Exxon agrees $1bn deal to sell UK North Sea assets

ExxonMobil has agreed to sell most of its non-operated upstream assets in the UK's central and northern North Sea to private equity-backed upstream company Neo Energy for more than $1bn.

The deal includes stakes in "14 producing fields operated primarily by Shell, including Penguins, Starling, Fram, the Gannet Cluster and Shearwater; Elgin-Franklin fields operated by Total; and interests in the associated infrastructure". ExxonMobil said. The firm's share of output from these fields averaged about 38,000 b/d of oil equivalent (boe/d) in 2019.

ExxonMobil said it will keep its non-operated share in upstream assets in the UK's southern North Sea, as well as its interest in the Segal infrastructure that supplies ethane to the company's Fife ethylene plant in Scotland. The sale price has "additional upside of approximately $300mn in contingent payments" depending on future commodity prices, the firm said.

The deal reinforces a shift in the corporate landscape of the UK's upstream sector, which has gathered pace in recent years as legacy firms that have been producing in the North Sea for decades switch their attention to higher-margin assets elsewhere and a new wave of companies, many supported by private equity cash, enter the fray. US independent ConocoPhillips sold its UK oil and gas fields to private equity-backed Chrysaor for $2.7bn in 2019. And Chevron sold the bulk of its UK North Sea portfolio to Israeli-owned independent Ithaca Energy for $2bn later that year.

ExxonMobil said the deal with Neo will help it focus investment on its "advantaged projects" such as those in Guyana, Brazil and the US Permian basin. The transaction, which is subject to approvals, is expected to close by the middle of the year.

Neo, which was set up by Norwegian private equity company HitecVision in 2019 through the merger of two existing North Sea investment vehicles, expects the acquisition to boost its production to about 70,000 boe/d this year on a pro-forma basis. It expects output to grow organically to over 80,000 boe/d in 2024 thanks to ongoing developments such as the Penguins field. "Adding close to 40,000 boe/d and more than 140mn of reserves, it represents a major step towards Neo's near-term target of producing 120,000 boe/d," the firm said.

The deal will leave Neo with stakes in 35 fields, including those under development.

In 2017, ExxonMobil sold its operated interests in five Norwegian oil and gas fields to Point Resources, another firm backed by HitecVision. Point Resources and the Norwegian subsidiary of Italy's Eni later merged into Var Energi in December 2018.

"We have built one of Norway's largest oil and gas companies through our joint venture with Eni, in Var Energi. We believe that Neo has the potential to achieve a similar position in the UK sector," HitecVision senior partner John Knight said. "We will continue to fund Neo's growth in the UK through more acquisitions and, where appropriate, mergers."

By Konstantin Rozhnov