NEO Energy to acquire Zennor Petroleum
NEO Energy and HitecVision are pleased to announce the signing of a transaction that solidifies NEO’s position among the largest oil and gas producers in the UK. Based on current estimates NEO’s production will grow from circa 80,000 barrels of oil equivalent per day (boepd) in 2021 to a stable production base in the period 2022 – 2026 of between 90,000 and 100,000 boepd. A growing and then stable production profile in this period gives NEO a unique position in the UK offshore oil and gas industry. About 55% of NEO’s production growth in this period will be operated by NEO.
NEO Energy is to acquire independent oil and gas company Zennor Petroleum Limited (Zennor), which includes a portfolio of assets located in the Central and Northern North Sea and an experienced team with a strong operational track-record.
This announcement follows the circa USD 1 billion agreement NEO and HitecVision signed last month, which sees NEO acquire a major portfolio of non-operated oil and gas assets in the Central and Northern North Sea from ExxonMobil.
Through the acquisition of Zennor, NEO will take ownership of a quality portfolio of assets centred around the strategic Britannia and ETAP production hubs, with organic near-term growth prospects from sanctioned projects including the operated Finlaggan tie-back, scheduled for first production later this year, and a series of future development opportunities including the operated Greenwell and Leverett projects (tie-backs to Britannia), and Murlach (tie back to ETAP). This acquisition will increase NEO’s portfolio of operated asset providing greater control and capital allocation flexibility. The Zennor portfolio adds circa 40 mmboe of reserves and more than 90 mmboe of un-risked resource to NEO.
This acquisition will further diversify and balance NEO’s producing asset base with the newly acquired assets bringing NEO’s oil-to-gas weighting to around 60/40. The combined entity will align with HitecVision’s target to halve the carbon intensity of its energy producing portfolio companies by 2030.
The agreed terms include a total consideration of up to USD 625 million, including deferred and contingent payments. The asset portfolio acquired has limited exposure to decommissioning liabilities, with the majority of the Britannia liabilities covered by a former owner.
Following completion of the transaction, the Zennor team will join NEO, increasing headcount to over 180 people. This deal delivers a combination of two highly complementary teams, particularly enhancing NEO’s technical and operating skills and capabilities.
Russ Alton, CEO of NEO Energy, said:
“This transaction provides a further immediate uplift to NEO’s production and resource base with several high-quality follow-on development opportunities. This follows closely on from our agreement with ExxonMobil and is a further demonstration of the scale of our ambition in the UKCS, with a clearly defined target of achieving 120,000 boepd in 2023. We are excited to welcome the Zennor team, whose capabilities complement those in NEO today. Our combined teams will operate a large asset portfolio providing us with greater control and flexibility to maximise value and to invest in further expanding our asset base in the UKCS.”
John Knight, Senior Partner at HitecVision, added:
“This deal creates a company with a very distinctive growth profile and a high level of stable and operated production into the mid 2020’s. This is a unique profile among large oil and gas companies in the UK and it resembles what HitecVision and ENI have achieved in Norway with Vår Energi. In HitecVision we have deliberately invested both via M&A and organic growth through the cycle to create companies like Vår, Sval and NEO.
The European offshore oil and gas industry has many exciting opportunities for growth, with increasingly low CO2 emissions built into that growth. It is a sunrise industry that contributes to the climate agenda when approached with a positive and determined mindset. In the world of energy production, it is possible to have two thoughts in mind at the same time.”
The transaction has an effective date of 1 January 2021.