France’s Total said it has fully acquired E&P firm Mærsk Oil for US$7.45 billion in a share and debt transaction, making the French oil major the second largest operator in the NW Europe offshore region.
The transaction, with Mærsk Oil’s parent firm A.P. Møller – Maersk is expected to close in first quarter 2018 and has an effective date of 1st July 2017, Total said in a statement.
The acquisition will add Mærsk’s assets and reserves to Total’s portfolio.
The addition of Maersk Oil’s assets, including the operated UK gas field Culzean (49.99 per cent working interest), close to the Elgin-Franklin hub operated by Total, and its stake in the giant Johan Sverdrup oil development (8.44 per cent working interest) in Norway will increase Total’s production profile in these countries and increase its exposure to conventional assets in OECD countries.
Total expects the transaction to add around 1 billion barrels of oil of contingent and prospective reserves to its portfolio, 85 per cent of which are in OECD countries (more than 80 per cent in the North Sea).
It will also add 160,000 boe per day of mainly liquids production in 2018, acquired at an average price of $46,000 boepd, offering high margins with an estimated free cash flow break-even of less than $30 per barrel and growing to more than 200, 000 boe/d by the early 2020’s
Total also expects to generate operational, commercial and financial synergies of more than $400 million per year, in particular by the combination of assets of Total and Maersk Oil in North Sea.
Total CEO Patrick Pouyanne said the deal means Total will have a new anchor point in Denmark which will host its North Sea Business Unit and supervise its operations in Denmark, Norway and the Netherlands.
“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 and chemical businesses," he said.
Under the agreed terms, A.P. Møller – Maersk will receive a consideration of $4.95 billion in Total shares and Total will assume $2.5 billion of Maersk Oil’s debt, the French major said.
Dr Valentina Kretzschmar, a director in Wood Mackenzie's corporate services unit, said: “For Total, the deal is first and foremost about consolidation in the North Sea. Cost synergies should add value, with the North Sea a key area of overlap. The deal will also reduce Total's weighting towards areas of high above ground risk.”
Total also strengthens it platform for growth in the Middle East and Africa.
“Total is acquiring a deep specialist in unlocking complex reservoirs and boosting recovery factors through enhanced oil recovery techniques,” Dr Kretzschmar said. “Undoubtedly, there will be synergies across technology and mature reservoir expertise, in particular in Iran."
Total will issue to A.P. Møller – Maersk A/S, 97.5 million of shares, based on the average Total share price on the 20 business days prior to August, 21 (signing date) which will represent 3.75 per cent of the enlarged share capital of Total. Underpinning this share based partnership, subject to Total shareholders’ approval, Total has also offered the possibility of a seat on its Board of Directors to A.P. Møller Holding A/S, main shareholder of A.P. Møller – Mærsk.