Synergy potential from the merger between Statoil and Hydro's oil and gas activities 

February 12, 2007, 08:05 CET

Statoil (OSL: STL; NYSE: STO) has today 12 February 2007 presented its view on the synergy potential from the merger between Statoil and Hydro's (OSE: NHY; NYSE: NHY) oil and gas activities.

Synergies resulting from the merger will fall into the following three categories:

  • Lower costs, due to elimination of duplication and higher efficiency through economies of scale.
  • Higher revenues, by implementing best practice and deploying scarce resources and competencies more efficiently.
  • New growth opportunities because of improved international competitive position, larger portfolio and larger organisational and financial capacity.

“This merger is driven by a growth ambition,” says Statoil CEO Helge Lund.

“By combining the strengths of both organisations, the merged company will be able to pursue more opportunities and take on more tasks. In addition we will be able to realise cost synergies through more efficient operations and economies of scale.”

Hydro and Statoil operate as independent companies and are precluded from looking into each other’s books in order to carry out detailed analyses of potential synergies. Based on own activities and analyses by an external consultant, Statoil has estimated cost synergies for the new company when the merger is completed.

The total cost synergy potential for the combined company is estimated to be about NOK 4 billion per year before tax. The cost synergies include both increased efficiencies in development, operations and exploration activities, as well as within administration and business support activities.

Important measures to realise the operating cost synergies will be reduced external sourcing and internal redeployment of personnel. Parts of the synergies will be reflected in future CAPEX. The synergy potential will be realised after a few years, around 2009-2010, once the integration process has been fully completed. Any redundancies will be managed through natural attrition and other measures to be discussed with the trade unions.

The gross operator cost synergies are estimated to be significantly higher than NOK 4 billion. The gross synergies will however not only benefit the combined company, but also its partners through lower costs in Statoil and Hydro operated joint ventures.

It will not be possible to isolate the different synergy elements separately from other cost and revenue elements in the future financial statements of the combined company. The main reason is that a significant share of the cost synergies is to be achieved through redirection of resources to areas with scarcity of resources and growth potential.


Further information from:

Media:
Ola Morten Aanestad, vice president media relations, +47 48 08 02 12 (mobile), +47 51 99 13 77 (office)

Investor relations:
Lars Troen Sørensen, senior vice president investor relations, + 47 90 64 91 44 (mobile), +47 51 99 77 90 (office)
Geir Bjørnstad, vice president, US investor relations, + 1 203 978 6950

CAUTIONARY NOTE IN RELATION TO FORWARD-LOOKING INFORMATION
The matters set forth in this presentation, in particular statements as to the expected benefits of the merger such as synergies, efficiencies, cost savings, financial strength, and the competitive ability and position of the combined company are forward-looking statements. In some cases, we use words such as “believe”, “intend”, “expect”, “anticipate”, “plan”, “target” and similar expressions to identify forward-looking statements. These forward-looking statements reflect current, preliminary views with respect to future events and are, by their nature, subject to significant risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. You should also note that some or all of the assumptions upon which such forward-looking statements are based are beyond our ability to control or estimate precisely and may in some cases be subject to rapid and material changes. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements, including the possibility that cost synergies, new growth opportunities, improved performance and other anticipated benefits from the merger cannot be fully realized; required approvals by Statoil’s and Hydro’s shareholders and regulatory agencies; the possibility that costs or difficulties related to the integration of Hydro’s oil and gas activities and Statoil will be greater than expected; the ability to manage regulatory, tax and legal matters, including changes in tax rates; the impact of competition and other risk factors relating to the industry as detailed from time to time in Statoil’s reports filed with the SEC. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this presentation. Unless we are required by law to update these statements, we will not necessarily update any of these statements after the date of this presentation, either to conform them to actual results or to changes in our expectations.