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Maersk to spin off oil, energy units in major restructuring move

AP Moller-Maersk is planning to spin off its oil and energy businesses under a major restructuring as the Danish conglomerate focuses on growth in its container shipping businesses.

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The company said Thursday it planned to separate four units -- Maersk Oil, Maersk Drilling, Maersk Supply Service and Maersk Tankers -- from the parent group within the next two years.

It will consider joint ventures, mergers and listings to separate the four units from the parent group, either individually "or in combination". The company said it has no plans to demerge the energy units in a single move.

Maersk Oil is Denmark's biggest offshore producer and stakes in producing assets in the UK and Norway, including a share of the massive Norwegian Johan Sverdrup field which due to come onstream in 2019. It also holds stakes in exploration plays further afield including Kenya, Kurdistan and Brazil.

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Maersk Oil expects production this year to average 320,000-330,000 b/d of oil equivalent, up from 2015 production of 312,000 boe/d.

The company has been considering its upstream growth options particular after a setback over a key Qatar contract earlier this year.

In June, Maersk learned it will lose its stake in the joint venture operating Qatar's large Al Shaheen field from mid 2017, a project which is currently the biggest contributor to Maersk's upstream portfolio.

Maersk's output from the Al Shaheen field was 164,000 b/d in the second quarter, representing almost half of its total entitlement of 350,000 b/d.

"Our businesses have been challenged by the markets -- low freight rates and a low oil price," CEO Soren Skou said on a call with investors. "We are seeking to find a way to get this group back onto a long-term growth path in a world where growth in our industries across the board has slowed to a trickle."

"In the oil side of the business we are responding to a lower-for-longer oil price scenario, figuring out how to be profitable at today's oil prices."

Maersk plans to refocus the four units of its energy division on fewer regions, to concentrate its core assets in the North Sea, and keep exploration activity at a low level, it said. The company will also seek to increase its exposure to the natural gas market.

SHIPPING GROWTH PLAN

Maersk's new focus will be its logistics and transport division centered around its largest unit, container shipping company Maersk Line. The division is one of the largest buyers of bunker fuel in the world, consuming 8.9 million mt in 2015.

Maersk Line will now seek to take greater market share within its industry, Skou said.

"We have over the last five years gone from a strategy of wanting to go with the market, last year we upgraded to growing at least in line with the market, and now we are saying we want to grow market share."

"We need to grow market share organically, and we will also consider acquisitions if the right opportunities develop," Skou said.

Skou cited the bankruptcy of South Korea's Hanjin Shipping and the merger of Hapag-Lloyd with the United Arab Shipping Company as examples of a shrinking industry in which Maersk could take a larger role.

"There is a wave of consolidations going on in container shipping," he said. "We think this is an inflection point for the industry and we want to make sure we maintain our leading position."

Under the shake-up, Maersk said the long-standing head of Maersk Oil, Jakob Thomasen, will leave the company under a broad management reshuffle.

Claus Hemmingsen, head of Maersk Drilling, will to become CEO of the new energy division.

--Jack Jordan, jack.jordan@spglobal.com
--Robert Perkins, robert.perkins@spglobal.com
--Edited by Dan Lalor, daniel.lalor@spglobal.com