French oil giant becomes second-largest N. Sea producer after buying Maersk assets for £5.8bn

Maersk Oil's chiec executive Gretchen Watkins at the recent installation of the third Culzean jacket in the UK North Sea.
Maersk Oil chief executive Gretchen Watkins at the recent installation of the third Culzean jacket in the UK North Sea.

French oil company Total is to buy Maersk’s North Sea fields – including the flagship Culzean gas field – in a £5.8 billion take-over which will make it the second-biggest producer in the basin.

Maersk is currently developing the Culzean gas field which is expected to start production in 2019 and which could supply up to 5 percent of Britain’s gas demand

The combination with Maersk gives Total about 1 billion barrels of oil equivalent of proven and probable reserves, about 80 percent of which are in the North Sea. It will add output of about 160,000 barrels a day of oil equivalent to the French group next year, rising to 200,000 a day by 2020.

Total expects to  save more than $400 million a year starting in 2020, in particular by combing the two companies’ North Sea assets but the deal does not change Total’s forecast for capital expenditure of $15 billion to $17 billion next year.

The price paid takes account of about $3 billion in Maersk decommissioning liabilities.

Total Chief Executive Patrick Pouyanne had hinted last month that he was eyeing up possible acquisitions to grow production and take advantage of a plunge in company valuations, the cost of drilling and other equipment during the three-year industry downturn.

The Maersk assets will boost the French giant’s business in the North Sea, adding to deals earlier this year that expanded its presence in Brazil and Uganda.

Pouyanne 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.

“We had the feeling that on the North Sea, we had to go a step further to be more competitive. Maersk had been considering spinning off the oil and gas assets in an initial public offering, but we offered them another option.”

The Total-Maersk deal is among the largest that a super-major has done since oil prices crashed in 2014. Royal Dutch Shell Plc agreed to buy BG Group Plc for $52 billion in 2015.

22 Aug 2017

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