Total To Pay $7.45bn for Maersk Oil

In energy stocks news, Total ( TOT ) was down 0.4% after it said it has agreed to buy Maersk Oil & Gas A/S, a wholly owned subsidiary of A.P. Moller, for $7.45 billion in shares and debt.

Total will maintain Maersk Oil's strong position in the North Sea with Copenhagen and Esbjerg bases and with Denmark being the operating hub for Total's combined operations in Denmark, Norway and the Netherlands.

Last year Maersk revealed it would approach a new strategy in the wake of plummeting oil prices and split into two divisions: Transport & Logistics and Energy.

The agreement involves the transfer of $4.95bn in 97.5 million Total shares (3.76 percent of the company) to Moller Maersk, the Danish group selling its oil division.

The deal will see A.P. Møller - Maersk get $4.95 billion in Total shares, while Total will take on $2.5 billion of Maersk Oil's debt. It also complements the company's worldwide portfolio and creates synergies, including more than $200 million in cost synergies and about $100 million identified fiscal synergies per year.

"This transaction is immediately accretive to both cash flow and earnings per share and delivers further growth over coming years", said Total chairman and CEO Patrick Pouyanne. The transaction is expected to close in first quarter 2018.

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The Danish business will also bring in some 1 billion barrels of oil equivalent in proven and probable reserves, the bulk of them in the North Sea.

Total is also taking over short-term debt valued at Dollars 2.5 billion and closure obligations worth USD 2.9 billion. Total will also assume almost $3 billion in expected costs for decommissioning oil rigs in the North Sea.

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

Maersk said it plans to return a "material portion of the value of the received Total S.A. shares" to shareholders in 2018 and 2019 in the form of extraordinary dividend, share buyback or distribution of shares in Total.

The deal is a vote of confidence in the North Sea, where around 80% of Maersk's reserves are located. "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.

Total will have the largest stake of 50.1 percent stake, followed by the Chinese CNPC with 30 percent, and National Iranian Oil Co subsidiary Petropars with 19.9 percent.

  • Ronnie Bowen