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The merger with Statoil is on track for completion on 1 October, following shareholder and important regulatory approvals.

Net income rose to NOK 6,060 million in the second quarter 2007 from NOK 5,594 million in the previous quarter and NOK 5,932 million in the same quarter of 2006. Earnings before financial items and tax (EBIT) amounted to NOK 14,198 million in the second quarter, compared with NOK 14,644 million in the first quarter of 2007 and NOK 15,620 million in the second quarter last year.

Results for Aluminium Metal, Hydro's upstream aluminium business, were close to the record level achieved in the previous quarter, supported by firm aluminium prices and stable production. Aluminium Products, the company's downstream operations, delivered solid results reflecting sustained positive market conditions in Europe despite a continued weak North American market.

Entering a new era

"The second quarter confirms Hydro's operational performance in all core activities, giving us a solid basis to grow as a global aluminium company," said Hydro President and CEO Eivind Reiten.

"I'm pleased to report that Hydro's extensive restructuring and rationalization program continues to deliver results, enabling the organization to concentrate on new and promising business opportunities worldwide," he said.

"With the final go-ahead to begin construction of the Qatalum aluminium plant in Qatar, a key element in our growth strategy is in place. We have also signed a strategically important agreement with the intention to take part in the development of a new alumina refinery in Brazil, following our successful participation in the nearby Alunorte refinery. Upstream investments in geographically strategic areas are in line with our growth strategy as Hydro enters a new era as a global aluminium company," Reiten said.

Average oil and gas production amounted to 558,000 barrels of oil equivalents (boe) per day in the second quarter, down 52,000 boe per day from the first quarter due to planned maintenance and temporary shutdowns. Production from Hydro's international operations hit a new record of 89,700 boe per day for the quarter.
Net cash provided by operating activities was NOK 16.8 billion for the six months ended 30 June 2007, compared with NOK 23 billion for the first half of 2006.

Oil & Energy

EBIT for Oil & Energy amounted to NOK 11,455 million for the quarter compared with NOK 11,166 million in the first quarter of 2007. Positive effects from sharply higher oil prices were partly offset by seasonally lower gas production and planned maintenance as well as significantly lower gas prices. EBIT for the second quarter of 2007 declined from NOK 13,196 million in the second quarter of 2006 mainly due to increased depreciation and field costs and lower oil prices measured in Norwegian kroner.

Limited OPEC output, geopolitical developments and low US gasoline inventories lifted crude oil prices above the previous quarter's level. Hydro realized an average oil price of USD 67.2 per barrel in the second quarter of 2007, 20 percent higher than the first quarter of 2007 and slightly down from the second quarter of 2006. However, oil prices measured in Norwegian kroner declined 4 percent compared with the second quarter of 2006.

Average oil and gas production in the second quarter of 2007 amounted to 558,000 boe per day. Production in the second quarter was 52,000 boe per day lower than in the first quarter of 2007 mainly due to planned maintenance work and the temporary shutdown of the Kvitebjørn field. Production in the second quarter was 21,000 boe per day higher than the second quarter of 2006, reflecting positive contributions from several partner-operated fields on the Norwegian Continental Shelf (NCS) and record-high production from Hydro's international portfolio, mainly due to positive contributions from the Dalia field in Angola and the Terra Nova field in Canada.

Hydro participated in the completion of nine wells resulting in seven discoveries in the second quarter of 2007, of which 4 are commercial and 3 under evaluation. Exploration costs of NOK 653 million were charged to the results for the second quarter of 2007, compared to NOK 786 million in the first quarter of 2007 and NOK 618 million in the second quarter of 2006.

The development and start-up phase of the Ormen Lange/Langeled project is proceeding according to plan and was 97 percent complete at the end of June 2007. Production is expected to start in October 2007, on time and within budget. With today's cost of materials, equipment and services, the Ormen Lange phase II development is expected to be more expensive than the 2003 plan for development and operation (PDO) estimate. A final development solution for the phase II development has not been determined.

Aluminium Metal

EBIT for Aluminium Metal amounted to NOK 2,465 million in the second quarter of 2007, declining slightly from the record results in the first quarter of 2007 but 6 percent higher than the second quarter of 2006. The strong results for the quarter reflected continued high aluminium prices.

Realized aluminium prices in US dollars increased slightly from the high prices experienced during the first quarter of 2007, but declined by 2 percent measured in Norwegian kroner, reducing operating results by about NOK 110 million. Realized aluminium prices in Norwegian kroner rose 5 percent, compared with the second quarter of 2006. EBIT for the second quarter of 2007 included impairment write-downs of NOK 144 million relating to Hydro's remelters in Ellenville, New York, and St. Augustine, Florida and NOK 66 million mainly related to the closure of the Søderberg line in Årdal, Norway.

Hydro's primary aluminium production, including its share of production from part-owned companies, was relatively unchanged compared with first quarter 2007 amounting to 435,000 mt for the quarter. Production was down 4 percent compared with the second quarter of 2006, mainly due to the closure of the Stade smelter in Germany.

Aluminium Metal's share of profits in equity accounted investments increased to NOK 323 million in the second quarter from NOK 236 million in the first quarter of 2007 and NOK 249 million in the second quarter of 2006.

In June 2007, Hydro completed the closure of the Norwegian Søderberg line in Årdal. The closure represents the final milestone concluding the rationalization program initiated in 2005 which also included the closure of the German metal plants in Hamburg and Stade and the Søderberg line in Høyanger, Norway. Reduced capacity from the closures was largely offset by the expansion of the Alouette plant in Canada as well as increases from other plants in our smelter system. The closures, together with the expansions of Alouette and Hydro's wholly owned Sunndal metal plant in Norway, reflect the company's strategy to replace high cost and environmentally challenging production with more efficient, cleaner and lower-cost capacity.
Qatar Petroleum and Hydro have reached a final decision to proceed with the construction of the new Qatalum primary aluminium plant in Qatar. The plant is expected to begin production late in 2009 and reach an initial full capacity of 585,000 mt per year by mid 2010. Qatalum is currently the largest primary aluminium plant to be built in one phase and is expected to add substantial cost-efficient production capacity.

In the United States, Hydro will continue to focus on reducing operating costs in order to meet the challenging market conditions. Measures will include sale or closure of remelting activities in Ellenville, New York, expected to be completed by end-September 2007.

Aluminium Products

EBIT for Aluminium Products amounted to NOK 355 million in the second quarter of 2007, a decrease of about NOK 960 million compared with the first quarter of 2007. Results for the second quarter included costs related to plant closures of approximately NOK 63 million, as well as negative metal effects of NOK 28 million, while the first quarter included gains on divestments of approximately NOK 700 million (included in "Other income, net") and positive metal effects of NOK 149 million. EBIT increased by NOK 29 million from NOK 326 million in the second quarter of 2006.

Strong operating results continued in the second quarter of 2007 for rolled products, European extrusion and building systems operations, reflecting continued positive market conditions in Europe and solid operational performance. Developments in the North American market remained weak, with a significant volume decline in the US general extrusion market, estimated at 17 percent compared with the second quarter of 2006. However, operating costs declined in the United States as Hydro's improvement programs began to take effect.

During the first quarter of 2007, Hydro completed the divestment of its automotive casting operations and its interest in Meridian Technologies Inc, important steps in the restructuring of the aluminium products business portfolio. An agreement for the sale of magnesium remelters in Germany and China was signed in the beginning of July. No significant gain or loss on the sale transaction is expected. The divestment process of other smaller businesses will continue in the third quarter. During the second quarter, Hydro decided to discontinue the divestment process of its automotive structures business. A new management team is in place and new measures will be taken to turn around the performance of this business unit.

Outlook – Oil & Energy

Oil prices are expected to remain high for the next quarters. Planned maintenance shutdowns on the NCS will have negative impact on oil production in the third quarter. Exploration activity is expected to remain high throughout 2007, with approximately 50 wells planned to be spudded during the year.

The Ormen Lange/Langeled project is expected to come on stream in October, as planned, and contribute significantly to production capacity in the fourth quarter of 2007.

Outlook – Aluminium Metal

With the exception of China, key economic indicators continue to signal a somewhat slower growth in all major regions during the second half of 2007 compared with the first half of the year and compared with 2006. European industrial growth is expected to slow during the second half of 2007, while economic outlook for North America remains weak. China continues its rapid development, with industrial production currently increasing at a rate of about 18 percent on a year-on-year basis.

A combination of high LME prices and prevailing short-term alumina prices continues to lead to increased smelter capacity utilization in China. As a result, production is expected to increase by about three million tons, or more than 30 percent, in China in 2007 compared with 2006. Production growth in the rest of the world is estimated at around 1.3 million tons, or about 5.5 percent in the same period. Global aluminium production growth in 2007 is estimated to reach 12-13 percent, while global aluminium consumption is expected to show slightly lower growth rates.

Reported inventories remain at relatively low levels, supporting high metal prices.

European demand for casthouse products remained strong during the second quarter, but is expected to weaken somewhat during the second half of 2007. The market in the United States is expected to improve slightly during the second half of the year, but to remain relatively weak.

In addition to the global aluminium market balance, the behavior of financial investors will continue to be an important factor affecting the development of primary aluminium prices.

Outlook – Aluminium Products

European markets for extruded and rolled products were relatively strong during the first half of 2007. Margins are expected to remain stable for both product groups. Although shipment growth in 2007, especially for extruded products, is expected to be lower than in 2006, the outlook is positive for the third quarter.

In the United States, orders for extruded aluminium products are expected to remain weak after settling at a lower level compared to the market volume for the first half of 2006. The US industrial production is expected to show lower growth rates in 2007 than in 2006, possibly with a flat or negative development for the year as a whole.

The global light-vehicle market is predicted to continue growing in 2007, driven by emerging markets. The Western European market is expected to be slightly down, while the US market is expected to continue the negative developments experienced in 2006. Margins are expected to remain under pressure.

Results for Hydro's aluminium products operations in the third quarter 2007 are expected to be influenced by continued favorable market conditions in Europe, further progress on plant rationalization programs and divestments as well as seasonal effects.

Certain statements contained in this announcement constitute “forward-looking information” within the meaning of Section 27A of the US Securities Act of 1933, as amended, and Section 21E of the US Securities Exchange Act of 1934, as amended. In order to utilize the “safe harbors” within these provisions, Hydro is providing the following cautionary statement.

Certain statements included within this announcement contain (and oral communications made by or on behalf of Hydro may contain) forward-looking information, including, without limitation, those relating to (a) forecasts, projections and estimates, (b) statements of management’s plans, objectives and strategies for Hydro, such as planned expansions, investments, drilling activity or other projects, (c) targeted production volumes and costs, capacities or rates, start-up costs, cost reductions and profit objectives, (d) various expectations about future developments in Hydro’s markets, particularly prices, supply and demand and competition, (e) results of operations, (f) margins, (g) growth rates, (h) risk management, as well as (i) statements preceded by “expected”, “scheduled”, “targeted”, “planned”, “proposed”, “intended” or similar statements.

Although Hydro believes that the expectations reflected in such forward-looking statements are reasonable, these forward-looking statements are based on a number of assumptions and forecasts that, by their nature, involve risk and uncertainty. Various factors could cause Hydro’s actual results to differ materially from those projected in a forward-looking statement or affect the extent to which a particular projection is realized. Factors that could cause these differences include, but are not limited to, world economic growth and other economic indicators, including rates of inflation and industrial production, trends in Hydro’s key markets, and global oil and gas and aluminium supply and demand conditions. For a detailed description of factors that could cause Hydro’s results to differ materially from those expressed or implied by such statements, please refer to the risk factors specified under “Risk review – Risk factors” on page 134 of Hydro’s Annual Report 2006 (including Form 20-F) and subsequent filings on Form 6-K with the US Securities and Exchange Commission.

No assurance can be given that such expectations will prove to have been correct. Hydro disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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