NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF THAT JURISDICTION. THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND IS NOT AN OFFER OF SECURITIES IN ANY JURISDICTION.

THIS IS AN ANNOUNCEMENT AND NOT A CIRCULAR OR PROSPECTUS OR EQUIVALENT DOCUMENT AND INVESTORS AND PROSPECTIVE INVESTORS SHOULD NOT MAKE ANY INVESTMENT DECISION ON THE BASIS OF ITS CONTENTS. A CIRCULAR AND PROSPECTUS IN RELATION TO THE ACQUISITION DESCRIBED IN THIS ANNOUNCEMENT WILL EACH BE PUBLISHED IN DUE COURSE.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

Harbour Energy plc

("Harbour")

Transformational acquisition of Wintershall Dea asset portfolio

21 December 2023

Harbour is pleased to announce that it has reached an agreement with BASF and LetterOne, the shareholders of Wintershall Dea AG ("Wintershall Dea"), for the acquisition of substantially all of Wintershall Dea's upstream assets (the "Target Portfolio") for $11.2 billion (the "Acquisition").

The Target Portfolio includes all of Wintershall Dea's upstream assets in Norway, Germany, Denmark[1], Argentina, Mexico, Egypt, Libya[2] and Algeria as well as Wintershall Dea's CO₂ Capture and Storage ("CCS") licences in Europe. Wintershall Dea's Russian assets are excluded. The Acquisition will add 1.1 bnboe of 2P reserves at c.$10/boe and more than 300 kboepd of production at c.$35,000/boepd[3].  

The Acquisition is expected to transform Harbour into one of the world's largest and most geographically diverse independent oil and gas companies, adding material gas-weighted portfolios in Norway and Argentina and complementary growth projects in Mexico. Harbour will also benefit from an increased reserve life and improved margins with lower operating costs and greenhouse gas ("GHG") intensity. 

Harbour is expected to receive investment grade credit ratings and to benefit from a significantly lower cost of financing resulting from the porting of existing euro denominated Wintershall Dea bonds with a nominal value of c.$4.9 billion[4] (the "Wintershall Dea Bonds") and a weighted average coupon of c.1.8 per cent. The Acquisition is also accretive to Harbour's free cash flow, supporting enhanced and sustainable shareholder returns.

Acquisition benefits

The Board of Directors of Harbour believe the Acquisition is a strong strategic fit, in line with its stated M&A objectives, and offers a transformational value-creating opportunity for Harbour's shareholders. 

The Acquisition:

Consideration structure

Under the terms of the business combination agreement entered into between Harbour, BASF and LetterOne (the "BCA"), Harbour will acquire the Target Portfolio for $11.2 billion comprising:

Other key details of the Acquisition

Board recommendation and Undertakings

The directors of Harbour have determined that the Acquisition is in the best interests of Harbour based on a number of factors and intend unanimously to recommend that shareholders vote in favour of the relevant resolutions at the shareholder meeting to be held to approve the Acquisition.

The directors of Harbour and certain of their connected persons have irrevocably undertaken that they will vote in favour of the relevant resolutions required to implement the Acquisition at the shareholder meeting in respect of their own beneficial holdings of Harbour shares, representing approximately 1.7 per cent of the existing share capital of Harbour as at 20 December 2023, being the last practicable date prior to publication of this announcement.

EIG Asset Management LLC, EIG Separate Investments (Cayman) LP and Potomac View Investments, LP have each irrevocably undertaken to vote in favour of the relevant resolutions required to implement the Acquisition at the Harbour shareholder meeting in respect of their holdings of Harbour shares, representing 16.8 per cent of the existing share capital of Harbour as at 20 December 2023, being the last practicable date prior to publication of this announcement.

Conditions to closing

The Acquisition constitutes a reverse takeover for the purposes of the Listing Rules for Harbour, with the intention that Harbour applies to retain its premium London listing on completion. Harbour will seek shareholder approval and re-admission of its Ordinary Shares and admission of the new Ordinary Shares upon completion to the premium listing segment of the Official List of the Financial Conduct Authority (the "FCA") (or a listing on the single category for equity shares in commercial companies if such new listing category, as contemplated in FCA Consultation Paper CP23/31, has been implemented by the FCA and taken effect at the relevant time) and to trading on the main market for listed securities of the London Stock Exchange. Harbour will, in due course, issue a circular to its shareholders to convene a general meeting to seek approval of the Acquisition and publish a prospectus.

The Acquisition is subject to, amongst other things, regulatory, antitrust and foreign direct investment approvals, as well as Harbour shareholder approval. Completion of the Acquisition is expected to occur in Q4 2024.

Linda Z Cook, CEO of Harbour, commented:

"Today's announcement marks Harbour's fourth major acquisition and the most transformational step yet in our journey to build a uniquely positioned, large-scale, geographically diverse independent oil and gas company.

"The addition of Wintershall Dea's assets will increase our production to over 500 kboepd, extend our reserves life, and enhance our margins and cash flow, all supporting enhanced shareholder returns over the longer run. Importantly, the acquisition also advances our energy transition objectives by shifting our portfolio towards natural gas, lowering our GHG emissions intensity and expanding our CCS interests into new European markets. 

"I am proud of what we have achieved so far - a testament to the skill, hard work and commitment of our people - including our track record of safe and responsible operations and disciplined capital allocation, which have made this acquisition possible.

"We look forward to completion of the acquisition and welcoming Wintershall Dea employees to Harbour, and to our further growth as we continue to build a global independent oil and gas company of the future."

 Alexander Krane, CFO of Harbour, commented:

"The acquisition of Wintershall Dea's large scale, high quality portfolio will transform our asset base as well as our capital structure. The funding structure we have put together - including the porting of $4.9 billion of low-cost investment grade bonds with a coupon of 1.8 per cent and the issuance of $4.15 billion of equity at a significant premium - will significantly improve our credit rating and deliver a transaction which is accretive on a per share basis across all key metrics. This will materially improve our cost of capital and enable access to broader and lower cost sources of funding, supporting further growth and additional shareholder returns.         The increase to our ordinary dividend per share is a first step in this direction."

Harbour enquiries:

A live audio webcast and conference call for analysts and investors will be held today at 4.30pm London time. The conference call details can be found on Harbour's website: www.harbourenergy.com

FURTHER INFORMATION ABOUT THE ACQUISITION

Additional funding details

Key Conditions to the Acquisition

The Acquisition constitutes a reverse takeover for the purposes of the Listing Rules for Harbour, with the intention that Harbour will apply to readmit its Ordinary Shares, and admit the new Ordinary Shares, to listing in London on completion.

The Acquisition is conditional therefore on, among other things:

Shareholder approval

As indicated above, the Acquisition will be conditional on, amongst other things, approval by Harbour's shareholders. Harbour currently anticipates posting a shareholder circular to convene a shareholder meeting to approve the Acquisition in H1 2024. At that shareholder meeting, it is expected that shareholders will be asked to approve ordinary resolutions (i) consenting to the issuance of more than 30 per cent of the Ordinary Shares in Harbour to BASF without triggering a mandatory offer for the purposes of the Takeover Code (a Takeover Code "Rule 9 Waiver"); (ii) approving the Acquisition for the purposes of the Listing Rules; (iii) approving the issuance of new Harbour shares to BASF and LetterOne, as described above; and (iv) certain other matters required to effect the Acquisition.

Rule 9 Waiver

It is anticipated that BASF, as the largest shareholder of Wintershall Dea, will hold 46.5 per cent^[18] of the Ordinary Shares of Harbour post completion. As a result, BASF would ordinarily be required to make a mandatory offer under Rule 9, however a Rule 9 Waiver will be sought from the Takeover Panel in order to disapply mandatory offer requirements. This Rule 9 Waiver will require approval by Harbour's independent shareholders at the general meeting to be convened pursuant to the Circular which will be sent to shareholders in due course.

Relationship agreements

At completion, Harbour will enter into separate relationship agreements (the form of which has already been agreed) with BASF and LetterOne governing the relationship between Harbour and each of BASF and LetterOne which will be effective at Admission (the "BASF Relationship Agreement" and the "LetterOne Relationship Agreement" respectively and, together, the "Relationship Agreements"). The principal terms of the Relationship Agreements are referred to below.

BASF Relationship Agreement

In addition to the mandatory undertakings given by BASF required under the UK Listing Rules and other customary provisions, the BASF Relationship Agreement will provide that BASF will be entitled to appoint following Admission up to two Non-Executive Directors and reasonable cooperation and assistance from Harbour in relation to any offering of Ordinary Shares by BASF.

LetterOne Relationship Agreement

The LetterOne Relationship Agreement contains similar provisions to the BASF Relationship Agreement, except, among other things, certain rights and obligations of LetterOne, including in relation to the appointment of any Non-Executive Director, which will only be triggered from the date on which LetterOne holds 10 per cent or more of the Ordinary Shares.

Lock-Up Agreements

At completion, Harbour will enter into separate lock-up agreements with BASF and LetterOne governing the disposal of shares in Harbour held by BASF and LetterOne (the "BASF Lock-Up Agreement" and the "LetterOne Lock-Up Agreement").

BASF Lock-Up Agreement

Pursuant to the BASF Lock-Up Agreement, BASF's Ordinary Shares will be subject to a lock-up for the first six months following completion during which time, subject to customary exceptions, BASF will not be permitted to sell its Ordinary Shares.

LetterOne Lock-Up Agreement

The LetterOne Lock-Up Agreement contains similar provisions to the "BASF Lock-Up Agreement". In the event that LetterOne is able to convert its Non-Voting Shares into Ordinary Shares, such Ordinary Shares will be subject to a lock-up for the first six months following completion.

LetterOne Standstill Agreement

LetterOne will also enter into a standstill agreement (the "LetterOne Standstill Agreement") with Harbour to be effective on completion pursuant to which it will undertake:

LetterOne may transfer its Non-Voting Shares to certain permitted transferees, in certain cases only with the consent of Harbour and in accordance with the terms of the Non-Voting Shares.

Key indicative financial Information on Wintershall Dea

Summary IFRS financial information

The unaudited Target Portfolio historical financial information for the year ended 31 December 2022  and the six months ended 30 June 2023 (together the "Unaudited Target Portfolio Historical Financial Information") included in this announcement reflects the historical results of operations and financial position of the Target Portfolio as if the Target Portfolio had been run during the relevant periods as a stand-alone business, in conformity with IFRS and the accounting policies adopted by Wintershall Dea in its own consolidated Annual Report and Accounts. The Unaudited Target Portfolio Historical Financial Information does not include the cost of services historically provided by the headquarters of Wintershall Dea to the Target Portfolio, however such costs will be reflected in the Prospectus Historical Financial information (as defined below).

Following closing of the Acquisition Wintershall Dea may provide services to Harbour in connection with the Target Portfolio under a number of service agreements.

The Unaudited Target Portfolio Historical Financial Information has been prepared in accordance with Wintershall Dea IFRS accounting policies and no adjustments have been made to align the accounting policies of Wintershall Dea to those of Harbour. The Unaudited Target Portfolio Historical Financial Information has been extracted without material adjustments from the accounting records that underpin Wintershall Dea's 31 December 2022 consolidated Annual Report and Accounts and 30 June 2023 Half Year Results.

The accounting records referred to above are presented in EUR, which have been converted to USD using the Harbour foreign exchange (FX) rates in the tables below:

In accordance with the Listing Rules, the Circular and Prospectus will contain Historical Financial Information on the Target Portfolio covering the latest three financial years (expected to be the years ended 31 December 2023, 2022 and 2021) (the "Prospectus Historical Financial Information") prepared in accordance with IFRS and will be consistent with Harbour's accounting policies, adopted in Harbour's Annual Report and Accounts for the year ended 2023, expected to be latest annual consolidated accounts prior to the publication of the Circular and Prospectus. Such Prospectus Historical Financial Information on the Target Portfolio contained in the Circular and Prospectus may therefore differ from the Unaudited Target Portfolio Historical Financial Information set out above.

Harbour has undertaken an initial review to compare Wintershall Dea's accounting policies to those of Harbour. The following areas are expected to require alignment when preparing the Prospectus Historical Financial Information to be included in the Circular and Prospectus but have not been adjusted in the summary financial information included in this announcement:

On the basis of Harbour's initial review, and noting that both Wintershall Dea and Harbour report under IFRS, the accounting policy differences set out above are unlikely to have a material impact on Wintershall Dea's Unaudited Target Portfolio Historical Financial Information. Further differences may be identified upon finalisation of the accounting policy difference exercise in relation to which Harbour has been unable to assess materiality at this stage. The Prospectus Historical Financial Information will differ from the Unaudited Target Portfolio Historical Financial Information in respect of the accounting policy differences identified above, any other accounting policy differences identified and the central allocation of historical costs for services provided by Wintershall Dea to the Target Portfolio.

Illustrative post completion unaudited financial information for Harbour

The following sets out the illustrative post completion unaudited historical financial information for Harbour for the periods stated. The historical financial information below in relation to Harbour has been extracted from Harbour's Half Year Results for the six months ended 30 June 2023 and Annual Report and Accounts for the year ended 31 December 2022. The financial information below in relation to the Target Portfolio has been extracted from the above table in the Summary IFRS financial information section of this announcement. The post completion financial information below is a summation of the Harbour and Wintershall Dea financial information.

In the above table Revenue, EBITDAX and oil and gas reserves are shown under the respective company's definitions but for Operating cost per barrel the Harbour definition has been used for both Harbour and Wintershall Dea (as summarised in note 21).

In accordance with the Listing Rules, the Circular and Prospectus when published will include Harbour pro forma financial information prepared in accordance with the requirements of the Prospectus Regulation Rules. Such information may differ from the illustrative post completion Harbour financial information set out above.

NOTES TO EDITORS

About Harbour

Harbour started as a private company in 2014 and has grown through M&A to c.200 kboepd. Harbour publicly listed in the UK through a reverse merger with Premier Oil in 2021. 

Today, Harbour is the UK's largest oil and gas producer with over 90 per cent of its production coming from the UK and the balance from its assets in South East Asia. In addition, Harbour has a portfolio of international growth opportunities including in Indonesia and Mexico and is progressing two CCS projects in the UK, including the Harbour-led Viking project, one of the largest planned CCS projects in the world.

Harbour is a premium-listed, FTSE 250 company headquartered in London with approximately 2,000 staff and contractors across its offshore platforms and offices. In 2022, Harbour delivered free cash flow of $2.1 billion (post-tax, pre shareholder distributions) with production of 208 kboepd, split approximately 50 per cent liquids, 50 per cent gas. Harbour had combined 2P reserves and 2C resources of 865 mmboe as of December 2022.

Further information on Harbour can be found at www.Harbourenergy.com. The Group's ticker symbol is HBR-GB.

About Wintershall Dea

Wintershall Dea is a leading European independent gas and oil company, headquartered in Kassel and Hamburg, Germany. 

Wintershall Dea has more than 120 years of experience as an operator and project partner across the entire E&P value chain. The company with German roots explores for and produces gas and oil in 11 countries worldwide in an efficient and responsible manner. With activities in Europe, Latin America and the MENA region (Middle East & North Africa), Wintershall Dea has a global upstream portfolio and, with its participation in natural gas transport, is also active in the midstream business. Furthermore, the company develops carbon management and low carbon hydrogen projects to contribute to climate goals and secure energy supplies.

As at 30 June 2023, Wintershall Dea had gross assets of $20,156[27] million. This does not reflect the gross assets of the defined perimeter of the Acquisition.   

BASF

BASF creates chemistry for a sustainable future and combines economic success with environmental protection and social responsibility. More than 111,000 employees in the BASF Group contribute to the success of customers in nearly all sectors and almost every country in the world. Its portfolio comprises six segments: Chemicals, Materials, Industrial Solutions, Surface Technologies, Nutrition & Care and Agricultural Solutions.

BASF generated sales of €87.3 billion in 2022. BASF shares are traded on the Frankfurt stock exchange (BAS) and as American Depositary Receipts (BASFY) in the United States.

LetterOne

LetterOne is a £20 billion long-term investment business headquartered in Luxembourg. It supports 125,000 jobs globally in sectors including health, energy, technology and retail.

Target Portfolio

The Target Portfolio consists of Wintershall Dea's non-Russia connected upstream assets, including producing and development assets as well as exploration rights in Norway, Argentina, Germany (excluding midstream), Mexico, Algeria, offshore Libya, Egypt and Denmark (excluding the Ravn field) as well as Wintershall Dea's CCS licences in Europe.

The excluded assets are those located in Russia and those held through joint ventures with Russian majority state-owned energy corporation Gazprom: Wintershall Dea Noordzee B.V. (50 per cent Wintershall Dea / 50 per cent Gazprom^[28], registered in Rijswijk, The Netherlands), Wintershall Dea AG (51 per cent Wintershall Dea / 49 per cent Gazprom, registered in Celle, Germany) and Nord Stream AG (15.5 per cent Wintershall Dea / 51 per cent Gazprom, registered in Zug, Schweiz). WIGA Transport Beteiligungs-GmbH & Co. KG (50.02 per cent Wintershall Dea / 49.98 per cent SEFE, registered in Kassel, Germany) is also not part of the asset perimeter.

The Target Portfolio comprises:

Production of 317 kboepd (65 per cent gas) in H1 2023

Operating costs of c.$9/boe in H1 2023

IMPORTANT NOTICE

The information contained in this announcement is for information purposes only and does not purport to be complete. The information in this announcement is subject to change.

This announcement has been prepared in accordance with English law, the UK Market Abuse Regulation and the Disclosure Guidance and Transparency Rules and Listing Rules of the FCA and information disclosed may not be the same as that which would have been prepared in accordance with the laws of jurisdictions outside England.

No person has been authorised to give any information or make any representations to shareholders with respect to the Acquisition other than the information contained in this announcement and, if given or made, such information or representations must not be relied upon as having been authorised by or on behalf of Harbour, the Harbour directors, or any other person involved in the Acquisition. None of the above take any responsibility or liability for, and can provide no assurance as to the reliability of, other information that you may be given. Subject to the UK Market Abuse Regulation and the FCA's Disclosure Guidance and Transparency Rules and Listing Rules, the delivery of this announcement shall not create any implication that there has been no change in the affairs of Harbour since the date of this announcement or that the information in this announcement is correct as at any time subsequent to its date.

Barclays Bank PLC, acting through its Investment Bank ("Barclays"), which is authorised by the Prudential Regulation Authority and regulated in the UK by the Financial Conduct Authority and the Prudential Regulation Authority, is acting exclusively as joint financial adviser and sponsor for Harbour and no one else in connection with the Acquisition and shall not be responsible to anyone other than Harbour for providing the protections afforded to clients of Barclays nor for providing advice in connection with the Acquisition or any other matter referred to herein.

J.P. Morgan Securities plc, which conducts its UK investment banking activities as J.P. Morgan Cazenove ("J.P. Morgan Cazenove"), and which is authorised in the United Kingdom by the Prudential Regulation Authority and regulated in the United Kingdom by the Financial Conduct Authority and the Prudential Regulation Authority, is acting exclusively as joint financial adviser for Harbour and no one else in connection with the Acquisition and shall not be responsible to anyone other than Harbour for providing the protections afforded to clients of J.P. Morgan Cazenove or its affiliates, nor for providing advice in connection with the Acquisition or any other matter referred to herein.

The contents of this announcement are not to be construed as legal, business or tax advice. Each shareholder should consult its own legal adviser, financial adviser or tax adviser for legal, financial or tax advice respectively.

Percentages in tables have been rounded and accordingly may not add up to 100 per cent. Certain financial data have also been rounded. As a result of this rounding, the totals of data presented in this press release may vary slightly from the actual arithmetic totals of such data.

Forward-looking statements

Certain statements in this announcement are forward-looking statements. In some cases, these forward looking statements can be identified by the use of forward looking terminology including the terms "believes", "expects", "estimates", "anticipates", "intends", "may", "will" or "should" or in each case, their negative, or other variations or comparable terminology. These forward looking statements reflect Harbour's current expectations concerning future events and speak only as of the date of this announcement. They involve various risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Harbour Group, the post-completion Harbour Group, third parties or the industry to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. Such risks, uncertainties and other factors include, amongst other things, general economic and business conditions, industry trends, competition, changes in regulation, currency and commodity price fluctuations, the Harbour Group's or the post-completion Harbour Group's ability to recover its reserves or develop new reserves and to implement expansion plans and achieve cost reductions and efficiency measures, changes in business strategy or development and political and economic uncertainty. There can be no assurance that the results and events contemplated by these forward looking statements will in fact occur.

No statement in this announcement is intended as a profit forecast or estimate for any period and no statement in this announcement should be interpreted to mean that earnings, earnings per share or income, cash flow from operations or free cash flow for the Harbour Group or the post-completion Harbour Group, as appropriate, for the current or future years would necessarily match or exceed the amount set out in any forward-looking statement or historical published earnings, earnings per share or income, cash flow from operations or free cash flow for the Harbour Group or the post-completion Harbour Group, as appropriate.

This announcement and the documents required to be published pursuant to Rule 26.1 of the UK Code on Takeovers and Mergers (the "Takeover Code") will be made available at the relevant time for inspection on Harbour's website at www.Harbour.com. Neither the content of Harbour's (or any other website) nor the content of any website accessible from hyperlinks on Harbour's website (or any other website) is incorporated into, or forms part of, this announcement.

The information contained within this announcement is deemed by Harbour to constitute inside information for the purposes of Article 7 of Market Abuse Regulation (EU) No 596/2014 (as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018). By the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain. The person responsible for arranging for the release of this announcement on behalf of Harbour is Howard Landes, General Counsel.

LEI: 213800YPC42DYBKVPF97