BASF puts Wintershall Dea IPO on ice

German chemicals giant BASF announced on June 16 it had shelved a planned initial public offering (IPO) at its gas supply subsidiary Wintershall Dea, citing poor market conditions.

BASF owns 67% of ordinary shares in Wintershall Dea, which was formed through the merger of Wintershall and Dea in May 2019. While BASF said it remained "fully committed" to divesting its shares in the company, an IPO will no longer take place in the second half of 2021 as planned.

"While oil and gas prices at the spot market as well as at the shorter end of the forward price curve have recovered considerably, this improvement is not yet fully reflected in the forward-looking broker consensus assumptions," BASF explained. "In addition, market valuations of oil and gas companies have for various reasons not again reached the level the shareholders expect to kick off the IPO."

Oil and gas prices have rebounded to pre-pandemic levels on the back of rising fuel demand as lockdowns are ended and economies recover. But uncertainty about how demand for oil and gas will fare during the energy transition has weakened asset valuations.

BASF added that "due to its very robust performance, Wintershall Dea remains a strong cash contributor to its shareholders." The company resumed dividend payments in April, after reporting record oil and gas flow and a 47% surge in EBITDA in the first quarter. It distributed €500mn in that three-month period and a further €100mn in the second quarter.

Wintershall Dea says it is well positioned for the transition, given the fact that 70% of its output is now natural gas, which is set to see considerably stronger demand growth over the coming decades than oil. The company produced a record 659,000 barrels of oil equivalent/day in the first quarter, following the start-up of new projects in Russia.