Total chief quashes Shell speculation

Financial Times: Total chief quashes Shell speculation

“Thierry Desmarest, chief executive of Total, the French oil group, yesterday poured cold water on speculation he was interested in bidding for Anglo-Dutch rival Shell.”

By Martin Arnold

Published: September 9 2004

Thierry Desmarest, chief executive of Total, the French oil group, yesterday poured cold water on speculation he was interested in bidding for Anglo-Dutch rival Shell.

The current environment of high oil prices was “not conducive to profitable acquisitions,” he said.

“Even if it is undergoing a difficult period now, I am sure the quality of people at Shell will help it get out of its troubles,” he said. “I don’t know who is at the origin of these rumours but it is not us.”

Total, the world’s fourth-largest oil group, is the product of two large acquisitions, first Petrofina of Belgium in 1998, followed a year later by its larger French rival Elf, both of which Mr Desmarest engineered during the last big round of oil sector consolidation.

Total generated €2.2bn ($2.7bn) of net profits in the second quarter alone, sparking speculation about possible takeovers. “It is fair to say our current prosperity has not passed unnoticed,” Mr Desmarest said. However, he played down the likelihood of another big deal. “We are not fanatics of mega-mergers. In these big operations there is a 50:50 chance of success or failure.”

He continued: “I do not see the need for a big change in size nor are there any possible mergers that would guarantee success. When you pay cash for a deal you must take into account the conditions under which it is made.”

Total has also been linked with an interest in its Russian rival Sibneft, which is currently unwinding a merger with Yukos.

Mr Desmarest is understood to have held talks with President Vladimir Putin about Sibneft. But yesterday he said it was likely to require patience before “the risk/reward balance becomes attractive” for a Russian deal.

Christophe de Margerie, Total’s head of exploration and production, said: “At the moment, neither Sibneft nor Yukos are affairs that can be discussed as that would require someone opposite to negotiate with.”

He said the tax problems faced by Yukos were “the most beautiful poison pill”.

Although Mr Desmarest said he would continue to look for acquisitions, he said the current environment of oil prices at about $40 per barrel made it difficult to find value for money in big takeovers.

Total said it had loosened its investment criteria in the face of high oil prices, raising its North Sea Brent oil price assumption, used to judge the feasibility of exploration projects, from $17 to $21.

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