Non-Integral Oil and Gas Business

BASF holds 72.7% of the ordinary shares in Wintershall Dea AG; 27.3% are held by LetterOne.

Macroeconomic environment

The price of a barrel of reference Brent crude oil averaged $82 in 2023 (2022: $101 per barrel). Gas prices on the European spot markets averaged €40.52 per MWh ($12.83 per mmBtu) for the year and were therefore considerably lower than the high gas prices in the previous year (€124.16 per MWh or $38.01 per mmBtu), which were influenced by the very tense situation on the European gas market due to the significant reduction in gas supplies from Russia to the E.U.

Equity-accounted income of the oil and gas business

Wintershall Dea AG contributed -€130 million to net income from shareholdings in 2023 (2022: -€4,853 million). This included special items in the amount of -€164 million associated in particular with with the planned adjustment of the corporate structure. Impairment losses and reversals on the part of Wintershall Dea almost balanced each other out in 2023.

In 2022, net income from shareholdings in Wintershall Dea including special items amounted to around -€6.3 billion. Those primarily resulted from impairments and reversals of impairments on Wintershall Dea’s Russian assets and on its gas transportation business.

BASF received dividend payments of €291 million from Wintershall Dea in 2023. In the previous year, dividend payments from Wintershall Dea amounted to approximately €1 billion.

Wintershall Dea conducts production, development¹ and exploration activities in the following countries:

• Egypt (production, development, exploration)
• Algeria (production)
• Argentina (production, development)
• Denmark (production, exploration)
• Germany (production, development, exploration)
• Libya (production)
• Mexico (production, development, exploration)
• Netherlands (production, development, exploration)
• Norway (production, development, exploration)
• United Arab Emirates (development)
• United Kingdom (production, development, exploration)

Wintershall Dea is also active in gas transportation. This includes interests in GASCADE Gastransport GmbH and OPAL Gastransport GmbH & Co. KG held by WIGA Transport Beteiligungs-GmbH & Co. KG, and the interest in Nord Stream AG held directly by Wintershall Dea AG.

Withdrawal from Russia

On January 17, 2023, Wintershall Dea announced its full exit from Russia in compliance with all legal requirements. In this context, Wintershall Dea is implementing a legal separation of its Russia-related business. This comprises the interest in the joint ventures in Russia, the shareholdings in Wintershall AG (51% interest) in Libya and Wintershall Noordzee BV (50% interest) in the Netherlands as well as the interest in Nord Stream AG (15.5% interest).

Agreement with Harbour Energy on the merger of businesses

On December 21, 2023, BASF, LetterOne and Harbour Energy plc (Harbour) signed an agreement to combine the businesses of Wintershall Dea and Harbour. Accordingly, the E&P business of Wintershall Dea is to be transferred to Harbour; it comprises production and development assets as well as exploration rights in Norway, Argentina, Germany, Mexico, Algeria, Libya (excluding Wintershall AG), Egypt and Denmark (excluding Ravn), and licenses from Wintershall Dea for carbon capture and storage (CCS). In exchange, the shareholders of Wintershall Dea will receive a total cash consideration of $2.15 billion (BASF interest: $1.56 billion) on completion of the transaction as well as new shares to be issued by Harbour, equating to a total 54.5% shareholding in the enlarged Harbour (BASF interest: 39.6%). The agreed enterprise value for Wintershall Dea’s assets amounts to $11.2 billion. On completion of the transaction, Wintershall Dea’s outstanding bonds with a nominal value of around $4.9 billion will be transferred to Harbour.

In 2022, the combined business had pro forma sales of $13.5 billion and EBITDAX² of $10.3 billion. Overall, production volumes of Harbour and Wintershall Dea amounted to 526 thousand barrels of oil equivalent per day in 2022. At the end of 2022, combined 2P reserves stood at 1.5 billion barrels of oil equivalent.

Until the completion of the transaction, Wintershall Dea and Harbour will continue to operate separately as independent companies. The transaction is subject to antitrust approvals and official approvals for foreign investments, among other things, in various countries. Subject to these regulatory approvals, closing is scheduled for the fourth quarter of 2024.

With this agreement, BASF is taking a major step toward achieving its announced strategic goal of exiting the oil and gas business. Completion of the transaction will create opportunities for BASF to monetize its shares in the combined company easily, as Harbour is listed on the London Stock Exchange.

Furthermore, Wintershall Dea is working on the separate sale of its interest in WIGA Transport Beteiligungs-GmbH & Co KG (WIGA), which is not part of the transaction.

Restructuring

Wintershall Dea’s headquarters and its employees are not part of the transaction with Harbour. This means that, in addition to the restructuring initiated in September 2023, further restructuring and ultimately the closure of the headquarters in Kassel and Hamburg, which currently employ around 850 people, will be necessary. Harbour intends to transfer employees from these units to the combined company. Since signing, the parties have been working on further details regarding the transfer of employees in a joint integration committee. In 2023, Wintershall Dea already reduced its Management Board from five to three members. In 2023, Wintershall Dea recognized the necessary provisions for the implementation of the upcoming restructuring measures.

Wintershall Dea’s activities in 2023

Wintershall Dea produced 118 million BOE (barrels of oil equivalent) in 2023 (2022: 117 million excluding Russia) of which around 77 million BOE of gas (2022: 77 million excluding Russia). This corresponded to a daily production of 323 thousand BOE (2022: 321 thousand excluding Russia).

Several Norwegian development projects were successfully started in 2023. Hyme and Bauge started production in April 2023; Dvalin started production in July 2023.

In Argentina, the development of the Fénix project is progressing as planned, the underwater pipeline has been laid and the construction of the production platform has been completed. Gas production is expected to begin in 2025.

Wintershall Dea drilled nine exploration wells in 2023, of which five were successful. The result of one well is still pending.

In February 2023, Wintershall Dea, together with INEOS and the state-owned company Nordsøfonden, was granted the Greensand carbon capture and storage (CCS) license C2023/01 (IRIS) in the Danish North Sea. By 2026, up to 1.5 million metric tons of CO₂ per year are to be stored underground under this license.

In March 2023, Wintershall Dea was awarded its second operated CCS license in the Norwegian North Sea (Havstjerne). The storage facility is to be operated by Wintershall Dea, which holds 60% of the shares. The remaining shares of 40% are held by Stella Maris AS. The annual storage potential is estimated to be up to 7 million metric tons of CO₂.

In March 2023, Wintershall Dea and its partners submitted the development plan for the Zama oil field in the Gulf of Mexico and the project was approved by the authorities in June. The field is expected to produce up to 180,000 barrels of oil per day at its peak, which corresponds to around 10% of Mexico’s current total oil production.

At the end of March 2023, Wintershall Dea completed the acquisition of the 37% interest in the producing Hokchi Block off the coast of Mexico. The Hokchi Block, operated by Hokchi Energy, a subsidiary of Pan American Energy, currently produces around 24,000 BOE per day.

In April 2023, operator Wintershall Dea and its partners Harbour Energy and Sapura OMW discovered a significant oil deposit in the Kan prospect in Block 30, off the coast of Mexico. According to initial estimates, the deposit is approximately equal to 200 to 300 million BOE.

In August 2023, Wintershall Dea obtained the first CCS license in the United Kingdom. The expected annual storage potential of the Camelot license is up to 6 million metric tons of CO₂. Furthermore, Wintershall Dea received a 10% share in the Poseidon license (also in the United Kingdom) in November 2023.

In October 2023, Wintershall Dea completed the acquisition of shares in the Algerian Reggane Nord gas project from its previous project partner Edison. Wintershall Dea has thus increased its participating interest to 24%.

Also in October 2023, Wintershall Dea and its partners started gas production in the Egyptian onshore block East Damanhur, following successful exploration. Gas production is around 35 MMscf per day.

Wintershall Dea was once again recognized as one of the best companies in the industry in Morningstar Sustainalytics’ ESG Risk Rating (2023 ESG Risk Rating: 25.6 – medium risk). Wintershall Dea’s ESG risk management is rated as strong.