BASF 'In Talks on Wintershall-DEA Merger' (Update: DEA Confirms)

Updates with statement from LetterOne at the end, confirming talks

German chemicals giant BASF said November 24 it is "in discussions regarding a potential merger of BASF Group’s oil and gas activities with Letter One’s oil and gas activities bundled in the DEA Group."

NGW estimates that the combined net production of any merger could be in the region of 600,000 barrels of oil equivalent per day, much of which gas.

BASF said it would hold the majority of the shares in the joint enterprise, and that an initial public offering (IPO) of the joint enterprise would be an option in the medium term: "The outcome of the discussions is open and there is no assurance that any transaction will be consummated."

BASF’s oil and gas activities are bundled in its Wintershall division, which has E&P interests in northern Europe (principally Norway and Germany), North Africa, Russia, South America and the Middle East. Wintershall produced 452,000 boe/d net in 2016.

Together with Gazprom, Wintershall is also active in the gas transportation in Europe. Wintershall has several significant joint production ventures with Gazprom (including the Yuzhno Russkoye gasfield).

BASF said it does not intend to make any additional comments on the talks with LetterOne at this time. 

Net full year 2016 sales of BASF's Oil & Gas segment were around €2.8bn and pre-tax earnings (Ebitda) were some €1.6bn. Net income from BASF’s oil and gas increased by 321% year on year to €139mn in 3Q2017 thanks to special income from the sale of interests in a shale gas concession in Argentina. Wintershall's CEO since 2015 has been Mario Mehren, while DEA announced two months ago that former Engie E&P chief Maria Moraeus Hanssen is to become its new CEO early in 2018.

Luxembourg-registered LetterOne (L1) is owned by Russian investors, and wholly-owns Hamburg-based upstream oil and gas subsidiary DEA.

DEA's chairman is former BP boss John Browne. The company produced 138,000 barrels of oil equivalent net in 2016, of which 63,000 boe/d in Norway, with the rest evenly split between Germany/Denmark and north Africa. Gas accounted for 77,000 boe/d of the company's production.

DEA belonged to German utility RWE, until it was sold in March 2015 for €5.1bn ($5.7bn) to L1 which is controlled by Russian magnate Mikhail Fridman; DEA's UK business was spun off in Dec.2016 to Ineos.

Update as of 5.45pm UK time: A spokesman for LetterOne said that DEA has just put out the following statement -- "DEA Finance SA confirms discussions between LetterOne and BASF.

DEA Finance SA announces that LetterOne, the shareholder of the DEA Group, has confirmed that the BASF Group is in discussions with LetterOne regarding a potential merger of the BASF Group's oil and gas activities with LetterOne's oil and gas activities, which comprise of the DEA Group. The outcome of the discussions is open and there is no assurance that any transaction will be consummated.
The DEA Group does not intend to make any further comments on this matter at this time."