Total has announced that the Boards of Total and A.P. Møller – Mærsk have both approved the acquisition of 100 per cent of the equity of the E&P company Maersk Oil & Gas A/S (Maersk Oil) by Total in a share and debt transaction
Under the agreed terms, A.P. Møller – Maersk will receive a consideration of US$4.95bn in Total shares and Total will assume US$2.5bn of Maersk Oil’s debt. Total will issue to A.P. Møller – Maersk A/S, 97.5mn of shares, based on the average Total share price on the 20 business days prior to 21 August which will represent 3.75 per cent of the enlarged share capital of Total. Underpinning this share based partnersip, subject to Total shareholders’ approval, Total has also offered the possibility of a seat on its Board of Directors to A.P. Møller Holding A/S, main shareholder of A.P. Møller – Mærsk.
The proposed transaction is subject to the applicable legally required consultation and notification processes for employee representatives and to approvals by the relevant regulatory authorities. The transaction is expected to close in first quarter 2018 and has an effective date of 1 July 2017.
The combination with Maersk Oil offers Total an exceptional overlap of upstream businesses globally which will enhance Total’s competitiveness and value in many core areas, in particular through some high quality growing assets and through the delivery of synergies. Specifically the transaction will bring the following benefits to Total:
Around 1bn boe of 2P/2C reserves, 85 per cent of which are in OECD countries (more than 80 per cent in the North Sea), contributing to Total’s continuous balancing of country risks of its portfolio to enhance shareholder value
The addition of 160 kboe/d of mainly liquids production in 2018, acquired at an average price of 46 k$/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 further strengthening Total’s leading production growth outlook
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 Pouyanne, Chairman and CEO said, “This transaction delivers an exceptional opportunity for Total to acquire, via an equity transaction, a company with high quality assets which are an excellent fit with many of Total’s core regions. 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."
Dr Valentina Kretzschmar, director, corporate service, Wood Mackenzie said: “For Total, the deal is first and foremost about consolidation in the North Sea. Cost synergies should add value, with the North Sea a key area of overlap. The deal will also reduce Total's weighting towards areas of high above ground risk.”
Dr Kretzschmar added: “There are a number of strategic drivers at play here. The acquisition improves Total’s near-term growth outlook – it provides Total with an immediate 6 per cent production increase and strengthen near-term growth.
“It will further shift Total’s weighting towards OECD regions, a core strategic driver for the company as it looks to balance the portfolio away from areas of high above ground risk.”