- Deal with BASF-owned group will add 300,000boepd to production
- Cash, share and debt-funded acquisition
North Sea oil and gas producer Harbour Energy (HBR) will expand significantly through a $6.3bn (£5bn) acquisition of Wintershall Dea, majority owned by chemicals giant BASF (DE:BAS).
The combined company’s output will reach 500,000 barrels of oil equivalent per day (boepd) with 300,000boepd from Wintershall, largely in Norway. The acquisition agreement also includes taking on $4.9bn in bonds, taking the total to $11bn. Harbour will pay $2.15bn in cash and BASF will become 47 per cent shareholder of Harbour through the deal, holding 921mn in newly issued shares of the combined entity. The share issue will be at 360p a share, a 50 per cent premium on Thursday's opening price.
Wintershall is also part-owned by LetterOne, which was co-founded by sanctioned businessman German Khan. He lost a court challenge to EU sanctions last month. Harbour is not taking the company's Russian joint venture assets, but LetterOne will receive 251mn non-voting shares in the deal. If these are converted to ordinary shares, it will hold 15 per cent of the bigger company, while BASF will hold 40 per cent.
Harbour management has said the North Sea windfall tax had made investing in the UK less attractive, and promised a shift overseas. Norway has higher taxes than the UK, but analysts have said the more stable operating environment was a positive. Harbour’s reserves have been in decline and the company was under pressure to find a long-term solution.
Harbour’s shares climbed a fifth on the announcement, taking the company into growth territory for its shares year-to-date.
This deal would make Harbour “one of the world’s largest and most geographically diverse independent oil and gas companies”, it said. “The addition of Wintershall Dea’s assets will increase our production to over 500,000boepd, extend our reserves life, and enhance our margins and cash flow, all supporting enhanced shareholder returns over the longer run,” added chief executive Linda Cook.
The deal is expected to take around a year to complete. Peel Hunt analysts Werner Riding and Matt Cooper said the deal had addressed Harbour’s “growth problem”. “The benefits are clear: increased scale/liquidity, enhanced reserve life, reduced carbon intensity on a unit basis, and with clear geographic synergies and new areas to bring numerous reinvestment opportunities,” they said.
