"He's irreplaceable for a club like us at this moment," O'Neil said of Neto's departure.
"He's a top winger in world football and we knew it would be a challenge to keep him because of that.
"Obviously his last few seasons have been hampered by injury, but when he's fit and free-flowing there's not many like it in world football.
"I'm gutted to lose him. He was quite emotional as he's been here for a long time.
"I know he likes it here and he really enjoyed his time before I was here and with us.
"But when big clubs come calling you have a big decision to make.
"I spoke to him about the option of staying. It wasn't that he needed to go, it was up to him and we'd have loved to keep him if he wanted to stay.
"No-one can judge him for choosing to go play for Chelsea. It's one of the biggest clubs in England and we wish him very well. I loved working with him.
"You can't replace him, we're not going to go and sign another Pedro Neto, it's about using it (the money) well enough to replenish the squad in a few areas – a wide player being one."
“Next week is a big one for me to make sure the lads are ready for the Premier League and next week is a big one for us in the transfer market.
"The early business that we did was great because it showed everyone that we mean business and we are able to do stuff, Rodrigo, Pedro, Jorgen, it’s fantastic of the club to get them done so early.
“We are all really aligned with what we want to do here, and we understand there are still challenging situations which we’re trying to manage. We’ve made another £100 million this summer, we made £100m last summer, and that does provide its challenges to keep the team staying competitive and keep the team as strong as it once was four or five years ago when they were competing for Europe and there was fantastic times here.
“We’re trying to get it back to that, but with a very different make-up behind the scenes that we’re working to. But I enjoy those challenges a lot.
"Me and Matt (Hobbs) have spoken a lot about what we’re trying to do, trying to get players in who can help us with the money we’ve received, and hopefully we can help this group now, because they’re in a good spot, they’re giving everything, but the Premier League is tough.
“We’ve signed a lot of young players and hopefully we can sign a few that can help us in the here and now, as well as some more young ones. As a club, we try to sign ones who are going to add value to the football club, Rodrigo and Pedro Lima especially, they’re ones who have real talent, but also have a value.
“But we do need to do some who are ready now and have played in the Premier League and know what it’s all about because it is going to be a tough test.
"We need to make sure we get it right, we need to make sure that I get the team right, and I’m really looking forward to the season, but there is still some work to do between now and the end of August.”
