NEO Energy has announced a strategic merger with Repsol Resources UK, with the combined group forming a new entity named NEO NEXT Energy.
The merger positions NEO NEXT as one of the largest independent producers in the North Sea.
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NEO NEXT will be jointly owned by NEO Energy (55%) and Repsol UK (45%), having a diverse asset portfolio that is expected to generate significant cash flows and support growth.
Repsol will retain $1.8bn in decommissioning responsibilities linked to its older assets, which will improve the cash flow of the merged entity.
NEO Energy chairman John Knight said: “This is a great deal for all stakeholders. Our strategy can be summarised 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. But this company will also be very well positioned to choose both organic and inorganic growth. We will certainly look to be making more value accretive acquisitions. We have known Repsol E&P for many years and have the highest regard for them as a capable and reliable partner.”
The completion of the transaction is subject to regulatory approvals and is due to be completed in the third quarter of 2025.
Repsol E&P CEO Francisco Gea said: “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.”
Last year, NEO Energy announced plans to slow its investment activities across its development portfolio due to escalating regulatory and fiscal uncertainties in the UK oil and gas sector.
This strategic move is in response to recent government measures that have introduced challenges for energy projects.
