NEO Energy and Repsol Resources UK have agreed to merge, forming one of the UK North Sea’s largest independent oil and gas producers.
Subject to regulatory consents and approvals from the authorities, the transaction should close this summer. The combined group, to be renamed NEO NEXT Energy, will be owned 55% by NEO and 45% by Repsol UK, with a projected production this year of about 130,000 boe/d from a large portfolio of operated fields and non-operated field interests throughout the UK North Sea area.
The portfolio includes 11 offshore production hubs and substantial undeveloped reserves, which should ensure stable production with the flexibility to capitalize on emerging opportunities, NEO said.
The combined group will also pursue improved operational efficiency measures and cost synergies of more than $1 billion, while retaining a commitment to capital discipline.
Repsol E&P will guarantee to fund $1.8 billion of decommissioning liabilities related to its legacy assets.
The two companies plan to establish a joint executive team, with members of the board to comprise members nominated by Repsol UK, NEO Energy Holdings Ltd. (an investment vehicle managed by HitecVision), and independent directors.
“Repsol contributes operational capabilities on production, development and decommissioning activities, which will be combined with NEO Energy expertise on financial and commercial matters," Repsol E&P CEO Francisco Gea said. “We believe this combined business has many more opportunities for profitable growth in the basin and beyond.”
John Knight, chair of NEO Energy, added, “The combined company has much more scale and diversity and opportunities for cost consolidation and portfolio high-grading, giving resilience despite the tough conditions in the UK…
“But this company will also be very well positioned to choose both organic and inorganic growth. We will certainly look to be making more value accretive acquisitions."
