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Total says Maersk Oil $3 bln decommissioning liabilities taken into account

22 August 2017
Total says Maersk Oil $3 bln decommissioning liabilities taken into account

Total SA acquires the Danish giant A.P. Moeller-Maersk A/S's oil unit, the deal's cost is $7.5 billion.

The deal will help Total bolster its position among the world's largest oil companies, potentially boosting its earnings and cash flow and shoring up its ability to pay dividends. It will add output of about 160,000 barrels a day of oil equivalent to the French group next year, rising to 200,000 a day by 2020. With current prices of $50 per barrel most majors are simply struggling to balance their books. Not a bad deal for both sides, taking into account the prolonged downturn in the gas and oil industry.

"Companies [are] managing the effects of lower oil prices by reducing their portfolios or seeking economies of scale", says the Financial Times.

Valentina Kretzschmar, corporate service director for Wood Mackenzie, said the cost synergies should add value for Total, given the overlap in the North Sea.

Activity has also picked up internationally, particularly in Europe.

In July, Total took over from Maersk Oil as operator of the giant Al Shaheen field, offshore Qatar.

FILE - In this October 23, 2013, file photo of A.P. Moller-Maersk's oil rig in the North Sea named Halfdan.

"We had the feeling that on the North Sea, we had to go a step further to be more competitive", Pouyanne said on a call with reporters. It will also take over all decommissioning obligations, worth around $2.9 billion.

Total flagged last month that it was on the prowl for new acquisitions, after striking a confident tone in its second-quarter results.

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 transaction will deepen and accelerate this strategy significantly, as Total will become a 3 million barrels of oil equivalent per day major by 2019 to the benefit of all Total shareholders", he said.

The French company's existing United Kingdom assets include natural gas production in three major hubs - Alwyn/Dunbar in the northern North Sea, Elgin/Franklin in the central Graban area of the North Sea and Laggan/Tormore, in the fast-growing west of Shetland area.

Total's shares fell modestly on Monday morning, with stocks trading down about 0.2%.

Maersk has been in the Danish section of the North Sea for decades. It gains access to the prized Johan Sverdrup discovery and the UK's largest gas development, Culzean, 49.99%-owned by Maersk Oil.

A number of sizable new North Sea projects is generating renewed excitement. The 2018 production will have an estimated free cash flow break-even of less than $30/bbl.

The Boards of both Total and A.P. Moller-Maersk have approved the transaction.