LetterOne of Mikhail Fridman and BASF to combine their oil and gas assets


German BASF SE is discussing the merger of their oil and gas unit Wintershall AG with Dea Deutsche Erdoel AG which is controlled by the LetterOne (L1) group. Negotiations are at an advanced stage and can be completed within a few weeks. A new company may be worth about 10 billion euros. IPO is possible in the future too.

The majority of the shares of the joint venture will be owned by BASF. The IPO is considered in the medium term. In 2016 net profit of oil and gas segment of the BASF group amounted to approximately 2.8 billion euros, EBITDA of 1.6 billion euros and EBIT of around 500 million euros.

L1 was established in 2013 by Mikhail Friedman together with shareholders of “Alfa group” German Khan and Alexei Kuzmichev. The company invests in international projects, fixed capital – $14 billion that the Fund received in 2013 from the sale of its 25% stake in TNK-BP to “Rosneft” .

The Fund has a diversified asset portfolio ranging from technology and healthcare to retail and energy. The Fund bought RWE DEA in 2015 and renamed it then to DEA Deutsche Erdoel. In October it added Norwegian division of E. On to its energy portfolio.

The company now has 128 licenses in eight countries. Production for 2016 of over 50 million barrels of oil equivalent.

In March, German Khan said that L1 intends to invest $5 billion in oil and gas assets. According to him, the Fund intends to focus on acquiring oil and gas assets through two structures. The first one is to invest in Europe, North Africa, Latin America and the second in the United States. In North America Fund is interested projects related to hard-to-excavate reserves, said Mr. Khan.

Wintershall Holding is 100% owned by BASF. Proved hydrocarbon reserves (end 2016) – 1.6 billion barrels of oil equivalent. Hydrocarbon production is 165 million barrels of oil equivalent. The company operates in Argentina, Germany, and the middle East. It also has assets in Russia: JSC Achimgaz (50%) – a joint venture with Gazprom, engaged in the extraction of natural gas and condensate from the Achimov strata of the Urengoy field, and two sites of the Achimov deposits in the Urengoy gas condensate field (of 25.01%).

OJSC “Severneftegazprom” (35%) – a joint venture with “Gazprom” and German Uniper, which owns the license to develop the Yuzhno-Russkoye oil and gas condensate field. OOO “Volgodeminoyl” (50%) – a joint venture with a subsidiary of “LUKOIL”, OJSC “RITEK”, is engaged in oil and gas production in Volgograd region.

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