Realising energy potential
L1 Energy's ambition is to build a, safe, sustainably growing energy, group, which is recognised as a partner of choice in its industry.
Creating Europe’s Largest Independent Oil and Gas Company
In May 2019, L1 Energy and BASF completed the merger of their oil and gas businesses to create Wintershall Dea. All necessary regulatory approvals were received from nine countries, including Germany, Norway, the United Kingdom and Russia.
This merger, the largest in the oil and gas sector for a decade, created a new oil and gas company - Wintershall Dea - which is the world’s largest privately held energy company.
L1 Energy now holds 33% of Wintershall Dea. The company’s Supervisory Board is chaired on a rotating basis, with Lord Browne due to take the chairmanship on behalf of L1 Energy in August 2020.
Wintershall Dea has activity spanning 13 countries across Northern Europe, Russia, Middle East / North Africa, and Latin America. In addition to operating a number of key assets, the group is a partner in a number of long-term joint venture arrangements with the world’s leading oil and gas companies.
Wintershall Dea has a significant number of development projects that are due to come on-stream in 2020 and 2021, including six major development projects in Norway and one in Russia.
"In 2019 we completed a merger to create Wintershall Dea, the largest independent E&P company in Europe."Lord Browne of MadingleyExecutive Chairman of L1 Energy
Wintershall Dea Strategy
Wintershall Dea's strategy is to strengthen its position as a European gas and oil company by delivering safe and profitable growth, a sustainable return to shareholders, and playing an active role in the energy transition.
As post-merger integration continues, the company is defining and implementing new standards in sustainability.
Competitive Shareholder Returns in Volatile Low Oil Price Environment
Wintershall Dea expects continued high volatility in commodity prices, as a result of the interplay between rising energy demand, the standoff between Saudi Arabia and Russia over OPEC oil production quotas, economic volatility post COVID 19, and the impact of this on continued growth of low-cost oil and gas production from unconventional sources.
Wintershall Dea's competitive position is underpinned by its efficiency, scale, strong operating capabilities and competitive operating costs. As a result of the merger, Wintershall Dea is better equipped to upgrade its portfolio through strategic optimisation measures and to further reduce its already low production costs, which averaged $ 4.3 per boe in 2019.
By 2022, Wintershall Dea aims to achieve cash synergies of around € 200 million per year before tax, which will be derived from operating synergies, capital expenditure and production-related synergies. It expects to realise cost savings through a combination of procurement as well as exploration research and development functions. The company also intends to optimise cash flow and capital expenditure by actively managing its combined operating portfolio in addition to prioritising the most profitable assets and most probable discoveries.
Value capture impact will be derived evenly from the following categories:
- Operating costs: savings in overlapping German and Norwegian operations, significant reduction of FTEs, reduction of other general and administration costs;
- Production/investments: optimised procurement contracts and commercial activities, accelerated production across several business units, drilling optimisations in countries with overlapping activities;
- At the end of 2019, more than €100m had already been captured mainly through production initiatives in Mexico, Egypt and Norway, procurement CAPEX savings as well as the first organisational reductions.
Wintershall Dea Operational and Financial Performance
Wintershall Dea's production in the calendar year 2019 was 642 mboe/d, or 617 mboe/d excluding 25 mboe/d of Libyan onshore production, of which gas was 445 mboe/d (72%) and liquids 172 mboe/d. This represents an increase of 9% compared to 2018 on a like-for-like basis.
EBITDAX was impacted by the weaker commodity price environment, with Brent down 10% to $64 per bbl, and European gas down 44% respectively year on year. For the full calendar year 2019, EBITDAX amounted to €2,828m (2018: €3,591m). The business generated €88m of free cash flow in 2019.
As at 31 December 2019, Wintershall Dea held 2P reserves of 3,826m barrels of oil equivalent, an increase of 3% compared to 2018 on a like-for like basis.
Committed to Reducing its Emissions
Wintershall Dea continues to seek opportunities to further reduce its emissions. With 70% gas in its portfolio and a low equity greenhouse gas intensity of around 11 kg CO2e/boe compared to IOGP average (2018: ~ 21 kg CO2e/boe) Wintershall Dea is well positioned for the future.
Wintershall Dea systematically monitors its energy consumption and strives to increase the energy efficiency of its machinery and facilities. It aims to reduce energy consumption in its operations and associated emissions while delivering low-cost energy. Energy consumption and emissions performance are a key element for new projects.
Its' future climate approach is based on portfolio optimisation, energy efficiency, the use of innovative technologies and complemented by offsetting.
Wintershall Dea has already eliminated routine flaring at operated assets and uses the associated gas for generating power, heat and steam. It has voluntarily committed itself to the World Bank's "Zero Routine Flaring by 2030" initiative. In addition, it is exploring technologies to prevent flaring in non-routine operations. Furthermore, Wintershall Dea is committed to the Methane Guiding Principles and thus the continuous reduction of methane (CH4) emissions. These emissions occur when natural gas is released during the extraction or transportation of oil and gas.
Following completion of the merger, Wintershall Dea successfully issued four bonds in public markets, raising €4bn at an average interest rate of just over 1%. This represented the largest ever debut offering and the longest Euro-denominated tranche for a company without any prior access to capital markets.
Other highlights include:
- Norway - progress on major operated projects, with completion of subsea template in Dvalin, and Nova pipelines and umbilical’s, as well as the sale of the Nyhamna terminal and Polarled pipeline
- Argentina - Farm down of 45% share in the Aguada Federal and 50% in Bandurria Norte unconventional oil blocks to ConocoPhillips
- Brazil - successful exploration bid round with award of two offshore blocks
- Germany - closed the sale of the company's underground storage facility in Blexen, and completed the sale of interests in certain non-operated oil and gas assets in Emsland and Grafschaft Bentheim.
- Libya - signed two Exploration and Production Sharing Agreements (EPSAs), relating to the Libyan onshore business.
Wintershall Dea continues to prepare for an IPO, subject to market conditions.
Hydrogen from natural gas without CO2 emissions: Wintershall Dea and KIT launch cooperation project
Wintershall Dea and Karlsruhe Institute of Technology (KIT) have signed a cooperation agreement on research into a climate-friendly means of producing hydrogen from natural gas.
Methane pyrolysis enables the methane in natural gas to be separated into gaseous hydrogen and solid carbon. That may be a key component in delivering a climate-neutral supply of energy in the future: Hydrogen can be used as a clean, CO2-free energy source, while the solid carbon obtained is a valuable basic material for various branches of industry and can also be stored safely.
Hydrogen is increasingly seen in the energy debate as a key factor in the success of the energy transition. For example, even a hydrogen admixture in the European gas grid of 20 per cent could cut CO2 emissions by 60m tonnes a year, equivalent to the amount emitted by Denmark in an entire year.
The project between Wintershall Dea and KIT is initially scheduled to run for three years and aims to lay the foundations for future industrial use of methane pyrolysis.