People feel guilt when they have done something wrong. He did something wrong. He should feel guilty. There's nothing for you to deal with.
I had a strict conversation with him and he said that he will never do it again, he said he feels guilty for what he's done and apologized for what he did he also said they were never nude or anything always fully clothed.. how do I deal with his guilt?
No, this is not normal. It will be normal for him to experience some sexual arousal and it is normal for him to masturbate, but it is not acceptable for him to simulate sexual activity with a girl. He needs a firm limit set on this and the girl needs some help as well. i hope you are informaing the parents of the girl.