Norsk Hydro Earnings Blowout (NHY)

Buy-recommended Norsk Hydro (NHY) reported record results in oil, natural gas and aluminum in the first quarter of 2006 released on April 27. Cold weather in Europe actually helped natural gas prices, which was not the case in North America. As the aluminum commodity price took off for new heights, NHY gratified investors with respectable profits from its aluminum division, following several difficult quarters. A McDep Ratio of 1.17 indicates that the stock price exceeds estimated net present value of $130 a share. Yet the estimate presumes a long-term oil price of $50 a barrel compared to a futures price of $71 for oil delivered over the next six years. The aluminum portion of the present value estimate may also be low as it implies a multiple of 3.4 time cash flow for the third largest global competitor in a business with expected volume growth of 6% a year. Meanwhile, investors eagerly await word from buy-recommended Gazprom [OGZPY.PK] as to whether it will take Norsk Hydro as a partner in the development of Shtokman, a 100 trillion cubic feet Arctic natural gas field.

Written April 28 2006
Kurt Wulff's McDep Associates offers realtime, independent research services for investors in the energy and utilities sectors. For more information, go to www.mcdep.com or email Mr. Wulff at [e-mail].