The UK’s oil and gas sector consolidation has continued with news that oil and gas producers, NEO Energy and Repsol Resources UK, are to merge their North Sea operations.
As part of the plan, NEO will hold a 55% stake in the combined business, which will be renamed NEO NEXT Energy, with Repsol retaining the remaining 45%.
NEO said that the large and diverse asset portfolio is expected to generate material cash flows and provide a platform for organic and inorganic growth.
Repsol will retain $1.8 bill in decommissioning liabilities related to its legacy assets, which NEO said will enhance the cash flows of the merged business.
NEO said completion of the deal is subject to approvals from UK authorities and securing regulatory consents, which it expects to achieve during the third quarter of this year.
Repsol E&P CEO, Francisco Gea, said the combined business will “call upon the key strengths of both shareholders.”
“Repsol contributes operational capabilities on production, development, and decommissioning activities which will be combined with NEO Energy expertise on financial and commercial matters.
“We believe this combined business has many more opportunities for profitable growth in the basin and beyond,” he said.
NEO Energy Chairman John Knight added that the merger a “great deal for all stakeholders”.
“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,” Knight said.
“The benefits of synergies from consolidation will create much stronger value creation, profit and cash flow yield for shareholders and more options for capital allocation decisions well into the next decade.
“But this company will also be very well positioned to choose both organic and inorganic growth,” he said.
