BASF SE (BAS) is considering a bid for the oil-and-gas exploration assets put up for sale by German utility RWE AG (RWE), according to people with knowledge of the situation.
Wintershall, BASF’s oil and gas production unit, discussed the potential deal to buy part of RWE Dea with investment banks, said the people, who declined to be identified because talks are private. The BASF unit may be interested in sites in Norway and the North Sea, including ones on which it already cooperates with RWE Dea, three of the people said. German sites may also be considered, two of the people said said.
A bid for the RWE assets would mark the first sizeable acquisition under Chief Executive Officer Kurt Bock, who took the helm just over a year ago. For BASF, it would highlight a commitment to the Verbund and its integrated approach to energy and chemicals with oil and gas earnings providing a buffer when higher crude costs inflate chemical raw-material costs.
BASF’s recent acquisition history shows a drive to expand into specialty chemicals and additives that are less affected by economic cycles. Among its most recent larger acquisitions is cosmetics ingredient maker Cognis, which BASF purchased in 2010 for $3.8 billion.
RWE is raising as much as 11 billion euros ($14 billion) to reduce debt and help finance new projects after Chancellor Angela Merkel ordered German utilities to close their nuclear plants by 2022 in response to Japan’s Fukushima accident. RWE mandated Deutsche Bank AG (DBK) last year to prepare a sale of Dea assets from Egypt to Norway, people familiar said at the time. Potential bidders for the assets face a bid-submission deadline at the end of June, one of the people said.
RWE has opted to sell Egyptian energy assets that may cost as much as $3 billion including substantial investments, people familiar with the process said in November. Wintershall may also look at some of the northern African assets, one of the people said.
Through its Norwegian subsidiary, RWE Dea has holdings in six major offshore oil fields and in various exploratory projects and is also the operator in two license areas in the Norwegian North Sea, according to RWE Dea’s website.
Wintershall and RWE Dea already cooperate on several projects, with the utility earlier this year agreeing to acquire a 10 percent stake in a North Sea licensed area.
“The question is how much the selling of assets will hurt their growth, although the immediate problem is their balance sheet” said Benita Barretto, a London-based analyst at Berenberg Bank, who covers RWE and other utilities. “If they were offered the right price, they would probably agree to sell assets that are generating cash. Their immediate priority is to keep their credit rating.”
In Germany, RWE Dea and Wintershall each have a 50 percent stake in the offshore field called Mittelplate, according to Wintershall’s website. The field is on the southern edge of the German state of Schleswig-Holstein’s Wadden Sea National Park. The companies have been producing crude oil there since 1987.
Wintershall is Germany’s largest crude oil and natural gas producer, operating at sites in Europe, North Africa, South America, Russia, the Caspian Sea and Middle East.
BASF spokeswoman Jennifer Moore-Braun declined to comment. Stefan Leunig, a spokesman for Kassel-based Wintershall, said the company would look into any opportunities that come up. He declined to comment on Wintershall’s interest in RWE Dea’s assets.
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