Total Buying Maersk Oil in $7.5 Billion Deal

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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--French oil and gas 'supermajor' Total S.A. (NYSE:TOT) (Paris, France) has announced that it will buy Maersk Oil (Denmark) in a $7.45 billion deal that will increase its presence in the North Sea.

Total will provide Maersk with $4.95 billion in shares and will assume $2.5 billion of Maersk Oil's debt. The deal with add about 1 billion barrels of oil to Total's existing reserves, bringing it to 3 billion barrels of oil equivalent per day (boe/d) by 2019. Maersk Oil is being sold by parent company AP Moller-Maersk AS (Copenhagen), which intends to concentrate on its shipping business and other activities.

"It was time for us to do what a real oil and gas company would do in a period such as this when prices are lower and costs are down. Either launch new projects or acquire new reserves at attractive prices," explained Total Chief Executive Officer Patrick Pouyanne. He added that Total had presented the deal to Maersk as an alternative to floating its business.

"There was a debate within Maersk, and they finally accepted, given that it was attractive and also the fact that an IPO in a tense oil market would not be a right move," he said.

Total said it will now have access to 1 billion boe of 2P/2C reserves, 85% of which are in OECD countries (more than 80% in the North Sea). There will be the addition of 160,000 boe/d of mainly liquids production in 2018 rising to 200,000 boe/d by 2020. Total estimates that it will generate operational, commercial and financial synergies of more than $400 million per year, in particular by the combination of assets of Total and Maersk Oil in the North Sea.

Pouyanne said: "The combination of Maersk Oil's North Western Europe businesses with our existing portfolio will position Total as the second operator in the North Sea with strong production profiles in U.K., Norway and Denmark, thus increasing exposure to conventional assets in OECD countries. Internationally, in the U.S. Gulf of Mexico, Algeria, East Africa, Kazakhstan and Angola there is an excellent fit between Total and Maersk Oil's businesses, allowing for value accretion through commercial, operating and financial synergies."

Last month, Industrial Info reported that Maersk Oil had finished the construction of all three jackets at its high-pressure/high-temperature (HP/HT) Culzean oil and gas field development in the U.K. North Sea. Culzean is the largest discovery in the U.K. North Sea in more than a decade. For additional information, see July 26, 2017, article - Maersk Oil Hits Culzean Oil and Gas Milestones.

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