NEO Energy snaps up ExxonMobil’s North Sea assets for over $1bn

HitecVision-backed NEO Energy is acquiring a major portfolio of non-operated oil and gas assets in the Central and Northern North Sea from ExxonMobil.

The agreement is valued at more than $1 billion, NEO Energy and HitecVision said on Wednesday.

The agreement comes about a month after HitecVision and NEO revealed they were in talks with ExxonMobil for the purchase of its North Sea assets.

Following completion, NEO’s expected proforma 2021 production will be circa 70,000 barrels of oil equivalent per day (boepd), growing organically to more than 80,000 boepd in 2024 through ongoing field developments.

Adding close to 40,000 boepd and more than 140 million boe of reserves, the acquisition represents a major step towards NEO’s near-term target of producing 120,000 boepd.

On completion of the transaction, NEO will have a strong presence in the key hubs in the Central and Northern North Sea, with total reserves and resources of around 300 million boe.

The company will have a total of 35 fields both producing and under development.

There may be additional contingent considerations of approximately $300 million based on the potential for increases in commodity prices.

The portfolio to be acquired consists of 21 assets, including 14 fields and a number of infrastructure positions. The fields can be divided into the following hubs:

According to NEO, the assets include several organic growth opportunities, including ongoing development projects such as the Penguins field, infill wells and life extension opportunities.

The total number of employees in NEO at the closure of the transaction will be circa 160.

The fields being acquired are operated by some of the largest offshore operators in the world including Shell, BP, and Total.

As a result of the acquisition, NEO will become Shell’s largest partner in the UK Central and Northern North Sea.

Russ Alton, CEO of NEO Energy, said: “NEO is well placed, together with its operating partners, to extract value from this and other opportunities, while at the same time focusing on improved environmental performance”.

John Knight, Senior Partner at HitecVision, added: “HitecVision is a leading investor in the European offshore energy industry with $6.7 billion in assets under management. We have built one of Norway’s largest oil and gas companies, through our joint venture with Eni, in Vår Energi.

“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. This will be the first UK investment for our most recent fund, The North Sea Opportunity Fund, which we closed in March 2020”.

NEO will fund the acquisition partly from HitecVision funds and partly from an increase of commitments under its $2 billion Reserve Based Lending facility underwritten by BNP Paribas, DNB, ING and Lloyds Bank.

The transaction, which is subject to approvals from the relevant authorities and regulatory consents, is expected to complete by the middle of 2021.

Commenting on the deal, Neil Chapman, senior vice president of ExxonMobil, said: “We continue to high-grade our portfolio by divesting assets that are less strategic and focusing our investments on our advantaged projects that are among the best in the industry”.

“Our development plans that prioritize Guyana, the U.S. Permian Basin, Brazil and LNG are focused on increasing earnings potential and generating strong cash flow to fund future capital investments, reduce debt and maintain a reliable dividend”.

NEO Energy was also the buyer of Total’s UK North Sea assets in a deal that was completed in early August 2020.