreement
were approved solely by Kerr-McGee Corporation's non-employee directors.
There is no assurance that the terms of the merger are as favorable as
could be obtained from some alternative, arms-length transaction. See
"-- Fairness of the Merger" and "-- Opinion of Financial Advisor to the
Board of Directors of Kerr-McGee Corporation" for a discussion of the
determination of the fairness of the terms of the merger and an opinion
rendered by the financial advisor to Kerr-McGee Corporation with respect
to the fairness of the merger consideration to the public unit holders
from a financial point of view.

Reasons for the Merger

Avoidance of Conflicts of Interest

Kerr-McGee Corporation conducts businesses similar to that of
Sun Energy Partners through other Kerr-McGee Corporation affiliates. The
conduct of these other businesses, and the allocation of business
opportunities and capital investments between Sun Energy Partners and
these other businesses, may give rise to conflicts of interest. These
conflict situations will be eliminated through the merger.

Elimination of Minority Interest

In addition to the conflicts of interest concerns expressed above,
Kerr-McGee Corporation believes that having a minority ownership
interest in a subsidiary is not advisable and will limit its flexibility
in operating and growing its exploration and production business. The
merger will result in Sun Energy Partners becoming a wholly-owned
subsidiary of Kerr-McGee Corporation. See also "Avoidance of Conflicts
of Interest."

Reduction of Administrative Costs and Burdens

Kerr-McGee Corporation is endeavoring to avoid the
administrative costs and burdens of separate financial and tax
accounting, reporting and disclosure requirements for Sun Energy

Partners. These requirements are different from and in addition to those
which are required for Kerr-McGee Corporation's wholly owned businesses
because the depositary units are publicly held and listed on the New York
Stock Exchange.

Timing

Kerr-McGee Corporation is effecting the merger as soon as
practicable following the consummation of the Oryx merger, the event
which gave rise to the foregoing considerations.

Alternative Transactions Considered

Kerr-McGee Corporation, as the holder of 98.2% of the ownership
interests in Sun Energy Partners, reviewed various alternative methods
described below to allow it to acquire the outstanding publicly-held
units. Kerr-McGee Corporation determined that none of the alternatives
would provide for a timely transaction fair to all public unit holders
which could be effected with certainty and would achieve the goals of
efficiently combining the oil and gas businesses of Kerr-McGee
Corporation and Sun Energy Partners and eliminating conflicts of
interest. Certain of these alternative transactions, if pursued, may
have resulted in greater or lesser total consideration to the public unit
holders than they will receive in the merger. Kerr-McGee Corporation did
not pursue any of such alternative transactions and, therefore, cannot
determine whether such alternatives would actually have resulted in
greater or lesser total consideration to the public unit holders or
quantify the extent, if any, to which the total consideration to be
received in any such transactions might have exceeded the consideration
to be received in the merger.

Kerr-McGee Corporation considered the possibility of making a
cash tender offer or stock exchange offer for the outstanding publicly
held units followed by a call of the remaining units as permitted under
the Sun Energy Partners partnership agreement. Kerr-McGee Corporation
determined that a tender or exchange offer was not desirable because it
was uncertain that holders would tender enough units to permit Kerr-McGee
Corporation to exercise its call right. In that event, a merger would
still need to be effected subsequent to the tender or exchange offer in
order to complete the acquisition of the publicly held interests in Sun
Energy Partners. Thus, the alternative of a tender or exchange offer
presented both uncertainty and significant delay. Additionally, an
exchange offer was not selected because Kerr-McGee Corporation did not
want to issue securities, and because any unit holder who preferred to
hold Kerr-McGee securities could use the cash merger consideration to
purchase such securities on the open market.

Kerr-McGee Corporation also considered market purchases as a
means of acquiring sufficient publicly held units to permit it to
exercise its call right. However, given the historical trading volume of
the public units, Kerr-McGee Corporation believed it would take a number
of years to acquire a sufficient number of units through open-market
purchases to permit it to exercise its call right. This alternative would
also result in public unit holders receiving different consideration for
their units, as opposed to the merger which ensures that all holders receive
identical consideration.

For the reasons already discussed, Kerr-McGee Corporation
rejected the alternative of continuing to operate Sun Energy Partners as
it exists, with a small public minority interest.

Because Kerr-McGee Corporation owns 98.2% of the interests in
Sun Energy Partners and Sun Energy Partners' assets constitute a
substantial part of the assets acquired in the Oryx merger, all of
which Kerr-McGee Corporation plans to operate through its subsidiaries as
a going concern, Kerr-McGee Corporation did not consider the alternative
of liquidating Sun Energy Partners, which would have required the sale of
some or all of such assets.

Fairness of the Merger

Kerr-McGee Corporation, as managing general partner, believes
that the merger is fair to the public unit holders. In reaching this
conclusion, Kerr-McGee Corporation considered the following factors:

(1) The merger consideration of $4.52 per unit in
cash pursuant to the merger is based upon the same segment information
and valuation that was used in determining the fairness of the exchange
ratio in the Oryx merger. The cash merger consideration of $4.52 per
unit gives the public unit holders a premium over the $3.00 closing
trading price of a depositary unit on October 14, 1998 which is equal to
the 50.7% premium received by the Oryx stockholders in the Oryx merger
(based on the closing trading prices for Oryx common stock and Kerr-McGee
common stock on October 14, 1998, the trading day prior to the
commencement of the Oryx merger, and the exchange ratio in the Oryx
merger). The exchange ratio in the Oryx merger was negotiated in an
arm's length transaction between Oryx and Old Kerr-McGee, two companies
sophisticated and experienced in purchase and sale transactions involving
oil and gas properties. In addition, in connection with the Oryx merger,
both Oryx and Old Kerr-McGee received fairness opinions from their
financial advisors that, based in part upon such segment analysis, the
exchange ratio used in the Oryx merger was fair to their shareholders
from a financial point of view.

(2) Kerr-McGee Corporation considered the current
market price of the units and historical market prices for the units
during the past two years. The merger consideration represents a premium
of (a) 50.7% over $3.00, the closing trading price of the depositary
units on October 14, 1998, the last trading day prior to the announcement
of the Oryx merger, and (b) 11.3% over $4.06, the closing trading price
on March 8, 1999, the last trading day prior to the announcement of the
Sun Energy Partners merger. While the depositary units have at times
traded at prices higher than the merger consideration, the units also
have traded at lower prices. See "Price Range of Units; Cash
Distributions."

(3) Kerr-McGee Corporation relied in part upon the
fairness opinion rendered by Lehman Brothers described in "-- Opinion of
Financial Advisor to the Board of Directors of Kerr-McGee Corporation"
that the merger consideration is fair to the public unit holders from a
financial point of view.

(4) The merger will result in the liquidation of the
unit holders' interests for cash, an opportunity which might not otherwise

be available to all unit holders given the limited liquidity in the market
for the units.

(5) Unit holders are not entitled to appraisal
rights in connection with the merger. Accordingly, unit holders do not
have the alternative of dissenting from the merger and seeking a judicial
determination of the fair value of their units in lieu of accepting the
merger consideration of $4.52 per unit in cash to be paid in the merger.
See "-- No Appraisal Rights."

(6) Kerr-McGee Corporation did not structure the
merger to require approval of a majority of unaffiliated unit holders.
No vote of unaffiliated unit holders is required in connection with the
merger and no vote is being solicited. Kerr-McGee Corporation holds all
of the general partnership interests and 94.16% of the outstanding
limited partnership units of Sun Energy Partners. Therefore, whether a
majority of the unaffiliated unit holders approves or disapproves of the
merger will have no impact on the consummation of the merger or the
consideration to be received by unit holders in the merger.

(7) Although no unaffiliated representative was
retained to act solely on behalf of unaffiliated unit holders for the
purpose of negotiating the terms of the merger or preparing a report
concerning the fairness of the merger, the merger was approved by, and
the merger consideration was determined by, the non-employee directors of
the Kerr-McGee Corporation board of directors, acting in Kerr-McGee
Corporation's capacity as managing general partner of Sun Energy
Partners. In addition, the exchange ratio in the Oryx merger was based,
in part, on a valuation of the assets and properties of Sun Energy
Partners similar to that used in determining the fairness of the cash
merger consideration of $4.52 per unit. No independent party negotiated
the terms of the merger agreement with Kerr-McGee Corporation on behalf
of unaffiliated unit holders or prepared a report on behalf of
unaffiliated unit holders concerning the fairness of the merger, whether
prior to or after execution of the merger agreement. Except for Lehman
Brothers' delivery to Kerr-McGee Corporation's board of directors of its
fairness opinion, no independent party was consulted by Kerr-McGee
Corporation or Sun Energy Partners in connection with the determination
of the merger consideration.

(8) Kerr-McGee Corporation does not believe current
net book value or liquidation value per unit to be relevant to a
determination of the fairness of the merger consideration because Kerr-
McGee Corporation intends to continue to operate the business currently
conducted by Sun Energy Partners as a going concern and therefore Kerr-
McGee Corporation evaluated Sun Energy Partners on a going concern basis.

In view of the number and variety of factors considered,
Kerr-McGee Corporation did not find it practicable to, and did not,
assign relative weights to the factors described above. However, Kerr-
McGee Corporation believes that the factors described in (1), (2), (3)
and (4) above are favorable to its determination of fairness, factors
(5), (6) and parts of (7) are not favorable to such determination and
factor (8) is neutral. Notwithstanding factors (5), (6) and (7), Kerr-
McGee Corporation believes that the terms of the merger are fair to
public unit holders.

Opinion of Financial Advisor to the Board of Directors of Kerr-McGee
Corporation

Kerr-McGee Corporation, in its capacity as managing
general partner of Sun Energy Partners, engaged Lehman Brothers to act as
Kerr-McGee Corporation's financial advisor in connection with the merger
and instructed Lehman Brothers to evaluate the fairness, from a financial
perspective, to the public unit holders of the consideration to be paid
to such public unit holders in the merger. On March 9, 1999, Lehman
Brothers delivered its opinion to the Kerr-McGee Corporation board of
directors, acting in Kerr-McGee Corporation's capacity as managing
general partner of Sun Energy Partners, to the effect that as of such
date and based upon and subject to certain matters stated therein, from a
financial point of view, the cash consideration of $4.52 per unit to be
received by the public unit holders in the merger was fair to the unit
holders.

The full text of the written opinion of Lehman Brothers
is included as Appendix B to this document, and is incorporated herein by
reference. Unit holders may read such opinion for a discussion of the
assumptions made, factors considered and limitations upon the review
undertaken by Lehman Brothers in rendering its opinion. The following is
a summary of Lehman Brothers' opinion and the methodology Lehman Brothers
used to render its fairness opinion.

No limitations were imposed by Kerr-McGee Corporation,
acting in its capacity as managing general partner of Sun Energy
Partners, on the scope of Lehman Brothers' investigation or the
procedures to be followed by Lehman Brothers in rendering its opinion.
In arriving at its opinion, Lehman Brothers did not ascribe a specific
range of values to Sun Energy Partners but made its determination as to
the fairness of the consideration to be received by the unit holders in
the merger on the basis of the financial and comparative analyses
described below. Lehman Brothers' advisory services and opinion were
provided for the information and assistance of Kerr-McGee Corporation,
acting in its capacity as managing general partner of Sun Energy
Partners, in connection with its consideration of the merger.

In arriving at its opinion, Lehman Brothers reviewed and analyzed:

(1) the merger agreement and the specific terms of
the merger;

(2) publicly available information concerning Sun
Energy Partners and Kerr-McGee Corporation that
Lehman Brothers believed to be relevant to its
analysis, including, without limitation, each
of the periodic reports and proxy statements
filed by Sun Energy Partners and Kerr-McGee
Corporation since January 1, 1998, including
the audited and unaudited financial statements
included in such reports and statements;

(3) financial and operating information with
respect to the corporate structure, businesses,

operations and prospects of Sun Energy Partners
as furnished to Lehman Brothers by Kerr-McGee
Corporation, including financial projections
based on the respective business plans of Sun
Energy Partners and, in particular;

(a) certain estimates of proved and non-
proved reserves and

(b) projected annual production of such
reserves;

(4) a trading history of Sun Energy Partners units
from December 31, 1995 to March 8, 1999, and a
comparison of that trading history with those
of other companies that Lehman Brothers deemed
relevant;

(5) a comparison of the historical financial
results and present financial condition of Sun
Energy Partners with those of other companies
that Lehman Brothers deemed relevant; and

(6) a comparison of the financial terms of the
merger with the financial terms of certain
other transactions that Lehman Brothers deemed
relevant.

In addition, Lehman Brothers:

(a) had discussions with the management of Kerr-
McGee Corporation concerning Sun Energy
Partners' corporate structure, business,
operations, financial condition, reserves,
production profile, exploration program, assets
and prospects; and

(b) undertook such other studies, analyses and
investigations as Lehman Brothers deemed
appropriate.

In arriving at its opinion, Lehman Brothers assumed and
relied upon the accuracy and completeness of the financial and other
information used by Lehman Brothers without assuming any responsibility
for independent verification of such information and further relied upon
the assurances of management of Kerr-McGee Corporation that they were not
aware of any facts or circumstances that would make such information
inaccurate or misleading. With respect to the financial projections of
Sun Energy Partners, upon the advice of the management of Kerr-McGee
Corporation, Lehman Brothers assumed that such projections had been
reasonably prepared on a basis reflecting the then best currently
available estimates and judgments of the management of Kerr-McGee
Corporation as to the future financial performance of Sun Energy Partners
and that Sun Energy Partners would perform substantially in accordance
with such projections. In arriving at its opinion, Lehman Brothers did
not conduct a physical inspection of the properties and facilities of Sun
Energy Partners and did not make or obtain from third parties any

evaluations or appraisals of the assets or liabilities of Sun Energy
Partners. Lehman Brothers' opinion necessarily is based upon market,
economic and other conditions as they existed on, and could be evaluated
as of, the date of its opinion letter.

In connection with rendering its opinion, Lehman
Brothers performed certain financial, comparative and other analyses as
described below. The preparation of a fairness opinion involves various
determinations as to the most appropriate and relevant methods of
financial and comparative analysis and the application of those methods
to the particular circumstances, and, therefore, such an opinion is not
readily susceptible to summary description. Furthermore, in arriving at
its fairness opinion, Lehman Brothers did not attribute any particular
weight to any analysis or factor considered by it, but rather made
qualitative judgments as to the significance and relevance of each
analysis and factor. Accordingly, Lehman Brothers believes that its
analyses must be considered as a whole and that considering any portion
of such analyses and of the factors considered, without considering all
analyses and factors, could create a misleading or incomplete view of the
process underlying the opinion. In its analyses, Lehman Brothers made
numerous assumptions with respect to industry performance, general
business and economic conditions and other matters, many of which are
beyond the control of Sun Energy Partners or Kerr-McGee Corporation. Any
estimates contained in the analyses are not necessarily indicative of
actual values or predictive of future results or values, which may be
significantly more or less favorable than as set forth therein. In
addition, analyses relating to the value of businesses do not purport to
be appraisals or to reflect the prices at which businesses actually may
be sold.

Valuation Analysis

Lehman Brothers prepared a valuation of Sun Energy
Partners. In determining valuation, Lehman Brothers used the following
methodologies: discounted cash flow analysis, comparable company trading
analysis, comparable transactions analysis, going concern analysis and
segment valuation analysis. Each of these methodologies was used to
generate a reference enterprise value range for Sun Energy Partners. The
enterprise value range was adjusted for appropriate on- and off-balance
sheet assets and liabilities to arrive at an equity value range (in
aggregate dollars and dollars per unit). The per unit equity value
ranges were then used to evaluate the consideration to be received by the
unit holders in the merger. The implied per unit equity values derived
using the various valuation methodologies described above all supported
the conclusion that the consideration to be received by the unit holders
is fair to the unit holders from a financial point of view.

The various valuation methodologies noted above and the
implied per unit equity values derived therefrom are included in the
following table. This table should be read together with the more
detailed descriptions set forth below. The table alone does not
constitute a complete description of the financial and comparative
analyses. In particular, in applying the various valuation methodologies
to the particular businesses, operations and prospects of Sun Energy
Partners, and the particular circumstances of the merger, Lehman Brothers
made qualitative judgments as to the significance and relevance of each
analysis. In addition, Lehman Brothers made numerous assumptions with

respect to industry performance, general business and economic conditions
and other matters, many of which are beyond the control of Sun Energy
Partners or Kerr-McGee Corporation. Accordingly, the methodologies and
the per unit equity values derived therefrom as set forth in the table
must be considered as a whole and in the context of the narrative
description of the financial analyses, including the assumptions
underlying these analyses. Considering the implied per unit equity
values without considering the narrative description of the financial
analyses, including the assumptions underlying these analyses, could
create a misleading or incomplete view of the process underlying, and
conclusions represented by, Lehman Brothers' opinion.

Valuation Methodology Summary Description of Implied Equity Value
Valuation Methodology per Unit
- --------------------- ----------------------- -------------------
Discounted Cash Flow Net present valuation of after- $4.08 - $5.03
Analysis tax cash flows generated by
proved reserves using selected
hydrocarbon pricing scenarios
and discount rates plus
evaluation of probable reserves
and other assets and liabilities

Comparable Company Market valuation benchmark based $4.08 - $5.27
Trading Analysis on the common stock trading
multiples of selected comparable
companies for selected financial
and asset-based measures

Comparable Transactions Market valuation benchmark based $4.20 - $5.50
Analysis on consideration paid in
selected comparable transactions

Going Concern Analysis Net present valuation of $4.32 - $5.15
management projections of after-
tax cash flows using selected
hydrocarbon pricing scenarios
and discount rates and assumed
capital programs and finding
costs

Segment Valuation Build up of total enterprise $3.96 - $5.15
Analysis value based on the valuation of
each geographic business segment
(onshore and offshore)
determined by reference to the
discounted cash flow analysis,
comparable company trading
analysis and comparable
transactions analysis performed
with respect to each geographic
segment

Consideration to be received by the public unit holders $4.52
in the merger . . . . . . . . . . . . . . . . . . . . . .

Discounted Cash Flow Analysis. Lehman Brothers
estimated the present value of the future after-tax cash flows expected
to be generated from Sun Energy Partners' proved reserves as of January
1, 1999 based on reserves, production cost estimates and a range of
discount rates and assuming a tax rate of 35%, all as provided by and
discussed with Kerr-McGee Corporation management. Lehman Brothers added
to such estimated values for proved reserves assessments of the value of
certain other assets and liabilities of Sun Energy Partners, including
possible and probable reserves and other land and acreage, under three
oil and gas price scenarios ("Management Case," "Banker Case," "Lehman
Brothers Research Case," collectively, the "Pricing Scenarios"). These
assessments were made by Lehman Brothers based on information provided by
Kerr-McGee Corporation management and on various industry benchmarks and
assumptions provided by and discussed with Kerr-McGee Corporation
management.

The oil price forecasts in the Pricing Scenarios were
based on New York Mercantile Exchange ("NYMEX") West Texas Intermediate
("WTI") oil prices. Adjustments were made to the oil price forecasts to
reflect location and quality differentials. In the Management Case, the
unadjusted WTI oil prices per barrel for the years 1999 to 2002 were
assumed to be $13.50, $14.50, $15.00 and $15.50, respectively, and were
assumed to remain at that price thereafter without any escalation. In
the Banker Case, the unadjusted WTI oil prices per barrel for the years
1999 to 2003 were assumed to be $14.00, $15.00, $16.00, $17.00 and
$18.00, respectively, and were assumed to escalate at 2% per annum
thereafter. In the Lehman Brothers Research Case, the unadjusted WTI oil
prices per barrel for the years 1999 to 2003 were assumed to be $13.95,
$16.50, $17.50, $20.40 and $21.34, respectively, and were assumed to
escalate at 3% per annum thereafter.

The gas price forecasts in the Pricing Scenarios were
based on NYMEX (Henry Hub, Louisiana delivery) price forecasts from which
adjustments were made to reflect location and quality differentials. In
addition, adjustments to the forecasted NYMEX prices were made to reflect
the value per thousand cubic feet of gas. NYMEX gas price quotations are
stated in heating value equivalents per million British Thermal Units
("MMBtu"). In the Management Case, the unadjusted gas prices per MMBtu
for the years 1999 to 2002 were assumed to be $2.25, $2.35, $2.45 and
$2.55, respectively, and were assumed to remain at that price thereafter
without any escalation. In the Banker Case, the unadjusted gas prices
per MMBtu for the years 1999 to 2003 were assumed to be $2.25, $2.35,
$2.40, $2.45 and $2.50, respectively, and were assumed to escalate at 2%
per annum thereafter. In the Lehman Brothers Research Case, the
unadjusted gas prices per MMBtu for the years 1999 to 2003 were assumed
to be $2.25, $2.20, $2.25, $2.35 and $2.42, respectively, and were
assumed to escalate at 3% per annum thereafter.

The discounted cash flow analysis resulted in implied per unit
equity values ranging from $4.08 to $5.03. The consideration of $4.52
per unit to be received by the unit holders in the merger falls within
this range.

Comparable Company Trading Analysis. Lehman Brothers reviewed
the public stock market trading multiples for selected large
capitalization exploration and production companies including Burlington
Resources Inc., Devon Energy Corporation, Ocean Energy, Inc., Pioneer

Natural Resources Company, and Vastar Resources, Inc. Using publicly
available information, Lehman Brothers calculated and analyzed the
adjusted capitalization multiples of certain historical and projected
financial and operating criteria such as earnings before interest, taxes,
depreciation, depletion, amortization and exploration expenses ("EBITDE")
and proved reserves. The adjusted capitalization of each company was
obtained by adding its long-term debt to the sum of the market value of
the common equity, the value of its preferred stock (market value if
publicly traded, liquidation value if not) and the book value of any
minority interest minus the cash balance. The appropriate 1998,
projected 1999 and projected 2000 EBITDE multiple ranges were determined
to be 6.0x to 7.0x, 5.5x to 6.5x and 5.0x to 6.0x, respectively. Proved
reserve multiple ranges were determined to be $4.00 to $6.00 per barrel
of oil equivalent ("BOE") and $0.70 to $1.00 per thousand cubic feet of
gas equivalent ("Mcfe").

This methodology yielded valuations for Sun Energy Partners that
imply a per unit equity value range of $4.08 to $5.27. The consideration
of $4.52 per unit to be received by the unit holders in the merger falls
within this range.

Because of the inherent differences between the corporate
structure, businesses, operations and prospects of Sun Energy Partners
and the corporate structure, businesses, operations and prospects of the
companies included in the comparable company groups, Lehman Brothers
believed that it was inappropriate to, and therefore did not, rely solely
on the quantitative results of the analysis and, accordingly, also made
qualitative judgments concerning differences between the financial and
operating characteristics of Sun Energy Partners and the companies in the
comparable company groups that would affect the public trading values of
Sun Energy Partners and such comparable companies.

Comparable Transactions Analysis. Lehman Brothers
reviewed certain publicly available information on selected transactions
which were announced or took place from July of 1996 to March of 1999
including, but not limited to, Santa Fe Energy Resources, Inc./Snyder Oil
Company, Ocean Energy, Inc./Seagull Energy Corporation, Kerr-McGee
Corporation/Oryx Energy Company, Ocean Energy, Inc./United Meridian
Corporation, Sonat Inc./Zilkha Energy Company, Chesapeake Energy
Corporation/Hugoton Energy Corporation, Belco Oil & Gas Corp./Coda
Energy, Inc., Burlington Resources Inc./Louisiana Land and Exploration
Company, Louis Dreyfus Natural Gas Corp./American Exploration Company,
MESA Inc./Parker & Parsley Petroleum Company, Conoco Inc./TransTexas Gas
Corporation Lobo Trend natural gas properties and Seagull Energy
Corporation/Global Natural Resources, Inc. For each transaction,
relevant transaction multiples were analyzed including the total purchase
price (equity purchase price plus assumed obligations) divided by:

(1) latest twelve month ("LTM") EBITDE; and

(2) proved oil and natural gas reserves on a BOE
basis and a Mcfe basis.

The appropriate LTM EBITDE multiple ranges were
determined to be 5.5x to 7.5x. The appropriate proved reserve multiple
ranges were determined to be $4.00 to $6.00 per BOE and $0.70 to $1.00
per Mcfe, respectively.

This methodology yielded valuations for Sun Energy
Partners that imply per unit equity values ranging from $4.20 to $5.50.
The consideration of $4.52 per unit to be received by the unit holders in
the merger falls within this range.

Because the market conditions, rationale and circumstances
surrounding each of the transactions analyzed were specific to each transaction
and because of the inherent differences between the businesses, operations
and prospects of Sun Energy Partners and the acquired businesses analyzed,
Lehman Brothers believed that it was inappropriate to, and therefore did not,
rely solely on the quantitative results of the analysis and, accordingly, also
made qualitative judgments concerning differences between the characteristics
of these transactions and the merger that would affect the acquisition values
of Sun Energy Partners and such acquired companies.

Going Concern Analysis. Lehman Brothers prepared an
after-tax cash flow model for Sun Energy Partners utilizing information
and projections provided by Kerr-McGee Corporation. Lehman Brothers used
discount rates of 10% to 12% and terminal value EBITDE multiples of 4.5x
to 5.5x. The discount rates used were based on Lehman Brothers' review
of the financial terms of similar transactions in the sector of
exploration and production companies with a focus onshore in Texas,
Oklahoma and Louisiana and in the Gulf of Mexico. The year-5 terminal
value multiples were selected by reference to current trading multiples
of similar publicly traded companies and to recently completed or
proposed acquisitions of similar assets and companies.

This methodology yielded a valuation of Sun Energy
Partners implying a range of per unit equity values of $4.32 to $5.15.
The consideration of $4.52 per unit to be received by the unit holders in
the merger falls within this range.

Segment Valuation Analysis. Lehman Brothers performed a
discounted cash flow analysis, comparable company trading analysis and
comparable transactions analysis of the segmented operations of Sun
Energy Partners utilizing information and projections provided by Kerr-
McGee Corporation. Lehman Brothers segmented Sun Energy Partners'
operations into the geographic segments of onshore domestic and the Gulf
of Mexico. The segment enterprise value ranges calculated were added
together to calculate an enterprise value range for Sun Energy Partners.

The segment valuation analysis resulted in implied per
unit equity values ranging from $3.96 to $5.15. The consideration of
$4.52 per unit to be received by the unit holders in the merger falls
within this range.

Historical Trading Analysis. Lehman Brothers reviewed
the daily historical closing prices of Sun Energy Partners units for the
period from December 31, 1995 to March 8, 1999, including the closing
price of the Sun Energy Partners units on October 14, 1998 (the trading
day before the announcement of the Oryx merger) and March 8, 1999 (the
trading day before the announcement of the Sun Energy Partners merger).

Lehman Brothers calculated the Sun Energy Partners closing unit prices
based on 5-day, 10-day, 20-day, 30-day, 60-day, 120-day, 240-day and
360-day averages as of March 8, 1999. The following table summarizes such
historical trading analysis:

<TABLE>
<CAPTION>
Unit Price Premium Based on
$4.52 per Unit
Price in the
Merger
----------- -----------------
<S> <C> <C>
March 8, 1999 $4.06 11.3%
5-Day Average $4.08 10.9%
10-Day Average $3.92 15.3%
20-Day Average $3.82 18.4%
30-Day Average $3.86 17.1%
60-Day Average $3.64 24.2%
120-Day Average $3.56 27.0%
240-Day Average $3.63 24.4%
360-Day Average $3.98 13.6%
October 14, 1998 $3.00 50.7%
</TABLE>

Premiums Analysis. Lehman Brothers reviewed certain
publicly available information on selected exploration and production
transactions in which units held by unaffiliated limited partner unit
holders were acquired by the managing general partner in order to
calculate the premium paid by the managing general partner to the
unaffiliated limited partner unit holders. These transactions included,
but were not limited to, Valero Natural Gas Partners L.P./Valero Natural
Gas Company, Enserch Exploration Partners/Enserch Corporation, Diamond
Shamrock Offshore L.P./Meridian Offshore Inc., Santa Fe Energy Partners
L.P./Santa Fe Energy Resources, Inc. The following table summarizes the
premiums paid by the managing general partner to the unaffiliated limited
partner unit holders in those selected transactions. Lehman Brothers
noted that the $4.52 per unit cash consideration received by the public
unit holders in the merger represented a 50.7% premium to the unit price
of $3.00 per unit on October 14, 1998 (the trading day prior to the
announcement of the Oryx merger).

<TABLE>
<CAPTION>
Percentage Premium to the Price
as of Day(s) Prior to
Transaction Announcement
------------------------------
Selected Transactions 1-Day 5-Days 30-Days
------ ------- -------
<S> <C> <C> <C>
Median 1.0% 1.6% 22.6%
High 18.0% 32.6% 36.3%
Low (3.0%) (0.3%) 5.5%
Premium to be received by the
public unit holders in the merger 11.3% 13.0% 14.8%
</TABLE>

Lehman Brothers is an internationally recognized
investment banking firm engaged in, among other things, the valuation of

businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. Kerr-McGee Corporation,
acting in its capacity as managing general partner of Sun Energy
Partners, selected Lehman Brothers because of its expertise, reputation
and familiarity with Sun Energy Partners and because its investment
banking professionals have substantial experience in transactions
comparable to the merger.

Lehman Brothers has previously rendered certain
financial advisory and investment banking services to Kerr-McGee
Corporation for which it has received customary compensation, including
serving as financial advisor to Kerr-McGee Corporation in connection with
the Oryx merger and in connection with Kerr-McGee Corporation's
acquisition of producing properties in the North Sea from Gulf Canada
Resources Limited in May 1998, and serving as lead manager in connection
with Kerr-McGee Corporation's issuance of $300 million of debt securities
in late 1997. Pursuant to the terms of an engagement letter agreement,
dated February 23, 1999, between Lehman Brothers and Kerr-McGee
Corporation, acting in its capacity as managing general partner of Sun
Energy Partners, Kerr-McGee Corporation paid Lehman Brothers $500,000
upon delivery of the fairness opinion. In addition, Kerr-McGee
Corporation, acting in its capacity as managing general partner of Sun
Energy Partners, has agreed to reimburse Lehman Brothers for its
reasonable expenses (including, without limitation, professional and
legal fees and disbursements) incurred in connection with its engagement,
and to indemnify Lehman Brothers and certain related persons against
certain liabilities in connection with its engagement, including certain
liabilities which may arise under federal securities laws.

In the ordinary course of its business, Lehman Brothers
actively trades in the debt and equity securities of Sun Energy Partners
and Kerr-McGee Corporation for its own account and for the accounts of
its customers and, accordingly, may at any time hold a long or short
position in such securities.

A copy of the full text of the written materials used in
connection with Lehman Brothers' March 9, 1999 presentation to the Kerr-
McGee Corporation board of directors will be made available for
inspection and copying at the principal executive offices of Sun Energy
Partners and Kerr-McGee Corporation during regular business hours by any
interested unit holder or his or her representative who has been so
designated in writing.

Effect of the Merger on the Market for Units; NYSE Listing and
Securities Exchange Act Registration

As a result of the merger, the depositary units will
cease to be outstanding and will be delisted from the New York Stock
Exchange, and the registration of the depositary units under the
Securities Exchange Act will be terminated.

Financing of the Merger

The amount of funds needed to pay the aggregate merger
consideration and related fees and expenses will be approximately $__

million. See "Fees and Expenses." Kerr-McGee Energy has obtained all
of such funds through capital contributions or advances made by Kerr-
McGee Corporation.

No Appraisal Rights

Holders of units do not have appraisal rights in
connection with the merger. The partnership agreement does not provide
for appraisal rights. Sun Energy Partners is a Delaware limited
partnership and the partnership agreement provides that the partnership
agreement shall be construed in accordance with and governed by the laws
of the State of Delaware. Kerr-McGee Corporation is not aware of any
provisions of Delaware law expressly providing rights to holders of
interests in a Delaware limited partnership in lieu of appraisal rights.
Delaware law provides that the express terms of an agreement of limited
partnership preempt any fiduciary principles otherwise applicable. The
partnership agreement provides that in resolving any conflict of
interest, the managing general partner shall consider the relative
interests of each party to such conflict, agreement, transaction or
situation and the benefits and burdens relating to such interests, any
customary or accepted industry practices, and any applicable generally
accepted accounting or engineering practices or principles. In the
absence of bad faith by the managing general partner, the resolution,
action or terms so made, taken or provided by the managing general
partner shall not constitute a breach of the partnership agreement or a
breach of any standard of care or duty imposed by any agreement or under
the Delaware Revised Uniform Limited Partnership Act or any other
applicable law, rule or regulation. The partnership agreement further
provides that, unless otherwise expressly provided in the partnership
agreement, a partnership agreement with respect to any operating
partnership or any other agreement contemplated therein, any provision
contained in the partnership agreement shall control to the fullest
extent possible if it is in conflict with such standard of care or duty,
the Delaware Revised Uniform Limited Partnership Act or any other
applicable law, rule or regulation, and each limited partner waives such
standard of care or duty and the Delaware Revised Uniform Limited
Partnership Act or any other applicable law, rule or regulation and
agrees that the same shall be modified and/or waived to the extent
necessary to permit the managing general partner to act as described
above in this paragraph.

Other Unit Holder Rights

Pursuant to the Sun Energy Partners partnership
agreement, each limited partner has the right, for a proper purpose
reasonably related to such limited partner's interest in Sun Energy
Partners, upon two days written demand and under oath directed to Sun
Energy Partners at the principal office thereof stating the purpose
thereof, and at such partner's own expense, to inspect and copy during
the regular business hours of Sun Energy Partners at its principal place
of business such books and records of Sun Energy Partners as are just and
reasonable, subject to certain exceptions. Pursuant to the depositary
agreement with respect to the depositary units, each record holder of a
depositary unit or another limited partnership unit has the right to
inspect the books kept by the recordkeeping transfer agent for the
transfer of depositary receipts and depositary units, upon two business
days written notice to the transfer agent of such holder's desire to

inspect such books, provided that such inspection shall not be for the
purpose of communicating with holders of depositary receipts in the
interest of a business or object other than the business of Sun Energy
Partners or a matter related to the depositary agreement or the
depositary receipts.

Certain United States Federal Income Tax Consequences

The following discusses the material United States
federal income tax consequences of the merger to unit holders that are
United States persons. A "United States person" is a unit holder who is
one of the following: a citizen or resident of the United States; a
corporation, partnership or other entity created or organized in or under
the laws of the United States or any political subdivision of the United
States; an estate, the income of which is subject to United States federal
income taxation regardless of its source; any trust if a court within the
United States is able to exercise primary supervision over the
administration of such trust and one or more United States persons have
the authority to control all the substantial decisions of such trust; or
a trust that has a valid election in effect under applicable Treasury
regulations to be treated as a United States person.

This summary does not discuss the tax consequences that
might be relevant to unit holders that are subject to special treatment
under United States federal income tax law including, without limitation,
banks, real estate investment trusts, regulated investment companies,
insurance companies, dealers in securities or currencies, tax-exempt
investors, or foreign investors. In addition, this summary does not
include any description of any tax consequences arising out of the tax
laws of any state, local or foreign jurisdiction. You should consult
your own tax advisor regarding the tax consequences of the merger to you.

Upon completion of the merger, a unit holder will generally
recognize gain or loss, for federal income tax purposes in an amount equal to
the difference between the amount realized by the unit holder in the merger
and the unit holder's aggregate tax basis in its units. Except as provided
in section 751 of the Internal Revenue Code of 1986, as amended (the "Code"),
if a unit holder holds its units as a capital asset, any gain or loss
recognized will be capital gain or loss. The capital gain or loss will be
long-term capital gain or loss if the unit holder has held its units for more
than one year at the time of the merger. Long-term capital gains of
individuals are taxed at a maximum rate of 20%. The deductibility of
capital losses is subject to certain limitations.

A unit holder will recognize ordinary income for federal
income tax purposes to the extent that the amount realized by the unit
holder in the merger is attributable to (i) unrealized receivables, as
defined in section 751(c) of the Code or (ii) inventory items, as defined
in section 751(d) of the Code.

Backup Withholding

Certain noncorporate unit holders may be subject to
backup withholding at a 31% rate on cash received in the merger. Backup
withholding will not apply, however, to a unit holder who furnishes a
correct taxpayer identification number and certifies that he or she is
not subject to backup withholding and otherwise complies with the
applicable requirements of the Treasury Regulations.

Because of the complexity of the tax laws and because
the tax consequences to a particular unit holder may be affected by
matters not discussed herein, each unit holder should consult a personal
tax advisor concerning the applicability of any federal, state, local and
foreign tax consequences of the merger.

Accounting Treatment

The effective acquisition by Kerr-McGee Corporation of
the public unit holders' approximately 1.8% interest in Sun Energy
Partners will be accounted for as a purchase.

Pending Litigation

A purported class action lawsuit entitled Kaplan v. Sun Energy
Partners L.P. has been filed in Delaware Chancery Court by two unit holders.
The complaint names as defendants Sun Energy Partners, Kerr-McGee Corporation
and several former directors of Oryx Energy Company and several Kerr-McGee
Corporation directors. Among other things, the plaintiffs allege that the
defendants have breached fiduciary and common law duties by failing to offer a
fair price to unit holders in the merger, failing to negotiate the purchase
price at arms-length, failing to obtain an independent valuation of the units
and of Sun Energy Partners, and otherwise seeking to enrich themselves to the
detriment of the unit holders. The plaintiffs further allege that the merger
is timed to take advantage of the depressed market price of the units and that
the purchase price is grossly inadequate relative to the market price of the
units prior to the announcement of the merger and the premium paid in
Kerr-McGee Corporation's merger with Oryx. The lawsuit seeks unspecified
damages and costs and to enjoin or rescind the merger, among other things. Sun
Energy Partners and Kerr-McGee Corporation believe that this lawsuit is wholly
without merit.

THE MERGER

Terms of the Merger

Merger Consideration

At the effective time of the merger, each outstanding
unit (other than units held by Kerr-McGee Corporation or any of its
affiliates) will be converted solely into the right to receive the merger
consideration of $4.52 per unit in cash, without interest, less any
required withholding taxes and all such units will automatically cease to
be outstanding and will be canceled and retired and cease to exist.

Effective Time

The merger will become effective at the time a
Certificate of Merger is duly filed with the Secretary of State of the
State of Delaware in accordance with the Delaware General Corporation Law
and the Delaware Revised Uniform Limited Partnership Act or at such other
time as may be specified in the Certificate of Merger. Provided the
conditions to the merger have been satisfied or waived, it is anticipated
that the merger will be consummated on [insert date 20 days after
mailing] or as promptly as practicable thereafter.

<PAGE>
Parties; Surviving Entity

In the merger, Kerr-McGee Energy will be merged into Sun
Energy Partners, whereupon the separate existence of Kerr-McGee Energy
will cease. Sun Energy Partners will be the surviving entity in the
merger and will continue its existence under the laws of the State of
Delaware. At the election of Kerr-McGee Corporation, any direct or
indirect wholly owned subsidiary of Kerr-McGee Corporation may be
substituted for Kerr-McGee Energy as a party in the merger.

Conditions to the Merger

The obligations of Kerr-McGee Energy and Sun Energy
Partners to effect the merger are each subject to the following
conditions which must be satisfied or waived:

-- no statute, rule, regulation, executive order, decree,
injunction or other order, whether temporary,
preliminary or permanent, shall have been enacted,
entered, promulgated or enforced by any court or
governmental authority which is in effect and has the
effect of prohibiting the consummation of the merger;
provided that each of the parties shall have used its
best efforts to prevent the entry of any injunction or
other order and to appeal as promptly as possible any
injunction or other order that may be entered;

-- there shall not be pending or threatened against Kerr-
McGee Corporation, Sun Energy Partners or Kerr-McGee
Energy, or any of their affiliates, property or
businesses, any other action, suit or proceeding
involving a claim at law or in equity or before or by
any federal, state, or municipal or other government
department, commission, board, bureau, agency or
instrumentality, domestic or foreign, relating to the
merger or the merger agreement that would be reasonably
likely to have a material adverse effect on the
condition, financial or otherwise, of Kerr-McGee
Corporation, Sun Energy Partners or Kerr-McGee Energy;

-- the parties shall have received any necessary
governmental consents or approvals and the waiting
period, and any extension thereof, applicable to the
consummation of the merger under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, if any,
shall have expired or been terminated;

-- 20 days shall have elapsed from the date this
Information Statement is sent or given to unit holders;
and

-- Lehman Brothers' fairness opinion shall not have been
withdrawn or modified in any manner materially adverse
to Kerr-McGee Corporation, Kerr-McGee Energy or Sun
Energy Partners.

Termination

Kerr-McGee Energy may, at any time prior to the
effective time of the merger, abandon the merger on prompt written notice
to Sun Energy Partners.

Procedures for Exchange of Depositary Units

Prior to the merger, Kerr-McGee Energy will appoint a
bank or trust company to act as disbursing agent for the payment of the
merger consideration upon surrender of certificates representing the
depositary units. Promptly after the merger, Sun Energy Partners will
cause the disbursing agent to mail to each person who was a record holder,
as of the effective time of the merger, of an outstanding certificate or
certificates which immediately prior to the effective time of the merger
represented depositary units, a form of letter of transmittal and
instructions for use in effecting the surrender of such certificates in
exchange for payment of the merger consideration. The letter of
transmittal shall specify that delivery shall be effected, and risk of
loss with respect to the certificates representing depositary units shall
pass, only upon proper delivery of the certificates to the disbursing
agent. Upon surrender to the disbursing agent of a certificate
representing depositary units, together with such letter of transmittal
duly executed and such other documents as may be reasonably required by
the disbursing agent, the holder of such certificate will be paid
therefor cash in an amount equal to the product of the number of
units represented by such certificate multiplied by the merger
consideration, and such certificate shall forthwith be canceled. No
interest will be paid or accrued on the cash payable upon the surrender
of the certificates representing depositary units.

At and after the effective time of the merger, there
will be no registration of transfers of units and Sun Energy Partners
will instruct the depositary for depositary units not to register
transfers of depositary units. From and after the effective time of the
merger, the holders of units outstanding immediately prior to the
effective time of the merger shall cease to have any rights with respect
to such units except as otherwise provided in the merger agreement or by
applicable law.

At any time more than one year after the effective time
of the merger, Sun Energy Partners will be entitled to require the
disbursing agent to deliver to it any funds made available to the
disbursing agent and not disbursed in exchange for certificates
representing depositary units. Thereafter, holders of units will be
entitled to look only to Sun Energy Partners, subject to abandoned
property, escheat and other similar laws, as general creditors thereof
with respect to any merger consideration that may be payable upon due
surrender of the certificates held by them. Neither Sun Energy Partners
nor the disbursing agent will be liable to any holder of a unit for any
merger consideration delivered to a public official pursuant to any
abandoned property, escheat or other similar law.

Effects of the Merger

As a result of the merger, each outstanding unit, other
than units held by Kerr-McGee Corporation or any of its affiliates, will
be converted into the right to receive the merger consideration of $4.52
per unit in cash, without interest, and all such units will automatically
cease to be outstanding and will be canceled and retired and cease to
exist and will have no further interest in the net book value, assets,
net income, cash flow, distributions or other future performance of Sun
Energy Partners, and the current holders of units, other than Kerr-McGee

Corporation and its affiliates, will have no equity interest in Sun
Energy Partners and, therefore, will not be able to participate in the
future growth, if any, of Sun Energy Partners. At the same time, the
interest of Kerr-McGee Corporation and its affiliates in the net book
value, assets, net income, cash flow, distributions and future
performance of Sun Energy Partners will increase from 98.2% to 100%.

The foregoing summary of the merger agreement is
qualified in its entirety by reference to the complete text of the merger
agreement, a copy of which is attached as Appendix A.

CERTAIN CONTACTS AND TRANSACTIONS WITH AFFILIATES

As described above in "Special Factors -- Background,"
Old Kerr-McGee recently completed a business combination with Oryx, which
prior to such business combination was the managing general partner and
holder of all general partnership interests and 94.16% of all outstanding
limited partnership units in Sun Energy Partners. The "managing general
partner" refers to Oryx prior to February 26, 1999 and to Kerr-McGee
Corporation since February 26, 1999.

The managing general partner serves as Sun Energy
Partners' lender and borrower of funds and a clearing-house for the
settlement of intercompany receivables and payables. Deposits earn
interest at a rate equal to the rate paid by a major money market fund.
Demand loans bear interest at a rate based on the prime rate.

Sun Energy Partners is indebted to the managing general
partner under a 9.75% note due 1999-2001. Repayment obligations under
such note are approximately $14 million in 1999, $16 million in 2000 and
$8 million in 2001.

The managing general partner is reimbursed by Sun Energy
Partners for all direct costs incurred in performing management functions
and indirect costs (including payroll and payroll related costs and the
cost of postemployment benefits and management incentive plans) allocable
to Sun Energy Partners. The full cost of direct and indirect costs
incurred on behalf of Sun Energy Partners by the managing general partner
is allocated to Sun Energy Partners based on services rendered and extent
of use. Such costs, which are charged principally to production cost,
exploration cost and general and administrative expense, totaled $57
million, $61 million and $61 million for the years 1998, 1997 and 1996.
The managing general partner does not receive any carried interests,
promotions, back-ins or other similar compensation as the general partner
of Sun Energy Partners.

Interest income received from the managing general
partner was earned on advances to the managing general partner and
totaled $3 million, $4 million and $4 million during the years 1998, 1997
and 1996.

Interest cost paid to the managing general partner was
primarily incurred on long-term debt and advances due the managing
general partner and totaled $20 million, $14 million and $16 million
during the years 1998, 1997 and 1996.

SELECTED FINANCIAL DATA

Sun Energy Partners

The following selected financial data relating to Sun
Energy Partners has been taken from its 1998 Annual Report on Form 10-K.
The financial data set forth below is qualified in its entirety by
reference to such reports and other documents, including the financial
statements and related notes contained therein.

Year Ended December 31
------------------------------------------------------
1998 1997 1996 1995 1994
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
For the Period
Revenues . . . . . . . . . . . . . . . . . . . . . . $ 523 $ 728 $ 686 $ 552 $ 613
Income (loss) before cumulative effect of
accounting change<F1> . . . . . . . . . . . . . . $ (44) $ 239 $ 248 $ 99 $ 100
Net income (loss)<F1> . . . . . . . . . . . . . . . $ (44) $ 239 $ 248 $ 99 $ (477)
Net income (loss) per unit before cumulative
effect of accounting change<F1> . . . . . . . . . $ (.10) $ .57 $ .59 $ .24 $ .24
Net income (loss) per unit . . . . . . . . . . . . . $ (.10) $ .57 $ .59 $ .24 $ 1.13)
Cash distributions paid to unit holders . . . . . . $ 8 $ 105 $ 67 $ 194 $ 114
Cash distributions paid per unit . . . . . . . . . . $ .02 $ .25 $ .16 $ .46 $ .27
Weighted average units outstanding (in thousands) . 421.2 421.2 421.2 421.2 421.2
Capital expenditures . . . . . . . . . . . . . . . . $ 367 $ 410 $ 314 $ 206 $ 166
At End of Period
Total assets . . . . . . . . . . . . . . . . . . . . $ 1,374 $ 1,468 $ 1,299 $ 1,143 $ 1,181
Long-term debt<F2> . . . . . . . . . . . . . . . . . $ 24 $ 38 $ 52 $ 62 $ 74
Partners' capital . . . . . . . . . . . . . . . . . $ 1,102 $ 1,154 $ 1,020 $ 839 $ 934
Book value per unit . . . . . . . . . . . . . . . . $ 2.62 $ 2.74 $ 2.42 $ 1.99 $ 2.22
<FN>
<F1> Effective January 1, 1994, Sun Energy Partners
adopted a new policy for determining the ceiling test for its
oil and gas properties. A one-time non-cash charge of $577
million for the cumulative effect of the change was recognized
in the earnings for 1994. As a result of an impairment test
related to the application of Statement of Financial Accounting
Standards No. 121, Sun Energy Partners reported a non-cash
write-down of assets of $75 million in the fourth quarter of
1998.
<F2> Includes $24 million, $38 million, $51 million,
$62 million and $72 million of long-term debt due to the
managing general partner.
</TABLE>
Kerr-McGee Energy

The assets of Kerr-McGee Energy consist of $_____, in
cash, obtained from Kerr-McGee Corporation. Kerr-McGee Energy does
not have any liabilities, except its obligations under the merger
agreement.

FEES AND EXPENSES

It is estimated that the expenses incurred in connection
with the payment of the merger consideration and the merger will be
approximately as set forth below:

Filing Fees . . . . . . . . . . . . . . . . .$6,818.96
Financial Advisory Fees and Expenses
Accounting Fees and Expenses
Disbursing Agent Fees and Expenses
Legal Fees
Printing and Mailing Costs
Miscellaneous
Total:. . . . . . . . . . . . . . . .$

Sun Energy Partners and Kerr-McGee Energy will be
responsible for all of the foregoing fees and expenses. Brokers,
dealers, commercial banks and trust companies will, upon request only, be
reimbursed by Kerr-McGee Energy for customary mailing and handling
expenses incurred by them in forwarding material to their customers.

REGULATORY APPROVAL

Under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), and the rules promulgated thereunder
by the Federal Trade Commission (the "FTC"), the merger may not be
consummated until notifications have been given and certain information
has been furnished to the FTC and the Antitrust Division of the
Department of Justice (the "Antitrust Division") and specified waiting
period requirements have been satisfied. Kerr-McGee Corporation expects to
file notification and report forms under the HSR Act with the FTC and the
Antitrust Division on March 29, 1999. Early termination of the waiting
period under the HSR Act was granted effective ________, 1999. Sun
Energy Partners is not aware of any other regulatory approvals required
in connection with the merger. If any other regulatory approvals are
required, Kerr-McGee Corporation and Sun Energy Partners intend to seek
such approvals as promptly as practicable.

SCHEDULE 1 - DIRECTORS AND EXECUTIVE OFFICERS OF KERR-McGEE
CORPORATION, KERR-McGEE L.P. CORPORATION AND KERR-McGEE
ENERGY CORPORATION

(Unless otherwise noted, each director's and officer's business address is
c/o Kerr-McGee Corporation, 123 Robert S. Kerr Avenue, Oklahoma City,
Oklahoma 73102 and each is a United States citizen)

DIRECTORS AND EXECUTIVE OFFICERS OF KERR-MCGEE CORPORATION

Directors

Name, Address Current and Recent Business Experience

William E. Bradford Chairman, Halliburton Company, a provider of energy
and energy services, from 1998; Chairman and Chief
Executive Officer of Dresser Industries, Inc., now
merged with Halliburton Company, from 1996 to 1998;
President and Chief Operating Officer of Dresser
Industries, Inc. from 1992 to 1995; Director,
Ultramar/Diamond Shamrock, Inc.

Luke R. Corbett Chief Executive Officer of Kerr-McGee Corporation
since February 27, 1999; Chairman of the Board and
Chief Executive Officer of Kerr-McGee Corporation
from February 1997 to February 26, 1999; President
and Chief Operating Officer from May 1995 through
January 1997; Group Vice President from 1992 through
May 1995. Director, Devon Energy Corporation, OGE
Energy Corp and BOK Financial Corp.

Sylvia A. Earle Chair, Deep Ocean Exploration and Research, Inc.
since 1992 and Explorer-in-Residence for the National
Geographic Society since 1998; Chair of the Sea
Change Trust, a non-profit scientific research
organization from 1993 to 1995; Advisor to the
Administrator from 1992 to 1993 and Chief Scientist
from 1990 to 1992 of the National Oceanic and
Atmosphere Administration.

David G. Managing Director, SMG Management L.L.C., an
Genever-Watling investment firm, since 1997; President and Chief
Executive Officer from 1992 to 1995 of General
Electric Industrial and Power Systems.

Martin C. Jischke President of Iowa State University since 1991.
Director, Bankers Trust Corporation.

Robert L. Keiser Chairman of the Board of Kerr-McGee Corporation
since February 27, 1999. Chairman of the Board and
Chief Executive Officer of Oryx Energy Company from
1994 through February 1999.

Tom J. McDaniel Vice Chairman of Kerr-McGee Corporation since
February, 1997; Senior Vice President and Corporate
Secretary from 1989 through January 1997. Director,
Devon Energy Corporation and UMB Oklahoma Bank.

William C. Morris Chairman of the Board of J. & W. Seligman & Co.,
Incorporated; Chairman of the Board of
Tri-Continental Corporation and Chairman of the
Boards of the companies in the Seligman family of
investment companies, all since December 1988.
Chairman of the Board of Carbo Ceramics, Inc., since
1987.

John J. Murphy Managing Director, SMG Management L.L.C., an
investment firm, since January 1997; Chairman of the
Board of Dresser Industries, Inc., hydrocarbon energy
products and services, from 1983 through November
1996; Chief Executive Officer of Dresser Industries,
Inc., from 1983 to 1995. Director, Carbo Ceramics,
Inc.; PepsiCo Inc., W. R. Grace & Co. and Shaw
Industries.

Leroy C. Richie President, Intrepid World Communications since
September 1998; Vice President and General Counsel
for Automotive Legal Affairs, Chrysler Corporation,
1990 through December 1997.

Richard M. Rompala Chairman of the Board, President and Chief Executive
Officer of The Valspar Corporation, a manufacturer of
paints and related coatings, since February 1998;
President and Chief Executive Officer of The Valspar
Corporation from 1995 through January 1998; President
of The Valspar Corporation in 1994; Group Vice
President of PPG Industries from 1987 to 1994.
Director, Olin Corporation.

Matthew R. Simmons President of Simmons & Company International, a
specialized investment banking firm that serves the
worldwide energy service industry, since founding the
company in 1974.

Farah M. Walters President and Chief Executive Officer of University
Hospitals Health System, Cleveland, Ohio since 1992.
Director, LTV Corporation and Geon Company.

Ian L. White-Thomson Chairman of U.S. Borax, Inc., a provider of borax and
borate products since 1996; President and Chief
Executive Officer from 1996 to 1999; Chief Executive
Officer, Rio Tinto Borax Ltd. since 1995. Director,
KCET Community Television of Southern California, LA
Opera and 3D Systems Corp.

Executive Officers

Name Position Recent Business Experience.

Robert L. Keiser Chairman of the (see above)
Board

Luke R. Corbett Chief Executive (see above)
Officer

Tom J. McDaniel Vice Chairman (see above)

John C. Linehan Executive Vice Executive Vice President and Chief
President Financial Officer of Kerr-McGee
Corporation since 1997. Chief
Financial Officer since 1987. Senior
Vice President from 1987 to 1997.
Director, BancFirst Oklahoma City.

Kenneth W. Crouch Senior Vice Senior Vice President of Kerr-McGee
President Corporation since 1996. Senior Vice
President, Worldwide Exploration and
Production Operations, Kerr-McGee
Oil & Gas Corporation since 1998.
Senior Vice President, Exploration,
Kerr-McGee Oil & Gas Corporation
from 1996 to 1998. Senior Vice
President, North America and
International Exploration,
Exploration and Production Division
during 1996. Vice President, Gulf of
Mexico and International Exploration,
Exploration and Production Division
from 1995 to 1996. Vice President
and Managing Director of Exploration
for North Sea Operations,
Exploration and Production Division
from 1993 to 1995.

Russell G. Horner, Senior Vice Senior Vice President and Corporate
Jr. President, General Secretary of Kerr-McGee Corporation
Counsel and since 1997. General Counsel since
Corporate Secretary 1986. Vice President from 1986 to
1997.

Michael G. Webb Senior Vice Senior Vice President of Kerr-McGee
President Corporation since 1994. Senior Vice
President, Exploration, Exploration
and Production Division from 1994 to
1996. Vice President, Exploration
from 1992 to 1993. Citizen of
Canada.

W. Peter Woodward Senior Vice Senior Vice President of Kerr-McGee
President Corporation since May 1997. Senior
Vice President of Kerr-McGee Chemical
Corporation since May 1997. Senior
Vice President, Chemical Marketing of
Kerr-McGee Chemical Corporation from
May 1996 through May 1997. Director,
Pigment Business Management of
Kerr-McGee Chemical Corporation from
1993 through April 1996.

DIRECTORS AND EXECUTIVE OFFICERS OF KERR-McGEE
L.P. CORPORATION AND KERR-McGEE ENERGY CORPORATION

Directors

Name Recent Business Experience

Luke R. Corbett (see above)

Tom J. McDaniel (see above)

Russell G. Horner, Jr. (see above)

Executive Officers

Name Current Position Recent Business Experience

Luke R. Corbett President (see above)

Tom J. McDaniel Vice President (see above)

Russell G. Horner, Secretary (see above)
Jr.

Don Hager Assistant Secretary Assistant General Counsel of Kerr-
McGee Corporation since October 1998.
Assistant Secretary of Kerr-McGee
Corporation since 1984.

APPENDIX A

AGREEMENT AND PLAN OF MERGER
DATED AS OF MARCH 9, 1999
BETWEEN
SUN ENERGY PARTNERS, L.P.
AND
KERR-McGEE ENERGY CORPORATION

AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER dated as of March 9, 1999
(the "Agreement"), between SUN ENERGY PARTNERS, L.P., a Delaware limited
partnership (the "Partnership"), and KERR-McGEE ENERGY CORPORATION, a
Delaware corporation (the "Company").

BACKGROUND

The Board of Directors of the Company (the "Board of
Directors") has approved on behalf of the Company, and Kerr-McGee
Corporation, a Delaware corporation (the "Parent"), in its capacity as
managing general partner of the Partnership, has approved on behalf of
the Partnership, upon the terms and subject to the conditions set forth
in this Agreement, the merger of the Company into the Partnership (the
"Merger"), whereby each outstanding LP Unit (as defined in the Second
Amended and Restated Agreement of Limited Partnership of the Partnership,
as amended (the "Partnership Agreement")) not owned by the Company or any
of its affiliates will be converted into the right to receive the Merger
Consideration (as hereinafter defined).

Pursuant to Section 17-211(b) of the DRULPA (as defined
below), the Parent, in its capacities as (i) the sole general partner of
the Partnership and (ii) the holder of more than 50% of the LP Units, has
executed a written consent approving the Merger.

Now, therefore, the Partnership and the Company hereby
agree as follows:

ARTICLE I

THE MERGER

SECTION 1.1 The Merger. Upon the terms and subject to
the conditions hereof, and in accordance with the relevant provisions of
the Delaware General Corporation Law (the "DGCL") and the Delaware
Revised Uniform Limited Partnership Act (the "DRULPA"), the Company shall
be merged with and into the Partnership as soon as practicable following
the satisfaction or waiver of the conditions set forth in Article IV.
Following the Merger, the Partnership shall continue as the surviving
entity (the "Surviving Entity") and shall continue its existence under
the laws of the State of Delaware, and the separate existence of the

Company shall cease. At the election of the Parent, any direct or
indirect wholly-owned subsidiary of the Parent may be substituted for the
Company as a constituent party in the Merger.

SECTION 1.2 Effective Time. As soon as practicable
following the satisfaction or waiver of the conditions set forth in
Article IV, but in no event before a 20-day period shall have elapsed
from the date of mailing to holders of LP Units of an information
statement with respect to the Merger, the Merger shall be consummated by
filing with the Secretary of State of the State of Delaware a certificate
of merger or other appropriate documents (in any case, the "Certificate
of Merger") in accordance with the DGCL and the DRULPA. The Merger shall
become effective at such time as the Certificate of Merger is duly filed,
or at such other time as the Partnership and the Company shall specify in
the Certificate of Merger (the time the Merger becomes effective being
the "Effective Time").

SECTION 1.3 Effects of the Merger. The Merger shall
have the effects set forth in Section 259 of the DGCL and Section 17-211
of the DRULPA.

SECTION 1.4 Certificate of Limited Partnership and
Partnership Agreement. The Certificate of Limited Partnership and the
Partnership Agreement of the Partnership shall be the certificate of
limited partnership and partnership agreement of the Surviving Entity
until thereafter changed or amended as provided therein or by applicable
law.

SECTION 1.5 General Partner. The Parent shall be the
managing general partner of the Surviving Entity until the earlier of its
resignation or removal or until its successor is duly appointed or
elected pursuant to the Partnership Agreement.

SECTION 1.6 Conversion of Units. At the Effective
Time, by virtue of the Merger and without any action on the part of the
Partnership, the Company or the holders of any of the following
securities:

(a) each LP Unit held by the Parent or any affiliate of
the Parent shall be canceled and retired and shall cease to
exist, and no payment or consideration shall be made with
respect thereto;

(b) each issued and outstanding LP Unit, other than LP
Units referred to in paragraph (a) above, shall be converted
into the right to receive from the Surviving Entity an amount in
cash, without interest, equal to $4.52 per LP Unit (the "Merger
Consideration") less any required withholding taxes. At the
Effective Time, all such LP Units shall cease to be outstanding
and shall automatically be canceled and retired and shall cease
to exist, and each holder of a certificate representing any such
LP Unit shall cease to have any rights with respect thereto,
except the right to receive the Merger Consideration, without
interest; and

(c) all of the issued and outstanding shares of capital
stock of the Company shall be converted into and become a number
of LP Units equal to the number of LP Units canceled and retired
pursuant to paragraphs (a) and (b) above.

ARTICLE II

EXCHANGE OF UNITS

SECTION 2.1 Exchange of Certificates.

(a) Prior to the Effective Time, the Company shall
appoint a bank or trust company to act as disbursing agent (the
"Disbursing Agent") for the payment of Merger Consideration upon
surrender of certificates representing the LP Units. The
Company will enter into a disbursing agent agreement with the
Disbursing Agent, in form and substance reasonably acceptable to
the Company, and shall deposit or cause to be deposited with the
Disbursing Agent in trust for the benefit of the holders of LP
Units cash in an aggregate amount necessary to make the payments
pursuant to Section 1.06 to holders of LP Units (such amounts
being hereinafter referred to as the "Exchange Fund"). The
Disbursing Agent shall, pursuant to irrevocable instructions,
make the payments provided for in the preceding sentence out of
the Exchange Fund. The Disbursing Agent shall invest portions
of the Exchange Fund as the Company directs, provided that such
investments shall be in obligations of or guaranteed by the
United States of America, in commercial paper obligations
receiving the highest rating from either Moody's Investors
Service, Inc. or Standard & Poor's Corporation, or in
certificates of deposit, bank repurchase agreements or banker's
acceptances of commercial banks with capital exceeding $100
million. The Exchange Fund shall not be used for any other
purpose, except as provided in this Agreement.

(b) Promptly after the Effective Time, the Surviving
Entity shall cause the Disbursing Agent to mail to each person
who was a record holder as of the Effective Time of an
outstanding certificate or certificates which immediately prior
to the Effective Time represented Depositary Units (as defined
in the Partnership Agreement) representing LP Units (the
"Certificates"), and whose LP Units were converted into the
right to receive Merger Consideration pursuant to Section 1.06,
a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss with respect to the
Certificates shall pass, only upon proper delivery of the
Certificates to the Disbursing Agent) and instructions for use
in effecting the surrender of the Certificate in exchange for
payment of the Merger Consideration. Upon surrender to the
Disbursing Agent of a Certificate, together with such letter of
transmittal duly executed and such other documents as may be
reasonably required by the Disbursing Agent, the holder of such
Certificate shall be paid in exchange therefor cash in an amount
equal to the product of the number of LP Units represented by

such Certificate multiplied by the Merger Consideration, and
such Certificate shall forthwith be canceled. No interest will
be paid or accrued on the cash payable upon the surrender of the
Certificates. If payment is to be made to a person other than
the person in whose name the Certificate surrendered is
registered, it shall be a condition of payment that the
Certificate so surrendered be properly endorsed or otherwise be
in proper form for transfer and that the person requesting such
payment pay any transfer or other taxes required by reason of
the payment to a person other than the registered holder of the
Certificate surrendered or establish to the satisfaction of the
Surviving Entity that such tax has been paid or is not
applicable. Until surrendered in accordance with the provisions
of this Section 2.01, each Certificate (other than Certificates
representing LP Units owned by the Parent or any affiliate of
the Parent) shall represent for all purposes only the right to
receive the Merger Consideration in cash multiplied by the
number of LP Units represented by such Certificate, without any
interest thereon.

(c) At and after the Effective Time, there shall be no
registration of transfers of LP Units and the Partnership shall
instruct the depositary for the Depositary Units not to register
transfers of the Depositary Units which were outstanding
immediately prior to the Effective Time. From and after the
Effective Time, the holders of LP Units outstanding immediately
prior to the Effective Time shall cease to have any rights with
respect to such LP Units except as otherwise provided in this
Agreement or by applicable law. All cash paid upon the surrender
of Certificates in accordance with the terms of this Article II
shall be deemed to have been paid in full satisfaction of all
rights pertaining to the LP Units previously represented by such
Certificates. If, after the Effective Time, Certificates are
presented to the Surviving Entity for any reason, such
Certificates shall be canceled and exchanged for cash as
provided in this Article II. At any time more than one year
after the Effective Time, the Surviving Entity shall be entitled
to require the Disbursing Agent to deliver to it any funds which
had been made available to the Disbursing Agent and not
disbursed in exchange for Certificates (including, without
limitation, all interest and other income received by the
Disbursing Agent in respect of all such funds). Thereafter,
holders of LP Units shall look only to the Surviving Entity
(subject to abandoned property, escheat and other similar laws)
as general creditors thereof with respect to any Merger
Consideration that may be payable, without interest, upon due
surrender of the Certificates held by them. Notwithstanding the
foregoing, neither the Surviving Entity nor the Disbursing Agent
shall be liable to any holder of an LP Unit for any Merger
Consideration delivered in respect of such LP Unit to a public
official pursuant to any abandoned property, escheat or other
similar law.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

SECTION 3.1 Representations and Warranties of Each
Party. Each of the Company and the Partnership represent and warrant to
the other that:

(a) such company is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
organization and has the requisite power and authority to carry
on its respective business as now conducted;

(b) such company has the requisite power and authority
to enter into this Agreement and to perform its obligations
hereunder. The execution, delivery and performance of this
Agreement by such company and the consummation of the
transactions contemplated hereby have been duly authorized by
all requisite organizational action and no other organizational
proceeding is necessary therefor. This Agreement has been duly
executed and delivered by such company and constitutes the valid
and binding obligation of such company, enforceable against each
such company in accordance with its terms;

(c) neither the execution and delivery hereof by such
company, nor the consummation of the transactions contemplated
hereby, nor compliance with the provisions hereof will (A)
violate or conflict with or result in the breach of or default
(whether following lapse of time or notice of both), or
terminate or accelerate any right or obligation, or create any
lien upon any property or assets of such company or any of its
subsidiaries, under any of the terms of (x) the organization
documents of such company or its subsidiaries or (y) any
material debt or other agreement to which such company or its
subsidiaries or the assets or properties thereof may be subject;
or (B) violate any judgment, ruling, order, writ, injunction,
statute, rule or regulation applicable to such company; except
in the case of clauses (A) and (B) above, for such violations,
conflicts, breaches, defaults, terminations, accelerations or
liens which, in the aggregate, would not have a material adverse
effect on the transactions contemplated hereby or on the
condition (financial or other), business or operations of such
company and its subsidiaries, taken as a whole. Other than
under the DRULPA, the DGCL, the federal securities laws, the
"blue sky" regulations of various states, and the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, to the
knowledge of such company no notice to, filing with, or
authorization of any domestic or foreign public body or
authority is required for the consummation of the transactions
contemplated hereby; and

(d) the Parent, as managing general partner of the
Partnership, has received the opinion of Lehman Brothers Inc.
dated March 9, 1999, to the effect that the consideration to be
paid to the holders of the LP Units (other than the Parent and

any other holders of LP Units that are affiliates of the Parent)
in connection with the Merger is fair to such holders of LP
Units from a financial point of view (the "Fairness Opinion").

SECTION 3.2 Additional Representations and Warranties
of the Partnership. The Partnership represents and warrants as follows:
Since December 31, 1998, the business of the Partnership has not
undergone any material adverse change.

ARTICLE IV

CONDITIONS TO CONSUMMATION OF THE MERGER

SECTION 4.1 Conditions to Each Party's Obligation to
Effect the Merger. The respective obligations of each party to effect
the Merger are subject to the satisfaction or waiver, prior to the
Effective Time, of the following conditions:

(a) no statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary,
preliminary or permanent), shall have been enacted, entered,
promulgated or enforced by any court or governmental authority
which is in effect and has the effect of prohibiting the
consummation of the Merger; provided that each of the parties
shall have used its best efforts to prevent the entry of any
injunction or other order and to appeal as promptly as possible
any injunction or other order that may be entered;

(b) there shall not be pending or threatened against
the Partnership, the Parent, or the Company, or any affiliate of
the Partnership, the Parent, or the Company, or the property or
business of the Partnership, the Parent, or the Company, any
other action, suit or proceeding involving a claim at law or in
equity or before or by any federal, state, or municipal or other
government department, commission, board, bureau, agency or
instrumentality, domestic or foreign, relating to the Merger or
this Agreement that would be reasonably likely to have a
material adverse effect on the condition, financial or
otherwise, of the Partnership, the Parent, or the Company;

(c) the parties shall have received any necessary
governmental consents or approvals and the waiting period (and
any extension thereof) applicable to the consummation of the
Merger under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, if any, shall have expired or been terminated
and a 20-day period shall have elapsed from the date of mailing
to holders of LP Units of an information statement with respect
to the Merger; and

(d) the Fairness Opinion shall not have been withdrawn
or modified in any manner materially adverse to the Parent, the
Company or the Partnership.

SECTION 4.2 Abandonment. The Company shall have the
option, at any time prior to the Effective Time, to abandon the Merger;
provided, that if the Company decides to exercise such option, the
Company shall provide prompt written notice thereof to the Partnership.

ARTICLE V

MISCELLANEOUS

SECTION 5.1 Amendment. This Agreement may not be
amended except by an instrument in writing signed on behalf of all the
parties.

SECTION 5.2 Entire Agreement; Assignment. This
Agreement constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof. Except as set forth in this
Agreement, neither this Agreement nor any right, interest or obligation
under this Agreement shall be assigned, in whole or in part, by operation
of law or otherwise without the prior written consent of the other
parties.

SECTION 5.3 Validity. In the event any one or more of
the provisions contained in this Agreement should be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability
of the remaining provisions contained herein and therein shall not in any
way be affected or impaired thereby.

SECTION 5.4 Governing Law. This Agreement shall be
governed by and construed in accordance with the substantive laws of the
State of Delaware regardless of the laws that might otherwise govern
under principles of conflicts of laws applicable thereto.

SECTION 5.5 Descriptive Headings. The descriptive
headings herein are inserted for convenience of reference only and are
not intended to be part of or to affect the meaning or interpretation of
this Agreement.

SECTION 5.6 Parties in Interest. Nothing in this
Agreement, express or implied, is intended to confer upon any person
other than the parties to this Agreement any rights or remedies of any
nature whatsoever under or by reason of this Agreement.

SECTION 5.7 Counterparts. This Agreement may be
executed in one or more counterparts, each of which shall be deemed to be
an original, but all of which shall constitute one and the same
agreement, and shall become effective when one or more counterparts have
been signed by each of the parties and delivered to the other parties.

IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed on its behalf by its respective officers
thereunto duly authorized, all as of the day and year first above
written.

SUN ENERGY PARTNERS, L.P.

By: Kerr-McGee Corporation,
its Managing General Partner

By: /s/ Russell G. Horner, Jr.
_________________________________
Russell G. Horner, Jr.
Senior Vice President

KERR-McGEE ENERGY CORPORATION

By: /s/ John M. Rauh
_________________________________
John M. Rauh
Vice President

Signature Page of Agreement and Plan of Merger Dated as
of March 9, 1999 Between Sun Energy Partners, L.P. And
Kerr-McGee Energy Corporation

APPENDIX B

LEHMAN BROTHERS

March 9, 1999

Kerr-McGee Corporation
Kerr-McGee Center
123 Robert S. Kerr Avenue
Oklahoma City, Oklahoma 73102

Kerr-McGee Corporation, acting in its capacity
as Managing General Partner of Sun Energy Partners, L.P.:

We understand that Kerr-McGee Corporation (the
"Company"), acting in its capacity as Managing General Partner of Sun
Energy Partners, L.P. ("SLP"), is considering entering into a transaction
(the "Proposed Transaction") pursuant to which (i) SLP will merge with a
newly-formed, wholly-owned indirect subsidiary of the Company ("Newco")
and (ii) each of the depository units representing units of limited
partnership interest in SLP that are held by holders unaffiliated with
the Company (the "Public Unitholders") will be converted into the right
to receive $4.52 per unit in cash. The terms and conditions of the
Proposed Transaction are set forth in more detail in the Agreement and
Plan of Merger dated March 9, 1999 between SLP and Newco (the
"Agreement").

We have been requested by the Company, acting in its
capacity as Managing General Partner of SLP, to render our opinion with
respect to the fairness, from a financial point of view, to the Public
Unitholders of the consideration to be received by the Public Unitholders
in the Proposed Transaction. We have not been requested to opine as to,
and our opinion does not in any manner address, the Company's underlying
business decision to proceed with or effect the Proposed Transaction.

In arriving at our opinion, we reviewed and analyzed:
(1) the Agreement and the specific terms of the Proposed Transaction; (2)
such publicly available information concerning the Company and SLP that
we believe to be relevant to our analysis, including, without limitation,
each of the periodic reports and proxy statements filed by the Company
since January 1, 1998 and each of the periodic reports filed by SLP since
January 1, 1998 (including the audited and unaudited financial statements
of both the Company and SLP included in such reports and statements); (3)
financial and operating information with respect to the business,
operations and prospects of SLP furnished to us by the Company, including
financial projections based on the business plan of SLP, and, in
particular, (a) certain estimates of proved and non-proved reserves and
(b) projected annual production of such reserves; (4) a trading history
of SLP's units from December 31, 1995 to the present and a comparison of
that trading history with those of other companies that we deemed
relevant; (5) a comparison of the historical financial results and

present financial condition of SLP with those of other companies that we
deemed relevant; and (6) a comparison of the financial terms of the
Proposed Transaction with the financial terms of certain other
transactions that we deemed relevant. In addition, we have had
discussions with the management of the Company concerning SLP's business,
operations, assets, financial condition, reserves, production profile,
exploration program and prospects and have undertaken such other studies,
analyses and investigations as we deemed appropriate.

In arriving at our opinion, we have assumed and relied
upon the accuracy and completeness of the financial and other information
used by us without assuming any responsibility for independent
verification of such information and have further relied upon the
assurances of management of the Company that they are not aware of any
facts or circumstances that would make such information inaccurate or
misleading. With respect to the financial projections of SLP, upon
advice of the Company we have assumed that such projections have been
reasonably prepared on a basis reflecting the best currently available
estimates and judgments of the management of the Company as to the future
financial performance of SLP and that SLP will perform substantially in
accordance with such projections. In arriving at our opinion, we have not
conducted a physical inspection of the properties and facilities of SLP
and have not made or obtained any evaluations or appraisals of the assets
or liabilities of SLP. Our opinion necessarily is based upon market,
economic and other conditions as they exist on, and can be evaluated as
of, the date of this letter.

Based upon and subject to the foregoing, we are of the
opinion as of the date hereof that, from a financial point of view, the
consideration to be received by the Public Unitholders in the Proposed
Transaction is fair to the Public Unitholders.

We have acted as financial advisor to the Company in
connection with the Proposed Transaction and will receive a fee for our
services. In addition, the Company has agreed to indemnify us for certain
liabilities that may arise out of the rendering of this opinion. We also
have performed various investment banking services for the Company in the
past (including acting as financial advisor in the Company's merger with
Oryx Energy Company) and have received customary fees for such services.
In the ordinary course of our business, we actively trade in the debt and
equity securities of the Company for our own account and for the accounts
of our customers and, accordingly, may at any time hold a long or short
position in such securities.

This opinion is solely for the use and benefit of the
Company, acting in its capacity as Managing General Partner of SLP, and
is rendered to the Company in such capacity in connection with its
consideration of the Proposed Transaction.

Very truly yours,

LEHMAN BROTHERS

<PAGE>
<PAGE> PART II

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 1-9033
------------------------------
SUN ENERGY PARTNERS, L.P.

(Exact name of Registrant as specified in its charter)

DELAWARE 75-2070723
(State or other jurisdiction of (I.R.S. employer identification
incorporation or organization) number)
123 ROBERT S. KERR AVENUE
OKLAHOMA, OK 73102
(Address of principal executive offices) (Zip code)

Registrant's telephone number, including area code:
405-270-1313

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

Name of Each Exchange
Title of Each Class on Which Registered
------------------- ---------------------
Depositary Units New York Stock Exchange, Inc.

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy of information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___

The aggregate market value of the Depositary Units held by nonaffiliates of
the Registrant as of February 28, 1999, was approximately $30 million.

The total number of Partnership Units outstanding as of February 28, 1999,
was 421,170,459.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

CERTAIN ABBREVIATIONS AND OTHER MATTERS

As used herein, the following terms have specific meanings:

[C] [S]
m thousand
mm million
bbl barrel
mb thousand barrels
mmb million barrels
eb equivalent barrel
meb thousand equivalent barrels
mmeb million equivalent barrels
b/d barrels per day
bc/d barrels of condensate per day
mcf thousand cubic feet
mmcf million cubic feet
bcf billion cubic feet
mmcf/d million cubic feet per day
mmcfe/d million cubic feet equivalent per day
ED&A exploration, development and acquisition*
FD&A finding, development and acquisition per barrel
WTI West Texas Intermediate spot price
HH Henry Hub spot price

- ------------------------------
* ED&A outlays represent capital expenditures and cash exploration costs,
excluding capitalized interest.

Natural gas equivalents are determined under the relative energy content
method by using the ratio of 6 mcf of natural gas to 1 bbl of crude oil,
condensate or natural gas liquids.

With respect to information quoted as to working interest, "net" is
determined by multiplying the whole numbers by Sun Energy Partners, L.P.'s
working interest.

<PAGE>
<PAGE>
FORWARD-LOOKING STATEMENTS

In the following report, Sun Energy Partners, L.P. has included certain
statements (other than statements of historical fact) that constitute
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. When used
herein, the words "budget", "budgeted", "anticipate", "expects", "believes",
"seeks", "goals", "intends" or "projects" and similar expressions are intended
to identify forward-looking statements. It is important to note that Sun Energy
Partners, L.P.'s actual results could differ materially from those projected by
such forward-looking statements. Although Sun Energy Partners, L.P. believes the
expectations reflected in such forward-looking statements are reasonable and
such forward-looking statements are based upon the best data available at the
time this report is filed with the Securities and Exchange Commission, no
assurance can be given that such expectations will prove correct. Factors that
could cause Sun Energy Partners, L.P.'s results to differ materially from the
results discussed in such forward-looking statements include, but are not
limited to, the following: production variances from expectations, volatility of
oil and gas prices, the need to develop and replace its reserves, the
substantial capital expenditures required to fund its operations, exploration
uses, environmental risks, uncertainties about estimates of reserves,
competition, government regulation and political actions, and the ability of Sun
Energy Partners, L.P. to implement its business strategy. All such
forward-looking statements in this document are expressly qualified in their
entirety by the cautionary statements in this paragraph.

48
<PAGE>
<PAGE>

PART I

ITEMS 1 AND 2. BUSINESS AND PROPERTIES

GENERAL

Sun Energy Partners, L.P. (Sun Energy Partners) engages in the oil and gas
exploration and production business in the United States. Prior to February 26,
1999, Oryx Energy Company (Oryx) controlled Sun Energy Partners and was its
managing general partner. On that date, Kerr-McGee Corporation (Kerr-McGee)
became managing general partner following its merger with Oryx, and Kerr-McGee
now controls Sun Energy Partners. The Company refers to Oryx prior to February
26, 1999 and to Kerr-McGee since February 26, 1999. As of December 31, 1998, the
Company owned 98.2 percent of Sun Energy Partners. The remaining 1.8 percent
interest is comprised of limited partnership interests held by public
unitholders in the form of depositary units (Units). Eighty-five percent of the
Company's Board of Directors must approve any additional issuance, sale or
transfer of units that would reduce the Company's holdings below 85 percent of
the outstanding units.

On March 9, 1999, Kerr-McGee, as managing general partner, announced that
its Board of Directors had approved a plan to merge Sun Energy Partners with
Kerr-McGee Energy (an indirect wholly-owned subsidiary of Kerr-McGee). As part
of the transaction, each of the publicly held limited partnership units will be
converted solely into the right to receive $4.52 in cash, and as a result,
Kerr-McGee will own 100% of Sun Energy Partners. Detailed information regarding
this transaction will be distributed to all holders of limited partnership units
prior to the consummation of the transaction. The transaction is subject to the
expiration of the Hart-Scott-Rodino waiting period and other customary closing
conditions and regulatory approvals, and is expected to be completed by the end
of the third quarter, 1999.

Sun Energy Partners' business is conducted through Sun Operating Limited
Partnership, a Delaware limited partnership, and several other operating
partnerships (collectively, the Operating Partnerships). In all of the
partnerships which comprise the Operating Partnerships, Sun Energy Partners
holds a 99 percent interest as the sole limited partner, while the Company holds
a 1 percent interest as the managing general partner.

Sun Energy Partners and the Operating Partnerships (collectively, the
Partnership), are managed by the Company. The holders of limited partnership
units have no power to direct or participate in the control of the Partnership.
The Company makes all decisions regarding exploration, development, production
and marketing for properties belonging to the Partnership, all decisions
regarding the sale of less than substantially all of such properties or the
acquisition of properties by the Partnership and all other decisions regarding
the Partnership's business and operations.

The Partnership has no officers or employees. Officers and employees of the
Company perform all management functions required for Sun Energy Partners.

The Partnership's strategy is to target as future growth opportunities
those areas where its advanced technological capabilities will have the greatest
economic impact.

ROVED RESERVES

As of December 31, 1998, the Partnership's proved reserves were an
estimated 209 mmb of liquids and an estimated 1,084 bcf of natural gas, an
aggregate of 390 mmeb of reserves. More information on the estimated quantities
of proved oil and gas reserves and information on proved developed oil and gas
reserves, as well as information concerning the standardized measure of
discounted future net cash flows from estimated production of proved oil and gas
reserves (Standardized Measure), are presented in the "Consolidated Financial
Statements Supplementary Financial and Operating Information." The Partnership
files oil and gas reserve estimates with various governmental regulatory
authorities and agencies, the variability of which does not exceed 5 percent.

The Partnership's production is exclusively in the United States and in
1998, the Partnership produced 42 mmeb. The Partnership seeks production
replacement through a balanced approach that combines exploration, development
and acquisition. In 1998, the Partnership replaced 88 percent of its production
at an FD&A cost of $11.02 per eb.

OFFSHORE

The Partnership has identified the Gulf of Mexico as the primary focus of
its growth strategy.

The Partnership has a significant presence in the Gulf of Mexico with an
interest in 210 blocks at December 31, 1998, in various stages of exploration,
development and production. The Partnership has an interest in 37 producing
platforms, 19 of which it operates. The Partnership also holds interests in
various offshore pipelines and facilities. In 1997, the Partnership achieved a
6 percent reduction in its offshore operating costs per equivalent barrel. In
1998, operating costs per equivalent barrel increased 12 percent compared to
1997.

Exploration

Of the Gulf of Mexico blocks in which the Partnership owns an interest,
167 are undeveloped. In 1998, the Partnership spent $62 million to acquire
interests in 25 blocks.

In May 1997, the Partnership participated in an exploration discovery,
Garden Banks 215 #4 (Sun Energy Partners 25 percent), the Conger prospect, in
the flex trend. The well encountered approximately 300 feet of net pay
thickness both above and below salt formations. The Garden Banks 215 #4 well
was drilled to a total depth of 21,692 feet subsurface in about 1,500 feet
of water depth. It is adjacent to the Garden Banks 260 Unit (Baldpate),
which includes Blocks 215 South, 216, 259 and 260.

In early 1998, the Partnership participated in a successful Conger
appraisal well, Garden Banks 215 #5, which encountered about 300 feet of net
pay sands approximately one and a half miles from the discovery well.
Development will be by a sub-sea tie-back to a host facility on a neighboring
block. Development drilling is scheduled to begin in the second quarter of
1999. First production from the Conger Field is scheduled for the fourth
quarter of the year 2000.

In late 1997, the Partnership participated in a subsalt discovery at its
Penn State Deep prospect. The discovery is located at Garden Banks 216 block
(Sun Energy Partners 50 percent). The Penn State Deep discovery well (GB 216 #3)
encountered hydrocarbons at about 20,500 feet subsurface in 1,450 feet of water
depth. It lies below the GB 216 #2 discovery (Penn State Shallow) drilled in
1996, which encountered 214 net feet of pay in a shallower structure. The GB 216
#3 well found 123 net feet of subsalt pay. The Partnership is developing the
Penn State Shallow discovery as a sub-sea tie-back to the Baldpate facilities
and is evaluating the deeper discovery as another potential tie-back. The Penn
State wells are located approximately three miles to the northeast of the
Baldpate facility.

In late 1997, the Partnership participated in a discovery at High Island
A-553 (Sun Energy Partners 33 percent) on the continental shelf. The A-7 well
tested at a flow rate of 16 mmcf/d and 800 b/d. The HI A-553 A-7 well was
drilled to a total depth of about 13,000 feet in 260 feet of water depth. The
well encountered approximately 100 feet of net pay in 4 zones.

As of December 31, 1998, the Partnership was not drilling or participating
in the drilling of any offshore exploratory wells.

Production and Development

The Partnership owns a 99 percent interest in the four-block High Island
384 Unit which is located approximately 112 miles off the Texas coast in water
depths averaging 360 feet. This development (Patton) was originally discovered
in October 1993, began production in January 1995 and in September 1995
achieved the expected peak production of 20 meb/d.

Late in 1995, the Partnership confirmed the presence of natural gas
reserves in a previously untested area of the High Island 384 Unit. The High
Island 385 #3 well encountered 158 feet of net gas pay. Two subsequent
delineation wells found the same pay interval in nearby fault blocks. In the
second phase of Patton, the Partnership installed the "D" platform in 360 feet
of water and developed the new gas reservoir. First production occurred in the
fourth quarter of 1996 with gross production of 35 mmcf/d. In addition, two
wells were drilled and the "E" platform was installed to develop a previously
discovered reservoir on High Island 379. These wells came on stream during the
fourth quarter of 1996 at 24 mmcfe/d.

In 1995, the Partnership approved a plan for the development of Viosca
Knoll 826 (Sun Energy Partners 50 percent and operator) which lies 80 miles off
the Alabama coast in water depths of 1,500 to 2,500 feet. The Neptune
development utilizes a new type of floating production facility called a spar.
The spar is a cylindrical-shaped vessel anchored vertically to the sea floor.
First production occurred in March 1997 and in late 1997 expected peak
production of 30 meb/d was achieved. The second phase of drilling was commenced
in 1998 and a second, higher peak of about 35 meb/d is expected.

The Partnership began production at its Baldpate platform in the Gulf of
Mexico flex trend in September 1998. Production is expected to increase to a
peak of 75meb/d. The nearby Penn State Shallow reservoir is currently being
developed as a sub-sea tie-back to Baldpate. The Company also has a discovery at
Penn State Deep in the same area. The Baldpate facilities have a rated daily
throughput capacity of 60,000 barrels of oil and 200 million cubic feet of gas.
Production levels from Baldpate are expected to increase as a total of 7
pre-drilled wells are brought on line. Development of the Baldpate facility
utilized leading-edge technology by employing an articulated compliant tower
design. At a height of 1,902 feet to the top of the flare boom, it sets a
record as the world's tallest free-standing structure. The Partnership has a
50 percent working interest in the project.

To facilitate the orderly execution of its deep water strategy, in early
1998, the Partnership secured drilling commitments for a substantial portion of
its deep water drilling plans. The Partnership along with two partners, has
entered into a five-year contract for a deep water semi-submersible drilling
rig, capable of drilling in water depths of up to 6,000 feet. The term of the
contract is five years, plus options to extend, with rig delivery currently
scheduled for the second quarter of 1999. The Partnership has rights to
one-third of the term. The Partnership has entered into a five-year contract for
50-percent of the use of a drill ship. The newly-built vessel will have the
capacity to drill in water depths of up to 7,500 feet and will become available
in the fourth quarter of 1999.

As of December 31, 1998, the Partnership was drilling or participating in
the drilling of 6 gross (2 net) offshore development wells.

ONSHORE

The onshore area has been a major contributor of production volumes and
cash flow with relatively modest reinvestment needs. This is important for the
funding of the Partnership's plans in other strategic areas. In 1995, the
Partnership initiated significant cost-reduction measures at its operated
fields. The Partnership achieved a 4 percent reduction in onshore operating
costs per equivalent barrel in 1997. In 1998, onshore operating costs per
equivalent barrel increased 14 percent compared to 1997 costs. The Partnership
has interests in 60 major onshore fields in five states and operates about 75
percent of its production. In addition, the Partnership has increased its
drilling activity to more rapidly exploit its onshore asset portfolio.

The Partnership is applying 3-D technology to create opportunities in new
fault blocks and deeper pool horizons which provide new volumes and reserves.
The Partnership will continue to exploit its waterflood operations. The onshore
will be managed for maximum cash flow generation.

Exploration

In 1997, the Partnership drilled 2 exploration wells (Sun Energy Partners
99 percent and operator) at the Seabreeze field in southeast Texas that tested
a total of 33 mmcf/d and 1,160 b/d. The wells were drilled into new fault
blocks as a result of a continuing 3-D seismic program around the
Partnership's larger onshore fields.

At December 31, 1998, the Partnership was not drilling or participating in
the drilling of any onshore exploratory wells.

Production and Development

In 1997, the Partnership increased production at the Northwest Chitwood
Unit, (Sun Energy Partners 69 percent and operator) located in south-central
Oklahoma, through an ongoing reservoir waterflood program. In 1997, daily oil
production increased from about 1,700 barrels to 5,400. In 1998, the NW
Chitwood 18-2 and 26-2 wells tested at 2,838 and 840 barrels per day.

As of December 31, 1998, the Partnership was drilling or participating in
the drilling of 5 gross (3 net) development wells onshore.

TABULAR INFORMATION

The following table sets forth the Partnership's undeveloped and developed
oil and gas acreage (in thousands) held at December 31, 1998 and 1997:

<TABLE>
<CAPTION>
GROSS NET
------------- -------------
1998 1997 1998 1997
----- ----- ----- -----
<S> <C> <C> <C> <C>
Undeveloped Acreage
Onshore................................................. 904 908 499 503
Offshore................................................ 927 889 512 521
----- ----- ----- -----
Total................................................ 1,831 1,797 1,011 1,024
===== ===== ===== =====
Developed Acreage
Onshore................................................. 948 982 539 552
Offshore................................................ 225 248 106 116
----- ----- ----- -----
Total................................................ 1,173 1,230 645 668
===== ===== ===== =====
</TABLE>

The following table sets forth the Partnership's net exploratory and
development oil and gas wells drilled in 1998, 1997 and 1996:

<TABLE>
<CAPTION>
EXPLORATORY WELLS DEVELOPMENT WELLS
------------------ ------------------
1998 1997 1996 1998 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Oil
Onshore........................................... -- -- -- 11 29 43
Offshore.......................................... 2 1 -- 4 4 9
--- --- --- --- --- ---
2 1 -- 15 33 52
--- --- --- --- --- ---
Gas
Onshore........................................... -- 3 -- 23 39 50
Offshore.......................................... -- -- 1 2 4 8
--- --- --- --- --- ---
-- 3 1 25 43 58
--- --- --- --- --- ---
Dry
Onshore........................................... 2 -- -- 7 4 10
Offshore.......................................... 2 3 2 -- 2 2
--- --- --- --- --- ---
4 3 2 7 6 12
--- --- --- --- --- ---
Total.......................................... 6 7 3 47 82 122
=== === === === === ===
/TABLE
<PAGE>
<PAGE>

The following table sets forth the Partnership's gross and net producing
oil and gas wells at December 31, 1998:

<TABLE>
<CAPTION>
GROSS* NET
------------- -----------
OIL GAS OIL GAS
----- ----- ----- ---
<S> <C> <C> <C> <C>
Onshore....................................... 2,403 810 1,179 481
Offshore .................................... 86 161 51 87
----- ----- ----- ---
Total.................................... 2,489 971 1,230 568
===== ===== ===== ===
</TABLE>
- ------------------------------
* Gross producing wells include 104 multiple completion wells (more than one
formation producing into the same well bore).

The following table sets forth the Partnership's average daily net
production for 1998, 1997 and 1996:

<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Crude and Condensate (mb):
Onshore......................................... 24 27 28
Offshore........................................ 20 19 15
--- --- ---
44 46 43
Processed Natural Gas (mb):....................... 7 7 7
--- --- ---
51 53 50
=== === ===
Natural Gas (mmcf):
Onshore......................................... 211 286 299
Offshore........................................ 160 199 187
--- --- ---
371 485 486
=== === ===
</TABLE>

The following table sets forth the Partnership's average revenues and
production costs per unit of oil and gas production for 1998, 1997 and 1996:

<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Revenues:
Crude oil and condensate (per bbl)............... $13.58 $18.75 $20.43
Natural gas (per mcf).................... ....... $ 2.10 $ 2.40 $ 2.14
Average production cost per unit of oil and gas
production (per eb):*
Offshore
Operating cost......................... ...... $ 3.37 $ 3.01 $ 3.20
====== ====== ======
Onshore
Operating cost................................ $ 3.19 $ 2.81 $ 2.94
Production taxes.............................. 1.05 1.48 1.32
------ ------ ------
Total production costs...................... $ 4.24 $ 4.29 $ 4.26
====== ====== ======
Total Company operating cost..................... $ 3.28 $ 2.99 $ 3.14
Production taxes.............................. .59 .87 .87
------ ------ ------
Total production costs...................... $ 3.87 $ 3.86 $ 4.01
====== ====== ======
</TABLE>
- ------------------------------
* Excludes natural gas liquids production.

7
<PAGE>
<PAGE>

ASSET DISPOSALS

Assets are managed on a portfolio basis. The Partnership will continue to
buy and sell assets with the intention of upgrading its asset base.

RECOVERY METHODS

During 1998, the Partnership obtained 61 and 39 percent of its crude
production from primary and secondary recovery methods. This compares to 63 and
37 percent of its crude oil production in 1997. At December 31, 1998, the
Partnership was participating in no major tertiary oil recovery programs.

The terms "secondary recovery" and "tertiary recovery" relate to those
methods used to increase the quantity of crude oil and condensate and natural
gas that can be recovered in excess of the quantity recoverable using the
primary energy found in a reservoir. Secondary recovery methods include
pressure maintenance by waterflooding or natural gas injection.

MARKETING OF OIL AND GAS

Distribution

Crude oil, condensate and natural gas are distributed through pipelines
and/or trucks or barges to traders, end users, gatherers and transportation
companies. Sufficient distribution systems exist and are readily available in
the areas of the Partnership's production to enable the Partnership to
effectively market its oil and gas. In some instances, the Partnership owns an
interest in these systems.

Crude Oil and Condensate

During 1998, sales to Sun Company, Inc. and Amoco Production Company
totaled approximately 12 and 16 percent of the Partnership's sales of crude oil
and condensate. No other customer purchased more than 10 percent of the
Partnership's sales of crude oil and condensate.

Since most of the Partnership's crude oil and condensate is produced in
areas where there are other buyers offering to purchase at market prices, the
Partnership believes that the loss of any major purchaser would not have a
material adverse effect on the Partnership's business. In 1998, the 10 largest
customers accounted for approximately 82 percent of such sales.

Currently, approximately 55 percent of sales are made pursuant to
arrangements that are cancelable upon 30 days' written notice by the
Partnership or the purchaser, with substantially all of the remainder of the
production being sold pursuant to contracts of varying terms of up to six
years in length.

Natural Gas

The Partnership sold approximately 50 percent of its natural gas
production in 1998 to Producers Energy Marketing Company, LLC (ProEnergy).
ProEnergy has exclusive marketing rights to gas production owned or controlled
by the Partnership for up to 10 years. The Partnership has the option to
terminate the marketing agreement after six years. ProEnergy purchases the
majority of its members' gas at index prices. No other customer purchased more
than 10 percent of the Partnership's natural gas. Approximately 34 percent of
the Partnership's natural gas was purchased by various local distribution
companies, end users and processors of natural gas under term contracts
predating the formation of ProEnergy. Most of these agreements will come to
term within three years.

Hedging

Because of the volatility of oil and gas prices, the Partnership
periodically has entered into crude oil and natural gas hedging activities.
Effective with the Kerr-McGee/Oryx merger, the Partnership has elected to
eliminate the hedging program and all contracts have been closed.

REGULATION

General

The oil and gas industry is subject to regulation by national, state and
local governments relating to such matters as the award of exploration and
production interests, the imposition of specific drilling obligations,
environmental protection controls and control over the development and
abandonment of a field (including restrictions on production and abandonment of
production facilities). The industry is also subject to the payment of
royalties and taxes, which tend to be high compared to those levied on other
commercial activities. The Partnership cannot predict the impact of future
regulatory, taxation and royalty initiatives.

Natural Gas

The domestic gas industry remains under federal regulation pursuant to the
Natural Gas Act and the Natural Gas Policy Act.

Environmental Matters

The Partnership is subject to, and makes every effort to comply with,
various environmental quality control regulations of national and local
governments. Although environmental requirements can have a substantial impact
upon the energy industry, generally these requirements do not appear to affect
the Partnership any differently or to any greater or lesser extent than other
exploration and production companies.

The Partnership has been named as a potentially responsible party (PRP) at
four sites pursuant to the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended. At two of these sites, the Partnership
has been named as a de minimis party and therefore expects its liability to be
small. At a third site, the Partnership is reviewing its options and anticipates
that it will participate in steering committee activities with the Environmental
Protection Agency (EPA). At the fourth and largest site, the Operating
Industries, Inc. site in California, the Partnership has participated in a
steering committee consisting of 139 companies. The steering committee and other
PRPs previously entered into two partial consent decrees with the EPA providing
for remedial actions which have been or are to be completed. The steering
committee has recently successfully negotiated a third partial consent decree
which provides for the following remedial actions: a clay cover, methane
capturing wells and leachate destruction facilities. The remaining work at the
site involves groundwater evaluation and long-term operation and maintenance.

Based on the facts outlined above and the Partnership's ongoing analyses of
the actions where it has been identified as a PRP, the Partnership believes that
it has accrued sufficient reserves to absorb the ultimate cost of such actions
and that such costs will not have a material impact on the Partnership's
financial condition. While liability at superfund sites is typically joint and
several, the Partnership has no reason to believe that defaults by other PRPs
will result in liability of the Partnership materially larger than expected.

COMPETITION

The oil and gas industry is highly competitive. Integrated companies,
independent companies and individual producers and operators are active bidders
for desirable oil and gas properties, as well as for the equipment and labor
required to operate and develop such properties. Although these competitors may
have financial resources substantially greater than those of the Partnership,
management of the Company believes that the Partnership is in a position to
compete effectively.

The availability of a ready market for the Partnership's oil and gas
production depends on numerous factors beyond its control, including the level
of prices and consumer demand, the extent of worldwide oil and gas production,
the cost and availability of alternative fuels, the cost and proximity of
pipelines and other transportation facilities, regulation by national and local
authorities and the cost of compliance with applicable environmental
regulations.

TECHNOLOGY

The Partnership's exploration, development and production activities depend
upon the use of applied technology. In support of this in 1998, the Partnership,
through the managing general partner, had 35 engineers, geoscientists,
technicians and support personnel focusing on the technology used in the
exploration for, and development and production of, energy resources. The
Partnership's expenditures on technology activities, including its share of the
managing general partner's employee-related costs, were $11 million, $9 million
and $8 million for the years 1998, 1997 and 1996.

CONFLICTS OF INTEREST

Certain conflicts of interest may arise as a result of the relationships
between the Company and the Partnership. The Company has oil and gas interests
in the Gulf of Mexico in addition to such interests held through the
Partnership. The directors and officers of the Company have fiduciary duties to
manage the Company in the best interest of its stockholders. The Company, as
managing general partner of the Partnership, has a fiduciary duty to manage the
Partnership in a manner that is fair to the public unitholders. The duties of
the directors of the Company to its stockholders may therefore come into
conflict with the duties of the Company as managing general partner of the
Partnership.

A Committee of the Board of Directors of the Company, none of whose members
is affiliated with the Company except as Company directors or stockholders or as
holders of units, reviews policies and procedures regarding matters of potential
conflict of interest. The Committee also monitors the application of such
policies and procedures.

OTHER

The Partnership's financial condition and business operations are affected
from time to time by political developments and laws and regulations which
relate to such matters as production, taxes, property, imports, pricing and
environmental controls. The Company makes no representations as to future events
and developments which could affect the Partnership's operations and financial
condition. Oil and gas prices are subject to supply and demand. Political
developments (especially in the Middle East) and the decisions of OPEC can
particularly affect world oil supply and oil prices. Furthermore, the
Partnership's business and financial condition could be affected by, among other
things, competition, future price changes or controls, material and labor costs,
legislation, transportation regulations, tariffs, embargoes and armed conflicts.

ITEM 3. LEGAL PROCEEDINGS

The historical method used by the oil industry in the United States to
establish the price at which crude oil is bought and sold is being challenged.
Buyers and sellers have traditionally determined the market price of crude oil
by reference to "posted prices", which are prices published by certain crude oil
buyers such as crude oil refiners and transporters as the price at which they
are willing to buy. A number of suits have been brought alleging that posted
prices have been set consistently below market value, and that, as a result,
royalties have been underpaid.

The Partnership was named as a defendant in such a case filed in state
court in Starr County, Texas in April, 1995 and a co-defendant in cases filed in
state courts in Lee County, Texas and in Louisiana and Alabama and in federal
courts in Texas, Louisiana and Mississippi. All of these lawsuits seek
certification as class actions on behalf of royalty owners in specific
geographic areas, except the Texas and Alabama cases, which seek certification
of a nationwide class of royalty owners. These cases also allege that the
co-defendants have conspired and acted in concert to establish the price of
crude oil in violation of antitrust statutes. These suits are similar to those
brought in Texas by the Texas General Land Office, and in New Mexico, Oklahoma
and Florida by private royalty owners against major crude oil producers. Suits
are also being brought by natural gas royalty interest owners regarding royalty
valuation and deductions of post-production costs from royalty.

The Partnership holds and has held interests in a number of federal and
Indian oil and gas production leases. The Minerals Management Service (MMS) of
the United States Department of the Interior is challenging the prices on which
royalties were based for oil and gas produced from certain of these leases. The
MMS has claimed that a number of crude oil producers including the Partnership
underpaid royalties owed the federal government on California crude oil
production from 1980 to 1988 and has sent Orders to Pay to a number of producers
including the Partnership. Separately, numerous oil and gas producers, including
the managing general partners of certain of the Operating Partnerships, have
been named as defendants in lawsuits brought pursuant to the federal False
Claims Act in connection with royalty payments on production from federal and
Indian lands.

While a number of claims and suits against the Partnership and other crude
oil and natural gas producers have already been brought by a variety of
governmental and private plaintiffs in a number of jurisdictions, the fact that
these suits challenge practices common to the industry suggests that additional
lawsuits against the Partnership may be filed. The suits filed to date, to
include the actions in which the Partnership is a party, are procedurally in the
preliminary stages, though settlement discussions have taken place with respect
to a number of claims. The Partnership believes it has meritorious defenses and,
if acceptable settlements cannot be reached, intends to defend these claims and
lawsuits vigorously.

The Partnership is involved in a number of other legal and administrative
proceedings arising in the ordinary course of its oil and gas business. Although
the ultimate outcome of these proceedings cannot be ascertained at this time, it
is reasonably possible that some of the proceedings could be resolved
unfavorably to the Partnership. Management of the Company believes that any
liabilities which may arise out of legal claims or proceedings would not be
material in relation to its financial position, results of operations or
liquidity at December 31, 1998. The Company intends to maintain liability and
other insurance for the Partnership of the type customary in the oil and gas
business with such coverage limits as the Company deems prudent.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF UNITHOLDERS

None.

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S LIMITED PARTNERSHIP
UNITS AND RELATED SECURITY HOLDER MATTERS

The depositary units of Sun Energy Partners, L.P. are traded on the New
York Stock Exchange, Inc. The following table sets forth the high and low sales
prices per unit, as reported on the New York Stock Exchange Composite
Transactions quotations, for the periods indicated:

<TABLE>
<CAPTION>
1998 1997
---------------------- ----------------------
HIGH LOW HIGH LOW
---- --- ---- ---
<S> <C> <C> <C> <C>
First Quarter......................................... $4 3/4 $4 $5 5/8 $4 3/8
Second Quarter........................................ $4 1/2 $3 5/16 $5 3/8 $4 1/4
Third Quarter......................................... $3 15/16 $2 9/16 $6 1/16 $5 1/8
Fourth Quarter........................................ $4 1/16 $2 3/4 $5 5/8 $4 1/4
</TABLE>

The Partnership had approximately 1,445 holders of record of depositary
units as of February 23, 1999.

For the years 1998 and 1997, the quarterly cash distributions per unit paid
to unitholders were as follows:

<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
First Quarter............................................... $.02 $.15
Second Quarter.............................................. -- .08
Third Quarter............................................... -- .02
Fourth Quarter.............................................. -- --
---- ----
Total.................................................. $.02 $.25
==== ====
</TABLE>

Any future quarterly cash distributions to unitholders are expected to be
paid on or about the 10th day of March, June, September and December in each
year. Distributions will fluctuate due to oil and gas prices, production
volumes, operating costs and the timing and amount of capital expenditures and
divestment proceeds. (See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Cash Distribution Policy.")

ITEM 6. SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------------
1998 1997 1996 1995 1994
------- ------- ------- ------- -------
(MILLIONS OF DOLLARS, EXCEPT PER UNIT AMOUNTS)
<S> <C> <C> <C> <C> <C>
For the Period
Revenues......................................... $ 523 $ 728 $ 686 $ 552 $ 613
Income (loss) before cumulative effect of
accounting change(1).......................... $ (44) $ 239 $ 248 $ 99 $ 100
Net income (loss)(1)............................. $ (44) $ 239 $ 248 $ 99 $ (477)
Net income (loss) per unit before cumulative
effect of accounting change(1)................ $ (.10) $ .57 $ .59 $ .24 $ .24
Net income (loss) per unit(1).................... $ (.10) $ .57 $ .59 $ .24 $(1.13)
Cash distributions paid to unitholders........... $ 8 $ 105 $ 67 $ 194 $ 114
Cash distributions paid per unit................. $ .02 $ .25 $ .16 $ .46 $ .27
Weighted average units outstanding (in
thousands).................................... 421.2 421.2 421.2 421.2 421.2
Capital expenditures............................. $ 367 $ 410 $ 314 $ 206 $ 166
At End of Period
Total assets..................................... $1,374 $1,468 $1,299 $1,143 $1,181
Long-term debt (2)............................... $ 24 $ 38 $ 52 $ 62 $ 74
Partners' capital................................ $1,102 $1,154 $1,020 $ 839 $ 934
Book value per unit.............................. $ 2.62 $ 2.74 $ 2.42 $ 1.99 $ 2.22

</TABLE>

- ------------------------------

(1) Effective January 1, 1994, the Partnership adopted a new policy for
determining the ceiling test for its oil and gas properties. A one-time
non-cash charge of $577 million for the cumulative effect of the change was
recognized in the earnings for 1994. As a result of an impairment test
related to the application of Statement of Financial Accounting Standards
No. 121, the Partnership reported a non-cash write-down of assets of $75
million in the fourth quarter of 1998.

(2) Includes $24 million, $38 million, $51 million, $62 million and $72 million
of long-term debt due to the Company.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Management's discussion and analysis of the Partnership's financial
condition and results of operations which follow should be read in conjunction
with the Consolidated Financial Statements and Selected Financial Data included
in this report.

RESULTS OF OPERATIONS

The Partnership reported a net loss in 1998 of $44 million. The realized
oil price in 1998 decreased 28 percent to $13.58 per barrel and the realized
natural gas price decreased 13 percent to $2.10 per mcf. Exploration costs
increased 57 percent primarily from increased offshore dry hole costs and
increased geological and geophysical expense due to increased activity.
Depreciation, depletion and amortization expense increased 29 percent primarily
due to a non-cash write down of assets (see Note 6 to the Consolidated Financial
Statements).

Net income in 1997 was $239 million. Production volumes increased 2 percent
in 1997 compared to 1996 primarily due to offshore development. The realized oil
price in 1997 decreased 8 percent to $18.75 per barrel. The realized gas price
in 1997 increased 12 percent to $2.40 per mcf. Exploration costs increased 45
percent primarily from increased offshore dry hole costs and increased
geological and geophysical expense due to increased activity. Depreciation,
depletion and amortization expense increased 19 percent primarily because of
additional development and higher production volumes.

Net income in 1996 was $248 million. The realized oil price in 1996
increased 24 percent to $20.43 per barrel. The increase in 1996 followed a 12
percent increase in 1995 compared to 1994. The Partnership's

realized gas price in 1996 increased 24 percent to $2.14 per mcf. Total costs
and expenses decreased 3 percent to $438 million in 1996. Operating costs
decreased 14 percent in 1996 due to cost efficiency measures. Production taxes
increased 27 percent in 1996 due to higher prices.

LIQUIDITY AND CAPITAL RESOURCES

ED&A outlays were $398 million in 1998, $427 million in 1997 and $317
million in 1996. In 1998, 61 percent of the Partnership's total ED&A investment
was for development and acquisition and 39 percent was for exploration. In 1999,
in the absence of the planned merger of the Partnership, total ED&A outlays
would have been expected to be approximately $220 million of which 77 percent
was targeted for development and 23 percent for exploration. In 1998, the
Partnership replaced 88 percent of its production at an FD&A cost of $11.02 per
eb.

In 1998, cash flow from operating activities decreased $240 million
compared to 1997 primarily due to lower oil and gas prices and lower production
volumes. Cash flow from investing activities used $273 million in 1998 compared
to $421 million in 1997. Proceeds from divestments were $113 million higher in
1998 while capital expenditures were $43 million lower. Cash flow from financing
activities used $21 million in 1998 compared to a use of $117 million in 1997
primarily due to reduced distributions to unitholders in 1998.

In 1997, cash flow from operating activities increased $143 million
compared to 1996 primarily due to favorable increases in cash flow working
capital components. Cash flow from investing activities used $421 million in
1997 compared to $323 million in 1996. Capital expenditures were $96 million
higher in 1997 while proceeds from divestments were $7 million lower. Cash flow
from financing activities used $117 million in 1997 compared to a use of $78
million in 1996. Cash distributions paid to unitholders were $38 million higher
in 1997 than 1996.

In 1996, cash flow from operating activities increased $58 million from
1995 primarily due to higher oil and gas prices and lower costs and expenses
partially offset by lower production volumes. Cash flow from investing
activities used $323 million in 1996 compared to $144 million in 1995. Proceeds
from divestments were $67 million lower in 1996 while capital expenditures
increased by $108 million. Cash flow used for financing activities decreased by
$127 million in 1996 primarily because of the reduced distributions to
unitholders.

The Partnership adopted Statement of Financial Accounting Standards (SFAS)
No. 130, "Reporting Comprehensive Income" effective January 1, 1998. Total
comprehensive income and net loss are identical for the year ended December 31,
1998. Additionally, in January 1998, the Partnership adopted SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information," resulting
in the restatement of selected operating information in years prior to 1998.

In December 1997, the Partnership adopted SFAS No. 128, "Earnings per
Share" and SFAS No. 129, "Disclosure of Information about Capital Structure,"
resulting in no material change.

The Partnership's investing levels will be governed by its cash flow from
operating activities which will continue to be affected by prevailing oil and
gas prices, cost levels and production volumes. Volatility in oil and gas prices
experienced over the past several years is expected to continue. Any shortfall
in expected cash flow from operating activities may require adjustment of the
business plans. Options include deferral of discretionary ED&A outlays and the
sale of Partnership units. The Partnership's long-term cash generation
capability is ultimately tied to the value of proved reserves.

RESERVE REPLACEMENT

The ability to sustain cash flow is dependent, among other things, on the
level of the Partnership's oil and gas reserves, oil and gas prices and cost
containment. Replacement of proved reserves through extensions and discoveries,
improved recovery, purchases and revisions to prior reserve estimates in 1998
was 100 percent of liquids production and 78 percent of gas production. Reserve
replacement rates of liquids and gas were 185 and 119 percent in 1997 and 122
and 49 percent in 1996.

HEDGING ARRANGEMENTS

The Partnership from time to time has entered into commodity futures
contracts to manage its crude oil and natural gas price risk and to maintain
specified margins. Effective with the merger of Oryx into Kerr-McGee, the
Partnership has elected to eliminate the hedging program and all contracts have
been closed.

YEAR 2000 READINESS

In 1996, the Company established a formal Year 2000 Program (Program) to
assess and correct Year 2000 problems in both information technology and
non-informational technology systems. The Program is organized into two major
areas: business systems and facilities integrity. Business systems include
replacement and upgrade of computer hardware and software, including major
business applications, such as purchasing, inventory, engineering, financial,
human resources, etc. Facilities integrity encompasses telecommunications, plant
process controls, instrumentation and embedded chip systems as well as an
assessment of third party Year 2000 readiness.

As a result of the merger of Oryx with Kerr-McGee, the Company is
undertaking steps to minimize Year 2000 problems that might adversely impact the
Partnership.

To date, activities associated with business systems have included:

- inventory and assessment

- remediation and testing of legacy systems and hardware

- communication with critical business partners

Future activities will include:

- conversion of data from Oryx's financial, human resources, production,
technical and other systems into Year 2000 compliant systems utilized
by the Partnership

- remediating and testing certain Oryx legacy systems that will be
retained and utilized by the Partnership

- replacement of hardware and operating systems with Kerr-McGee Year
2000 compliant systems

- Year 2000 integration testing of converted and remediated systems to
ensure proper functionality beyond 2000.

These activities are scheduled to be complete near the end of third
quarter, 1999. Costs expended to date by the Partnership are approximately $1.4
million. Total forecasted costs are approximately $3.6 million, but are being
re-evaluated by the Company as a result of the merger. However, management
believes that the costs are not material to the Partnership's results of
operations, financial position or cash flow.

To date, major activities associated with facilities integrity have
included:

- inventory and assessment

- remediation

- testing and verification

Inventory and assessment activities are essentially complete with
remediation and testing and verification scheduled for completion in third
quarter, 1999. Additional activities will be incorporated and include
communication with third party vendors, suppliers and partners, and development
of contingency plans. These activities are expected to be completed in late
third quarter or early fourth quarter, 1999.

Costs expended to date have been minor for facilities associated with the
Partnership. Forecasted costs to complete these activities are approximately
$300,000, but are being re-evaluated by the Company as a result of the merger.

Management believes that the Program is comprehensive and reduces Year 2000
risks associated with internal systems to a manageable level. Regardless of
management's efforts to assess and verify readiness there can be no assurance
that all entities affecting the Company will be Year 2000 ready. To address
these concerns, contingency plans will be developed. However, failure by a
third party to remediate their Year 2000 issues in a timely manner could have
a material effect to the Partnership's result of operations and cash flows in
a particular quarter or annual period. Failure of a critical operating or
safety component, or failure by a key third party supplier or customer are
believed to be the most reasonably likely worst case scenarios that could
impact the Partnership.

ENVIRONMENTAL

The Partnership's oil and gas operations are subject to stringent
environmental regulations. The Company is dedicated to the preservation of the
environment and has committed significant resources to comply with such
regulations. Although the Partnership has been named as a potentially
responsible party at sites related to past operations, the Company believes the
Partnership is in general compliance with applicable governmental regulations
and that the potential costs to it, in the aggregate, are not material to its
financial condition. However, risks of substantial costs and liabilities are
inherent in the oil and gas business. Should other developments occur, such as
increasingly strict environmental laws, regulations and enforcement policies or
claims for damages resulting from the Partnership's operations, they could
result in additional costs and liabilities in the future. (See Note 12 to the
Consolidated Financial Statements.)

CASH DISTRIBUTION POLICY

The Partnership funds its capital outlays from internally generated funds,
including cash proceeds from asset sales and makes distributions of only that
cash remaining after such outlays.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL
AND OPERATING INFORMATION

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................... 14
Financial Statements:
Consolidated Statements of Income for the Years Ended
December 31, 1998, 1997 and 1996....................... 15
Consolidated Balance Sheets as of December 31, 1998 and
1997................................................... 16
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996....................... 17
Notes to Consolidated Financial Statements................ 18
Supplementary Financial and Operating
Information -- (Unaudited):
Oil and Gas Data.......................................... 30
Quarterly Financial Information........................... 33
Quarterly Operating Information........................... 34

</TABLE>

SUN ENERGY PARTNERS, L.P.
REPORT OF INDEPENDENT ACCOUNTANTS

To the Partners of Sun Energy Partners, L.P. and the Board of Directors of
Oryx Energy Company:

In our opinion, the accompanying consolidated balance sheets of Sun Energy
Partners, L.P. and its Subsidiaries and the related consolidated statements of
income and cash flows present fairly, in all material respects, the consolidated
financial position of Sun Energy Partners, L.P. and its Subsidiaries as of
December 31, 1998 and 1997 and the consolidated results of their operations and
their cash flows for each of the three years in the period ended December 31,
1998 in conformity with generally accepted accounting principles. These
financial statements are the responsibility of Oryx Energy Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.

/s/ PRICEWATERHOUSECOOPERS LLP

Dallas, Texas
February 22, 1999, except for Note 14 as to which
the date is March 9, 1999

SUN ENERGY PARTNERS, L.P.

CONSOLIDATED STATEMENTS OF INCOME
(MILLIONS OF DOLLARS, EXCEPT PER UNIT AMOUNTS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Revenues
Oil and gas..................................... $ 501 $ 738 $ 700
Other -- net (Notes 3 and 4).................... 22 (10) (14)
------ ------ ------
523 728 686
------ ------ ------
Costs and Expenses
Operating costs................................. 126 138 139
Production taxes (Note 5)....................... 26 39 38
Exploration costs............................... 96 61 42
Depreciation, depletion and amo................. 271 210 177
General and administrative expense (Note 3)..... 40 41 41
Interest and debt expense (Note 3).............. 20 15 17
Interest capitalized............................ (12) (15) (16)
------ ------ ------
567 489 438
------ ------ ------
Net Income (Loss)................................. $ (44) $ 239 $ 248
====== ====== ======
Net Income (Loss) Per Unit........................ $ (.10) $ .57 $ .59
====== ====== ======
Cash Distributions Paid to Unitholders............ $ 8 $ 105 $ 67
====== ====== ======
Cash Distributions Paid Per Unit.................. $ .02 $ .25 $ .16
====== ====== ======
Weighted Average Units Outstanding (In Millions).. 421.2 421.2 421.2
====== ====== ======
</TABLE>

(See Accompanying Notes)

SUN ENERGY PARTNERS, L.P.

CONSOLIDATED BALANCE SHEETS
(MILLIONS OF DOLLARS)

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31
---------------
1998 1997
------ ------
<S> <C> <C>
Current Assets
Cash and cash equivalents................................. $ 6 $ 2
Accounts receivable and other current assets.............. 65 124
------ ------
Total Current Assets........................................ 71 126
Properties, Plants and Equipment (Note 6)................... 1,221 1,254
Investment in Affiliate (Note 1)............................ 82 88
------ ------
Total Assets................................................ $1,374 $1,468
====== ======

LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities
Advances from affiliate (Note 3).......................... $ 88 $ 49
Accounts payable.......................................... 58 80
Accrued liabilities (Note 7).............................. 50 84
Current portion of long-term debt due affiliate (Note
8)..................................................... 14 13
Current portion of long-term debt (Note 8)................ 1 1
------ ------
Total Current Liabilities................................... 211 227
Long-Term Debt Due Affiliate (Note 8)....................... 24 38
Deferred Credits and Other Liabilities (Note 12)............ 37 49
Commitments and Contingent Liabilities (Note 9)
Partners' Capital (Notes 10 and 11)
Limited partnership interests............................. 338 354
General partnership interests............................. 764 800
------ ------
Partners' Capital........................................... 1,102 1,154
------ ------
Total Liabilities and Partners' Capital..................... $1,374 $1,468
====== ======
</TABLE>

- ------------------------------

The successful efforts method of accounting is followed.

(See Accompanying Notes)

18<PAGE>
<PAGE>

SUN ENERGY PARTNERS, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(MILLIONS OF DOLLARS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------
1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
Cash and Cash Equivalents From Operating
Activities
Net Income (Loss).............................. $ (44) $ 239 $ 248
Adjustments to reconcile net income (loss)
to net cash from operating activities
Depreciation, depletion and amortization... 271 210 177
Dry hole costs and leasehold impairment.... 52 27 19
Loss (gain) on sale of assets.............. (21) 5 2
Other...................................... (2) 5 15
----- ----- -----
256 486 461
Changes in working capital:
Accounts receivable and other current assets 59 12 (40)
Accounts payable, accrued liabilities and
advances from Affiliate.................... (17) 40 (26)
----- ----- -----
Net Cash Flow Provided From Operating Activities. 298 538 395
----- ----- -----
Cash and Cash Equivalents From Investing
Activities
Capital expenditures............................ (367) (410) (314)
Proceeds from divestments....................... 114 1 8
Other........................................... (20) (12) (17)
----- ----- -----
Net Cash Flow Used For Investing Activities..... (273) (421) (323)
----- ----- -----
Cash and Cash Equivalents From Financing
Activities
Proceeds from borrowings.................. ... -- -- 2
Repayments of long-term debt.................. (13) (12) (13)
Cash distributions paid to unitholders........ (8) (105) (67)
----- ----- -----
Net Cash Flow Used For Financing Activities..... (21) (117) (78)
----- ----- -----
Changes in Cash and Cash Equivalents............ 4 -- (6)
Cash and Cash Equivalents at Beginning of Year.. 2 2 8
----- ----- -----
Cash and Cash Equivalents at End of Year........ $ 6 $ 2 $ 2
===== ===== =====
</TABLE>

(See Accompanying Notes)

19<PAGE>
<PAGE>

SUN ENERGY PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Control

Sun Energy Partners operates through Sun Operating Limited Partnership, a
Delaware limited partnership, and several other operating partnerships
(collectively, the Operating Partnerships). In all of the partnerships which
comprise the Operating Partnerships, Sun Energy Partners holds a 99 percent
interest as the sole limited partner, while the Company holds a 1 percent
interest as the managing general partner.

Sun Energy Partners and the Operating Partnerships (collectively, the
Partnership) have no officers or employees. The officers and employees of the
Company perform all management functions.

Basis of Presentation

The Partnership's consolidated financial statements have been prepared
using the proportionate method of consolidation for Sun Energy Partners and its
99 percent interest in the Operating Partnerships. Such financial statements are
prepared in accordance with generally accepted accounting principles which is
different from the basis used for reporting taxable income or loss to
unitholders.

Cash Equivalents

The Partnership considers highly liquid investments with original
maturities of less than 3 months to be cash equivalents. Cash equivalents are
stated at cost which approximates market value.

Properties, Plants and Equipment

The successful efforts method of accounting is followed for costs incurred
in oil and gas operations.

Capitalization Policy. Acquisition costs are capitalized when
incurred. Costs of unproved properties are transferred to proved properties
when proved reserves are added. Exploration costs, including geological and
geophysical costs and costs of carrying unproved properties, are charged
against income as incurred. Exploratory drilling costs are capitalized
initially; however, if it is determined that an exploratory well did not
find proved reserves, such capitalized costs are charged to expense, as dry
hole costs, at that time. Development costs are capitalized. Costs incurred
to operate and maintain wells and equipment are expensed.

Leasehold Impairment and Depreciation, Depletion and
Amortization. Periodic valuation provisions for impairment of capitalized
costs of unproved properties are expensed. The acquisition costs of proved
properties are depleted by the unit-of-production method based on proved
reserves by field. Capitalized exploratory drilling costs which result in
the addition of proved reserves and development costs are amortized by the
unit-of-production method based on proved developed reserves by field. In
addition, unamortized capital costs at a field level are reduced to fair
value if the sum of expected undiscounted future cash flows is less than
net book value.

<PAGE>
<PAGE>
SUN ENERGY PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Dismantlement, Restoration and Abandonment Costs. Such costs are
estimated and accrued as a component of depreciation, depletion and
amortization expense; actual costs are charged to the accrual.

Retirements. Gains and losses on the disposals of fixed assets are
generally reflected in income. For certain property groups, the cost less
salvage value of property sold or abandoned is charged to accumulated
depreciation, depletion and amortization except that gains and losses for
these groups are taken into income for unusual retirements or retirements
involving an entire property group.

Investment in Affiliate

Effective in 1988, Oryx Energy Company issued three million shares of its
$1 par value common stock to an operating partnership of the Partnership in
exchange for certain assets. These shares were converted into 1,107,000 shares
of Kerr-McGee common stock consistent with the terms of the Kerr-McGee/Oryx
merger agreement (Note 14) and continue to be non-voting and legally restricted
from disposition. The Partnership accounts for this investment under the cost
method, whereby investment income is recognized by the Partnership if and when
common dividends are received from the Company.

Capitalized Interest

The Partnership capitalizes interest costs incurred as a result of the
acquisition and installation of significant assets.

Income Taxes

The Operating Partnerships and Sun Energy Partners are treated as
partnerships for income tax purposes and, as a result, income or loss of the
Partnership is includable in the tax returns of the individual unitholders.
Accordingly, no recognition has been given to income taxes in the financial
statements.

At December 31, 1998, 1997 and 1996, the Partnership's financial reporting
bases of assets and liabilities exceeded the tax bases of its assets and
liabilities (net temporary differences) by $654 million, $758 million and $596
million.

Cash Flows

For purposes of reporting cash flows, cash and cash equivalents includes
cash, highly liquid investments with remaining maturities of less than 3 months
(see "Cash Equivalents", above) and advances to affiliate.

Interest paid totaled $20 million, $15 million and $17 million in 1998,
1997 and 1996.

Sales of Oil and Gas

Sales of oil and gas are recorded on the entitlement method. Differences
between actual production and entitlements result in a receivable when
underproduction occurs and a payable when overproduction occurs.

During 1998, 1997 and 1996, sales of oil to the Partnership's top purchaser
totaled approximately 16 percent, 18 percent and 8 percent, and sales of natural
gas to the Partnership's top purchaser totaled 50 percent, 52 percent and 51
percent. The Partnership believes that the loss of any major purchaser would not
have a material adverse effect on its business.

SUN ENERGY PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Oil and Gas Price Hedging Activity

The Partnership, from time to time, enters into arrangements to hedge the
impact of price fluctuations on anticipated crude oil and natural gas sales.
Gains or losses on hedging activities are recognized in oil and gas revenues in
the period in which the hedged production is sold (Note 2).

Environmental Costs

The Partnership establishes reserves for environmental liabilities as
incurred (Note 12).

Statement Presentation

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

2) FINANCIAL INSTRUMENTS

Derivatives

As discussed in Note 1, the Partnership enters into hedging arrangements
for crude oil and natural gas prices with major financial institutions. The
Partnership does not enter into derivative transactions for trading purposes.

At December 31, 1998, the Partnership was a party to crude oil collar
contracts to hedge about 7 percent of its estimated 1999 crude oil production at
an average floor price of $15.85 per barrel and an average ceiling price of
$17.35 per barrel. Approximately 31 percent of its estimated 1999 natural gas
production was hedged at an average floor price of $2.29 per mmbtu and an
average ceiling price of $2.47 per mmbtu. At December 31, 1997, the Partnership
was a party to crude oil and natural gas contracts to hedge about 9 percent of
its estimated 1998 crude oil production at an average floor price of $20.17 per
barrel and an average ceiling price of $21.24 per barrel and 20 percent of its
estimated 1998 natural gas production at an average floor price of $2.19 per
mmbtu and an average ceiling price of $2.40 per mmbtu. These arrangements serve
to reduce the volatility associated with prices of crude oil and natural gas.
The aggregate carrying values of these assets at December 31, 1998 and 1997 were
$7 million and $2 million and the aggregate fair values, subject to daily
fluctuation, based on quotes from brokers, were approximately $18 million and $5
million.

The above mentioned derivative contracts expose the Partnership to credit
risk. The Partnership has established controls to manage this risk and closely
monitors the creditworthiness of its counterparties which are major financial
institutions. In the normal course of business, collateral is not required for
financial instruments with credit risk. The Partnership believes that losses
from nonperformance are unlikely to occur.

<PAGE>
<PAGE>
SUN ENERGY PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2) FINANCIAL INSTRUMENTS (CONTINUED)
Other Financial Instruments

At December 31, 1998 and 1997, the carrying values of the Partnership's
long-term debt, including amounts due within one year, were $39 million and $52
million (Note 8). At December 31, 1998 and 1997, the aggregate fair values of
the Partnership's long-term debt were approximately $41 million and $55 million,
estimated primarily based on current rates offered to the Partnership for debt
of the same remaining maturities.

3) RELATED PARTY TRANSACTIONS

Advances to/from Affiliate

The Company has served as the Partnership's lender and borrower of funds
and a clearing-house for the settlement of intercompany receivables and
payables. Deposits earn interest at a rate equal to the rate paid by a major
money market fund. Demand loans bear interest at a rate based on the prime rate.

Long-Term Debt Due Affiliate

The Partnership is indebted to the Company under a 9.75% note due 1999-2001
(Note 8).

Sales of Natural Gas

During the fourth quarter of 1995, the Partnership, Apache Corporation and
Parker & Parsley Petroleum Company formed Producers Energy Marketing Company,
LLC (ProEnergy) to jointly market natural gas. Full operations commenced in
April 1996. In 1997, Pioneer Natural Resources Company (formerly Parker &
Parsley Petroleum Company) terminated its relationship with ProEnergy. As of
December 31, 1997 the Partnership had an ownership interest of 40 percent in
ProEnergy; however, ownership varied based on the Partnership's share of natural
gas throughput for the preceding quarter. The Partnership accounted for its
investment in ProEnergy using the equity method, and as of December 31, 1997 had
an investment in ProEnergy of $4 million. The Partnership sold substantially all
of its natural gas production to ProEnergy at index prices. On June 18, 1998,
the Partnership sold its interest in ProEnergy at a gain of $15 million and
entered into an agreement with the purchaser whereby the purchaser would market
the Partnership's gas production for up to ten years through ProEnergy. Natural
gas sales to ProEnergy totaled $82 million for the six months ended June 30,
1998, $219 million for the year ended December 31, 1997 and $193 million for the
nine months ended December 31, 1996. At December 31, 1997, the Partnership had
an outstanding receivable balance of $22 million from ProEnergy. On June 30,
1998, the Partnership had an outstanding receivable balance of $19 million from
ProEnergy which was subsequently collected.

Direct and Indirect Cost

The Company is reimbursed by the Partnership for all direct costs incurred
in performing management functions and indirect costs (including payroll and
payroll related costs and the cost of postemployment benefits and management
incentive plans) allocable to the Partnership. The full cost of direct and
indirect costs incurred on behalf of the Partnership by the Company is allocated
to the Partnership based on services rendered and extent of use. Such costs,
which are charged principally to production cost, exploration cost and general
and administrative expense, totaled $57 million, $61 million and $61 million for
the years 1998, 1997 and 1996. The Company does not receive any carried
interests, promotions, back-ins or other similar compensation as the general
partner of the Partnership.

<PAGE>
<PAGE>
SUN ENERGY PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3) RELATED PARTY TRANSACTIONS (CONTINUED)
Interest Income

Interest income received from the Company, which is reflected in
"Other-net" in the Consolidated Statements of Income, was earned on advances to
the Company and totaled $3 million, $4 million and $4 million during the years
1998, 1997 and 1996.

Interest Cost

Interest cost paid to the Company, which is included in "Interest and debt
expense" in the Consolidated Statements of Income, was primarily incurred on
long-term debt and advances due the Company and totaled $20 million, $14 million
and $16 million during the years 1998, 1997 and 1996 (Note 8).

4) OTHER-NET

Other-net consists of the following:

<TABLE>
<CAPTION>
1998 1997 1996
----- ----- -----
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Interest income......................................... $ 3 $ 4 $ 4
Gain (loss) on sale of assets........................... 21 (5) (2)
Miscellaneous........................................... (2) (9) (16)
--- ---- ----
$22 $(10) $(14)
=== ==== ====
</TABLE>

5) PRODUCTION TAXES

Production taxes consisted of the following:

<TABLE>
<CAPTION>
1998 1997 1996
----- ----- ----
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Severance................................................$15 $28 $29
Property taxes........................................... 11 11 9
--- --- ---
$26 $39 $38
=== === ===
</TABLE>

<PAGE>
<PAGE>
SUN ENERGY PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6) PROPERTIES, PLANTS AND EQUIPMENT

At December 31, the Partnership's properties, plants and equipment and
accumulated depreciation, depletion and amortization were as follows:

<TABLE>
<CAPTION>
1998 1997
--------- ---------
(MILLIONS OF DOLLARS)
<S> <C> <C>
Gross Investment
Proved properties................................... $3,716 $3,840
Unproved properties................................. 126 75
Other................................................ 11 8
----- ------
3,853 3,923
------ ------
Less Accumulated Depreciation, Depletion and Amortization
Proved properties*.................................. 2,628 2,666
Other............................................... 4 3
------ ------
2,632 2,669
------ ------
Net Investment............................................$1,221 $1,254
====== ======
</TABLE>
- ------------------------------
* Includes $28 million for dismantlement, restoration and abandonment at
December 31, 1998 and 1997.

As a result of an impairment test related to the application of SFAS No.
121, the Partnership reported a non-cash write-down of assets of $75 million in
1998. The Partnership deemed that certain of its oil and gas fields, primarily
offshore, were impaired because the assets were no longer expected to recover
their net book value through future estimated cash flows. The lower estimated
cash flows result primarily from continued weakness in oil and gas prices. In
addition, minor downward reserve revisions were deemed necessary for certain oil
and gas fields. The prices used in performing the impairment analysis of future
cash flows are the Partnership's investment guideline prices, developed
internally giving consideration to currently available price forecasts for 1999
of $13.00 to $17.50 per barrel and $1.80 to $2.40 per mmbtu as published by
various energy industry consultants and investment banks. The Partnership used
crude oil prices of $14.50 per barrel in 1999 escalating to $18.50 per barrel in
2001 and increased by $.50 per barrel annually thereafter and natural gas prices
of $2.10 per mmbtu in 1999 escalating to $2.20 per mmbtu in 2000 and increased
<PAGE>
<PAGE>

by $.05 per mmbtu annually thereafter. A discount rate of 10% based on the
Partnership's approximate weighted-average cost of capital was used. The
Partnership used proven reserves and probable reserves when justified by actual
drilling results and planned additional drilling. The impairment loss is
included in "Depreciation, depletion and amortization" in the Consolidated
Statements of Income. The impairment represents about 6% of the Partnership's
oil and gas assets.

7) ACCRUED LIABILITIES

At December 31, the Partnership's accrued liabilities were comprised of the
following:

<TABLE>
<CAPTION>
1998 1997
---- ----
(MILLIONS OF
DOLLARS)
<S> <C> <C>
Drilling and operating costs................................ $46 $62
Taxes payable............................................... 4 13
Other....................................................... -- 9
--- ---
$50 $84
=== ===
</TABLE>

<PAGE>
<PAGE>
SUN ENERGY PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8) LONG-TERM DEBT

At December 31, the Partnership's long-term debt consisted of the
following:

<TABLE>
<CAPTION>
1998 1997
---- ----
(MILLIONS OF
DOLLARS)
<S> <C> <C>
9.75% note payable to affiliate, due 1999-2001, payable in
quarterly installments.................................... $38 $51
Capitalized lease obligations due 1999...................... 1 1
--- ---
39 52
Less: Current portion of note payable to affiliate.......... 14 13
Current portion of capitalized lease obligations...... 1 1
--- ---
$24 $38
=== ===
</TABLE>

Repayment obligations under the Partnership's long-term debt due affiliate
are $14 million, $16 million, and $8 million in 1999, 2000 and 2001.

9) COMMITMENTS AND CONTINGENT LIABILITIES

The Partnership has operating leases for office space and other property
and equipment. Total rental expense for such leases for the years 1998, 1997 and
1996 was $13 million, $12 million and $15 million. Under contracts existing as
of December 31, 1998, future minimum annual rentals applicable to noncancellable
operating leases that have initial or remaining lease terms in excess of 1 year
were as follows (in millions of dollars):

<TABLE>
<S> <C>
Year Ending December 31:
1999...................................................... $ 3
2000...................................................... 2
2001...................................................... 2
2002...................................................... 1
---
Total minimum payments required........................ $ 8
===
</TABLE>

Several legal and administrative proceedings are pending against the
Partnership. Although the ultimate outcome of these proceedings cannot be
ascertained at this time, and it is reasonably possible that some of them could
be resolved unfavorably to the Partnership, management of the Company believes
that any liabilities which may arise would not be material to the Partnership's
financial position, results of operations or liquidity.

SUN ENERGY PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10) PARTNERS' CAPITAL

<TABLE>
<CAPTION>
LIMITED PARTNERS GENERAL PARTNER
------------------------------------------------------- -----------------
ORYX ENERGY ORYX ENERGY
PUBLIC COMPANY TOTAL COMPANY TOTAL
--------------- ----------------- ----------------- ----------------- -----------------
UNITS DOLLARS UNITS DOLLARS UNITS DOLLARS UNITS DOLLARS UNITS DOLLARS
----- ------- ------- ------- ------- ------- ------- ------- ------- -------
(DOLLARS IN MILLIONS, UNITS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
December 31, 1995............... 7,543 $14 121,628 $243 129,171 $257 292,000 $582 421,171 $ 839
Cash distributions............ -- (1) -- (20) -- (21) -- (46) -- (67)
Net income.................... -- 5 -- 72 -- 77 -- 171 -- 248
----- --- ------- ---- ------- ---- ------- ---- ------- ------
December 31, 1996............... 7,543 18 121,628 295 129,171 313 292,000 707 421,171 1,020
Cash distributions............ -- (2) -- (30) -- (32) -- (73) -- (105)
Net income.................... -- 4 -- 69 -- 73 -- 166 -- 239
----- --- ------- ---- ------- ---- ------- ---- ------- ------
December 31, 1997............... 7,543 20 121,628 334 129,171 354 292,000 800 421,171 1,154
Cash distributions............ -- -- -- (2) -- (2) -- (6) -- (8)
Net loss...................... -- (1) -- (13) -- (14) -- (30) -- (44)
----- --- ------- ---- ------- ---- ------- ---- ------- ------
December 31, 1998............... 7,543 $19 121,628 $319 129,171 $338 292,000 $764 421,171 $1,102
===== === ======= ==== ======= ==== ======= ==== ======= ======
</TABLE>

11) CASH DISTRIBUTIONS

Distributable cash is defined as revenues (including interest income) less
operating costs; seismic, geological and geophysical costs (including related
costs); payments of principal of and interest on debt; general and
administrative expenses including reimbursements to the Company as managing
general partner; capital expenditures (net of proceeds from divestments); and
cash exploration costs. No deduction is made for depreciation, depletion and
amortization.

Sun Energy Partners' quarterly cash distributions per unit for the years
1998, 1997 and 1996 were as follows:

<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
First Quarter............................................$.02 $.15 $.02
Second Quarter........................................... -- .08 .07
Third Quarter............................................. -- .02 .06
Fourth Quarter............................................ -- -- .01
--- ---- ----
Total.................................................02 $.25 $.16
=== ==== ====
</TABLE>

12) DEFERRED CREDITS AND OTHER LIABILITIES

At December 31, the Partnership's deferred credits and other liabilities
were comprised of the following:

<TABLE>
<CAPTION>
1998 1997
---- ----
(MILLIONS OF
DOLLARS)
<S> <C> <C>
Accrued environmental cleanup costs......................... $14 $15
Other....................................................... 23 34
--- ---
$37 $49
=== ===
</TABLE>

Environmental cleanup costs have been accrued in response to the
identification of several sites that require cleanup based on environmental
pollution, some of which have been designated as superfund sites by the
Environmental Protection Agency (EPA). The Partnership has been named as a
Potentially Responsible Party (PRP) at four sites pursuant to the Comprehensive
Environmental Response, Compensation, and

SUN ENERGY PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12) DEFERRED CREDITS AND OTHER LIABILITIES (CONTINUED)
Liability Act of 1980, as amended. At two of these sites, the Partnership has
been named as a de minimis party and therefore expects its liability to be
small. At a third site, the Partnership is reviewing its options and anticipates
that it will participate in steering committee activities with the EPA. At the
fourth and largest site, the Operating Industries, Inc. site in California, the
Partnership has participated in a steering committee consisting of 139
companies. The steering committee and other PRPs previously entered into two
partial consent decrees with the EPA providing for remedial actions which have
been or are to be completed. The steering committee has successfully negotiated
a third partial consent decree which provides for the following remedial
actions: a clay cover, methane capturing wells and leachate destruction
facilities. The remaining work at the site involves groundwater evaluation and
long-term operation and maintenance. The Partnership is a member of the group
that is responsible for carrying out the first phase of the work, which is
expected to take 5 to 8 years. Completion of all phases is estimated to take up
to 30 years. The maximum liability of the group, which is joint and several for
each member of the group, is expected to range from approximately $450 million
to $600 million, of which the Partnership's share is expected to be
approximately $10 million. Cleanup costs are payable over the period that the
work is completed.

Based on the facts outlined above and the Partnership's ongoing analyses of
the actions where it has been identified as a PRP, the Partnership believes that
it has accrued sufficient reserves to absorb the ultimate cost of such actions
and that such costs therefore will not have a material impact on the
Partnership's liquidity, capital resources or financial condition. While
liability at superfund sites is typically joint and several, the Partnership has
no reason to believe that defaults by other PRPs will result in liability of the
Partnership materially larger than expected.

In October 1996, Statement of Position (SOP) 96-1, "Environmental
Remediation Liabilities," was issued. It required companies to recognize the
costs of environmental remediation on an accrual basis. The Partnership has and
continues to recognize the costs required by the SOP, therefore, adoption in
1997 had no material impact on its financial position or results of operations.

13) GEOGRAPHIC SEGMENT INFORMATION

Sales of oil to the Partnership's top purchaser in 1998, 1997 and 1996
totaled approximately 16, 18 and 8 percent of oil revenue. Sales of gas to the
Partnership's top purchaser in 1998, 1997 and 1996 totaled approximately 50, 52
and 51 percent of gas revenue. The Partnership believes that the loss of any
major purchaser would not have a material adverse effect on the Partnership's
business.

<PAGE>
<PAGE>
SUN ENERGY PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

13) GEOGRAPHIC SEGMENT INFORMATION (CONTINUED)
Financial information by segment, as utilized by management of the Company
for making operating decisions, for the years ended December 31, 1998, 1997 and
1996 is summarized as follows:

<TABLE>
<CAPTION>
ONSHORE OFFSHORE TOTAL
------- -------- ------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
December 31, 1998
Revenues
Oil and gas......................................... $283 $ 218 $ 501
Gain on sale of assets.............................. 21 -- 21
Other............................................... (2) -- (2)
---- ----- ------
Total Revenues......................................... 302 218 520
---- ----- ------
Operating Expenses
Operating costs..................................... 69 57 126
Production taxes.................................... 26 -- 26
Exploration costs................................... 26 70 96
Depreciation, depletion and amortization............ 78 193 271
---- ----- ------
Total Operating Expenses............................... 199 320 519
---- ----- ------
Operating Profit (Loss)................................ $103 $(102) 1
==== =====
General and administrative expense.................. (40)
Interest, net....................................... (5)
------
Net Loss............................................... $ (44)
======
Capital Expenditures................................... $ 70 $ 297* $ 367
==== ===== ======
Total Assets........................................... $654 $ 720 $1,374
==== ===== ======
</TABLE>

- ------------------------------

* Includes capitalized interest of $12 million.

<PAGE>
<PAGE>
SUN ENERGY PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

13) GEOGRAPHIC SEGMENT INFORMATION (CONTINUED)

<TABLE>
<CAPTION>
ONSHORE OFFSHORE TOTAL
------- -------- ------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
December 31, 1997
Revenues
Oil and gas......................................... $440 $ 298 $ 738
Loss on sale of assets.............................. (5) -- (5)
Other............................................... (9) -- (9)
---- ----- ------
Total Revenues......................................... 426 298 724
---- ----- ------
Operating Expenses
Operating costs..................................... 79 59 138
Production taxes.................................... 39 -- 39
Exploration costs................................... 13 48 61
Depreciation, depletion and amortization............ 90 120 210
---- ----- ------
Total Operating Expenses............................... 221 227 448
---- ----- ------
Operating Profit....................................... $205 $ 71 276
==== =====
General and administrative expense.................. (41)
Interest, net....................................... 4
------
Net Income............................................. $ 239
======
Capital Expenditures................................... $126 $ 284* $ 410
==== ===== ======
Total Assets........................................... $788 $ 680 $1,468
==== ===== ======
</TABLE>

- ------------------------------

* Includes capitalized interest of $15 million.

<PAGE>
<PAGE>
SUN ENERGY PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

13) GEOGRAPHIC SEGMENT INFORMATION (CONTINUED)

<TABLE>
<CAPTION>
ONSHORE OFFSHORE TOTAL
------- -------- ------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
December 31, 1996
Revenues
Oil and gas......................................... $440 $ 260 $ 700
Loss on sale of assets.............................. (2) -- (2)
Other............................................... (16) -- (16)
---- ----- ------
Total Revenues......................................... 422 260 682
---- ----- ------
Operating Expenses
Operating costs..................................... 82 57 139
Production taxes.................................... 38 -- 38
Exploration costs................................... 9 33 42
Depreciation, depletion and amortization............ 99 78 177
---- ----- ------
Total Operating Expenses............................... 228 168 396
---- ----- ------
Operating Profit....................................... $194 $ 92 286
==== =====
General and administrative expense.................. (41)
Interest, net....................................... 3
------
Net Income............................................. $ 248
======
Capital Expenditures................................... $ 86 $ 228* $ 314
==== ===== ======
Total Assets........................................... $792 $ 507 $1,299
==== ===== ======
</TABLE>

- ------------------------------

* Includes capitalized interest of $16 million.

14) SUBSEQUENT EVENTS

Effective February 26, 1999, Oryx merged into Kerr-McGee.

On March 9, 1999, Kerr-McGee, as managing general partner, announced that
its Board of Directors had approved a plan to merge Sun Energy Partners with
Kerr-McGee Energy (an indirect wholly-owned subsidiary of Kerr-McGee). As part
of the transaction, each of the publicly held limited partnership units will be
converted solely into the right to receive $4.52 in cash, and as a result,
Kerr-McGee will own 100% of Sun Energy Partners. The transaction is subject to
the expiration of the Hart-Scott-Rodino waiting period and other customary
closing conditions and regulatory approvals, and is expected to be completed by
the end of the third quarter, 1999.

31
<PAGE>
<PAGE>

SUN ENERGY PARTNERS, L.P.

SUPPLEMENTARY FINANCIAL
AND OPERATING INFORMATION (UNAUDITED)

OIL AND GAS DATA

CAPITALIZED COSTS

<TABLE>
<CAPTION>
DECEMBER 31
----------------------
1998 1997
--------- ---------
(MILLIONS OF DOLLARS)
<S> <C> <C>
Onshore:
Proved properties......................................... $1,881 $2,218
Unproved properties....................................... 2 4
------ ------
Total capitalized costs................................... 1,883 2,222
Less accumulated depreciation, depletion and
amortization........................................... 1,450 1,680
------ ------
Net capitalized costs..................................... $ 433 $ 542
====== ======
Offshore:
Proved properties......................................... $1,835 $1,622
Unproved properties....................................... 124 71
------ ------
Total capitalized costs................................... 1,959 1,693
Less accumulated depreciation, depletion and
amortization........................................... 1,178 986
------ ------
Net capitalized costs..................................... $ 781 $ 707
====== ======
</TABLE>

COSTS INCURRED IN OIL AND GAS PRODUCING ACTIVITIES

<TABLE>
<CAPTION>
1998 1997 1996
----- ----- -----
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Onshore:
Property acquisition costs:
Proved................................................. $ -- $ 9 $ 6
Unproved............................................... -- 2 --
Exploration costs......................................... 23 13 12
Development costs......................................... 68 111 76
---- ---- ----
$ 91 $135 $ 94
==== ==== ====
Offshore:
Property acquisition costs:
Proved................................................. $ 2 $ -- $ --
Unproved............................................... 62 30 24
Exploration costs......................................... 70 77 33
Development costs*........................................ 173 185 166
---- ---- ----
$307 $292 $223
==== ==== ====
</TABLE>

- ---------------
* Excludes capitalized interest of $12 million, $15 million and $16 million for
1998, 1997 and 1996.

EXPLORATION COSTS
<TABLE>
<CAPTION>
1998 1997 1996
----- ----- -----
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Onshore
Dry hole costs............................................ $ 6 $-- $--
Leasehold impairment...................................... 7 4 1
Geological and geophysical................................ 12 10 9
--- --- ---
$25 $14 $10
=== === ===
Offshore
Dry hole costs............................................ $39 $23 $18
Geological and geophysical................................ 29 21 13
Other..................................................... 3 3 1
--- --- ---
$71 $47 $32
=== === ===
</TABLE>
ESTIMATED NET QUANTITIES OF PROVED OIL AND GAS RESERVES

Proved reserve quantities were based on estimates prepared by Company
engineers in accordance with guidelines established by the Securities and
Exchange Commission and were reviewed by Gaffney, Cline & Associates, Inc.,
independent petroleum engineers. The Partnership considers such estimates to be
reasonable; however, due to inherent uncertainties and the limited nature of
reservoir data, estimates of underground reserves are imprecise and subject to
change over time as additional information becomes available.

There has been no favorable or adverse event that has caused a significant
change in estimated proved reserves since December 31, 1998. The Partnership has
no long-term supply agreements or contracts with governments or authorities in
which it acts as producer nor does it have any interest in oil and gas
operations accounted for by the equity method. All reserves are located onshore
and offshore within the United States.
<PAGE>
<PAGE>

<TABLE>
<CAPTION>
CRUDE OIL AND CONDENSATE NATURAL GAS LIQUIDS NATURAL GAS*
(MILLIONS OF BARRELS) (MILLIONS OF BARRELS) (BILLIONS OF CUBIC FEET)
---------------------------- ---------------------------- ----------------------------
ONSHORE OFFSHORE TOTAL ONSHORE OFFSHORE TOTAL ONSHORE OFFSHORE TOTAL
------- -------- ----- ------- -------- ----- ------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PROVED RESERVES
BALANCE AT DECEMBER 31, 1995....... 120 66 186 15 3 18 813 472 1,285
Revisions of previous estimates.... 5 4 9 3 (1) 2 (10) (12) (22)
Improved recovery.................. 1 -- 1 -- -- -- -- -- --
Purchases of minerals in place..... 3 -- 3 -- -- -- 8 -- 8
Sales of minerals in place......... (3) -- (3) -- -- -- (26) (6) (32)
Extensions and discoveries......... 2 3 5 2 -- 2 56 45 101
Production......................... (10) (6) (16) (2) -- (2) (110) (68) (178)
--- -- --- -- -- -- ---- --- -----
BALANCE AT DECEMBER 31, 1996....... 118 67 185 18 2 20 731 431 1,162
Revisions of previous estimates.... 2 2 4 2 -- 2 14 (23) (9)
Improved recovery.................. 3 -- 3 1 -- 1 8 3 11
Purchases of minerals in place..... 4 -- 4 1 -- 1 16 3 19
Sales of minerals in place......... -- -- -- -- -- -- (3) -- (3)
Extensions and discoveries......... 1 19 20 1 -- 1 37 153 190
Production......................... (10) (7) (17) (3) -- (3) (106) (71) (177)
--- -- --- -- -- -- ---- --- -----
BALANCE AT DECEMBER 31, 1997....... 118 81 199 20 2 22 697 496 1,193
Revisions of previous estimates.... 1 5 6 1 (1) -- 32 (37) (5)
Improved recovery.................. -- -- -- -- -- -- -- -- --
Purchases of minerals in place..... -- -- -- -- -- -- -- 4 4
Sales of minerals in place......... (12) -- (12) -- -- -- (80) -- (80)
Extensions and discoveries......... -- 12 12 1 -- 1 28 79 107
Production......................... (9) (7) (16) (3) -- (3) (78) (57) (135)
--- -- --- -- -- -- ---- --- -----
BALANCE AT DECEMBER 31, 1998....... 98 91 189 19 1 20 599 485 1,084
=== == === == == == ==== === =====
</TABLE>

- ------------------------------
* Natural gas reserve volumes include liquefiable hydrocarbons approximating 5
percent of total gas reserves which are recoverable downstream. Such
recoverable liquids also have been included in natural gas liquids reserve
volumes.

STANDARDIZED MEASURE

The standardized measure of discounted future net cash flows from estimated
production of proved oil and gas reserves is presented in accordance with the
provisions of Statement of Financial Accounting Standards No. 69, "Disclosures
about Oil and Gas Producing Activities" (SFAS No. 69). In computing this data,
assumptions other than those mandated by SFAS No. 69 could produce substantially
different results. The Partnership cautions against viewing this information as
a forecast of future economic conditions or revenues.

The standardized measure has been prepared assuming year-end selling prices
adjusted for future fixed and determinable contractual price changes, year-end
development and production costs and a 10 percent annual discount rate. No
future income tax expense has been provided for the Partnership since it incurs
no income tax liability. (See Summary of Significant Accounting
Policies -- Income Taxes in Note 1 to the Consolidated Financial Statements.)
The year-end realized prices were $8.86 and $17.16 per barrel of oil and $1.82
and $2.29 per mcf of gas for 1998 and 1997.

<TABLE>
<CAPTION>
ONSHORE OFFSHORE TOTAL
------- -------- -------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
1998
Future cash inflows.................................... $ 2,112 $1,741 $ 3,853
Future production and development costs................ (951) (787) (1,738)
------- ------ -------
Future net cash flows.................................. 1,161 954 2,115
Discount at 10 percent................................. (484) (353) (837)
------- ------ -------
Standardized measure................................... $ 677 $ 601 $ 1,278
======= ====== =======
1997
Future cash inflows.................................... $ 3,870 $2,663 $ 6,533
Future production and development costs................ (1,508) (999) (2,507)
------- ------ -------
Future net cash flows.................................. 2,362 1,664 4,026
Discount at 10 percent................................. (1,001) (549) (1,550)
------- ------ -------
Standardized measure................................... $ 1,361 $1,115 $ 2,476
======= ====== =======
</TABLE>

SUMMARY OF CHANGES IN THE STANDARDIZED MEASURE

<TABLE>
<CAPTION>
1998 1997 1996
------- ------- ------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Balance, beginning of year............................. $ 2,476 $ 4,183 $2,341
Increase (decrease) in discounted future net cash
flows:
Sales of oil and gas production, net of related
costs............................................. (349) (561) (523)
Revisions to estimates of proved reserves:
Prices net of production taxes.................... (1,195) (2,023) 1,724
Development costs................................. (225) (167) (9)
Production costs.................................. 208 (1) (31)
Quantities........................................ 22 25 59
Other............................................. (190) (52) (213)
Extensions, discoveries and improved recovery, less
related costs..................................... 142 353 336
Development costs incurred during the period......... 241 296 242
Purchases of reserves in place....................... 3 26 38
Sales of reserves in place........................... (95) (1) (8)
Accretion of discount................................ 240 398 227
------- ------- ------
Balance, end of year................................... $ 1,278 $ 2,476 $4,183
======= ======= ======
</TABLE>

QUARTERLY FINANCIAL INFORMATION

<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
(MILLIONS OF DOLLARS, EXCEPT PER UNIT AMOUNTS)
<S> <C> <C> <C> <C>
Revenue:
1998............................................ $146 $138 $116 $ 123
==== ==== ==== =====
1997............................................ $200 $169 $169 $ 190
==== ==== ==== =====
Gross profit:*
1998............................................ $ 3 $ 28 $ 16 $ (65)
==== ==== ==== =====
1997............................................ $ 98 $ 58 $ 69 $ 67
==== ==== ==== =====
Net income (loss):
1998............................................ $ -- $ 28 $ 3 $ (75)
==== ==== ==== =====
1997............................................ $ 83 $ 48 $ 51 $ 57
==== ==== ==== =====
Net income (loss)per unit:
1998............................................ $ -- $.07 $.01 $(.18)
==== ==== ==== =====
1997............................................ $.20 $.11 $.12 $ .14
==== ==== ==== =====
</TABLE>

- ------------------------------

* Gross profit equals oil and gas revenues plus gas plant margins less
production cost, exploration cost and depreciation, depletion and
amortization.

QUARTERLY OPERATING INFORMATION

<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 YEAR
-------- ------- ------------ ----------- ------
<S> <C> <C> <C> <C> <C>
Crude oil and condensate:
Net production (thousand barrels daily):
1998................................. 48 45 41 43 44
1997................................. 41 45 49 49 46
Average price (per barrel):
1998................................. $15.05 $13.47 $13.12 $12.51 $13.58
1997................................. $21.19 $18.20 $17.81 $18.21 $18.75
Natural gas:
Net production (million cubic feet
daily):
1998................................. 378 381 366 361 371
1997................................. 507 500 470 462 485
Average price (per thousand cubic feet):
1998................................. $ 2.16 $ 2.11 $ 2.00 $ 2.11 $ 2.10
1997................................. $ 2.77 $ 2.05 $ 2.22 $ 2.55 $ 2.40
</TABLE>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The Partnership has no employees. The Company, as the managing general
partner of the Partnership, has the responsibility for the Partnership's conduct
of operations. Set forth below is information as of March 1, 1999 concerning the
14 directors of the Company and the 13 executive officers of the Company (3 of
which are also directors). All elected executive officers of the Company are
elected annually by the Board of Directors of the Company. The directors are
divided into 3 classes with approximately one-third of the directors
constituting the Board being elected each year to serve a three-year term. Class
I directors (whose term expires in 2002) are Mr. McDaniel, Mr. Murphy, Mr.
Simmons and Mr. White-Thomson. Class II directors (whose term expires in 2000)
are Dr. Earle, Dr. Jischke, Mr. Keiser, Mr. Richie and Mr. Rompala. Class III
directors (whose term expires in 2001) are Mr. Bradford, Mr. Corbett, Mr.
Genever-Watling, Mr. Morris and Ms. Walters.

<TABLE>
<CAPTION>
NAME, AGE AND BUSINESS EXPERIENCE DURING
POSITION WITH THE COMPANY PAST FIVE YEARS
------------------------- --------------------------
<S> <C>
William E. Bradford, 64...................... Chairman, Halliburton Company, a provider of energy
Director and energy services from 1998; Chairman and Chief
Executive Officer of Dresser Industries, Inc., now
merged with Halliburton Company, from 1996 to 1998;
President and Chief Operating Officer of Dresser
Industries, Inc. from 1992 to 1995.
George D. Christiansen, 54................... Vice President since March 1998; Vice President,
Vice President, Safety and Environmental Environmental Assessment and Remediation from
January 1996 to March 1998; Vice President,
Minerals Exploration, Hydrology and Real Estate,
Safety and Environmental Affairs Division from 1994
to 1996; Vice President, Exploration, Minerals
Exploration Division from 1980 to 1994.
Luke R. Corbett, 52.......................... Chief Executive Officer of Kerr-McGee since February
Chief Executive Officer and Director 27, 1999; Chairman of the Board and Chief Executive
Officer from 1997 to February 26, 1999; President
and Chief Operating Officer from 1995 through
January 1997; Group Vice President from 1992 to
1995.
Kenneth W. Crouch, 55........................ Senior Vice President of Kerr-McGee since 1996;
Senior Vice President Senior Vice President, Exploration, Kerr-McGee Oil
& Gas Corporation since 1996; Senior Vice
President, North America and International
Exploration, Exploration and Production Division
from 1995 to 1996; Vice President and Managing
Director of Exploration for North Sea Operation,
Exploration and Production Division from 1993 to
1995.
</TABLE>

<TABLE>
<CAPTION>
NAME, AGE AND BUSINESS EXPERIENCE DURING
POSITION WITH THE COMPANY PAST FIVE YEARS
------------------------- --------------------------
<S> <C>
Sylvia A. Earle, 63.......................... Chair, Deep Ocean Exploration and Research, Inc.,
Director since 1992; Explorer-in-Residence for the National
Geographic Society since 1998; Chair of the Sea
Change Trust, a non-profit scientific research
organization from 1993 to 1995; Advisor to the
Administrator from 1992 to 1993; and Chief
Scientist of the National Oceanic and Atmospheric
Administration from 1990 to 1992.
David C. Genever-Watling, 53................. Managing Director, SMG Management L.L.C., an
Director investment firm, since 1997; President and Chief
Executive Officer of General Electric Industrial
and Power Systems from 1992 to 1995.
Julius C. Hilburn, 48........................ Vice President, Human Resources since 1996; Manager,
Vice President, Human Resources Benefits Administration from 1992 to 1996.
Russell G. Horner, Jr., 59................... Senior Vice President and Corporate Secretary of
Senior Vice President, General Counsel and Kerr-McGee since 1997; General Counsel since 1986;
Corporate Secretary Vice President form 1986 to 1997.
Martin C. Jischke, 57........................ President of Iowa State University since 1991.
Director
Robert L. Keiser, 56......................... Chairman of the Board of Kerr-McGee Corporation since
Chairman of the Board February 27, 1999; Chairman of the Board and Chief
Executive Officer of Oryx Energy Company from 1994
to February 26, 1999.
Deborah A. Kitchens, 42...................... Vice President and Controller since 1996; Controller,
Vice President and Controller Exploration and Production Division from 1992 to
1996.
John C. Linehan, 59.......................... Executive Vice President of Kerr-McGee since 1997;
Executive Vice President and Chief Chief Financial Officer since 1987; Senior Vice
Financial Officer President from 1987 to 1997.
Tom J. McDaniel, 60.......................... Vice Chairman of the Board of Kerr-McGee since
Vice Chairman and Director February 1997; Senior Vice President and Corporate
Secretary from 1989 through January 1997.
William C. Morris, 60........................ Chairman of the Board of J. & W. Seligman & Co.,
Director Inc., an investment firm; Chairman of the Board of
Tri-Continental Corporation and Chairman of the
Boards of the companies in the Seligman family of
investment companies, all since December 1988.
Chairman of the Board of Carbo Ceramics, Inc. since
1987.
</TABLE>

<TABLE>
<CAPTION>
NAME, AGE AND BUSINESS EXPERIENCE DURING
POSITION WITH THE COMPANY PAST FIVE YEARS
------------------------- --------------------------
<S> <C>
John J. Murphy, 67........................... Managing Director of SMG Management L.L.C., an
Director investment firm, since January 1997; Chairman of
the Board of Dresser Industries, Inc., hydrocarbon
energy products and services, from 1983 through
November 1996; Chief Executive Officer of Dresser
Industries, Inc. from 1983 to 1995.
John M. Rauh, 49............................. Treasurer since 1996; Vice President since 1987;
Vice President and Treasurer Controller From 1987 to 1996.
Leroy C. Richie, 57.......................... President, Intrepid World Communications since
Director September 1998; Vice President and General Counsel
for Automotive Legal Affairs, Chrysler Corporation,
1990 through December 1997.
Richard R. Rompala, 52....................... Chairman of the Board, President and Chief Executive
Director Office of The Valspar Corporation, a manufacturer
of paints and related coatings, since February
1998; President and Chief Executive Officer from
1995 to January 1998; President in 1994; Group Vice
President of PPG Industries from 1987 to 1994.
Matthew R. Simmons, 55....................... President of Simmons & Company International, a
Director specialized investment banking firm that serves the
worldwide energy service industry, since founding
the company in 1974.
Jean B. Wallace, 44.......................... Vice President, General Administration since 1996;
Vice President, General Administration Vice President, Human Resources from 1989 to 1996.
Farah M. Walters, 54......................... President and Chief Executive Officer of University
Director Hospitals Health System of Cleveland, Ohio since
1992.
Michael G. Webb, 51.......................... Senior Vice President of Kerr-McGee since 1993;
Senior Vice President Senior Vice President, Exploration, Exploration and
Production Division from 1993 to 1996.
Ian L. White-Thomson, 62..................... Chairman of U.S. Borax, Inc.,a provider of borax and
Director borate products since 1996; President and Chief
Executive from 1996 to 1999; Chief Executive
Officer of Rio Tinto Borax Ltd. since 1995.
W. Peter Woodward, 50........................ Senior Vice President of Kerr-McGee since June 1997;
Senior Vice President Senior Vice President of Kerr-McGee Chemical
Corporation since June 1997; Senior vice president,
Chemical Marketing of Kerr-McGee Chemical
Corporation from may 1996 through May 1997.
Director, Pigment Business Management of Kerr-McGee
Chemical Corporation from 1993 through April 1996.
</TABLE>

ITEM 11. EXECUTIVE COMPENSATION

The directors, officers and employees of the Company (the managing general
partner) receive no direct compensation from the Partnership for their services
to the Partnership. Such persons receive compensation from the Company, a
substantial portion of which is generally reimbursed to the Company by the
Partnership as costs allocable to it. (See Note 3 to the Consolidated Financial
Statements.)

The Partnership reimburses the Company for all direct costs and indirect
costs associated with the Partnership's activities. For the year 1998, the
Company received $57 million as reimbursement of costs allocable to the
Partnership. Such amounts included salaries of employees and allocations of
certain executive and administrative expenses. The aggregate amount reimbursed
by the Partnership to the Company in 1998 for the salaries of the Chief
Executive Officer of the Partnership and each of the four most highly
compensated executive officers of the Partnership other than the Chief Executive
Officer was approximately $1 million. (See Note 3 to the Consolidated Financial
Statements.)

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table provides certain information regarding beneficial
ownership of the limited partnership units of Sun Energy Partners, L.P. as of
March 1, 1999.

UNITS OF SUN ENERGY PARTNERS, L.P.

<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
BENEFICIAL OWNER UNITS CLASS
---------------- ----------- ----------
<S> <C> <C>
Kerr-McGee Corporation
123 Robert S. Kerr Avenue
Oklahoma City, OK 73102................................... 413,627,359 98.2*
All Directors and Executive Officers of Managing General
Partner (Kerr-McGee Corporation) as a Group (24).......... -- --
</TABLE>

- ------------------------------

* Assumes that Kerr-McGee Corporation's 292,000,000 general partnership units
are converted into limited partnership units of Sun Energy Partners, L.P.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In its capacity as managing general partner of the Partnership, the Company
controls the Partnership and its operations and has served as a lender and
borrower of funds for the Partnership. Following is a table which summarizes
lending activities between the Partnership and the Company during the year ended
December 31, 1998:

<TABLE>
<CAPTION>
BALANCE DUE BALANCE DUE
FROM FROM
PARTNERSHIP PARTNERSHIP
DECEMBER 31, 1997 ADDITIONS REPAYMENTS DECEMBER 31, 1998
----------------- --------- ---------- -----------------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C>
Variable Rate Advances to Oryx Energy
Company................................ $(49) $(186) $147 $(88)
===== ====== ==== =====
9.75% Note Payable to Oryx Energy
Company................................ $(51) $ -- $ 13 $(38)
===== ====== ==== =====
</TABLE>

During 1998, no amounts were owed to the Partnership by the Company for
variable rate advances. The largest balance owed to the Company by the
Partnership during 1998 resulting from advances from Oryx Energy Company and
amounts due under the 9.75% Note Payable was $259 million. Certain information
required by this section is included in Notes to the Consolidated Financial
Statements. See Notes 1, 3 and 8 included elsewhere in this Form 10-K.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) The following Documents are filed as a part of this report:

1. Financial Statements:

See Index to Financial Statements, Supplementary Financial and Operating
Information on page 13.

2. Exhibits:

2 -- Agreement and Plan of Merger, dated as of March 9, 1999,
between Sun Energy Partners, L.P. and Kerr-McGee Energy
Corporation

3(a) -- Second Amended and Restated Agreement of Limited
Partnership of Sun Energy Partners, L.P., dated
December 10, 1985 (incorporated by reference to Exhibit
3(a) of the Form SE filed March 20, 1986)
3(a)(i) -- Amendment No. 1, dated March 9, 1999, to the Second
Amended and Restated Agreement of Limited Partnership
of Sun Energy Partners, L.P.
3(b) -- Certificate of Limited Partnership of Sun Energy
Partners, L.P., dated October 1, 1985 (incorporated by
reference to Exhibit 3(b) of the Partnership's Form
10-K for the one month ended December 31, 1985)
3(b)(i) -- Certificate of Amendment, dated March 9, 1999, to the
Certificate of Limited Partnership of Sun Energy
Partners, L.P.
4(a) -- Deposit Agreement, made as of December 3, 1985 among Sun
Energy Partners, L.P., Manufacturers Hanover Trust
Company, Sun Company, Inc., Oryx Energy Company and All
Limited Partners in Sun Energy Partners, L.P.
(incorporated by reference to Exhibit 4(a) of the Form
SE filed March 20, 1986)
4(b) -- Instruments defining the rights of security holders,
including indentures: The Partnership will provide
copies of the instruments relating to long-term debt to
the SEC upon request
<PAGE>
<PAGE>

12 -- Computation of Consolidated Ratios of Earnings to Fixed
Charges
21 -- Affiliated Operating Partnerships/Subsidiary Corporations
of Sun Energy Partners. L.P. (incorporated by reference
to Exhibit 22 of the Form SE filed March 18, 1988)
24 -- Power of Attorney executed by certain officers and
directors of Kerr-McGee Corporation, managing general
partner of Sun Energy Partners, L.P.
27 -- Financial Data Schedule
99(a) -- Agreement of Limited Partnership of Sun Operating Limited
Partnership dated November 18, 1985, as amended
(incorporated by reference to Exhibit 28(a) of the Form
SE filed March 20, 1986)
99(b) -- Certificate of Limited Partnership of Sun Operating
Limited Partnership dated November 19, 1985
(incorporated by reference to Exhibit 28(b) of the
Partnership's Form 10-K for the one month ended
December 31, 1985)
99(c) -- Sun Operating Limited Partnership 9.75% Promissory Note
(incorporated by reference to Exhibit 28(c) of the
Partnership's Annual Report on Form 10-K for the fiscal
year ended December 31, 1991, as amended by Amendment
No. 1 on Form 8 dated July 17, 1992, Commission File
No. 1-9033)

99(d) -- Letter Agreement Dated November 21, 1990, Between Oryx
Energy Company and Atlantic Richfield Company
(incorporated by reference to Exhibit 28(a) of the

Partnership's Current Report on Form 8-K dated January
31, 1991, Commission File No. 1-9033)
99(e) -- Amendment Dated November 28, 1990 to Letter Agreement
Dated November 21, 1990, Between Oryx Energy Company
and Atlantic Richfield Company (incorporated by
reference to Exhibit 28(b) of the Partnership's Current
Report on Form 8-K dated January 31, 1991, Commission
File No. 1-9033)

(b) Reports on Form 8-K:

The Partnership did not file any reports on Form 8-K during the quarter
ended December 31, 1998.

<PAGE>
<PAGE>
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

SUN ENERGY PARTNERS, L.P.

By: KERR-MCGEE CORPORATION
(Managing General Partner)

By: /s/ JOHN C. LINEHAN
---------------------------------
John C. Linehan
Executive Vice President and
Chief Financial Officer
Date: March 24, 1999

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by or on behalf of the following persons on behalf
of the Registrant and in the capacities with Kerr-McGee Corporation, Managing
General Partner, and on the date indicated:

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
WILLIAM E. BRADFORD* Director March 24, 1999
- --------------------------
William E. Bradford

LUKE R. CORBETT* Chief Executive Officer and March 24, 1999
- -------------------------- Director (principal executive
Luke R. Corbett officer)

SYLVIA A. EARLE* Director March 24, 1999
- --------------------------
Sylvia A. Earle

DAVID C. GENEVER-WATLING* Director March 24, 1999
- ---------------------------
David C. Genever-Watling

MARTIN C. JISCHKE* Director March 24, 1999
- ---------------------------
Martin C. Jischke

ROBERT L. KEISER* Chairman of the Board March 24, 1999
- ---------------------------
Robert L. Keiser

/s/ JOHN C. LINEHAN Executive Vice President and March 24, 1999
- ---------------------------- Financial Officer (principal
John C. Linehan Chief financial officer)

TOM J. MCDANIEL* Vice Chairman and Director March 24, 1999
- -----------------------------
Tom J. McDaniel

WILLIAM C. MORRIS* Director March 24, 1999
- -----------------------------
William C. Morris

JOHN J. MURPHY* Director March 24, 1999
- -----------------------------
John J. Murphy

LEROY C. RICHIE* Director March 24, 1999
- -----------------------------
Leroy C. Richie

RICHARD M. ROMPALA* Director March 24, 1999
- ------------------------------
Richard M. Rompala

MATTHEW R. SIMMONS* Director March 24, 1999
- ---------------------------
Matthew R. Simmons

FARAH M. WALTERS* Director March 24, 1999
- ---------------------------
Farah M. Walters

IAN L. WHITE-THOMSON* Director March 24, 1999
- ---------------------------
Ian L. White-Thomson

*By: /s/ JOHN C. LINEHAN
- ---------------------------
John C. Linehan Attorney-in-Fact
</TABLE>

- ------------------------------
* Original powers of attorney authorizing Luke R. Corbett, Tom J. McDaniel and
John C. Linehan or any one of them, to sign this Form 10-K Annual Report on
behalf of Sun Energy Partners, L.P., is being filed as an Exhibit to this Form
10-K.

INDEX TO EXHIBITS

<TABLE>
<C> <S>
2 -- Agreement and Plan of Merger, dated as of March 9, 1999,
between Sun Energy Partners, L.P. and Kerr-McGee Energy
Corporation
3(a) -- Second Amended and Restated Agreement of Limited
Partnership of Sun Energy Partners, L.P., dated
December 10, 1985 (incorporated by reference to Exhibit
3(a) of the Form SE filed March 20, 1986)
3(a)(i) -- Amendment No. 1, dated March 9, 1999, to the Second
Amended and Restated Agreement of Limited Partnership
of Sun Energy Partners, L.P.
3(b) -- Certificate of Limited Partnership of Sun Energy
Partners, L.P., dated October 1, 1985 (incorporated by
reference to Exhibit 3(b) of the Partnership's Form
10-K for the one month ended December 31, 1985)
3(b)(i) -- Certificate of Amendment, dated March 9, 1999, to the
Certificate of Limited Partnership of Sun Energy
Partners, L.P.
4(a) -- Deposit Agreement, made as of December 3, 1985 among Sun
Energy Partners, L.P., Manufacturers Hanover Trust
Company, Sun Company, Inc., Oryx Energy Company and All
Limited Partners in Sun Energy Partners, L.P.
(incorporated by reference to Exhibit 4(a) of the Form
SE filed March 20, 1986)
4(b) -- Instruments defining the rights of security holders,
including indentures: The Partnership will provide
copies of the instruments relating to long-term debt to
the SEC upon request
12 -- Computation of Consolidated Ratios of Earnings to Fixed
Charges
21 -- Affiliated Operating Partnerships/Subsidiary Corporations
of Sun Energy Partners. L.P. (incorporated by reference
to Exhibit 22 of the Form SE filed March 18, 1988)
24 -- Power of Attorney executed by certain officers and
directors of Kerr-McGee Corporation, managing general
partner of Sun Energy Partners, L.P.
27 -- Financial Data Schedule
99(a) -- Agreement of Limited Partnership of Sun Operating Limited
Partnership dated November 18, 1985, as amended
(incorporated by reference to Exhibit 28(a) of the Form
SE filed March 20, 1986)
99(b) -- Certificate of Limited Partnership of Sun Operating
Limited Partnership dated November 19, 1985
(incorporated by reference to Exhibit 28(b) of the
Partnership's Form 10-K for the one month ended
December 31, 1985)
<PAGE>
<PAGE>

99(c) -- Sun Operating Limited Partnership 9.75% Promissory Note
(incorporated by reference to Exhibit 28(c) of the
Partnership's Annual Report on Form 10-K for the fiscal
year ended December 31, 1991, as amended by Amendment
No. 1 on Form 8 dated July 17, 1992, Commission File
No. 1-9033)
99(d) -- Letter Agreement Dated November 21, 1990, Between Oryx
Energy Company and Atlantic Richfield Company
(incorporated by reference to Exhibit 28(a) of the
Partnership's Current Report on Form 8-K dated January
31, 1991, Commission File No. 1-9033)
99(e) -- Amendment Dated November 28, 1990 to Letter Agreement
Dated November 21, 1990, Between Oryx Energy Company
and Atlantic Richfield Company (incorporated by
reference to Exhibit 28(b) of the Partnership's Current
Report on Form 8-K dated January 31, 1991, Commission
File No. 1-9033)
</TABLE>

<PAGE>
<PAGE>
EXHIBIT 12

SUN ENERGY PARTNERS, L.P.
COMPUTATION OF CONSOLIDATED RATIOS OF EARNINGS
TO FIXED CHARGES - UNAUDITED (a)
(MILLIONS OF DOLLARS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------
1998 1997
-------- --------
<S> <C> <C>
RATIO OF EARNINGS TO FIXED CHARGES:
Fixed Charges:
Consolidated interest cost and debt
expense $ 20 $ 15
Interest allocable to rental expense (b) 2 2
-------- --------
Total $ 22 $ 17
======== ========

Earnings:
Consolidated income (loss) $ (44) $ 239
Fixed charges 22 17
Interest capitalized (12) (15)
Amortization of previously capitalized
interest 7 4
-------- --------

Total $ (27) $ 245
======== ========

Ratio of Earnings to Fixed Charges (c) 14.41
========
</TABLE>

(a) The consolidated financial statements of Sun Energy Partners, L.P.
include the accounts of all subsidiaries (more than 50 percent owned
and/or controlled).

(b) Represents one-third of total operating lease rental expense which is
that portion deemed to be interest.

(c) Since earnings for the year ended December 31, 1998 were less than
zero, the ratio of earnings to fixed charges for such period is not
meaningful and, accordingly, has not been presented. Earnings for such
period were inadequate to cover fixed charges by $49 million.