Total to Buy Maersk's Oil and Gas Business for $4.95 Billion

LONDON — The Danish container shipping company A.P. Moller-Maersk said on Monday that it had agreed to sell its oil and gas business to the French energy giant Total for $4.95 billion.

Oil prices have started to recover after an extended downturn, strengthening profit at major oil producers in the second quarter of this year and opening the door to more mergers in the sector.

Patrick Pouyanné, the chairman and chief executive of Total, said last month that the company would “take advantage of the low-cost environment” to start new projects and seek acquisitions.

The proposed deal with Maersk values the Danish company’s oil and gas business at $7.45 billion, including debt.

“This transaction delivers an exceptional opportunity for Total to acquire, via an equity transaction, a company with high quality assets which are an excellent fit with many of Total’s core regions,” Mr. Pouyanné said in a news release.

Big energy companies like BP, Chevron and Total have wrestled in recent years with a sharp decline in oil prices — a barrel of crude now sells for around $52, less than half its peak in early 2014.

They initially sought to bolster earnings by cutting jobs and investment, but have since gone further by embracing new technologies and construction methods.

As a result, operating costs have fallen and cash flows have firmed. As recently as 2015, it cost $97 for big energy companies to break even on a barrel of oil, after expenses, investments and shareholder dividends, according to an analysis by RBC Capital Markets, an investment bank. That figure has now nearly been halved.

Such adjustments have ensured that if oil prices do rise, profits at major oil and gas companies will surge. The shift was borne out in the latest batch of results, with Chevron, Exxon Mobil, Royal Dutch Shell and Total all reporting much healthier earnings.

The Maersk deal would increase Total’s overall production by 160,000 barrels a day in 2018 and make it one of the largest operators of offshore rigs in northwest Europe, the company said.

The French company said the purchase in a relatively safe part of the world was part of a “balancing of country risks” just months after Total signed a deal with Iran to lead a natural gas project in the Persian Gulf.

The agreement with Tehran could open Iran’s huge energy reserves to international players. But it also exposes Total to a high degree of risk, particularly if President Trump reneges on the Iran nuclear deal, or if Washington imposes further sanctions on Tehran.

Maersk had said last year that it planned to spin off or sell its oil business as it focused on its transport and logistics services operations.

Under the terms of the deal, the Danish company would receive 97.5 million Total shares, or about 3.8 percent of the French company. Total would also assume $2.5 billion in debt as part of the transaction.

Maersk’s main shareholder also has the possibility of a seat on Total’s board of directors.

The deal is subject to regulatory approval and a consultation process with Total’s employees. It is expected to close in the first quarter of next year.

As part of the transaction, Total would also assume decommissioning obligations of $2.9 billion, Maersk said in its own statement.

The Danish company added that it would seek to return a “material portion of the value” of the shares it received from Total in the form of extraordinary dividend, share buyback or distribution of Total shares by 2019.

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