BASF and LetterOne have signed a final agreement to merge their respective oil and gas business, Wintershall and DEA Deutsche Erdöl AG and create Wintershall DEA.
Wintershall DEA will form the leading independent European exploration and production company with international activities in selected core regions. Crude oil and natural gas production at Wintershall and DEA amounted pro forma to a total of 210 million barrels of oil equivalent (BOE) in 2017; that corresponds to a daily production volume of around 575,000 BOE. Through this merger, BASF and LetterOne are laying the foundation for further profitable growth. The medium-term plan is to list Wintershall DEA through an initial public offering.
Closure of the deal is expected in the first half of 2019, subject to the approvals from the merger control and foreign investment authorities. Wintershall and DEA will continue to operate as independent companies.
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.
BASF will initially hold 67 per cent and LetterOne will hold 33 per cent of Wintershall DEA. The merged company 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.”
Greig Aitken, principal analyst M&A, at global natural resources consultancy Wood Mackenzie, said: “DEA saw scale as key to future success and this deal certainly delivers. For Wintershall, the tie-up is a logical step en route to a future IPO, which will allow the BASF-owned company to escape the shadow of its chemical company parent. The deal will form one of Europe's largest independent E&P companies. Production from Wintershall DEA will rank below only the majors and Repsol in terms of European-headquartered producers.