Total, one the largest energy companies in the world, recently announced the acquisition of shipping giant Maersk's oil and gas business. The French company feels the $7.45 billion deal will strengthen its operations in the North Sea, as well as boost earnings and cash flow.
The sale of Maersk Oil, with reserves equivalent to around 1 billion barrels, fits with the Danish company’s strategy of focusing on its shipping business. Total continues with its pattern of investing in new fields in the North Sea, and this acquisition gives it further economies of scale by making it the second largest player in the region. The deal was triggered, in part, by lower energy prices around the globe.
The acquisition could be a trend wherein larger oil companies rely on new investments and larger production quantities to offset historically low retail prices. With current prices hovering around $50 per barrel of crude oil, many in the oil industry are barely covering their costs. As inventories grow and demand shrinks in the face of renewable energy use, more efficient gasoline engines, and additional sources of oil and natural gas in the U.S., the costs of exploring and tapping new fields is consuming a larger portion of profits.
Under the terms of the deal, Maersk will get $4.95 billion in Total shares and Total will assume $2.5 billion of Maersk Oil's debt. Maersk has recently unveiled a stronger focus on its transport and logistics businesses due to losses in the energy sector.