Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Investor Day (September 2006)
47 slides from Norsk Hydro Asa's investor day presentation, Sep 28, 2006
Slide 1: Capital Markets Day 2006
Capital Markets Day 2006 www.hydro.com 2006-09-28
Slide 2: Cautionary note in relation to certain forward-looking statements
Cautionary note in relation to certain forward-looking statements Certain statements contained in this announcement constitute “forward-looking information” within the meaning of Section 27A of the US Securities Act of 1933, as amended, and Section 21E of the US Securities Exchange Act of 1934, as a
Slide 3: Use of non-GAAP financial measures / Cautionary note on oil and gas reserves
Use of non-GAAP financial measures/ Cautionary note in relation to oil and gas reserves 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
Slide 4: Oil & Energy – performance and perspectives
Oil & Energy – performance and perspectives 4
Slide 5: Highlights Oil & Energy
Highlights Oil & Energy z Strengthened resource base z Continued high exploration and selective acquisitions z Robust production and development portfolio in low risk regions z Expected oil and gas production 2010: 700 000 boed z Growth beyond 2010 from broader development and exploration portfolio
Slide 6: Return on capital in line with peers
Return on capital in line with with peers RoaCE 40% Peer range * Oil & Energy 35% 30% 25% 20% 15% 10% 5% 0% 2003 2004 2005 2006 * BG Group, BP, Chevron, ExxonMobil, RepsolYPF, Shell, Statoil and Total Source: Bloomberg return on capital methodology. 12 month rolling Q1 2002-Q3 2006. Hydro figures ar
Slide 7: Continued production growth
Continued production growth 1 000 boed z 2007 target: 605 000 boed 800 700 700 z 2010 expected: 700 000 boed - Capacity constraints lead to project delays 605 600 570 z Growth from high-quality portfolio 500 400 z Improved growth prospects beyond 2010 300 200 100 0 1998 2000 2002 2004 2006E 2010E 7
Slide 8: International portfolio in top tier countries
International portfolio in top tier countries Russia z Present in 7 of the top Norway 10 petroleum provinces Canada available for IOCs Denmark z Production in 6 countries Morocco Iran US Gulf Cuba of Mexico Libya z Field development projects Mozambique in 8 countries Brazil Angola z Exploration acti
Slide 9: High share of production in OECD countries
High share of production in OECD countries Top 2005 producing countries globally 2005 production by region Hydro presence Company OECD Non-OECD Russia Suncor Energy CNR US Husky Energy Saudi Arabia EnCana Canada Hydro Devon Energy Iran ConocoPhillips China Statoil Norway Murphy Mexico Talisman Anada
Slide 10: Tore Torvund
Tore Torvund Executive Vice President, Oil & Energy 10
Slide 11: Operational highlights
Operational highlights CMD 2005 2006 estimate Production 615 000 boed 570 000 boed Production costs NOK 23/boe NOK 25/boe Capital expenditures NOK 20 billion NOK 18 billion Exploration activity NOK 5 billion NOK 6 billion Production costs definition: Field cost, fees, overhead, R&D, follow-up, insur
Slide 12: Production 2006 hampered by extraordinary events and delayed build-up
Production 2006 hampered by extraordinary events and delayed build-up 1 000 boed 615 0 21 10 9 5 570 z Production interruptions z Delayed build-up 2006 Target NCS Hydro NCS Partner- Gulf of Mexico Canada Other fields 2006 Revised operated operated estimate 12
Slide 13: Measures to meet 2007 target
Measures to meet 2007 target 1 000 boed z Norway - Continued operational excellence 605 570 - Proactive follow-up of partner operated fields - Ormen Lange on stream z Canada - Terra Nova upgraded to ensure higher uptime z Gulf of Mexico - NCS production management to drive performance - Independence
Slide 14: Competitive cost position
Competitive cost position 2005 production and lease operating cost in USD/boe Woodside Hydro Gas injection cost BG Group Anadarko Statoil BHP Billiton BP EnCana Kerr-McGee Santos ExxonMobil Devon Energy Chevron Murphy Shell CNR Nexen Hess Talisman Oxy Petro-Canada ConocoPhillips Suncor Energy 0 5 10
Slide 15: Unit production cost to stabilize from 2007
Unit production cost to stabilize from 2007 Production cost excluding gas injection in NOK/boe 28 z Cost increase 2006 below industry 25 ~ NOK 28/boe average 23 20 18 z Sustainable unit cost excluding gas injection below NOK 28 per boe 2004 2005 Target Estimate Target 2006 2006 2007 15
Slide 16: Growth from existing portfolio
Growth from existing portfolio 16
Slide 17: Technology leadership to deliver growth
Technology leadership to deliver growth Exploration excellence Subsea compression Advanced drilling Subsea technology Project management 17
Slide 18: Maximizing value of existing portfolio
Maximizing value of existing portfolio z Troll Oil: - Announcing more than 500 million barrels in new oil reserves - Reserves up 34 percent to more than 2 billion barrels z Troll Gas: Increase gas off-take and export capacity z Plan for development and operation (PDO) in 2007 18
Slide 19: Large remaining oil potential in Hydro fields
Large remaining oil potential in Hydro fields Long-term ambition of 60 percent recovery factor on NCS Troll Ekofisk Eldfisk Valhall Snorre Heidrun Statfjord Oseberg Gullfaks Oseberg South Tor Balder Gullfaks South Njord Brage Grane Åsgard Visund Ula Remaining in ground at planned Produced oil end 20
Slide 20: Broad project portfolio supports continued growth
Broad project portfolio supports continued growth Delivered projects 2001-2006 Fields under development New projects Fram East Ormen Lange Peregrino Fram West Dalia Idun/Skarv Front Runner Rosa Sigrid Girassol Independence Hub area: Dagny Q , Spiderman , San Jacinto Pazflor Grane Vilje Morvin Jasmim
Slide 21: Field development portfolio
Field development portfolio Generating above 200 000 boed at peak Hydro share Start year Field name at peak rate Country Type Operator 2006 Dalia 21 000 Angola Oil Total 2007 Ormen Lange 70 000 Norway Gas/Cond Hydro Rosa 14 000 Angola Oil Total Independence Hub Area 11 500 US GoM Gas Hydro/others Vi
Slide 22: Ormen Lange – a world giant on cost and schedule
Ormen Lange – a world giant on cost and schedule Global top 20 fields on stream 2007-2008 by volume Horizon Oil Sands, Canada z A vast subsea scheme with Sakhalin 2, Russia ground-breaking technology Ormen Lange, Norway Verkhne-Chonskoye, Russia Kovyktinskoye, Russia Agbami-Ekoli, Nigeria z Largest
Slide 23: Field developments in main core area
Field developments in main core area z Vega - Innovative subsea development - Partner cooperation for development of resources in three licenses - PDO in 2006 and production start in 2010 - Hydro share at peak 18 000 boed in 2011 - Working interest PL 090C 25 percent - Working interest PL 248 40 per
Slide 24: Deepwater Gulf of Mexico field developments
Deepwater Gulf of Mexico field developments z Lorien field on stream in 2006 - Green Canyon block 199 z Independence Hub - a cornerstone for GoM gas - Third-party owned, shared production facility with ten fields tied back - Production start in 2007 - Hydro fields: Spiderman, San Jacinto and Q (Hydr
Slide 25: Status on the Front Runner field
Status on the Front Runner field z Floating production facility in 1 000 meters of water z Partners: - Murphy (37.5 percent and operator) - Dominion (37.5 percent) - Hydro (25 percent) z Complex reservoir - Production significantly lower than expected z Internal project team established by Hydro dev
Slide 26: Angola production increases significantly
Angola production increases significantly Approaching 40 000 boed in 2008 Block 17 (10 percent) z Dalia FPSO in production December 2006 - 21 000 boed Hydro share at peak z Rosa development to come on stream in 2007 - Tie-in to Girassol - 14 000 boed Hydro share at peak z Future developments to be s
Slide 27: Leveraging strong Canadian position
Leveraging strong Canadian position z Terra Nova back on stream - 15 000 boed net Hydro share - Comprehensive re-certification 2006 z Hibernia in steady production - 9 000 boed net Hydro share z Hibernia South - Development plans in process z Hebron - Significant development resource z Grand Banks –
Slide 28: Large field development to start in Brazil
Large field development to start in Brazil z Peregrino start-up planned in 2010 z Field production ~100 000 boed on plateau in 2011 z Hydro share 50 percent z Large oil volumes in place – great upside for increased recovery - Long horizontal wells with sand control - Efficient separation of heavy oi
Slide 29: Exploration excellence to deliver long-term growth
Exploration excellence to deliver long-term growth 29
Slide 30: Two Hydro discoveries among the world's largest in 2005
Two Hydro discoveries among the world’s largest in 2005 Vladimir Filanovsky, Russia Papa Terra, Brazil Anaran (Azar), Iran z 14 discoveries in 2005 Qingshen, China Deen Dayal, India z 22 wells completed Chaivo outside (Sakhalin 1), Russia Caldita, Australia Shwe Phyu, Myanmar z 64 percent success ra
Slide 31: Extensive exploration in 2006
Extensive exploration in 2006 z 47 wells completed so far (13 Norway and 34 international) z 25 discoveries (5 Norway and 20 international) z 53 percent success rate z Mainly infrastructure-led exploration z Attractive new exploration acreage - US Gulf of Mexico, Norway, Denmark, Canada and Brazil 3
Slide 32: High exploration level to continue in 2007
High exploration level to continue in 2007 z 60 wells planned z Several high-impact wells to be drilled Norway Denmark US Gulf of Mexico Libya Morocco Iran Cuba Frontier/growth Infrastructure Mozambique Brazil Angola 20 40 NCS International Planned drilling activity Seismic and pre-drilling activity
Slide 33: Northern Norway - exciting frontier exploration
Northern Norway - exciting frontier exploration z High impact operator wells with very large oil potential z Challenging drilling and development in environmentally sensitive areas 33
Slide 34: Norwegian Sea - frontier and growth exploration
Norwegian Sea - frontier and growth exploration z Pursue the deepwater gas play in the Stetind area z New wells to test Halten area potential PL 263 z Njord near field exploration Zita 2007 - Galtvort - Noatun 34
Slide 35: Northern North Sea – near-field exploration potential
Northern North Sea – near-field exploration potential z Oseberg area - Shetland Chalk z Fram area - New structures to be tested z Grane area - Midway prospect to be tested z Exploration in mature areas to maximize value of infrastructure z Short lead times 35
Slide 36: Southern North Sea - significant growth potential
Southern North Sea - significant growth potential z Exploring a new basin - Farsund basin is an untested basin with a large oil potential z Revival of the deep Central Graben - Upper Jurassic and Permian geological plays - Deep challenging wells z Strong acreage position extending into Denmark 36
Slide 37: Leveraging strong Gulf of Mexico position
Hydro leases New leases August 2006 San 17 Hands Jacinto Zia Thunderhawk Spiderman Q Independence Lorien Hub FrontRunner Leveraging strong Gulf of Mexico position z Large exploration potential, short lead times and high-value resources z Spinnaker acquisition a solid foundation for organic growth -
Slide 38: Active deepwater exploration program
Krakotoa Superior Green Bay Badgers Active deepwater exploration program z Substantial inventory of prospects - Play types from amplitude to sub-salt, pleistocene to paleocene - More than 20 prospects in the new lower tertiary trend z Four exploration wells in 2007 z Rig capacity secured through 201
Slide 39: Strong position in Walker Ridge and Keathley Canyon
Strong position in Walker Ridge and Keathley Canyon Hydro holds 48 blocks covering 9 prospects 39
Slide 40: Green Bay - first Hydro lower tertiary prospect to be tested
Green Bay - first Hydro lower tertiary prospect to be tested z Hydro operator – 40 percent working interest Green Bay z Partners: Chevron, Anadarko and Nippon z Location: Walker Ridge z Analogs: Jack, St. Malo and Kaskida z Water depth: 1 900 meters z Expected spud in 2007 40
Slide 41: A long-term perspective in Iran
A long-term perspective in Iran z Giant Azar oil discovery in the Anaran block declared commercial, negotiations for field development ongoing z Changuleh West – another significant discovery in the Anaran block z Hydro closely monitors political and economic conditions 41
Slide 42: Early mover in new high potential basins
Early mover in new high potential basins z Brazil Won three blocks in deepwater Santos, one operatorship z Mozambique Operator in two blocks in the offshore Rovuma basin Pre-drilling activities z Morocco Operator in the North West Safi license Pre-drilling activities z Cuba Partner in seven offshore
Slide 43: Continued high global exploration activity
Continued high global exploration activity NOK billion 8 z Attractive exploration portfolio Approx. - Balanced risk 50 wells Approx. - Geography 6 60 wells NOK 5-6 billion 4 z Rig capacity secured - Balanced portfolio of long-term 22 wells drilling contracts on NCS 2 - NCS exploration secured to 200
Slide 44: Long-term growth perspectives
Long-term growth perspectives 44
Slide 45: Oil and gas reserves and resources
Oil and gas reserves and resources Million boe 4 000 CMD 2005 3 000 2 000 z Added total ~350 mboe in new resources in 2006 1 000 z Few sanctioned fields in 2006 z 2006 estimated production 209 mboe z Total reserve/resource base up 120 mboe 0 Proven reserves Additional expected 2006E Production Added
Slide 46: New projects beyond 2010
New projects beyond 2010 Field name Country Type Operator Peregrino Brazil Oil Hydro/Anadarko Sigrid Norway Gas/Cond Hydro Idun/Skarv Norway Gas/Cond BP Hiberina South Canada Oil ExxonMobil Dagny Norway Gas/Cond Statoil Pazflor Angola Oil Total Morvin Norway Oil Statoil Njord North-West Flank Norway
Slide 47: Growth perspectives beyond 2010
Growth perspectives beyond 2010 Existing portfolio, technology leadership and exploration excellence z International production build-up in top petroleum provinces z Gas growth from large reserve base z Strong NCS oil position 47