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BASF Roundtable Oil and Gas September 2013

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BASF Investor Roundtable Oil and Gas September 13, 2013. Presentation by Dr. Rainer Seele, CEO Wintershall and President BASF Oil & Gas Division

BASF Investor Roundtable Oil and Gas September 13, 2013. Presentation by Dr. Rainer Seele, CEO Wintershall and President BASF Oil & Gas Division

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  • 1. Investor Roundtable Oil & Gas Dr. Rainer Seele CEO Wintershall and President BASF Oil & Gas Division September 13, 2013
  • 2. BASF Oil & Gas, September 2013 2 This presentation may contain forward-looking statements that are subject to risks and uncertainties, including those pertaining to the anticipated benefits to be realized from the proposals described herein. Forward-looking statements may include, in particular, statements about future events, future financial performance, plans, strategies, expectations, prospects, competitive environment, regulation and supply and demand. BASF has based these forward-looking statements on its views and assumptions with respect to future events and financial performance. Actual financial performance could differ materially from that projected in the forward-looking statements due to the inherent uncertainty of estimates, forecasts and projections, and financial performance may be better or worse than anticipated. Given these uncertainties, readers should not put undue reliance on any forward-looking statements. The information contained in this presentation is subject to change without notice and BASF does not undertake any duty to update the forward- looking statements, and the estimates and assumptions associated with them, except to the extent required by applicable laws and regulations. Cautionary note regarding forward-looking statements
  • 3. BASF Oil & Gas, September 2013 33 1 | Overview & Strategy 2 | Exploration & Production 3 | Gas Transport 4 | Summary & Outlook
  • 4. BASF Oil & Gas, September 2013 * Restated, figures for 2012 adjusted to changes in IFRS and new segment structure effective Jan. 1, 2013 Not depicted here: ~5% of BASFGroup sales reported under ‘Other‘ 4 Overview & Strategy BASF today – A well balanced portfolio Sales by segment 2012* (percent)
  • 5. BASF Oil & Gas, September 2013 Overview & Strategy Oil & Gas – Significant advantages for BASF Group 5 Technological synergies through BASF Research Verbund Significant cash flow and stable earnings Strong contributor to BASF’s profitable growth Hydrocarbon hedge
  • 6. BASF Oil & Gas, September 2013 Overview & Strategy Oil & Gas – Continuous production growth 6 104 109 112 111 112 130 136 133 113 144 126 66 0 25 50 75 100 125 150 175 200 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2012 2013 1HY Production* (million boe) restated*** * Since November 2011 including Achimgaz ** Oil production in Libya suspended from February to October 2011 *** Restated, figures for 2012 adjusted to changes in IFRS **
  • 7. BASF Oil & Gas, September 2013 Overview & Strategy Strong earnings contribution from Oil & Gas 7 433 480 601 857 789 951 712 923 1.064 1.201 677 0 300 600 900 1.200 1.500 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 1HY Net income Oil & Gas (million €)
  • 8. BASF Oil & Gas, September 2013 Overview & Strategy Oil & Gas – Strong free cash flow contribution to BASF Group 8 0 500 1.000 1.500 2.000 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 1HY Cash flow Oil & Gas* (million €) Operating cash flow Oil & Gas * Wintershall cash flow, not BASF Group consolidated view ** Free cash flow: Operating cash flow less payments related to property, plant and equipment and intangible assets Free cash flow** Oil & Gas ∼45% of operating cash flow delivered to BASF Group (Avg. 2003-2012)
  • 9. BASF Oil & Gas, September 2013 2008 2012  2008-2012: – Oil & Gas: Solid profit contributor to BASF Group – Oil & Gas accounted for 30% of BASF Group capex  EBITDA share of Oil & Gas in BASF‘s portfolio expected to remain in the same order of magnitude in the upcoming years  Capex share of Oil & Gas business in BASF portfolio will slightly decline Key facts * Excluding non-deductible oil taxes **Fixed assets, tangible assets from acquisitions, activated exploration expenditures Average EBITDA* 2008-2012 (€ billion) Cumulative capex (plant, property, equipment) (€ billion) BASF Group w/o Oil & Gas 7.0 (76%) BASF Group w/o Oil & Gas 12.3 (70%) Oil & Gas 2.2 (24%) Oil & Gas 5.2** (30%) 2008 2012 - - 9 Overview & Strategy Share of Oil & Gas in BASF portfolio
  • 10. BASF Oil & Gas, September 2013 Overview & Strategy Oil & Gas provides earnings stability 10 0 1.000 2.000 3.000 4.000 5.000 6.000 7.000 8.000 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 EBIT before special items BASF Group* (million €) Excluding non-compensable taxes on oil production * Excluding non-compensable taxes on oil production EBIT bSI* Oil & Gas EBIT bSI BASF Group w/o Oil & Gas 2012 (restated)
  • 11. BASF Oil & Gas, September 2013 11 BASF R&D Verbund Overview & Strategy Adding value as One Company – Leveraging BASF’s Research Verbund * EOR: Enhanced Oil RecoveryBASF Oil & Gas, September 2013
  • 12. BASF Oil & Gas, September 2013 Polymer injector Production well Overview & Strategy Enhanced oil recovery – Schizophyllan BASF’s proprietary technology 12  Schizophyllan – proprietary biopolymer  Produced by a fungus in pilot scale plant at BASF  General principle: – Polymer added to injection water, which then becomes more viscous – Remaining oil is then more effectively pushed towards production well – Increased incremental oil recovery of up to 10% on waterflooding Key facts BASF Oil & Gas, September 2013
  • 13. BASF Oil & Gas, September 2013 Overview & Strategy Oil & Gas – Focus on upstream activities 13 Oil & Gas Value Chain Upstream Downstream Exploration / Development / Production Transport Storage / Trading Upstream
  • 14. BASF Oil & Gas, September 2013 14 Natural Gas Focus Oil & Gas business on attractive E&P activities1 Exit natural gas storage and trading business 3 Overview & Strategy Active portfolio management – Focus on profitable upstream activities 2 Harvest gas transport business Exploration / Development / Production Upstream Natural Gas Storage / TradingTransport
  • 15. BASF Oil & Gas, September 2013 1515 1 | Overview & Strategy 2 | Exploration & Production 3 | Gas Transport 4 | Summary & Outlook
  • 16. BASF Oil & Gas, September 2013 Exploration & Production BASF Oil & Gas – Key facts >80years of experience in E&P 16 partnerships(e.g. Gazprom, Statoil) Strong expertise Technological focus Clear (e.g. core regions) BASF Oil & Gas, September 2013
  • 17. BASF Oil & Gas, September 2013 Exploration & Production BASF Oil & Gas – Key facts 2012 Production million boe (2012 restated)126 Reserves and resources 1.2billion boe proved (1P) reserves 1.7billion boe discovered resources 9years reserves/ production ratio 17BASF Oil & Gas, September 2013
  • 18. BASF Oil & Gas, September 2013 Exploration & Production Oil & Gas – Clear strategy for further profitable growth 18 ”Growing at the source”  E&P  Core regions  Low risk exploration Focus Technology Partnerships  BASF Research Verbund  EOR  Strategic partnerships with regional resource holders Long-term profitable growth
  • 19. BASF Oil & Gas, September 2013 19 Core region Development region Operating company / production Representative office Current activities Current activities in development region South America North Africa Europe Russia Caspian Sea Region Middle East . Exploration & Production Clear regional focus: Four core regions and two development regions
  • 20. BASF Oil & Gas, September 2013 Exploration & Production Exploration & Production – Regional footprint 2012 (1) 20  Russia stands for roughly 50% of total production  In 2012, natural gas accounted for approx. 75% of total production Production  Russia provides strong reserve base  Gas accounts for roughly 75% of total reserves Reserves Russia/ Caspian Sea 47% North Africa/ Middle East 16% Europe 16% South America 21% 126 million boe North Africa/ Middle East 12% Europe 11% South America 18% Proved 1P reserves by region 2012 (million boe) 1.2 billion boe * Restated, figures for 2012 adjusted to changes in IFRS; Libya onshore 51% Russia/ Caspian Sea 59% Production by region 2012 (million boe)*
  • 21. BASF Oil & Gas, September 2013  Europe account for more than 50% of sales Sales  Russia is strongest earnings contributor, including at-equity income of €109 million, mainly from Yuzhno Russkoye Net income Exploration & Production Exploration & Production – Regional footprint 2012 (2) 21 Europe 22% Net income E&P by region 2012 (million €) South America 8% North Africa/ Middle East 10% Sales E&P by region* 2012 (million €) North Africa/ Middle East 5% Europe 55% South America 15% €2.6 billion €983 million Russia/ Caspian Sea 60% Russia/ Caspian Sea 25% * Restated, figures for 2012 adjusted to changes in IFRS; Libya onshore accounted for at-equity
  • 22. BASF Oil & Gas, September 2013  2015 target maintained despite restatement (Effect: -18 million boe in 2012)  Continue to significantly invest in core and development regions  E&P Capex 2013-2015 ~€2.0 billion** – Russia/Caspian Sea ~€0.5 billion – Europe ~€1.2 billion – South America and Middle East ~€0.3 billion Exploration & Production Oil & Gas – Excellent further growth opportunities 22 Production volumes (million boe)* 0 50 100 150 200 2012* 2015 target >160 126 Russia South America North Africa/Middle East Europe * Restated, figures for 2012 adjusted to changes in IFRS; 2012 reported: 144 million boe ** Without capex in financial participations Key Facts
  • 23. BASF Oil & Gas, September 2013 1. 2. 3. 4. Russia Further expand gas and condensate production in Western Siberia Exploration & Production Key initiatives for further profitable growth Europe Develop discoveries to production, with particular focus on Norway South America Realize resource potential in Argentina Middle East Apply technology and develop to core region 23
  • 24. BASF Oil & Gas, September 2013 24 Global natural gas reserves (trillion m³)* 0 5 10 15 Average acquisition cost per 2P reserves ($/boe)**  Russia has largest natural gas reserves and resources worldwide  Proximity to European market  Comparably low development cost for 2P reserves Russia 24% 195 trillion m³ * Source: BGR 2012 ** Source: Herold Global Upstream M+A Review 2013 Russia/ CIS Africa/ Middle East Asia Pacific Latin America United States Europe Canada Exploration & Production Russia – ¼ of global natural gas resources, attractive reserve cost
  • 25. BASF Oil & Gas, September 2013 Exploration & Production BASF Oil & Gas – Unique partnership with Gazprom for more than 20 years 25 Balance of interests trust & respect – complementary interests – promise & deliver
  • 26. BASF Oil & Gas, September 2013 Exploration & Production Russia – Building on the unique partnership with Gazprom 26 25 billion m3 p.a.* plateau production 8 billion m3 p.a.* by 2018 plateau production up to >8billion m3 p.a.* plateau production Yuzhno Russkoye Maintain level for 10 years Achimgaz Further development Block IA Achimov Blocks IV & V Start joint development * Russian Standard Conditions (RSC) ** Equals ~300,000 boe/d million boe p.a. by 2018**~110 Production growth in Russia
  • 27. BASF Oil & Gas, September 2013 Exploration & Production Russia – Asset swap with Gazprom (Achimov Blocks IV and V) 27  Expansion of successful partnership with Gazprom  Strengthening of E&P activities by acquiring shares in Blocks IV and V in the huge Achimov formation  Exit of natural gas trading and storage business by transferring Wintershall shares to Gazprom  Transaction financially retroactive to April 1, 2013. Closing is subject to approval by the relevant authorities.  Key field data: – Total resources: 2.4 billion boe – Plateau production: >8 billion cubic meters natural gas* – Production start: 2016 planned – Wintershall share: 25% plus one share * Russian Standard Conditions (RSC)
  • 28. BASF Oil & Gas, September 2013  Natural gas pricing related to European gas prices and Russian domestic gas prices – Limited oil price exposure  Gas production sold according to long-term contracts – Low physical sales risks  Long-term production upsides due to huge proven undeveloped reserves in Russia Exploration & Production Oil & Gas – Strong returns from Russia 28 Net income (€/boe)* 0 25 50 75 100 0 5 10 15 2008 2009 2010 2011 2012 * Source: BASF Report Key FactsOil price (€/barrel) Net income per boe from activities in Russia Oil price
  • 29. BASF Oil & Gas, September 2013 Exploration & Production Europe – Building on significant growth opportunities in the North Sea 40,000boepd in 2013 Norway Increase production from 3,000 to profits Germany Strong ∼240 licenses Strong project pipeline expertise The Netherlands Center of excellence for offshore 29BASF Oil & Gas, September 2013
  • 30. BASF Oil & Gas, September 2013 30  Revus acquisition provided the basis for our growth in the northern North Sea – Successful build-up of a new operating company  Participation in various promising oil discoveries, e.g. – Maria ∼60-120 million boe – Skarfjell ∼60-160 million boe – Knarr ∼85 million boe – Edvard Grieg ∼185 million boe  65% of Revus exploration resources (2008: ∼400 million boe) already discovered  Balanced exploration portfolio – Exploration licenses: >50 (more than half with operatorship) Exploration & Production Revus acquisition pays off
  • 31. BASF Oil & Gas, September 2013 Exploration & Production Excellent growth opportunities in the northern North Sea 31 Edvard Grieg  15% share (-15% out)  Lundin* Brage  32.7% share  Wintershall to be operator as of Oct. 1, 2013 Gjøa  15% share  GDF Suez* Bergen Assets In Asset Out Existing Assets Astero  25% share  Statoil* Vega  30% share  Statoil* * Operator Broom  29% share  EnQuest* Knarr  20% share  BG* Grosbeak  45% share  Wintershall* Skarfjell  35% share  Wintershall* Maria  50% share  Wintershall* Crathes/ Scolty  50% share  EnQuest* Catcher  20% share  Premier* Cladhan  33.5% share  Sterling*
  • 32. BASF Oil & Gas, September 2013 32 Supply  Optimize transport logistics via location swap  Norwegian production to secure European supply Technology  Combine knowledge on EOR and unconventional hydrocarbons Exploration & Production Norway – Strengthening our position through strategic partnership with Statoil Production  Equity in three producing fields Vega, Gjøa and Brage  Increase in production by ~37,000 boepd  Brage: 1st own operated producing field in Norway
  • 33. BASF Oil & Gas, September 2013 © Øyvind Hagen Exploration & Production Transaction with Statoil closed* – Significant increase in cash flow and EBIT 33 37,000 boepd Production increase by ∼$800 Compensation payment million** Brage Operatorship of platform * Closed on July 31, 2013 ** Agreed upon compensation payment of $1.35 billion reduced to around $800 million by earnings of the three fields (Vega, Gjøa and Brage) generated in the first seven months of 2013. In addition, Wintershall assumes a tax liability in 2014 of around $300 million related to these profits.
  • 34. BASF Oil & Gas, September 2013 Exploration & Production South America – Realize resource potential in Argentina 34 potential Huge shale gas/oil in Argentina Attractive returns New gas price scheme in Argentina 15oil & gas fields Wintershall has stakes in BASF Oil & Gas, September 2013
  • 35. BASF Oil & Gas, September 2013 Exploration & Production Middle East – Leverage technological expertise to gain access to attractive fields 35 Abu Dhabi  Develop Shuwaihat gas/condensate field in the western region of Abu Dhabi  Wintershall: Operator in appraisal phase  Resources: 50-500 million boe  Production start: ~2020 Qatar  Gas discovery Block 4 North (Khuff formation) offshore Qatar  Wintershall: Operator  Resources: ~400 million boe  Production start: 2017
  • 36. BASF Oil & Gas, September 2013 Exploration & Production Production growth from solid project pipeline (major projects) 36 2011 2013 2015 2017 2019 2021 Norway Development phase Wingate Cladhan / Catcher Knarr / Edvard Grieg / Maria Skarfjell Achimgaz (FFD) Achimov Blocks IV / V* Qatar: Block 4N Vega Pleyade Shale Neuquen / Mendoza Fenix Abu Dhabi: Shuwaihat Hibonite F 17a * Closing is subject to approval by the relevant authorities
  • 37. BASF Oil & Gas, September 2013 3737 1 | Overview & Strategy 2 | Exploration & Production 3 | Gas Transport 4 | Summary & Outlook
  • 38. BASF Oil & Gas, September 2013 38 Ludwigshafen Düsseldorf Krefeld Aachen Köln Kassel Hameln Emden Greifswald Hamburg Schwerin Berlin OPAL Brandov Frankfurt/O. Erfurt NEL STEGAL Kiel Key facts  Germany as distribution hub for Europe  GASCADE with a pipeline system of ~2,300 km  OPAL: in operation since 2011  Nord Stream: in operation since 2012  NEL: first sections in operation since 2012; completion expected in autumn 2013  South Stream: under construction; startup expected for 2015 Netherlands France Belgium Poland Czech Republic Gas Transport Efficient pipeline network – Well connected to major European distribution hubs Nürnberg
  • 39. BASF Oil & Gas, September 2013 Gas Transport Gas transport business – Stable earnings contribution 39  Gas transport business generates stable earnings – Non-regulated pipelines: Ship-or-pay contracts; earnings independent from demand fluctuations – Regulated pipelines: Fixed tariffs  Security of supply through participation in transit pipelines – Securing deliveries from Russian gas to Western Europe  Recent investment focus on non-regulated pipelines offering more attractive returns – Nord Stream offshore – OPAL – South Stream offshore  Total investments pipeline infrastructure: €3.3 billion* (BASF share) – GASCADE: >€1.5 billion (BASF share) – OPAL, NEL: ~€0.65 billion (BASF share) – Nord Stream offshore: €1.15 billion (BASF share: 15.5%, financial investment, not part of capex) * Investments until 1HY 2013
  • 40. BASF Oil & Gas, September 2013 4040 1 | Overview & Strategy 2 | Exploration & Production 3 | Gas Transport 4 | Summary & Outlook
  • 41. BASF Oil & Gas, September 2013 Outlook & Summary BASF Oil & Gas – Outlook 2013 Sales and earnings increase 41 Exploration & Production  In 2013, we expect an increase in sales and earnings due to higher production volumes.  Overall, we anticipate higher production due to the further field development of Achimgaz and our transaction with Statoil in Norway. Natural Gas Trading  In 2013, we expect a decrease in earnings due to margin pressure.  We anticipate natural gas sales volumes to be on prior-year level. Assumptions 2013 - Average oil price: $105 per barrel Brent - Average exchange rate: $1.30 per €
  • 42. BASF Oil & Gas, September 2013 42 BASF’s Oil & Gas division – Summary and roadmap 2015  Strong E&P portfolio with access to high potential acreage  Low risk strategy with focus on regions of expertise and limited exploration risk  Solid project pipeline  Powerful partnerships in key regions  Oil & Gas maintains ambitious production target despite restatement due to changes in IFRS  Reduction of downstream / natural gas trading exposure BASF Oil & Gas, September 2013
  • 43. BASF Oil & Gas, September 2013 43
  • 44. BASF Oil & Gas, September 2013 44 Back-up
  • 45. BASF Oil & Gas, September 2013 Overview & Strategy Experienced management team 45 Dr. Gerhard König 11 years with Wintershall 21 years experience in the gas trading industry Dr. Ties Tiessen 17 years with Wintershall Head of Exploration & Production Operating Companies, Exploration, Development, Technology, Engineering CFO Finance, Legal, Taxes, Insurance, Procurement, Sales Oil & Gas Head of Natural Gas Trading Gas Trading, Gas Storage, Gas Transport, Regulation Management Mario Mehren 7 years with Wintershall Head of Russia Wintershall Russia, Achimgaz, Senior Project South Stream/ Nord Stream Dr. Rainer Seele 17 years with Wintershall CEO Strategy & Portfolio management, Communications, Energy Politics, HR, HSE Martin Bachmann 4 years with Wintershall 29 years experience in E&P industry
  • 46. BASF Oil & Gas, September 2013 0 50 100 150 2003 2005 2007 2009 2011 Overview & Strategy Oil & Gas – Production and trading volumes 46 Oil Gas Production (million boe)* thereof Germany Europe 144 104 109 112 111 112 130 136 133 113 2012 2013 H1 66 126 restated 2012 0 20 40 60 2003 2005 2007 2009 2011 2013 H1 * Since November 2011 incl. Achimgaz ** Including sales to BASF Natural Gas Trading (billion m³)** 47 29 30 33 35 37 42 39 41 42 27 CAGR 4% p.a. CAGR 6% p.a. 2012
  • 47. BASF Oil & Gas, September 2013 ** EBIT bSI more than halved due to deconsolidation of Wintershall AG (Libya). Net income remains unchanged 0 30 60 90 120 0 5 10 15 2003 2005 2007 2009 2011 Overview & Strategy Oil & Gas – Sales and earnings 47 Sales* (billion €) E&P Gas Trading 2012 2013 H1 0 1 2 3 4 5 2003 2005 2007 2009 2011 * Sales to third parties. Restated sales lower mainly due to the deconsolidation of Wintershall AG (Libya) 2012 2013 H1 E&P Gas Trading 16.7 4.8 5.3 7.7 10.7 10.5 14.4 11.4 12.1 12.7 10.8 7.5 4.1 1.4 1.6 2.4 3.3 3.0 3.8 2.3 2.4 2.1 1.9 1.0 restated 2012 restated 2012 Brent oil (€/bbl) CAGR 15% p.a. CAGR 13% p.a. EBIT before special items** (billion €)
  • 48. BASF Oil & Gas, September 2013 Overview & Strategy Oil & Gas – Higher production volumes drive earnings 48 88 208 59 280 0 100 200 300 400 Q2/2012 Net Income Q2/2013 Net Income Exploration & Production 525 (10%) Natural Gas Trading 2,311 +17% €2,836 +10% Q2’13 segment sales (million €) vs. Q2’12 EBIT bSI/Net income (million €) Natural Gas Trading Exploration & Production Net income Sales development Period Volumes Prices/Currencies Portfolio Q2’13 vs. Q2’12 10% 0% 0% 330 242 323 382
  • 49. BASF Oil & Gas, September 2013 49 Back-up Market Environment
  • 50. BASF Oil & Gas, September 2013 Market environment Market trends Difficult Reserve access 50
  • 51. BASF Oil & Gas, September 2013  Energy demand grows mainly in emerging markets – in particular in China and India  Increasing energy efficiency enables GDP to grow faster than energy demand  Positive growth rates for all fuels, renewables with highest rates Key facts Source: IEA World Energy Outlook 2012; original figures in toe (1 toe = 7.332 boe) 51 Primary energy demand (million boe) Oil Natural Gas NuclearCoal Renewables Market environment Fossil fuels will continue to dominate the primary energy demand 0 20.000 40.000 60.000 80.000 100.000 120.000 2010 2015 2020 93,000 103,000 109,000
  • 52. BASF Oil & Gas, September 2013 5252 Europe Africa Caspian Region 40 Asia Pacific South and Central America 132 79515 Russia 88 8 (46) 15 (88) 80 (484) 16 (101) 46 (278) 4 (26) Oil, in billion boe Natural Gas, in trillion m3 (billion boe) Global oil and gas reserves Natural Gas total reserves: ~195 trillion m3 (≅ 1,180 billion boe) Oil total reserves: ~1,580 billion boe Source: BGR 2012 Middle East 41 17 (103) 246 10 (60) 225 North America Market environment Global oil and gas reserves
  • 53. BASF Oil & Gas, September 2013 Market environment Changing competitive landscape – Technology key for partnerships 53  Reserve access getting more difficult – Predominantly owned by national oil companies (NOCs) – E&P technology gaining more importance  Risk is increasing as reservoirs are getting more complex  Large investments are needed to meet growing energy demand International oil companies (IOC) ~15% National oil companies (NOC) ~85% Technology ~40% Drivers for largest M&A transactions 2012** Resource ~60% Holders of global Oil & Gas reserves 2011* * Source: Oil & Gas Journal, WoodMackenzie, own calculation ** Source: Herold, own calculation Key facts
  • 54. BASF Oil & Gas, September 2013 54 0 5 10 15 20 Implied 3-years weighted average reserve replacement costs ($/boe)*  Russia has by far the lowest reserve replacement costs Russia/ CIS Africa/ Middle East Asia Pacific Latin America United States EuropeCanada Market environment Reserve replacement costs by region * Source: IHS Herold 2012, including acquisition, exploration and development expenditures
  • 55. BASF Oil & Gas, September 2013 Market environment Growing import need for natural gas in Europe (EU 27) 55 European supply/demand balance gas (billion m³)  European natural gas demand to increase from 490 billion m³ in 2012 to 550 billion m³ in 2020  End of oversupply expected by 2015  Shale gas not anticipated to compensate for declining domestic production  Additional imports needed in 2020 to cover projected supply/demand gap Domestic production Pipeline imports** LNG supply* Demand 490 550530 * FID Source: IHS CERA, Arthur D. Little, own calculation Key facts ** Incl. contract prolongations
  • 56. BASF Oil & Gas, September 2013 Market environment Growing importance of Russia for European natural gas supply (EU 27) 56Source: IHS CERA, BP, own calculations Other Imports (LNG) Imports Russia/Caspian Region (Pipeline) Imports North Africa (Pipeline) Europe Domestic production European natural gas supply 2012 23% 2020 17-20% 2012 25% 2020 25-30% 2012 7% 2020 7-10% 2012 12% 2020 17-24% 2012 33% 2020 25% Imports Norway (Pipeline) .  Natural decline of domestic gas fields in Europe from 160 billion m³ in 2012 to 140 billion m³ in 2020 expected  Increasing importance of LNG imports in the middle and long run, particularly for UK, Spain and France  Russia to further increase gas exports into Europe from 115 billion m³ in 2012 to 140-160 billion m³ in 2020 Key facts
  • 57. BASF Oil & Gas, September 2013 Market environment Convergence of spot and contract gas prices despite increasing shale gas / LNG 57  Increasing LNG volumes largely absorbed by strong gas demand in Asia  Additional gas volumes (LNG) used in Japan after the natural disaster to compensate for damaged nuclear and coal power generation  Growing shale gas production in US mainly impacts US gas spot prices Recent developmentsNatural gas price development ($/mmbtu) Spot price Europe (Zeebrugge Hub) German import price Source: BAFA, Argus Spot price US (Henry Hub) 0 2 4 6 8 10 12 14 2008 2009 2010 2011 2012 2013
  • 58. BASF Oil & Gas, September 2013 58 Back-up Exploration & Production
  • 59. BASF Oil & Gas, September 2013 Exploration & Production Reserves and R/P at constant level 59  R/P ratio at 9 years  Total 1P reserves (2012) 1,157 million boe  Gas accounts for roughly 75% of total reserves  Strong contribution to reserve replenishment from assets in Russia  Participation in Yuzhno Russkoye led to strong increase in reserves in 2007  Asset swap with Gazprom in 2007 reduced oil reserves significantly** Key facts1P Reserves* (million boe) R/P (years) 0 2 4 6 8 10 12 0 200 400 600 800 1.000 1.200 1.400 2003 2006 2009 2012 Oil Natural gas R/P * According to SEC guidelines; since Nov 2011 including Achimgaz; Libya onshore 51% ** Gazprom received a minority interest of 49% in a subsidiary of Wintershall, which holds the rights of the onshore concessions (C96/C97) in Libya Reserve Replacement Rate (RRR, in percent) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 102 50 52 48 389 116 89 89 131 100 12 10 8 6 4 2 0
  • 60. BASF Oil & Gas, September 2013 Exploration & Production Reserves and resources 2012 60  Stable proven reserve position  Strong discovered resource base built on – Exploration success (e.g. Norway) – Resource access (e.g. Russia) – Improved recovery (e.g. technology)  Discovered resource contributions from – Russia – Europe – South America Key factsReserves and Resources 2012 (billion boe) 0,0 0,5 1,0 1,5 2,0 2,5 3,0 3,5 * Proved reserves based on SEC definitions 1.2 billion boe 1.7 billion boe Discovered resources Proved (1P) reserves*
  • 61. BASF Oil & Gas, September 2013 61  Wintershall and Gazprom agree on asset swap relating to Blocks IV and V of the Achimov formation of the Urengoy natural gas and condensate field  Wintershall to receive 25% plus 1 share in Blocks IV and V of the Achimov formation with the option to further increase the share in the two deposits  Gazprom to receive: – 50% share in Wintershall Noordzee, which is active in the exploration and production of oil and gas in the southern North Sea (Netherlands, UK, Denmark) – 50% shares (thus taking over 100%) in the gas trading companies WINGAS, WIEH and WIEE, including shares in the natural gas storage facilities in Rehden and Jemgum, Germany, as well as Haidach, Austria, and the gas storage operator astora – Activities to be divested contributed in total about €10 billion to sales and roughly €500 million to EBITDA of BASF Group in 2012  Transaction financially retroactive to April 1, 2013. Closing is subject to approval by the relevant authorities.  Ownership of gas transportation business unaffected Exploration & Production Asset swap with Gazprom – Transaction highlights
  • 62. BASF Oil & Gas, September 2013 62  Focuses BASF’s Oil & Gas business on highly profitable upstream exploration and production activities and delivering medium-term earnings uplift  Provides access to attractive, condensate-rich Achimov assets  Significantly increases Wintershall’s resource base  Further strengthens the strategic partnership with Gazprom and Wintershall’s focus on Russia as a core region for Oil & Gas  Through participation in Nord Stream (15.5%) and South Stream (15%) respectively, Wintershall will contribute to reliable transportation of natural gas from Russia to Europe Exploration & Production Asset swap with Gazprom – Strategic rationale
  • 63. BASF Oil & Gas, September 2013 63  Key field data: – Targeted field depth: ~3,600 meters – Total resources of Blocks IV and V: 2.4 billion boe − 274 billion m³* of natural gas − 74 million tons of condensate  BASF share (600 million boe) equivalent to approx. 20% of total BASF hydrocarbon resource base as at Dec 31, 2011  Plateau production potential of >8 billion m³* p.a. in total for the two additional blocks  Synergies through regional and technological expertise of both partners  Start of production is planned for 2016 * Russian Standard Conditions (RSC) Exploration & Production Asset swap with Gazprom – Achimov Blocks IV and V key facts
  • 64. BASF Oil & Gas, September 2013 Exploration & Production Denmark – Exploration success 64  Oil discovery Hibonite in March 2013 in the Danish sector of the North Sea  The Hibonite prospect lies around seven kilometers north of the Ravn field which was successfully appraised in 2009  Partner: Wintershall (operator) 35%, Bayerngas 30%, NordsØfonden 20%, EWE 15%  Key field data: – 278 kilometer west of Esbjerg (DK) – Water depth: ~50 meters – Resources: ~100 million bbl (oil in place) – Targeted field depth: 4,431 meters – Production start: end of 2015 at the earliest  Next steps: – Evaluating commercial viability, further upside potential and development synergies with the nearby Ravn discovery 64 Denmark Norway Hibonite The Netherlands Germany Den Helder Amsterdam Rijswjk
  • 65. BASF Oil & Gas, September 2013 Denmark Norway Exploration & Production Netherlands – Exploration success 65  In December 2012 Wintershall discovered oil in the exploration license F17a in the Dutch North Sea  Most southern extension of the chalk trend ranging from Norway through Denmark to the Netherlands  Partner: Wintershall (operator) 30%, EBN 40%, GDF SUEZ 20%, Rosewood 5%, TAQA Offshore 5%  Key field data: – 120 kilometer north of Den Helder (NL) – Water depth: ~44 meters – Resources: at least 30 million bbl – Targeted field depth: 1,490 meters – Production start: end of 2015 at the earliest  Next steps: – Appraisal drilling planned in 2013 – Additional nearby chalk exploration F17-CK1 The Netherlands Germany Den Helder Amsterdam Rijswjk
  • 66. BASF Oil & Gas, September 2013 Exploration & Production Middle East - Shuwaihat project in Abu Dhabi 66  Shuwaihat is a discovered gas/condensate field (containing H2S and CO2) in the western region of Abu Dhabi  Wintershall is the operator in the appraisal phase with OMV as a partner on a 50/50 basis  Wintershall has more than four decades expertise to produce and to purify H2S and CO2 containing gas  Key field data: – 200 km west of Abu Dhabi – Water depth: 0-15 meters – Resources: 50-500 million boe – Targeted field depth: 3,400 meters – Production start: ~2020  Next steps: – An appraisal campaign is required to confirm the reserves and to define the development plan
  • 67. BASF Oil & Gas, September 2013 Exploration & Production Middle East – Gas discovery offshore Qatar 67  Qatar Petroleum (QP), Wintershall and Mitsui discovered gas in the exploration Block 4 North (Khuff formation) offshore Qatar  Wintershall and QP entered into an exploration and production sharing agreement for the Block in 2008  Wintershall (80%) is operator, Mitsui (20%) joined in 2010 as partner  Key field data: – Discovery is located in direct proximity to the largest gas field in the world, the North Field – Water depth: ~70 meters – Resources: ~70 billion cubic meter of gas (~400 million boe) – Targeted field depth: 3,500 meters – Production start: early 2017  Next steps: – Assessment of the economic field development 67 Block 4N Qatar Saudi Arabia UAE Iran North Field
  • 68. BASF Oil & Gas, September 2013 Exploration & Production Argentina – Strong position with vast shale oil/gas potential 68  Participation in 15 oil and gas fields in Argentina – Active since 1978 – 26 million boe annual production 2012 – 4th largest gas producer – Applying leading-edge technologies to improve recovery – Activities in the provinces of Neuquén, Tierra del Fuego and recently Mendoza  Field development in Tierra del Fuego and Neuquén  One of the regions with the best prospects for shale gas and shale oil outside North America with great potential in the Vaca Muerta horizon in the Neuquén basin  Operatorship for exploration licenses in the province of Mendoza for the Blocks CN-V and Ranquil Norte in 2012 awarded  New gas price scheme with significant gas price incentives for new gas projects Santa Rosa Buenos Aires Exploration Exploration Production Argentina Chile Tierra del Fuego Operated blocks Non operated blocks Neuquén Mendoza
  • 69. BASF Oil & Gas, September 2013 69 Back-up Outlook & Summary
  • 70. BASF Oil & Gas, September 2013 2012 restated 2013 Financial performance Sales to 3rd parties: €12.7 billion EBIT before special items: €1.9 billion Net income: €1.2 billion E&P: In 2013, we expect an increase in sales and earnings due to higher production volumes. Natural Gas Trading: Decrease in earnings due to margin pressure. Production volumes Total production: 126 million boe Overall higher production expected due to the further field development of Achimgaz and our transaction with Statoil in Norway. Sales volumes Natural gas sales: 47 billion m³ Natural gas sales expected on similar level. Investments*/ Expenditures Investments 2008-2012 (IFRS old):~€5.2 billion thereof E&P: ~€3.1 billion thereof Natural Gas Trading: ~€2.1 billion Investments** 2013-2015: ~ €2.4 billion thereof E&P: ~ €2.0 billion thereof Natural Gas Trading: ~ €0.4 billion Macroeconomic assumptions Average oil price (brent): $112 per barrel Average exchange rate: $1.28 per € Forecast 2013: $105 per barrel $1.30 per € Outlook & Summary Oil & Gas – Outlook 2013 70 * Incl. tangible assets from acquisitions, activated exploration expenditures, without capex in financial participations ** Without tangible assets from acquisitions and activated exploration expenditures
  • 71. BASF Oil & Gas, September 2013 Appendix Benchmarking 71
  • 72. BASF Oil & Gas, September 2013 72 Production growth (percent p.a.) Five year average 2008-2012 -3.3 -1.2 -1.0 -0.5 0.8 1.2 1.4 1.5 1.8 2.3 4.2 6.1 9.8 -5 0 5 10 15 Wintershall 17.6 17.1 17.1 16.5 16.3 16.2 15.8 14.9 14.1 13.4 13.2 5.9 5.4 0 5 10 15 20 Production costs ($/boe) Five year average 2008-2012 Average peers 1.7 14.8 Peers Source: Herold, SEC, own calculation Peer Group represents an average of the E&P industry Wintershall Exploration & Production Wintershall – Positioned competitively (1)
  • 73. BASF Oil & Gas, September 2013 73 F&D cost ($/boe) Five year average 2008-2012 74.5 58.7 58.1 42.6 33.4 31.5 30.3 27.5 26.4 21.3 16.3 14.6 10.7 0 20 40 60 80 63.1 57.7 40.0 28.6 28.1 27.9 24.6 23.6 19.0 15.1 15.1 14.2 8.3 0 20 40 60 80 Reserve replacement costs ($/boe) Five year average 2008-2012 36.3 29.8 Exploration & Production Wintershall – Positioned competitively (2) Wintershall Average peersPeers Source: Herold, SEC, own calculation Peer Group represents an average of the E&P industry
  • 74. BASF Oil & Gas, September 2013 74 Reserve replacement (percent) Five year average 2008-2012 150 134 134 130 128 105 100 26 219 133 118 87 82 0 50 100 150 200 250 16.4 15.2 13.0 12.8 12.6 12.5 11.4 11.3 11.2 10.3 10.2 10.0 8.7 0 5 10 15 20 Reserve/Production ratio (years) Five year average 2008-2012 120 12.1 Exploration & Production Wintershall – Positioned competitively (3) Wintershall Average peersPeers Source: Herold, SEC, own calculation Peer Group represents an average of the E&P industry
  • 75. BASF Oil & Gas, September 2013 75 Oil & Gas EBIT Financial results = Income before taxes and minority interests ./. Income taxes (incl. non-compensable oil taxes in Libya) ./. Minority interests = Net income 50% 15.5% 51% 100% Wintershall AG (Libya) Achimgaz WINGAS Nord Stream offshore 100% Yuzhno Russkoye SNGP Gas Mktg C.* -50%-1 of after tax income Projects with Gazprom – Impact on BASF’s P&L * Gas marketing company 35%
  • 76. BASF Oil & Gas, September 2013 76