Woodmac: Total-Maersk deal is mostly about North Sea

Following yesterday’s big news of France’s Total taking over Denmark’s Maersk Oil in a $7.45 million transaction, Wood Mackenzie has offered its view on the deal.

According to Dr Valentina Kretzschmar, a director in Wood Mackenzie’s corporate services unit, the proposed deal is mostly about Maersk Oil’s North Sea assets, where the company is developing the Culzean HPHT field in the UK, and has a share in the giant Johan Sverdrup oil development in Norway.

Commenting on the proposed transaction Dr. Kretzschmar said:“For Total, the deal is first and foremost about consolidation in the North Sea. Cost synergies should add value, with the North Sea a key area of overlap. The deal will also reduce Total’s weighting towards areas of high above ground risk.”

According to Woodmac, the transaction is the biggest North Sea-weighted deal since the Statoil / Norsk Hydro merger in 2006.

Dr Kretzschmar added: “There are a number of strategic drivers at play here. The acquisition improves Total’s near-term growth outlook – it provides Total with an immediate 6% production increase and strengthen near-term growth.

“It will further shift Total’s weighting towards OECD regions, a core strategic driver for the company as it looks to balance the portfolio away from areas of high above ground risk.”

The acquisition also strengthens Total’s North Sea exposure, through Maersk’s core positions in the UK, Norway and Denmark. Total gains access to the prized Johan Sverdrup discovery (8.44%) and the UK’s largest gas development, Culzean (49.99%). Both are currently under development and are expected to come on stream towards 2020.

While it says the North Sea is the main focus of the deal, Wood Mackenzie says Total will also strengthen it platform for growth in the Middle East and Africa.

“Total is acquiring a deep specialist in unlocking complex reservoirs and boosting recovery factors through enhanced oil recovery techniques,” Dr Kretzschmar said. “Undoubtedly, there will be synergies across technology and mature reservoir expertise, in particular in Qatar and Iran.

“Total took operatorship of the large Al Shaheen oil field in Qatar last month and will be looking to leverage Maersk’s intimate knowledge of the asset.”

“In addition, Total will acquire legacy oil production in Algeria to help support its existing gas-led growth strategy in the country. It will also gain a foothold in the Kenyan upstream sector with exposure to longer-term oil opportunities.”