Aug. 21 (UPI) -- French supermajor Total said Monday it would become the second-largest operator in northwest Europe through a deal to acquire Danish producer Maersk Oil.
Total said it would buy off the oil unit of Danish shipping giant A.P. Moller-Maersk for $7.45 billion, taking on $2.5 billion of the debt held by Maersk Oil in the process. The French company is coming off a strong quarter, with adjusted net income growing by 13 percent from last year to $2.5 billion. Chairman and CEO Patrick Pouyanné said when releasing results last month his company could "take advantage of the low-cost environment" by taking on new resources.
Under the deal to acquire Maersk, Total could be the second-largest offshore operation in northwest Europe, which is the seventh largest oil and gas producing region in the world. Maersk Oil as of Monday had around 1 billion barrels of oil equivalent in potential reserves, with more than 80 percent of that in the North Sea.
"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," the French company said.
Maersk said its share of production during the second quarter was around 284,000 barrels of oil equivalent per day, about 14 percent lower than last year, but better than the first quarter by about 10,000 barrels per day. The company is a player in some of the largest North Sea projects, including the giant Johan Sverdrup field in Norway. When some of those projects start production before the end of the decade, Maersk said it expected to see its development grow by as much as 75,000 barrels per day.
Total said it would acquire assets that could generate free cash flow even if crude oil prices drop below $30 per barrel. After surging more than 3 percent on Friday, the price for Brent crude oil, the global benchmark, was around $52.50 early Monday.
"This transaction will deepen and accelerate this strategy significantly, as Total will become a 3 million barrels of oil equivalent per day major by 2019 to the benefit of all Total shareholders," Pouyanné said in a statement.
The oil division of A.P. Moller-Maersk grew out of the split from the company last year and it started 2017 by saying it was working to improve its efficiency under the reorganization by cutting about 160 positions.
The proposed merger would clear by first quarter 2019, provided it's approved by relevant regulatory authorities.
