French Total today announced the acquisition of Danish Maersk Oil in a stock and debt transaction worth US$7.45 billion.
The bigger portion of the deal, US$4.95 billion, consists of Total shares. In addition, the French major will assume US$2.5 billion worth of Maersk Oil’s debt. The share portion represents 3.75 percent of Total’s share capital. The deal should close by end-March 2018.
The acquisition is part of Total’s international growth strategy, which includes buys, not just in its traditional field of hydrocarbon development but a notable diversification into renewables.
Maersk Oil will strengthen the French company’s output with the addition of 160,000 barrels of oil equivalent to its daily total as of next year, seen to grow to over 200,000 bpd in the early years of next century.
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.
The acquisition will result in synergies worth around US$400 million annually, of which US$200 million will be cost synergies, Total said, adding that Maersk Oil’s free cash flow breakeven price per barrel of oil equivalent was less than US$30.
Total’s chief executive Patrick Pouyanne told media today that following the deal the company will raise its cost savings target for the period to 2018 from the current US$4 billion and suggested there may be further job cuts, after the large-scale layoffs prompted by the 2014 price crash.
A week ago, Maersk Oil reported an improvement in second-quarter net income on the back of higher oil prices and lower production costs. The company, with operations in the U.S., Kazakhstan, Algeria, Qatar, and Kurdistan, besides the North Sea, said its average daily production stood at 284,000 barrels of oil equivalent daily.
Maersk Oil’s parent company said last year it was looking to spin off the oil business in a bid to streamline its operations with an exclusive focus on its core business, container shipping.
By Irina Slav for Oilprice.com
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Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.