Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Investor Day (December 2003)
35 slides from Norsk Hydro Asa's investor day presentation, Dec 11, 2003
Slide 1: Progress Review and Forward Strategy
Hydro Oil & Energy Tore Torvund Executive Vice President Progress Review and Forward Strategy Capital Markets Day December 11, 2003
Slide 2: Main messages
Main messages ! We deliver on our operational targets for 2003 ! We take corrective actions within exploration ! We extend the 8% growth rate to 2007 ! We pursue growth opportunities based on our competence in core areas ! We build a downstream presence in European gas markets ! We have ambitious ta
Slide 3: Strong 2003 performance
Strong 2003 performance CMD Dec 2002 2003 Estimate ! Production target 510 000 boe/day 525 000 boe/day ! Operating cost 82 NOK/boe (excl. exploration) ! F&D costs USD 5/boe On track (3 year average) ! RRR 140% (3 year average) ! CAPEX-level NOK 11.5 billion NOK 10.1 billion ! Exploration level NOK 1
Slide 4: Exploration review
Hydro Oil & Energy Exploration review
Slide 5: An examination of exploration
An examination of exploration NOK million Exploration expenditure 3 000 Gulf of Mexico 2 000 Canada: Scotian Shelf, Grand Banks, Flemish Iran: Anaran Angola: Block 34 & 25, Block 17 1 000 Libya: Murzuk Norway 0 1999 2000 2001 2002 2003E Excluding license acquisition costs 47349 Hydro Media 12 2003 •
Slide 6: Main exploration wells 1999 - 2003
Main exploration wells 1999 - 2003 Number of Number of Area exploration wells technical discoveries Norway 76 39 Angola 25 16* Canada 13 7 Libya 14 8* Gulf of Mexico 5 1 Iran 1 In progress* * Drilling ongoing 47349 Hydro Media 12 2003 • 6 • Hydro Oil & Energy
Slide 7: Exploration review - Main findings
Exploration review - Main findings ! Portfolio ! High reward portfolio, but too expensive and too high risk ! Gulf of Mexico – underestimated drilling costs ! Too high entry costs ! Organization ! Need to centralize decision processes 47349 Hydro Media 12 2003 • 7 • Hydro Oil & Energy
Slide 8: Actions taken
Actions taken Exploration activity vs production (2002)* ! More centralized organization Repsol-Ypf with world-wide responsibility Occidental ExxonMobil Statoil Hydro 2004E ! Level of exploration reduced: Total Shell ! 2004(E): NOK 1 billion BP Apache ! Future: NOK 1.5 billion ChevronTexa Burlington
Slide 9: Building on our competence
Hydro Oil & Energy Building on our competence
Slide 10: Scale as operator is basis for competence
Scale as operator is basis for competence 1000 boe/day Production 2003(E) 1000 900 800 700 Offshore operator production oil and gas, boe/day * 0 500 000 1 000 000 1 500 000 2 000 000 600 Statoil Shell 500 Petrobras 400 BP Hydro Operator 300 ExxonMobil Equity Woodside 200 Chevron Texaco TotalFinaElf
Slide 11: Adding value by applying world class technological competence
Adding value by applying world class technological competence Technology/Competence Hydro position Benefits ! Global leader in ! Increased oil production multilateral wells and recovery ! No 5 globally in number ! Reduced drilling costs of subsea wells Troll thin oil zone ! Increased oil production/
Slide 12: Ormen Lange – one of the world’s most technologically challenging gas projects
Ormen Lange – one of the world’s most technologically challenging gas projects ! Development plan delivered Nyhamna plant ! Total investments Multiphase (field + pipeline): NOK 66 billion transport Gas export ! Production start October 2007 Seabed development Steep and uneven (800- (800-1000m deep)
Slide 13: An efficient offshore operator
An efficient offshore operator McKinsey Benchmark 2002 (Norway and UK North Central) 2001 2002 ! Total manning Hydro in Oil & Energy Best performers cut from 4 600 to 3 800 Hydro ! Continuous Median performer focus on improving work processes 0 10 20 30 40 50 0 10 20 30 40 50 Total TQ gap (%) Total
Slide 14: Basis for future production growth
Hydro Oil & Energy Basis for future production growth
Slide 15: Production continuing to grow strongly
Production continuing to grow strongly 1 000 boe/day 8% average annual growth 700 600 500 400 300 200 100 0 1998 1999 2000 2001 2002 2003E 2004E 2005E 2006E 2007E Oil NCS Oil Int Gas 8% CAGR* * Compound Annual Growth Rate, 2001 baseline 47349 Hydro Media 12 2003 • 15 • Hydro Oil & Energy
Slide 16: New fields onstream 2004 – 2007
New fields onstream 2004 – 2007 Hydro share boe/day Dalia 22 000 ▼ International Kharyaga 2+3 15 000 (phase 1-3) ▼ ▼ Murzuq 6 000 (A + D field) ▼ ▼ Rosa 13 000 ▼ NCS operator Ormen Lange ▼ 70 000 ▼ Oseberg ▼ 14 000 ▼ Vestflanken ▼ Oseberg Sør J 7 000 ▼ NCS non-operator Visund gas 17 900 ▼ phase ▼ Kv
Slide 17: Strong production growth based on attractive project portfolio
Strong production growth based on attractive project portfolio Oil price giving 10% real rate of return post tax Libya NCS satellittes* Grane Fram Vest Angola bl. 17 Ormen Lange** Kvitebjørn 0 5 10 15 20 Brent USD/bbl *NCS satellites – Vigdis extension, Mikkel, Oseberg Vestflanke, Visund gas export
Slide 18: High investment level going forward
High investment level going forward Annual investments O&E NOK billion 16 14 SDFI acquisition 12 10 8 6 4 2 0 2001 2002 2003E 2004-6E 47349 Hydro Media 12 2003 • 18 • Hydro Oil & Energy
Slide 19: Production growth beyond 2007
Hydro Oil & Energy Production growth beyond 2007
Slide 20: Three sources of longer term production growth
Three sources of longer term production growth 1000 boe/day ! Existing portfolio 700 ! Development projects ! Increased oil recovery 600 500 ! Exploration 400 ! Acquiring resources 300 200 100 0 2003E 2007E Future 47349 Hydro Media 12 2003 • 20 • Hydro Oil & Energy
Slide 21: Angola – Development portfolio and exploration
Angola – Development portfolio and exploration ! Block 17 value creation ! Jasmin production start ! Dalia development ! Satellite tie-ins to Dalia and Girassol ! Clarify exploration potential Block 34 ! Well 34-2 drilling ! Pursue business development opportunities 47349 Hydro Media 12 2003 • 21 •
Slide 22: Canada – Development portfolio
Canada – Development portfolio ! Hibernia and Terra Nova value creation ! Develop Hebron Ben Nevis Gulf of NewfoundlandHibernia St. Lawrence St.John’s ! Recoverable resources ~ 600 million bbls Hebron Terra Nova ! Evaluate the Annapolis gas Nova Scotia discovery Halifax Grand Banks ! Exploration sca
Slide 23: Russia – Development portfolio and business opportunities
Russia – Development portfolio and business opportunities ! Further development of the Kharyaga field ! Technology co-operation agreement with Rosneft for the Shtokman field ! Pursue business development opportunities Kharyaga 47349 Hydro Media 12 2003 • 23 • Hydro Oil & Energy
Slide 24: Iran – Exploration portfolio
Iran – Exploration portfolio ! Anaran exploration contract Anaran ! Seismic acquisition completed ! Drilling campaign ongoing ! Prepare for a field development contract ! Pursue new business opportunities Anaran drilling rig 47349 Hydro Media 12 2003 • 24 • Hydro Oil & Energy
Slide 25: Development opportunities
Development opportunities ! Gulf of Mexico ! Lorien development ! Exploration scaled back Gulf of Mexico ! Libya ! Marbruk/Murzuq developments ! Pursuing new opportunities Libya 47349 Hydro Media 12 2003 • 25 • Hydro Oil & Energy
Slide 26: Norway – Exploration, Development and IOR
Norway – Exploration, Development and IOR Existing portfolio provides longer term opportunities ! Increased gas export from Oseberg and Troll ! Ormen Lange ramp-up bcm Oseberg Area gas exports 10 ! Increased oil recovery 8 6 ! Development opportunities 4 2 0 2000 2003 2006 2009 2012 2015 2018 47349
Slide 27: Still potential on the NCS given the right incentives
Still potential on the NCS given the right incentives Exploration wells UK and Norway drilled 1965-2003 ! Proposals from “Kon-kraft”: ! Reduce special tax level on new developments ! Volume allowance on existing fields for increased recovery Source: Norsk Hydro, Petrobank 47349 Hydro Media 12 2003 •
Slide 28: New areas have to be opened for exploration
New areas have to be opened for exploration ! Still potential for large oil and gas finds, but high risk Regional Consequence Disputed ! Risk/reward balance assessment zone made more favourable by improving frame conditions Barents Sea Snøhvit ! Industry commitment to explore with minimal Russia env
Slide 29: Strategic directions for acquiring resources
Strategic directions for acquiring resources ! Returns before growth Framework ! Fit with core competences ! Primarily current areas of activity Geography ! Potential step-out to adjoining basins 47349 Hydro Media 12 2003 • 29 • Hydro Oil & Energy
Slide 30: Building a downstream presence in European gas markets
Hydro Oil & Energy Building a downstream presence in European gas markets
Slide 31: Gas production increasing steeply
Gas production increasing steeply bcm/year 14 ● From 7.5 bcm in 2003(E) to 11-12 bcm 12 in 2007(E) 10 Uncommitted volumes 8 ● Producer-wholesaler- trader role 6 4 Expected offtake under long term contracts ● Portfolio of longer and 2 shorter term sales 0 2003 2004 2005 2006 2007 47349 Hydro Media 12
Slide 32: Total gas sales of 12-13 bcm planned for 2004(E)
Total gas sales of 12-13 bcm planned for 2004(E) ! Duke’s Dutch marketing business acquired NCS portfolio management ! Contract with Mærsk for new supplies from 2004/5 Mærsk purchase ! Sourcing from: agreement ! Equity production: 8 bcm ! 3rd parties and hubs: 4-5 bcm Duke marketing business acquire
Slide 33: HydroWingas – New UK marketing joint venture
HydroWingas – New UK marketing joint venture ! Jointly owned company to market and sell gas in UK ! Primarily to wholesalers, large end-users and power plants ! Combines Wingas and Hydro’s gas and marketing skills ! Builds market presence and expands arbitrage possibilities & ! Scale and diversity o
Slide 34: Targets for 2004
Targets for 2004 ! Production target 560 000 boe/day ! Production costs NOK 24/boe ! F&D costs (3 year average) USD 6/boe ! RRR (3 year average) 120% ! CAPEX-level NOK 11 billion ! Exploration level NOK 1 billion ! Investments in new development projects to meet USD 16/bbl* hurdle rate for 10% real,
Slide 35: Summary
Summary ! We have delivered on our operational targets for 2003 ! We haven taken corrective actions within exploration ! We extend the 8% growth rate to 2007 ! We pursue growth opportunities based on competence in core areas ! We build a downstream presence in European gas markets ! We have ambitiou