Wintershall Dea sees Q2 earnings surge on higher gas prices
Core earnings (Ebitdax) at Germany's Wintershall Dea leapt up 140% year on year in the second quarter to arrive at €636mn ($750mn), on the back of higher gas prices, the gas supplier reported on July 27.
Ebitdax was also down 10% quarter on quarter, however, owing to a 7% decline in production to 613,000 barrels of oil equivalent/day. Wintershall Dea's output surged to a record 659,000 boe/d in Q1 2021, thanks to a new project starting up in Russia and further gains in north Europe and Latin America. Production in Q2 was lower as a result of maintenance work, although it was still stable yr/yr.
Spot prices in Europe have soared to record heights in recent weeks, as a result of a summer heat wave, constrained supply, the rising cost of EU carbon permits and increased reinjection into storage. Average day-ahead prices at the Dutch TTF trading hub reached $8.76/'000 ft3 in the second quarter, up from $1.72 a year earlier, according to Wintershall Dea.
The German company estimates that its own realised gas price increased to $2.37/'000 ft3 in Q2 2021, up from $1.16 in the same period last year. The growth was more pronounced in north Europe, where the price climbed to $5.59/'000 ft3 from $2.12.
Wintershall Dea's capital expenditure was down 37% yr/yr at €223mn in the second quarter, which the company said put it on track to reach its full-year target of €1.0-1.1bn. It also managed to lower its net debt by over €2bn to €3.8bn, reducing its leverage (net debt to LTM Ebitdax) to 1.7.
"Q2 proved to be an excellent quarter for Wintershall Dea," CEO Mario Mehren commented. "Our strong operational and financial performance allowed us to reduce our leverage back to our mid-term target range. This has stabilised our credit ratings and gives us significant flexibility to follow our strategic objectives."
The company distributed an extra €100mn in common dividends to shareholders in the second quarter, bringing the full-year total to €600mn.
Among Wintershall Dea's operational highlights in the three-month period was the discovery of up to 87mn boe of gas, condensate and oil in the Norwegian Sea in May. With its Russian partner Gazprom, it also started production at a new section of the deep Achimov layer of west Siberia's Urengoy gas field the previous month.
While Wintershall Dea has often stressed the critical role it sees natural gas having in the energy transition, it is also making forays into low-carbon technologies. It recently established a new carbon management and hydrogen division to manage these investments.
Oil and gas prices may have recovered from pandemic lows thanks to recovering consumption, but concerns about future demand still weigh on asset valuations. This was the reasoning behind German chemicals giant BASF's decision in June to shelve an initial public offering it had planned at Wintershall Dea. BASF owns 67% ordinary shares in the gas supplier, which was formed through the merger of Wintershall and Dea in May 2019.