Just under a year after the start of the war in Ukraine, the oil and gas company Wintershall Dea has been forced to withdraw from its Russian business.

The world's largest chemical company BASF, which holds almost 73 percent of Wintershall Dea, is facing write-downs of more than seven billion euros in the past financial year, along with other burdens. This resulted in a net loss of 1.38 billion euros in 2022, compared to a profit of 5.52 billion in the previous year. Analysts had expected a profit of around 4.77 billion euros. BASF shares fell by more than two percent at the peak on Wednesday, but were little changed in the course of trading.

Analyst Markus Mayer from Baader Helvea explained that the write-downs did not come out of the blue. "Nevertheless, the magnitude takes your breath away." For BASF, which merged its subsidiary Wintershall with rival Dea in 2019, the investment had recently become more and more of a burden. The company actually wanted to withdraw from the oil and gas business and float Wintershall Dea on the stock market. However, the IPO was postponed several times, partly due to a dispute with the co-owner - the LetterOne investor group of Russian billionaire Mikhail Fridman - and the plans were then scuppered by the war in Ukraine.

In 2022, the chemical company had to make write-downs totaling 7.3 billion euros on the investment, 5.4 billion euros of which were made in the fourth quarter alone due to the deconsolidation of the Russian activities. Further write-downs were made on the stake held by Wintershall Dea in Nord Stream AG, the operator of the damaged Nord Stream 1 pipeline, and on the Nord Stream 2 pipeline, which Wintershall Dea co-financed.

Despite the war in Ukraine, the oil and gas company had continued to hold on to its business in Russia and warned that billions would be lost to the Russian state if it withdrew. Other energy companies such as Shell, Total and Enel, on the other hand, had divested their activities in Russia. Most recently, however, Wintershall Dea also continued to distance itself from its Russian business and announced at the end of October that it was considering a legal separation.

Now the company has effectively been economically expropriated, as CEO Mario Mehren admitted. "In recent months, the Russian government has restricted the activities of Western companies in the country. In addition, external interference in the activities of our joint ventures has meant that Wintershall Dea cannot operate in Russia as before." The company referred to decrees by the Russian government that retroactively reduced the prices at which the joint ventures can sell oil and gas to the Russian Gazprom group.

Wintershall Dea is now planning a complete withdrawal from Russia "in compliance with all applicable laws and regulations". The company is involved in three production projects at the Yuzhno Russkoye natural gas field and the Achimov formation of the Urengoy field in Siberia. Russian business recently accounted for 50 percent of total production. The company now wants to grow outside Russia, for example in Norway, Algeria, Argentina and Mexico.

Meanwhile, BASF achieved its targets for the past financial year in its day-to-day business. Thanks to higher prices and positive currency effects alone, sales rose by eleven percent to 87.3 billion euros. The forecast had been 86 to 89 billion. Adjusted operating profit (EBIT) fell by a good eleven percent to 6.88 billion euros and was therefore at the lower end of the forecast range. As the largest industrial gas consumer in Germany, BASF 2022 was particularly hard hit by the significant rise in energy costs as a result of the war. The company therefore announced a new cost-cutting program in October, which also includes job cuts.

(Edited by Ralf Banser. If you have any questions, please contact our editorial team at berlin.newsroom@thomsonreuters.com (for politics and the economy) or frankfurt.newsroom@thomsonreuters.com (for companies and markets).)

- by Patricia Weiss