Total to buy Maersk Oil in $7.45-billion deal

Aug. 28, 2017
Total SA plans to acquire 100% of the equity of Maersk Oil & Gas AS, a wholly owned subsidiary of AP Moller-Maersk AS of Copenhagen, for $4.95 billion in Total shares.

Matt Zborowski
Assistant Editor

Total SA plans to acquire 100% of the equity of Maersk Oil & Gas AS, a wholly owned subsidiary of AP Moller-Maersk AS of Copenhagen, for $4.95 billion in Total shares. Total also will assume $2.5 billion of Maersk Oil's debt as part of a move that bolsters the French supermajor's North Sea position.

The deal will provide Total with 160,000 boe/d of mainly liquids production in 2018 that offers "high margins with an estimated free cash flow breakeven of less than $30/bbl" and is expected to grow to more than 200,000 boe/d by the early 2020s, the firm said.

Patrick Pouyanne, Total chairman and chief executive officer, said his firm will now "become a 3 million-boe/d major by 2019." Total will take over about 1 billion boe of 2P reserves, more than 80% of which are in the North Sea.

Valentina Kretzschmar, director of corporate research at consulting firm Wood Mackenzie Ltd., said the move will increase Total's production by 6% and "further shift [its] weighting towards [Organization for Economic Cooperation and Development] regions, a core strategic driver for the company as it looks to balance the portfolio away from areas of high above-ground risk."

Big North Sea projects

In the North Sea, Total will become operator with 49.99% interest in Culzean gas field, near the firm's operated Elgin-Franklin hub, and receive 8.44% stake in the giant Johan Sverdrup oil development off Norway.

The Culzean project at the end of the second quarter was 55% complete, according to Maersk Oil's second-quarter earnings report. Gas export and condensate pipelines have been laid and all three jackets have been installed on the field (OGJ Online, July 21, 2017). High-pressure, high-temperature drilling also began in July.

Fabrication, construction, and drilling activities for Johan Sverdrup continue to progress in line with expectations, Maersk Oil said.

Total also in the deal will gain a new production hub through operatorship and 31.2% interest in the Danish Underground Consortium (DUC). Net production from DUC in 2018 is estimated to be 60,000 boe/d. DUC partners are Royal Dutch Shell PLC, Chevron Corp, and Danish state-run Nordsofonden.

"We are also very pleased that we will have a new anchor point in Denmark which will host our North Sea business unit and supervise our operations in Denmark, Norway, and the Netherlands," commented Pouyanne.

After completion of the deal, expected in first-quarter 2018, Total will operate more than 500,000 boe/d of gross production in northwestern Europe.

Outside of Europe, Total will gain interest in the Jack development in the Wilcox formation in the US Gulf of Mexico as well as assets in Algeria, Angola, Brazil, Kazakhstan, Kenya, and the Kurdistan region of Iraq.

Another possible outcome of the firms' combination is Total's ability to access Maersk Oil's operating experience with the giant Al-Shaheen oil field off Qatar. Total last month took over for Maersk Oil as partner in the field with Qatar Petroleum (OGJ Online, July 11, 2017).

As a result of the acquisition, Total expects to generate operational, commercial, and financial synergies of more than $400 million/year, primarily through the combination of North Sea assets.

Total will issue to AP Moller-Maersk 97.5 million shares based on the average Total share price on the 20 business days prior to Aug. 21, which will represent 3.75% of the enlarged share capital of Total. The deal is effective July 1.