Kelley and Williams Announce Production From South Louisiana Discoveries.

HOUSTON--(BUSINESS WIRE)--Oct. 19, 1998--KELLEY OIL & GAS CORPORATION (Nasdaq NM: KOGC) and Williams (NYSE: WMB) announced today the successful completion of the Goldsby No. 3 well, a Realty Sand discovery in the Ouiski Bayou Field of Terrebonne Parish, Louisiana. Kelley and Williams each own a 50 percent working interest in the well.

The well encountered in excess of 26 net feet of normally pressured hydrocarbon bearing sandstone at a depth below 11,280 feet. The well is currently producing to sales at a daily rate of 5.2 million cubic feet equivalent (4.6 million cubic feet of gas and 100 barrels of condensate), at a flowing tubing pressure of 3,740 pounds per square inch on an 11/64ths-inch choke.

The upper zone in the Wylie Heirs No. 12 well, which was previously announced, has now been unitized and it is currently producing 11.1 million cubic feet of gas at a flowing tubing pressure of 3,250 pounds per square inch on a 21/64ths-inch choke. Kelley and Williams each own 50% working interest in the well and are continuing to incorporate the results of their recent drilling program, including the successful drilling of the Goldsby No. 3 and the previously announced Wylie Heirs No. 12 well, into their 125-square mile 3-D seismic survey in Terrebonne Parish, Louisiana to identify additional leads and prospects.

Kelley Oil & Gas Corporation is engaged in the development, exploration, acquisition and production of oil and natural gas. Natural gas represents about 95% of the Company's equivalent production and proved reserves.

Kelley Oil & Gas Corporation common stock and preferred stock are traded on the NASDAQ National Market under the symbols KOGC and KOGCP. Company information is available at www.kelleyoil.com.

Williams, through its subsidiaries, is the nation's largest-volume transporter of natural gas and provides a full range of traditional and leading-edge energy and communications services. Williams' exploration and production unit explores for, develops and produces natural gas reserves in the San Juan Basin, northern Rocky Mountain region, east and south Texas, Louisiana and both onshore and offshore in the Gulf Coast region. Company information is available at www.willtales.com/energy.

Cautionary Statement as to Forward-Looking Information

Portions of the document may constitute forward-looking statements as defined by federal law. Although the company believes any such statements are based on reasonable assumptions, there is no assurance that actual outcomes will not be materially different. Additional information about issues that could lead to material changes in performance is contained the company's annual report or form 10K which is filed with the Securities and Exchange Commission.