Wintershall increased income from operations from 1.37 billion euros in 2003 to 1.65 billion euros in 2004, which means that Germany's biggest oil and gas producer was once again the segment delivering the highest earnings in the BASF Group in 2004. This figure includes income from the Natural Gas Trading sector, which rose by 33 million to 344 million euros. In the Exploration and Production sector, income increased from 1.06 billion euros to 1.30 billion euros, primarily due to price. Compared with 2003, net sales (sales excluding natural gas taxes) rose by 522 million euros to 5.82 billion euros. The Natural Gas Trading sector contributed 3.16 billion euros (+140 million) to this increased sales figure, while Exploration and Production generated 2.66 billion euros (+382 million). Income after tax and after minority interests was 480 million euros (2003: 433 million).
Oil and gas production made the biggest contribution to the company’s income in 2004. After the significant growth of the past few years, Wintershall achieved another overall increase in the production of oil and gas in 2004. Production increased by 4.2 percent to 14.3 million tonnes (2003: 13.7 million tonnes) oil equivalent in 2004. Oil and condensate production was 8.5 million tonnes, marginally below 2003 (8.6 million tonnes), but natural gas production increased by 13% to 6.9 billion cubic meters (2003: 6.1 billion cubic meters). This dynamic performance was primarily driven by the increase in gas volumes in the Netherlands and Argentina.
The market framework for the Exploration and Production sector was favorable in 2004. The sharp increase in the price of crude oil significantly overcompensated for the negative impact of the continued weakness of the U.S. dollar against the euro in 2004. Compared with the previous year, the average price quoted for Brent crude went up by more than 9 U.S. dollars/barrel (159 liters) to around 38 U.S. dollars. In 2004, one euro cost around 1.24 U.S. dollars on average, compared with 1.13 U.S. dollars in 2003. This development canceled out some of the U.S. dollar-based increase in revenue. Measured in euros, the average price of Brent crude went up by just over 5 euros/barrel in 2003 to 30.76 euros/barrel in 2004.
2010 Growth Targets
“The progress of the last few years has brought us a good deal closer to the targets that we have set our two sectors for 2010,” said Chairman of the Board Reinier Zwitserloot, presenting the company’s results at the Annual Press Conference in Kassel. For the first decade of the new millennium, Wintershall has set itself ambitious growth targets. In line with these targets, oil and gas production is to be increased by 50 percent and natural gas trading is to be turned into an increasingly strong contributor to income.
“2005 is the half-way mark,” said Zwitserloot. “The results achieved so far are quite impressive, because in half the time that we have allowed ourselves, we have already met most of our growth target."
With an increase in production of 36 percent in the Exploration and Production sector, Wintershall has already met most of its growth target compared with the volume at the beginning of 2000. The production of natural gas in particular has increased considerably over the past few years, which gives the energy source of the future a greater overall weighting in the company’s portfolio. In spite of the significant expansion of production, the company has managed to replenish proved reserves fully over the same period.
Natural gas trading activity also increased significantly. In line with this trend, the three trading companies have increased their sales by 50 percent compared with the beginning of 2000, while the sales of WINGAS have almost doubled. Natural Gas Trading makes a solid and significant contribution to income from operations.
Outlook
“The excellent interim results are a good motivator. Even if the search for promising new opportunities presents us with ever greater challenges, we are planning additional, but more moderate growth for the second half of the decade," announced Zwitserloot. Achimgaz, a joint venture with Gazprom, which will produce natural gas and condensate from the Achimov horizon of Western Siberia’s Urengoy field, will contribute to this growth. In 2004, the contractual basis was put in place to allow the project to start in 2005. The first two wells are expected to be drilled this year, and the development of the entire field is scheduled to start in 2008. Over more than 40 years, a total of around 200 billion cubic meters of gas and 40 million tonnes of condensate are expected to be produced. At the same time, Wintershall is also planning to continue the expansion of its activities in its other core regions in Europe, North Africa and South America.
Zwitserloot also sees great opportunities for the gas business. Liberalization offers excellent opportunities for expanding the company’s activities, although there is also a possible risk of over-regulation. In future, the successful activities in Europe are to be extended further by intensifying cooperation with Gazprom’s subsidiary OOO Gazexport. The partnership with Gazprom is an important cornerstone in securing supplies for Germany and Europe because it safeguards long-term reliable supplies of Russian natural gas to customers. Zwitserloot emphasized the growing importance of Russian natural gas for Central and Western Europe, because production volumes in the North Sea are on the decline while demand is increasing.
“For this reason we have agreed an early extension, through 2030, and increased volumes for our supply contracts with Gazprom,” reported Zwitserloot.
“Our two successful sectors, Exploration and Production and Natural Gas Trading, have the shared objective of increasing Europe’s supply security. Our “Gas for Europe” concept means finding and producing new gas in and around Europe and contributing to shaping the connecting infrastructure that takes the gas to our European customers.”
For 2005, Wintershall is planning a moderate increase in oil and gas production and further growth in natural gas trading sales. Wintershall, the Oil and Gas segment of BASF, will again make a significant contribution to sales and income of the BASF Group in 2005.
Changes on the Board of Executive Directors of Wintershall AG
By splitting Board responsibility for “Exploration and Production” into two sectors as of February 1, 2005, Wintershall is giving effective and targeted support to its growth strategy. Bernhard Schmidt, member of the Board and previously responsible for both Exploration and Production, is now Board member for “Exploration & Development”, with focus on finding and developing new oil and gas fields in Wintershall’s core regions. On February 1, 2005, Dr. Ties Tiessen, previously General Manager of Wintershall Libya, became an additional member of the Board of Directors of Wintershall. Tiessen, who is 47, now heads the new “Production" sector.
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