The Press and Journal (Inverness, Highlands, and Islands)
NEO to buy £700m North Sea package
ExxonMobil has agreed to sell a package of UK northern and central North Sea assets to NEO Energy in a deal worth more than £700 million.
NEO, formed in 2019 through the merger of Verus Petroleum and NEO E&P, entered exclusive talks last month for the portfolio.
The deal covers stakes in 21 assets, including 14 producing fields and a number of infrastructure positions, mainly operated by Shell.
It provides NEO with interests in major producing hubs including the Shearwater area and the new Penguins redevelopment due to come online next year.
NEO, backed by private equity group HitecVision, said the deal will make it one of the top five North Sea oil and gas producers, taking production to 70,000 barrels per day upon completion, up from around 30,000 barrels currently.
The firm expects that to grow to 80,000 by 2024 through several “organic growth opportunities” such as Penguins.
It is “working with” Exxon to figure out how many staff will come over, but the Aberdeen-based company expects its headcount to sit at 160 once the deal completes.
Exxon, which has interests in more than 40 North Sea fields, is not exiting the sector – unlike fellow US giants Chevron and ConocoPhillips which sold assets to Ithaca Energy and Chrysaor, respectively.
It will retain assets in the southern North Sea and its share in the Shell Esso gas and liquids infrastructure that supplies ethane to the company’s Fife ethylene plant.
NEO may pay an additional £423m based on the potential for increased oil and gas prices.
Neither company has disclosed who is retaining decommissioning liabilities for the portfolio, which analysts said last month would be a “downside of the package”.
However, when asked, NEO chief executive Russ Alton said the assets have a long life, with “not very much in the near-term” in terms of decommissioning liabilities, making it a “manageable profile” of decom costs.
The deal is expected to close in the middle of 2021.
It comes after the firm acquired a package of assets from Total in August.
NEO hopes to ultimately boost its portfolio to 120,000 barrels of oil per day by 2023, adding extra production through mergers and acquisitions.
Mr Alton said: “We set ourselves the ambition of 120,000 barrels per day by 2023 just to give a sketch on the fact that we want to grow further from here, both organically and inorganically
“We think this is a good step in the right direction to bring a large-producing asset base with development potential.
“We certainly see a good opportunity set in the UK to build a larger-scale portfolio and we’re well-funded by Hitec and the core banks that we work with.”
NEO is funding the ExxonMobil asset acquisition partly through a $2 billion (£1.4m) reserve based lending facility, underwritten by BNP Paribas, DNB, ING and Lloyds Bank.
John Knight, senior partner at HitecVision, added: “We believe that NEO has the potential to achieve a similar position in the UK sector to that held by Vår Energi in Norway. We will continue to fund NEO’s growth in the UK through more acquisitions and, where appropriate, mergers.”