French oil company Total has completed the Maersk Oil acquisition signed on August 21, 2017.
Total CEO Patrick Pouyanné announced earlier this week during CERAWeek conference that the acquisition would be completed on Thursday.
The acquisition brings to Total around 1 billion barrels of oil equivalent of 2P/2C reserves and resources, mainly in the OECD countries, and a production of about 160,000 barrels of oil equivalent per day (boe/d) in 2018, ramping up to more than 200,000 boe/d by the early 2020s, Total said on Thursday.
The acquisition of Maersk Oil allows the group to reinforce its existing leading positions in the U.K. and in Norway, as well as to enter Denmark, making Total the second-largest operator in the North Sea with an output of 500,000 boe/d by 2020, the French company added.
“This major acquisition is a success on many levels,” said Patrick Pouyanné, Chairman and CEO of Total.
“First, it illustrates our strategy to build on our strengths and grow our presence in Total’s core areas, like the North Sea, to strengthen our leadership there. Second, it brings high-quality and low-breakeven assets, enhancing our worldwide portfolio. Third, the strong overlap between Maersk Oil and the Group’s assets will generate more than $400 million of synergies per year.”
“We are committed to preserve and further develop Maersk Oil’s heritage by relying on the strong competencies of its teams. Our regional hub for North Sea activities is now headquartered in Copenhagen. Moreover, we welcome a major new shareholder — A.P. Moller-Maersk (APMM) — which will hold 3.70% of the Group’s capital,” he added.
The transaction also strengthens other growth areas of Total, in particular in Algeria and in the Gulf of Mexico in the United States. It is immediately accretive to both cashflow per share and earnings per share.
The effective date of the transaction is March 8, 2018. Under the agreed terms, A.P. Moller-Maersk will receive a consideration of $4.95 billion in Total shares (around 97.5 million shares based on average share price of the 20 business days prior the signing date of the 21 st of August 2017) and Total will assume $2.5 billion of Maersk Oil’s debt.
Maersk Oil’s key assets in the North Sea include a 8.44% of the giant Johan Sverdrup oil field, Norway; a 49.99% of the Culzean gas field, U.K.; a 31.2% of the Tyra producing gas field, Denmark. In the United States, Maersk Oil has a 25% interest of the Jack producing oil field and in Algeria it has a 12.25% of the El-Merk, Hassi Berkine producing oil fields.
All regulatory approvals have been obtained and the sale was completed on Thursday, Maersk Group said in a separate statement.
In addition to the shares, Total has assumed a short-term debt of $2.5bn via debt push down from APMM into Maersk Oil. The short-term debt will be repaid to APMM shortly after closing and the proceeds will after customary closing adjustments be used by APMM to reduce debt.
As part of the transaction Total will take over all decommissioning liabilities. The Danish Energy Agency’s approval of the transfer conditions that APMM assumes secondary liability for the decommissioning costs related to existing Danish offshore facilities corresponding to Maersk Oil’s 31.2 % interest in the Danish Underground Consortium, should Total be unable to cover such costs.
Maersk Oil’s current provision for these decommissioning costs amounts to $1.2bn. APMM’s secondary liability will be reduced as part of the redevelopment of the Tyra project as well as future decommissioning of other existing facilities.