Total buys Maersk Oil business for $7.5billion, raises output by 50%
French oil major, Total is buying Maersk’s oil and gas business in a $7.45 billion deal, which is expected to deepen Total’s operations in the North Sea and raise its output to 3 million barrels per day by 2019.
For Danish company A.P. Moller Maersk (MAERSKb.CO), the sale of Maersk Oil, with reserves equivalent to around 1 billion barrels of oil, fits with a strategy of focusing on its shipping business and other activities announced last year.
Total expects its biggest oil deal since it acquired Elf in 2000 to generate financial synergies of more than $400 million per year, in particular by combining assets in the North Sea. It also said the acquisition would boost earnings and cash flow.
Expected to be completed in the first quarter of 2018, the deal could see some job cuts particularly in Britain where there are overlaps, Total said, adding that it could make additional cost savings of about $200 million per year.
“Maersk Oil is the first of the four energy companies of A.P. Moller – Maersk for which a future structural solution has now been identified. The solutions for Maersk Drilling, Maersk Supply Service, and Maersk Tankers remain to be defined before the end of 2018,” the company added.
As agreed, Total will take over Maersk Oil’s entire organisation, portfolio, obligations and rights with minimal pre-conditions. It was added that the planned development schedules and investments in strategic and sanctioned projects will be upheld.
“In determining the best future ownership structure for Maersk Oil, it has been imperative for us that the capabilities and assets created in Maersk Oil continue to be developed, and that long-term investments are upheld, especially in the Danish part of the North Sea,” says Søren Skou, CEO of A.P. Moller – Maersk.
“In my heart and mind, this is a very difficult, but right decision. Maersk Oil has for almost half a century been at the forefront of the Danish oil development, been vital to A.P. Moller – Maersk and to this very day plays a decisive role in the Danish and international oil and gas industry,” Chairman of A.P. Møller Holding A/S, Ane Mærsk Mc-Kinney Uggla added.
Under the terms of the deal, APMM will see $7.45 billion paid by 97.5 million shares in Total S.A. with a value of $4.95 billion equal to approx. 3.76% of Total. In addition, Total is assuming a short-term debt of $2.5 billion and all decommissioning obligations currently amounting to $2.9 billion.
On its part, Total is said to be planning to maintain Maersk Oil’s position in the North Sea with Copenhagen and Esbjerg bases.
The deal is subject to regulatory approval from relevant authorities, including the Danish Minister of Energy, Utilities and Climate and relevant competition authorities. Closing is expected to take place during the first quarter, 2018.
A.P. Moller – Maersk sailed into a loss of $ 264 million in the second quarter of 2017, a switch from last year’s profit of $118 million.
Maersk said the loss was due to impairments worth $732 million, primarily resulting from lower asset valuations in Maersk Tankers and some financially-troubled terminals in APM Terminals.
The group booked a revenue jump of $743 million to $9.6 billion, driven by $1.0 billion or 21% increase in its boxship business Maersk Line, which returned to profit of $339 million. The revenue rise was also aided by an increase of $90 million in Maersk Oil, partly offset by a $217-million drop in Maersk Drilling and USD 75-million fall in APM Terminals.
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