NEO Energy to become a top ten producer in the UK with ExxonMobil North Sea deal

Following the news that NEO Energy is acquiring ExxonMobil’s Central and Northern North Sea assets in the UK;

Daniel Rogers, Senior Oil and Gas Analyst at GlobalData, a leading data and analytics company, offers his view on the deal:

“This section of Exxon’s UK North Sea portfolio has been on the market since 2019 when the deal was originally valued at US$2bn. The portfolio is oil weighted as the gas rich assets in the Southern North Sea were not included as part of the deal. The non-operated assets produced around 40,000 barrels of oil equivalent per day (boed) in 2020 and have further upside to over 55,000 boed once Penguins Redevelopment reaches peak production.

“The deal will boost NEO’s UK production to around 70,000 boed in 2021, making the company a top ten producer in the UK. It follows the trend of private equity backed E&P companies acquiring producing North Sea assets with significant cashflow, left behind by the majors, as investors capture the remaining value and the majors look to free up capital for higher growth areas of their portfolios.

“For Exxon, not being able to agree a sale in 2019 would likely have led to a lowered price tag for the assets in 2021. It is probable that the company will continue its divestments across its NW Europe upstream portfolio and could bundle its Southern North Sea assets into a gas focused upstream package.

“It is hard to see Exxon holding onto its remaining Southern North Sea upstream portfolio for much longer as most of the fields are in decline and there is limited growth in the pipeline. Despite continued interest in the Southern North Sea, the assets may not be easy to offload as they come with aging infrastructure and a significant decommissioning price tag. However, available access to a gas hungry UK market would provide clear routes to commerciality for any interested buyers.”

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