Breaking News: Total buying Maersk Oil in US$7.45 billion deal

French oil giant Total is set to acquire its Danish rival Maersk Oil and Gas for US$7.45 billion dollars.

Danish Maritime giant Maersk A/S confirmed on the 21^st August that it had entered into an agreement to sell its subsidiary Mærsk Olie og Gas A/S to Total SA for US$7.45 billion in a combined share and debt transaction. This was also confirmed by Total in a separate statement.

The agreement provides that A P Møller – Mærsk will receive the equivalent of US$4.95 billion in Total shares equal to approximately 3.76% of Total SA, and that Total will take over US$2.5 billion of Maersk Oil debt.

Total SA will pay an interest of 3% pa of the enterprise value from the 30^th June 2017 and until closing of the transaction. Total SA will take over all decommissioning obligations currently amounting to US$2.9 billion.

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

Patrick Pouyanné, Chairman and Chief Executive Officer of Total said: “This transaction represents an exceptional opportunity for Total to acquire, through a stock transaction, a company with high quality and complementary assets in many key regions where Total is already present. The integration of Maersk Oil’s activities will make Total the second largest operator in the North Sea, benefiting from major positions in the UK, Norway and Denmark, and will increase the share of conventional OECD assets in our portfolio.

“Combining the highly complementary international activities of Total and Maersk Oil in the Gulf of Mexico in the United States, Algeria, East Africa, Kazakhstan and Angola will also create value through commercial, operational and financial synergies.”

According to the French company, the deal will make Total the second largest operator in the NW Europe offshore region which is the seventh largest oil and gas producing region globally. Post completion, Total will operate over 500 kboe/d (gross) production in this region.

The transaction strengthens Total’s existing North Sea offshore producing business in UK and Norway. The addition of Maersk Oil’s world class assets, including  the operated UK gas field Culzean (49.99% Working Interest), close to the Elgin-Franklin hub operated by Total, and its stake in the giant Johan Sverdrup oil development (8.44% Working Interest) in Norway will bolster Total’s production profile in these countries, Total said.

Furthermore, Total has pointed out that the transaction adds a new production hub with Maersk Oil’s operatorship and 31.2% ownership of the DUC (Drilled But Uncompleted) producing assets in Denmark with net production in 2018 estimated at around 60 kboe/d.

The transaction is subject to regulatory approval from relevant authorities including the Danish Minister of Energy, Utilities and Climate and competition authorities as well as required consultation and notification processes with Total SA’s employee representatives.

Closing is expected to take place during the first quarter of 2018. Calculated as of the 30^th June 2017, the transaction gain after tax for Maersk A/S amounts to US$2.8 billion. The accounting gain will be recorded partly from earnings until closing and the residual at closing.

As a consequence of the transaction Maersk Oil will be classified as held-for-sale and discontinued operations in the Interim Report in the third quarter of 2017 for Maersk A/S. Maersk A/S financial guidance for 2017 remains unchanged except for the effect of the reclassification of Maersk Oil, the company said.