--Lower costs, due to elimination of duplication and higher efficiency through economies of scale. --Higher revenues, by implementing best practice and deploying scarce resources and competencies more efficiently. --New growth opportunities because of improved international competitive position, larger portfolio and larger organizational and financial capacity.
"This merger is driven by a growth ambition," said Statoil CEO Helge Lund.
"By combining the strengths of both organizations, the merged company will be able to pursue more opportunities and take on more tasks. In addition we will be able to realize cost synergies through more efficient operations and economies of scale."
Hydro and Statoil operate as independent companies and are precluded from looking into each other's books in order to carry out detailed analyses of potential synergies. Based on own activities and analyses by an external consultant, Statoil has estimated cost synergies for the new company when the merger is completed.
The total cost synergy potential for the combined company is estimated to be about NOK 4 billion per year before tax. The cost synergies include both increased efficiencies in development, operations and exploration activities, as well as within administration and business support activities.
Important measures to realize the operating cost synergies will be reduced external sourcing and internal redeployment of personnel. Parts of the synergies will be reflected in future CAPEX. The synergy potential will be realised after a few years, around 2009-2010, once the integration process has been fully completed. Any redundancies will be managed through natural attrition and other measures to be discussed with the trade unions.
The gross operator cost synergies are estimated to be significantly higher than NOK 4 billion. The gross synergies will however not only benefit the combined company, but also its partners through lower costs in Statoil and Hydro operated joint ventures.
It will not be possible to isolate the different synergy elements separately from other cost and revenue elements in the future financial statements of the combined company. The main reason is that a significant share of the cost synergies is to be achieved through redirection of resources to areas with scarcity of resources and growth potential.
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