Norsk Hydro Reports 3rd Quarter Results
Norsk Hydro reports the following effects and their consequences for the company's third quarter results in 2002.
Norsk Hydro has now completed an extensive evaluation of prospects for the company's Block 34 licence in Angola. Two further exploration wells in other parts of the 6,000 sq.km area are planned, but the company has decided to expense the remaining part of previously capitalized costs of acquiring the licence rights. This will give rise to a charge of NOK 480 million. The third exploration well in the Gulf of Mexico, Spa, has been concluded without a discovery being made. A charge of roughly NOK 300 million will be made for this, including the previously capitalized costs of acquiring the license rights. Although a discovery was made in the Svane well on the Danish shelf, this is not considered commercial and NOK 140 million will be expensed during the quarter. Altogether, exploration costs of some NOK 1.3 billion will be charged to Hydro's results in the third quarter.
Oil and gas operations on the Norwegian shelf are the source of a considerable share of Hydro's pre-tax results, and are subject to a marginal rate of taxation of 78 percent. Roughly NOK 1.1 billion of the total exploration costs in the third quarter relate to activities outside Norway. The combination of high marginal tax on earnings from the Norwegian continental shelf and the expensing of major costs internationally, will result in an unusually high rate of taxation for third quarter. Hydro expect the tax rate in the third quarter to be 80 - 90 percent.