Wintershall Dea: well positioned to weather the corona-crisis

Wintershall Dea Chairman of the Board and CEO Mario Mehren spoke exclusively with Pipeline Oil and Gas News’s Julian Walker about how the German gas and oil company is coping with the coronavirus crisis and why the merger a year ago with DEA came at the right moment

Pipeline  What does the crisis mean in practical terms for the business and for your day to day work?

We are currently – as we all notice in our everyday lives – in a state of emergency. As Wintershall Dea we are also in a state of emergency, but still able to act. We are in a kind of controlled state of emergency, and so we are acting and responding with careful consideration.

In the last month, almost all employees at our locations in 13 countries - Germany, the UAE and elsewhere - have been working from home. Clearly however that’s not always possible for everyone, in particular not for our onsite teams. I’m truly thankful to our people at production sites around the world who are working hard – and maintaining appropriate safety measures - to continue producing gas and oil.

Pipeline  As CEO, what does the situation mean for you personally, and how are you managing to engage with your team and your people? 

Certainly it has been a big change to working life. Since mid-March I’ve been working from home myself, and my wife and children are at home with me. All of our people have dispensed with business trips, nationally and internationally, and that goes for me too. Not making any business trips is a particularly noticeable change!

Apart from that, I’m making more phone calls than ever before, and using online tools constantly. I’m a big fan of talking in person, and I miss it! But in an internationally active company, video conferences are always part of everyday life. We’re therefore well versed in that and also very well equipped.

I’ve been running digital meetings with employees for over a year now, and since we all moved to remote working we’ve stepped that up so they are weekly. Once a week I share a video message from my home office to our 2,800 people worldwide. Any employee can then submit a question, and I and my management team do our best to answer them.  

I also use my internal blog to share some of my personal thoughts about working from home. It’s an unusual and often challenging situation for everyone, and I think it’s important for me as CEO to recognise that.

Pipeline  What protective measures has Wintershall Dea taken at its production sites?

We’re doing everything we can to stem the spread of the virus and ensure health and safety. At the same time, we need to keep our operations and our businesses running so that we can continue to produce and deliver the energy the world needs. We have implemented the necessary safety measures at production sites. Teams have been reduced to a minimal staff, so that they can maintain safety distances. Measures such as only allowing lifts on production platforms to be used by one person at a time have been put in place. 

Pipeline  Is production and the business suffering in any way from corona?

At the moment we’re managing to keep our production largely stable. Our advantage is that we produce a lot in extremely remote regions such as Siberia and Tierra del Fuego, or are relatively isolated with offshore platforms on the high seas. We also benefit from the fact that we’ve invested in digitalisation. A number of our production platforms in Norway and the Netherlands are operated unmanned, and are controlled remotely. More broadly, we established various programmes to make virtual working easier last year, shortly after the merger of Wintershall and DEA. Together, these digital investments have helped make our business more resilient at this difficult time.

Pipeline  To what extent is the corona crisis threatening your business? And has your merger last year helped to make you more robust?

We, too, are affected by these developments, but Wintershall Dea is well positioned – even in this crisis. We have an extremely robust portfolio, we produce in 13 countries and at production costs that are almost half the average of our competitors. Our diversified, well-balanced portfolio, which makes us highly crisis-proof, is proving its worth here.

And yes, our merger last year – between Wintershall and DEA – came at just the right moment! May 2020 sees the first anniversary of our merger and our new company, and we are now seeing the benefits. We now face this crisis situation as a single, forward looking company. Europe’s leading, independent gas and oil company. We are leaders in terms of our production and reserves, but also in terms of our production costs, which are significantly lower than those of our competitors.

Pipeline  But the oil price has plummeted dramatically. What level do you think is realistic by the end of the year?

This depends on many very different factors that are difficult to predict. But it seems evident that oil and gas prices will be significantly lower than in 2019.

Pipeline  Do you expect the current crisis to have a major impact on the oil and gas industry?

Our economic environment is extremely difficult at present. In many countries, the coronavirus is sending the economy into a tailspin to an extent that we have not experienced for many years. The price development represents an extreme challenge for our industry. Even if we keep our production largely stable, we are still dependent on global market prices.

Pipeline  Do you expect the corona crisis to affect your company’s sales and profits this year?

The corona crisis will have an impact on the entire global economy and also on our industry.

Pipeline  Can you maintain your growth and investment targets? Will you also need to reduce costs? And will there be an impact on your business in the UAE?

We are well positioned and optimistic. We have very low production costs and at the same time very high reserves. But we have already taken steps to adapt to the new challenges: together with our shareholders, we have decided to suspend the dividend until further notice. We will use this flexibility to shore up our balance sheet.

Our investments for 2020 will be well below our previous plans at between 1.2 to 1.5 billion euros, which is a 20 per cent reduction on what we had planned only recently, and compares to a 2019 spend of around 1.5 billion euros. Our exploration budget, which will range between 150 and 250 million euros, will also be significantly lower than in 2019. We will also continue to look for opportunities to streamline our portfolio. However, we will only do so where we see appropriate long-term value.

Here in the UAE, we are a committed partner for the Ghasha concession project, an important part of our growth plans. We are proud to be a partner to ADNOC, which is part of the DNA of the UAE’s economy. We understand that ADNOC – together with us and the other IOCs involved – has to react to the current situation, and we expect and believe the project to progress.

Pipeline  Wintershall Dea wants to go public. Given the stock market crash, is that still at all realistic?

It’s no secret that our shareholders want to take us public. But it’s also no secret that an IPO is always dependent on the market conditions.