Harbour to Acquire Wintershall Upstream Assets for $11.2B - Rigzone News

Harbour to Acquire Wintershall Upstream Assets for $11.2B | Rigzone

Harbour to Acquire Wintershall Upstream Assets for $11.2B

Harbour Energy PLC and the co-owners of Wintershall Dea AG have reached an agreement divesting all the exploration and production operations of the German oil and gas company except its Russian assets to United Kingdom-based Harbour for $11.2 billion.

“The Target Portfolio includes all of Wintershall Dea’s upstream assets in Norway, Germany, Denmark, Argentina, Mexico, Egypt, Libya and Algeria as well as Wintershall Dea’s CO2 [carbon dioxide] Capture and Storage licenses in Europe”, Harbour said in a recent press release. “Wintershall Dea's Russian assets are excluded”.

Russian and foreign media reported last week President Vladimir Putin ordered the transfer of the assets of Wintershall, as well as OMV AG, in Russia to new Russian companies. Wintershall, owned by BASF SE with a 72.7 percent stake and LetterOne with 27.3 percent, already announced January it was exiting Russia citing the Putin regime’s invasion of Ukraine.

BASF said in its own announcement, “In parallel to the transaction with Harbour, the legal separation of Wintershall Dea’s Russia-related business is progressing as planned”.

“BASF and LetterOne will remain the owners of the company holding the Russia-related business, for which significant federal German investment guarantees are in place”.

Meanwhile Wintershall is pursuing talks to sell its stake in WIGA Transport Beteiligungs-GmbH & Co. KG, BASF also said in the announcement. Wintershall owns a 50.02 percent interest in the gas transporter while SEFE Securing Energy for Europe GmbH holds the remaining 49.98 percent.

Harbour and Wintershall’s owners expect to complete the transaction by the end of next year subject to shareholder and regulatory approvals. Upon completion, BASF will own 46.5 percent of Harbour’s listed ordinary shares and will be entitled to nominate two non-executive directors to Harbour's board.

However, if LetterOne opts to convert about 251.5 million non-listed, non-voting shares in Harbour into ordinary stock, BASF’s stake in Harbour could come down to 39.6 percent. In this case LetterOne will become a 14.9 percent shareholder in Harbour.

LetterOne, an investment firm partially owned by a Russian billionaire under Western sanctions, will have no representation in the Habour board while sanctions linked to LetterOne’s investors remain, Harbour said.

“While LetterOne itself is not a sanctioned entity, certain of LetterOne’s minority owners are subject to sanctions in the UK, EU and US. As such, LetterOne’s Non-Voting Shares have no governance rights”, it said.

BASF said, “Wintershall Dea’s headquarters and the related staff are not part of the transaction”.

“This will require further restructuring and ultimately the closure of the headquarters’ units in Kassel and Hamburg that currently have around 850 employees”.

However, Harbour intends to absorb some staff from Wintershalk’s current headquarters into the combined company.

“Employee representatives will be involved in the process according to respective legal regulations and established practices”, BASF said. Details about the potential employee transfer would be revealed after a review of the agreement, BASF said.

Harbour said the combined company would be one of the world’s biggest and most geographically diverse independent oil and gas companies. The resulting company is expected to have an average production of 500,000 barrels of oil equivalent per day (boepd), mostly natural gas, and proven and probable reserves of 1.5 billion boe.

The acquisition would boost “Harbour’s natural gas-weighting with combined natural gas production of over 300 kboepd (c.60 percent of total production)”, Harbour said.

It would also be “materially accretive to margins with lower combined opex of c.$11/boe and exposure to advantaged markets (Brent for oil and TTF for European gas)”, Harbour added.

If successful, ordinary shareholders expect an increase in annual dividend to around $380 million, according to Harbour.

Additionally the combined company would have lower greenhouse gas emissions of about 15 kilograms of carbon dioxide equivalent per boe compared to Harbour’s.

As part of the price tag, Harbour will take over $4.9 billion in bonds issued by Wintershall Dea. “Post completion, Harbour expects to receive investment grade credit ratings, increasing its access to low cost, diverse sources of capital”, Harbour said.

“Today’s announcement marks Harbour’s fourth major acquisition and the most transformational step yet in our journey to build a uniquely positioned, large-scale, geographically diverse independent oil and gas company”, Harbour chief executive Linda Z. Cook said in a statement.

“Importantly, the acquisition also advances our energy transition objectives by shifting our portfolio towards natural gas, lowering our GHG emissions intensity and expanding our CCS interests into new European markets”, Cook added.

BASF chief financial officer Dirk Elvermann said, “With this transaction, BASF takes a major step towards achieving its announced strategic goal to exit the oil and gas business”.

To contact the author, email jov.onsat@rigzone.com

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