Total to buy Maersk Oil

Ann Santiago
August 22, 2017

Total will issue to A.P. Moller–Maersk 97.5 million shares, based on the average Total share price on the 20 business days prior to August 21.

This will mark the largest deal in the oil and gas industry this year, though other transactions of lesser value have been announced by majors.

The move is the latest in a wave of consolidation that has gripped the sector in recent years in response to the low oil price.

He said that once completed in the first quarter of 2018, the deal would generate some $400 million in cost savings and other synergies each year, which would immediately help to increase the combined group's cash flow and earnings per share.

In the US, where small shale-oil producers have proved remarkably resilient to low oil prices, the sector has experienced a flurry of deals. Moreover, the deal adds significant volumes to the North Sea reserve base. "The deal will also reduce Total's weighting towards areas of high above ground risk".

It delivers some 1bn barrels of additional reserves to Total - with around 85% of that in OECD territories - and the acquired assets will account for some 160,000 barrels oil equivalent production per day for Total.

Earlier this year, Shell sold its British North Sea assets to Chrysaor Holdings a deal worth up to $3.8 billion.

With the acquisition of Maersk, this will put Total as one of the biggest competitors in the North Sea region.

Alongside Maersk Oil's UK North Sea assets, Total will also take over its Danish and Norwegian operations.

The French conglomerate Total is a new owner of the Maersk company, the official statements about the details of the deal released on Monday.

Total's share price was up 0.5 per cent at the time of writing in a modestly falling market. The share portion represents 3.75 percent of Total's share capital.

Given Maersk's ability to tap the chalk fields could be applied to the fields here, helping regional oil producers to meet their local enhanced oil recovery (EOR) targets.

Maersk has been in the Danish section of the North Sea for decades.

A number of sizable new North Sea projects is generating renewed excitement.

The boards of both companies have approved the deal. Known as a scrip dividend, paying investors in shares has allowed Total to preserve cash but has also diluted its share pool and weighed on its value.

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