French group Total buys Maersk Oil in $7.5 billion deal

Total's US$7.4bn tilt for Maersk expected to deliver significant North Sea synergies
Maersk Oil sold to France's Total
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21 August, 2017

The company said it will use the capital generated from the sale to take a step back from oil to create an "integrated transport and logistics company".

Total will pay $4.95bn for the company and is taking on $2.5bn of its debt.

The transaction is expected to close in first quarter 2018 and has an effective date of 1st July 2017. Alongside Maersk Oil's UK North Sea assets, Total will also take over its Danish and Norwegian... The region has been a major oil-and-gas hub for decades but has also been plagued by high costs, aging infrastructure and declining production.

“The combination with Maersk Oil offers Total an exceptional overlap of upstream businesses globally which will enhance Total's competitiveness and value in many core areas, in particular through some high-quality growing assets, ” Total said in its statement.

Total said it expected to generate operational, commercial and financial synergies of more than $400 million annually by combining the assets of the two firms.

"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".

Total plans for Maersk oil unit is clear, the French company stated that an acquisition of Maersk Oil will bolster its production by 160,000 barrels a day in 2018.

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Image: Al Shaheen. Image from Maersk Oil.

Maersk recently boosted its container business by buying Hamburg Sud, a German rival with a strong position in Latin America, for $4bn (£3.1bn).

Pierre-Louis Brenac, Middle East managing partner of consultancy Sia Partners, said that the deal seemed to be a flawless match to generate savings.

Brent crude, the worldwide oil price benchmark that sets prices in the North Sea region, was down 1.1 per cent to $52.13 a barrel, as traders took profits following a rally at the end of last week. The French company is coming off a strong quarter, with adjusted net income growing by 13 percent from previous year to $2.5 billion.

Maersk Oil is the first of the four energy companies in AP Moller-Maersk for which a structural solution has now been identified.

The deal is the latest sign of consolidation in the oil-and-gas industry, which is only now coming to grips with a prolonged and painful downturn. Known as a scrip dividend, paying investors in shares has allowed Total to preserve cash but has also diluted its share pool and weighed on its value. "They can have other deals in the pipeline".

AP Moller Maersk's share price rose 4 per cent in Monday trading, while Total's was down 0.1 per cent.


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