For the first nine months of 2004, Hydro’s income from continuing operations was NOK 7,839 million, compared with NOK 5,384 million in the first nine months of 2003.

Hydro’s agri business was transferred to Yara International ASA in a demerger transaction completed on 24 March 2004. The following discussion excludes these activities.

"The strong results from the first half of this year continued through the third quarter leading to a further strengthening of the group’s financial position. The exceptionally high oil prices and a recent significant strengthening of the aluminium metal market make a solid positive impact on our results. Another important contribution to this year’s strong performance is the result of  our efforts over the past several years to increase volumes and expand business activities under strict cost control. Finally, our major projects are progressing on schedule and within budget," says president and CEO Eivind Reiten.

Operating income for the third quarter of 2004 amounted to NOK 8,047 million, compared with NOK 5,288 million in the third quarter of 2003. Both Oil & Energy and Aluminium benefited from positive market conditions and good performance.

Operating income for the first three quarters of 2004 was NOK 25,613 million, compared to NOK 15,259 million in the first three quarters of 2003.

Oil & Energy

The operating results for Oil & Energy were impacted by further price increases from the high price levels during the second quarter. The averaged realized oil price was USD 41.7 per barrel in the third quarter of 2004, compared to USD 28.2 per barrel in the third quarter of the previous year. Measured in Norwegian kroner, the average realized price increased 39 percent for the quarter.

Oil and gas production averaged 514,000 barrels of oil equivalents (boe) per day during the third quarter, compared to 489,000 boe per day in the third quarter of the previous year. For the first nine months of 2004, oil and gas production averaged 566,000 boe per day, an increase of 11 percent compared to the first nine months of 2003.

Operating income for Energy and Oil marketing suffered from weak results from downstream gas activities and lower power production. Operating income for Oil & Energy also included the elimination of unrealized gains on internal gas contracts between Exploration and Production and Energy and Oil marketing. The elimination resulted in a negative effect in "Eliminations" of NOK 300 million.

Aluminium

Aluminium operations continued to benefit from improved market conditions. Hydro’s realized aluminium prices increased from USD 1,445 per tonne in the third quarter of 2003 to USD 1,677 per tonne in the current quarter. Measured in Norwegian kroner, realized prices increased by about 12 percent.

Upstream volumes increased mainly as a result of new capacity and improved capacity utilization. Volume developments for downstream activities remained positive, while margins declined or remained unchanged for the quarter.

The first phase of the manning reductions related to the Aluimprover improvement program approved earlier in the year progress as planned. Costs relating to the Aluimprover project are expected to impact the fourth quarter by approximately NOK 400 million.

Cash flow, investments, taxes

Cash flow from operations in the first three quarters of 2004 was NOK 24.4 billion, compared to NOK 22.2 billion in the first three quarters of 2003.

Investments in the third quarter of 2004 amounted to NOK 4.4 billion. Around half of the amount invested related to oil and gas operations.

The provision for current and deferred taxes in the first three quarters of 2004 was NOK 17,474 million, approximately 69 percent of pre-tax income.

Outlook for the coming months

Oil prices and demand are expected to remain high for the remainder of the year as a result of capacity constraints and continued global economic growth. The company has increased its production target for 2004 as a whole from 560,000 to 575,000 boe per day. However, oil and gas production on the Norwegian Continental Shelf (NSC) will be negatively impacted for the remainder of the year and for 2005, if the current labor dispute relating to floating rigs continues for an extended period.

At the beginning of October aluminium (three month LME) was trading between USD 1,700 and USD 1,900 per tonne in a very volatile market, supported by declining LME stocks, continuing short-term supply disruptions and renewed interest from investment funds. Volume developments are expected to remain positive for the remainder of the year, but gradually level off once consumer inventories are replaced. Pressure on downstream margins is expected to continue for the remainder of the year.