The boards of Total and AP Møller – Mærsk have both approved the acquisition of 100% of the equity of the E&P company Maersk Oil & Gas A/S (Maersk Oil), a wholly owned subsidiary of AP Møller – Mærsk A/S, by Total in a share and debt transaction.
Under the agreed terms, AP Møller – Maersk will receive a consideration of $4.95 billion in Total shares and Total will assume $2.5 billion of Maersk Oil’s debt. Total will issue to AP Møller – Maersk A/S, 97.5 million of shares, based on the average Total share price on the 20 business days prior to August, 21 (signing date) which will represent 3.75% of the enlarged share capital of Total. Underpinning this share based partnership, subject to Total shareholders’ approval, Total has also offered the possibility of a seat on its board of directors to AP Møller Holding A/S, main shareholder of AP Møller – Mærsk.
The combination with Maersk Oil offers Total:
- Around 1 billion boe of 2P/2C reserves, 85% of which are in OECD countries (more than 80% in the North Sea)
- The addition of 160 kboe/d of mainly liquids production in 2018, acquired at an average price of 46 k$/boepd, offering high margins with an estimated free cash flow break-even of less than $30 per barrel and growing to more than 200 kboe/d by the early 2020’s
- Total expects to generate operational, commercial and financial synergies of more than $400 million per year, in particular by the combination of assets of Total and Maersk Oil in North Sea, an area of excellence for both companies
- The transaction is immediately accretive to both earnings and cash flow per share underpinning Total’s dividend profile.
- At closing of the transaction, in order that Total’s shareholders benefit from the accretive impact of the acquisition of Maersk Oil on earnings and cash flow, the Board of Directors of Total will consider removing the discount offered on the scrip dividend.
Commenting on the transaction, Patrick Pouyanné, Chairman and CEO said, “The combination of Maersk Oil’s North Western Europe businesses with our existing portfolio will position Total as the second operator in the North Sea with strong production profiles in UK, Norway and Denmark, thus increasing exposure to conventional assets in OECD countries. Internationally, in the US Gulf of Mexico, Algeria, East Africa, Kazakhstan and Angola there is an excellent fit between Total and Maersk Oil’s businesses allowing for value accretion through commercial, operating and financial synergies.
We are also very pleased that we will have a new anchor point in Denmark which will host our North Sea Business Unit and supervise our operations in Denmark, Norway and the Netherlands."
Patrick Pouyanné concluded: “This transaction is immediately accretive to both cash flow and earnings per share and delivers further growth over coming years. It is in line with our announced strategy to take advantage of the current market conditions and of our stronger balance sheet to add new resources at attractive conditions. By adding such a portfolio of growing conventional offshore North Sea assets, we confirm our strategy for value creation of, on the one hand, playing to our core strengths in order to grow further and, on the other hand, to constantly seek to lower our break-even by delivering significant synergies. This transaction will deepen and accelerate this strategy significantly, as Total will become a 3 Mboe/d major by 2019 to the benefit of all Total shareholders.”
The acquisition transforms Total’s North West Europe outlook.
- The transaction will make Total the second largest operator in the NW Europe offshore region which is the 7th largest oil and gas producing region globally. Post completion, Total will operate over 500 kboe/d (gross) production in the region.
- The addition of Maersk Oil’s assets, including the operated UK gas field Culzean (49.99% working interest), close to the Elgin-Franklin hub operated by Total, and its stake in the Johan Sverdrup oil development (8.44% working interest) in Norway will bolster Total’s production profile in these countries.
- The transaction adds a new production hub with Maersk Oil’s operatorship and 31.2% ownership of the DUC producing assets in Denmark with net production in 2018 estimated at around 60 kboe/d.
The proposed transaction is subject to the applicable legally required consultation and notification processes for employee representatives and to approvals by the relevant regulatory authorities. The transaction is expected to close in first quarter 2018 and has an effective date of July 1, 2017.