Hydro's direction set following Yara listing

March 25, 2004, 10:00 CET

Hydro will sharpen its focus on Oil & Energy and Aluminium following the listing of Yara international on the Oslo Stock Exchange. Strict capital discipline is promised and new investment opportunities are possible.

Declaring the start of a new era in the history of Norsk Hydro ASA the company said today that the demerger of its Agri business into a new company, Yara, will allow it to concentrate fully on further development of its position as a leading offshore producer of oil and gas and as the world’s third-largest aluminium supplier.

Yara International ASA was listed on the Oslo Stock Exchange on Thursday morning.

“The demerger of Agri will make it possible to direct greater attention and financial resources to the significant opportunities in our remaining two core businesses,” President and CEO Eivind Reiten said.

”We will continue to strengthen our competitive position through focus on capital discipline and improved profitability. Maintaining financial flexibility to take advantage of possible investment opportunities will also be a key objective.”

Since the founding of the company almost 100 years ago, Hydro has grown from being mainly a Norwegian corporation to becoming a truly global company, listed on the Fortune 500 (No. 221 in 2003). After the demerger, Hydro will employ 36,000 people in some 40 countries, with revenues (excluding Agri) equivalent to USD 19 billion (NOK 136 billion) as of the end of 2003.

“Through this transaction Hydro is demonstrating the ability to restructure in order to meet new challenges and secure our long-term competitive position in both core business lines,” Reiten said.

Oil & Energy

Over the last five years, the company has doubled its oil and gas production – from 270,000 barrels of oil equivalents/day (boe/d) in 1998 to 530,000 boe/d in 2003.

Hydro is currently the second largest operator on the Norwegian continental shelf, operating a daily production of 900,000 boe/d. The company is also the fifth largest deep-water producer globally. 

Oil & Energy will continue to build upon its competitive advantages in relation to cost-efficient field development and operations, application of new technology, and will furthermore take advantage of its strong position in the liberalized European energy market.

The Ormen Lange gas field, a USD 9,5 billion investment project (NOK 66 billion) for which Hydro is the operator during the development phase, will be key in realizing this strategy. The Ormen Lange project, one of the world’s largest deep-water developments, and the associated pipeline to the UK, is well on schedule for production start up in 2007.


Hydro is the leading aluminium company in Europe and one of the three largest integrated aluminium companies in the world.

Between 1998 and 2003 sales for Hydro’s Aluminium business has almost doubled, primarily through the acquisition of the German company VAW in 2001.

The aluminium business will further strengthen its market positions mid- and downstream because of greater focus on quality, cost-efficient production and proximity to customers. Additional value will be created through improvements to the relative cost levels in alumina and primary production, portfolio adjustments and the completion of current improvement programs. Recently, there have been signs of a general economic upturn and improving market conditions. Hydro is well positioned to take full advantage of this.

Several opportunities for investment and growth

Following the Agri demerger, Hydro has financial strength to grow and will continue to monitor potential opportunities. The company will, however, maintain strict capital discipline.

“We face a number of attractive investment opportunities both within Oil & Energy and Aluminium, that will require a relatively high investment level for the next couple of years,” Reiten said.

For 2004 the total capital allocation, including exploration activities within the Oil & Energy area, has been set at approximately USD 3 billion (NOK 20 billion). In 2005, capital expenditure is expected to remain at approximately the same level, with Ormen Lange accounting for a large proportion of the total expenditure.

“The major share of our resources will be channeled into highly profitable oil and gas projects that generate strong production growth for several years.  Higher gas production from Ormen Lange and other fields will gradually contribute significantly to our total production. Outside Norway, we will place greater importance on the acquisition of hydrocarbon resources, where we can create value by utilizing the expertise we have developed as an operator on the Norwegian Continental shelf,” Reiten said.

Within Aluminium, investments will be directed towards projects that can improve the company’s position in selected downstream market, as well as improving the competitive position of Hydro’s metal plants, and securing better raw material sourcing.

“Both in Oil & Energy and Aluminium we see attractive organic growth in the coming years. It will, however, be our ambition to move beyond organic growth should we be faced with attractive investment opportunities. We need to maintain financial flexibility to take advantage of such opportunities,” Reiten said.

(All USD figures are based on an exchange rate of 7,00 NOK/USD)