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• Cash offer of NOK115 per Saga share valuing Saga at NOK17 billion
• Premium of 35% over Saga’s share price prior to Norsk Hydro’s offer
• 8% higher than the current value of Norsk Hydro’s offer and in cash
• Saga to benefit from Elf’s financial strength and technology
• Elf to operate under Saga name on Norwegian Continental Shelf
• Increases Elf E&P reserve base by a quarter at a competitive cost
• Reinforces Elf’s strong position in European gas markets
• Potential for substantial efficiency gains with annual NOK1 billion gross savings
• Friendly offer following solicitation by Saga Board

Elf Aquitaine ("Elf") announces the terms of a cash offer ("Offer") for Saga Petroleum ASA ("Saga") valuing each Saga share at NOK115 and the whole of Saga’s issued share capital at approximately NOK17 billion (Euro 2 billion).

The Offer represents a premium of approximately 35% over the closing price of NOK85 per Saga share on 7 May 1999, the last dealing day before the announcement by Norsk Hydro of an offer for Saga.

The Offer is 8% higher than Norsk Hydro’s offer for Saga based on Norsk Hydro’s closing price on 27 May 1999 and is in cash.

Elf has had discussions with Saga with respect to the level and structure of its Offer and will be seeking a formal recommendation from the Board of Saga.

Commenting on the Offer and the role of Saga in the Elf Group, Philippe Jaffré, Chairman and Chief Executive Officer of Elf, said:
"Elf is one of the pioneers on the Norwegian Continental Shelf where it has been active for over 30 years successfully operating the Frigg field. This offer reinforces our continued commitment to the oil and gas industry in Norway which will represent the largest part of our E&P division. We plan to retain Saga’s strong identity on the Norwegian Continental Shelf and intend that all our Norwegian operations will operate under the Saga name. We are looking forward to working with the Board, management and staff of Saga in developing the enlarged business.

"The offer for Saga is consistent with our strategy to grow our core E&P business through selective acquisitions. Saga also provides further access to long-term, cost competitive gas reserves and to infrastructures serving European markets which will reinforce Elf’s strong position in the European gas business.

"We believe that the offer for Saga is in the best interests of Saga employees, the Saga organisation and shareholders. We would urge all shareholders to accept the offer."

Commenting on the Offer, Yves-Louis Darricarrère, Chairman of Elf Norge, said:
"We are looking forward to working with the Saga organisation which has made such an important contribution to the Norwegian oil and gas sector. We believe that Elf can help build the business with wider access to capital and technology which will be in the best interests of the Saga organisation and the Norwegian oil and gas sector."

Elf in Norway
Elf has been active on the Norwegian Continental Shelf ("NCS") for over 34 years and has interests in close to 30 producing fields and fields under development. Elf Norge produced 153,000 barrels of oil equivalent ("boe") per day in 1998, 15% of Elf’s total production, and had proven NCS reserves as at the end of 1998 of 528 million boe, representing 15% of Elf’s total reserves. The Offer for Saga further demonstrates Elf’s commitment to Norway.

Saga
Saga is the fourth largest participant by reserves on the NCS and is operator of a number of important fields in production and under development, including the Snorre, Tordis, Vigdis and Varg fields and of the major high pressure/high temperature (HP/HT) Kristin / Lavrans discoveries. Saga produced 188,500 boe per day in 1998 and had proven plus probable ("P+P") reserves as at the end of 1998 of 1,442 million boe (867 million boe of proven reserves) of which 89% is on the NCS broadly equally split between oil and gas.

The combined group
The combined group will create a formidable participant on the NCS and a unique opportunity for the continued development of the NCS. The new Saga group would be a core part of Elf’s E&P business comprising 30% of Elf reserves and production.

Saga’s membership of a larger group will:

• provide access to substantial capital in support of continued growth,
• provide wider access to the technological resources required for successful exploration and development programmes particularly in the deep Atlantic Margin waters and in HP/HT conditions, and
• allow Saga to take larger interests in development and exploration projects with higher attendant levels of risk.

The Saga organisation will comprise the major part of the enlarged group in Norway and contribute a substantial number of the management team.

Elf intends to use the Saga name for its integrated operations on the NCS which will include full responsibility for engineering and field development. The new Saga group will have substantial autonomy within Elf’s decentralised management structure in common with other Elf group companies. Membership of the Elf group will provide Saga employees with access to international career opportunities at all levels within the world-wide organisation.

Reasons for the Offer
The offer for Saga is part of Elf’s strategy of pursuing profitable growth in its core E&P business. The offer will:

• increase P+P reserves by 1.4 billion boe and proved reserves by 867 million boe or 24% of the Elf group total at a competitive price for North Sea P+P reserves. The larger reserve base will provide the basis for faster growth and improve the geographic balance and risk profile of Elf’s portfolio,
• strengthen Elf’s position in the European gas chain through the acquisition of significant long-term, competitive gas reserves and of infrastructure serving the growing European markets. Over 30% of the North Sea reserves of Saga and Elf are uncontracted which improves the enlarged group’s ability to serve new customers. The enlarged group will continue to contribute to and support Norwegian gas policy, and
• provide the basis for substantial efficiency gains throughout the operations of the combined group. Annual gross pre-tax savings are forecast to be NOK1 billion.
  

Finance and effects
The consideration payable under the Offer is to be financed from Elf’s existing resources including the possible realisation of value in non-core assets. The Offer is expected to be strongly accretive to cash earnings per share from completion and to be neutral to earnings per share from 2000.

Timetable and conditions
The formal offer document will be posted to Saga shareholders as soon as practicable. The Offer will then be open for acceptance for an initial period of 14 days if the Offer is not made into the United States. The Offer will be conditional upon the satisfaction of a number of standard conditions including acceptances to the Offer being received in respect of a minimum of 67% of the number of shares in issue. The transaction, including transfer of ownership of licence interests on the NCS and elsewhere, is subject to the consent of relevant regulatory authorities.

Elf is being advised by Warburg Dillon Read in respect to the Offer.

* * *

Media contact:
Thomas Saunders (33.1) 47.44.42.30 or (33) 6.07.78.10.17
Catherine Durand (33.1) 47 44 37 76

Investor Relations contact:
Françoise Leroy (33 1) 47.44.24.63 or (33 1) 48.88.34.78

Meetings:

In connection with the Offer, Warburg Dillon Read, a division of UBS AG, regulated in the UK by The Securities and Futures Authority Limited, is acting for Elf and no one else and will not be responsible to anyone other than Elf for providing the protections afforded to customers of Warburg Dillon Read nor for giving advice in relation to the Offer.

This release is not an extension of an Offer, whether in the United States or in any other jurisdiction, whether for the purchase of securities or otherwise. Neither this document nor any copy hereof may be taken in or transmitted into the United States. No decision has been made whether to extend the offer into the United States. In the event any offer described herein is not made in the United States, such offer will not be capable of acceptance by use of the mails of, or by any other means or instrumentality (including, without limitation, facsimile transmission, telex or telephone) of interstate or foreign commerce of, or any facility of a national securities exchange of, the United States, Canada, Australia, Japan or any other jurisdiction in which the making of the Offer or acceptance thereof will not be in compliance with the laws of such jurisdiction, and the Offer will not be capable of acceptance by any such use, means, instrumentality or facility from within the United States, Canada, Australia, Japan or such other jurisdiction.