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Wintershall Dea exiting Russia as operations are “not tenable”

Germany’s oil and gas company Wintershall Dea is planning to fully exit Russia, stating that continuing to operate in Russia is “not tenable” and that Russia’s aggression on Ukraine is incompatible with the company’s values.

The Supervisory Board approved a principle decision by the Management Board to exit Russia, and as a consequence, Wintershall Dea said it intends to fully exit Russia in an orderly manner.

The German firm concluded that it no longer meets the criteria set out under IFRS for having control or significant influence over its Russian joint ventures, thus it had deconsolidated all its Russian participations in Q4.

Until the exit is completed, the Russian participations will be accounted for as financial assets measured at fair value according to IFRS 9.

“Wintershall Dea will end its Russian activities. Continuing to operate in Russia is not tenable. Russia’s war of aggression in Ukraine is incompatible with our values and has destroyed cooperation between Russia and Europe,” said Wintershall Dea’s CEO Mario Mehren.

“In recent months, limitations imposed by the Russian Government on operations of Western companies in the country and external interferences in our joint venture operations, made it impossible for Wintershall Dea to operate in Russia as before and resulted in an economic expropriation of the Joint Ventures in Russia.”

Following the deconsolidation, Wintershall Dea will no longer report financial or operational KPIs, including production and reserves, of the Russian joint ventures in its group financial statements, except changes in fair value of the financial assets.

According to the company, the fair value of the Russian joint ventures is significantly impacted by the external interference into the business models, namely, the Russian Presidential Decree and the decision of the Russian Government from December, among others, that retroactively reduce the prices at which the joint ventures can sell their produced hydrocarbons to Russian gas company Gazprom.

Consequently, Wintershall Dea expects to record a non-cash loss from the deconsolidation of the joint ventures that together with other Russia-related impairments, in particular on its participating interests in Nord Stream AG and WIGA Transport Beteiligungs, amounts to a total of approximately €5.3 billion.

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Since the start of the war in Ukraine, Wintershall Dea has adjusted its financial framework and excluded Russian operations from its planning perimeter.

“Having built significant flexibility during the year 2022, the company will take actions in line with its financial policy to maintain a strong balance sheet consistent with its investment grade rating commitment and in parallel profitably grow and diversify its business outside of Russia,” the company stated.

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