Total to Buy Maersk's Oil and Gas Business for $4.95 Billion

Ashley Carr
August 21, 2017

Total has been betting on new rather than mature fields in the North Sea and the acquisition gives it further economies of scale by making it the second largest player in the region.

Total is to buy Maersk Oil for $7.45bn in a upstream gas-rich deal expected to close in 1Q 2018. Shares in A.P. Moller - Maersk rose 4.1 per cent to DKK13,330 (€1,792). Meanwhile, Total shares were down 0.64% to change hands at €42.39. As part of the transaction, Total will assume decommission obligations of $2.9 million, A.P. Moller-Maersk said. "Some of Maersk North Sea technology can be useful in the Middle East, such as the tools for drilling and extracting from chalk areas", he said. Alongside Maersk Oil's UK North Sea assets, Total will also take over its Danish and Norwegian...

For Total, the deal builds on its large existing presence in the North Sea and means it will become the second-largest exploration firm in the region, behind Norway's Statoil.

This deal "is in line with our announced strategy to take advantage of the current market conditions and of our stronger balance sheet to add new resources at attractive conditions", Total Chief Executive Patrick Pouyanne said.

Total Chairman and CEO Patrick Pouyanne said the addition of Maersk Oil will "create a leading worldwide operator in the North West European offshore region, making Denmark a regional anchor point for Total's North Sea business".

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"Total is acquiring a deep specialist in unlocking complex reservoirs and boosting recovery factors through enhanced oil recovery techniques", Wood Mac director Valentina Kretzschmar said.

In the USA, where small shale-oil producers have proved remarkably resilient to low oil prices, the sector has experienced a flurry of deals.

Although oil prices have recovered of late to trade around $50 a barrel, they are still around half the level they were just three years ago. Moreover, Total will assume debt totalling nearly 16 billion kroner.

Total will issue to Maersk 97.5 million shares, representing 3.75 percent of its enlarged share capital.

Zacks Investment Research lowered shares of A.P. Moller - Maersk A/S (NASDAQ:AMKBY) from a hold rating to a sell rating in a research note released on Friday morning. Total will update its company-wide cost-savings plan in mid-September, said Pouyanne.

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