ITALIAN oil giant Eni is set to clinch a blockbuster deal to acquire North Sea-focused Neptune Energy, which will underline the appeal of the area.
Eni is in advanced talks to buy private-equity backed Neptune for around $5 billion (£4bn) according to Bloomberg. The news agency reckons a transaction could be announced this week.
Reuters reported earlier this month that Eni was in exclusive talks to buy Neptune.
The planned acquisition would allow Eni to become a major player in the North Sea years. The company retreated from the area in the early years of this century.
Neptune’s portfolio includes the giant Cygnus field, which it says is capable of meeting around six per cent of the UK’s gas demand.
Neptune is preparing to start production from the Seagull oil field east of Aberdeen with BP following hefty investment.
READ MORE: North Sea job cuts fuel calls for oil industry to be nationalised
The deal signals that Eni sees potential in the North Sea despite the furore sparked by the introduction of the windfall tax last year.
The energy profits levy was introduced after North Sea producers enjoyed dramatic growth in profits following the surge in oil and gas prices fuelled by Russia’s war on Ukraine.
Neptune grew profits by 80% in 2022, to $3.8bn before interest, tax, depreciation and amortisation and exploration costs, from $2.1bn in the preceding year.
Industry leaders have warned that the introduction of the levy could spark an exodus from the North Sea as firms shift investment overseas.
The Government made a significant concession to critics this month when it agreed the windfall tax would be scrapped if oil and gas prices fell below set levels. The price floors are well below current levels.
Eni’s expansion comes as majors look to boost production to capitalise on expected strong demand for oil and gas in coming years.
Shell angered environmental campaigners last week said it expected to maintain oil production at current levels until 2030, while supporting the development of low carbon energy systems.
READ MORE: Oil major's plan to maintain production of back stuff angers campaigners
Eni has highlighted the important role it thinks gas can play in support of the net zero drive by reducing reliance on more carbon-intensive fuels, such as gas.
Greig Aitken, corporate research director at the Wood Mackenzie energy consultancy, said:
“Neptune looks like a good fit for Eni – its assets align well with Eni’s existing portfolio and strategy.”
Eni entered the UK North Sea in 1964 and had a significant presence in the area for years. It sold big portfolios to Dana Petroleum in 2002 and JX Nippon in 2012.
The group has major exploration and production operations in countries ranging from Kazakhstan to Mozambique.
Eni is investing in carbon, capture and storage projects in northern England.
READ MORE: Investors eye big returns as carbon capture bandwagon gathers pace
Neptune has extensive interests in the Norwegian North Sea. It also has assets in the Netherlands, Algeria and Indonesia.
The UK accounts for around 11% of production. The company runs its UK North Sea operations from Aberdeen.
Neptune was founded in 2015 by former Centrica boss Sam Laidlaw. He won backing from Carlyle and CVC to pursue an acquisition-led growth strategy amid a downturn in the industry. China Investment Corporation acquired a big stake in Neptune in 2018.
READ MORE: North Sea gas firm backed by Warren Buffett sees shares plunge after setbacks
Bloomberg reported that Eni is set to beat off competition from France’s TotalEnergies to buy Neptune. The agency cited people familiar with the matter, whom it did not name.
Neptune declined to comment on the Bloomberg report.
A spokesperson for Eni said it had no comment to make on the Bloomberg report.
Eni was first reported to be in talks to buy Neptune in November. It is thought those discussions broke down amid a pricing disagreement.
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