Total says the Boards of Total and A.P. Møller–Mærsk approved the $4.95 billion acquisition of 100% of the equity of the exploration and production company Maersk Oil & Gas A/S, a unit of A.P. Møller–Mærsk A/S, in a share and debt transaction.

The deal will make Total the second largest operator in the Northwest Europe offshore region, which is the 7th largest oil and gas producing region globally. Post completion, Total will operate over 500 kilo barrels of oil per day (kboe/d) production in this region.

Under terms of the deal, A.P. Møller–Maersk Total will assume $2.5 billion of Maersk Oil’s debt. Total will issue to A.P. 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 which will represent 3.75% of the enlarged share capital of Total.

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.

The transaction is expected to bring the following benefits to Total:

  • Around 1 billion barrels of oil (boe) of 2P/2C reserves, 85% of which are in OECD countries (more than 80% 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 combining assets in the North Sea.

The transaction strengthens Total’s existing North Sea offshore producing business in the U.K. and Norway. The addition of Maersk Oil’s world class assets, including the operated U.K. gas field Culzean (49.99% Working Interest), close to the Elgin-Franklin hub operated by Total, and its stake in the giant 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. Maersk Oil has been the leading operator in Denmark for almost 50 years. The pooling of Total’s and Maersk Oil’s technology and operating expertise will optimize the long term value potential of the DUC assets to the benefit of Denmark and Total shareholders.

The transaction also is expected to strengthen other core Total regional businesses including:

  • Consolidating Total’s US Gulf of Mexico presence with the Maersk Oil interest in the Jack development in the Wilcox formation
  • Becoming the second largest IOC in Algeria by production
  • Complementing Total’s leading East Africa position via Maersk Oil’s Kenya assets
  • Strengthening of Total’s Kazakh business via addition of operated production
  • Benefiting of potential upsides in Angola and Brazil
  • Pooling of Total and Maersk Oil geological and operational expertise in the Middle East-North Africa region