Finance

Maersk to sell oil, gas business to Total

Maersk to sell oil, gas business to Total”

Total said it would buy off the oil unit of Danish shipping giant A.P. Moller-Maersk for $7.45 billion, taking on $2.5 billion of the debt held by Maersk Oil in the process.

"The combination of Maersk Oil's northwestern Europe businesses with our existing portfolio will position Total as the second operator in the North Sea with strong production profiles in the UK, Norway and Denmark, thus increasing exposure to conventional assets in OECD countries".

Maersk said the agreement to sell is part of its strategy to separate its oil and oil-related activities as it focuses on integrated transport and logistics.

CEO Patrick Pouyanne says the company took account of about $3 billion decommissioning liabilities linked to Maersk Oil deal valuation. The deal is expected to close in first-quarter 2018 with an effective date of July 1, Total said in an August 21 news release announcing the acquisition. DenmarkÂs A.P. Moller-Maersk A/S is splitting its container shipping and energy operations into two independent entities as part of a major shakeup. Total was the first company to be awarded a 10 per cent stake in the 40-year concession for Abu Dhabi's prime onshore oilfields. In January, Exxon Mobil Corp. agreed to pay $5.6 billion in shares, plus a series of contingent cash payments totaling as much as $1 billion, for drilling rights in the Permian shale region of Texas.

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.

Maersk Oil in Denmark, Norway, and the UK.

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"Investors should however think of these as high-margin low-priced barrels" that will recoup costs even if the price of oil falls to $30 per barrel from its current level around $50. So far this year, deals in North America have totaled $73.2 billion, more than in all of 2016, according to data from Edinburgh-based consultancy Wood Mackenzie.

The purchase also signals some oil majors are prepared to invest to replenish reserves and boost production, anticipating an oil price recovery.

Maersk has been in the Danish section of the North Sea for decades.

Total will issue to Maersk 97.5 million shares, representing 3.75 percent of its enlarged share capital.

Total will have the largest stake of 50.1 percent stake, followed by the Chinese CNPC with 30 percent, and National Iranian Oil Co subsidiary Petropars with 19.9 percent.

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