www.hydro.com Hydro Oil & Energy Lehman Energy Conference, New York David W. Nunn, Senior Vice President, Corporate Portfolio Strategy 2005-09-08
www.hydro.com
Hydro Oil & Energy
Lehman Energy Conference, New York
David W. Nunn, Senior Vice President, Corporate Portfolio Strategy2005-09-08
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Forward-Looking Statements/Use of Non-GAAP Financial Measures
In order to utilize the “safe harbour" provisions of the United States Private Securities Litigation Reform Act of 1995, Hydro is providing the following cautionary statement: This presentation contains certain forward-looking statements with respect to the financial condition, results of operations and business of the Company and certain of the plans and objectives of the Company with respect to these items. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. The actual results and developments may differ materially from those expressed or implied in the forward-looking statements due to any number of different factors. These factors include, but are not limited to, changes in costs and prices, changes in economic conditions, and changes in demand for the Company's products. Additional information, including information on factors which may affect Hydro's business, is contained in the Company's 2004 Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission.
With respect to each non-GAAP financial measure Hydro uses in connection with its financial reporting and other public communications, Hydro provides a presentation of what Hydro believes to be the most directly comparable GAAP financial measure and a reconciliation between the non-GAAP and GAAP measures. This information can be found in Hydro’s earnings press releases, quarterly reports and other written communications, all of which have been posted to Hydro’s website (www.hydro.com).
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Cautionary Note
The United States Securities and Exchange Commission permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. We use certain terms in this presentation material, such as expected recoverable resources, that the SEC’s guidelines strictly prohibit us from including in filings with the SEC. Investors are urged to consider closely the disclosure in our Form 20-F, SEC File No. 1-9159, available from us at our Corporate Headquarter: Norsk Hydro, N-0240 Oslo, Norway. You can also obtain this form from the SEC by calling 1-800-SEC-0330.
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Financial overview – 2004
Oil & Energy47 %
Aluminium51 %
Other2 % Aluminium
17 %
Other1 %
Oil & Energy82 %
Oil & Energy42 %
Other7 %
Aluminium51%
Operating revenues – USD 23 bill. EBITDA – USD 7,6 bill.
Capital Employed – USD 12,8 bill.
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Consistently delivering profitable growthOil and gas production
1 000 boe/day
0
500
1000
1500
2000
1998 2004 2010E
Aluminium production1 000 tonnes
0
250
500
750
1998 2004 2008E
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Total Shareholder Return
6 %
14 %
20 %
24 %
26 %
26 %
28 %
34 %
44 %
46 %
-16 %
-20 % 0 % 20 % 40 % 60 %
Alcoa
Alcan
RoyalDutch
Shell
BP
Total
ChevronTexaco
ExxonMobil
BG
Statoil
Hydro
12 %
15 %
23 %
30 %
43 %
44 %
70 %
100 %
139 %
-17 %
-50 % 0 % 50 % 100 % 150 %
Alcoa
RoyalDutch
BP
Shell
Alcan
ExxonMobil
ChevronTexaco
BG
Total
Hydro
2004 2000-2004
Source: Goldman Sachs
Page 7
RoaCE by business area
16,2 %
23,4 %
11,6 %
2002 2003 2004
Oil & Energy Aluminium
7.0 %
2.7 %
4.7 %
3.5 %
2002 2003 2004
Adjusted for German writedown*
Realized
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0,6
0,110,14
0,38
2002 2003 2004 2005 Q2
Debt/equity ratio
Interest-bearing debt + net pension liability (tax adjusted) + operating lease commitments (discounted) –cash and cash equivalents – other liquid assets divided by shareholders’ equity + minority interest
Target: 0,5
Aluminium – highlights
Strong primary metal market fundamentals
Mixed development downstream
Planning new world-class plant in Qatar
Intensified restructuring - decision to close primary capacity
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The industry provides attractive opportunities
Demand increasePercent
World
China
Fast-growing regional markets2004 - 2020
Fast-growing custom segments2004 - 2020
3-6%CAGR
High growth in smelting2004 - 2020
7
35
28
Demand increase
Shut downs
New capacity
Aluminium production increaseMtpy
Transportation
Electrical
Consumer durables
Packaging
Engineering
Construction
2004 2020
Aluminium demandMtpy
CAGR
4.6
Source: Demand model; McKinsey metals and mining practice; team analysis
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Aluminium Qatar – project description
Heads of agreement signed
Annual capacity- 570 000 tonnes - Expansion potential up to 1 200 000 tonnes
Investments- Smelter and casthouse: USD 2 – 2.5 billion - Power plant: USD 0.7-0.8 billion
Hydro 50% ownership- Hydro to market total tonnage
Production start-up end 2009
Exceed 10% IRR after tax at USD 1400/tonne
Excellent location
HAL Technology
Oil & Energy
One of the most efficient North Sea operators
Continued strong production growth
Exploration activity bearing fruit
Adding value by applying world class competence
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Continued strong production growth1 000 boe/day
0
100
200
300
400
500
600
700
800
1998 1999 2000 2001 2002 2003 2004 2005E 2006E 2007E 2008E
Oil NCS Oil Int Gas 8% CAGR*
8% average annual growth*
*Compound Annual Growth Rate, 2001 baseline
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Strong production growthbased on attractive project portfolio
Oil price giving 10% real rate of return post tax*
Brent USD/bbl0 5 10 15 20 25
Skinfaks/RimfaksÅsgard Q-projectNorne Satellites
Angola - RosaLibya - Great Mabruk
Libya - B-fieldNjord Gas Export
Oseberg S JVilje
Oseberg S J CTune Phase 2Ormen Lange
TrollOseberg E
OsebergNjord
Oseberg S Operator IOR NCS
Operator NCSInternationalPartner operated NCS
Operator Development Phase
*Calculations based on USD/NOK exchange rate 8
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Strong growth in equity gas production
0
2
4
6
8
10
12
14
16
2003 2004 2005 2006 2007 2008
bcm
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The Ormen Lange development concept
Seabed development(850-1100m deep)
Steep and uneven terrain
Nyhamna plant
Gas export
Multiphase transport
Hydro’s technologies and expertise make a difference 42% complete
IranPromising discovery in AnaranExploration acreage
Iran
Russia
NCS
Angola
North SeaIncreased exploration activity paying off
- Oseberg, Troll- Peon, Astero
Ormen Lange on trackAmbitious IOR programNew projects submitted and planned
West AfricaAngola - Block 4 and 17Continuous business development
CanadaHebron proceeding towards developmentNew acreage secured
Strengthening position
Telemark/Lorien on trackNew acreage securedPreparing for 2006-2008 exploration campaign
Many opportunities
Expanding
Well positioned in energy rich area
Continued growth
RussiaShtokman proposal submittedMoUs with Gazprom on Barents SeaPositive developments on Kharyaga
Staying power
New Exploration acreageNorway, Canada, IranMorooco, Madagascar, Cuba
Expanding a balanced exploration portfolio
Canada
GoM
Deepwater US GoM
Increasing our international presence
LibyaProduction and exploration ongoing
New leases being pursued
Libya
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Three paths to future growth
Existing portfolio- Increased recovery- Develop technical resources
Exploration- Increase predictability- Exploit infrastructure position- Entry in new regions
Acquisitions- Utilize our competence- Capital discipline Short term Long term
Existing portfolio
Exploration
Acquisitions
Developing the Norwegian Continental ShelfThe Hydro Troll field development
Development projects on plan
Ambitious IOR projects
Submitted new development projects
Preparing for important 19th round
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Creating value by integrating new technologies
14081447
1164
1225
PDOI-Wells
PDO Troll C
PDOT-wells
Prod. StartTroll C
649
945
PDOH-wellsGasProvince
Prod start Troll B
Increased well density
500
1000
1500
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
M bbl
353 385
PDO Troll B
Test prod.Gasprovince
Troll 300=
1900 mill. bbl
208277
Test prod.PetrojarlHorizontal well
13281358
Troll PilotPDO P2wells
ResourcesProduction
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Exploration strategy paying offDiscoveries 2005
Peon
Astero
Troll Brent
Oseberg Sør B Oseberg Sør J
North Sea discoveries 2005- Astero - Peon- Troll Brent
- Oseberg South - B South- Oseberg South - J Central
- Vigdis M5
International discoveries 2005- Angola- Denmark - Iran
Ambitious exploration plans going forward- 2H’05: Spudding 15-20 wells- 2006: 20 wells
Vigdis
Hejre
Discovery wells operated by HydroDiscovery wells with Hydro participation
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NCS: 21 billion barrels left to discover
Barents Sea: 6.2 billion barrels
High risk – high potentialOil-play potential
Norwegian Sea: 7.7 billion barrels
High risk – medium/high potential
North Sea: 7.5 billion barrels
Moderate risk – smaller structuresHigh value per barrel
Source: NPD
Hydro – priorities
Operational improvementsFirst-class project executionImprove Aluminium profitability Strengthen oil & gas resource base
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www.hydro.com
Additional information
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Key facts Ormen Lange and Langeled project
Total field & pipeline investments NOK 66 bn (2003) (9,5 bn USD)
Profitable Above $13/bbl > 10% IRR after tax
Production start Ormen Lange October 2007
Operations start Langeled October 2006
Recoverable gas reserves 397 Bcm (14 TCF)
Recoverable condensate 28.5 Mcm
Gas production 21.4 Bcm/yr (2.100 mmcfd)
Condensate production 40.000 bbl/d
Water depth 850 – 1 100 metres
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CanadaMature area opportunities in highly profitable portfolio
Existing portfolioHibernia and Terra Nova optimizationHebron development solution
ExplorationNear infrastructure led explorationMature current licence portfolioAssess risk/volume in immature basins
Acquiring resourcesIncrease technical resources in the Grand Banks area
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AngolaDiversified opportunities in profitable growth portfolio
Existing portfolioGirassol and Jasmim optimizationsDalia/Rosa development projects 3rd production hub selection
ExplorationCommercialize Block 4 discoveryAlternative potential in Block 34New opportunities with Sonangol P&PSignificant mid-sized prospect potential
Acquiring resourcesAdditional opportunities based on proven reserves
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RussiaLegacy asset opportunities through long-term commitment
Existing portfolioFurther development of Kharyaga
ExplorationPursuing business opportunities
Acquiring resourcesShtokman Co-operation with Gazprom on thedevelopment concept
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LibyaExisting exploration potential in long-term core area
Existing portfolioMabruk developmentsMurzuq developments
ExplorationExploration drillingCo-operation with Wintershall EPSA exploration round V
Acquiring resourcesActively pursuing additional value creating growth opportunities
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IranExploring for oil in key petroleum province
Exisiting portfolioAnaran exploration acreage
ExplorationAzar well with positive progress Khoramabad contract bid submitted
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Gulf of MexicoCommercial mindset and deep-water competence
Existing portfolioTelemark development (operator)Lorien development (non operator)
ExplorationSuccessful lease salesOperator blocks
Acquiring resourcesActively pursing additional value creating growth opportunities
TelemarkLorien