NEO closes $1bn ExxonMobil North Sea purchase

Private equity-backed NEO Energy announced on December 9 it had closed the $1bn takeover of most of ExxonMobil's UK North Sea business, as the company continues on its acquisition-fuelled growth path.

Since its creation in 2019 through the merger of Verus Petroleum and NEO E&P - two investment vehicles belonging to Norwegian private equity investor HitecVision, NEO has been buying up North Sea assets at a fast pace.  The ExxonMobil deal gives NEO stakes in the Shearwater area and the Penguins development, as well as interests in the Gannet, Nelson, ETAP and Elgin-Franklin fields. It may have to pay a further $300mn in contingent payments to the US major based on future oil and gas prices.

The pair agreed on the sale in February, and it was originally scheduled for closure before the middle of this year. The delay prompted concern from upstream regulator OGA, which opened an investigation into the deal's progress in October.

NEO snapped up a group of TotalEnergies assets flowing 23,000 barrels of oil equivalent/day in 2020, and went on to buy North Sea producer Zennor Petroleum earlier this year. And in late November it struck a deal to buy the UK business of Japan's JX Nippon, which includes a 20% stake in the Mariner field and a 18% interest in the Culzean field. The transaction excludes JX Nippon's Andrea area interests.

With these acquisitions, and on the back of projects like Penguins, NEO is targeting an output of more than 80,000 boe/d by 2024, versus 26,500 boe/d last year.

ExxonMobil is retaining gas assets in the south UK North Sea, as well as its share in the Shell Esso gas and liquids (SEGAL) transport system that pumps ethylene to its ethylene plant in Fife. Onshore it also has refining, fuel marketing, lubricants, petrochemicals and gas marketing activities.

However, the US major has stated in its strategy that it is looking to eventually withdraw from the European upstream sector altogether, in order to focus on higher-margin plays in the Americas, Africa and Asia. It recently  agreed to divest its stake in the Neptun Deep gas project in Romania to state-owned Romgaz.