REG - Harbour Energy PLC - Acquisition of Wintershall Dea asset portfolio

Harbour EnergyAnnouncement

21/12/2023 14:15

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RNS Number : 6502X  Harbour Energy PLC  21 December 2023

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN, INTO OR
FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE
RELEVANT LAWS OF THAT JURISDICTION. THIS ANNOUNCEMENT IS FOR INFORMATION
PURPOSES ONLY AND IS NOT AN OFFER OF SECURITIES IN ANY JURISDICTION.

 

THIS IS AN ANNOUNCEMENT AND NOT A CIRCULAR OR PROSPECTUS OR EQUIVALENT
DOCUMENT AND INVESTORS AND PROSPECTIVE INVESTORS SHOULD NOT MAKE ANY
INVESTMENT DECISION ON THE BASIS OF ITS CONTENTS. A CIRCULAR AND PROSPECTUS IN
RELATION TO THE ACQUISITION DESCRIBED IN THIS ANNOUNCEMENT WILL EACH BE
PUBLISHED IN DUE COURSE.

 

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

 

 

Harbour Energy plc

("Harbour")

Transformational acquisition of Wintershall Dea asset portfolio

21 December 2023

 

 

 §   Transforms scale and geographic diversification
 §   Materially enhances production, reserve life and margins
 §   Increases exposure to natural gas and lowers emissions intensity
 §   Delivers significant financial synergies
 §   Immediately accretive to free cash flow
 §   Enhanced and sustainable shareholder returns

 

Harbour is pleased to announce that it has reached an agreement with BASF
and LetterOne, the shareholders of Wintershall Dea AG ("Wintershall Dea"),
for the acquisition of substantially all of Wintershall Dea's upstream assets
(the "Target Portfolio") for $11.2 billion (the "Acquisition").

 

The Target Portfolio includes all of Wintershall Dea's upstream assets in
Norway, Germany, Denmark 1  (#_edn1) , Argentina, Mexico, Egypt, Libya 2 
(#_edn2) and Algeria as well as Wintershall Dea's CO(2) Capture and Storage
("CCS") licences in Europe. Wintershall Dea's Russian assets are excluded. The
Acquisition will add 1.1 bnboe of 2P reserves at c.$10/boe and more than 300
kboepd of production at c.$35,000/boepd 3  (#_edn3) .

 

The Acquisition is expected to transform Harbour into one of the world's
largest and most geographically diverse independent oil and gas companies,
adding material gas-weighted portfolios in Norway and Argentina and
complementary growth projects in Mexico. Harbour will also benefit from an
increased reserve life and improved margins with lower operating costs and
greenhouse gas ("GHG") intensity.

 

Harbour is expected to receive investment grade credit ratings and to benefit
from a significantly lower cost of financing resulting from the porting of
existing euro denominated Wintershall Dea bonds with a nominal value of c.$4.9
billion 4  (#_edn4) (the "Wintershall Dea Bonds") and a weighted average
coupon of c.1.8 per cent. The Acquisition is also accretive to Harbour's free
cash flow, supporting enhanced and sustainable shareholder returns.

 

Acquisition benefits

The Board of Directors of Harbour believe the Acquisition is a strong
strategic fit, in line with its stated M&A objectives, and offers a
transformational value-creating opportunity for Harbour's shareholders.

The Acquisition:

 

 § Transforms Harbour's scale and geographic diversification
 -      Combined production of over 500 kboepd 5  (#_edn5) and 2P reserves
 of 1.5 bnboe 6  (#_edn6)
 -      Significant production of c.170 kboepd 7  (#_edn7) in Norway with
 additional material positions in Argentina, Egypt and Germany
 -      Combined revenue of $5.1 billion and EBITDAX of $3.7 billion for
 six months to end June 2023

 

 § Adds high quality assets which are accretive to Harbour's reserve life and
 margins
 -      Increases Harbour's 2P reserve life 8  (#_edn8) to c.8 years with
 organic reserve replacement opportunities from c.1.5 bnboe 9  (#_edn9) of
 combined 2C resources
 -      Enhances Harbour's natural gas-weighting with combined natural gas
 production of over 300 kboepd 10  (#_edn10) (c.60 per cent of total
 production)
 -      Materially accretive to margins with lower combined opex 11 
 (#_edn11) of c.$11/boe and exposure to advantaged markets (Brent for oil and
 TTF for European gas)

 

 § Supports Harbour's energy transition goals
 -      Step change in Harbour's GHG emissions intensity, with lower
 combined GHG emissions intensity of c.15 kgCO(2)e/boe 12  (#_edn12)
 -      Strong pipeline of European CCS projects with potential to store
 more than 10 mtpa of CO(2) (net equity share)
 -      Harbour's 2035 Net Zero commitment reaffirmed 13  (#_edn13)

 

 § Significantly enhances Harbour's financial strength
 -      Material financial synergies with porting of existing Wintershall
 Dea Bonds with a nominal value of c.$4.9 billion, a weighted average coupon of
 c.1.8 per cent and weighted average maturity of c.4.5 years
 -      Post completion, Harbour expects to receive investment grade
 credit ratings, increasing its access to low cost, diverse sources of capital
 -      Significantly increases Harbour's per share free cash flow 14 
 (#_edn14)

 

 § Enables enhanced and sustainable shareholder returns framework
 -      Supports an increase in Harbour's annual dividend from $200
 million to c.$455 million, of which c.$380 million will be paid to holders of
 ordinary shares in Harbour ("Ordinary Shares"). This reflects a 5 per cent
 increase in dividend per Ordinary Share to 26.25 cents 15  (#_edn15)
 -      High quality portfolio, free cash flow accretion and significantly
 enhanced financial strength underpin a sustainable increase in the dividend
 -      Potential for additional returns in line with Harbour's existing
 policy

 

Consideration structure

Under the terms of the business combination agreement entered into between
Harbour, BASF and LetterOne (the "BCA"), Harbour will acquire the Target
Portfolio for $11.2 billion comprising:

 

 § The porting of existing Wintershall Dea Bonds with a nominal value of
 c.$4.9 billion and a weighted average coupon of c.1.8 per cent to Harbour

 § Approximately 921.2 million new Harbour shares issued to Wintershall Dea's
 shareholders (the "Consideration Shares") at an agreed value of $4.15 billion
 or 360 pence per Harbour share, representing a premium of c.60 per cent to
 Harbour's 30-day volume weighted average share price of c.227 pence 16 
 (#_edn16) , such that on completion:
 -      BASF, a 72.7 per cent shareholder in Wintershall Dea, will own
 46.5 per cent of Harbour's listed Ordinary Shares with Harbour's current
 shareholders owning 53.5 per cent 17  (#_edn17)
 -      LetterOne, a 27.3 per cent shareholder in Wintershall Dea, will
 own 251.5 million non‐voting, non‐listed convertible ordinary shares with
 preferential rights (the "Non-Voting Shares"). If the Non-Voting Shares were
 to be converted into Ordinary Shares, Harbour's current shareholders would own
 45.5 per cent of Harbour; BASF and LetterOne would own 39.6 per cent and 14.9
 per cent, respectively

 § $2.15 billion of cash consideration to be funded through cash flow
 generated from the Target Portfolio between the effective date of 30 June 2023
 and completion, and an underwritten bridge facility

 

Other key details of the Acquisition

 § Post completion, Harbour will continue to be Chaired by R. Blair Thomas,
 with Linda Z. Cook and Alexander Krane remaining as Chief Executive Officer
 and Chief Financial Officer, respectively

 § All Target Portfolio employees will be transferred to Harbour on
 completion. In addition, Harbour intends to take on some employees from
 Wintershall Dea's corporate headquarters

 § BASF will be entitled to nominate two Non-Executive Directors to the Board
 of Harbour provided BASF holds at least 25 per cent of the Ordinary Shares,
 and one Non-Executive Director in the event BASF holds between 10 and 25 per
 cent

 § BASF's Ordinary Shares will be subject to a six month lock-up following
 completion (subject to customary exceptions). The lock-up arrangements will
 also apply to any Ordinary Shares held by LetterOne in the event LetterOne
 converts its Non-Voting Shares into Ordinary Shares within the period of six
 months from completion

 § LetterOne's Non-Voting Shares are convertible (on a one-for-one basis) into
 Ordinary Shares on the satisfaction of certain conditions, including receipt
 of relevant regulatory approvals (if applicable). In the event of conversion,
 LetterOne will be entitled to equivalent rights as BASF regarding the
 nomination of Non-Executive Directors

 § The dividend payable on each Non-Voting Share will be at a 13 per cent
 premium to any dividend payable in respect of each Ordinary Share, reflecting
 its unlisted nature and limited voting rights

 § LetterOne will not be permitted to acquire any Ordinary Shares for a period
 of six months following completion and, until such date as the conversion
 conditions in respect of the Non-Voting Shares have been satisfied, LetterOne
 will not be able to own more than 19.99 per cent of Harbour's issued share
 capital

 § While LetterOne itself is not a sanctioned entity, certain of LetterOne's
 minority owners are subject to sanctions in the UK, EU and US. As such,
 LetterOne's Non-Voting Shares have no governance rights and, for so long as
 those sanctions remain in place, LetterOne will have no representation on the
 Harbour Board

 § All of Wintershall Dea's assets located in Russia or held in joint ventures
 with Russian companies are excluded from the Acquisition as is Wintershall
 Dea's stake in WIGA Transport Beteiligungs-GmbH & Co. KG

 

 

 

 

Board recommendation and Undertakings

The directors of Harbour have determined that the Acquisition is in the best
interests of Harbour based on a number of factors and intend unanimously to
recommend that shareholders vote in favour of the relevant resolutions at the
shareholder meeting to be held to approve the Acquisition.

 

The directors of Harbour and certain of their connected persons have
irrevocably undertaken that they will vote in favour of the relevant
resolutions required to implement the Acquisition at the shareholder meeting
in respect of their own beneficial holdings of Harbour shares, representing
approximately 1.7 per cent of the existing share capital of Harbour as at 20
December 2023, being the last practicable date prior to publication of this
announcement.

 

EIG Asset Management LLC, EIG Separate Investments (Cayman) LP and Potomac
View Investments, LP have each irrevocably undertaken to vote in favour of the
relevant resolutions required to implement the Acquisition at the Harbour
shareholder meeting in respect of their holdings of Harbour shares,
representing 16.8 per cent of the existing share capital of Harbour as at 20
December 2023, being the last practicable date prior to publication of this
announcement.

 

Conditions to closing

The Acquisition constitutes a reverse takeover for the purposes of the Listing
Rules for Harbour, with the intention that Harbour applies to retain its
premium London listing on completion. Harbour will seek shareholder approval
and re-admission of its Ordinary Shares and admission of the new Ordinary
Shares upon completion to the premium listing segment of the Official List of
the Financial Conduct Authority (the "FCA") (or a listing on the single
category for equity shares in commercial companies if such new listing
category, as contemplated in FCA Consultation Paper CP23/31, has been
implemented by the FCA and taken effect at the relevant time) and to trading
on the main market for listed securities of the London Stock Exchange. Harbour
will, in due course, issue a circular to its shareholders to convene a general
meeting to seek approval of the Acquisition and publish a prospectus.

 

The Acquisition is subject to, amongst other things, regulatory, antitrust and
foreign direct investment approvals, as well as Harbour shareholder approval.
Completion of the Acquisition is expected to occur in Q4 2024.

 

Linda Z Cook, CEO of Harbour, commented:

"Today's announcement marks Harbour's fourth major acquisition and the most
transformational step yet in our journey to build 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 emissions intensity and
expanding our CCS interests into new European markets.

 

"I am proud of what we have achieved so far - a testament to the skill, hard
work and commitment of our people - including our track record of safe and
responsible operations and disciplined capital allocation, which have made
this acquisition possible.

 

"We look forward to completion of the acquisition and welcoming Wintershall
Dea employees to Harbour, and to our further growth as we continue to build a
global independent oil and gas company of the future."

 

 Alexander Krane, CFO of Harbour, commented:

"The acquisition of Wintershall Dea's large scale, high quality portfolio will
transform our asset base as well as our 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 per cent 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 enquiries:

 

 Harbour plc                                           +44 (0) 203 833 2421

 Elizabeth Brooks, Head of Investor Relations
 Brunswick (PR Advisers)                               +44 (0) 207 404 5959

 Patrick Handley

 Will Medvei
 Financial Advisors on the transaction:                +44 (0) 207 623 2323

 Barclays (Joint Financial Adviser and Sole Sponsor)

 Michael Powell

 Ben Plant
 J.P. Morgan Cazenove (Joint Financial Adviser)        +44 (0) 203 493 8000

 James Janoskey

 Daniele Apa
 Harbour Energy corporate brokers:                     +44 (0) 207 623 2323

 Barclays

 Robert Mayhew

 Tom Macdonald
 Jefferies                                             +44 (0) 207 029 8000

 Sam Barnett

 Will Soutar

 

A live audio webcast and conference call for analysts and investors will be
held today at 4.30pm London time. The conference call details can be found on
Harbour's website: www.harbourenergy.com

 

FURTHER INFORMATION ABOUT THE ACQUISITION

Additional funding details

 § The Wintershall Dea Bonds form part of the Target Portfolio to be acquired
 by Harbour and the liabilities in respect of the Wintershall Dea Bonds will be
 assumed by Harbour at completion. Completion of the Acquisition will not
 trigger a change of control (as defined in the relevant terms and conditions)
 or a bond investor put right given Harbour's expected investment grade credit
 rating status.

 § In addition to the underwritten $1.5 billion bridge facility, Harbour has
 secured a new underwritten $3.0 billion unsecured Revolving Credit and Letter
 of Credit Facility to cover its Letter of Credit requirements and to provide
 additional liquidity. This will replace its existing RBL facility.

 § Following completion and conditional upon the average price of Brent oil in
 certain agreed test periods, potential contingent payments of up to a maximum
 of $300 million may be made by Harbour to BASF and LetterOne over the four
 years following completion.

 

Key Conditions to the Acquisition

The Acquisition constitutes a reverse takeover for the purposes of the Listing
Rules for Harbour, with the intention that Harbour will apply to readmit its
Ordinary Shares, and admit the new Ordinary Shares, to listing in London on
completion.

The Acquisition is conditional therefore on, among other things:

 § Harbour shareholder approval at a general meeting convened pursuant to an
 FCA approved circular (the "Circular")

 § Publication of an FCA approved prospectus (the "Prospectus")

 § A Rule 9 Waiver (as defined below) having been granted in respect of BASF
 by the UK Panel on Takeovers and Mergers ("Takeover Panel"), subject to the
 approval of the waiver by the independent shareholders of Harbour

 § FCA and LSE approval of the admission of all new Ordinary Shares
 ("Admission") and re-admission of all existing Ordinary Shares to listing on
 the premium segment of the Official List of the FCA (or a listing on the
 single category for equity shares in commercial companies if such new listing
 category as contemplated in FCA Consultation Paper CP23/31 has been
 implemented by the FCA and taken effect at the relevant time) and to trading
 on the main market of the London Stock Exchange

 § Satisfaction of regulatory, anti-trust and foreign direct investment
 approvals in relevant jurisdictions

 

Shareholder approval

As indicated above, the Acquisition will be conditional on, amongst other
things, approval by Harbour's shareholders. Harbour currently anticipates
posting a shareholder circular to convene a shareholder meeting to approve the
Acquisition in H1 2024. At that shareholder meeting, it is expected that
shareholders will be asked to approve ordinary resolutions (i) consenting to
the issuance of more than 30 per cent of the Ordinary Shares in Harbour to
BASF without triggering a mandatory offer for the purposes of the Takeover
Code (a Takeover Code "Rule 9 Waiver"); (ii) approving the Acquisition for the
purposes of the Listing Rules; (iii) approving the issuance of new Harbour
shares to BASF and LetterOne, as described above; and (iv) certain other
matters required to effect the Acquisition.

 

Rule 9 Waiver

It is anticipated that BASF, as the largest shareholder of Wintershall Dea,
will hold 46.5 per cent(( 18  (#_edn18) )) of the Ordinary Shares of Harbour
post completion. As a result, BASF would ordinarily be required to make a
mandatory offer under Rule 9, however a Rule 9 Waiver will be sought from the
Takeover Panel in order to disapply mandatory offer requirements. This Rule 9
Waiver will require approval by Harbour's independent shareholders at the
general meeting to be convened pursuant to the Circular which will be sent to
shareholders in due course.

 

Relationship agreements

At completion, Harbour will enter into separate relationship agreements (the
form of which has already been agreed) with BASF and LetterOne governing the
relationship between Harbour and each of BASF and LetterOne which will be
effective at Admission (the "BASF Relationship Agreement" and the "LetterOne
Relationship Agreement" respectively and, together, the "Relationship
Agreements"). The principal terms of the Relationship Agreements are referred
to below.

 

BASF Relationship Agreement

In addition to the mandatory undertakings given by BASF required under the UK
Listing Rules and other customary provisions, the BASF Relationship Agreement
will provide that BASF will be entitled to appoint following Admission up to
two Non-Executive Directors and reasonable cooperation and assistance from
Harbour in relation to any offering of Ordinary Shares by BASF.

 

LetterOne Relationship Agreement

The LetterOne Relationship Agreement contains similar provisions to the BASF
Relationship Agreement, except, among other things, certain rights and
obligations of LetterOne, including in relation to the appointment of any
Non-Executive Director, which will only be triggered from the date on which
LetterOne holds 10 per cent or more of the Ordinary Shares.

 

Lock-Up Agreements

At completion, Harbour will enter into separate lock-up agreements with BASF
and LetterOne governing the disposal of shares in Harbour held by BASF and
LetterOne (the "BASF Lock-Up Agreement" and the "LetterOne Lock-Up
Agreement").

 

BASF Lock-Up Agreement

Pursuant to the BASF Lock-Up Agreement, BASF's Ordinary Shares will be subject
to a lock-up for the first six months following completion during which time,
subject to customary exceptions, BASF will not be permitted to sell its
Ordinary Shares.

 

LetterOne Lock-Up Agreement

The LetterOne Lock-Up Agreement contains similar provisions to the "BASF
Lock-Up Agreement". In the event that LetterOne is able to convert its
Non-Voting Shares into Ordinary Shares, such Ordinary Shares will be subject
to a lock-up for the first six months following completion.

 

LetterOne Standstill Agreement

LetterOne will also enter into a standstill agreement (the "LetterOne
Standstill Agreement") with Harbour to be effective on completion pursuant to
which it will undertake:

 

 § Not, subject to customary exceptions, to acquire any Ordinary Shares for a
 period of six months following completion

 § Until such time as the conversion conditions in respect of the Non-Voting
 Shares have been satisfied, not to own more than 19.99 per cent of Harbour's
 issued share capital in total

 

LetterOne may transfer its Non-Voting Shares to certain permitted transferees,
in certain cases only with the consent of Harbour and in accordance with the
terms of the Non-Voting Shares.

 

Key indicative financial Information on Wintershall Dea

Summary IFRS financial information

The unaudited Target Portfolio historical financial information for the year
ended 31 December 2022  and the six months ended 30 June 2023 (together the
"Unaudited Target Portfolio Historical Financial Information") included in
this announcement reflects the historical results of operations and financial
position of the Target Portfolio as if the Target Portfolio had been run
during the relevant periods as a stand-alone business, in conformity with IFRS
and the accounting policies adopted by Wintershall Dea in its own consolidated
Annual Report and Accounts. The Unaudited Target Portfolio Historical
Financial Information does not include the cost of services historically
provided by the headquarters of Wintershall Dea to the Target Portfolio,
however such costs will be reflected in the Prospectus Historical Financial
information (as defined below).

 

Following closing of the Acquisition Wintershall Dea may provide services to
Harbour in connection with the Target Portfolio under a number of service
agreements.

 

The Unaudited Target Portfolio Historical Financial Information has been
prepared in accordance with Wintershall Dea IFRS accounting policies and no
adjustments have been made to align the accounting policies of Wintershall Dea
to those of Harbour. The Unaudited Target Portfolio Historical Financial
Information has been extracted without material adjustments from the
accounting records that underpin Wintershall Dea's 31 December 2022
consolidated Annual Report and Accounts and 30 June 2023 Half Year Results.

 

The accounting records referred to above are presented in EUR, which have been
converted to USD using the Harbour foreign exchange (FX) rates in the tables
below:

 

 IFRS                                           Six months ended 30 June 2023    EUR to USD FX rates 19  (#_edn19)     Six months ended 30 June 2023      Twelve months ended 31 December 2022  EUR to USD FX rates(19)  Twelve months ended 31 December 2022

 Revenue 20  (#_edn20)                          2,878                            1.08                                  3,116                              7,651                                 1.05                     8,030

million EUR
million USD
million EUR
million USD
 EBITDAX 21  (#_edn21)                          2,069                            1.08                                  2,240                              6,002                                 1.05                     6,300

million EUR
million USD
million EUR
million USD
 Operating costs per barrel(( 22  (#_edn22) ))  7.9                              1.08                                  8.6                                7.6                                   1.05                      8.0

EUR/boe
USD/boe
EUR/boe
USD/boe
 Oil and gas reserves 23  (#_edn23)             n/a                              n/a                                   n/a                                n/a                                   n/a                      1,129

million boe
 Production                                     n/a                              n/a                                   317                                n/a                                   n/a                      318

kboepd
kboepd

 

 

In accordance with the Listing Rules, the Circular and Prospectus will contain
Historical Financial Information on the Target Portfolio covering the latest
three financial years (expected to be the years ended 31 December 2023, 2022
and 2021) (the "Prospectus Historical Financial Information") prepared in
accordance with IFRS and will be consistent with Harbour's accounting
policies, adopted in Harbour's Annual Report and Accounts for the year ended
2023, expected to be latest annual consolidated accounts prior to the
publication of the Circular and Prospectus. Such Prospectus Historical
Financial Information on the Target Portfolio contained in the Circular and
Prospectus may therefore differ from the Unaudited Target Portfolio Historical
Financial Information set out above.

 

Harbour has undertaken an initial review to compare Wintershall Dea's
accounting policies to those of Harbour. The following areas are expected to
require alignment when preparing the Prospectus Historical Financial
Information to be included in the Circular and Prospectus but have not been
adjusted in the summary financial information included in this announcement:

 

 a)    Presentational currency - Harbour's presentational currency is the US
 Dollar while Wintershall Dea's presentational currency is the Euro

 b)    Exploration and evaluation expenditure ("E&E") capitalisation -
 There is a difference in some of the E&E costs capitalised by Harbour and
 Wintershall Dea, primarily those relating to seismic survey costs.

Once the technical feasibility and commercial viability of a well are
 demonstrable, Wintershall Dea's license acquisition costs are transferred to
 intangibles and the cost of successful exploration drilling is transferred to
 Property, Plant and Equipment ("PPE"); in Harbour, both cost categories are
 transferred to PPE

 c)    Over-/under-lift positions - Harbour measures over-/under-lift at
 net realisable value using an observable year-end oil or gas market price and
 included within receivables, whereas Wintershall Dea
 values over-/under-lift based on actual production cost. Harbour and
 Wintershall Dea both measure overlift at net realisable value using an
 observable year-end oil or gas market price and is included in payables

 d)    Inventory valuation - Harbour measures all inventories, except for
 petroleum products, at the lower of cost and net realisable value. The cost of
 materials is the purchase cost, determined on a first-in, first-out basis.
 Wintershall Dea uses weighted average cost. Harbour petroleum products are
 measured at net realisable value using an observable year-end oil or gas
 market price, and are included in inventory whereas Wintershall Dea petroleum
 products are measured using weighted average cost and included in inventory

 e)    Finance income and finance cost - Wintershall Dea reports FX gains/
 losses net under finance income or expense whereas Harbour reports them gross
 as income and expense.  Wintershall Dea reports derivative gains/losses net
 under finance income or expense whereas Harbour reports them gross as income
 and expense

 

 

On the basis of Harbour's initial review, and noting that both Wintershall Dea
and Harbour report under IFRS, the accounting policy differences set out above
are unlikely to have a material impact on Wintershall Dea's Unaudited Target
Portfolio Historical Financial Information. Further differences may be
identified upon finalisation of the accounting policy difference exercise in
relation to which Harbour has been unable to assess materiality at this stage.
The Prospectus Historical Financial Information will differ from the Unaudited
Target Portfolio Historical Financial Information in respect of the accounting
policy differences identified above, any other accounting policy differences
identified and the central allocation of historical costs for services
provided by Wintershall Dea to the Target Portfolio.

 

Illustrative post completion unaudited financial information for Harbour

 

The following sets out the illustrative post completion unaudited historical
financial information for Harbour for the periods stated. The historical
financial information below in relation to Harbour has been extracted from
Harbour's Half Year Results for the six months ended 30 June 2023 and Annual
Report and Accounts for the year ended 31 December 2022. The financial
information below in relation to the Target Portfolio has been extracted from
the above table in the Summary IFRS financial information section of this
announcement. The post completion financial information below is a summation
of the Harbour and Wintershall Dea financial information.

 

                                      Six months ended 30 June 2023                                            Twelve months ended 31 December 2022
                                      Harbour               Wintershall Dea       Harbour post completion      Harbour               Wintershall Dea  Harbour post completion
                                      IFRS 24  (#_edn24)    IFRS 25  (#_edn25)    IFRS                         IFRS 26  (#_edn26)
IFRS(25)        IFRS

(A)
(B)
(A+B)
(C)
(D)
(C+D)

 Revenue (USD million)                2,016                 3,116                 5,132                        5,431                 8,030            13,461
 EBITDAX (USD million)                1,428                 2,240                 3,668                        4,011                 6,300            10,311
 Oil and gas reserves (mmboe)         n/a                   n/a                   n/a                          410                   1,129            1,539
 Operating cost per barrel (USD/boe)  15.4                  8.6                   11.2                         13.9                  8                10.3
 Production (kboepd)                  196                   317                   513                          208                   318              526

 

In the above table Revenue, EBITDAX and oil and gas reserves are shown under
the respective company's definitions but for Operating cost per barrel the
Harbour definition has been used for both Harbour and Wintershall Dea (as
summarised in note 21).

 

In accordance with the Listing Rules, the Circular and Prospectus when
published will include Harbour pro forma financial information prepared in
accordance with the requirements of the Prospectus Regulation Rules. Such
information may differ from the illustrative post completion Harbour financial
information set out above.

 

NOTES TO EDITORS

About Harbour

Harbour started as a private company in 2014 and has grown through M&A to
c.200 kboepd. Harbour publicly listed in the UK through a reverse merger with
Premier Oil in 2021.

 

Today, Harbour is the UK's largest oil and gas producer with over 90 per cent
of its production coming from the UK and the balance from its assets in South
East Asia. In addition, Harbour has a portfolio of international growth
opportunities including in Indonesia and Mexico and is progressing two CCS
projects in the UK, including the Harbour-led Viking project, one of the
largest planned CCS projects in the world.

 

Harbour is a premium-listed, FTSE 250 company headquartered in London with
approximately 2,000 staff and contractors across its offshore platforms and
offices. In 2022, Harbour delivered free cash flow of $2.1 billion (post-tax,
pre shareholder distributions) with production of 208 kboepd, split
approximately 50 per cent liquids, 50 per cent gas. Harbour had combined 2P
reserves and 2C resources of 865 mmboe as of December 2022.

 

Further information on Harbour can be found at www.Harbourenergy.com. The
Group's ticker symbol is HBR-GB.

 

About Wintershall Dea

Wintershall Dea is a leading European independent gas and oil company,
headquartered in Kassel and Hamburg, Germany.

 

Wintershall Dea has more than 120 years of experience as an operator and
project partner across the entire E&P value chain. The company with German
roots explores for and produces gas and oil in 11 countries worldwide in an
efficient and responsible manner. With activities in Europe, Latin America and
the MENA region (Middle East & North Africa), Wintershall Dea has a global
upstream portfolio and, with its participation in natural gas transport, is
also active in the midstream business. Furthermore, the company develops
carbon management and low carbon hydrogen projects to contribute to climate
goals and secure energy supplies.

 

As at 30 June 2023, Wintershall Dea had gross assets of $20,156 27  (#_edn27)
million. This does not reflect the gross assets of the defined perimeter of
the Acquisition.

 

BASF

BASF creates chemistry for a sustainable future and combines economic success
with environmental protection and social responsibility. More than 111,000
employees in the BASF Group contribute to the success of customers in nearly
all sectors and almost every country in the world. Its portfolio comprises six
segments: Chemicals, Materials, Industrial Solutions, Surface Technologies,
Nutrition & Care and Agricultural Solutions.

 

BASF generated sales of €87.3 billion in 2022. BASF shares are traded on the
Frankfurt stock exchange (BAS) and as American Depositary Receipts (BASFY) in
the United States.

 

LetterOne

LetterOne is a £20 billion long-term investment business headquartered in
Luxembourg. It supports 125,000 jobs globally in sectors including health,
energy, technology and retail.

 

Target Portfolio

The Target Portfolio consists of Wintershall Dea's non-Russia connected
upstream assets, including producing and development assets as well as
exploration rights in Norway, Argentina, Germany (excluding midstream),
Mexico, Algeria, offshore Libya, Egypt and Denmark (excluding the Ravn field)
as well as Wintershall Dea's CCS licences in Europe.

 

The excluded assets are those located in Russia and those held through joint
ventures with Russian majority state-owned energy corporation Gazprom:
Wintershall Dea Noordzee B.V. (50 per cent Wintershall Dea / 50 per cent
Gazprom(( 28  (#_edn28) )), registered in Rijswijk, The Netherlands),
Wintershall Dea AG (51 per cent Wintershall Dea / 49 per cent Gazprom,
registered in Celle, Germany) and Nord Stream AG (15.5 per cent Wintershall
Dea / 51 per cent Gazprom, registered in Zug, Schweiz). WIGA Transport
Beteiligungs-GmbH & Co. KG (50.02 per cent Wintershall Dea / 49.98 per
cent SEFE, registered in Kassel, Germany) is also not part of the asset
perimeter.

 

The Target Portfolio comprises:

Production of 317 kboepd (65 per cent gas) in H1 2023

Operating costs of c.$9/boe in H1 2023

 

IMPORTANT NOTICE

The information contained in this announcement is for information purposes
only and does not purport to be complete. The information in this announcement
is subject to change.

 

This announcement has been prepared in accordance with English law, the UK
Market Abuse Regulation and the Disclosure Guidance and Transparency Rules and
Listing Rules of the FCA and information disclosed may not be the same as that
which would have been prepared in accordance with the laws of jurisdictions
outside England.

 

No person has been authorised to give any information or make any
representations to shareholders with respect to the Acquisition other than the
information contained in this announcement and, if given or made, such
information or representations must not be relied upon as having been
authorised by or on behalf of Harbour, the Harbour directors, or any other
person involved in the Acquisition. None of the above take any responsibility
or liability for, and can provide no assurance as to the reliability of, other
information that you may be given. Subject to the UK Market Abuse Regulation
and the FCA's Disclosure Guidance and Transparency Rules and Listing Rules,
the delivery of this announcement shall not create any implication that there
has been no change in the affairs of Harbour since the date of this
announcement or that the information in this announcement is correct as at any
time subsequent to its date.

 

Barclays Bank PLC, acting through its Investment Bank ("Barclays"), which is
authorised by the Prudential Regulation Authority and regulated in the UK by
the Financial Conduct Authority and the Prudential Regulation Authority, is
acting exclusively as joint financial adviser and sponsor for Harbour and no
one else in connection with the Acquisition and shall not be responsible to
anyone other than Harbour for providing the protections afforded to clients of
Barclays nor for providing advice in connection with the Acquisition or any
other matter referred to herein.

 

J.P. Morgan Securities plc, which conducts its UK investment banking
activities as J.P. Morgan Cazenove ("J.P. Morgan Cazenove"), and which is
authorised in the United Kingdom by the Prudential Regulation Authority and
regulated in the United Kingdom by the Financial Conduct Authority and the
Prudential Regulation Authority, is acting exclusively as joint financial
adviser for Harbour and no one else in connection with the Acquisition and
shall not be responsible to anyone other than Harbour for providing the
protections afforded to clients of J.P. Morgan Cazenove or its affiliates, nor
for providing advice in connection with the Acquisition or any other matter
referred to herein.

 

The contents of this announcement are not to be construed as legal, business
or tax advice. Each shareholder should consult its own legal adviser,
financial adviser or tax adviser for legal, financial or tax advice
respectively.

 

Percentages in tables have been rounded and accordingly may not add up to 100
per cent. Certain financial data have also been rounded. As a result of this
rounding, the totals of data presented in this press release may vary slightly
from the actual arithmetic totals of such data.

 

Forward-looking statements

Certain statements in this announcement are forward-looking statements. In
some cases, these forward looking statements can be identified by the use of
forward looking terminology including the terms "believes", "expects",
"estimates", "anticipates", "intends", "may", "will" or "should" or in each
case, their negative, or other variations or comparable terminology. These
forward looking statements reflect Harbour's current expectations concerning
future events and speak only as of the date of this announcement. They involve
various risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Harbour Group, the post-completion
Harbour Group, third parties or the industry to be materially different from
any future results, performance or achievements expressed or implied by such
forward looking statements. Such risks, uncertainties and other factors
include, amongst other things, general economic and business conditions,
industry trends, competition, changes in regulation, currency and commodity
price fluctuations, the Harbour Group's or the post-completion Harbour Group's
ability to recover its reserves or develop new reserves and to implement
expansion plans and achieve cost reductions and efficiency measures, changes
in business strategy or development and political and economic uncertainty.
There can be no assurance that the results and events contemplated by these
forward looking statements will in fact occur.

 

No statement in this announcement is intended as a profit forecast or estimate
for any period and no statement in this announcement should be interpreted to
mean that earnings, earnings per share or income, cash flow from operations or
free cash flow for the Harbour Group or the post-completion Harbour Group, as
appropriate, for the current or future years would necessarily match or exceed
the amount set out in any forward-looking statement or historical published
earnings, earnings per share or income, cash flow from operations or free cash
flow for the Harbour Group or the post-completion Harbour Group, as
appropriate.

 

This announcement and the documents required to be published pursuant to Rule
26.1 of the UK Code on Takeovers and Mergers (the "Takeover Code") will be
made available at the relevant time for inspection on Harbour's website at
www.Harbour.com (http://www.Harbour.com) . Neither the content of Harbour's
(or any other website) nor the content of any website accessible from
hyperlinks on Harbour's website (or any other website) is incorporated into,
or forms part of, this announcement.

 

The information contained within this announcement is deemed by Harbour to
constitute inside information for the purposes of Article 7 of Market Abuse
Regulation (EU) No 596/2014 (as it forms part of UK domestic law by virtue of
the European Union (Withdrawal) Act 2018). By the publication of this
announcement via a Regulatory Information Service, this inside information is
now considered to be in the public domain. The person responsible for
arranging for the release of this announcement on behalf of Harbour is Howard
Landes, General Counsel.

 

LEI: 213800YPC42DYBKVPF97

 

 

 

 1  (#_ednref1) Excluding the Ravn field.

 2  (#_ednref2) Excluding Wintershall AG.

 3  (#_ednref3) Production is for the six months to 30 June 2023, as per
management estimates. 2P reserves is based on verified year end 2022 2P
reserves.

 4  (#_ednref4) Average exchange rate of $1.08 over H1 2023.

 5  (#_ednref5) Based on H1 2023 production, as per management estimates.

 6  (#_ednref6) Based on verified year end 2022 2P reserves.

 7  (#_ednref7) Based on H1 2023 production, as per management estimates.

 8  (#_ednref8) Based on year end 2022 2P reserves and average H1 2023
production, as per management estimates.

 9  (#_ednref9) Based on verified year end 2022 2C resources.

 10  (#_ednref10) Based on H1 2023 production, as per management estimates.

 11  (#_ednref11) Direct operating costs (excluding over/under-lift),
including insurance costs, mark to market movements on

emissions hedges and tariff expense, less tariff income, divided by working
interest production.

 12  (#_ednref12) Scope 1 and Scope 2 emissions on a net equity share basis.

 13  (#_ednref13) Scope 1 and 2 emissions on a gross operated basis.

 14  (#_ednref14) Free cash flow is post tax and before distributions.

 15  (#_ednref15) Based on a total expected dividend for 2023 of 25
cents/share (12 cents interim and expected 13 cents final) and 1,440.1 million
Ordinary Shares post-completion.

 16  (#_ednref16) Based on 30 calendar days, as at 20 December 2023.

 17  (#_ednref17) Prior to conversion of the Non-Voting Shares.

 18  (#_ednref18) Prior to conversion of the Non-Voting Shares.

 19  (#_ednref19) Harbour's monthly average exchange rate has been used to
convert Revenue, EBITDAX and Operating costs per barrel.

 20  (#_ednref20) Revenue includes i) oil and gas revenues; ii) other revenues
(including tariff income); and iii) other operating income.

 21  (#_ednref21) EBITDAX comprises earnings before interest, taxes,
depreciation, amortisation and exploration expenses adjusted for special
items. Wintershall and Harbour EBITDAX definitions are not materially
different.

 22  (#_ednref22) Direct operating costs (excluding over/under-lift) for the
period, including insurance costs, mark to market movements on emissions
hedges and tariff expense, less tariff income, divided by working interest
production.

 23  (#_ednref23) Reserves are those quantities of oil and natural gas
anticipated to be commercially recoverable from known accumulations of
hydrocarbons. Wintershall Dea presents proved reserves plus reserves that are
deemed probable to be commercially recoverable.

 24  (#_ednref24) As per Harbour's Half Year Results 2023.

 25  (#_ednref25) As per table on page 8.

 26  (#_ednref26) As per Harbour Annual Report and Accounts 2022.

 27  (#_ednref27) €18,389, using Harbour's 30 June exchange rate of 1.10.

 28  (#_ednref28) As per Wintershall Dea Annual report 2021.

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