Basf Completes the Business Transfer of Its Subsidiary Wintershall Dea

On December 21, BASF, LetterOne and Harbour Energy plc (Harbour) signed a business combination agreement to transfer Wintershall Dea's exploration and production business to Harbour. This includes its exploration and development assets and exploration rights in Norway, Argentina, Germany, Mexico, Algeria, Libya (excluding Wintershall AG), Egypt and Denmark (excluding Ravn), as well as Wintershall Dea's carbon capture and storage (CCS) licenses.

In exchange, upon completion of the transaction, Wintershall Dea's shareholders - BASF (72.7%) and LetterOne (27.3%) - will receive a total cash consideration of $2.15 billion (BASF's share: $1.56 billion) and the new shares issued by Harbour represent a combined stake of 54.5% (BASF's stake: 39.6%) in the enlarged Harbour company.

With this transaction, BASF has taken an important step towards achieving its stated strategic goal of exiting the oil and gas business.

Following the completion of the transaction, BASF's stake in the combined company has the option to be monetized due to Harbour's listing on the London Stock Exchange. Dr. Dirk Elvermann, Chief Financial Officer of BASF, said: "In addition to the cash component, the shares in Harbour that BASF will receive upon completion of the transaction have significant value creation potential and allow for a gradual exit from the oil and gas business over the next few years.

Wintershall Dea's headquarters and associated employees are not part of the deal. This will require further restructuring and the eventual closure of the Kassel and Hamburg headquarters units, which currently employ around 850 people. Harbour intends to bring some employees from its current headquarters into the combined company. Further details will be agreed upon after a more detailed review between signing and closing. Employee representatives will participate in this process in accordance with relevant legal provisions and practices.

In parallel with the Harbour deal, the legal separation of Wintershall Dea's Russia-related operations is also proceeding as planned. BASF and LetterOne will remain the owners of the company's related operations in Russia, for which the German federal government has provided significant investment guarantees. Related operations in Russia include a stake in a joint venture in Russia, a stake in Wintershall AG in Libya (Wintershall Dea's share: 51%), Wintershall Noordzee BV in the Netherlands (Wintershall Dea's share: 50%) and the shares of Nord Stream AG (15.5% Wintershall Dea).

In addition, Wintershall Dea is continuing to prepare for a separate sale of its stake in WIGA Transport Beteiligungs-GmbH & Co. KG (WIGA), which is not part of the transaction. WIGA, which operates mainly in Germany, is a joint venture between Wintershall Dea (50.02%) and SEFE Securing Energy for Europe GmbH (49.98%). WIGA's independent subsidiaries operate high-pressure pipeline networks, including GASCADE's transport network, as well as OPAL and NEL.

Estimated operating conditions after the merger

Pending completion of the transaction, Wintershall Dea and Harbour will continue to operate as independent companies. There can be no assurance that the agreed transaction will be completed. Among other things, the transaction is subject to approval by merger regulators and foreign investment institutions in several countries. Subject to successful receipt of these regulatory approvals, the transaction is expected to close in the fourth quarter of 2024.

In the first half of 2023, the combined company has pro forma revenue of $5.1 billion and earnings before interest, tax, depreciation and amortization (EBITDAX) of $3.7 billion. Overall, production from Harbour and Wintershall Dea reached 513,000 barrels of oil equivalent per day in the first half of 2023. In 2022, the combined business has pro forma revenue of $13.5 billion and earnings before interest, tax, depreciation and amortization (EBITDAX) of $10.3 billion. In total, Harbour and Wintershall Dea produced 526,000 barrels of oil equivalent per day in 2022. 2P's combined reserves stood at 1.5 billion barrels of oil equivalent at the end of 2022.