Exclusive: Maersk, DONG
oil and gas merger talks stall over price - sources
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[December 14, 2016]
By Jacob Gronholt-Pedersen and Ron Bousso
COPENHAGEN/LONDON
(Reuters) - Talks between shipping group A.P. Moller-Maersk and
DONG Energy to merge their oil and gas business have stalled after the
two Danish firms could not agree on a price, industry and banking
sources said on Wednesday.
The breakdown in talks aimed at creating a joint company worth more than
$10 billion may open the door for other bids for DONG's operations,
which it is spinning off as it moves away from fossil fuels to focus on
offshore wind, the sources said.
Maersk entered talks with DONG in November after announcing plans to
merge or spin off its energy assets as part of a major restructuring to
shift the company's focus to its transport and logistics businesses.
The development will be a blow for Maersk, which said on Tuesday it may
consider selling assets or cutting dividends as it seeks to retain its
credit rating, which is at risk.
In June, Maersk announced it had lost a major oil production contract in
Qatar, adding to capital pressures.
Several private equity funds, including EIG Global Energy Partners, have
shown interest in DONG, according to banking sources.
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Maersk, DONG and EIG were not immediately available to comment.
This was the second merger attempt of the two businesses in recent
years, the sources said.
Bringing together the two Danish companies' oil and gas divisions was
seen by many in the industry as a natural fit, creating a company
focused on the UK and Norwegian North Sea.
But they were unable to agree on the valuation of their assets and the
terms of the merger, several sources close to the talks said.
The negotiations were unlikely to resume "any time soon", according to
one source.
Maersk's Baa1 credit rating was put under review for a downgrade by
Moody's in September. Last month, Standard & Poor's lowered the
company's credit rating to BBB from BBB+ with a negative outlook.
Maersk said separately this week its planned acquisition of German
shipping company Hamburg Süd will replace some 60 percent of revenue
lost when the group spins off its energy division.
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![](../images/121416pics/busine19.jpg)
FILE PHOTO - The MV Maersk Mc-Kinney Moller, the world's biggest
container ship, arrives at the harbour of Rotterdam August 16, 2013.
REUTERS/Michael Kooren
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Nevertheless, Morgan Stanley analysts said in a note this week that all of
Maersk's energy units remained under pressure due to sluggish markets and
finding ways to cut costs.
Deal
making in the North Sea has slowed in the past few years partly as a result of a
global oil price slump and a sharp rise in the number of assets offered for sale
in the aging basin. Companies such as Royal Dutch Shell, ConocoPhillips and
French utility Engie are seeking to sell their North Sea operations.
DONG
produced 89,000 barrels of oil and gas per day in 2016, down from 115,000
barrels daily last year. Its main producing assets include the Ormen Lange, Syd
Arne and Laggan-Tormore fields.
Maersk Oil produced an average of 295,000 barrels of oil equivalent in the first
nine months of 2016. It suffered a major setback when Qatar chose not to extend
its 25-year license to operate the giant Al Shaheen field and award it from 2017
to Total <TOTF.PA>.
(Additional reporting by Arno Schuetze in Frankfurt and Jonathan Saul in London;
Editing by Jane Merriman and Susan Thomas)
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