Strategy

Total Adds North Sea Assets With Maersk Buy

The $4.95 billion acquisition of Maersk Oil will make Total the second-largest producer in the North Sea.
Matthew HellerAugust 21, 2017

Amid signs of a turnaround in the energy sector, France’s Total said Monday it will acquire the oil and gas business of Danish container shipping company A.P. Moller-Maersk for $4.95 billion, boosting its profile in the North Sea.

Maersk Oil has reserves equivalent to around 1 billion barrels of oil, 80 percent of which are in the North Sea. The acquisition is Total’s largest since it bought Elf in 2000 and will make it the second-largest producer in the region, with production of about 500,000 barrels of oil equivalent per day.

Under the terms of the deal, Moller-Maersk will receive 97.5 million Total shares, or about 3.8% of the French company. Total will also assume $2.5 billion in Maersk Oil debt.

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“This transaction delivers an exceptional opportunity for Total to acquire, via an equity transaction, a company with high quality assets which are an excellent fit with many of Total’s core regions,” Total CEO Patrick Pouyanné said in a news release.

He added that the deal was “in line with our announced strategy to take advantage of the current market conditions and of our stronger balance sheet to add new resources at attractive conditions.”

As The New York Times reports, oil prices “have started to recover after an extended downturn, strengthening profit at major oil producers in the second quarter of this year and opening the door to more mergers in the sector.”

A barrel of crude now sells for around $52, less than half its peak in early 2014, but major oil companies have worked to improve their balance sheets through cutting costs and embracing new technologies.

“The supply and demand balance is much better than it was 12 months ago, from an absolute inventory level and from an OPEC and non-OPEC supply perspective,” Mark Lacey, a portfolio manager at the asset management firm Schroders, told the Times. “That’s giving the C.E.O.s a little more confidence in the crude price.”

“With these improving crude price outlooks, I think you’re going to get M&A picking up,” he added.