Repsol and NEO Energy Merge to Dominate UK North Sea

In a landmark move set to reshape the UK Continental Shelf (UKCS), Repsol has announced a strategic combination of its UK North Sea upstream business with NEO Energy Group Limited. This merger, expected to close in the third quarter of 2025, will create a formidable new entity named NEO NEXT Energy Limited, poised to become one of the largest independent oil and gas producers in the region.

The new joint venture will be jointly owned by Repsol E&P Group (45%) and NEO UK (55%), reflecting the strategic alignment and contributions of both parties. The combined company will boast a projected 2025 production of approximately 130,000 barrels of oil equivalent per day (boe/d), solidifying its position as a key player in the North Sea.

The merger brings together two strong, complementary operators with over 30 years of collective experience in the UKCS. The new entity will operate a highly diversified portfolio, including 11 production hubs and substantial undeveloped reserves. This strong asset base will enable the company to continue to deliver operational efficiencies while pursuing organic growth.

One of the most significant aspects of this merger is the expected operational and financial synergies. The combined group is targeting synergies exceeding $1 billion, which will enhance cash generation and shareholder returns. These synergies will be achieved through the consolidation of operations, general, and administrative costs, as well as the optimization of the portfolio.

Repsol E&P will retain a funding commitment up to a nominal amount of $1.8 billion, representing approximately 40% of the decommissioning liabilities related to its legacy assets. This commitment ensures a sustainable and responsible approach to decommissioning across the portfolio, supported by the highly cashflow generative portfolio of assets.

The leadership of the new joint venture will be guided by a joint executive team, representing both Repsol UK and NEO UK. The governance structure will be balanced, with members of the company board comprising members nominated by Repsol UK and NEO Energy Holdings Limited, as well as independent directors. This balanced governance will ensure effective decision-making and strategic alignment.

The market reactions to this consolidation are expected to be positive. The enhanced, and competitive positioning of the combined company is anticipated to drive substantial growth and long-term value creation for shareholders. 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.



Francisco Gea, CEO of Repsol E&P, commented, "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."

John Knight, Chair of NEO UK, added, "This is a great deal for all stakeholders. Our strategy can be summarized 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."

In conclusion, the strategic combination of Repsol's UK North Sea upstream business with NEO Energy Group Limited is set to create a robust and diversified UK North Sea-focused oil and gas company. The new joint venture, NEO NEXT Energy Limited, is poised to become one of the largest independent producers in the UKCS, with a projected 2025 production of approximately 130,000 boe/d. The expected operational and financial synergies, along with a strong financial position and balanced governance structure, will drive substantial growth and long-term value creation for shareholders. This merger is a testament to the strategic alignment and contributions of both Repsol and NEO Energy, and it is expected to have a significant impact on the competitive landscape of the UKCS.