Oil & Gas Toward new levels of performance. John Feldmann

Transcription

1 Oil & Gas Toward new levels of performance John Feldmann 1

2 1 Oil & Gas in the BASF portfolio 2 E & P 3 Gas trading 4 Strategic partnership with Gazprom 5 Outlook 2

3 Oil & Gas one of BASF s core activities Chemicals Agriculture & Nutrition Chemical activities Plastics 20% Oil & Gas Performance Products 2006 total sales*: 52.6 billion Euro 3 *Including other activities 2006: 2.5 billion Euro (5%)

4 Oil & Gas business provides significant advantages for BASF BASF Long term security of gas supply in Europe Hydrocarbon hedge Significant cash flow Sustainable profitability Oil & Gas 4

5 Oil & Gas core activities Exploration and Production Gas Trading UK DK F B D CZ AU RO BUL Core region Current gas trading activities Operating company 5

6 Oil & Gas production and gas trading Production in million boe Production 4% CAGR Gas share increased to ~40% 40 Gas Oil 6 Gas trading in billion m³ WINGAS Wholesale Gas trading 11% CAGR Base load sales to BASF at 19%

7 Oil & Gas sales and EBIT Sales in billion Euro Gas trading E&P Sales 19% CAGR Boost in 2005 and 2006 from - higher oil and gas prices - higher gas production in E&P - increased sales in gas trading 7 EBIT in billion Euro Gas trading E&P EBIT 20% CAGR Significant increase of EBIT in E&P predominantly due to higher volumes and further increase of oil and gas prices in 2005 and 2006

8 1 Oil & Gas in the BASF portfolio 2 E & P 3 Gas trading 4 Strategic partnership with Gazprom 5 Outlook 8

9 Exploration and Production Success through focus Wintershall is a midsize E&P-company with focus on 5 core regions World class operational excellence Projects which require specific technological experience Strategic partnerships Profitable growth 9

10 Exploration and Production Core region strategy Russia: - Development of Siberian gas - Acquisition of new projects Europe: - Traditional strength in oil and gas - Base for technological expertise Caspian: - Exploration in Russian and Turkmen sectors Core region Operating company Production and/or Exploration Northern Africa: - Established oil production in Libya - Additional growth opportunities South America: - Established production in Argentina and further exploration 10

11 Exploration and Production Wintershall competitive position Five year average Wintershall Peers average* Range peers Production growth [% p.a.] Production costs [USD/boe] Return on capital [% p.a.]** Finding & Development costs [USD/boe] F&D/Production [USD/boe] Reserve replacement [%] Reserve/Production ratio [yrs.] * Peer Group (upstream only): ExxonMobil, Shell, BP, Total, Amerada Hess, Apache, Marathon, Occidental, Talisman, Woodside ** (Income before tax + interest on borrowed capital) / average total assets Source: Herold, SEC

12 Exploration and Production Way forward Continue production growth into next decade - Short term focus on Russian gas projects overall production target: 150+ million boe/a Ensure adequate reserve base in (re)balanced asset portfolio - Continue near field exploration, enhance greenfield activities - Acquire additional brownfield development opportunities (oil) Keep geographic focus, core region concept Innovation: Evolve from smart follower to one of the leaders in selected technologies 12

13 1 Oil & Gas in the BASF portfolio 2 E & P 3 Gas trading 4 Strategic partnership with Gazprom 5 Outlook 13

14 Gas trading well positioned in a liberalizing European market WINGAS # 3 in German market, expanding into Europe Excellence in gas distribution, trading, transport and storage Strategic partnership with Gazprom through successful joint ventures (WINGAS, WIEH, WIEE)* Large long term supply contracts (until 2030) Modern, expanding own infrastructure - Well structured pipeline system in Germany - Largest gas storage facility in Europe (Rehden) Direct connections to European gas hubs 14 * WINGAS: 65% BASF / 35% Gazprom (50% plus/minus one share after finalization of asset deal); WIEH and WIEE 50/50 each.

15 Gas trading WINGAS activities in Europe WINGAS growth: UK DK Sales 1995: 3.8 billion m³ Sales 2006: 23 billion m³ F B D CZ AU RO CAGR : 14% Strategic target Gas for Europe BUL Exploiting the potential of market liberalization Significant volume growth WINGAS WIEE (Central Europe Gas trading activities) 15

16 Gas trading WINGAS competitive position Five year average Gas sales growth [% p.a.] WINGAS Peers average* Range peers Sales per employee [million /employee] EBIT per employee [million /employee] Return on capital [% p.a.]** Return on sales [% p.a.] * Peer Group: E.on Ruhrgas, Verbundnetz Gas AG, Gaz de France, Centrica ** (Income before tax + interest on borrowed capital) / average total assets Source: Annual Reports, own calculation

17 Gas trading Central pipeline system in Europe EU 27 in billion m³ % % 44% 25% Imports Local production Nord Stream WINGAS pipeline system (1) Interconnector (2) Europipe I (3) Europipe II (4) Jamal (5) Transgas (6) BBL (7) Nord Stream 17

18 Gas trading supply contracts key to sustainable growth WINGAS supply portfolio in billion m³ p.a short-/mid-term (1-4y) long-term Russian supplies (2030) Supply Portfolio of long-term supply contracts of > 700 billion m³ in total* Strong foundation of business Potential to optimize through short-/mid-term supplies in the future Sales Until 2010 approx. 80% of sales volumes already contracted 18 long-term West (>4y) long-term Russian supplies (2035) Nord Stream WINGAS sales * Over contract period

19 Gas trading way forward Continue profitable growth above market average in Germany and Europe 2010 Gas trading sales target: 40 billion m³ Reap benefits of market liberalization, minimize cost of regulation Capture logistical optimization through swap potential Implement Haidach and Saltfleetby to become # 3 storage company in Europe Target earliest Nord Stream implementation LNG supply only as an option to additional deliveries 19

20 1 Oil & Gas in the BASF portfolio 2 E & P 3 Gas trading 4 Strategic partnership with Gazprom 5 Outlook 20

21 Achimgaz Pilot drillings confirm expectations Achimgaz (50% BASF, 50% Gazprom) First production joint venture with Gazprom One of the largest German investments in Russia: Total investment 1.1 billion Euro (BASF share 0.6 billion Euro) Securing production volumes Wintershall provides technical expertise for development of complex reservoirs Joint venture started drilling production wells Drilling results confirm expectations Risk minimizing through two phased approach Reserve booking under discussion 21

22 Asset swap with Gazprom Deepening our long-term partnership Expanding partnership with Gazprom through joint development of Yuzhno Russkoye gas field BASF with 25% less one share and 10% non voting shares significantly improves its reserve basis and long term production volumes Gazprom extends its WINGAS participation (50% less one share) Gazprom will participate with 49% share in a Wintershall subsidiary for onshore E&P in Libya Gazprom and BASF both increase their earnings potentials Total investment of 1.9 billion Euro (BASF share 0.7 billion Euro) 22

23 Nord Stream Northern European Gas Pipeline Major infrastructure project to supply Western Europe with Russian gas (55 bn m³/2 pipelines) Gazprom holding 51%, BASF 24.5%, E.ON 24.5% in JV (participation of Gasunie under negotiation) Subsea pipeline from Vyborg, Russia through the Baltic Sea to the coast of Germany near Greifswald Pipeline length 1200 km (one of the longest subsea pipelines in the world) Projected start-up late 2010 The total investment for the offshore pipeline* and Germany onshore continuation is estimated to be at least 9 billion Euro (BASF share 2.8 billion Euro) 23 * Published investment by Nord Stream AG for the offshore part is at least 5 billion Euro

24 1 Oil & Gas in the BASF portfolio 2 E & P 3 Gas trading 4 Strategic partnership with Gazprom 5 Outlook 24

25 Oil & Gas resources and reserves Resources* (3P) ** (in million boe) SEC Reserves *** (in million boe) 3,000 3,000 YR/Libya Swap 2,000 Achimgaz 2,000 R/P ratio 10 from ,000 Base 1, ,000 0, * As of closing of Yuzhno Russkoye deal ** Sum of proven, probable and possible reserves *** Proven reserves according to SEC guidelines 25

26 Oil & Gas Pursuing ambitious growth targets Crude oil and natural gas production of 111 million barrel oil equivalent Natural gas sales of 35 billion cubic meters Investments : 3.0 billion Euro EPS from E&P: 1.4 Euro* EPS from gas trading: 0.47 Euro* Increasing crude oil and natural gas production to 140 million barrel oil equivalent Increasing natural gas sales to 40 billion cubic meters Major investments : 3.3 billion Euro EPS from E&P: Euro** EPS from gas trading: Euro*** 26 * Based on number of BASF shares on (501,090,000); Brent average 2006 of USD/bbl, USD/Euro 1.26; Gas trading: WINGAS: 65% BASF / 35% Gazprom ** Based on number of BASF shares on (494,705,000); Brent range of USD, USD/Euro 1.25; including Yuzhno Russkoye 35%, Libya onshore C96/C97 51% *** Based on number of BASF shares on (494,705,000); subject to contract prolongation, no major changes in market framework, minor Nord Stream volumes only; WINGAS: 50% BASF / 50% Gazprom (plus/minus one share)

27 Wintershall fit for the future Wintershall contributes substantially to BASF Group results and will continue to do so in a challenging business environment through tailored organic growth strategies in both up- and midstream in growth markets focused on Europe s increasing gas import requirements. 27

28 Disclaimer This presentation contains forward-looking statements under the US Private Securities Litigation Reform Act of These statements are based on current expectations, estimates and projections of BASF management and currently available information. They are not guarantees of future performance, involve certain risks and uncertainties that are difficult to predict and are based upon assumptions as to future events that may not prove to be accurate. Many factors could cause the actual results, performance or achievements of BASF to be materially different from those that may be expressed or implied by such statements. Such factors include those discussed in BASF s Form 20-F filed with the Securities and Exchange Commission. We do not assume any obligation to update the forward-looking statements contained in this presentation. 28

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30 Glossary and abbreviations 30 3P reserves BBL E&P F&D costs JAGAL MIDAL NEGP NEL OPAL OPEX R/P SEC SEL STEGAL WEDAL WIEE WIEH Sum of proven, probable and possible reserves Balgzand Bacton Line Exploration and Production Finding and Development costs Jamal-Gas-Anbindungs-Leitung (Yamal gas link) Mitte-Deutschland-Anbindungs-Leitung (Central Germany gas link) North European Gas Pipeline, former project name of Nord Stream Norddeutsche-Erdgas-Leitung (Northern Germany gas link, planned) Ostsee-Pipeline-Anbindungs-Leitung (Nord Stream gas link, planned) Operating Expenditures Proven reserves divided by annual production (years) Securities and Exchange Commission Süddeutsche-Erdgas-Leitung (Southern Germany gas link, planned) Sachsen-Thüringen-Erd-Gas-Anbindungs-Leitung (Saxony-Thuringia natural gas pipeline) West-Deutschland-Anbindungs-Leitung (Western German gas link) Wintershall Erdgas Handelshaus Zug AG Wintershall Erdgas Handelshaus GmbH & Co. KG

31 Abbreviations and conversions bbl bcm boe bscf Btu kwh toe barrel billion cubic meter barrel oil equivalent billion standard cubic feet British thermal unit kilo Watt hours tons oil equivalent 1 bbl = 159 liter 1 bscf = about 0.17 million boe 1 m³ = 35.3 cf (1 m³ 0 C = 37.3 scf 60 F ) 1 toe = about 7.6 boe 1 therm = 29.3 kwh 1 Btu = 100,000 therms 1 mbtu = about 1.07 scf 31