From its platform U.S. shale entry in South Texas’ Eagle Ford play, U.K.-based energy conglomerate INEOS Plc aims to expand in the Lower 48.
“We've got our toe hold,” Jack Collins, president of privately held INEOS’ Denver-based, U.S.-focused E&P business unit, said.
INEOS bought its initial onshore U.S. producing property in 2023 from Expand Energy for $1.4 billion. The deal included 2,300 wells on 172,000 net acres, producing 36,000 boe/d net, 65% oil, in South Texas.
“Where we move after that I think will really be driven by where the opportunities lie, being a private company, having that long-term-hold opportunity,” Collins told attendees at Hart Energy’s Energy Capital Conference in Houston recently.
“We want to invest capital, we want to generate cash from that [and] reinvest the cash back into other assets, and there are opportunities to do that across the U.S.,” he said.
Formed in 1998 by Sir Jim Ratcliffe, a vocal but so far unsuccessful advocate of U.K. development of its own onshore shale resources, INEOS has grown into $55 billion a year in revenue. It has hydrocarbon-focused operations in 32 countries.
The company’s oil and gas production is some 90,000 boe/d, entirely from the U.S., including a non-operated Gulf Coast offshore property it picked up in December from CNOOC Ltd., gaining some 50,000 bbl/d.
Separately, it has LNG contracts from the Gulf Coast, shipping to Europe, following a 185 MMcf/d deal with Sempra Infrastructure in 2022.
Waiting for maturation
INEOS looked at operating U.S. shale properties in the past, but tight-rock development at the time was still nascent.
It held off, instead participating in U.S. shale development via contracts for associated ethane output, particularly from the Marcellus, and through building its own fleet of ethane tankers.
Now, operating mature shale property is part of its long-hold strategy of “being effectively an infinite-lived kind of private company,” Collins said.
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“We're not looking to buy an asset and then sell that asset one, two, three, five, 10 years down the road. … We plan to hold that asset for the remaining life of it.”
The South Texas start was chosen in part because it’s “an area where people want oil and gas kind of investment.”
The foundational property is “to build the business over time.”
“We are buying assets that can generate free cash and then assets into which we can invest more dollars to maintain [and] grow production selectively, opportunistically. And so maturity is important.”
The INEOS team treats the resource with “the amount of engineering rigor” unsuitable for an E&P with a growth-via-proven undeveloped (PUD) mandate.
“Sometimes these PDP assets are held by companies that haven't put that amount of work into it.”
Meanwhile, INEOS doesn’t operate in the U.K. North Sea where the effective tax rate is 80%.
“INEOS would be in the North Sea if the economics justified doing so,” Collins said.
“But the $3 billion that has gone into the U.S. is really driven off … stability, the long-term view, and that we can put capital to work and not worry that the government's going to change the fiscal profile regime in the midst of it.”
Collins joined INEOS in 2023. Previously, he was president of Denver-based BPX Energy and CFO of BP Midstream Partners. Prior, he was executive director of finance, for Denbury Resources and CFO of PostRock Energy. He began his career as an energy securities analyst.