For the first nine months of 2005, Hydro’s income from continuing operations amounted to NOK 11,453 million (NOK 45.60 per share), compared to NOK 7,839 million (NOK 30.80 per share) in the first nine months of 2004.

Operating income for the third quarter of 2005 amounted to NOK 12,973 million, compared to NOK 11,255 million in the second quarter of 2005 and NOK 8,047 million in the third quarter of 2004. The strong operating results reflected the continuing high oil and gas prices and strong operational performance. Operating income for the first nine months of the year amounted to NOK 35,982 million, compared to NOK 25,613 million in the first nine months of 2004.
 
"Hydro's third-quarter results are the company's best quarterly results ever. The continued high oil price is the main reason for the improvement. We have taken important steps to strengthen the foundation for future oil and gas production through successful exploration wells in Norway and internationally as well as the agreement to acquire the US company, Spinnaker Exploration. The acquisition, which we expect to conclude in the fourth quarter, will significantly enhance Hydro's position in the Gulf of Mexico," says Eivind Reiten, President and CEO.

"In Aluminium, metal production has increased and metal prices are higher, while market conditions downstream remain difficult. Higher energy and raw material prices represent increasing challenges to our efforts to improve profitability in Hydro's aluminium business," says Reiten.

Oil & Energy

Operating income for Oil & Energy reached an all time high, amounting to NOK 12,625 million for the quarter.

Hydro realized an average oil price of US dollar 60.4 per barrel in the third quarter of 2005, an increase of 21 percent compared with the second quarter of 2005 and 45 percent higher than in the third quarter of 2004. Oil and gas production averaged 541,000 barrels of oil equivalents (boe) per day during the third quarter of 2005, slightly above the level of the previous quarter. For the first nine months of the year, average oil and gas production declined about 2 percent compared with the same period last year, to 554,000 boe per day.

Hydro continued to demonstrate good project execution and cost control. The Ormen Lange project proceeded according to schedule and on budget and was 49 percent completed at the end of September 2005.

During the quarter, Hydro made continued progress both on the Norwegian Continental Shelf (NCS) and internationally to secure its resource base for continued growth through successful exploration and business development activities. Exploration results for the year have been very encouraging. During the quarter, Hydro, as operator, made four discoveries on the NCS, of which one discovery is still under evaluation. Hydro also participated in one discovery in Libya and one discovery in Angola in the quarter. In total, Hydro has made seven discoveries during the year as operator on the NCS and in Iran, and has participated in an additional five discoveries as partner.

In the third quarter of 2005, Hydro entered into an agreement to acquire the US-based Spinnaker Exploration Company, with significant assets and production in the Gulf of Mexico. The acquisition is subject to approval by Spinnaker shareholders and regulatory approval, and is expected to be completed in the fourth quarter of 2005. The consequences of the extreme weather in the Gulf of Mexico resulting from hurricanes Katrina and Rita are not expected to seriously effect Hydro’s activities in this region.

Aluminium

Aluminium’s operating income amounted to NOK 842 million for the third quarter of 2005, decreasing by NOK 16 million from the third quarter of 2004.

Primary metal production increased by 5 percent to 461,000 tonnes, compared with the third quarter of 2004. The increase resulted primarily from the Sunndal expansion in Norway and the Alouette expansion in Canada.

Compared with the third quarter of 2004, Hydro’s realized aluminium price in US dollars increased about 6 percent to US dollar 1,770 per tonne. However, realized prices in Norwegian kroner decreased by 2 percent. Results for the quarter were also influenced by unrealized losses on London Metal Exchange (LME) contracts amounting to NOK 231 million, compared with losses of NOK 286 million for the third quarter of 2004.

Outlook

Oil prices are expected to remain high for the remainder of 2005. Volatility in the gas and power markets is expected to continue and could result in substantial unrealized gains and losses in future quarters. There is significant uncertainty related to production from certain partner-operated fields during the fourth quarter of 2005 due to delayed build-up of production after shut-downs and delayed start-up of new fields. Hydro has revised its production target for 2005 downward by 10,000 boe per day to 565,000 boe per day. The partner-operated Urd and Kristin fields are expected to start production in the fourth quarter of 2005. Planned maintenance shutdowns will have a minor impact on oil production levels in the fourth quarter of 2005.

In September, Hydro submitted an application for exploration licenses relating to fields close to existing infrastructure on the NCS as part of the Awards for Predefined Areas (APA 2005) licensing round. The Ministry of Petroleum and Energy plans to award the new production licenses in December 2005. Hydro will also participate in the 19th Licensing Round on the NCS, which will be awarded in the first quarter of 2006. In the third quarter of 2005, Hydro, together with Statoil, Eni and Shell entered into a comprehensive rig contract that will secure exploration well drilling capacity on the NCS during the coming years. With this contract, Hydro will be able to continue high exploration activity on the NCS, and will be well positioned to acquire new licenses with drilling commitments in future licensing rounds.

In the middle of October, aluminium (three-month LME) was trading at US dollar 1,900 – 1,950 per tonne following a period of fluctuating prices, but with an increasing trend. Upstream market fundamentals remain favorable for the fourth quarter. Realized effects of the Sunndal hedge program are expected to be slightly negative in the fourth quarter of 2005 due to losses on the related LME contracts and limited positive contribution on the related US dollar forward contracts. Realized effects of this program had a positive effect on year to date results amounting to NOK 274 million. Global economic growth is expected to continue in 2005 but at a lower rate than the previous year. Economic developments in Western Europe are expected to be flat. Downstream European market developments are expected to remain relatively weak while US downstream market developments are expected to be positive, but with lower growth rates.

While the high oil and gas prices are expected to continue contributing favorably to Hydro’s results, the impact on power prices represents an increasing challenge to Hydro’s aluminium activities particularly in continental Europe.

Other issues

Earnings from non-consolidated investees amounted to NOK 237 million in the third quarter of 2005, compared to NOK 287 million in the third quarter of 2004. For the first nine months of 2005, earnings from non-consolidated investees were NOK 696 million, compared to NOK 539 million in the corresponding period of the previous year. The increase resulted primarily from strong operating results in Alunorte, the Brazilian alumina refinery, and improved operating results from Hydro’s Søral smelter located in Norway. In addition, the first nine months of 2005 included currency gains relating to Alunorte amounting to NOK 184 million, compared to a net currency loss of NOK 7 million in the same period of 2004. Charges relating to the planned closure of the Hamburger Aluminium Werk smelter in Germany had a negative impact for the first nine months of 2005 amounting to NOK 149 million.
 
Net financial income for the third quarter of 2005 amounted to NOK 157 million, compared with NOK 307 million for the third quarter of 2004. The current quarter included a net foreign currency loss of NOK 46 million, while the third quarter of 2004 included a net currency gain amounting to NOK 424 million. Net interest cost was lower in the third quarter of 2005 than in the corresponding quarter of 2004 .

Other income was nil for both the current and prior year third quarter. For the first nine months of 2005, other income amounted to NOK 233 million, compared to NOK 110 million for the corresponding period of the previous year. In January 2004, Hydro divested 80.1 percent of its shares in Pronova Biocare, resulting in a gain of NOK 110 million. On 15 April 2005, Hydro agreed to sell its remaining interest in Pronova Biocare for NOK 275 million, recognizing a gain on the sale amounting to NOK 233 million. The sale was completed in the second quarter of 2005.

Income tax expense for the first nine months of 2005 amounted to NOK 23,895 million, compared to NOK 17,474 million for the corresponding period of 2004. This represents 67 percent and 69 percent of income from continuing operations before tax, respectively.

Cash flow from operations for the first nine months of the year amounted to NOK 25.4 billion, compared to NOK 24.4 billion in the corresponding period of 2004.

Investments amounted to NOK 4.2 billion for the third quarter of 2005. Roughly 80 percent of the amount invested related to oil and gas operations.