Wintershall Dea AG (HBR) Earnings Call Transcript & Summary

Hello, everyone, and welcome to the Harbour Energy plc Transformational Acquisition. My name is Seb, and I'll be the operator for your call today. [Operator Instructions] I will now hand the floor over to Linda Cook, CEO of Harbour Energy. Please go ahead.

Great. Thanks, Seb, and good afternoon or morning to those of you dialing in from the U.S., and welcome to our call. We have exciting news to share, and we're glad to see that some you have been able to join us on such short notice and so close to the holidays. With me on the call, if you turn to Slide 1, please, is Alexander Krane, our CFO. Together, we'll provide an overview of the transaction announced earlier today and then happy to take your questions. Turning to Slide 2. We're pleased to share that we've reached an agreement with the shareholders of Wintershall Dea for Harbour to acquire substantially all of the upstream oil and gas assets of the company. Those of you who know us well will be aware that this represents our fourth material transaction since 2017. Given its size and quality, it will transform Harbour Energy into the global diverse independent oil and gas company we've aspired to be since starting from scratch a few years ago. The portfolio being acquired will also take us forward on our energy transition journey, significantly lowering our greenhouse gas emissions intensity and expanding our already strong CO2 capture and storage position into new European markets. And consistent with our M&A track record, even though the transaction will more than double the size of Harbour, upon completion, our balance sheet will be strong. In fact, we will have improved our credit rating by several notches. All of this supports an increase to our dividend and our ongoing commitment to competitive and sustainable shareholder returns. The next slide provides a snapshot of the transaction, which includes a total consideration of $11.2 billion with an effective date of the 30th of June 2023. The right side of the page summarizes how we'll pay for it. Starting at the bottom, reporting existing investment-grade bonds for Wintershall Dea with a nominal value of $4.9 billion and priced at very favorable terms. The impact of this on our cost of financing is one of the most important sources of synergies resulting from this transaction. Second, we're paying $2.15 billion in cash. This will come from the interim period cash flow generated by the target portfolio with the balance as necessary from drawing down on a $1.5 billion bridge facility provided by our lenders. The remainder of the consideration, $4.15 billion will be paid in Harbour equity. For the purpose of converting this into a shareholding a value of 360p per share was agreed with the sellers, representing a more than 50% premium to where our shares have recently traded. Our ability to structure the transaction in this way in particular through the porting of the Wintershall Dea bonds, along with the equity component of the transaction and the quality of the assets being acquired, mean that we expect to receive investment-grade credit ratings upon completion. This is another important step along Harbour's journey to become the company we aim to be. Turning to the left side of the page. The portfolio includes Wintershall Dea's upstream assets in Norway and Germany, Argentina and Mexico as well as their smaller positions in North Africa. The portfolio will increase our 2P reserves by 1.1 billion barrels being acquired at a price of $10 per barrel competitive when compared to other recent large transactions. The equity component of the transaction means we'll have 2 new investors. First, BASF, the largest investor in Wintershall Dea, and they'll receive ordinary shares in Harbour giving them a stake of 47% in our listed ordinary share. As a result, they'll have the right to nominate 2 nonexecutive directors to our Board. In the past, BASF has publicly stated their aim to exit upstream oil and gas. While this was reconfirmed in their release today, they also recognize the significant potential for value creation, their investment in Harbour offers. During the period, where there are a large investor in Harbour will certainly welcome their representatives to our Board and all the knowledge and experience, I'm sure they'll bring. Turning to LetterOne who own 27% of Wintershall Dea. Those of you familiar with the company will be aware that 2 of their Russian owners are subject to sanction. Importantly, LetterOne itself is not sanctioned. Nevertheless, we took steps to ensure Harbour was distanced from any potential negative impact related to the situation. This includes several things. Number one, we're not acquiring any of Wintershall Dea's assets in Russia. Number two, we're not acquiring Wintershall Dea's interest in assets held through joint ventures with Gazprom. And number three, we structured the transaction in a way to ensure the LetterOne has no influence on Harbour. This has been achieved by providing their Harbour equity in the form of unlisted, non-voting preferred shares. As a consequence, I'll not have the right to appoint directors to our Board or any other governance rights. In return then for the lack of influence and liquidity, LetterOne will receive a 13% premium on any dividend paid on our ordinary shares. The structure was developed in a very thoughtful manner and has withstood the scrutiny of our own advisers as well as the various credit and sanctions committees of our lending banks, which as I'm sure you can imagine, are quite rigorous. Turning to our Harbour investors. I'm pleased to say we already have irrevocable commitments, representing 18.5% of our shares, including from our directors and largest investors. This gives us a head start along the way towards the required approval of 50% of those voting, and we'll endeavor to secure more of these in advance of our shareholder meeting. Turning now to the next page that we have an overview of the portfolio being acquired. The single biggest component is in Norway with its low unit operating cost and greenhouse gas emissions, stable fiscal regime and supportive environment, it's a very attractive country for oil and gas companies. We've aspired to a material position in Norway since starting Harbour, but we're particularly optimistic we'd ever be successful in a competitive bidding process. by engaging directly with the Wintershall Dea shareholders, by structuring the transaction the way we have, by finding solutions to the various complexities presented in this transaction, we've been able to secure this Norwegian position when we know is coveted by other companies through our private bilateral discussions with the Wintershall Dea investors. The transaction will make us the sixth largest producer in the country with a portfolio that's a mix of operated and nonoperated assets and with a large base of undeveloped reserves and resources to supplement the existing producing assets. Next largest is Argentina. Assets there are operated by Total and like Norway are natural gas dominated. In Mexico, coincidentally, we are already partners with Wintershall Dea in 2 discoveries Zama and Kan. So we know those assets well. They offer the potential to help replace production and reserves in the future. And then there's also Wintershall Dea's long-standing presence in Germany, where they operate the country's largest oil and gas fields and a well-established position in North Africa, including onshore and offshore positions in Egypt, where BP is the operator. All in all, 2P reserves of 1.1 billion barrels of oil equivalent, 2/3 of this natural gas with first half 2023 production of more than 300,000 barrels per day. Importantly, for us, the 2P reserves life is 10 years at year-end 2022 and unit OpEx is $9 per barrel. And finally, the greenhouse gas emissions intensity of the portfolio on a net equity basis is 12, which is top quartile when compared to industry globally. Turning to Page 5. We can answer the question, what this means for Harbour. The structure of the acquisition, together with the portfolio, means it's accretive across all key metrics on a per share basis. Production exceeds 500,000 barrels a day with material contributions from the U.K., Norway and Argentina, resulting in a 20% increase per share. With our reserves almost tripling, the transaction is accretive on a reserves per share basis, and it increases our 2P reserves life to 8 years back in our comfort zone. The acquisition also significantly increases our per share cash flow going forward, which has been a key criteria for us. The sustainability of our production and future cash flows as a result of the acquisition will enable us to increase our annual dividend post completion, resulting in a 5% dividend per share growth for current investors. We'll also increase the size of our organization by more than 50% adding about 1,200 employees from Wintershall Dea, those based in the business units we're acquiring. We may also have roles for many of their staff located in their current headquarters. We look forward to welcoming all of these additions to Harbour and the skills and expertise, I'm sure they'll bring post completion of the transaction. Turning to Slide 6. The acquisition is straight down the fairway of the strategy we've been following since Harbour's inception in 2014. Those of you who have been following will have heard us talk about the goal of building a new global independent oil and gas company since that time. We knew it was ambitious, but we saw the opportunity presented initially with major oil companies trimming their portfolios, that led to our acquisitions of large asset packages in the U.K. from both Shell and Conoco. Then we have smaller companies recognizing the need for scale, and we saw the opportunity for the merger with Premier, which delivered material financial synergies, our entry into Southeast Asia and Mexico and delivered a public listing for Harbour. More recently, we have challenges faced by privately held companies as they try to find a path to liquidity given IPO headwinds. And this, of course, is one of the factors that led to our discussion with Wintershall Dea's investors. All of these situations are still present today. In particular, majors are now consolidating once again, likely leading to some divestments as they rationalize combined portfolios and small companies increasingly see the need for scale, diversity and the importance of an investment-grade credit rating in order to survive. Given the way we've been able to structure the transaction announced today, I believe we'll remain very well positioned for future opportunities that could lead to additional growth. But our commitment to be patient and to be disciplined will remain. On Slide 7, we cover the rationale behind the transaction captured in 4 categories. I've actually mentioned all of these already, and there are details in the pages that follow. So I won't dwell on them here other than to say there are many reasons why we feel the transaction is compelling. These include the material impact it has on our scale and diversification, but it's not just scale for the sake of scale or diversification for the sake of diversity. Important for us is the quality of the assets and in particular, the reserves life and margins. The predominance of natural gas in the portfolio was also a key driver for us with the low greenhouse gas emissions intensity and Wintershall Dea's carbon capture and storage portfolio, we see the transaction as a step forward in our own energy transition journey. And finally, as Alexander will explain in just a moment, that also takes us a big step forward with respect to our financial framework. On Slide 8, we have a look at the pro forma portfolio with material assets in Northern Europe, Latin America and Southeast Asia. Notably, over 3/4 of our production and 2P reserves will be in OECD countries. Beyond that, we'll have 1.5 billion barrels of 2C resources volumes that give us the potential to offset decline and replace production over time. Similar to many of our opportunities in the U.K., the Norway 2C volumes are largely associated with short-cycle, high-return drilling projects in or near existing fields, including the Neptune operated Gjoea field and the Aker BP-operated Skarv complex. In addition, there's the recent successful appraisal of the Wintershall Dea Bergknapp discovery near Maria and Dvalin. However, the largest 2C volumes are actually in Argentina. As mentioned earlier, these are operated by Total and largely associated with the offshore Tierra del Fuego/CMA-1 field with incremental development opportunities around the Carina field and Fénix Phase 2 and then the onshore Vaca Muerta with quite some running room going forward. Next are the development opportunities in Mexico. These include Zama, where we're working towards the start of feed and the potential FID of the large development in partnership with Pemex and Talos and also in Block 30 where we have a shared interest in the recent Kan oil discovery. These projects are supplemented by existing development opportunities in Indonesia, including the Tuna project, and our large Andaman Sea discoveries. Timpan was discovered by a Harbour operated exploration well last year on our Andaman II license and the Layaran discovery on Andaman South was announced earlier this week. These will be followed by at least 3 more exploration wells over the coming months to test additional natural gas prospects across both licenses with the aim of determining the full potential of this important play. On Slide 9, we see the impact of the acquisition on some key operating metrics. Margins are enhanced, helped by the lowering of our unit OpEx to $11 per barrel and also supported by our increased exposure to advantaged commodity price markets including Brent oil and Northern European gas prices, which so far this year has averaged $13 per MMBtu compared to the U.S. Henry Hub marker of less than $3 per MMBtu. Our 2P reserves are increased by over 250% to 1.5 billion barrels, extending our reserves live to 8 years. And our 2C resources are also increased significantly to 1.5 billion barrels. As you can see on Slide 10, we also achieved a step change from a greenhouse gas emission standpoint. Overall, we increased our gas weighting on a 2P plus 2C basis to 55%, and our pro forma greenhouse gas emissions intensity drops to around 15, putting us well below the global average. And in fact, just outside the top quartile when compared to other producers. This is driven mainly by the dominance of Norway and the acquired portfolio and the increase in proportion of production that is natural gas. We're also reaffirming our net zero 2035 commitment set back in 2021 and remain committed to achieving this. Another important component of the portfolio being acquired are the CO2 storage licenses and projects under development by Wintershall Dea. These projects are in Norway, Denmark and the U.K. and very complementary to Harbour's existing Viking and Acorn projects in the U.K. In combination, we see an opportunity to be a real leader in CCS across Northern Europe and are excited about using our oil and gas skills and our infrastructure to enable the transportation and storage of large volumes of CO2 over the coming years. And now I'm going to turn it over to Alexander.

Fantastic. Great. Thanks, Linda, and good afternoon to everyone joining today. So you've just heard from Linda, how this transaction ticks all the boxes in terms of the M&A criteria that we've been talking about for the last 2.5 years. Geographical diversification, an increase in R/P, improved margins and cash flow accretion. Now this, together with the way we have structured the transaction is expected to transform our capital structure, delivering significant financial synergies and it's a step change in our credit quality. Turning here to the capital structure. This will now be more aligned with our investment-grade peers, both in Europe and the U.S. moving from a largely secured RBL form of financing towards a fully unsecured structure comprising of an RCF and bonds providing us with cheaper and more flexible financing going forward. As a result of replacing our secured RBL facility with a fully underwritten unsecured RCF, we will no longer be subject to mandatory hedging, annual redetermination or an amortization profile. We have also put in place a fully underwritten bridge facility which we can draw on as necessary to fund the cash component not met by the interim cash flows generated from the target portfolio. We expect the bridge facility to be taken out by a combination of free cash flow generated from the business and by issuing new investment-grade bonds after the transaction has closed. Our existing 5.5% 2026 bonds will stay as part of the capital structure, and we will refinance those in the investment-grade markets in due course. In the meantime, the covenant-light nature of these high-yield bonds mean that they don't constrain our business. And then finally, we have the ported investment-grade bond portfolio composed of EUR 1.5 billion of hybrid notes and EUR 3 billion senior bonds. Together, this translates into a nominal value of approximately $4.9 billion. The EUR 1.5 billion hybrid notes are structured to support credit metrics. These are expected to continue to be a feature of the capital structure going forward. The ported bond portfolio has a weighted average coupon of 1.8%, which represents a significant discount when compared to what we would be achievable in today's market. And the bonds have a weighted average maturity of approximately 4.5 years. So in summary, the acquisition will result in us moving to a fully unsecured, more flexible capital structure. Post completion, we have a balanced and a well-distributed maturity profile, allowing us to effectively manage refinancings in the coming years. We will also have a significantly lower cost of financing and important if oil and gas companies today also access to broader, more liquid sources of capital. This alongside our high-quality cash-generative asset base, positions us well to continue building a global oil and gas company of the future, while at the same time, delivering long-term shareholder value. So turning to shareholder returns on Slide 12. As you have heard several times already, the acquisition increases our reserve life, it enhances our margins and result in higher sustainable free cash flow. This together with our expected investment-grade credit profile, enables us to more than double our annual base dividend payment from $200 million to $455 million. Just to be clear, the $455 million includes the base dividend on both ordinary shares and non-voting shares. The dividend on the non-voting shares include a 13% premium to that of the ordinary shares, reflecting the limited voting and governance rights attached to those shares. Just looking at the ordinary share component then, we plan to increase our annual dividend on ordinary shares to about $380 million, which equates to roughly a 5% increase in dividend per share for existing Harbour shareholders. We also see the potential for additional shareholder returns post completion over and above the base dividend in line with our existing policy. So let's move to the next slide on our capital allocation policy. Our approach to capital allocation remains disciplined. We will safeguard the balance sheet, ensure a resilient and robust portfolio through selective investments, and we will return cash to shareholders. The slide change here is that we now add a commitment to remain investment grade. So turning to that first. A strong balance sheet is key for an oil and gas company in 2023 and onwards, something we believe both equity investors and creditors value highly. And we've built a strong track record here. Since our first acquisition in 2017, this has been a defining feature of Harbour, and that will remain the case going forward. In the past, we have actively hedged oil and gas revenues to ensure a predictable cash flow and management of our net debt. While we have no mandatory hedging requirements, we will look to do that again to prudently manage downside risk and protect our investment-grade credit rating. We will review our hedging policy in due course. The targeting hedging around 25% to 50% of total volumes on a rolling 3-year basis seems prudent to us. Next is our priority to ensure a robust and diverse portfolio. Our significantly increased portfolio, including an estimated 1.5 billion BOE of 2C resources, provides us with optionality or our capital investment program and the ability to high grade our very best opportunities to help replace reserves and support production and secure material cash flow generation over the longer term. Our strategy to grow primarily through M&A is unchanged. And given the way we've been able to structure this transaction, we will remain well positioned for future opportunities that could lead to additional growth. But our commitment to be patient and disciplined focusing only on value accretive transaction will remain, and our immediate focus will be on completing this transaction and successful integration of the portfolio into our business. Our approach to shareholder returns remains unchanged. We will continue to look to return excess capital over and above our upsized dividend to shareholders while balancing our other capital allocation priorities. Now, I apologize I think that slides have been moving a bit back and forth, but we're now on to the time line, which at least is showing on my screen. So on Slide 14 for the time line. We've set out here the expected time line for the transaction. We're expecting to publish the circular and prospectus in the first half of next year, which will be followed by shareholder meetings where we will be asking our shareholders to approve the acquisition. Now as a reminder, a simple majority of more than 50% of those voting is required. And as Linda noted, we have already received 18.5% irrevocable undertaking in support of the acquisition, which gives us a good start. In terms of government and regulatory approvals, this is a large transaction spanning multiple jurisdictions. So as you can imagine, there are numerous government and regulatory approvals required, which will take time to work through. As such, we are targeting completion during the fourth quarter of next year. So that's all for me, and I'll pass it back to Linda for a few closing remarks. Thanks.

Thanks, Alexander. Really, just one more slide left before taking your questions. So here, we put the transaction in the context of peers. Today, while Harbour has assets in Mexico and Southeast Asia, our portfolio is dominated by our U.K. production and reserves. Given that in our size today, we straddle this group of small U.K. listed or U.K.-focused independents on one side and the large Norwegian players on the other. With the transaction announced today, we'll move significantly to the left. Placing ourselves in a new peer group, including the large Norwegians, but in addition, some U.S.-listed large independents who have been household names in the oil sector for several years, companies like Apache and Murphy who are more U.S. focused. I think this page makes the point about the unique investment opportunity Harbour presents, a new large-scale global independent with a diverse and high-quality portfolio of mostly conventional offshore assets that's natural gas weighted with considerable exposure to European gas pricing, low emissions intensity and very competitive margins. It also makes clear the progress we've made since founding Harbour just a few years ago and the opportunity we have to continue to play a material role in the world's energy sector going forward. Now the last page is just a repeat of a slide I showed earlier and an opportunity for us to thank you once again for listening. And now I do appreciate this is late on Thursday for many of you just before the holidays. But if there are any questions, we're happy to take them at this time.

[Operator Instructions] The first question comes from Lydia Rainforth at Barclays.

Congratulations on getting the transaction done. I have three questions, if I could. The first one, just to talk through the price that was paid for the Wintershall Dea assets. Can you just -- when we look at that price, what was the best value option that you have? And I suspect probably that links to the second question of can you still -- you talked about being able to do additional opportunities as and when they arrive, if they're accretive. Do you have to get this deal closed before you would look at those? And then secondly, Alexander, if I could just pick up on what you talked about the financing synergies. Could you just run through those again for me in a little bit more detail?

Thanks, Lydia, for the questions. I'll try to tackle the first two. And then as you suggest, for the last one, I'll refer to Alexander. As you can imagine, we've been working on this deal for several months. It's large and complicated. So it has taken some time. But during that period, we actually had the opportunity to engage on at least 2 or 3 different deals of completely different nature. But each time and especially as we were making progress with the transaction announced today, we would compare those opportunities to the Wintershall Dea 1 and always concluded that today's transaction was a much better fit for us and plus, it has tremendous scale. And with the bonds that Alexander talked about gave us the opportunity to lower the cost of financing and really nothing else could compete with the opportunity that we think this still presents for us and our investors. Will we have to wait until this deal completes? It will take several months, as Alexander said. Don't get me wrong, our number one priority other than safety in the company will be the successful execution and completion of this transaction. But I'm not sure that we're at the end of our journey. I think in this sector, scale, diversity are going to continue to be important. And so our strategy will generally remain unchanged, and that's to continue to look for additional value creative opportunities for our investors. Alexander, over to you.

Yes. Thanks for the question, Lydia. And I think when we look at Harbour's balance sheet today, where we have, one, $500 million bonds and when we see the floating interest rates and what we can raise in a secured structure like the RBL, it's pretty clear that porting the bonds portfolio, which has an average of 1.8% interest rates over an average of 4.5 years, I think that the stated one is until 2031. It's a clear improvement on what our cost of debt is. And I think also when we've structured the transaction in such a manner that we are raising, just north of $4 billion in equity as at a premium to today's share price, that also minimizes the dilution on our current shareholders. So in totality, it really transforms the balance sheet here. So our cost of capital will be significantly improved based on the transaction and the structuring here, Lydia.

Lydia, maybe just to kind of add to what Alexander talked about in my answer to one of your earlier questions. When we think about people making large transformative acquisitions, doubling or tripling the size of their company, a lot of times part of their presentation and announcement is about how they're going to have a focus on getting their debt down afterwards, they have to have some divestments because of the -- to help the balance sheet, warnings about maybe limits on buybacks or increases in the dividends, et cetera. I think the remarkable thing for us really is here we are increasing the size of the company by 2 to 3x. And with that, we're actually improving our credit rating to an investment-grade rating, and we're announcing an increase to our dividend. So something that we're, of course, very proud of as part of this transaction. And then it takes me to your point about, are we finished with acquisitions? Again, I make the comment that completing this one is our number one priority. But I think what I feel good about is that we'll have the option and will be ready and prepared should the right opportunity present itself from a financial standpoint even after completing this large transaction.

The next question comes from Mark Wilson at Jefferies.

My first question is on really some of the details in this. And I think to you, Alex, could you just confirm what the pro forma net debt of the company is as we stand? And then looking at the free cash flow going forward, I noticed Wintershall Dea has negative free cash flow for the first 9 months. So should we consider that $2 billion of cash from ongoing business as being the cash flow generation towards that completion date? That's the first question.

Thanks, Mark. So on net debt on completion, I think what we do have a lot of clarity on that it's just a quantum of bonds that will be ported to us. And there are several moving pieces here on free cash flow, which is dependent on commodity prices and timing of working capital and a lot of different things. I think the effective date on this transaction is June 30. So looking at the first 9 months of the year for Wintershall Dea, there are going to be a lot of different things in there. And one of them is clearly going to be the phasing of tax payments in Norway. So it's a bit hard to read out of the 9 months there on exactly how that's going to impact us. But I think what we do see and as we've been going through this process with the rating agencies and doing lots of modeling with them and getting comfortable on how we end with an investment-grade rating is that we do expect leverage here to be less than 1x. So lots of different pieces going into that, Mark. Lots of details there and also payment of 2022 taxes also probably comes in there. But -- yes.

Okay. And so the porting of the Wintershall bonds of $4.9 billion and the $0.5 billion of Harbour bonds, that's where more than that, that should be considered at the moment?

Yes. Then there's also, as Linda talked about, the $2.15 billion of cash that will be paid on completion, where -- yes, there will, of course, be the free cash flow from effective dates until closing of the -- or completion of the transaction. And that's also where we have a bridge facility in place that we can draw on if needed.

Okay. Great. Then in terms of the assets, global asset set in these various countries, and you spoke to the approvals, where do you consider or anticipate the most difficult approval to come through if we look at the next 12 months?

Mark, it's Linda. Thanks for the question. I don't know that we say that anyone is going to be more difficult or easier than the other. There is a long list of them. Some governments move more quickly than others. And I think we'll just work through them one at a time as we go through the coming weeks and months. And it's unclear at this point in time which one will be the long pole in the tent, but we feel confident we'll get to the finish line.

Got it. Okay. And then in terms of the main investor questions so far have been on the valuation, the $3.60 and just how that was set? Any comments you can make about that?

Yes. As I said earlier, it's a large complicated transaction. We were dealing with both investors and Wintershall Dea who had quite honestly, obviously, some different priorities in the transaction, which added a number of different dimensions to it. So there were a number of things to be negotiated and discussed and the valuation of Harbour on a per share basis was one of those. And it's all part of a package deal and where we landed was the $3.60 valuation.

Okay. Congratulations to getting to this stage.

Thanks, Mark. Thank you.

Our next question comes from Chris Wheaton at Stifel.

Linda, Alexander, I think I'll allow you to wreck my Christmas holiday just for this deal, which is I think brilliant, so well done for getting it done before Christmas as well. A number of questions for me, please. Firstly, can I come back to Mark's point on the financial position of the company. And at the end of 2Q '23, Wintershall Dea had EUR 2.3 billion of cash on balance sheet. I was unclear from your answer, how much of that is actually transferring over with the business? Because, obviously, that you're getting or you're paying EUR 2.1 billion of cash out of the free cash flow from the business. But with the bridge facility if there isn't enough free cash flow, but does that assume a 0 cash baseline at the end of 2Q '23? Or is there a cash balance -- will you get that EUR 2.3 billion? If you could clarify that, Alexander, that would be a great place to start.

Yes. Thanks for the question, Chris, and I appreciate the upfront commentary. So the way the transaction is structured is we are acquiring almost all of the operating entities here and not the headquarter and the top co. So a lot of that cash that you're seeing there on the balance sheet will be left in the company. So the way we look at this, it's more a porting of the $4.9 billion of the bonds, so the hybrids and the unsecured notes. I think there's close to $300 million or $400 million there of cash, which is sitting there within the perimeter. So -- and that cash is mainly working capital that we see in the different business units. So a lot of the cash position sitting there at the corporate headquarter that will not form part of the perimeter there.

Okay. So just to be clear, is that $300 million to $400 million included in the $2.15 billion you are paying over or is it assumed that, that stays as working capital in the business?

So that is the -- so that's part of working capital where you will see that there's going to be debtors, there's going to be accounts payable and all kinds of things there as well when we do that working capital assessment there. But clearly, that is one of the areas that requires quite a bit of work, and there's going to be quite significant cash flow generation in the interim period here as well up until closing when we do estimate it's going to be those bonds ported, the bridge and the original $500 million bonds sitting with us and then that interim cash flow, depending on how much we have to draw on the bridge facility will be the net debt at the completion of this transaction.

Okay. Okay. That's very helpful. Second question would be on who -- how much influence do you have on this business then in the next 12 months? Because clearly, this is going to be more or less a year until this completes. Then I'm interested in what control, if anything, you have over what decisions they might take in the next 12 months?

Chris, thanks for the question. I think it's pretty normal. The rules and restrictions and guidelines that are in place between announcement and completion, people have to get on with their business and do normal course of things. Approved budgets are now in place for both Harbour and Wintershall Dea, which we've had line of sight to, and we're comfortable with. And anything new and material above and beyond that, major divestments or acquisitions, of course, will require some sort of discussion between the parties.

Okay. That's brilliant. My last question is about break fees and whether there's any break fees payable to, or payable by BASF or LetterOne should this deal not complete? I obviously -- there's been a significant amount of press comment in the last month about whether ADNOC was interested in buying these assets. And therefore, I'm interested in --at least BASF and LetterOne made irrevocable commitments to this deal? Or are there break fees should a higher offer -- in the event of a higher offer emerging from some of third-party?

Yes. Thanks, Chris. So no, there are no break fees, but there is a contractual commitment amongst all parties to carry through with the transaction, which, of course, we'll be relying on. So -- and just another comment on that. We've spent months negotiating the various features of this deal. It's quite a bespoke transaction that was designed to help meet the objectives of the 2 sellers, which aren't exactly in alignment and nothing right or wrong about either position. But BASF, of course, having the stated objective over time to exit upstream oil and gas, LetterOne preference to remain invested and maintain exposure to oil and gas. And so it required a bit of creativity in order to meet everyone's objectives and get where we got to at the finish line. So I think some of the complex structuring, hopefully, will help us fare well and get to the finish line on this one.

Okay. That's I think some really helpful context there. Thank you very much indeed. I think this is exactly what you should have been doing as you will have seen from a lot of the research I've been writing. So brilliant, well done. And I hope you have -- you can relax and have a good Christmas now.

Thanks, Chris. And yes, sorry to you and everyone else for interrupting your time away, if you're already off for the holidays. We had, of course, preferred to have gotten to this point much earlier in the year. But as I said, large complicated transaction takes some time. And so we have announced it as soon as we could and are just happy we got it done before the holidays.

Our next question comes from Sasikanth Chilukuru from Morgan Stanley.

Congratulations on the deal. Just wanted to add -- the first question was, again, coming back to the balance sheet as well. I wanted to understand what you think is the right level of debt are getting for the pro forma company post completion? I just wanted to understand what the picking order of cash flow would be post the deal completion? The second question was more related to the shareholder distributions in 2024. I just wanted to understand what should be expecting for distribution until the deal is completed in 4Q 2024?

Thanks, Sasi. I'll let Alexander take your first question, then I'll take the last one and then I think wrap it up given the time.

Yes. Thanks, Sasi. I think on the balance sheet, I appreciate there's lots of moving pieces here. But when we get to completion with the ambition structure here, that probably leaves us less than 1x levered. And I think you've seen in the past when we've done transactions that, yes, we'll put some more debt on the balance sheet, but we've been able to rather predictably reduce the debts on the balance sheet and -- through hedging and just being a time prudent on that. And we should have necessarily rule out that, that's going to happen this time as well. I think the number one priority that we're now adding that we didn't have previously is a commitment to staying in investment grade. So we have been spending quite a bit of time with the rating agencies and getting ourselves and then comfortable that pro forma this portfolio will remain within investment-grade metrics. So we haven't set certainly not now a set target for that quantum, but it's more living within the boundaries there of having an investment-grade balance sheet, which is likely to be the new threshold there. Linda?

Thanks, Alexander. So Sasi, your other question was on the -- what to expect in terms of distributions during 2024 from Harbour? So we will pay our final dividend with respect to 2023, which will be $100 million in May of 2024. It's possibly late April. And Elizabeth will correct me if I'm wrong, but I think it's scheduled to go in May, just right after our annual shareholders meeting. Then we would normally expect we paid dividends in the past 2 times a year. We would normally expect our interim dividend with respect to 2024 then to be paid sometime in the fourth quarter of the year. I think the exact timing for that interim payment will be dependent on and subject to exactly when it looks like we're going to complete this transaction. So a little bit TBD. And then if that's paid actually after we've completed this deal, then the 5% increase in the dividend would take effect. If it's paid before we complete the deal, then the 5% increase doesn't take effect until after completion. Okay. So I think in the interest of time, that's the last question for today. I want to thank everyone again for joining us on such short notice and so close to the holidays and wish everyone safe and healthy and happy holiday break with lots of time with friends and family. Thanks so much for joining.