Total Buys Maersk Oil for $4.95 Billion

Total acquiring Maersk Oil in deal worth $7.45bn

Mærsk A/S (APMM) has entered into an agreement to sell Mærsk Olie og Gas A/S ("Maersk Oil") to Total S.A. for United States dollars 7.45bn in a combined share and debt transaction, the company announces in its press release.

It will see French firm Total take control Denmark's Maersk's assets in the United Kingdom sector of the North Sea, including the Culzean gas field.

The deal illustrates Total's strategy of using a strong balance sheet to acquire attractive assets from competitors having emerged from the prolonged oil downturn stronger than some of its rivals.

"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 and through the delivery of synergies", the French company said. "In addition, the agreement will strengthen the financial flexibility of A.P. Moller-Maersk and free up resources to focus our future growth on container shipping, ports and logistics". Total will also take on some $4.9bn worth of decommissioning liabilities.

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Under the terms of the deal, A.P. Moller Maersk will get $4.95 billion in Total shares and Total will assume $2.5 billion of Maersk Oil's debt. This acquisition will boost the oil giant's position among its competitors.

Total will leapfrog BP to become the second largest offshore oil producer in the North Sea, after China National Offshore Oil Corporation (CNOOC), following the deal. If the move is approved by shareholders and regulatory bodies, the sale would close in the first quarter of next year. "We intend to build on the strong operational and technical competencies of the Maersk Oil teams in the same way we managed to do it in Belgium with the teams of Petrofina in the refining & chemical businesses". As part of the deal, which is expected to be completed in the first three months of 2018, the France-based company will also take over all decommissioning obligations now amounting to $2.9bn. Total will also assume almost $3 billion in expected costs for decommissioning oil rigs in the North Sea. "There are 700 staff on both sides in Total UK and Maersk UK with more or less same size of assets", he said in the Reuters article. "There are a number of strategic drivers at play here".

Image: Al Shaheen. Image from Maersk Oil.

Maersk is now developing the Culzean gas field which is expected to start production in 2019 and which could supply up to 5 percent of Britain's gas demand. This could increase to more than 200 Mboe/d by the early 2020s.

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