On Song in Norway

Statoil and Hydro, Norway's two national oil companies, will merge to create the world's biggest offshore operator. It is proposed that Eivind Reiten will become chairman of the new company, while Helge Lund has been proposed as CEO. The process of preparing for the election of the new board has been agreed.

Hydro's shareholders will hold 32.7% of the new company and Statoil's shareholders will hold 67.3%. Hydro's shareholders will receive 0.8622 shares in the new company for each Hydro share and continue as owners of Hydro. Statoil shareholders will maintain their holdings in the new company on a one-for-one basis. The Norwegian state will hold approximately 62.5% in the merged entity.

The new company will create something new, something different from both Hydro and Statoil. It will take the best from each.

Statoil / Hydro will be by far the world's largest offshore operator with a very strong portfolio. By combining the capabilities of Hydro and Statoil, it will become a first-class company and be a major – and reliable – supplier of gas to Europe. The merged company will also have a new name.

Hydro energy production will continue, after the de-merger of its oil and gas assets, as the Hydro aluminium company, the third largest integrated aluminium company globally and the third largest listed company in the world. The restructuring of the Hydro aluminium company has nearly been completed, positioning the company for strong results and long-term growth.

Hydro's energy production activities will stay with the aluminium company, and not become part of the new oil company, to secure the company's long-term power coverage and its strong position in aluminium production. With the strong financial position that Hydro has today, it is clear that the Hydro company, following the de-merger of its oil and gas activities, will still occupy a strong financial position.

INTEGRATION PROCESS

The process of planning the company integration and leading the integration team will be the responsibility of Hilde Merete Aasheim, who is presently head of HR in Hydro. It is a key position; providing equal opportunities and finding the best person for a given job is going to be crucial to the success of the merger.

The new company is setting out some key principles for this process, to help it continue the excellent traditions that both Statoil and Hydro already have when it comes to managing integrations in a manner that is timely and sensitive to its employees.

STEP CHANGE

For the merged entities, the merger will be a step-change, both in terms of production and resource base – the merger is very much driven by growth and growth initiatives.

The new company will have a combined production of 1.9mbpd in 2007 and proven oil and gas reserves of 6.3 billion barrels of oil equivalent. The company will have approximately 31,000 employees and operations in 40 countries.

It will have a stronger portfolio in Norway and internationally. As both Statoil and Hydro have increased their exploration activities significantly in the last few years, the new company will go forward with a very exciting and strong exploration programme.

PROMISING FUTURE

The new company will have a strong technology profile, particularly in terms of subsea technology, and excellent project execution skills. In terms of gas, it will further improve its position, not only in piped gas but also in LNG and gas-to-liquid (GTL) technology.

There will be a considerable emphasis on upstream, but also on a strong value chain. The new company will continue to build its activities and capabilities in the increasingly important areas of carbon capture and sequestration.

The combined entity will bring the Norwegian Continental Shelf (NCS) to a new level. It is expected to address the challenges on the NCS in an even more dynamic way than the merging companies have been able to do alone, by deploying improved oil and gas recovery technologies and by using scale advantages in the logistics and operations areas to become a more efficient operator. There can be no doubt that the new company will become a leading force in the Arctic.

The company will be strong in North Africa, Nigeria, Libya, Egypt and West Africa (particularly Angola). It will have a very exciting combined portfolio in the Gulf of Mexico, which will include producing assets, projects under development and discoveries, as well as a huge licence portfolio. In addition, the company's position in Brazil, particularly in terms of exploration, but also in terms of development, will remain strong.

The merged company believes that, in up-scaling its activities and building up its technology base, it will increase its competitive position in the hunt for new resources and opportunities. And the company believes that it will benefit from greater operational and financial flexibility, enabling it to take more growth initiatives and respond to the long-term growth challenges of the industry.