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Business

Total takes over Maersk’s oil business

French oil giant Total has agreed to purchase AP Moller-Maersk’s oil unit in a deal that will strengthen its position in the North Sea. It is also a sign that the global oil-and-gas business is partially back on track.

French oil company Total said Monday that it would buy Maersk Oil, a part of Danish shipping giant AP Moller-Maersk, for $7.45 billion (6.35 billion euros).

Total said the deal will bolster its positions in the Gulf of Mexico, Algeria, Kenya and Kazakhstan, while making it the second biggest operator in the North Sea, which is the seventh-largest oil-and-gas producing region in the world.

Total promised to uphold the oil company's development schedules and investments in a series of projects and that Denmark will become the regional hub for all its operations in Denmark, Norway and the Netherlands.

As part of the deal, Maersk will get $4.95 billion worth of Total shares, which is equivalent to around 3.8 percent of Total's share capital. The French company will also assume around $2.5 billion worth of Maersk Oil debt.

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Combing the two companies should nonetheless generate some $400 million in cost savings and other synergies each year according to Total chairman and CEO Patrick Pouyanne.

The deal, which is subject to relevant regulatory approvals, as well as both company's advisory boards, is expected to be completed during the first quarter of 2018.

 

A significant restructuring

Maersk had announced in September that it was splitting its transport and energy divisions as it faced headwinds in both sectors. The sale of Maersk Oil is just part of this restructuring strategy, which will see it focus on its core transport and logistics arms.

Lower oil prices over the past few years also played their role in the company's plan to divest its oil arm. Although oil prices have recovered of late to trade around $50 a barrel, they are still around half the level they were just three years ago.

The fall has cut into oil companies' margins and made many production areas less economically attractive. Relatively expensive areas such as the North Sea, where deep-water drilling is required, have especially become less attractive than they were previously.

tr/uhe (AP, AFP)

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