On Monday, May 18, 2020, multinational energy company, Total called off its plan to acquire Occidental Petroleum’s assets in Ghana.
Last year, Total and Occidental Petroleum entered an $8.8 billion Purchase and Sale Agreement (PSA) in order for Total to acquire Anadarko’s assets in African countries such as Mozambique, Ghana, Algeria, and South Africa. Under this agreement, Total and Occidental have since completed the sale and purchase of only Mozambique and South Africa assets.
In addition, the PSA provided that the sale of Ghana’s assets was conditional upon the completion of the Algeria assets’ sale. However, Occidental informed Total that, as part of an understanding with the Algerian authorities on the transfer of Anadarko’s interests to the company, it will not be in a position to sell its interests in Algeria.
By doing so, this has put an end to the proposed agreement Occidental made with the French energy company. Given the extraordinary market environment and the non-operated nature of Anadarko’s interests in Ghana, Total has decided not to complete the possession of Ghana’s assets and, as a consequence, to preserve the Group’s financial flexibility.
Speaking on the lost Ghanian acquisition, Total Chairman and CEO Patrick Pouyanné said: “This decision not to pursue the completion of Ghana assets consolidates the Group’s efforts in the control of its net investments this year.” Subsequently, Pouyanné added that it provides Total with the “financial flexibility to face the uncertainties and opportunities linked to the current environment.”
The coronavirus pandemic has had a significant impact on the global energy sector, plummeting oil and gas prices which have the potential to cause disruptions well beyond the energy sector. As a result of this, Oil and energy companies are thinking of long-term strategies that will secure and support their corporations at this time.
Meanwhile, a report by The Motley Fool shows that the sale of Anadarko’s African assets was a key piece of Occidental’s debt reduction strategy. Initially Occidental aimed to sell up to $15 billion of its assets to help pay down some of the debt it took on to acquire Anadarko.
Nevertheless with these African sales falling apart, Occidental no longer believes it can sell enough assets in the near-term to address its upcoming debt maturities. It has $6.4 billion due in 2021 and another $4.7 billion maturing in 2022. Thus, the company is exploring alternative financing options to help manage its debt.
