Wintershall Dea anticipates project deferrals and possible IPO delay

Exclusive: The German company's onshore operations in Libya have completely ceased following the force majeure on exports

Wintershall Dea chief executive Mario Mehren. The company revised its capex for 2020 to between €1.2 billion and €1.5bn. Victor Besa / The National
Wintershall Dea chief executive Mario Mehren. The company revised its capex for 2020 to between €1.2 billion and €1.5bn. Victor Besa / The National

Wintershall Dea, Germany's biggest upstream oil and gas player, expects deferrals of some projects and a possible delay of its initial public offering this year, as the coronavirus pandemic squeezes the energy sector, its chief executive said.

"When it comes to development projects and that's a mixed bag, some are progressing as planned, while others see deferrals because of a lack of materials that are needed," Mario Mehren told The National in an interview.

The company, a subsidiary of the world's largest chemicals company, BASF is "IPO ready" but the planned listing of as much as 30 per cent of the company this year remains uncertain, he said.

"I would assume given the situation we are currently in, in terms of depressed equity markets and also extremely low oil and gas prices, it is difficult to imagine an IPO this year but you never know what's going to happen," Mr Mehren said.

The German company, which merged with DEA, owned by Russia's LetterOne in May 2019 had initially targetted a listing by the second half of the year, possibly in Frankfurt.

Wintershall Dea, which operates a clutch of concessions in places such as Egypt, Russia, Norway, Mexico, the UAE, and Libya is revising its upstream production portfolio in line with global demand for crude.

Crude prices have dropped as much as 80 per cent from their most recent peak in January, while demand has plunged following worldwide lockdowns and social distancing measures to contain the coronavirus outbreak.

Wintershall is considering adjusting its current production target of between 600,000 and 630,000 barrels of oil equivalent per day for 2020.

"It's too early to say now whether this will change or not," said Mr Mehren. The German company will disclose its first-quarter earnings on May 20.

Oil and gas majors in Europe have faced a challenging first quarter as demand for crude crumbled globally. Wintershall Dea was one of the earliest to revise its capital expenditure for 2020, reducing spending by 10 per cent to between €1.2 billion (Dh4.8bn) and €1.5bn.

Wintershall Dea, which had initially targetted raising its global output to 750,000 boepd by 2023 is preparing to revise its targets, keeping some projects on hold.

"For the time being I would not say that it would be 2023 exactly but the growth path that we're on is absolutely ok and the projects in Norway etc are all in the execution phase so time will tell," Mr Mehren said.

Production across its various concessions currently averages 617,000 boepd and has been "stable" so far, he added.

The company is concerned, however, about the situation in Libya, where a force majeure in early January halted export of all production from onshore oil fields.

Output from the North African country has subsequently dwindled to 80,000 barrels per day, with the National Oil Company stating that losses have amounted to $4bn (Dh14.7bn).

Wintershall Dea, which operates across nine oil fields in Libya says production onshore has completely ceased. Its onshore stake in the Al Jurf field is minor and has little impact on the company's overall production figures, Mr Mehren said.

"We are more concerned about the situation in Libya because of our more than 500 employees that we have there and that are obviously facing a severe crisis in terms of economic impact, production impact," he added.

He dismissed the possibility of an exit from the country noting that Wintershall Dea will continue to produce if allowed to do so.

The company, which commemorates one year of its merger with Russia's DEA, will lay off around 1,000 employees across the organisation as part of the integration process. However, there are no additional layoffs related to the pandemic, Mr Mehren said.

The energy company will not seek any aid from the German government, which has sanctioned €750bn to prevent bankruptcies or foreign takeovers in the wake of the pandemic.

Wintershall Dea doesn't plan to tap debt markets this year as it's well-financed, Mr Mehren said.

"We have sufficient working capital lines so, for the time being, I don't feel the need to do any additional refinancing or additional finance," said Mr Mehren.

Published: April 30, 2020 11:42 AM

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