Total expands in North Sea with purchase of Maersk Oil

Posted August 21, 2017

The cost savings will be seen "in particular by the combination of assets of Total and Maersk Oil in North Sea".

It also noted the price in terms of output was almost a third less than Shell sold its North Sea portfolio to Chrysaor earlier this year. The Maersk assets will boost the French giant's business in the North Sea, adding to deals earlier this year that expanded its presence in Uganda and Brazil. It said it will uphold Maersk Oil's development schedules and investments in a series of projects, and that Denmark will become the regional hub for all its operations in Denmark, Norway and the Netherlands.

Brent crude has risen 17.3 per cent from a 2017 low of $44.82 a barrel and traded at $52.56 at 10.38am Luxembourg time, according to Bloomberg data.

Under the terms of the transaction, Maersk will receive $4.95bn worth of Total shares and Total will assume $2.5bn of Maersk Oil's debt. The full transaction value of $7.45 billion is above what some analysts were expecting and Maersk shares jumped as much as 5.7 percent following the announcement. So far this year, deals in North America have totaled $73.2 billion, more than in all of 2016, according to data from Edinburgh-based consultancy Wood Mackenzie.

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"This transaction delivers an exceptional opportunity for Total to acquire, via an equity transaction, a company with high quality assets which are an excellent fit with many of Total's core regions", said Patrick Pouyanne, Total chairman and chief executive. Maersk had been considering spinning off the oil and gas assets in an initial public offering, but "we offered them another option".

After the signing the deal, Maersk will retain an interest in the sector through 97.5 million shares in the French energy conglomerate, equal to 3.76% of Total. It will also take over all decommissioning obligations, worth around $2.9 billion. That will represent 3.75 percent of the enlarged share capital of Total.

The oil division of A.P. Moller-Maersk grew out of the split from the company a year ago and it started 2017 by saying it was working to improve its efficiency under the reorganization by cutting about 160 positions.

The transaction, expected to close in the first quarter of 2018, is subject to regulatory approval from the Danish Minister of Energy and a consultation process with Total employees.