Reports emerged yesterday that AP Moller-Maersk had decided to sell the shares that the company owns in oil and gas. AP Moller-Maersk is a Danish company that has made a name for itself by transporting containers across the globe. The company released a report saying that it had agreed to sell the oil and gas business for a net worth of $4.95 billion to Total, the French energy giant. The mergers being experienced in the oil industry can be attributed to the recovering of oil prices for the last three months meaning that major players in this sector are recording profits. This acquisition comes one month after Total mentioned that it would embark on new projects. According to Patrick Pouyanne who is the chief executive and chairman of Total, he recently said that the low-cost environment at the moment allows for new acquisitions and new projects. The whole deal including debt owed by AP Moller-Maersk will cost Total $7.45 billion. The chief executive of Total said that the new acquisition offers his company the chance to acquire high-quality assets. He also said that making the deal happen via equity transaction was an achievement for Total, AP Moller-Maersk, and any other relevant stakeholder.
In the past few years, energy companies that include Total, Chevron and BP have all struggled with the decline that has been experienced in the oil industry. For instance, a crude oil barrel currently costs $52. Three years ago, the same barrel would trade at over 100 dollars. Before major players in this industry embarked on better construction methods and new technologies, they were contemplating about cutting their investments in the industry as well as laying off some employees. The new measures have resulted in increased cash flow and a reduction in operational costs. This can be reflected by the earnings that have been recorded by other players in the market such as the Royal Dutch Shell, Exxon Mobil, and Chevron. Total has also recorded some improved earnings in the past two years. A portfolio manager known as Mark Lacey said that despite the decline in oil prices, major oil producers have worked effortlessly to improve balance sheets. These efforts have led to a streamlined balance in demand and supply. Total recently signed an agreement with Iran to explore gas in the Persian Gulf. This meant that the world’s largest oil and gas reserves could become accessible to international companies for the first time.