TotalEnergies SE (EPA:TTEF) has signed an agreement to merge its U.K. operations with Repsol (BME:REP) and Hitec, creating the largest independent oil and gas producer in the United Kingdom.

Under the deal, TotalEnergies will acquire a 47.5% stake in NEO NEXT+, making it the largest shareholder. HitecVision will own 28.875% and Repsol will hold 23.625% of the combined entity.

The transaction is expected to close in the first half of 2026, pending regulatory approvals.

“The announcement reflects a continuation of the trend we’ve seen in recent years from the majors in the UK North Sea, coming on the back of Repsol’s deal in March and Shell and Equinor’s agreement in December 2024 to combine their UK offshore oil and gas assets,” according to RBC analysts.

RBC added that while companies may focus on improving efficiencies and cutting costs, one potential downside is that HMRC could see lower tax receipts, as the combined group is expected to pay less than the two firms would have individually.

The merged company is projected to produce approximately 250,000 barrels of oil equivalent per day in 2026. Its portfolio will include assets such as Penguin, Mariner, Shearwater, and interests in the Elgin/Franklin complex and Alwyn North.

As part of the agreement, TotalEnergies will retain up to $2.3 billion of decommissioning liabilities related to its legacy assets. The company expects its involvement to be immediately accretive to the joint venture’s cash flow upon completion.

This deal follows the March announcement of NEO Energy’s merger with Repsol, which had a similar structure where Repsol retained $1.8 billion of funding commitments, representing 40% of decommissioning liabilities related to its legacy assets.

Prior to this new agreement, Hitec and Repsol had projected production for their joint venture would reach around 130,000 barrels of oil equivalent per day in 2025.