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French integrated oil and gas company Total has reached a binding agreement with Occidental Petroleum to acquire Anadarko’s assets in Africa for $8.8-billion in the event of the successful completion of Occidental’s takeover bid for Anadarko.
The transaction hinges on Occidental entering into and completing its proposed acquisition of Anadarko, as well as on approval by the relevant authorities. The deal is expected to close in 2020.
Chevron has submitted a competing bid to acquire Anadarko.
The acquisition of Anadarko’s African assets offers Total the opportunity to acquire a “world-class portfolio” of assets.
Assets that will be sold in the proposed acquisition include a 24.5% participating interest and operatorship of blocks 404a and 208 in the Berkine basin, in Algeria, in which Total already owns 12.25%, as well as a 27% participating interest in the Jubilee field and a 19% participating interest in the TEN fields, in Ghana.
In Mozambique, Total is set to acquire a 26.5% participating interest and operatorship in Area 1 where a 12.8-million-tonne-a-year liquefied natural gas (LNG) project is largely derisked and close to sanction.
In South Africa, Total will acquire exploration licences near the Brulpadda discovery.
Overall, these assets represent about 1.2-billion barrels of oil-equivalent proven and probable reserves, of which 70% is gas, as well as two-billion barrels of oil-equivalent long-term natural gas resources in Mozambique.
Equity production is expected to grow to around 160 000 barrels of oil-equivalent a day by 2025.
Commenting on the announcement, Total chairperson and CEO Patrick Pouyanne said that, through the Anadarko portfolio, the company would be able to leverage its expertise in LNG by operating a major project in Mozambique and in Deepwater, in Ghana.
The company would also become the operator of major Algerian oil assets, where the company is already a partner, and it would be able to generate value through adding volumes to its growing LNG portfolio.
“Total is committed to execute smoothly this transaction, should Occidental be successful in its offer to acquire Anadarko. The proposed transaction is a win-win for Total and Occidental,” he added.
Through the transaction, Total would get access to about three-billion barrels of oil-equivalent resources and Occidental would be able to strengthen its post completion balance sheet by monetising the international assets of Anadarko.
Despite the capital investment in the Mozambique LNG project, the acquisition is expected to be free cashflow positive from 2020 even at a Brent price of less than $50/bl and to generate more than $1-billion a year of free cashflow from 2025 onwards after start-up of the Mozambique project.