Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Q1 2006 Earnings Presentation
71 slides from Norsk Hydro Asa's earnings presentation, 2006
Slide 1: First quarter 2006
First quarter 2006 www.hydro.com
Slide 2: Highlights – first quarter
Highlights – first quarter z Record-high earnings z High energy prices and good operational performance z Significantly improved earnings for Aluminium Metal z Aluminium divided into two separate business areas z Strong financial position 1
Slide 3: Income from continuing operations
Income from continuing operations* By quarter 5 869 NOK million Gains from divestments 4 183 4 186 3 638 3 693 3 577 3 135 2 991 2 481 2 224 2 005 1 851 1 809 2003 2004 2005 2006 Accumulated 8 656 11 477 15 638 5 869 * Changes in accounting principles for 4th quarter 2005 resulted in a negative amou
Slide 4: Consolidated income statements
Consolidated income statements NOK million Q1 2006 Q1 2005 Operating revenues 55 416 42 152 Operating income 17 867 11 754 Non-consolidated investees 316 213 Financial income (expense), net 759 (910) Income before tax and minority interest 18 943 11 057 Income tax expense (13 117) (7 283) Minority i
Slide 5: Adjusted EBITDA
Adjusted EBITDA NOK million 22 769 17 108 17 000 15 852 15 533 13 546 13 210 12 266 12 094 11 045 9 935 9 451 8 197 2003 2004 2005 2006 Accumulated 38 628 51 116 65 493 22 769 4
Slide 6: Oil & Energy – operating income
Oil & Energy – operating income Operational data Q1 2006 Q4 2005 Q1 2005 Oil and gas production (1 000 boe/day) 610 589 584 Realized oil price, USD/boe 60.60 55.60 46.40 Realized oil price, NOK/boe 403.50 368.80 291.70 Realized gas price, NOK/Sm³ 2.17 1.85 1.47 Exploration expense, NOK million 1 407
Slide 7: Aluminium activities – operating income
Aluminium activities – operating income Operational data Q1 2006 Q4 2005 Q1 2005 Realized aluminium price, USD/tonne 2 146 1 851 1 783 Realized aluminium price, NOK/tonne 14 850 12 383 11 732 Primary aluminium production, 1 000 tonnes 449 464 444 Operating income, NOK million Q1 2006 Q4 2005 Q1 2005
Slide 8: Operating income
Operating income Individual operating segment NOK million Q1 2006 Q4 2005 Q1 2005 Exploration and Production 13 102 10 690 9 057 Energy and Oil Marketing 967 1 403 1 046 Eliminations 57 (556) (261) Oil & Energy 14 126 11 537 9 842 Aluminium Metal 2 040 12 1 068 Aluminium Products 452 (1 035) 279 Oth
Slide 9: Adjusted net debt/equity ratio
Adjusted net debt/equity ratio 0.50 0.38 0.31 0.17 0.11 2003 2004 2005 2006 31-mar-06 31 March 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
Slide 10: Oil & Energy – highlights
Oil & Energy – highlights z Record-high energy prices z Oil and gas production – 610 000 boed z High exploration activity z Ormen Lange/Langeled on track z Shtokman bid submitted 9
Slide 11: Oil & Energy – operating income
Oil & Energy – operating income NOK million Eliminations 14 126 Energy and Oil Marketing Exploration and Production 12 624 11 537 9 842 9 447 8 621 7 818 7 521 7 184 6 175 5 994 5 322 3 652 2003 2004 2005 2006 Accumulated 21 143 31 144 43 451 14 126 10
Slide 12: Petroleum production per quarter
Petroleum production per quarter 1 000 boe/day Oil Gas 615 610 596 591 584 589 569 552 539 541 514 484 489 166 173 147 176 156 178 142 184 208 442 123 154 112 116 430 422 415 406 405 402 396 391 385 399 372 373 2003 2004 2005 Q1 2006 Average 530 572 563 610 11
Slide 13: Production costs per barrel 2006
Production costs per barrel 2006 NOK/boe Gas injection cost 26.3 25.3 Production cost excluding gas injection 20.7 20.7 5.4 6.6 0.7 20.0 2.8 19.9 19.7 17.9 2003 2004 2005 Q1 2006 Production in million boe 194 209 206 55 12
Slide 14: Capturing US Gulf of Mexico potential
Capturing US Gulf of Mexico potential z Production Q1: 15 000 boed z Annual production estimate: 30 000 boed - Two new fields on stream: High Island 165 and Seventeen Hands – 2 800 boed* - Lorien on stream late April – 6 500 boed* z 20 exploration wells in 2006 – 8 deep water and 12 on the shelf - Q
Slide 15: High exploration activity
High exploration activity z 60 wells planned in 2006 - Norway: 20-25 Libya: 10-15 - US Gulf of Mexico: 20 Other locations: 5-10 z 11 wells completed in Q1, 9 wells currently drilling - 3 discoveries, 4 wells under evaluation - Exploration activity: NOK 1 698 million z New acreage secured: Norway, De
Slide 16: Oil & Energy – prospects
Oil & Energy – prospects z High energy prices z 2006 production target maintained: 615 000 boed z Extensive exploration activity z Capture value through strenghtened portfolio - Realize US Gulf of Mexico potential - Prepare Chinook field (Brazil) for development z Shtokman partnership conclusion 15
Slide 17: Aluminium Metal – highlights
Aluminium Metal – highlights z Significantly improved financial performance z Realized aluminium price USD 2 146 per tonne z Further progress on smelter restructuring z Joint venture agreement for world-class aluminium plant in Qatar 16
Slide 18: Increasing aluminium price
Increasing aluminium price USD per tonne 3 000 LME (3 month avg.) LME forward Primary aluminium USD/ tonne 2 750 Q1 2006 average 2 444 Q1 2006 end 2 471 2 500 Q4 2005 average 2 069 2 250 Q4 2005 end 2 277 2 000 Average 2005 1 900 1 750 1 500 1 250 2000 2002 2004 2006 2008 2010 Per 24. april 2006 17
Slide 19: Aluminium Metal – operating income
Aluminium Metal – operating income NOK million z Production 449 000 mt 2 040 Unrealized LME effects 480 Aluminium Metal excl. unrealized LME effects z Higher aluminium prices 1 068 1 560 1 166 12 1 235 458 447 1 132 z Increased raw material and energy 822 costs 708 (167) z Unrealized effect on LME c
Slide 20: Aluminium Metal – prospects
Aluminium Metal – prospects z LME prices at record levels z Energy contracts for Neuss secured for 2006-2008 z Alunorte 2 expansion in full production by end of second quarter z Tight alumina market 19
Slide 21: Aluminium Products – highlights
Aluminium Products – highlights z Improved earnings but returns remain unsatisfactory z High shipments for Rolled Products and Extrusion z Increasing metal prices, further pressure on margins z Continued good performance in Building Systems z Weak magnesium market 20
Slide 22: Aluminium Products – operating income
Aluminium Products – operating income NOK million z Rolled Products NOK 461 million - Metal effect: NOK 349 million in Q1 2006 Rolled Products Extrusion - Increased volumes Automotive Other and eliminations z Extrusion NOK (158) million 452 - Increased volumes 279 210 371 - Reduced margins - UK pens
Slide 23: Aluminium Products – prospects
Aluminium Products – prospects z Positive economic outlook but rebuilding of inventories to taper off z Margins under pressure with increasing metal prices z Continued focus on cash generation and restructuring - Magnesium casthouse in Porsgrunn to be closed 22
Slide 24: Hydro – priorities
Hydro – priorities z Capture value from strengthened international portfolio z Repositioning Aluminium Metal z Extensive portfolio review in Aluminium Products z Further strengthening of oil and gas resource base z First-class project execution 23
Slide 25: Forward-looking statements/ use of non-GAAP financial measures
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
Slide 26: Cautionary note
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 exist
Slide 27: Additional information
HYDRO Additional information
Slide 28: Adjusted income first quarter 2006
Adjusted income first quarter 2006 NOK million Reported income Adjustments Adjusted income Exploration and Production 13 102 173 13 275 Energy and Oil Marketing 967 (118) 849 Eliminations 57 (57) - Oil & Energy 14 126 (2) 14 124 Aluminium Metal 2 040 (339) 1 701 Aluminium Products 452 (119) 333 Othe
Slide 29: Infrequent and other special items impacting income statement first quarter 2006
Infrequent and other special items impacting income statement first quarter 2006 NOK million Unrealized (gains)/losses on oil and gas derivatives, Spinnaker Exploration and Production 127 Unrealized (gains)/losses on gas contracts Exploration and Production 46 Unrealized (gains)/losses on gas contra
Slide 30: Adjusted income first quarter 2005
Adjusted income first quarter 2005 NOK million Reported income Adjustments Adjusted income Exploration and Production 9 057 (15) 9 042 Energy and Oil Marketing 1 046 (160) 886 Eliminations (261) 261 - Oil & Energy 9 842 86 9 928 Aluminium Metal 1 068 173 1 241 Aluminium Products 279 (14) 265 Other a
Slide 31: Infrequent and other special items impacting income statement first quarter 2005
Infrequent and other special items impacting income statement first quarter 2005 NOK million Unrealized (gains)/losses on gas contracts Exploration and Production (15) Unrealized (gains)/losses on gas contracts Energy and Oil marketing (160) Unrealized (gains)/losses on gas and power contracts Oil &
Slide 32: Operating income – Adjusted EBIT – Adjusted EBITDA
Operating income – Adjusted EBIT – Adjusted EBITDA First quarter 2006 Depr. Operating Non-cons. Interest Selected Adjusted Adjusted NOK million income investees income fin. items EBIT and EBITDA amort. Exploration and Production 13 102 2 4 2 13 111 2 989 16 100 Energy and Oil Marketing 967 56 12 16
Slide 33: Adjusted EBITDA
Adjusted EBITDA Individual operating segment NOK million Q1 2006 Q1 2005 Exploration and Production 16 100 11 456 Energy and Oil Marketing 1 241 1 220 Eliminations 57 (261) Oil & Energy 17 398 12 416 Aluminium Metal 2 775 1 636 Aluminium Products 926 806 Other Activities 335 422 Corporate and elimin
Slide 34: Variance analysis Hydro
Variance analysis Hydro NOK million Q1 2006 22 769 2005 15 852 Variance adjusted EBITDA 6 917 - Prices and currency, Exploration and Production (E&P) 5 985 - Margin incl. currency effects ¹) 1 500 - Volume 1 245 - Fixed costs (465) - Depreciation (620) - Production and exploration costs, E&P (1 520)
Slide 35: Consolidated balance sheets
Consolidated balance sheets NOK million 31.03.2006 31.03.2005 Cash and cash equivalents 20 762 15 467 Short-term investments 3 850 15 392 Receivables and other current assets 47 292 38 538 Inventories 15 230 13 824 Non-current assets 156 584 130 567 Total assets 243 717 213 789 Short-term interest-b
Slide 36: Statement of cash flows
Statement of cash flows Three months ended Three months ended NOK million 31 March 2006 31 March 2005 Operating activities: Net income 5 869 3 693 Depreciation, depletion and amortization 4 142 3 547 Other adjustments 5 639 1 228 Net cash provided by operating activities 15 650 8 468 Investing activ
Slide 37: Additional information – Oil & Energy
Additional information – Oil & Energy
Slide 38: High oil price driven by supply concerns
High oil price driven by supply concerns OPEC spare capacity at low levels Million bbl/day USD per bbl 5 80 70 4 60 3 50 40 2 30 20 1 10 0 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 OPEC spare capacity Brent dated Brent forward Sources: International Energy Agency(IEA), Reuters, Platts
Slide 39: Oil & Energy – Adjusted EBITDA
Oil & Energy Adjusted EBITDA NOK million 17 398 15 191 14 766 Eliminations Energy and Oil Marketing 12 416 Exploration and Production 11 583 11 967 10 503 9 928 9 764 9 139 8 668 7 745 6 274 2003 2004 2005 2006 Accumulated 31 826 41 777 54 339 17 398 38
Slide 40: Average realized gas prices
Average realized gas prices NOK/Sm3 2.17 1.85 1.47 1.36 1.31 1.20 1.10 1.07 1.03 1.06 0.99 1.01 0.98 2003 2004 2005 2006 39
Slide 41: Average prices and exchange rates
Average prices and exchange rates Oil Oil Gas 500 80 NOK/boe USD/boe NOK/boe NOK/USD NOK/Sm3 USD/boe Q1 2004 31.6 218.3 6.91 1.10 400 Q2 2004 34.7 238.0 6.85 0.98 60 Q3 2004 41.7 286.3 6.87 1.07 Q4 2004 41.8 263.8 6.32 1.20 300 2004 37.3 251.3 6.74 1.09 40 200 Q1 2005 46.4 291.7 6.29 1.47 Q2 2005 49
Slide 42: Operating costs per boe
Operating costs per boe NOK/boe 122.5 99.4 94.9 83.8 82.1 Q1 2006 excl. 2003 2004 2005 Q1 2006 Spinnaker Exploration 8.1 6.0 8.9 25.6 12.2 Net transportation 6.8 8.3 9.4 12 12.2 Other cost/income 1.7 0.7 3 4.4 3.8 Deprec.& aband. 46.4 46.4 48.2 54.2 45.1 Gas for injection 0.7 2.8 5.4 6.6 6.7 Prod. c
Slide 43: Oil production per field Q1 2006
Oil production per field Q1 2006 Boe/day Share Q1 2005 Hydro Q1 2005 Q1 2006 Hydro Q1 2006 Oil and NGL/Condensate Grane 38.00% 164 62 215 82 Oseberg incl C 34.00% 165 56 137 47 Snorre 17.65% 130 23 159 28 Troll B&C 9.78% 268 26 245 24 Oseberg South 34.00% 69 23 70 24 Ekofisk 6.65% 366 24 342 23 Gull
Slide 44: Gas production per field Q1 2006
Gas production per field Q1 2006 Boe/day Share Q1 05 Hydro Q1 05 Q1 06 Hydro Q1 06 Gas Troll A 9.78% 560 55 546 53 Oseberg incl C 34.00% 50 17 101 34 Sleipner Area 9.42% 242 23 260 25 Tune 40.00% 65 26 50 20 Åsgard 9.60% 190 18 178 17 Kvitebjørn 15.00% 73 11 113 17 Spinnaker 100.00% 0 0 9 9 Gullfaks
Slide 45: New fields on stream 2006 - 2007
New fields on stream 2006 - 2007 Field Hydro peak production (boe/day) Peak year 2004 2005 2006 2007 International Lorien 6 500 2006 W Dalia 24 000 2007 W Rosa 13 000 2008 W Eastern Gulf development* 12 500 2008 W WW Oseberg Vestflanken 12 000 2007 W Oseberg South J Sentral 2 000 2009 W W W Operator
Slide 46: Exploration activity/cost
Exploration activity/cost NOK million 1 400 1 200 1 000 800 600 Expensed 400 share 200 0 - 200 - 400 2002 2003 2004 2005 2006 Capitalized share Expensed Expensed old wells Refund insurance Iran Seismic Spinnaker 45
Slide 47: 2005 discoveries and new acreage Q1 2006
2005 discoveries and new acreage Q1 2006 z Norway - 19th License round - PL 393 - PL 394 Barents Sea z Denmark - 6th License round - DK 01/06 - DK 04/06 - DK 05/06 Norwegian Sea - DK 06/06 Stetind Vigdis M5 Peon Astero Troll Brent Oseberg South B Oseberg South J North Sea Hydro operated Hydro partne
Slide 48: Secured prices for Spinnaker production
Secured prices for Spinnaker production 16 Oil - WTI (USD/bbl) Gas - Henry Hub (USD/mmbtu) 70 14 60 Secured price 12 45.00 - 71.45 50 10 Secured minimum price 7.5 8 40 6 30 4 20 2 10 0 2000 2002 2004 2006 2008 2000 2002 2004 2006 2008 Source: Ecowin Oil, WTI Crude Oil, Spot, USD, (Nominal) Source: E
Slide 49: UK gas prices – NBP forward curves
UK gas prices – NBP forward curves Pence/th 105 95 85 75 65 55 45 35 25 15 Jan-05 jan.05 Jan-06 jan.06 Jan-07 jan.07 Jan-08 jan.08 Jan-09 jan.09 End Q1 2005 End Q4 2005 End Q1 2006 48
Slide 50: Nordic power market – forward curves
Nordic power market – forward curves NOK/MWh 500 450 400 350 300 250 200 150 Jan-06 Jan 06 End Q4 2005 End Q1 2006 49
Slide 51: Variance analysis Oil & Energy
Variance analysis Oil & Energy NOK million Q1 2006 17 398 2005 12 416 Variance adjusted EBITDA 4 982 Prices and currency 5 985 - Oil 3 290 - Gas 2 245 - Currency 640 - Options (190) - Margin 335 - Volume 685 - Fixed costs (65) - Depreciation (640) - Production costs (420) - Exploration costs (1 100)
Slide 52: Variance analysis Exploration and Production
Variance analysis Exploration and Production NOK million Q1 2006 16 100 2005 11 456 Variance adjusted EBITDA 4 644 Prices and currency 5 985 - Oil - Gas 3 290 2 245 - Currency 640 - Options (190) - Volume 665 - Depreciation (590) - Production costs (420) - Exploration costs (1 100) - Other (495) Var
Slide 53: Variance analysis Energy and Oil Marketing
Variance analysis Energy and Oil Marketing NOK million Q1 2006 1 241 2005 1 220 Variance adjusted EBITDA 21 - Margin 15 - Volume 20 - Fixed costs (70) - Depreciation (45) - Other - Variance operating income (79) - Non-consolidated investees 31 - Interest income and other 21 - Other income - - Deprec
Slide 54: Additional information – Aluminium
Additional information – Aluminium
Slide 55: Primary aluminium production per quarter
Primary aluminium production per quarter 1 000 mt 457 461 464 441 446 444 449 415 418 388 381 360 343 2003 2004 2005 2006 Slovalco consolidated from Q1 2004 54
Slide 56: Primary aluminium market
Primary aluminium market USD per tonne days Aluminium inventories (days of consumption) 2 600 70 Aluminium price (LME 3 month) 2 400 65 60 2 200 55 2 000 50 1 800 45 1 600 40 35 1 400 30 1 200 25 1 000 20 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 55
Slide 57: Germany 2006-2008
Germany 2006-2008 z Closures: HAW closed (40 000 mt), Stade to be closed end of 2006 (60 000 mt) z Neuss represents 12% of Hydro primary production positive margin locked in z Volumes and prices: USD 2 220/ mt average price for 460 000 mt - 2006: USD 2 150/tonne – 130 000 mt - 2007-2008: USD 2 250/t
Slide 58: Current position – Power market
Current position – Power market EEX Power market development. Baseload contract one year ahead. Avg. spot prices for the year Eur/Mwh 70 63.04 60 50 45.98 z Forward prices all 40 time high – above 60€/Mwh 29.49 28.52 30 22.55 z Forward power 20 prices driven by CO2 and fuel prices 10 0 jan-02 jul-02
Slide 59: Aluminium – operational data
Aluminium – operational data Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Volumes and prices 2006 2005 2005 2005 2005 2004 2004 2004 2004 Primary production (1 000 tonnes) * 449 464 461 457 444 446 441 418 415 Total metal products sales excluding trading 835 736 741 835 802 735 752 776 786 (1 000 tonnes) LME realized
Slide 60: Inventories – primary aluminium
Inventories – primary aluminium IAI and LME 1 000 tonnes LME (London Metal Exchange) 5 000 IAI (Producers' inventories) 4 000 3 000 2 000 1 000 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Q1 2006 Sources: IAI and LME 59
Slide 61: Variance analysis Aluminium Metals and Aluminium Products
Variance analysis Aluminium Metals and Aluminium Products NOK million Q1 2006 3 701 2005 2 442 Variance adjusted EBITDA 1 259 - Margin 675 - Volume 535 - Fixed costs (375) - Depreciation 25 - Trading and hedging ¹) (50) - Unrealized LME effects 715 - Restructuring costs - - Infrequent items (405) -
Slide 62: Variance analysis Aluminium Metal
Variance analysis Aluminium Metal NOK million Q1 2006 2 775 2005 1 636 Variance adjusted EBITDA 1 139 - Margin 550 - Volume 50 - Fixed costs (50) - Depreciation (15) - Trading & price hedging ¹) (50) - Unrealized LME effects 645 - Infrequent items (195) - Other 35 Variance operating income 972 - Non
Slide 63: Variance analysis Aluminium Products
Variance analysis Aluminium Products NOK million Q1 2006 926 2005 806 Variance adjusted EBITDA 120 - Margin 125 - Volume 485 - Fixed costs (325) - Depreciation 40 - Trading & price hedging ¹) - - Unrealized LME effects 70 - Infrequent items (210) - Other (10) Variance operating income 173 - Non-cons
Slide 64: Variance analysis Rolled Products
Variance analysis Rolled Products NOK million Q1 2006 603 2005 395 Variance adjusted EBITDA 208 - Margin 375 - Volume 80 - Fixed costs (225) - Depreciation 15 - Infrequent items (15) - Other - Variance operating income 231 - Non-consolidated investees (1) - Interest income and other (4) - Depreciati
Slide 65: Variance analysis Extrusion
Variance analysis Extrusion NOK million Q1 2006 (20) 2005 242 Variance adjusted EBITDA (262) - Margin (110) - Volume 250 - Fixed costs (65) - Depreciation - - Restructuring costs - - Infrequent items (340) - Other - Variance operating income (267) - Non-consolidated investees 2 - Interest income and
Slide 66: Variance analysis Automotive
Variance analysis Automotive NOK million Q1 2006 190 2005 88 Variance adjusted EBITDA 102 - Margin (150) - Volume 155 - Fixed costs (35) - Depreciation 30 - Infrequent items 145 - Other (5) Variance operating income 139 - Non-consolidated investees (9) - Interest income and other - - Depreciation an
Slide 67: Additional information – Other Businesses
Additional information – Other Businesses
Slide 68: Variance analysis Polymers
Variance analysis Polymers NOK million Q1 2006 174 2005 326 Variance adjusted EBITDA (152) - Margin (115) - Volume 25 - Fixed costs (25) - Depreciation (5) - Other - Variance operating income (122) - Non-consolidated investees (38) - Interest income and other - - Depreciation and amortization 8 Vari
Slide 69: Investor Relations in Hydro
HYDRO Investor Relations in Hydro
Slide 70: Investor Relations in Hydro
Investor Relations in Hydro t +47 22 53 32 73 Idar Eikrem Senior Vice President Idar.Eikrem@hydro.com m +47 950 28 363 t +47 22 53 24 55 Gudmund Isfeldt Investor Relations Officer Gudmund.Isfeldt@hydro.com m +47 480 01 180 t +47 22 53 35 39 Stefan Solberg Investor Relations Officer Stefan.Solberg@hy
Slide 71: Hydro is a Fortune energy and aluminium supplier
Hydro is a Fortune 500 energy and aluminium supplier with 33,000 employees in 40 countries. We are a leading offshore producer of oil and gas, the world's third largest aluminium supplier and a leader in the development of renewable energy sources. Our mission is to strengthen the viability of the c