Total set to raise cost savings target after Maersk Oil deal

PARIS: Total is set to increase its target for $4 billion of cost savings by 2018 in the light of its planned acquisition of Maersk Oil, Chief Executive Patrick Pouyanne said on Monday.
Overlap between the UK operations of the two companies means some jobs could be at risk there, he added.
Total has offered to buy the oil and gas business of Denmark’s A.P. Moller Maersk in a $7.45 billion deal which the French energy major said would strengthen its operations in the North Sea and boost earnings and cash flow.
Total said the deal was expected to generate operational, commercial and financial synergies of more than $400 million per year, in particular by combining assets in the North Sea.
“At least $200 million are costs synergies, so we target cutting costs by $200 million out of this combination on top of what Total has already done, and it will be a part of our new target for cost savings,” Pouyanne told journalists.
Total previously planned to cut costs by $4 billion by the end of 2018, adjusting to lower oil prices.
“By mid September we will revise this target, we will upgrade the target,” he said. The company will hold an investor day in September.
Pouyanne said the North Sea was one of the areas where the company would have to go further in cost savings to remain competitive, and the Maersk Oil deal offers it the opportunity to do so.
Maersk lost a long-standing agreement to operate Al-Shaheen in Qatar to Total last year, but is according to media reports in talks with Iran to develop the oil layer of the South Pars field, which is an extension of the Qatari field.
Total last month signed a major deal with Iran to develop the gas part of South Pars.
Total also said it was investing $3.5 billion over five years in Qatar's offshore Al Shaheen oilfield.