Business

Total and Maersk agree £5.8bn deal

Total and Maersk agree £5.8bn deal”

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.

"Companies [are] managing the effects of lower oil prices by reducing their portfolios or seeking economies of scale", says the Financial Times.

Consultancy Wood Mackenzie (Woodmac) said the transaction was the biggest North Sea-weighted deal since Statoil merged with Norsk Hydro in 2006.

Activity has also picked up internationally, particularly in Europe. Today, the company said in its presentation about the deal with Total that "it has been seeking sustainable structural solutions for its energy-related businesses that will enable it to separate them from the group" and that this is a "major first step in this separation agenda".

French oil giant Total has agreed to buy Maersk Oil for $7.45bn. Total will then have $2.5 billion in debt to fund the rest of the deal.

For assuming $2.5 billion of Maersk Oil's debt and giving $4.95 billion in Total shares-or 97.5 million shares-to Maersk Oil parent company A.P. Møller-Maersk, Total will grow its reserves by about 1 Bbbl, more than 85% in OECD countries.

Total also said it was investing $3.5 billion over five years in Qatar's offshore Al Shaheen oilfield.

The deal, considered the biggest the North Sea has seen since Statoil's almost $30 billion acquisition of Norsk Hydro in 2006, comes as oil and gas companies continue to work toward lowering break-evens, keeping costs low and generating cash flow as they rebound from the prolonged downturn. That will represent 3.75 percent of the enlarged share capital of Total. "The number of well abandonment campaigns in the North Sea is steadily increasing and we're thrilled to have achieved this contract for a key abandonment operation".

Then, last month, Centrica, the owner of British Gas, pooled its North Sea assets wih a German partner. Total and its European peers can cover spending from cash flow at current prices, but a fresh slump could put dividends at risk. It is expected to close in the first quarter of next year.

The boards of both companies have approved the deal.

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



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