Total set to raise cost savings target after Maersk Oil deal

PARIS (Reuters) - Total (TOTF.PA) 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 (MAERSKb.CO) 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 end 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.

“In the UK in particular, we have two operations of similar size. There are 700 staff on both sides in Total UK and Maersk UK with more or less same size of assets,” he said.

“Obviously we’ll merge these two subsidiaries. At the end of the day, we will have the opportunity to do some rationalization,” Pouyanne said.

Reporting by Bate Felix; Editing by Keith Weir


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