John Knight, Executive Chairman, NEO NEXT+ on UK North Sea M&A and Capital Allocation

LONDON –  For much of the past decade, the UK North Sea has been defined by consolidation, policy uncertainty and evolving investor expectations. Few companies have been more active in shaping that landscape than NEO NEXT+.

In this exclusive interview, John Knight, Executive Chairman of NEO NEXT+, discusses the company’s acquisition strategy, the role of decommissioning in UKCS transactions, the importance of disciplined capital allocation and what must change to restore confidence in long-term investment across the basin. From M&A and financing to fiscal policy and reserve replacement, Knight offers a candid view of the opportunities and challenges facing the next chapter of North Sea development.

John, when you spoke to Energy Council last year, you described NEO NEXT+ as a business deliberately built through many transactions executed quickly, rather than buying one or two assets and optimising them. Now that NEO NEXT+ has achieved substantial scale, what must be true for the next acquisition to create more value than investing in the portfolio you already own or returning cash to shareholders?

The NEO NEXT+ strategy is explained by the mantra: “Resilience, Yield and Growth.”

The next acquisition of scale will need to display several characteristics. First, it must be of a scale and production longevity that can help move NEO NEXT+ towards an investment-grade debt rating. That can loosen the terms, tenor and cost of debt, which adds value, liquidity and flexibility to the NEO NEXT+ business model. This is the growth part.

Any deal we do needs to enhance, not reduce, cash flow and yield. In other words, it must support returns to shareholders and not consume liquidity for much longer-term value growth. This is the yield part.

The assets also need to be such that decommissioning liabilities are, to some degree, left with the seller or merger partner. That enhances the NEO NEXT+ model significantly for many decades. This is part of the resilience element of our strategic mantra.

Of course, all deals of any scale bring synergies, often tax-related but, more importantly, cost synergies.

Last year you described decommissioning structuring as the central issue in UKCS M&A and said you would not do a transaction with a major if the liability structure wasn’t right. As the basin matures, is the ability to allocate decommissioning risk now the single biggest factor determining which assets can change hands?

You said last year that the real ‘secret sauce’ wasn’t the transactions themselves but the governance model behind them: weekly liquidity forecasting, hands-on ownership and what you called ‘inspect don’t expect’. As NEO NEXT+ becomes a much larger organisation, how do you preserve that intensity without creating another layer of corporate bureaucracy?

NEO NEXT+ is not a subsidiary of Total, Repsol or the HitecVision funds. It has its own business processes that are distinct from those of its owners. This is embedded in the Shareholders’ Agreement, which effectively requires unanimity among shareholders for any major decision.

It is therefore up to the Board, CEO and Executive Leadership Team of NEO NEXT+ to help all employees understand these facts and keep NEO NEXT+ as nimble and self-sufficient in the future as it has been in the past.

This task is work. It takes time. The leaders of NEO NEXT+ all need to embrace the future as a self-standing, independent business rather than celebrate a past as a subsidiary of a major. We are on it.

Your model has historically been extremely cash-focused. You described modern private equity last year as being about ‘cash tomorrow’, rather than waiting five or ten years for value creation. How do assets with longer-dated development value fit into that philosophy? How do you balance near-term liquidity and yield against the need to replenish the portfolio for the next decade?

In any natural resource industry, reserves need to be replenished. However, there is more than one way to do that. It does not necessarily require large capital investments in new projects that only come on stream five to ten years after discovery.

In the UK, large new projects have taken a long time to navigate modern politics. Rosebank, Jackdaw, Cambo and the next phases of Clair are examples. At NEO NEXT+, we are not currently involved in those projects, deliberately so at this point. However, that does not mean we are not replenishing our reserves.

How do we do that today? In 2026, NEO NEXT+ will spend around US$900 million on development capital expenditure, but across many smaller infill and tie-back projects around existing hubs. These projects also extend the lives of those hubs and increase reserve recovery. In my view, we can continue investing at this level through to 2030.

That does not mean we will not undertake larger field developments in the future. However, for that to happen, the policy and fiscal terms for investment in the UKCS will need to change. Successive UK governments have promoted policies and tax regimes that discourage new investment and the development of new reserves. We have therefore focused on investments that are less controversial.

Last year you told us that even difficult tax and regulatory conditions can create opportunity for companies that are thoughtful and quick enough to ‘make their own weather’. Is there a point at which the UK fiscal or regulatory environment becomes so difficult that you can no longer structure around it and consolidation stops being an opportunity and simply becomes value destruction?

I hope not. 

The answer is in the hands of the UK’s new Prime Minister. We shall see by the end of 2026 where his priorities lie. At the time of answering this question, I have no idea what his direction of travel will be, let alone the specifics of any policy changes he may have in mind. 

If taxes or policies become more onerous, or if Jackdaw and/or Rosebank are not approved, my guess is that most players on the UKCS will move into a low-investment mode. In that scenario, the decommissioning costs of which the UK Government is ultimately expected to bear 40-50% will reach the Treasury sooner than it may currently expect. Value destruction will not be limited to oil and gas investors; it will affect the national pocket as well.

John and team will be joining us at the upcoming Energy Council London (formerly WECA) in London this December 9-10. Energy Council London brings together investors, operators, and energy leaders to explore opportunities ranging from traditional energy to the low-carbon transition. It provides a platform for participants to understand market dynamics, emerging risks, and investment strategies shaping the future of energy.