Total snubs U.S. shale with North Sea deal

When Total warned last month it was ready for acquisitions, U.S. shale assets weren’t at the top of its shopping list.

On Monday, the French energy giant agreed to buy the oil and gas unit of Denmark’s A.P. MollerMaersk, its biggest purchase since 1999. The $7.45 billion deal, including debt, reinforces Total’s footprint in conventional oil and gas assets in Europe and Africa. U.S. shale — whose development over the past decade has upended the balance in the oil market — won’t be part of the portfolio.

Chief Executive Officer Patrick Pouyanne said shale assets were “quite expensive” and that Total wasn’t the best company to develop them. The deal puts a value of about $50 to $55 a barrel on Maersk, while U.S. shale is closer to $80, he said. Benchmark Brent crude traded at $51.66 a barrel Monday in London

U.S. shale tends to have “higher asset prices,” Brendan Warn, head of international oil and gas equity research at BMO Capital Markets, said by phone. “It’s not Total’s core competency. They’ve tended to be contrarian almost and focus on offshore, conventional” and longer-cycle projects.

The transaction will add about 1 billion barrels of oil equivalent to Total’s reserves, with more than 80 percent of those in the North Sea, spanning Norway, Denmark and the U.K.

“The deal is really about consolidation in the North Sea,” Valentina Kretzschmar, a corporate director at energy consultancy Wood Mackenzie, said by phone.

Total is present in the U.K. North Sea through Laggan-Tormore as well as in the Elgin-Franklin project.

With the Maersk deal, the major will add an operating stake in Culzean, another U.K. North Sea project that’s expected to meet 5 percent of total U.K. gas demand. Total will also get an 8.44 percent stake in the giant Johan Sverdrup oil field off Norway.