nsucurrent.com February 22, 2018

Total Buys Maersk Oil for $4.95 Billion

21 August 2017, 08:31 | Ruby West

A man performs a split as he practices Kung Fu at Beihai Park in Beijing China. Reuters China Stringer Network

Kung Fu

For Maersk the deal follows through on its plan, announced last September, to abandon the oil sector altogether as it seeks to cement its position as "the world's largest container shipping line".

Maersk shares were up 4.61% in the first 15 minutes of trading, changing hands at Dkr 13,360.

Total shares were 0.6 per cent lower in Paris at €42.41 as of 11.02am Luxembourg time, according to data from Bloomberg.

As part of the deal, Maersk will receive approximately $4.95 billion in Total shares, while Total will assume $2.5 billion of short term debt to fund the remainder of the deal.

Maersk announced past year it planned to close Houston offices during the oil price crash.

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

The deal is a vote of confidence in the North Sea, where around 80% of Maersk's reserves are located. The transaction is expected to close in first quarter 2018.

Total said the combination with Maersk Oil offers it an "exceptional overlap" of upstream businesses which will increase its competitiveness through growing assets and $400 million in annual cost-saving synergies. Mr Pouyanné said that the additional value to the company's portfolio would help it reach a lower breakeven oil price.

Although oil prices have recovered of late to trade around $50 a barrel, they are still around half the level they were just three years ago. The 2018 production will have an estimated free cash flow break-even of less than $30/bbl.

The deal with Total is expected to be completed sometime in early 2018 - pending approval from the competition authority. It will also take over all decommissioning obligations, worth around $2.9 billion.

The oil division of A.P. Moller-Maersk grew out of the split from the company past year and it started 2017 by saying it was working to improve its efficiency under the reorganization by cutting about 160 positions.

Total said it would make Denmark its new operating hub for Total's combined operations in Denmark, Norway and the Netherlands. 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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