Wintershall reports over 1b euro profit fourth year in a row

Abu Dhabi: Wintershall made a profit of more than one billion euros in 2014, for the fourth year in a row. The net income after taxes and minority interests was 1.464 billion euros (2013: 1.730).

“Despite the low oil price, especially in the fourth quarter, in 2014 we achieved the second-best result in the company’s history,” the Wintershall Chairman of the Executive Board, Rainer Seele. The income from operations before special items (EBIT) remained at a high level of 1.795 billion euros (2013: 1.856). Despite several months of interruptions to production in Libya, Wintershall managed to increase the oil and gas production to 136 million boe (2013: 132). The higher volumes, especially in Russia and Norway, were only partially able, however, to compensate for the lower prices.

The good result in 2014 was delivered by a diversified portfolio in comparison with competitors, low costs for production and reserves replenishment, as well as by a focus on attractive technology and exploration projects. “This enables us to make significant contributions to the results of the BASF Group even when the oil price is low,” Seele, said.

Wintershall has been active in Argentina for 37 years and has working interests in 15 onshore and offshore fields altogether. Argentina is estimated to have the second-largest shale gas and fourth-largest shale oil deposits in the world. Since 2014 Wintershall has held a 50 percent share in the Aguada Federal block in the Neuquén province (central Argentina) and is the operator here. Together with the local state-owned energy company Gas y Petróleo del Neuquén S.A. (GyP), Wintershall intends to investigate the block and possibly develop it further. Wintershall launched the first vertical exploration well in the block in March 2015. The launch of a second exploration well is also planned for 2015. The shale rock of the Vaca Muerta formation is being developed in the 97-square-kilometer block. In addition, Wintershall is working on the development of the new natural gas field, Vega Pleyade, in the Argentinean Sea off the coast of Tierra del Fuego together with Total and Pan American Energy (PAE). New production wells have also been sunk in the neighboring Carina field since May 2014, which should allow production to be increased short-term.

In Libya Wintershall is the operator of eight oil fields in the onshore concessions 96 and 97. Owing to external influences, in particular the partially interrupted export-infrastructure, onshore crude oil production in Libya was suspended for sustained periods during 2014. Since February 2015 the company has been producing 30,000 barrels of oil a day again. However, the crude oil field Al Jurf off the coast of Libya, in which Wintershall holds a share, was operated continuously throughout this time.

About 50 percent of all the world’s oil and gas reserves are located in the Middle East. No other region has comparable potential. Hence, the Middle East plays an increasingly important role in Wintershall’s diversified portfolio. In May 2014, Wintershall began with its first own-operated exploration well for the development of the Shuwaihat sour gas and condensate field in Abu Dhabi. The state-run oil company of Abu Dhabi, ADNOC, and the Austrian oil and gas company OMV are also participating in the project. The markets in the Middle East demand the flexibility of the Wintershall experts, their extensive experience and cutting-edge technological expertise for difficult geological conditions. Wintershall brings its know-how in the production of sour gas to the Shuwaihat project, for example. The company has been producing sour gas in Germany for more than 40 years.

The company now aims to continue raising the production of oil and gas to 190 million boe by 2018. “Wintershall pursues promising projects,” Seele added.

That includes the ongoing development of the Achimgaz project in Siberia, the Norwegian fields Edvard Grieg, Maria and Aasta Hansteen, as well as the gas project Vega Pleyade off the Argentinean coast at Tierra del Fuego. Wintershall plans to start increasing production as soon as 2015.

“Future performance demands continuous investments and innovation,” Seele, said.

“Wintershall will invest at least four billion euros in expanding its oil and gas activities during the next five years, in particular in Norway, Argentina and Russia. The strategy remains the same: we want to achieve more profitable growth at the source and continue our focused diversification,” he said, however, he added, these must be weighed up carefully and be well-balanced.

In 2014 Wintershall established an excellent foundation for its further growth: the company has been particularly successful in its search for new crude oil and natural gas reservoirs. From a total of 21 (2013: 20) exploration and appraisal wells, 16 (2013: 8) discovered oil and gas deposits – in Russia, the Netherlands, Norway and Argentina. Wintershall also recorded growth with the proven crude oil and natural gas reserves. These rose 17 percent on the 2013 year-end figure to 1.7 billion boe. The quantities produced in 2014 were replenished by a factor of 284 percent. The total reserve-to-production ratio, which is based on Wintershall’s share of production in 2014 and refers to the reserves at year end, is around 13 years (2013: 11).

Particularly pioneering is the research project for the biopolymer Schizophyllan, which Wintershall is working on together with BASF and which is attracting a great deal of attention internationally. This biopolymer, which is produced by a fungus that grows in Germany, thickens the water that is injected into the reservoir to enhance oil production. Experts believe this will enable mature oil fields to be exploited effectively and in an environmentally safe manner. Wintershall continued its field test with the biopolymer Schizophyllan in the North German oil field Bockstedt in 2014. “We are very satisfied with the progress of the field test so far. We are producing considerably more from our test well,” confirms Seele. The data we have gathered will now be evaluated further and the field test extended. “We don’t just want to produce more; we also want to know more first,” says Seele. In addition, Wintershall is working on other innovations to improve the oil recovery.

Oil and gas will also continue to make significant contribution to meeting the increasing energy needs of the growing world population in the future. Wintershall is investing in the exploration and production of oil and gas, particularly in the core regions of Europe, North Africa, Russia, South America, and increasingly the Middle East region.

Around 55 percent of the natural gas required in the European Union is still produced in the North Sea and the countries bordering it. The domestic North Sea is therefore an important and secure source for Europe’s energy beyond 2020.

Norway is a core region for future growth for Wintershall. The company has expanded its activities in the country significantly in recent years. With over 50 licenses – more than half of these as operator – Wintershall is already one of the major license holders in Norway. At the same time, Wintershall’s successful exploration portfolio is progressing further to the development and production phase. During the last few years it has already expanded its daily production from 3,000 to 60,000 boe. A key component of these increased activities is the partnership with the Norwegian company Statoil. Wintershall received shares in the producing fields Brage, Vega and Gjøa as part of two transactions. In addition, Wintershall also acquired a stake in the Aasta Hansteen development project, the Asterix discovery and the Polarled pipeline project. Brage also represents Wintershall’s first operatorship of a large production platform in Norway. The company has also been the operator of the Vega production field since March 2015.

In Germany Wintershall demonstrates how to produce profitably under challenging conditions. Owing to very complex geological conditions, production in Germany is technologically demanding. This makes domestic production a source of innovation for new technologies for Wintershall, which can then be deployed in international projects. The research and development activities mainly focus on improving the discovery rate of oil and gas reservoirs, developing technologies for reservoirs with difficult development and production conditions, and on increasing the yield from reservoirs (Enhanced Oil Recovery – EOR). The best example is in Emlichheim, where Wintershall has been producing at plateau for 65 years with the steam flooding technique. Wintershall is currently investigating old oil reservoirs in Germany that were abandoned 20 years ago (when the oil price was between 10 and 20 US dollars).

“Production in Germany contributes to securing energy supplies,” Seele, said.

“About 11 percent of demand in Germany is currently covered from domestic reservoirs. Before diversifying import deliveries and looking to far-away countries, domestic resources should be exploited intelligently, he adds. “Crude oil and natural gas production in Germany must not be endangered due to confusion between tight and shale gas as well as a result of inaccurate and uninformed discussions,” Seele said.

“Business needs a reliable regulatory framework, a timeframe and planning certainty, especially for the future use of fracking technology in Germany – while of course observing Germany’s stringent safety and environmental standards. “The current draft legislation is a good starting point, but could place a disproportionately high burden on the industry.”

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