LetterOne, BASF merge oil & gas units to create Wintershall DEA
Chemicals group BASF and LetterOne signed a merger agreement to combine their respective oil and gas businesses Wintershall and DEA to create an independent European oil and gas company, the companies said Sept. 27.
The new company called Wintershall DEA will be headquartered in Kassel and Hamburg and will seek to list itself through an IPO, BASF said.
Under the deal, LetterOne will put all its shares in a vehicle of Russian billionaire Mikhail Fridman’s DEA into Wintershall Holding GmbH against the issuance of new shares of the company to LetterOne.
BASF will initially hold 67% and LetterOne 33% of Wintershall DEA’s ordinary shares.
The Joint Venture will aim for daily production of 750,000 to 800,000 barrels of oil equivalent between 2021 and 2023 and is expecting synergies of at least 200 million euros (US$232.80 million) per year are expected as of the third year following the closing of the transaction.
The new independent company will be led by the CEO of Wintershall, Mario Mehran and Maria Moraeus Hanssen, CEO of DEA, will be the deputy CEO and COO of the joint venture.
Closing is subject to regulatory approvals and is expected in the first half of 2019.
LetterOne and BASF have agreed to merge their oil and gas businesses to create Wintershall DEA
- Creation of the largest independent European exploration and production company.
- Largest European merger in the sector for over a decade.
- Closing is subject to regulatory approvals, and is expected in the first half of 2019.
LetterOne and BASF have today signed a Business Combination Agreement to merge their oil and gas businesses and create Wintershall DEA. Closing of the transaction is subject to customary regulatory approvals.
Wintershall DEA will be the largest independent European exploration and production company, with activity in twelve countries across Europe, Latin America, North Africa and the Middle East. The combined business would have had pro-forma production of approximately 575,000 barrels of oil equivalent per day in 2017, almost 70% of which comes from natural gas. Production is expected to rise to between 750,000 and 800,000 barrels of oil equivalent per day in the early 2020s as the company executes its business plan.
In 2017, the combined business would have generated revenue of €4.7 billion and earnings before interest, taxes, depreciation and amortisation (EBITDA) of €2.8 billion. Based on the combined proven (1P) reserves of almost 2.2 billion barrels of oil equivalent at the end of 2017, the reserves to production ratio of the combined business would be approximately 10 years.
The combined portfolio and scale of Wintershall DEA will provide significant potential for sustainable, long-term growth. LetterOne and BASF expect to be able to realise synergies equivalent to at least €200 million per annum. In the medium term, the shareholders intend to offer shares in the company to the public through an initial public offering.
Wintershall DEA will be jointly headquartered in Hamburg and Kassel.
Lord Browne, the Executive Chairman of L1 Energy and Chairman of the Supervisory Board of DEA, said: “I am delighted that we have reached agreement to create Europe’s largest independent E&P company. Wintershall DEA is the largest E&P merger in Europe for over a decade, and will have a diverse portfolio of outstanding growth prospects, with the scale needed to access important new opportunities. We expect the company to evolve rapidly into a world-class and globally competitive organisation with an international portfolio. We look forward to working with our new partners to create a disciplined, responsible and sustainable oil and gas company.”
Mikhail Fridman, co-founder of LetterOne, said: “LetterOne is looking forward to working with BASF to create Wintershall DEA, which will be a new and unique international company. We are proud to be part of a very important moment for the energy industry.”
Mario Mehren, Chief Executive Officer (CEO) of Wintershall, will be the CEO of Wintershall DEA. Maria Moraeus Hanssen, CEO of DEA, will be the deputy CEO and Chief Operating Officer. In addition, Thilo Wieland, member of the Board of Executive Directors of Wintershall, and Hugo Dijkgraaf, Managing Director of Wintershall Norge, will be on the five-member Management Board of Wintershall DEA. The appointment of the Chief Financial Officer will be announced in due course.
LetterOne and BASF will now begin the process of seeking regulatory approvals, a process which could take approximately six months. Until closing, DEA and Wintershall will continue to operate as independent companies.
BASF will initially hold 67% and LetterOne will hold 33% of Wintershall DEA. This does not take into account Wintershall’s gas transportation business. However, at closing of the transaction, Wintershall DEA will issue preference shares to BASF reflecting the value of Wintershall’s gas transportation business. Before IPO, but no later than 36 months after closing, these preference shares will be converted into additional ordinary shares in Wintershall DEA for BASF.
DEA Deutsche Erdoel AG is an international operator in the field of exploration and production of crude oil and natural gas based in Hamburg. Its focus is on safe, sustainable and environmentally conscious production of oil and gas. DEA Deutsche Erdoel AG has 119 years of experience working along the entire upstream value chain as operator or project partner. With a staff force of 1,150 employees, DEA Deutsche Erdoel AG has shares in production facilities and concessions in, among others, Germany, Norway, Denmark, Egypt, Algeria and Mexico. Production of DEA averaged 125,000 barrels of oil equivalent (BOE) per day in 2017; as of year-end DEA had 1P reserves of 508 million BOE, and 2P reserves of 698 million BOE.
Wintershall, headquartered in Kassel, Germany, focuses on exploration and production in oil and gas-rich regions in Europe, Russia, South America, North Africa, and the Middle East. Together with Gazprom, Wintershall is also active in the transportation of natural gas in Europe. The company has about 2,000 employees worldwide and is Germany’s largest, internationally active crude oil and natural gas producer. Wintershall’s production averaged 450,000 BOE per day in 2017; as of year-end Wintershall had 1P reserves of 1.67 billion BOE.
L1 Energy is the energy investment arm of LetterOne. LetterOne was founded in 2013 and is an international investment business headquartered in Luxembourg. LetterOne’s strategy is to build a new portfolio of successful companies that are leaders in their fields and sectors. It makes long-term investments of its own capital in companies in which its sectoral experience and strategic and geographic expertise will improve performance and help companies grow. It has recruited world-class CEOs, sector investment teams and Advisory Boards to invest at scale. It buys and builds assets, which it can develop over time as platforms of long-term sustainable growth. It invests through L1 Energy, L1 Technology, L1 Health and L1 Retail.
(Source: DEA Deutsche Erdoel AG)