Repsol, a Spanish oil and gas company, is in negotiations to merge its UK North Sea oil and gas operations with NEO Energy, a company backed by private equity, reported Reuters, citing sources.   

The merger could achieve a combined output exceeding 110,000boepd, establishing the new entity as a leading producer in the UK North Sea, the sources said. 

The discussions, which have been ongoing for several weeks, may result in a formal deal announcement soon, although its value has not yet been disclosed. 

Both Repsol and NEO Energy have refrained from commenting on this matter, the publication said.  

The backdrop of these talks is a period of significant change for UK North Sea producers, who have been consolidating and seeking diversification following the UK Government’s imposition of a windfall tax in response to the 2022 energy price surge.  

With the upcoming British elections and the Labour Party’s lead in polls, the sector anticipates further changes, including a possible tax increase and the elimination of reinvestment profit exemptions. 

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Repsol Resources UK, part of the Repsol group, has a stake in 48 North Sea assets and operates 38 of them.  

At the end of 2022, the company reported a tax loss position of $3.7bn, which could be leveraged against tax on future investments.  

Its production was nearly 39,000boepd at the end of the year. 

NEO Energy, established in 2019 and supported by HitecVision, has been actively acquiring assets in the North Sea, including from TotalEnergies and ExxonMobil.  

It currently has interests in 25 fields and produces approximately 80,000boepd, according to one source. 

In a separate development, Repsol is also looking to divest a minority stake in its Eagle Ford shale assets in South Texas, US, potentially valuing the assets at up to $2bn (€1.86bn).  

The company has engaged Scotiabank to facilitate the sale, aiming to introduce partners to hold non-operational positions, the news agency reported, citing sources.  

These partners would share in the revenue from hydrocarbon sales and contribute to operating costs without being involved in the day-to-day operations. 

Repsol is considering selling up to a 49% interest in its Eagle Ford assets, which comprise more than 800 producing wells across roughly 80,000 net acres and produce around 50,000boepd.  

Despite the potential sale, Repsol intends to retain a majority stake and continue operating the asset.  

The sources have indicated that a transaction is not certain. Repsol and Scotiabank refused to comment on the US asset sale.