PARIS • Total is buying Maersk's oil and gas business in a US$7.45 billion (S$10.2 billion) deal which the French energy major said would strengthen its operations in the North Sea and boost earnings and cash flow.
For Danish company A.P. Moller Maersk, the sale of Maersk Oil, with reserves equivalent to around 1 billion barrels of oil, fits with a strategy of focusing on its shipping business and other activities announced last year.
The world's top oil firms have been back on the takeover trail over the last year, helped by signs of a recovery in the oil market.
Total expects its biggest oil deal since it acquired Elf in 2000 to generate financial synergies of more than US$400 million per year, in particular by combining assets in the North Sea.
Total has been betting on new rather than mature fields in the North Sea, and the acquisition gives it further economies of scale by making it the second largest player in the region.
The deal illustrates Total's strategy of using a strong balance sheet to acquire attractive assets from competitors, having emerged from the prolonged oil downturn stronger than some of its rivals.
Total's chief executive Patrick Pouyanne said: "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."
The purchase also signals that some oil majors are set to invest to replenish reserves and boost production, anticipating an oil price recovery. With current prices of US$50 per barrel, most are simply struggling to balance their books.
Mr Pouyanne said Total had proposed a deal to Maersk as an alternative to floating the business.
"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," he said, adding that no other oil major was bidding for the assets.
Under the deal, A.P. Moller Maersk will get US$4.95 billion in Total shares and Total will assume US$2.5 billion of Maersk Oil's debt.
Maersk said it plans to return a "material portion of the value of the received Total shares" to shareholders next year and in 2019 in the form of extraordinary dividend, share buyback or distribution of shares in Total.
Maersk has embarked on a major restructuring to focus on its transport and logistics businesses, and separate its energy operations in the face of a drop in income.