Wintershall Dea to exit Russia, causing parent firm to take hit
Germany's Wintershall Dea has announced its exit from Russia, becoming the latest in a number of Western oil and gas companies to withdraw from the country amid fallout from Moscow's invasion of Ukraine. The decision led its parent firm BASF to book a €7.3bn ($7.9bn) impairment charge.
"Wintershall Dea will end its Russian activities," CEO Mario Mehren said in a statement late on January 17. "Continuing to operate in Russia is not tenable. Russia's war of aggression in Ukraine is incompatible with our values and has destroyed cooperation between Russia and Europe."
Restrictions imposed by the Russian government have made it impossible for Wintershall Dea to operate in Russia and its joint ventures in the country have been expropriated, the company head said.
Wintershall Dea's Russian business includes a 35% interest in the Yuzhno-Russkoye gas field in Siberia, where it is partnered with Gazprom with a 40% stake and Austria's OMV with a 25% holding. The company also co-owns two Achimov gas layer projects: Achimgaz and Achim Development.
Wintershall Dea said in March that it was unable to extract its revenues from its projects in Russia as a result of sanctions, cutting itself from a business that had been generating around a fifth of its pre-tax profit. The company also noted that Russian presidential decrees had cut the price at which its joint ventures could sell their hydrocarbons to Gazprom.
As a result of its decision to exit the country, Wintershall Dea will book a one-off non-cash charge of €5.3bn in the fourth quarter of 2022. The sum also includes other Russia-related impairments, including its interest in Gazprom's Nord Stream pipeline, which was rendered inoperable as a result of suspected sabotage in September.
Wintershall Dea stressed that it remained financially flexible in spite of the developments.
"Having built significant flexibility during the year 2022, the company will take actions in line with its financial policy to maintain a strong balance sheet consistent with its investment grade rating commitment and in parallel profitably grow and diversify its business outside of Russia," Wintershall Dea said.
German chemicals giant BASF owns 72.7% of Wintershall Dea, while the rest of the company is owned by Russian billionaire Mikhail Fridman's LetterOne investment firm. BASF said separately that it would book a €7.3bn impairment as a result of Wintershall Dea's write-offs, including €5.4bn in the fourth quarter. As a result, BASF was dragged down to a €1.38bn net loss for 2022.