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Total North SeaFrench oil major Total $TOT is buying Maersk Oil & Gas A/S from Danish shipping giant A.P. Møller – Mærsk A/S in a share and debt transaction valued at US$7.45 billion. The deal adds reserves equivalent to around 1 billion barrels of oil for Total and A.P. Møller – Mærsk A/S can focus on its shipping business and other activities the company announced last year. This was Total's biggest oil deal since it acquired Elf in 2000

Total is now able to strengthen its operations in the North Sea and beleives the deal will boost it's earnings and cash flow with  financial synergies of more than $400m per year, in particular from combining assets in the North Sea. Maersk Oil employs 2,800 people, 688 of whom are based at its Aberdeen office.

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  1. AP Moller Maersk shares +3.7 per cent 
  2. Total shares - 0.7 per cent at 0900 GMT

The deal reminds us of the deal Transocean buying Songa Offshore SE for $3.4 Billion last week. Both are effectively betting on new rather than mature fields in the offshore fields, for Total specifically in the North Sea. Both deals give the acquirer further economies of scale. Total will be the second largest player in the region.

The deal also takes a leaf out of Exxon Mobil's playbook,  using a strong balance sheet to acquire attractive assets from competitors having emerged from the prolonged oil and gas slump.

"It was time for us to do what a real oil and gas company would do in a period such as this when prices are lower and costs are down. Either launch new projects or acquire new reserves at attractive prices," Total chief executive Patrick Pouyanne told reporters.

Under terms of the deal, Maersk will receive $4.95 billion in Total shares and Total will assume $2.25 billion in Maersk Oil debt. The share payment consists of 97.5 million common shares, representing 3.75% of the share capital of Total. 

The deal is scheduled to close in the first quarter of 2018. Maersk Oil will add 160 Mbbl/d in liquids production, 1 billion boe in 2P/2C reserves and more to Total's existing portfolio.

IPO considered but no other bidders

Pouyanne also said to reporters; "There was a debate within Maersk and they finally accepted given that it was attractive and also the fact that an IPO in a tense oil market would not be a right move," adding that no other oil major was bidding for the assets.

Maersk said it plans to return a "material portion of the value of the received Total SA shares" to shareholders in 2018 and 2019 in the form of extraordinary dividend, share buyback or distribution of shares in Total.

Source: Total

From The TradersCommunity News Desk

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