Harbour Energy to buy Wintershall DEA in $11.2bn deal

North Sea giant Harbour Energy (LON: HBR) has unveiled an $11.2bn deal to buy German oil and gas firm Wintershall DEA.

The portfolio covers upstream oil and gas assets in Norway, Germany, Denmark, Argentina, Mexico, Egypt and Libya.

It does not cover any assets in Russia, where Wintershall DEA has a presence but announced it this year it would be exiting.

Harbour Energy, the largest producer in the UK North Sea, has been seeking opportunities outside Britain due to the impact of the windfall tax – which it says “wiped out” profits in 2022 and saw the firm make layoffs.

It follows a flurry of big deals for Harbour Energy, formerly Chrysaor, including packages of assets from Shell, ConocoPhillips, and most recently a reverse takeover of Premier Oil which led to its current iteration after listing in London.

Harbour Energy shares rose 23% on Thursday afternoon (4.35pm) following the Wintershall DEA announcement to 300.49 pence.

© Harbour Energy

Bosses said this move for Wintershall DEA is expected to “transform” Harbour Energy into “one of the world’s largest and most geographically diverse” independent oil and gas firms.

The deal will add 1.1 billion barrels of oil equivalent in reserves (2P) which Harbour said had development costs of $10 per barrel.

The move more than doubles production for Harbour Energy, which totalled 208,000 barrels of oil equivalent per day in 2022, to more than 500,000 boe per day.

It will also boost the gas-weighting of the production portfolio to more than 60%, and improve the combined firm’s emissions intensity.

Harbour’s intensity of production was 21 kg CO2/ barrel in 2022, which will now be 15 kg / barrel.

Completion of the deal, with Wintershall DEA owners BASF and Letter ONE, is expected in Q4 of 2024.

New structure and increased dividend

© Supplied by Wintershall DEA

Harbour Energy chairman R. Blair Thomas, CEO Linda Cook and CFO Alexander Krane will lead the enhanced group.

BASF is expected to nominate directors but LetterONE will have no representatives on the board due to sanctions on their Russian minority owners.

Harbour Energy said it intends to take on employees linked to the assets being acquired, along with “some employees” from Wintershall DEA’s corporate headquarters which is understood to play host to around 800 workers.

The firm will also be able to increase its annual dividend from around $200m to $455m due to the deal, and expects the move to “significantly improve” its credit rating, improving its access to other funding.

The new firm will have combined revenues of $5.1bn and earnings before interest tax depreciation and amoritsation of $3.7bn for the six months to end of June 2023.

Wintershall completed its merger with fellow German firm DEA in 2019, with the combined firm having a particular focus on Norway.

It was reported earlier this year that BASF was seeking an exit from the group, with a sale or IPO considered.

The $11.2bn deal is covered by issuing $4.15bn of equity to Wintershall DEA shareholders, with 921.2m new Harbour shares to be issued, along with assuming existing Wintershall DEA bonds valued at $4.9bn.

Another $2.15bn of the cash consideration will be funded through cash flow from Wintershall DEA’s upstream portfolio.

Fourth major acquisition

CEO Linda Cook said: “Today’s announcement marks Harbour’s fourth major acquisition and the most transformational step yet in our journey to build a uniquely positioned, large-scale, geographically diverse independent oil and gas company.

“The addition of Wintershall Dea’s assets will increase our production to over 500 kboepd, extend our reserves life, and enhance our margins and cash flow, all supporting enhanced shareholder returns over the longer run. Importantly, the acquisition also advances our energy transition objectives by shifting our portfolio towards natural gas, lowering our GHG emissions intensity and expanding our CCS interests into new European markets.

“I am proud of what we have achieved so far – a testament to the skill, hard work and commitment of our people – including our track record of safe and responsible operations and disciplined capital allocation, which have made this acquisition possible.

“We look forward to completion of the acquisition and welcoming Wintershall Dea employees to Harbour, and to our further growth as we continue to build a global independent oil and gas company of the future.”