French energy company Total, SA (NYSE: TOT – $52.04) said that it will acquire exploration and production company Maersk Oil & Gas A/S, a wholly owned subsidiary of A.P. Møller – Mærsk A/S, in a share and debt transaction. Under the agreed terms, A.P. Møller – Maersk will receive $4.95 billion in Total shares and Total will assume $2.5 billion of Maersk Oil’s debt. The combination with Maersk Oil offers Total an exceptional overlap of upstream businesses globally which will enhance the company’s competitiveness and value in many core areas, particularly through some high quality growing assets and the delivery of synergies. Subject to regulatory and other approvals, the transaction is expected to close in first quarter 2018.
Total has numerous projects in the production pipeline, including phase three of Halfaya in Iraq, early stage operations in Qatar and Argentina, and obtaining offshore exploration permits in various locations. Too, ongoing cost-cutting initiatives ought to yield a lower break-even price point for crude oil, currently in the $40-$50 a barrel range. The shares, yielding 5.1%, can be maintained in a well-diversified income account.