Germany-based chemical giant BASF has signed a letter of intent with LetterOne to merge their oil and gas subsidiaries Wintershall and DEA, respectively, to create one of the largest independent exploration and production firms in Europe.
Under the terms of the LOI, BASF and LetterOne will merge their oil and gas businesses in a joint venture, which is planned to be named Wintershall DEA.
However, financial details of the transaction were not disclosed.
Upon completion of the deal, BASF will have 67% stake in Wintershall DEA while LetterOne will own the remaining 33% interest.
The new joint venture, which will have significant growth potential, is expected to optimize the portfolio of the combined business and realize synergies, LetterOne said.
L1 Energy, the energy investment arm of LetterOne and BASF is planning to list Wintershall DEA through an initial public offering (IPO), upon completion of the deal.
L1 Energy executive chairman Lord Browne said: “Wintershall DEA will be one of Europe’s largest independent E&P Companies, with the scale needed to generate sustainable growth long into the future.
“We look forward to creating jointly with BASF a new company, with activities in new places, new perspectives and new prospects for the future”
L1 Energy and BASF plan to conduct a confirmatory due diligence process as well as negotiate definitive transaction agreements in near future.
In 2016, the combined business’ production volumes amounted to 215 million barrels of oil equivalent (BOE), with a revenue of €4.3bn.
BASF said: “Based on the combined proven reserves (1P) of 2.1 billion BOE at the end of 2016, the reserve to production ratio of the combined business would be around 10 years.”
Wintershall and DEA will continue to operate independently until the merger is completed which is scheduled in the second half of 2018.
Headquartered in Hamburg, Germany, DEA operates in the field of exploration and production of crude oil and natural gas.Employing around 1,150 people, DEA has stakes in production facilities and concessions in Germany, Norway, Denmark, Egypt, Algeria and Mexico.
Wintershall focuses on exploration and production in oil and gas-rich regions in Europe, Russia, South America, North Africa, and the Middle East. It employs about 2,000 employees worldwide.
Image: BASF and LetterOne will merge their oil and gas subsidiaries to create one of the largest independent European exploration and production companies. Photo: courtesy of Wintershall Holding GmbH.