How Total's CEO pounced on Anadarko's African energy assets

5/10/2019

It took Total’s chief executive and a small group of advisers just days to line up the French energy major’s biggest acquisition in almost two decades when it agreed to buy the African assets of U.S. firm Anadarko.

Patrick Pouyanne pounced after Occidental Corp trumped Chevron’s $33 billion bid for Anadarko in April with an offer that includes raising financing by selling some of Anadarko’s operations worth up to $15 billion.

By keeping those in the know to a minimum, the French CEO was able to stay flexible in negotiations, take a swift decision and ensure there were no leaks until the binding deal worth $8.8 billion was announced on Sunday, a Total source said.

“Pouyanne proceeded in the same way he did with previous deals: a restricted task force, no bankers and no external counsel,” another source, close to the deal, told Reuters.

Throwing out the rulebook that expects CEOs to be surrounded by investment bankers and other advisers when dealmaking has become a trademark for the 55-year-old CEO and chairman of Total, who took the helm of the French energy major in 2014.

He has surprised investors with his acquisitions, such as buying Maersk’s oil and gas business in 2017 and Engie’s upstream LNG operations in 2018, setting one deal in motion after an unsolicited phone call with the controlling shareholder.

His strategy, which one analyst has called “opportunistic”, has rapidly lifted Total’s growth outlook. Total has made acquisitions worth almost $20 billion in the past five years, under Pouyanne’s leadership.

But the buying spree has increased debt and left its shares lagging rivals, such as Royal Dutch Shell and BP. His manner can also come across as brash, and industry sources say it was one reason a deal to buy a Libyan oilfield stake has now run into a roadblock.

HEAVENLY MATCH

Pouyanne’s move to buy Anadarko’s assets, the French firm’s biggest acquisition since taking over Elf almost two decades ago, will add 5 percent to Total’s output by 2025, said Bernstein analysts, who rate Total’s shares “outperform”.

The assets stretching from Algeria to South Africa bolster his effort to refocus Total on operations in Africa, the North Sea, deep offshore and liquefied natural gas (LNG). The deal depends on Occidental (Oxy) completing the Anadarko merger.

“Pouyanne quickly understood that it could be a match made in heaven because Oxy was mainly focused on Anadarko’s Permian assets. And Pouyanne has repeatedly said he was not interested in Permian,” a source close to the deal said, referring to the Permian Basin where the U.S. shale oil industry is concentrated.

Total has built up a strong balance sheet under Pouyanne since the 2014 oil price crash, giving him the firepower to swoop on Anadarko’s assets. But Total was also able to act swiftly because it has long had its eye on those African operations.

“Total was already familiar with Anadarko’s portfolio. At some point, they took a closer look at Anadarko’s assets, particularly in Africa. There were some discussions, but they did not go any further,” an industry source said.

Another source said Anadarko had been looking for a partner for its Mozambique LNG project to tap an estimated 75 trillion cubic feet of recoverable gas.

Two days after Occidental announced its bid for Anadarko on April 24, Oxy’s corporate jet was on the tarmac in Paris.

UNDER WRAPS

Both firms declined to comment on the reason for the jet’s flight to Paris, although an industry source told Reuters the jet was flown in for a meeting with Total.

Another source familiar with the matter said Occidental Chief Executive Officer Vicki Hollub had flown in with another executive, without telling anybody, to discuss Anadarko’s African assets with Total.

“Of course they (Total) had already thought about it. And I think they reached out to her and said ‘Hey Vicki, if you happen to win this, we would really be interested’,” the second source said. “She did not let the phone get cold. She left and flew to Paris overnight, met with them and heard their deal.”

Occidental did not comment on the account.

A banking source said this deal was not the first time Total had held talks without bankers in the room. The source said it made sense in this case because Total did not need financing and wanted to make a quick decision.

The deal is also not the first to take investors by surprise. Pouyanne first made a splash in 2017 with the purchase of Maersk’s energy business for $7.5 billion after an unsolicited bid made in a phone call to Ane Maersk Mc-Kinney Uggla, chairwoman of the A.P. Moller Foundation, which has a controlling stake, a corporate source said.

“The deal was unplanned but it was a good fit. A banker gave Patrick the idea and he made it happen,” the source said.

Maersk could not immediately be reached for comment.

But Pouyanne’s manner does not always win over partners.

When he boasted to a U.S. energy conference about the benefits to Total of his deal to buy a $450 million stake in a Libyan field from Marathon Oil last year, Libya’s state-owned National Oil Corporation sought to re-negotiate terms, concerned it was too much of a bargain, industry sources said.

Total has said it was in talks with Libyan authorities to resolve financial issues over the deal. NOC could not immediately be reached for comment.

Additional reporting by Ron Bousso, David French, Devika Krishna Kumar, Gary McWilliams, Clara Denina and Stine Jacobsen; Editing by Edmund Blair