Total said on Monday (21 August), that it will transfer 97.5 million shares with a value of $4.95bn to Maersk, and will also assume a short term debt of $2.5bn. If the move is approved by shareholders and regulatory bodies, the sale would close in the first quarter of next year.
Total expects to generate synergies of more than $400 million a year starting in 2020, in particular by combing the two companies' North Sea assets. Building on Maersk Oil's high safety standards, strong technological leadership, operational excellence and strong Danish heritage, we will intensify and accelerate the push to optimise and extend the Danish oil and gas production.
It is expected to boost its production by 160,000 barrels per day in 2018 as well as significantly bolstering its reserves to the tune of 1 billion barrels of oil equivalent - four-fifths of which will be in the North Sea.
As a result of the deal, which will make the firm the second largest operator in the North Sea, Total production will rise to 3 MMboe/d by 2019. Maerk has operated Al Shaheen since 1992.
According to WoodMac, The acquisition also strengthens Total's North Sea exposure, through Maersk's core positions in the UK, Norway and Denmark.
Pierre-Louis Brenac, Middle East managing partner of consultancy Sia Partners, said that the deal seemed to be a ideal match to generate savings.
For Maersk, the deal concludes a review process that started over a year ago as it looked to combat one of the worst shipping down-cycles and a historic oil-price rout.
Given Maersk's ability to tap the chalk fields could be applied to the fields here, helping regional oil producers to meet their local enhanced oil recovery (EOR) targets. In recent days, prices have been around $50 per barrel. The French company is coming off a strong quarter, with adjusted net income growing by 13 percent from past year to $2.5 billion. "This deal demonstrates Total's purchasing power and free cash flow", said Mr Brenac.
The deal is the latest sign of consolidation in the oil-and-gas industry, which is only now coming to grips with a prolonged and painful downturn. Subject to meeting its investment grade objective, APMM plan to return a material portion of the value of the received Total S.A. shares to the APMM shareholders during the course of 2018/19 in the form of extraordinary dividend, share buyback and/or distribution of Total S.A. shares.