Exxon in $1B+ North Sea Deal


February 26 -- ExxonMobil (NYSE: XOM) has announced that it has signed an agreement with HitecVision, through its wholly owned company NEO Energy, for the sale of most of XOM’s non-operated upstream assets in the UK central and northern North Sea.

XOM outlined that the deal has a sale price of more than $1 billion, which is subject to closing adjustments, although the company added that there is an additional upside of approximately $300 million in contingent payments based on the potential for increase in commodity prices.

The agreement includes ownership interests in 14 producing fields operated primarily by Shell, including Penguins, Starling, Fram, the Gannet Cluster and Shearwater; the Elgin Franklin fields operated by Total; and interests in associated infrastructure. XOM’s share of production from these fields was approximately 38,000 barrels of oil equivalent per day in 2019. XOM will retain its non-operated share in upstream assets in the southern North Sea and its share in the Shell Esso gas and liquids (SEGAL) infrastructure that supplies ethane to the company’s Fife ethylene plant.

The deal is expected to close by the middle of 2021, subject to regulatory and third-party approvals, XOM noted. Following completion of the deal, NEO’s expected proforma 2021 production will be around 70,000 barrels of oil equivalent per day. NEO said it will fund the acquisition partly from HitecVision funds and partly from an increase of commitments under its $2 billion Reserve Based Lending facility underwritten by BNP Paribas, DNB, ING, and Lloyds Bank. NEO described the acquisition as an important milestone for the company that supports its strategy of being a leading full-cycle exploration and production business on the UK Continental Shelf (UKCS).

“We continue to high-grade our portfolio by divesting assets that are less strategic and focusing our investments on our advantaged projects that are among the best in the industry,” Neil Chapman, XOM’s senior vice president, said in a company statement.

“Our development plans that prioritize Guyana, the U.S. Permian Basin, Brazil and LNG are focused on increasing earnings potential and generating strong cash flow to fund future capital investments, reduce debt and maintain a reliable dividend,” he added.

Russ Alton, the chief executive officer of NEO Energy, said, “this acquisition builds on NEO’s existing North Sea portfolio and towards delivering on our ambition to be a leading producer on the UKCS”.

“NEO is well placed, together with its operating partners, to extract value from this and other opportunities, while at the same time focusing on improved environmental performance,” he added.

John Knight, a senior partner at HitecVision, said, “we believe that NEO has the potential to achieve a similar position in the UK sector to that held by Vår Energi in Norway”.

“We will continue to fund NEO’s growth in the UK through more acquisitions and, where appropriate, mergers. This will be the first UK investment for our most recent fund, The  North Opportunity Fund, which we closed in March 2020,” he added.

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