TOTAL has agreed to acquire Maersk Oil in a $7.5 billion (£5.8bn)) deal that signals its enthusiasm for the North Sea but will likely spark fears of further job losses in the area.
The acquisition will give the French oil and gas giant control of a business with one billion barrels reserves, around 80 per cent of which are in the North Sea.
Total said the deal will enhance its key operating position in the UK leaving it with a strong growth outlook in the country.
However, noting that Total was acquiring assets at what it regarded as attractive prices, chief executive Patrick Pouyanne highlighted the scope to squeeze costs out of the enlarged business in the North Sea.
The process may take a toll on jobs in the UK operations of the two firms, which employ around 1,400 staff in total.
“There are 700 staff on both sides in Total UK and Maersk UK with more or less same size of assets. Obviously we'll merge these two subsidiaries,” said Mr Pouyanne in a webcast to discuss the deal.
“At the end of the day, we will have the opportunity to do some rationalization."
The transaction provides further evidence of how the plunge in the oil price since 2014 is encouraging a shake up in the North Sea.
Sector watchers note many assets have been put up for sale amid moves by some firms to focus investment in areas they believe have greater growth prospects.
Thousands of jobs have been shed across the supply chain.
The AP Moller Maersk shipping group which owns Maersk Oil decided last year to focus on its transport and logistics operations.
Maersk Oil has stakes in the giant Culzean field 145 miles east of Aberdeen, from which first gas is expected in 2019 and the Johan Sverdrup development off Norway.
Mr Pouyanne said the transaction was in line with Total’s strategy to take advantage of the current market conditions and of its strong balance sheet to add new resources at attractive conditions.
Total said it expects to squeeze $400 million synergies annually out of the enlarged business, “in particular by the combination of assets of Total and Maersk Oil in North Sea”.
Some $200m of the synergies are expected to come from cost cutting.
Total started production from the bumper Laggan Tormore gas development West of Shetland last year following delays.
It has agreed to pay Maersk $4.95 billion in Total shares and to assume $2.5 billion of Maersk Oil’s debt.
Maersk Oil also has interests in countries ranging from the USA to Angola.
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