Maersk Oil seen surviving split to become independent producer

By Mikael Holter on 9/23/2016

COPENHAGEN, Denmark (Bloomberg) -- Maersk Oil may well survive as an independent oil company after being split off from its larger parent. While assets that include a stake in the giant Johan Sverdrup project off Norway will draw suitors, listing the company would make sense, analysts said.

“It would create value to list Maersk Oil on its own,” said Teodor Sveen Nilsen, an Oslo-based equity analyst at Swedbank AB. “There’s definitely a market for a listing of the oil unit separately. High-quality, fully-financed assets, combined with dividend capacity, is highly valued in the current market.”

AP Moeller Maersk A/S, Denmark’s 112-year-old shipping and energy conglomerate, said Thursday it was separating the oil-related businesses from the group over the next two years to focus on transport and logistics in a bid to maximize shareholder value. The group’s four units for oil and gas production, drilling, tankers and supply vessels will be separated individually or bundled, through joint ventures, mergers or listing, Maersk said. In the meantime, they will be included in one of two new divisions in the company, labeled Energy.

Maersk Oil gets most of its 330,000 boed from Qatar, the UK, Denmark and Algeria, but 40% of that will disappear from the middle of next year as it lost a bid to continue operating Qatar’s Al Shaheen field. The producer will now focus on fewer regions and seek to grow, particularly in the North Sea, where it is the operator of Culzean gas condensate field on the UK side and, most notably, a stakeholder in the Johan Sverdrup oil discovery in Norway. Both fields are expected to start producing in 2019.

Strengthening Portfolio

Maersk Oil will even look at strengthening its portfolio through acquisitions or mergers, Maersk said. Maersk Oil is in talks to buy North Sea assets from Royal Dutch Shell, Reuters reported Thursday. Representatives of Maersk Oil and Shell declined to comment.

“We see an IPO of the oil business as likely,” DNB ASA said in a note to clients. “We believe Maersk Oil will create a strong North Sea-focused production and development company, with a robust balance sheet to support dividends.”

Sverdrup Appeal

Sverdrup is likely to attract potential buyers at a time when deal-making is accelerating after a two-year downturn in the oil market. The field is the biggest oil discovery offshore Norway in decades with as much as 3 Bbbl of crude and has a break-even price of less than $30/bbl, according to operator Statoil. Even with a stake of only 8.4%, Sverdrup is the crown jewel of Maersk Oil’s portfolio, Sveen Nilsen said.

Companies interested in acquiring Maersk Oil—and especially its Norwegian assets—are likely to include three other stakeholders in Sverdrup—Statoil, Lundin Petroleum and Det Norske Oljeselskap—said Trond Omdal, an analyst at Pareto Securities ASA. Det Norske, which is merging with BP Plc’s Norwegian unit, has said it is interested in making more acquisitions. Statoil this year bought a 20% stake in Lundin, citing a willingness to boost its exposure to projects including Sverdrup.

Swedbank’s Sveen Nilsen also cited Statoil and Det Norske as companies likely to be interested in Maersk Oil’s Norwegian assets. DEA Deutsche Erdoel AG, the oil company owned by billionaire Mikhail Fridman’s LetterOne, could also be interested in Maersk’s Norwegian, UK and Danish assets, he said.

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