Updated from 8:06 a.m. EDTKerr-McGee ( KMG ) and Westport Resources ( WRC ) Wednesday said they would merge in an all-stock deal valued at about $2.5 billion. Under terms of the merger agreement, Westport shareholders will receive 0.71 shares of Kerr-McGee common stock for each of their shares. Based on Kerr-McGee's closing price of $51.51 Tuesday, the offer is worth $36.57 a share. Oklahoma City, Okla.-based Kerr-McGee will issue approximately 49.4 million new shares to Westport's shareholders. Recently, Westport shares gained $1.45, or 4.4%, to $34.50, while Kerr's fell $2.21, or 4.3%, to $49.30. The deal combines Kerr-McGee's offshore expertise with Denver-based Westport's land-based experience, creating one of the largest independent oil and natural gas companies in the U.S. The companies expect the merger to produce cost savings of approximately $40 million a year, and it will be accretive to both earnings and cash flow per share beginning in 2005. The deal includes about $900 million in debt. The transaction is expected to be completed during the third quarter of this year. The merged company will be called Kerr-McGee and be headquartered in Oklahoma City.