Oil and gas producers NEO Energy and Repsol Resources UK have announced a “strategic merger” across their North Sea operations.
Under the deal, NEO said it will hold a 55% stake in the combined business, which will be renamed NEO NEXT Energy, with Repsol retaining the remaining 45%.
NEO said the “large and diverse asset portfolio” is expected to generate material cashflows and provide a platform for “organic and inorganic growth”.
Repsol will retain $1.8 billion (£1.4bn) in decommissioning liabilities related to its legacy assets, which NEO said will enhance the cash flows of the merged business.
The deal comes shortly after Spanish-owned Repsol confirmed plans to cut jobs across its North Sea operations earlier this month.
Analysts have long predicted the potential for a tie-up between the two North Sea operators to create one of the largest independent producers in the UK.
NEO and Repsol
NEO said completion of the deal is subject to approvals from UK authorities and securing regulatory consents, which it expects to achieve during the third quarter of 2025.
Repsol E&P chief executive Francisco Gea said the combined business 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,” he said.
© Supplied by Shell“We believe this combined business has many more opportunities for profitable growth in the basin and beyond.”
Meanwhile, NEO Energy chairman John Knight called the merger a “great deal for all stakeholders”.
“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,” Knight said.
“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.”
North Sea mergers
Knight said the combined company will “certainly look to be making more value accretive acquisitions”, signalling that a flurry of mergers in the North Sea may yet continue.
London-listed independent Ithaca Energy and Italian firm Eni completed a merger of their UK upstream assets in October last year.
Meanwhile, supermajors Shell and Equinor announced in December last year that they were also planning to combine their North Sea assets into a joint venture.
Similarly, EnQuest is plotting a takeover of North Sea rival Serica Energy.
Elsewhere, Harbour Energy also completed the takeover of German rival Wintershall Dea in 2024.
