Total Enhancing Its Competitiveness and Value with Maersk Oil Acquisition

Total announced that the Boards of Total and A.P. Møller – Mærsk have approved the acquisition of 100 percent of the equity of the E&P company Maersk Oil & Gas A/S (Maersk Oil), a wholly owned subsidiary of A.P. Møller – Mærsk A/S, by Total in a share and debt transaction.

Under the agreed terms, A.P. Møller – Maersk will receive a consideration of $4.95 billion in Total shares and 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 (signing date) which will represent 3.75 percent of the enlarged share capital of Total. Underpinning this share-based partnership, 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 1st 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 1 billion 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 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.

Key Themes of Transaction

Acquisition transforms Total’s North-West Europe outlook.

• This transaction will make Total the second largest operator in the NW Europe offshore region, which is the 7th largest oil and gas producing region globally. Post completion, Total will operate over 500 kboe/d (gross) production in this region.

• The transaction strengthens Total’s existing North Sea offshore producing business in UK and Norway. The addition of Maersk Oil’s world class assets, including the operated UK 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.

   

   

Excellent overlap internationally enhances Total’s regional businesses.

The transaction also will strengthen other core Total regional businesses due to clear complementary positions between Total and Maersk Oil 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 Middle East - North Africa Region.

   

Keywords: Upstream Businesses, North Sea, Oil and Gas, ARC Advisory Group.