Wintershall with Profit Jump
Monday 12 March 2018
BASF's Wintershall subsidiary has presented significantly improved results for 2017. After strong increases in previous years, CEO Mario Mehren expects Wintershall to set a new production record for 2018 by commissioning of new production in the established production regions, and thereby considerably increasing sales and EBIT before special items. In addition, Wintershall now intends to become active in Brazil in the exploration of oil and gas reserves. Furthermore, BASF's and LetterOne's intended merger of Wintershall with DEA Deutsche Erdoel AG will provide further momentum.
In 2017, Germany's largest internationally active oil and gas producer increased its income from operations (EBIT) before special items by 53 percent (€276 million) to €793 million (2016: €517 million). This is primarily attributable to the increase in oil and gas prices as well as the higher earnings contribution from our share in the Yuzhno Russkoye natural gas field. Comprehensive measures aimed at optimizing exploration and technology projects as well as the successful implementation of operational cost-saving measures also had a positive effect. EBIT rose by €544 million (plus 109 percent) to €1,043 million (2016: €499 million). This included special income from the reversal of impairments in Norway and the Netherlands as well as from the sale of shares in the Aguada Pichana concession in Argentina. This was partially offset by an impairment on the exploration potential in Norway. Net income increased by €357 million (plus 99 percent) to €719 million (2016: €362 million).
Sales to third parties increased by €476 million (plus 17 percent) to €3,244 million over the previous year (2016: €2,768 million) as a result of higher prices and volumes. The price of a barrel of Brent crude oil averaged $54 in 2017 (2016: $44). Gas prices on the European spot markets rose by around 24 percent compared with the previous year. Volumes growth was mainly driven by higher gas sales volumes.
Oil and Gas Production Maintain Record Levels
The company managed to maintain its crude oil and natural gas production at the previous year's level (2016: 165 million barrels of oil equivalent). In the search for new oil and gas reservoirs, Wintershall completed a total of seven exploration and appraisal wells in 2017, of which three were successful. Our proven oil and gas reserves rose by 3 percent compared with the end of 2016 to 1,677 million barrels of oil equivalent (2016: 1,622 million boe). Wintershall replenished 133 percent of the volumes produced in 2017. The reserves-to-production ratio is around 10 years (2016: 10 years). This is based on Wintershall's production in 2017 and the reserves at year-end. This is because in the same period Wintershall also successfully increased its reserves by almost 50 percent.
Overall, Wintershall plans to invest around €3.5 billion in expanding its oil and gas activities by 2022. This is about one fifth (18 percent) of the BASF Group's total investment for the period from 2018 to 2022.
In 2018 Wintershall will continue to invest in the expansion of oil and gas production, particularly in Norway, Argentina and Russia. The key projects in the coming years will be Nova (formerly Skarfjell) and Aasta Hansteen in Norway, the projects in the Achimov Formation in Russia as well as our projects in the Tierra del Fuego and Neuquén provinces in Argentina. The company’s production in Europe will continue to focus on increasing efficiency and effectiveness. Wintershall will also continue to push ahead with its exploration activities.