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. There will be a Q&A session on today's call and you can register your question by pressing star one on your telephone keypad or star two to withdraw your question. 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 so many of you have been able to join us on such short notice and so close to the holidays. With me on the call, if we 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. 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, porting existing investment-grade bonds from 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. 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 360 pence 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 two 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 shares. As a result, they'll have the right to nominate two non. BASF has publicly stated their aim to exit upstream oil and gas. They also recognize the significant potential for value creation their investment in Harbour offers. During the period where they're a large investor in Harbour, we'll 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 two of their Russian owners are subject to sanctions. 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 interests in assets held through joint ventures with Gazprom. And number three, we've structured the transaction in a way to ensure that 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, they'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 advisors, 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, we have an overview of the portfolio being acquired. The single biggest component is in Norway.
With its low unit operating costs 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 weren't particularly optimistic we'd ever be successful in a competitive bidding process. By engaging directly with 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, one 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 non-operated assets, and with a large base of undeveloped reserves and resources to supplement.
As the sixth largest producer in the country with a portfolio that's a mix of operated and non-operated assets, and with a large base of undeveloped reserves and resources to supplement the existing producing assets. Next largest is Argentina. The assets there are operated by Total and, like Norway, are natural gas dominated. In Mexico, coincidentally, we are already partners with Wintershall Dea in two discoveries, Zama and Kan, so we know those assets well. They offer the potential to help replace production and reserves in the future. Then there's also Wintershall Dea's longstanding 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, two-thirds 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. 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 UK, 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 Harbour 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 true to. To be disciplined will remain. On slide 7, we cover the rationale behind the transaction captured in four 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, it 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 three-fourths 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 Gjøa 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 in Fenix 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 a 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 Harbour's 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 three 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 have 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 life to eight years, and our 2C resources are also increased significantly to 1.5 billion barrels. As you can see on slide 10, we also achieve a step change from a greenhouse gas emissions standpoint. Overall, we increase our gas weighting on a 2P plus 2C basis to 55%, and our pro forma greenhouse gas emissions.
Overall, we increase 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 in 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 UK, and very complementary to Harbour's existing Viking and Acorn projects in the UK.
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. Now I'm going to turn it over to Alexander.
Fantastic. Great. Thanks, Linda, and good afternoon to everyone joining today. 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 our 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 US dollar 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-like nature of these high-yield bonds means that they don't constrain our business. And then finally, we have the ported investment-grade bond portfolio composed of EUR 1.5 billion 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 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, importantly for 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 results 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 GBP 200 million to GBP 455 million. Just to be clear, the GBP 455 million includes the base dividend on both ordinary shares and non-voting shares. The dividend on the non-voting shares includes 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 GBP 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. Let's move to the next slide in 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 slight 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. We 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 will 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, but targeting hedging around 25%-50% of total volumes on a rolling three-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 over 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 or creative transaction, will remain, and our immediate focus will be on completing this transaction and subsequent 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 the slides have been moving a bit back and forth, but we're now onto the timeline, which at least is showing on my screen. So on slide 14 for the timeline, we've set out here the expected timeline 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. 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. 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. 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. 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.
Thank you. If you would like to ask a question, please press star one on your telephone keypad or press star two if you would like to withdraw your question. The first question comes from Lydia Rainforth at Barclays. Please go ahead.
Thank you, and good afternoon to you both, and congratulations on getting the transaction done.
Actually, 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 look, when we look at that price, was that the best value option that you had? 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 agreed to. 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.
Thanks, Lydia, for the questions. I'll try to tackle the first two, and then as you suggest, turn the last one over for 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 two or three 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 one and always concluded that today's transaction was a much better fit for us. And plus, it had 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 deal 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. 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. 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.
Yeah. Yeah, thanks. Thanks for the question, Lydia. I think when we look at Harbour's balance sheet today, where we have one $500 million bond, 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 four and a half years I think the latest dated one is until 2031. It's a clear improvement on what our cost of debt is. I think also, when we've structured that transaction in such a manner that we are raising just north of $4 billion in equity at a premium to today's share price, that also minimizes the dilution on our current shareholders. In totality, it really transforms the balance sheet here.
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 to have a focus on getting their debt down afterwards, may have to have some divestments to help the balance sheet, warnings about maybe limits on buybacks or increases in the dividends, etc. I think the remarkable thing for us, really, is here we are, increasing the size of the company by 2-3 times. 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's our number one priority. But I think what I feel good about is that we'll have the option, and we'll be ready and prepared should a right opportunity present itself from a financial standpoint, even after completing this large transaction.
That's a great way to look at it. Thank you very much.
Welcome, Lydia.
The next question comes from Mark Wilson at Jefferies. Please go ahead.
Thank you. Thank you for the call. 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 nine months. So should we consider that $2 billion of cash from ongoing business as being the cash flow generation towards that completion date? First question. Thank you.
Okay. Thanks, Mark. So on net debt on completion, I think what we do have a lot of clarity on, that is 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 30th.
So looking at the first nine 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 nine 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'd 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 yeah.
Okay. Thank you. And so the porting of the Wintershall bonds, the $4.9 billion and the $0.5 billion of Harbour bonds, that's what the net debt should be considered at the moment?
Yeah. 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 a bit of free cash flow from effective date until closing 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. Thank you. 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?
Hey, Mark. It's Linda. Thanks for the question. I don't know that we say that any one's going to be more difficult or easy than the other. There is a long list of them. Some governments move more quickly than others. I think we'll just work through them one at a time as we go through the coming weeks and months. 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. Then in terms of the main investor questions so far, have been on the valuation, the 360, and just how that was set. Any comments you can make about that?
Yeah. 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 360 valuation.
Okay. Thank you for those answers. Congratulations to getting to this stage. Yeah.
Great, Mark. Thank you.
Our next question comes from Chris Wheaton at Stifel. Please go ahead.
Thank you very much, Linda. Alexander, good evening. 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. Number of questions from me, please.
Firstly, can I come back to Mark's point on the financial position of the company? At the end of 2Q23, 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, you're getting or you're paying EUR 2.1 billion of cash out of the free cash flow from the business. But with a bridge facility, if there isn't enough free cash flow. But does that assume a zero cash baseline at the end of 2Q23, or if there are cash balance, will you get that EUR 2.3 billion? If you could clarify that, Alexander, that would be a great place to start. Thank you.
Yeah. Thanks for the question, Chris. I appreciate the upfront comments here. So the way the transaction is structured is we are acquiring most all of the operating entities here and not the headquarters and the topco. 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 portion of the EUR 4.9 billion of the bonds, so the hybrids and the unsecured notes. I think there's closer to 300 or 400 million there of cash, which is sitting there within the perimeter. 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 headquarters, that will not form part of the perimeter there. Okay.
So just to be, is that $300 million-$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 's part of the 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 then the original $500 million bond 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. Thank you. Second question would be on how much influence do you have on this business then in the next 12 months? Because clearly, there's 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 DEA might take in the next 12 months.
Hey, 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. Thank you. 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. 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, has 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 a third party?
Yeah. Thanks, Chris. So no, there are no break fees, but there is a contractual commitment among all parties to carry through with the transaction, which, of course, we'll be relying on. 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 two sellers, which aren't exactly in alignment. So nothing right or wrong about either position, but BASF, of course, having the stated objective over time to exit upstream oil and gas, LetterOne, a 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. So 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 can relax and have a good Christmas now. Thank you very much.
Thanks, Chris. And yeah, sorry to you and everyone else for interrupting your time away if you were 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.
We've 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. Please go ahead.
Hi. Thanks for taking my questions. Congratulations on the deal. Just wanted to ask 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 or gearing for the pro forma company post-completion. Just wanted to understand what the pecking order of cash flow would be post-deal completion. The second question was more related to the shareholder distributions in 2024. Just wanted to understand what should we expect for distributions 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.
Yeah. 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 acquisition 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've put some more debt on the balance sheet, but we've been able to rather predictably reduce the debt on the balance sheet through hedging and just being a tad prudent on that end. We shouldn't necessarily rule out that that's going to happen this time as well. And 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 them comfortable that pro forma this portfolio will remain within investment grade metrics. So we haven't set, certainly not now, a set target for debt 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 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. Elizabeth, he'll 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've paid dividends in the past two 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 this 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 a safe and healthy and happy holiday break with lots of time with friends and family. Thanks so much for joining.