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Hydro Concludes Dialogue With SEC Regarding Proved Undeveloped
Reserves
OSLO, Norway, June 29 /PRNewswire-FirstCall/ -- Norsk Hydro ASA has concluded
the dialogue with the U.S. Securities and Exchange Commission's Division of
Corporation Finance (SEC) regarding Hydro's estimate of the "proved undeveloped
reserves" for the Ormen Lange gas field. As Hydro reported on May 10, 2004, the
company, before filing its Form 20-F for 2003, initiated this dialogue after
becoming aware of the substantial variation in the estimates of the proved
undeveloped reserves among the Ormen Lange partners.
Based on the outcome of the dialogue with the SEC, Hydro has decided to book in
the 2003 Form 20-F its 18.07 percent share in Ormen Lange at 234 million
barrels of oil equivalents (boe), which is 102 million boe lower than the
reserve figure estimate in the 2003 annual report to shareholders. This does
not result in any change in the expected reserves and production profile
described in the field development plan (PDO) for Ormen Lange, unanimously
agreed by the partnership in December 2003. The Norwegian authorities approved
the PDO on April 2, 2004. Hydro's 2003 booking of proved undeveloped reserves
for Ormen Lange represents 49 percent of Hydro's share of the estimated
recoverable reserves in the field, as reflected in the PDO.
Based on the methodology now applied for Ormen Lange, certain adjustments have
been made for other fields in Hydro's portfolio of proved undeveloped reserves.
This has resulted in a reduction of the proved undeveloped reserves compared to
those reported in Hydro's 2003 annual report to shareholders amounting to 59
million boe. Of this amount, 19 million boe relates to the Snohvit field. Early
in 2004 Hydro entered into an agreement to sell its 10 percent share in Snohvit
to Statoil. Also included in this adjustment is 26 million boe related to the
Rosa/Lirio field in Angola, pending a formal approval of the field development
by the Angolan authorities.
The modifications and adjustments described above, inclusive of Ormen Lange,
result in a change in the total volume of Hydro's proved oil and gas reserves
reported in its 2003 annual report to shareholders from 2,449 million boe to
2,288 million boe, representing 6.6 percent. The difference relates to proved
undeveloped reserves; there is no change in proved developed reserves.
Hydro's reserve replacement ratio for the three years ended December 31, 2003
was accordingly 114 percent. For the year 2003 isolated, the reserve
replacement ratio was 133 percent.
The above information will be reflected in Hydro's 2003 20-F.
By way of additional explanatory information, the SEC's definition of "proved
undeveloped reserves" permits the booking of such reserves in undrilled areas
that are within one "offset location" away from productive units that are
reasonably certain of production when drilled. The definition also provides
that proved undeveloped reserves for other undrilled units (i.e., units more
than one offset location away from such productive units) can be claimed only
where it is demonstrated with "certainty" that there is continuity of
production from the existing productive formation. For purposes of the proved
undeveloped reserves definition, an "offset location" may, in appropriate
circumstances, be determined by the radius of investigation of the well test
data. The SEC, in written interpretative guidance issued in March 2001, has
noted the difficulty in writing reserve definitions that easily cover all
possible situations, stating that each case has to be studied as to its own
unique issues. Hydro provided the SEC with information regarding the
methodologies used to evaluate Ormen Lange (i.e., open hole logs, core samples,
modular formation tester, drill stem testing and seismic evaluations), as well
as Hydro's analysis of the well data, seismic evaluation, fluid flow properties
and faults within the reservoir. The estimate of the proved undeveloped
reserves for Ormen Lange included in the 2003 annual report to shareholders
reflected Hydro's view that the integrated, multidisciplinary approach used to
extrapolate the observations from the four exploratory and appraisal wells
drilled within the reservoir - and taking into account the high degree of
correlation in the well data and seismic evaluation, and excellent reservoir
properties - served as sufficient basis for demonstrating the requisite
"certainty."
Conference call Hydro's management will host a conference call today at 11.00
CET. The dial-in number is +44 207 162 0197. The conference call will be
recorded, and will be made available for replay on http://www.hydro.com/.
Cautionary Note to U.S. Investors -- 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 existing economic and operating conditions. We use certain
terms in this press release (specifically, "expected reserves" and "estimated
recoverable reserves") that the SEC's guidelines strictly prohibit us from
including in filings with the SEC. U.S. investors are urged to consider
closely the disclosure in our Form 20-F, File No. 1-9159, available from us at
the following address: Norsk Hydro ASA, Drammensveien 264, Vaekero N-0240 Oslo,
Norway, Attn: Investor Relations. You can also obtain this form from the SEC
by calling 1-800-SEC-0330.
Certain statements in this press release are or may constitute "forward-
looking" statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Statements that are not in the nature of historical facts
may be deemed to be forward-looking statements and may contain identifying
words such as "believes", "anticipates", "plans", "expects" and similar
expressions. These forward-looking statements are based on Hydro's current
expectations, assumptions, estimates and projections about the company and the
industries in which it engages in business. All forward-looking statements
involve risks and uncertainties. For a detailed description of factors that
could cause Hydro's actual results to differ materially from those expressed in
or implied by such statements, please refer to its annual report on Form 20-F
for the year-ended December 31, 2003, and subsequent filings on Form 6-K with
the U.S. Securities and Exchange Commission. 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 comparable GAAP financial measure and a
reconciliation between the non-GAAP and GAAP measures. This information can be
found in Hydro's earnings press releases, quarterly reports and other written
communications, all of which have been posted to Hydro's website
(http://www.hydro.com/).
Contact Idar Eikrem Kjetil Bakken
Telephone (+47) 22 53 32 73 (+47) 22 53 23 13
Cellular (+47) 95 02 83 63 (+47) 91 889 889
E-mail
Contact Tor Steinum
Telephone (+47) 22 53 27 31
Cellular (+47) 95 08 39 33
E-mail
DATASOURCE: Norsk Hydro ASA
CONTACT: Idar Eikrem, +47-22-53-32-73, cell, +47-95-02-83-63 or
, or Kjetil Bakken, +47-22-53-23-13, cell, +47-91-889-889
or , or Tor Steinum, +47-22-53-27-31, cell,
+47-95-08-39-33 or , all of Norsk Hydro ASA
Web site: http://www.hydro.com/