UK oil and gas producer Harbour Energy has commenced negotiations to merge with US-based oil and gas company Talos Energy, reported Reuters, citing four people familiar with the matter.

A potential deal could lead to listing of the combined company in New York. This would offer access to oil and gas-focused investors and banks for Harbour, the sources said.

Harbour CEO Linda Cook decided to scale back spending on North Sea assets, and the company is also considering diversifying its operations to foreign countries after the UK Government imposed a windfall tax in 2022 on oil and gas companies due to increased energy prices.

The UK Government increased the windfall levy on oil and gas companies from 25% to 35%, bringing the sector’s total tax to 75%.

Harbour, which has a global workforce of 1,700, is also reducing its staff in the UK by around 350 people.

The company had held on-and-off talks about a merger with Talos for at least six months. Negotiations between the companies have been restored in recent weeks, the sources said.

However, sources noted that there is no guarantee that an agreement between Harbour and Talos would be reached.

In 2023, Talos aims to produce up to 71,000 of barrels of oil equivalent per day in the Gulf of Mexico.

Recently, Talos agreed to offload 49.9% stake in its Mexican unit to Zamajal, a wholly owned subsidiary of Grupo Carso.