Renta 4 | Repsol has reached an agreement to consolidate its upstream oil business in the UK with NEO Energy Group Limited, a leading independent oil and gas operator in the UK.
The agreement will be structured through a share swap in which Repsol will have a 45% stake in the joint venture and NEO UK a 55% stake, reflecting the contribution and strategic alignment of both groups, with a balanced governance structure and a Board of Directors with members appointed by Repsol UK and NEO Energy, as well as independent directors. The closing of the transaction, expected during the third quarter of the year, is subject to the fulfilment of the usual conditions in this type of operation.
The transaction will position the joint venture as the market leader in the UK, with a projected production of approximately 130,000 boe/d by 2025, a diversified and resilient portfolio with 11 production hubs and substantial undeveloped reserves (1P reserves ~200 million boe), ensuring a steady production flow and the flexibility to capitalise on future opportunities.
They expect to obtain fiscal and operational synergies in excess of $1 billion, which will improve cash generation and profitability for shareholders.
Repsol will maintain a financing commitment of up to $1.8 billion in nominal terms, which represents approximately 40% of the decommissioning obligations of its contributed assets.
In addition, the Board of Directors will propose to the AGM on 30 May the payment of a second dividend in July of €0.5/share and another €0.5/share in January 2026, in line with our estimates, as well as the power to carry out buyback programmes to execute the amortisation of up to 20% of the share capital.
Assessment: Positive news that had been rumoured for months, fulfilling Repsol’s strategic objectives for its upstream oil business of focusing its portfolio towards predictable jurisdictions with competitive advantages, while opening up the possibility of offsetting €1.24 billion in tax loss carryforwards, in addition to the previous €498 million, which would have been impossible to offset with the previous dimension.
This strategic operation significantly improves the operational scale, with production increasing from 34 kboe/d in 2024 to an expected 58 kboe/d in 2030, and 1P reserves growing to around 90 million boe (versus 57 million boe in 2024).
The shareholder remuneration policy remains within the Company’s commitments and opens the door to new buyback programmes both this year, where the guidance offered in February points to a minimum of €700 million (versus €800 million R4e), and next year. We reiterate our OVERWEIGHT recommendation with a P.O. of €17.80/share.
