Wintershall raises oil and gas production again

• Earnings in 2015 significantly below previous year owing to price developments
• High production target for 2018 remains unchanged
• Further developments in UAE and the ME
• Expenditure will decrease considerably in 2016

Abu Dhabi, 7 April 2016. Wintershall made a profit of more than 1 billion euros in 2015 for the fifth year in a row - despite the challenging economic environment. Earnings after taxes and minority interests totaled 1.050 billion euros (2014: 1.464). “Despite the major fall in the oil and gas prices compared to 2014,in 2015 once again we proved Wintershall’s competitiveness and robustness, ”the Wintershall Chairman of the Board of Executive Directors, Mario Mehren, said at the company’s Annual Press Conference in Kassel.

Sales to third parties fell to12.998billion euros (2014: 15.145). This was primarily attributable to the asset swap with Russian company Gazprom executed at the end of September 2015;the consequence of which was the loss of contributions to earnings from the gas trading and storage business and from Wintershall Noordzee B.V. in the fourth quarter of 2015. EBIT before special items declined as a result of decreasing sales to1.366billion euros (2014: 1.795). Special charges totaled 636 million euros; these arose predominantly from impairments on exploration and production projects and on goodwill as a result of our reduced oil and gas price assumptions. Special income of 342 million euros, particularly form the asset swap with Gazprom, was only partly able to compensate for this. The price for the benchmark Brent crude oil fell by 47 percenton2014 to 52 dollars/barrel. The price for gas on the Northwest European spot markets decreased by 21 percent to 6.51 dollars/mmBtu(2014: 8.23) compared to 2014.

“We have a well diversified portfolio with low production and reserve replacement costs, especially in Russia and Argentina, compared to our competitors. This enables us to make a positive contribution to the earnings of the BASF Group, even with the low oil price,”Mehren commented. However, the current year remained challenging, the Wintershall CEO said, and could not be compared with 2015: “Volatility at low prices has become the new norm. We have to live with the low oil and gas prices and we cannot fully compensate for these by raising production. Hence, strict cost management, the reduction of investments, focused innovation and operational excellence are crucial now.”

Further developments in UAE and the ME
About 50 percent of the world’s oil and gas reserves are found in the Middle Eastregion. No other region has comparable potential. The Middle East region is playing an increasingly important role in Wintershall’s activities. The company has completed the first Wintershall-operated exploration well to develop the Shuwaihat sour gas and condensate field in Abu Dhabi and preparations for a second offshore exploration well are underway. The final processed data from the first exploration well is expected by end of April 2016. Based on the interpretation of this data a new subsurface model will be generated that captures the distribution of the hydrocarbon fill of the Shuwaihat Field more accurate and will help placing future developments wells in an optimal way. Regarding the second exploration well Wintershall is specially skilled for this kind of offshore operations as it provides a lot of experience drilling wells in shallow water and developing it economically. Other partners in the project are the state-run oil company of Abu Dhabi, ADNOC, and the Austrian oil and gas company OMV. The flexibility of the Wintershall specialists, their many years of experience and their cutting-edge technological expertise in difficult geological conditions are crucial for the markets in the Middle East. Wintershall, for instance, brings its know-how in sour gas production to the Shuwaihat project: the company has namely been producing sour gas in Germany for over 40 years. Additionally, Wintershall has deepened its partnership with ADNOC: a declaration of intent on joint research into Enhanced Oil Recovery (EOR) methods was signed in November 2015.

In Libya Wintershall operates eight oil fields in the onshore concessions 96 und 97 together with Gazprom and is the operator of these fields. Onshore oil production in Libya had to be suspended for prolonged periods in 2015 due to the intermittent availability of the export infrastructure. However, it was possible to operate uninterrupted from the Al Jurf crude oil field off the coast of Libya, in which Wintershall holds a share. 

Oil and gas production stepped up significantly
Wintershall was able to raise oil and gas production significantly, by 13 percent to 153 million barrels of oil equivalent (boe) (2014: 136). The higher volumes came primarily from Norway and the Achimgaz joint operation in Russia. In Libya Wintershall was able to produce from onshore concession 96 for a total of 125 days from February to May and from September to the beginning of November 2015despite the difficult political circumstances, even though on a low level. The production trend in Germany continued in the opposite direction, with the key driving factors being the natural decline in production and the authorization gridlock for fracking plans in conventional reserves that has now persisted for more than five years.

Wintershall intends to continue raising oil and gas production in the coming years to 190 million boe in 2018,mostly via the further development of the Achimgaz project in Siberia, the company’s Norwegian activities as well as the Vega Pléyade gas project in Tierra del Fuegooff the coast of Argentina, which commenced production in February 2016.

“Wintershall will do both in the coming years: save and invest. That is not a contradiction in terms,” Mehren explained at the press conference. On the one hand, the company will reduce its outgoings considerably in 2016. To do so, ongoing operating costs will be further optimized, and expenditure on exploration, development and technology, especially in countries with high costs, will be reduced. This means the number of exploration wells in the current year will fall. The savings potential of the cost-cutting measures planned in 2016 is up to 200 million euros.

On the other hand, Wintershall will keep investing in selected projects, especially in regions with favorable production conditions such as Argentina and Russia. The company plans to invest4.8 billion euros overall in the next five years in expanding its oil and gas activities. Investments of1billion euros have been earmarked for 2016, which represents a significant reduction on last year(2015: 1.4). “We will continue laying the foundations for our future production growth, invest in infrastructure, and above all efficiency. But we have to weigh up the investments very carefully, ”the Wintershall CEO said. Hence, individual development projects such as the Norwegian oil field Skarfjell and expanding production from the Wingate field will be postponed and further optimized; shale oil and gas projects in Argentina will be developed more slowly.

Successful exploration - new oil and gas fields discovered
Wintershall created a strong basis for further growth with its success rate in finding new crude oil and natural gas reservoirsin 2015. 17 exploration and appraisal wells (2014: 16) out of 25 (2014: 21) discovered hydrocarbons. Wintershall also recorded growth in its provencrude oil and natural gas reserves. These increased by 2percent on the 2014 year-end figure to 1.744billion boe. The quantities produced in 2015 were replenished by a factor of 123 percent. The total reserve-to-production ratio, which is based on Wintershall’s share of production in 2015 and refers to the reserves at year-end, is 11 years (2014: 13). In addition, Wintershall is working on additional innovative applications for enhanced oil recovery, which are increasingly sought after by national oil companies (NOCs).

Outlook 2016
“Our planning for 2016 is based on an average oil price for Brent crude oilof40 US dollarsperbarrel and an exchange rate of1.10 US dollarspereuro,”Mehren said: “Gas prices are likely to fallwell below the level in 2015 on average. We expect our production to be increased, but a significant fall in sales and EBIT before special items compared to 2015.”The lower prices for oil and gas as well as the divestment of the gas trading and storage business arethe main drivers of this. In addition, Wintershall will generate less sales and earnings from its stake in theYuzhno Russkoye natural gas field because the additional amounts procured in the last tenyears will be balanced out in 2016 - as contractually agreed. Despite the difficult framework conditions, Wintershall would continue to make a positive contribution to the result of the BASF Group, Mehren concluded.

Forward-looking statements and forecasts
This report contains forward-looking statements based on current expectations, assumptions and forecasts by the board of executive directors, as well as on the information currently available to that board. Forward-looking statements are not deemed to be guarantees of the future developments and results set out therein. Future developments and results are in fact dependent on a large number of factors; they contain different risks and imponderables and are based on assumptions that may not be accurate. We do not assume any obligation to update the forward-looking statements made in this document.

Wintershall Holding GmbH, based in Kassel, Germany, is a wholly-owned subsidiary of BASF in Ludwigshafen. The company has been active in the extraction of natural resources for 120 years, and in the exploration and production of crude oil and natural gas for over 80 years. Wintershall focuses on selected core regions where the company has built up a high level of regional and technological expertise. These are Europe, Russia, North Africa, South America, and increasingly the Middle East region. The company wants to expand its business further with exploration and production, selected partnerships, innovation and technological competence. Wintershall employs about 2,000 staff worldwide from 40 nations and is now Germany’s largest, internationally active crude oil and natural gas producer.

Wintershall. Shaping the future.