BASF's Oil, Gas Earnings Shrink

German chemicals giant BASF said that Q2 2016 pre-tax earnings (Ebit) from its oil and gas division fell to €93mn, down 78% from its January-June 2015 figure of €430mn.  

The “considerable” decline was due to €3bn of sales from activities discontinued in 4Q 2015 after the asset swap with Gazprom. Before the swap, BASF had 50% interests in German gas marketer Wingas and other sales and storage entities but these passed to Gazprom. BASF also ceded a half-stake in its Dutch/UK North Sea upstream business, reducing sales.

BASF’s wholly-owned Wintershall ramped up production overall by 9%, especially in Norway, but low oil and gas prices and currency changes on led to an 18% cut in earnings.

Moreover, there was the lower earnings contribution from BASF-Wintershall’s share in the Gazprom-run Yuzhno Russkoe gasfield in Western Siberia, as excess amounts received over the previous decade are to be compensated in 2016, as contractually agreed with Gazprom. Wintershall retains a 35% share in the economic rewards of the field.

The Gazprom-run Yuzhno Russkoye gasfield in Western Siberia (Photo credit: Wintershall)

Unlike Wintershall results, now provided only annually each March or April, quarterly BASF results often provide little detail on regional operations such as in North Africa including Libya, the Middle East and South America. BASF group’s Ebit was down 16% at €1.17bn in 2Q 2016, while net profit was 14% lower at €1.09bn.

Mark Smedley