Harbour Energy plc has agreed to acquire Wintershall Dea AG’s upstream assets for $11.2 billion.
RESERVES
The German company’s portfolio includes its upstream assets in Norway, Germany, Denmark, Argentina, Mexico, Egypt, Libya and Algeria as well as Wintershall’s CO2 capture and storage licences in Europe.
The transaction, Harbour’s fourth major acquisition, will add 1.1bn boe of 2P reserves at c.$10/boe and more than 300 kboepd of production at c.$35,000/boepd.
Wintershall’s assets in Russia, or held in joint ventures with Russian companies, and its stake in WIGA Transport Beteiligungs-GmbH & Co. are excluded.
Harbour said that the deal would add material gas-weighted portfolios in Norway and Argentina and complementary growth projects in Mexico.
The company reached the acquisition agreement with Wintersahll shareholders, BASF and LetterOne.
On completion, R. Blair Thomas will continue as Harbour chairman, with Linda Z. Cook and Alexander Krane remaining as chief executive officer and chief financial officer, respectively.
All employees in Wintershall’s portfolio, and some from its corporate headquarters, will transfer to Harbour.
BASF will be entitled to nominate two non-executive directors to the Harbour board provided it holds at least 25% of the ordinary shares, or one NED if BASF holds between 10 and 25%.
FUNDING
Harbour chief executive Linda Z Cook said that the acquisition would be the “most transformational” step towards building 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 [greenhouse gas] emissions intensity and expanding our CCS [carbon capture storage] interests into new European markets.”
Chief financial officer Alexander Krane added that Wintershall’s portfolio would also transform Harbour’s capital structure.
“The funding structure we have put together – including the porting of $4.9 billion of low-cost investment grade bonds with a coupon of 1.8% and the issuance of $4.15 billion of equity at a significant premium – will significantly improve our credit rating and deliver a transaction which is accretive on a per share basis across all key metrics.
“This will materially improve our cost of capital and enable access to broader and lower cost sources of funding, supporting further growth and additional shareholder returns.
“The increase to our ordinary dividend per share is a first step in this direction.”
Harbour directors and certain connected people, representing approximately 1.7% of the existing share capital, and EIG Asset Management LLC, EIG Separate Investments (Cayman) LP and Potomac View Investments (16.8%) have irrevocably undertaken to vote in favour of the acquisition.