Norsk Hydro cuts 2010 oil and gas output target by 6.7 %

Dec 06, 2006 01:00 AM

Norsk Hydro cut its oil and output target for 2010 by 6.7 % to 700,000 barrels of oil equivalent a day from 750,000 boepd but was upbeat about the company's prospects beyond 2010.
"We have not been so successful in meeting the (oil and gas production) targets we have set. It is an industry (wide) challenge, not just a Hydro challenge," Chief Executive Eivind Reiten said at the company's capital markets day. "The production downgrade is the negative side of the message. On the positive side, growth beyond 2010 is coming from a broader portfolio than we saw a year ago. We see solid and good growth beyond 2010," he added.

Reiten added that he expects oil prices through 2010 to remain high, which he considered to be $ 40-$ 60 a barrel. He added the revised oil and gas target for 2010 will be 90 % accounted for by production which is already on line and new projects which have been sanctioned. This compares with the earlier target of which 85 % was accounted for by existing and sanctioned new projects.
"We're all stretching for some resources, and 700,000 (boepd) represents the best estimate. There is uncertainty when we are talking about three years ahead, but we have made a very, very thorough review of it," Reiten said. "All projects (included in that figure) are well defined and transparent," he added.

Turning to the aluminium market, Reiten said that in 2006 the company prioritized upstream investments and repositioned itself.
"We are very pleased with the progress we are making in aluminium. We have reduced our downstream exposure by taking out the least performing part of that business. Even though we haven't finalized that, there's progress," he said.

Reiten expects 2007 to be a year with strong demand and good prices.
"Prices have now shifted to a higher level," he said, adding that it was hard to bring on new capacity to meet increasing demand. "There's a solid, good outlook for prices for both aluminium and oil and gas from a short-to-medium-term perspective," he said.Reiten added that return on average capital employed, or ROACE, is likely to be higher than the 16.8 % seen in 2005, and that ROACE figures for 2006 to the end of the third quarter is 14.9 %.

Source: Dow Jones Newswires
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