Total renegotiates terms of non-core North Sea assets sale with NEO Energy

HitecVision and NEO Energy have renegotiated terms for the acquisition of a portfolio of operated and non-operated assets in the UK North Sea from French oil major Total.

NEO said on Wednesday that it was able to renegotiate the financial terms of the deal to respond to the current market environment.

As it stands, NEO, HitecVision, and Total will be the three parties in this sale agreement while previous partner Petrogas is no longer part of the transaction.

Subject to regulatory approvals, the parties expect to complete the transaction by the third quarter of 2020.

According to the company, HitecVision and NEO worked closely with Total to restructure the deal. The structure of the consideration and phasing of payments has been modified, including vendor financing and earnout arrangements.

Total and NEO Energy also developed detailed transition plans to deliver smooth handover of operations upon completion to allow NEO to focus on embedding planned operating efficiencies and growth plans as rapidly as possible.

Through the transaction, NEO acquires a material, cash generative portfolio of assets in four producing areas of the UK North Sea, with an average 2019 production of approximately 23,000 boepd and substantial development upside.

In addition, the portfolio adds reserves of around 51 mmboe to NEO Energy. The transaction includes operatorship of two asset clusters, the Quad 15 and Flyndre areas, and an operator organisation of more than 80 employees and contractors.

The initial sale agreement saw Petrogas partner with HitecVision to buy the UK North Sea assets from Total for a consideration of $635 million in July last year.

All of the assets on sale were non-core and previously owned by Maersk Oil, a company which Total bough in March 2018.

Under the deal, NEO will buy stakes in Total’s Dumbarton, Balloch, Lochranca, Drumtochty, Flyndre, Affleck, and Cawdor fields, all of which it operates. Total will also divest its ownership in CNOOC-operated fields Golden Eagle, Scott, and Telford.

See below the corresponding Total ownership prior to the sale.

It is worth noting that NEO enjoys strong institutional backing from HitecVision, one of the largest providers of capital to the North Sea region’s energy industry.

HitecVision has been investing in the region for more than three decades and the firm’s sector expertise and structuring capabilities have allowed it to build several companies, such as Vår Energi, the second-largest E&P company on the Norwegian Continental Shelf.

HitecVision’s support in this acquisition will increase NEO’s portfolio and establish it as a top 10 independent UK Continental Shelf producer.

In a separate announcement, Total CFO Jean-Pierre Sbraire, said: “We have worked closely with HitecVision and its portfolio company NEO Energy to reconfirm our mutual commitment to completing the deal.

“The agreed revisions respond to current market conditions while retaining the majority of the value of the transaction. We look forward to progressing swiftly to completion and for NEO Energy to take over operations. We are confident that this sale is the right thing for both parties and the business and its employees”.