Andrey Rudakov/Bloomberg

Oil M&A Cheaper Than Exploration Puts Maersk on Takeover Watch

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A.P. Moeller-Maersk A/S is actively searching for North Sea oil acquisitions as the drop in energy prices makes takeovers a better option than exploration.

“We absolutely have appetite for acquisitions,” Nils Smedegaard Andersen, chief executive officer of Maersk, said in an interview on Thursday. “We think it’s better to reduce spending on exploration and then focus more on acquisitions as a method to grow reserves.”

Maersk’s oil unit is returning focus to its home waters, where it first started its operations in the 1960s. The company, which in recent decades expanded to countries including Algeria, Angola and Qatar, can find the best value in the tight chalk reservoirs of the North Sea, where it has a market-leading advantage with its oil-retrieving technologies, the CEO said.

“There’s a lot of stuff for sale in the North Sea and some of it looks good, other things less so, but we’re looking at all of it to see what’s best to spend money on,” Andersen said. “We perceive the North Sea as the area that matches our expertise the best way. Historically we have had a lot of success in the North Sea, both in exploration and in expansions, and we want to build on that.”

Possible targets may include Dong Energy A/S. Its owners, led by the Danish state and Goldman Sachs Group Inc., may be getting closer to selling Dong’s oil and gas assets in the waters around Denmark, Norway and the U.K. Andersen said he wouldn’t comment on whether Maersk Oil is interested in buying Dong’s exploration and production division.

Dong Assets

“I don’t know if it will be put up for sale and if it comes up for sale, we would have to consider things like the terms and the price,” he said. “There are a number of other things on the market we’re currently looking at.”

Maersk on Thursday said its ample cash reserve will allow it to buy back own stock for $1 billion, its second such plan in one year. The company also returned extra cash to shareholders earlier this year after selling most of its shares in Danske Bank A/S.

Maersk also said its oil unit will drop a target of increasing daily production to 400,000 barrels of oil. In the second quarter, daily production was 306,000 barrels.

“After three quarter with a low oil price we have to adjust our business and see that these are the conditions we have to operate under, at least for a while,” Andersen said. “We no longer want to provide quantitative targets for the oil division, but that doesn’t mean we won’t grow it to a 400,000 barrel company some day as we still think that’s a good size.”

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