Business review

Oil & Gas segment

• Sales decline by 79% and EBIT before special items down by 62% due to discontinuation of contributions from gas trading and storage business as well as to lower oil and gas prices

In the Oil & Gas segment, sales to third parties decreased by €10,230 million to €2,768 million year-on-year (volumes 3%, prices/currencies –3%, portfolio –79%). Owing to the asset swap with Gazprom completed at the end of September 2015, contributions from the natural gas trading and storage business and from Wintershall Noordzee B.V. ceased as of the fourth quarter of 2015. These activities had contributed €10.1 billion to sales in 2015. In the continuing oil and gas business, we raised volumes by 15% compared with 2015, while price and currency effects came out to minus 15%. The price of a barrel of Brent blend crude oil averaged $44 in 2016 (2015: $52). Gas prices on European spot markets dropped 29%, also a sharp fall compared with the previous year. Both oil and gas prices recovered significantly toward the end of 2016 as compared with the beginning of the year.

Oil & Gas – Sales by region
(Location of customer)

Income from operations (EBIT) before special items declined by €849 million to €517 million in 2016. This was primarily the result of falling oil and gas prices, in addition to the divestiture of our gas trading and storage business to Gazprom. The activities transferred to Gazprom had contributed around €260 million to EBIT before special items in 2015. In addition, as we had expected, the earnings contribution from our share in the Yuzhno Russkoye natural gas field was lower: A contractual agreement with our partner Gazprom stipulated that the excess amounts received over previous years be compensated in 2016. Positive effects came from comprehensive measures aimed at optimizing exploration and technology projects as well as the successful implementation of operational cost-saving measures. EBIT declined by €573 million to €499 million. Net income declined by €688 million to €362 million.

We increased our crude oil and natural gas production by 12 million barrels of oil equivalent (BOE) to 165 million BOE. In the search for new crude oil and natural gas deposits, we finished drilling a total of 14 exploration and appraisal wells in 2016, of which 9 were successful. Our proven crude oil and natural gas reserves fell by 7% compared with the end of 2015, to 1,622 million BOE. We replenished 26% of the volumes produced in 2016. The reserve-to-production ratio is around 10 years (2015: 11 years). This is based on Wintershall’s production in 2016 and refers to the reserves at year-end.