BASF’s oil and gas subsidiary Wintershall announced plans March 7 to expand into Brazil’s growing offshore oil sector as part of a drive to boost sales and profit this year.
CEO Mario Mehren told reporters his company, which is due to merge with German DEA , would compete in upcoming offshore licensing rounds in Brazil, possibly with partners.
“We have been very Norway-focused, which is good, but we want to have another area of exploration success,” he said.
“The Brazilian coastline is viewed as one of the world’s most promising oil regions,” he added.
Wintershall’s assets so far stretch from oil field concessions in Libya to subsea fields in the North Sea and to Russia’s Arctic regions.
The company has studied geological data and is ready to cooperate in arrangements for various assets in Brazil, as is customary in the oil and gas industry, Mehren said.
Foreign companies such as ExxonMobil and Statoil as well as Brazilian firms could be open to partnerships, he added.
For Wintershall, Brazil would add to its activities in Russia, Argentina, Norway, Libya and Germany. Across the world last year, the company repeated 2016’s record output of 165 billion cubic meters (Bcm) of oil equivalent.
Wintershall expects significant rises in sales and earnings before special items in 2018 after increasing both steeply in 2017, thanks to higher volumes and higher commodity prices.
Oil prices last year increased 23% to $54 per barrel on average for North Sea grade Brent. Wintershall’s internal company planning is based on an average price of $65 this year and an exchange rate of $1.2 per euro.
The company also sees gas prices remaining at current levels in northwestern Europe in 2018 after spot gas at European trading hubs rose 24% last year.
The merger with DEA, which BASF said last week would likely close by the end of the third quarter, will bring synergies in German and Norwegian oil and gas ventures where the two operate separately, and in administration costs, Mehren said.
This would likely affect the two headquarters at Kassel and Hamburg, Mehren said, mentioning that Frankfurt, Germany’s business capital, could become an option for moving certain operations.
The merger will be followed by an initial public offering of the merged entity, which BASF said it did not expect to happen before 2020.