Chemical giant BASF agreed to merge its oil and gas unit Wintershall with DEA, a vehicle of Russian billionaire Mikhail Fridman, to create one of the largest independent oil and gas firms in Europe, the companies said.
Fridman and his partners in the LetterOne investment vehicle made billions by selling their Russian oil empire in 2013 but have since struggled to expand in the United States and Britain due to sanctions imposed on Moscow despite not being under sanctions themselves.
By folding DEA into Wintershall and creating Germany’s first oil champion, cash-rich Fridman could create new opportunities for growth in large Western markets.
For BASF it represents a second chance to diversify outside Russia where it is heavily present via ventures with gas monopoly Gazprom. BASF already tried to buy DEA in 2014 from German utility RWE but lost the race to Fridman.
“Wintershall DEA will be one of Europe’s largest independent exploration and production companies, with the scale needed to generate sustainable growth long into the future,” said Lord John Browne, the executive chairman of LetterOne Energy.
“Wintershall DEA, will be a German and European energy champion which can compete with those in France, Italy, and Spain. Very rarely do you have the opportunity to create a company of this type,” Browne, a former chief of BP, said in a statement.
The new company will produce around 590,000 barrels per day from fields mainly in the North Sea, Africa and Russia and have combined proven reserves of 2.1 billion barrels of oil equivalent.
BASF will control 67% of the new firm while Fridman’s LetterOne will own the remaining 33%
BASF could increase its stake in the company at a later stage by folding into it its pipeline business, which was left outside the initial merger.
The new group would consider an IPO upon completion of the merger, which is expected in second-half 2018.
In May, Kurt Bock, BASF chief executive, said profit contributions from its oil and gas unit were diminishing further amid weak oil prices. As a result, the group would focus on boosting profitability at its chemicals and crop protection businesses.
The drop in profits came amid a slump in oil prices and turmoil in Libya, one of Wintershall’s key sources of oil, following the fall of late dictator Muammar Gaddafi.
DEA became a growth platform for Fridman and his partner BP sold Russian oil venture TNK-BP for $55 billion in 2013 to state-controlled oil major Rosneft.
DEA’s expansion in Britain and the United States has been hampered by Western sanctions on Russia with DEA unable to close a deal to buy gas fields in Britain's North Sea as well as shale oil and gas companies in Texas.
Recommended Reading
Vermilion Energy to Acquire Canada's Westbrick for $745MM
2024-12-23 - Canada’s Vermilion Energy Inc. will acquire Westrbrick Energy’s Alberta Deep Basin assets, including 700 locations, for CA$1.075 billion.
Civitas Makes $300MM Midland Bolt-On, Plans to Sell D-J Assets
2025-02-25 - Civitas Resources is adding Midland Basin production and drilling locations for $300 million. To offset the purchase price, Civitas set a $300 million divestiture target “likely to come” from Colorado’s D-J Basin, executives said.
PRB’s Sage Butte Ready for M&A Across Lower 48, Maybe Canada Too
2025-01-08 - Private E&P Sage Butte Energy, which operates in the Powder River Basin, is less interested in the Permian Basin, citing the cost of entry.
Energy Spectrum, UGI JV Buys Three Appalachia Gathering Systems
2025-01-28 - Pine Run Gathering LLC, a joint venture between Energy Spectrum Partners and UGI Corp., purchased three gathering systems in Pennsylvania from Superior Midstream Appalachian LLC.
Kimbell Royalty Partners Adds to Permian Portfolio with $231MM Deal
2025-01-07 - Kimbell Royalty Partners is acquiring oil and natural gas mineral and royalty interests in the Midland Basin in a cash-and-equity acquisition worth $231 million.