BASF, LetterOne, and Harbour Energy plc (Harbour) recently signed a business combination agreement to transfer Wintershall Dea’s E&P business consisting of its producing and development assets and exploration rights in Norway, Argentina, Germany, Mexico, Algeria, Libya (excluding Wintershall AG), Egypt and Denmark (excluding Ravn) and Wintershall Dea’s carbon capture and storage (CCS) licenses to Harbour. In exchange, at the closing of the deal, the shareholders of Wintershall Dea – BASF (72.7%) and LetterOne (27.3%) – will receive total cash consideration of $2.15 billion (BASF share: $1.56 billion) and new shares issued by Harbour equating to a total shareholding in the enlarged Harbour of 54.5% (BASF share: 39.6%).
The agreed enterprise value for the Wintershall Dea assets is $11.2 billion. This amount includes the outstanding bonds of Wintershall Dea, with a nominal value of around $4.9 billion that will be transferred to Harbour at the closing.
With this deal, BASF takes a major step towards achieving its announced strategic goal to exit the oil and gas business. After closing, the transaction creates an option to monetize BASF’s stake in the combined company, as Harbour is listed on the London Stock Exchange.
Wintershall Dea’s headquarters and the related staff are not part of the deal. And this will require further restructuring and, ultimately, the closure of the headquarters’ units in Kassel and Hamburg, which currently have around 850 employees. Harbour plans to take on some employees from the current headquarters into the combined company. Further specifics will be agreed upon following a more detailed review between signing and closing. Employee representatives will be involved in the process according to legal regulations and established practices.
In parallel to the deal with Harbour, the legal separation of Wintershall Dea’s Russia-related business is progressing as planned. BASF and LetterOne will remain the company’s owners holding the Russia-related business, for which significant federal German investment guarantees are in place. And the Russia-related business includes stakes in the joint ventures in Russia, the ownership interest in Wintershall AG in Libya (Wintershall Dea share: 51%), in Wintershall Noordzee BV in the Netherlands (Wintershall Dea share: 50%), and the share in Nord Stream AG (Wintershall Dea share: 15.5%).
Plus, Wintershall Dea is continuing its preparations for a separate sale of its stake in WIGA Transport Beteiligungs-GmbH & Co. KG (WIGA), which is not part of the transaction. And WIGA is active in the German gas transport business; it is a joint venture of Wintershall Dea (50.02%) and SEFE Securing Energy for Europe GmbH (49.98%). WIGA’s operationally independent subsidiaries operate high-pressure pipeline networks, including GASCADE’s transport network, as well as OPAL and NEL.
Until the closing, Wintershall Dea and Harbour will continue to operate as independent companies. And there is no assurance that the agreed transaction will be consummated. The deal is, among other things, subject to approvals of merger control and foreign investment authorities in several countries. Subject to these regulatory approvals, closing is targeted for the fourth quarter of 2024.
In the first half of this year, the combined business had pro-forma revenue of $5.1 billion and EBITDAX of $3.7 billion. Overall, production volumes of Harbour and Wintershall Dea amounted to 513 thousand barrels of oil equivalent per day in the first half of 2023. Last year, the combined business had pro-forma revenue of $13.5 billion and EBITDAX of $10.3 billion. Overall, production volumes of Harbour and Wintershall Dea amounted to 526 thousand barrels of oil equivalent per day in 2022. Combined 2P reserves stood at 1.5 billion barrels of oil equivalent at the end of 2022.
BASF appointed Morgan Stanley & Co. International plc as exclusive financial advisor as well as Freshfields Bruckhaus Deringer as legal advisor in connection with the transaction.
KEY QUOTE:
“In addition to the cash component, the shares in Harbour that BASF will receive upon completion of the transaction offer significant potential for value creation and allow for a gradual and optimized exit from the oil and gas business over the next few years.”
- Dirk Elvermann, Chief Financial Officer of BASF SE
