NEO Energy and Repsol merging North Sea ops to bolster resilience in ‘tough’ UK conditions

Aberdeen-based full-cycle energy business New European Offshore (NEO Energy) has reached an agreement with Repsol Resources UK, a subsidiary of Spanish energy giant Repsol, to combine their North Sea businesses.

According to NEO, the combined group, 55% owned by NEO and 45% by Repsol UK, will be renamed NEO NEXT Energy Limited and is expected to become one of the largest producers in the region. Once the required regulatory approvals are received, the transaction is expected to close in Q3 2025.

The new partners expect their “large and diverse” asset portfolio to generate material cash flows and provide a platform for organic and inorganic growth. Repsol is set to retain $1.8 billion of the decommissioning liabilities related to its legacy assets, which is also anticipated to contribute to the new company’s cash flows.

Francisco Gea, CEO of Repsol E&P, commented: “This combination will create a jointly governed business which 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.”

John Knight, Chair of NEO Energy, said that the new company will also be well positioned for organic and inorganic growth, adding that the plan is to make more value accretive acquisitions.

“Our strategy can be summarized as ‘Resilience, Yield and Growth’: 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. 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,” noted Knight.

Earlier this month, NEO shared that it was still waiting for the fiscal and regulatory uncertainty surrounding the UK’s oil and gas scene to clear up to move ahead with its Buchan Horst oil redevelopment project in the North Sea.

Meanwhile, Repsol and its partners are hoping to start production at a deepwater project in the U.S. Gulf of Mexico in mid-2025 as the work on the floating production unit (FPU) destined to work on the development is expected to finish soon.