Russell Alton became chief executive of private equity-backed NEO Energy in August and, he says, it was a chance he could not afford to miss.

NEO — short for New European Offshore — is one of the most closely watched independents in the UK North Sea.

Backed by the deep pockets of HitecVision, NEO has a strong growth agenda, with the Norwegian private equity firm’s management hoping to repeat off the UK the success they have achieved off Norway with Vaar Energi, now that country’s second-largest producer.

“The opportunity to come and run a growing business in my home market was just one I felt I couldn't turn down,” says Alton, 48, who spent the previous five years at Equinor, first leading the mergers and acquisitions team and latterly heading up the finance function at the Norwegian state-controlled oil and gas company.

NEO has about 140 employees — most in Aberdeen — and big ambitions to build a “leading exploration and production company” focused solely on the UK, which Alton characterises as producing 100,000 barrels of oil equivalent per day within about 18 to 24 months.

That target was set as a “bit of a waypoint” rather than an absolute goal, he says, while emphasising that “ultimately it is about building scale”.

“When you get to that scale, it is easier to manage a business,” he says. “We need to build ourselves to a scale where we are self-funding into the medium-to-long term.”

A Cambridge graduate — Alton was in the same year as current UK Energy Minister Kwasi Kwarteng — he qualified as an accountant and spent several years in investment banking, mainly at Merrill Lynch, before joining Centrica in 2009, where he cemented his already strong reputation for oil and gas dealmaking.

He was tempted to move from Centrica to Equinor — and then from Equinor to NEO — thanks to his good relations with former Equinor executive board member John Knight, a senior partner at HitecVision since 2018.

High energy

Born in Wimbledon, Alton attended St Paul’s School and now lives in West Sussex with his wife and two daughters.

He describes himself as “high-energy”, an attribute he reckons will stand him good stead at a smaller company.

But his experience at Equinor is already proving an “invaluable benefit”, not least in establishing strong ground rules for NEO’s governance.

He wants to marry that experience with a strong understanding of the small E&P business culture gained during his time in banking.

Rather than delivering returns to investors by seeking public listings for its portfolio companies, HitecVision has prioritised paying dividends.

Vaar, formed in 2018 following the merger of Eni Norge and HitecVision company Point Resources, has so far returned more than $2 billion to investors in dividends and is now fully self-sustaining.

“My ambition is to build a business that delivers free cash flow growth over time,” says Alton.

He acknowledges the “IPO market isn't today what it used to be 15 years ago”.

“Therefore, building a business that is cash generative at least gives flexibility for a number of different ‘end states’ for the business,” he says.

Alton describes the NEO strategy in three words: “Excel, optimise, grow”.

The first, he says, is about driving a strong safety culture, delivering good production efficiency, cost improvement and trying to capture value from the assets in a way that builds credibility with the authorities, partners, investors and capital providers.

Optimise refers to the assets now under its control.

Since completing its renegotiated acquisition of some of Total’s older North Sea assets in May — those previously owned by Maersk Oil — NEO now operates the Quad 15 area, where it is considering extending the life of the Global Producer III floating production, storage and offloading vessel.

On the cards

A redevelopment of the Affleck field, another former Total asset, is also on the cards.

NEO also operates the Flyndre Area, not far from Affleck, and the Babbage Area in the southern North Sea.

Alton reckons organic capital expenditure will be about £200 million ($259 million) over the next few years.

“In my view, we have a very strong operating capability. And part of the raison d'etre of the business is that we see ourselves as a natural owner of assets in the UK. The benefit of being a small company is that we can prioritise all our assets.

“We see ourselves as a company that will focus our A-game on the assets in the UK basin.”

The third strategic element is inorganic growth through acquisitions.

HitecVision recently told Upstream it has about $1.1 billion available, which will be allocated to NEO and Sval Energi, another company formed to target the Norwegian continental shelf.

NEO has also secured a $2 billion underwritten facility from several banks to cover decommissioning liabilities and new acquisitions.

“We feel that we're well funded,” says Alton. “We have a good technical team internally to take a view on the assets in the UK... and therefore we feel well placed to be a natural buyer of assets in the UK.”

Alton has enjoyed getting to know the HitecVision team.

“I can have very good conversations with the guys at Hitec, knowing that they understand the industry very well,” he says.

“They have a lot of very useful experiences to draw on and I think the relationship is very symbiotic.”

Alton adds: “I don't see many other businesses looking to build on the scale that we're looking to build in the UK at the moment. I think that makes it quite exciting.”

Production

'Excel, optimise, grow': NEO's Alton aims to forge new path in North Sea