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1
Oil & Gas Toward
new
levels
of performance
John Feldmann
22
1 | Oil & Gas in the BASF portfolio
2 | E & P
3 | Gas trading
4 | Strategic partnership with Gazprom
5 | Outlook
3
Chemical activities
Agriculture & Nutrition
*Including other activities 2006: 2.5 billion Euro (5%)
Oil & Gas
Oil & Gas –
one of BASF’s core activities
2006 total sales*: 52.6 billion Euro
PerformanceProducts
Plastics20%
Chemicals
4
Oil & Gas
Oil & Gas business provides significant advantages for BASF
BASF
Long term security of gas supplyin Europe
Significant cash flow
Hydrocarbonhedge
Sustainable profitability
5
Exploration and Production Gas Trading
Operating company
Core region
Oil & Gas –
core activities
5
D
F
UKDK
CZ
Current gas trading activities
RO
BUL
AU
B
6
Production
• 4% CAGR 2001-2006
• Gas share increased to ~40%
Gas trading
• 11% CAGR 2001-2006
• Base load sales to BASF at 19%
Oil & Gas –
production and gas trading
0
10
20
30
40
2001 2002 2003 2004 2005 2006
Gas trading
in billion m³
2124
29 3033 35
Wholesale
WINGAS
Production
in million boe
0
40
80
120
2001 2002 2003 2004 2005 2006
93 94105 108 112 111
Oil
Gas
7
Sales• 19% CAGR 2001-2006• Boost in 2005 and 2006
from - higher oil and gas prices
- higher gas production in E&P
- increased sales in gas trading
EBIT• 20% CAGR 2001-2006• Significant increase of
EBIT in E&P predominantly due to higher volumes and further increase of oil and gas prices in 2005 and 2006
Oil & Gas –
sales and EBIT
E&P
Gas trading
E&P
Gas trading
Sales
in billion Euro
EBIT
in billion Euro
0
3
6
9
12
2001 2002 2003 2004 2005 2006
E&P
Gas4.5 4.2 4.8 5.3
7.7
10.7
0
1
2
3
4
2001 2002 2003 2004 2005 2006
1.3 1.2 1.4 1.62.4
3.3
88
1 | Oil & Gas in the BASF portfolio
2 | E & P
3 | Gas trading
4 | Strategic partnership with Gazprom
5 | Outlook
9
Wintershall is a midsize E&P-company with focus on
• 5 core regions
• World class operational excellence
• Projects which require specific technological experience
• Strategic partnerships
• Profitable growth
Exploration and ProductionSuccess through focus
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Operating company
Core region
Production and/or Exploration
Caspian:- Exploration in Russian and Turkmen sectors
Russia:- Development of Siberian gas - Acquisition of new projects
Northern Africa:
- Established oil production in Libya - Additional growth opportunities
Europe:
- Traditional strength in oil and gas - Base for technological expertise
South America:- Established production in Argentina
and further exploration
Exploration and ProductionCore region strategy
11
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.]
Source: Herold, SEC
* Peer Group (upstream only): ExxonMobil, Shell, BP, Total, Amerada Hess, Apache, Marathon, Occidental, Talisman, Woodside** (Income before tax + interest on borrowed capital) / average total assets
Exploration and ProductionWintershall
competitive position
Five year average 2002 -
2006 Wintershall Peers average* Range peers
13 5325 53
-5.6 10.00.7 4.5
3.0 9.27.23.9
6.6 19.612.06.6
16.010.8
13278
11.68.7
4.5 4.5
78 230
8.1 16.2
12
• Continue production growth into next decade- Short term focus on Russian gas projects- 2015 overall production target:
150+ million boe/a
• Ensure adequate reserve base in (re)balanced asset portfolio
- Continue near field exploration, enhance greenfield activities
- Acquire additional brownfield development opportunities (oil)
• Keep geographic focus, core region concept
• Innovation: Evolve from smart follower to one of the leaders in selected technologies
Exploration and ProductionWay forward
1313
1 | Oil & Gas in the BASF portfolio
2 | E & P
3 | Gas trading
4 | Strategic partnership with Gazprom
5 | Outlook
14
Gas trading –
well positioned in a liberalizing European 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)• Modern, expanding own infrastructure
- Well structured pipeline system in Germany
- Largest gas storage facility in Europe (Rehden)
• Direct connections to European gas hubs
* WINGAS: 65% BASF / 35% Gazprom (50% plus/minus one share after finalization of asset deal); WIEH and WIEE 50/50 each.
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Gas trading –
WINGAS activities in Europe
WINGAS growth:• Sales 1995:
3.8 billion m³• Sales 2006:
23 billion m³• CAGR 2001-2006:
14%
Strategic target• “Gas for Europe”• Exploiting the potential
of market liberalization• Significant volume
growth
D
F
UKDK
CZAU
RO
BUL
B
WINGASWIEE (Central Europe Gas trading activities)
16
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.]
Gas tradingWINGAS competitive position
Five year average 2002 –
2006
-5.2 14.9
10.6 13.5
7.5 8.5
1.6 14.9
3.3 14.7
0.19 1.21
0.4 14.7
0.05 1.21
7.0 13.5
5.0 11.2
WINGAS Peers average* Range peers
Source: Annual Reports, own calculation
* Peer Group: E.on Ruhrgas, Verbundnetz Gas AG, Gaz de France, Centrica** (Income before tax + interest on borrowed capital) / average total assets
17
NordStre
am
EU 27in billion m³
Imports
Local production
2005 2015
600-700
550
44% 25%
75%56%
(1)
Interconnector(2)
Europipe
I(3)
Europipe
II(4)
Jamal
(5)
Transgas(6)
BBL(7)
Nord
Stream
WINGAS pipeline system
Gas trading Central pipeline system in Europe
18
Gas trading –
supply contracts key to sustainable growth
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 of > 700 billion m³ in total*
• Strong foundation of business
• Potential to optimize through short-/mid-term supplies in the future
Sales
• Until 2010 approx. 80% of sales volumes already contracted
* Over contract period
WINGAS supply
portfolioin billion m³ p.a.
0
40
1995 2000 2005 2010 2015
20
30
10
19
Gas trading –
way forward
• Continue profitable growth above market average in Germany and Europe
• 2010 Gas trading sales target: 40 billion m³
• Reap benefits of market liberalization, minimize cost of regulation
• Capture logistical optimization through swap potential
• Implement Haidach and Saltfleetby to become # 3 storage company in Europe
• Target earliest Nord Stream implementation
• LNG supply only as an option to additional deliveries
20
1 | Oil & Gas in the BASF portfolio
2 | E & P
3 | Gas trading
4 | Strategic partnership with Gazprom
5 | Outlook
21
Achimgaz Pilot drillings confirm expectations
Achimgaz
(50% BASF, 50% Gazprom)
• First production joint venture with Gazprom
• One of the largest German investments in Russia: Total investment 1.1 billion Euro (BASF share 0.6 billion Euro)
• Securing production volumes
• Wintershall provides technical expertise for development of complex reservoirs
• Joint venture started drilling production wells
• Drilling results confirm expectations
• Risk minimizing through two phased approach
• Reserve booking under discussion
22
Asset swap with Gazprom Deepening our long-term partnership
• Expanding partnership with Gazprom through joint development of Yuzhno Russkoye gas field
• BASF with 25% less one share and 10% non voting shares significantly improves its reserve basis and long term production volumes
• Gazprom extends its WINGAS participation (50% less one share)
• Gazprom will participate with 49% share in a Wintershall subsidiary for onshore E&P in Libya
• Gazprom and BASF both increase their earnings potentials
• Total investment of 1.9 billion Euro (BASF share 0.7 billion Euro)
23
Nord
Stream Northern European Gas Pipeline
• Major infrastructure project to supply Western Europe with Russian gas (55 bn m³/2 pipelines)
• Gazprom holding 51%, BASF 24.5%, E.ON 24.5% in JV (participation of Gasunie under negotiation)
• Subsea pipeline from Vyborg, Russia through the Baltic Sea to the coast of Germany near Greifswald
• Pipeline length 1200 km (one of the longest subsea pipelines in the world)
• Projected start-up late 2010
• The total investment for the offshore pipeline* and Germany onshore continuation is estimated to be at least 9 billion Euro (BASF share 2.8 billion Euro)
* Published investment by Nord Stream AG for the offshore part is at least 5 billion Euro
24
1 | Oil & Gas in the BASF portfolio
2 | E & P
3 | Gas trading
4 | Strategic partnership with Gazprom
5 | Outlook
25
814937
0,000
1,000
2,000
3,000
2000 2006 20100,000
1,000
2,000
3,000
Oil & Gas resources and reserves
Achimgaz
Base
YR/Libya Swap
Resources* (3P) ** (in million boe)
SEC Reserves *** (in million boe)
R/P ratio ≥ 10 from 2007
* As of closing of Yuzhno Russkoye deal
** Sum of proven, probable and possible reserves
*** Proven reserves according to SEC guidelines
26
Oil & Gas Pursuing ambitious growth targets
2006 2010
Crude oil and natural gas production of 111 million barrel oil equivalent
Increasing crude oil and naturalgas production to 140 million barrel oil equivalent
Natural gas sales of 35 billion cubic meters
Increasing natural gas sales to 40 billion cubic meters
Investments 2001-2006: 3.0 billion Euro
Major investments 2007-2010:3.3 billion Euro
EPS from E&P: 1.4 Euro*
EPS from E&P:1.2 – 1.8 Euro**
EPS from gas trading:0.47 Euro*
EPS from gas trading:0.35 – 0.40 Euro***
** Based on number of BASF shares on 31.03.2007 (494,705,000); Brent range of 35 – 55 USD, USD/Euro 1.25; including Yuzhno Russkoye 35%, Libya onshore C96/C97 51%
*** Based on number of BASF shares on 31.03.2007 (494,705,000); subject to contract prolongation, no major changes in market framework, minor Nord Stream volumes only; WINGAS: 50% BASF / 50% Gazprom (plus/minus one share)
* Based on number of BASF shares on 31.12.2006 (501,090,000); Brent average 2006 of 65.14 USD/bbl, USD/Euro 1.26; Gas trading: WINGAS: 65% BASF / 35% Gazprom
27
Wintershall contributes substantially to BASF Group results …
• … and will continue to do so in a challenging business environment …
• … through tailored organic growth strategies in both up- and midstream …
• … in growth markets focused on Europe’s increasing gas import requirements.
Wintershall
–
fit for the future
28
Disclaimer
This presentation contains forward-looking statements under the US Private Securities Litigation Reform Act of 1995. 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 Form 20-F filed with the Securities and Exchange Commission. We do not assume any obligation to update the forward-looking statements contained in this presentation.
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• 3P reserves Sum of proven, probable and possible reserves• BBL Balgzand Bacton Line• E&P Exploration and Production• F&D costs Finding and Development costs• JAGAL Jamal-Gas-Anbindungs-Leitung (Yamal gas link)• MIDAL Mitte-Deutschland-Anbindungs-Leitung (Central Germany gas link)• NEGP North European Gas Pipeline, former project name of Nord Stream• NEL Norddeutsche-Erdgas-Leitung (Northern Germany gas link, planned)• OPAL Ostsee-Pipeline-Anbindungs-Leitung (Nord Stream gas link, planned)• OPEX Operating Expenditures• R/P Proven reserves divided by annual production (years)• SEC Securities and Exchange Commission• SEL Süddeutsche-Erdgas-Leitung (Southern Germany gas link, planned)• STEGAL Sachsen-Thüringen-Erd-Gas-Anbindungs-Leitung
(Saxony-Thuringia natural gas pipeline)• WEDAL West-Deutschland-Anbindungs-Leitung (Western German gas link)• WIEE Wintershall Erdgas Handelshaus Zug AG• WIEH Wintershall Erdgas Handelshaus GmbH & Co. KG
Glossary and abbreviations
31
• bbl barrel• bcm billion cubic meter• boe barrel oil equivalent• bscf billion standard cubic feet• Btu British thermal unit• kWh kilo Watt hours• toe tons oil equivalent
• 1 bbl = 159 liter• 1 bscf = about 0.17 million boe• 1 m³ = 35.3 cf (1 m³0°C = 37.3 scf60°F )• 1 toe = about 7.6 boe• 1 therm = 29.3 kWh• 1 Btu = 100,000 therms• 1 mBtu = about 1.07 scf
Abbreviations and conversions
