AN oil and gas firm backed by international investors has underlined its confidence in the potential of the North Sea amid the sharp fall in commodity prices triggered by the coronavirus crisis.
NEO Energy has cemented its position as a significant player in the UK North Sea after acquiring a big portfolio of assets from Total.
The deal gave NEO stakes in a range of fields.
NEO made the purchase with the backing of Norwegian private equity business HiTec Vision.
READ MORE: £500m North Sea deal hailed as major vote of confidence in area
In May the firms said the terms of the deal had been renegotiated to take account of the change in the market environment since it was agreed in July last year, with a price tag of around £500 million attached.
The fall in oil and gas prices this year has prompted a range of firms to announce plans to cut investment in the North Sea.
However, NEO said the completion of the deal was a major milestone in its attempt to build a next generation North Sea operator.
Interim chief executive Paul Harris said he was extremely excited by the quality of both the asset portfolio and the employees who will join NEO following the deal.
Mr Harris said the portfolio provided the firm with a solid platform for growth. He noted it provided a meaningful production base and development opportunities.
NEO is understood to be working on plans to restart production from two wells on the Affleck field, which were shut in in 2016.
The company’s progress will be followed closely in the North Sea.
Newcomers helped stimulate activity in the area during the downturn that followed the sharp fall in oil and gas prices from 2014 to 2016.
READ MORE: North Sea oil firm starts 'significant' period of development activity
This created opportunities for firms to buy assets at much lower prices than they may have had to pay in the boom that preceded the downturn. Buyers showed willingness to invest in assets that some former owners appeared to have lost interest in.
The outlook for crude prices has improved in recent weeks after major exporters agreed to implement record production cuts to support the market. The easing of lockdown measures in some countries has helped boost demand.
Brent crude traded up $0.67 per barrel at $44.19/bbl yesterday afternoon.
However, Rystad Energy highlighted downside risks to oil prices.
The consultancy noted the cuts agreed by Opec Plus members started to unwind this month as planned. Concern about the possibility of a fresh wave of coronavirus infections is weighing on sentiment.
Brent crude fell to an 18-year-low of $15.98 per barrel in April, from around $70/bbl in January.
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