BASF. LetterOne Complete Upstream Merger
Wintershall and DEA can now form their joint venture, Wintershall’s owner, German chemicals giant BASF, said May 1. The new company, a 67-33 joint venture, under a management team led by Mario Mehren, with the aspiration to be a leading European independent oil and gas producer, is on track to produce 750,000-800,000 barrels of oil equivalent/day between 2021 and 2023. This is equivalent to an annual production growth rate of 6% to 8%. Last year the two produced 590,000 boe/d.
Although the exploration and production assets are valued 67-33 in favour of BASF, in order to reflect the value of Wintershall’s gas transportation business BASF will receive additional preference shares, giving it an initial shareholding of 72.7%. In 2018, the combined business of Wintershall and DEA had pro-forma sales of €5.7bn (6.4bn), income from operations before tax, interest depreciation and amortisation of €3.6bn and net income of €1.1bn.
The owners are eyeing synergies of at least €200mn/yr within three years of completion and an initial public offering is expected in the second half of next year.
DEA’s owner, Russian-owned LetterOne, and BASF signed a transaction agreement to merge their oil and gas assets last September. The chair of L1 Energy, ex-BP CEO John Browne, said in BASF's May 1 announcement: “Very rarely do you have the opportunity to create a company of this scale and quality. Wintershall Dea will hit the ground running, with a project pipeline that will deliver market-leading growth in the years to come.”
LetterOne gave Wintershall all its shares in DEA Deutsche Erdoel against the issue of new shares and the new company will be headquartered in Kassel and Hamburg.
Last year’s combined hydrocarbon production was 215mn boe/d and they finished the year with proven reserves of 2.4bn boe, or 11 years’ output at today’s rate.
Both shareholders are committed to the profitable growth path of Wintershall Dea and set a solid capital basis for the joint venture.
Wintershall Dea targets an investment grade credit rating. Following closing, the joint venture has no shareholder loans outstanding with BASF or LetterOne.
The other board members are: Maria Moraeus Hanssen,deputy CEO and COO, responsible for Europe and Middle East-North Africa; Thilo Wieland, responsible for Russia, Latin America and Midstream; Hugo Dijkgraaf, CTO; and Paul Smith, CFO.