Hydro Concludes Dialogue With SEC Regarding Proved Undeveloped Reserves
June 29 2004 - 6:11AM
PR Newswire (US)
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/
Copyright