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TOTAL (TOT) Acquires Maersk Oil for $7.45B, Expands Globally

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TOTAL S.A. announced that it has entered into a definite agreement to acquire Maersk Oil & Gas A/S (Maersk Oil) in a share and debt deal. This acquisition, expected to close in the first quarter of 2018, will strengthen its position globally as an oil and gas operator.

The deal will bring in high quality low margin production assets and help TOTAL increase its total hydrocarbon production level to 3,000 thousand barrels of oil equivalent (kboe) per day in 2019 from 2,500 kboe per day at the end of second quarter of 2017.

Deal in Details

TOTAL will acquire 100% stake in Maersk Oil through payment of its shares and assumption of debt. The company will issue shares worth $4.95 billion and assume Maersk Oil’s debt of $2.5 billion.

This acquisition will allow TOTAL to combine Maersk Oil’s high-quality assets spread globally with its existing assets. The combination of Maersk Oil’s North Western Europe businesses with TOTAL’s existing portfolio will position the latter as the second largest operator in the North Sea with strong production profiles in the U.K., Norway and Denmark.

Internationally, in the U.S. Gulf of Mexico, Algeria, East Africa, Kazakhstan and Angola there is an excellent fit between TOTAL and Maersk Oil’s businesses allowing for value accretion through commercial, operating and financial synergies.

This acquisition is going to be immediately accretive to TOTAL’s earnings per share and cash flow. The company expects to generate operational, commercial and financial synergies of more than $400 million per year.

Sale & Purchase of Assets

TOTAL continues to make strategic acquisitions in high potential areas and divest assets that are not in sync with its long-term objectives. After expanding its operations in the Middle-East in 2016 by signing an agreement with Qatar Petroleum, the company extended in Africa by acquiring the marketing and logistics network in Kenya, Tanzania and Uganda in the first quarter of 2017.

The decision to acquire Maersk Oil is a continuation of TOTAL’s ongoing merger and acquisition strategies to expand its footprint across the globe.

Zacks Rank

TOTAL currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

This deal will further strengthen its position in the industry and create tougher competition for the super majors like Exxon Mobil Corporation (XOM - Free Report) , Chevron Corporation (CVX - Free Report) and BP p.l.c. (BP - Free Report) .

Price Movement

TOTAL has gained 4.4% in the last 12 months versus 0.2% decline of its industry.



The company’s strong production portfolio, initiatives to lower operating costs and start new projects bode for it in the future.

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