segment presentation oil & gas, april 2008 · - higher oil and gas prices - increased sales in...

Straight Ahead to ValueSegment presentation Oil & Gas, April 2008

3

ChemicalActivities

Agricultural Solutions

Sales of 2007 have been restated according to new segment structure as of January 1, 2008

Oil & Gas

2007 total sales: €58 billionincluding other activities 2007: €6.6 billion (12%)

PerformanceProducts

15%

FunctionalSolutions

16%

Plastics17%

18%

6%

Chemicals16%

Oil & Gas – one of BASF’s core activities

4

Oil & Gas

Oil & Gas business provides significant advantages for BASF

Long term security of gas supply

Significant cash flow

and sustainable profitability

Hydrocarbonhedge

Joint R&D for EOR

(enhanced oil recovery)

5

Gas Transport and TradingExploration and Production

Oil & Gas businessCore activities

6

Gas Transport and TradingExploration and Production

• Successful exploration, acquisitions and farm-ins

• Profit sharing of E&P contracts withhost countries

• Selective technology development and deployment

• Integrated gas business

• Oil price

• Cost development

• Long term access to

– gas reserves

– transport capacity

– storage capacity

• Spotmarket opportunities

• Oil price volatility and time lag effects

• Weather conditions

Oil & Gas businessKey drivers of profitability

7

Exploration & Production• 3% CAGR 2001-2007• Gas share increased

to ~40%• Successful production

launch at YuzhnoRusskoye gas field

WINGAS• 13% CAGR 2001-2007• Gas sales to BASF

3.9 billion m³ (~16%)• Gas Trading business is

successfully maintaining its growth course

• Several contracts with new customers have been concluded

Oil & Gas – E&P and Gas Trading

0

10

20

30

40

2001 2002 2003 2004 2005 2006 2007

Gas Trading (including sales to BASF)in billion m³

21 2429 30 33 35

Wholesale(WIEH, WIEE)

WINGAS

Productionin million boe

0

40

80

120

2001 2002 2003 2004 2005 2006 2007

93 94 105 108 112 111

Oil

Gas

112

37

8

Sales• 15% CAGR 2001-2007• Boost in 2005-2007 from

- higher oil and gasprices

- increased sales ingas trading

EBIT• 15% CAGR 2001-2007• Oil price in Euro terms

remained flat in 2007 vs. 2006

• European gas pricesand margins sufferedfrom time lag effects in 2007

Oil & Gas – Sales and EBIT

E&P

Gas trading

E&P

Gas trading

Salesin billion €

EBITin billion €

0

3

6

9

12

2001 2002 2003 2004 2005 2006 2007

E&P4.5 4.2 4.8 5.3

7.7

10.7

0

1

2

3

4

2001 2002 2003 2004 2005 2006 2007

1.3 1.2 1.4 1.62.4

3.3

10.5

3.0

99


2 | E & P

3 | Gas trading


5 | Outlook

10

Operating Company (OPCO)

Core region

Production and / or Exploration

Russia

Northern Africa Caspian Sea

Europe

South America

Middle East

Exploration and ProductionActivities in core regions

11

Exploration and ProductionSuccess through focus

Wintershall is the starting point of a world-class hydrocarbon value chain called BASF

• #1 German E&P company, #11 in Europe, #59 worldwide*

• 75 years of E&P experience on- / offshore

• Experience in Enhanced Oil Recovery (EOR)since the mid 60’s

• Unique partnership with Gazprom

• Up- / midstream integration basis for“Gas for Europe” strategy

• Selective technology development

• World class operational excellence

* Source: Energy Intelligence 2008

12

Production growth [% p.a.]

Production costs [USD/boe]Return on capital [% p.a.]**

Finding & Development costs [USD/boe]F&D/Production [USD/boe]

Reserve replacement [%]Reserve/Production ratio [yrs.]***

* Benchmark Group (upstream only): Amerada Hess, Apache, BP, ExxonMobil, Marathon, Occidental, Shell, Talisman, Woodside** EBIT / average total assets, WIHO adjusted by non compensable taxes*** as of December 31, 2007Source: Herold, SEC, own calculation

Five year average 2003 – 2007 Wintershall Group Average* Group Range

13 27 46

-4.0 1.0 7.7

4.3 11.59.0

7.5 22.314.5

21.313.7

130

12.210.3

4.7

65 236

9.5 18.1

1.9

4.3

28

8.6

4.7

153

Exploration and ProductionWintershall competitive position

13

• Maintain geographic focus, core region concept

• Ensure adequate reserve base– Increase greenfield exploration, continue near

field exploration – Acquisitions

• Innovation: Evolve from smart follower to one of the leaders in selected technologies exploiting BASF know-how

• Continue production growth into next decade– Short term focus on Russian gas projects– 2015 overall production target:

150+ million boe/a

Exploration and ProductionStrategy

14

Nearfield exploration

Southern North SeaGermany

Libya

Greenfieldexploration

NorwayArgentina

Qatar

Frontier exploration

MauretaniaLibya – Kufra

Exploration and ProductionExploration portfolio strategy

15

Reduce explorationrisk

Advanced 3D seismicinterpretations

Improve oil and gasrecovery

Chemical EORSteam flooding

Optimized development of

complex reservoirs

Tight gasMulti frac technology

Exploration and ProductionSelective technology development

16

Exploration and ProductionExploration & development update

Norway• Participation in

11 licenses

Russia• Yuzhno Russkoye• Achimgaz phase I• Achimgaz phase II

Southern North Sea• 30 new licenses• E18-A development• P9-A/B development

Germany• Mittelplate: Infill drilling• Leer: Tight gas

Qatar• Operator block 3• 2nd appraisal well block 11

Libya• Operator license 201 Kufra• C97 water injection• Al Jurf (phase II)

Argentina• Aguada Pichana

infill drilling• Aguada Pichana

north west • Rincon Chico north

Mauritania• Taoudeni basin: 2nd

exploration phase

Operating Company (OPCO)

Core region

black

red

Current Activities

Exploration

Development

Turkmenistan• 2nd appraisal well block 11/12

17

Execution of Russian projectsAchimgaz

• First production joint venture with Gazprom

• Wintershall provides technical expertise for development of complex reservoirs

• 6 wells of pilot phase drilled and completed

• Production tests confirm expectations

• Start of production in 1H/2008

• Start of full field development in 2010

• Plateau production of up to 8 billion m³/a in 2015

18

Execution of Russian projectsYuzhno Russkoye

Yuzhno Russkoye• Start of production

ahead of schedule in October 2007

• Accelerated ramp up and earlier plateau phase

• Current production rate 33 million m³ per day* out of 59 wells

• Estimated production for 2008: 13 billion m³* (100%)

* Russian Standard

Forecast 2006Current schedule

Productionin billion m³ (100%)

0

5

10

15

20

25

2007 2008 2009 2010 2011

Plateau production

19

Reserves distribution end 2007Reserves development

Exploration and ProductionReserves*

* According to SEC guideline without Achimgaz** Concessions C96 / C97 at 51%

14%48%

24%11% 3%

NetherlandsArgentina

Libya**

Russia

GermanySEC Reserves (million boe)No consideration of Achimgaz reserves

R/P

0

200

400

600

800

1000

1200

1400

2001 2002 2003 2004 2005 2006 2007-10 yrs

-5 yrs

0 yrs

5 yrs

10 yrs

Oil Gas

940 976 978 924 871814

1,132

1,400

1,200

1,000

Total proven reserves: 1,132 million boe

2020


2 | E & P

3 | Gas trading


5 | Outlook

21

Sales developmentCore Regions

Gas Trading Activities in Europe

* WIEE

F

UKDK

RO*

BUL*

BCZ

WINGAS gas salesin billion m³ p.a.

0

10

20

30

40

2005 2007 2010E 2015E

30

40

21

Europe excl. GermanyGermany

33%

45%25

AU

D

22

Gas Trading Well positioned in a liberalizing market

• WINGAS # 3 in German market, expanding into Europe

• Excellence in gas distribution, trading, transport and storage

• Strategic partnership with Gazprom through successful joint ventures (WINGAS, WIEH, WIEE)*

• Large long term supply contracts (until 2030)• Access to modern and expanding infrastructure

– Well structured pipeline system in NW Europe

– Largest gas storage facility in West Europe(Rehden)

• Direct connections to European gas hubs

* WINGAS: 50+1% BASF / 50-1% Gazprom; WIEH and WIEE 50/50 each.

23

Gas TradingWINGAS competitive position

Gas sales growth [% p.a.]

Sales per employee [million €/employee]EBIT per employee [million €/employee]

Return on capital [% p.a.]**Return on sales [% p.a.]

Five year average 2002 – 2006

-5.2 14.9

10.6 13.5

7.5 8.5

1.6 14.9

3.3 14.70.4

0.19 1.21

14.7

0.05 1.21

7.0 13.5

5.0 11.2

WINGAS Peers average* Range peers

* Peer Group: E.on Ruhrgas, Verbundnetz Gas AG, Gaz de France, Centrica** (Income before tax + interest on borrowed capital) / average total assets Source: Annual Reports, own calculation

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• WINGAS offers long-term security of supply

• Diversified portfolio: competitive advantage throughoptimisation of short and long term supply

• Innovative sales strategies:– Gas for Europe– Optimization of customer portfolio: move closer

to end user– Focus on storage related products: value before

volume• Value creation through access to storage and

pipeline infrastructure

• Industry leader in cost efficiency

• Strengthen partnership with Gazprom through thewhole value chain

Gas TradingWINGAS strategy

25

Gas TradingWINGAS turntable for Russian gas

• Decreasing indigenous production (e.g. North Sea)

• Increasing demand• Growing import and

storage needs• Increasing share of

Russian importsEurope needs gas and flexibility

25

14

2

3

5

INTERCONNECTORJAMALTRANSGASBBLNORD STREAMGas depositWINGAS TRANSPORT-pipeline systemWINGAS TRANSPORT-pipeline system (planned/ under construction)

1

2

3

4

5

Imports

Local production

EU 27in billion m³

2006 2020

620-680

550

~ 40% ~ 20%

~ 80%~ 60%

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Offshore:• 55 bn m³/a capacity via two 1,200 km subsea

pipelines*• First gas to be delivered in 2011• Joint Venture between Gazprom 51%, BASF

and E.ON 24.5% each**

Onshore:• System expansion: OPAL (2011), NEL (2012)• Increased transportation capacity to NL, B, (UK)

through system upgrade incl. Storage• Germany as distribution hub for Europe

Total investment €3.1 billion (BASF-share)

Nord Stream Major project for European supply

* Nord Stream estimates project budget for the offshore part at €7.4 billion (March 31, 2008)** Joining of Gasunie with 9% will reduce BASF‘s and E.ON‘s share to 20% each, final agreement

to be signed in 1H/2008

27

Gas TradingDiversified supply portfolio

short-/mid-term (1-4y)

long-term West (>4y)long-term Russian supplies (2035)„Nord Stream“long-term Russian supplies (2030)

WINGAS sales

Supply

• Portfolio of long-term supply contracts from different sources

• Active at different spot markets in NW Europe

• Logistical integration of storages, spot markets and long term supplies

Diversification,optimized logistics,security of supply

Sales

• Until 2010 approx. 80% of sales volumes already contracted

WINGAS supply portfolioin billion m³ p.a.

0

40

1995 2000 2005 2010 2015

20

30

10

ZBHGerman border price

Long term vs. spot pricein ct/kWh

0

1

2

3

4

5

Jan03

Jan04

Jan05

Jan06

Jan07

Jan08

28

Competitive advantage through storage portfolio

• Different markets/regions

• Different storage characteristics

• Pipeline linkage

Arbitrage potential

Physical portfolio optimization

Security of supply

Integrated sales products for target customer

existingplanned/under construction

With planned expansion to 6.5 billion m³ storage volume WINGAS # 3 in NW Europe

Gas Trading Competitive storage portfolio

* Capacity 50% WINGAS, 50% Gazprom** Capacity 1/3 WINGAS, 1/3 RAG,

1/3 Gazprom28

Jemgum(2012: 1.2 bn m³)

Haidach (100%)**(2007: 1.2 bn m³)(2011: 2.4 bn m³)

Saltfleetby (100%)*(2011: 0.8 bn m³)

Rehden(1993: 4.2 bn m³)

2929


2 | E & P

3 | Gas trading


5 | Outlook

30

BASF receives

Yuzhno Russkoye WINGAS Libya onshoreBASF receives 25% less one share with voting rights plus 10% partici-

pation without voting rights in Severneftegazprom (SNG)

BASF receives the profits from the sale of 35% of the gas produced

Gazprom receives in addition to the present

shareholding of 35%15% minus one share

of WINGAS GmbH

Gazprom receives a 49% stake of a German

Wintershall subsidiary which holds the Libyan onshore concessions (C96/C97)

€540 millionCash payment to Gazprom

Gazprom receives

Structure of the asset swap

31

• BASF share of 35% of gas production is sold by SNG to Gas Marketing Company at cost plus margin

• Remaining 65% of gas production is sold directly to Gazprom at cost plus margin

• Cost plus margin of SNG isdistributed via dividends to shareholders (double-digit million Euro amount p.a.)

• Gas Marketing Company isselling-on BASF‘s share of gas to Gazprom accordingto agreed price formula

• Price formula is a mix of netback export price and Russian domestic prices

SNGGas Production

Company

Gas MarketingCompany*

65% of gasproduction

at “cost plus“

100% Profits

Sale ofBASF‘s shareof gas to Gazprom according to price formula

35% of gas production

at “cost plus“(BASF-share)

Dividends

Asset swap: Yuzhno RusskoyeGas and profit flows

Dividends

* ZAO Gazprom YRGM Trading

32

Financial impact of asset swap

Million €Fair Value of given assets (15% WINGAS, 49% Libya)

Cash Payments• Compensation of value of received assets

• Earnings 2006 (15% WINGAS; 49% Libya)

850

598540

58

Fair Value of received assets (35% Yuzhno Russkoye) Million €

Deferred taxes -424Total 1,448

Investment in SNG (BASF‘s share in equity value of SNG) 110

Total 1,448

Intangible assets* (Value of gas marketing contract) 1,762

Cash payments include • Cash compensation to

Gazprom to balance thevalue of swapped assets

• Balancing of earnings of WINGAS and Libya in 2006 as of effective date of swap agreementJune 1st, 2006

• WINGAS and Libyaearnings in 2007 will bedistributed via dividendsin 2008

* including deferred taxes (IFRS regulation)

33

Net income in € million*

Asset swapEstimated net effect on BASF net income

• Asset swap has alreadya positive impact in 2008 due to higher than expected production at Yuzhno Russkoye gas field

• Strong contribution to netincome as of 2009

0 5

143137

0

25

50

75

100

125

150

2007 2008 2009 2010

* Assumptions: Brent range $75 – 60 per bbl, Exchange rate $/€ 1.45 – 1.40

34

-49% of after tax income

100% 100%

50%

24.5% (20% if Gasuniehas joined JV)

LibyaConcession

96 & 97Achimgaz WINGAS Nord Stream

offshore

100%

Dividends

New projects with GazpromImpact on BASF’s P&L structure

Oil & Gas EBIT

Financial results(equity method)

= Income before taxes and minority interests

./. Income taxes(incl. n.c. taxes in Libya)

= Income before minority interests

./. Minority interests

= Net income

Yuzhno RusskoyeSNG Gas Mktg C.

-15% additional after tax income

3535


2 | E & P

3 | Gas trading


5 | Outlook

36

Oil & GasPursuing ambitious growth targets

***Brent range of $60 ($/€ 1.40) – $75 per barrel ($/€1.45) including Yuzhno Russkoye 35%, Libya onshore C96/C97 51%; WINGAS: 50% BASF plus one share; subject to contract prolongation, no major changes in market frame-work

* Excl. asset swap with Gazprom** Brent average 2007 of $/bbl 72.39, $/€ 1.37;

Libya C96/C97: BASF 51%, WINGAS: BASF 50%, effective December 2007

Investments 2008-2012:Gas trading capex: €3 – 4 billionE&P capex: ~ €2 billionE&P exploration expenses.: €1 bn

Investments 2001-2007:€3.5 billion*

Net income Oil & Gas: €780 – 910 million***

Net income Oil & Gas: €789 million**

Natural gas sales of 37 billion cubic meters

Crude oil and natural gas production of 112 million barrel oil equivalent

2007

Increasing natural gas sales to 40 billion cubic meters

Increasing crude oil and naturalgas production to 140 million barrel oil equivalent

2010

2001-2007 2008-2012

37

Disclaimer

This presentation may contain forward-looking statements. These statements are based on current expectations, estimates and projections of BASF management and currently available information. They are not guarantees of future performance, involve certain risks and uncertainties that are difficult to predict and are based upon assumptions as to future events that may not prove to be accurate.

Many factors could cause the actual results, performance or achievements of BASF to be materially different from those that may be expressed or implied by such statements. Such factors include those discussed in BASF’s Report 2007 on pages 106ff. We do not assume any obligation to update the forward-looking statements contained in this presentation.

39

Back-up

39

40

Exploration and ProductionProduction forecast

Russia2007: 4.2 million boe2010: min 60 million boe

Europe 2007: 30.2 million boe2010: min 26 million boe

North Africa2007: 51.5 million boe2010: min 22 million boe

South America2007: 26.4 million boe2010: min 27 million boe

Core regionCurrent Activities

Caspian Sea2007: --2010: tbd

Middle East2007: 0.4 million boe2010: tbd

41

0,000

1,000

2,000

3,000

Exploration and ProductionResource Overview

Achimgaz

Base

Net effectYR/Libya

Swap

Resources (3P) *(in million boe)

* Sum of proven, probable and possible reserves

segment presentation oil & gas, april 2008 · - higher oil and gas prices - increased sales in...

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