Inside Ineos’ US E&P Business Plan: Buy, Build, Buy

Ineos Plc’s new U.S. E&P business isn’t likely to appear at the seller’s side of an A&D deal.

Ineos “is a perpetual-hold entity. So we're not looking to exit,” Jack Collins, CEO of the Ineos Energy Group’s U.S. E&P business unit, told industry members at the IPAA’s Private Capital Conference Jan. 23.

A longtime operator in the global petrochemical business, London-based Ineos made a downstream debut in the U.S. shale renaissance in 2012, signing a contract with Range Resources for ethane from Range’s newly discovered Marcellus Shale-gas play.

In 2023, it made its U.S. onshore, operated E&P debut, picking up an oily western Eagle Ford Shale package from Chesapeake Energy, which is now part of 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.

The privately held conglomerate’s outlook is that “oil and gas is not going to go away anytime soon,” Collins said.

“So if you own it through the long term and you selectively deploy capital, you generate free cash from the business, that free cash you're able to reinvest either into the drillbit or to go out and acquire more assets.

“You can build something to scale and substance over time.”

‘Strategic’

What type of E&P property is Ineos looking for? “Assets that are no longer seen as strategic by others and to make them more profitable businesses,” Collins said.

It’s the same model Ineos was built from, beginning in 1998: “Taking assets that I would argue are underappreciated, undervalued in the market and making those assets better, more profitable.”

The Chesapeake property came with about 190 PUDs and some 100 employees. Monthly maintenance costs have been pared 30% to date.

Some of the wells were offline. Ineos put those back online. “We have 10 engineers now working this,” Collins said.

Instead of spending on drilling and completing new wells, “we focused very hard on ensuring the wells that we own are producing what they could produce. … We've added about 1,000 boe/d of production just by optimizing existing wells,” Collins said.

The Denver-based Ineos E&P unit is buying in the Gulf of Mexico now too, picking up CNOOC Ltd.’s nonop interest, primarily in the Appomattox and Stampede deepwater developments, gaining some 50,000 bbl/d in a deal announced in December.

Separately, it has LNG contracts from the Gulf Coast, shipping to Europe, following a 185 MMcf/d deal with Sempra Infrastructure in 2022.

“But at our core, we're an upstream-focused entity and focused in three areas now: the North Sea, Gulf of America and U.S. onshore.”

Local decision-making

Collins joined Ineos in 2023 to build the U.S. upstream unit. Previously, he was president of Denver-based BPX Energy and CFO of BP Midstream Partners. Prior, he was executive director, finance, for Denbury Resources and CFO of PostRock Energy. He began his career as an energy securities analyst.

The Ineos organization chart is federal in structure, Collins said, with each business unit having its own board. Decision-making is made at the business-unit level. London headquarters consist of only some 50 employees.

“There's a lot of decision-making that's pushed out to businesses like ours and are set up to run in a fit-for-purpose way for U.S. onshore,” he said.

“So we're not being given dictates by a central organization to operate the business a certain way. We're set up to be nimble, flexible and be very competitive in the markets that we're in.”

U.S. versus Europe

The U.S. is attractive to Ineos for its stable political regime but also its tax regime. In the U.K., oil and gas production is taxed roughly 80%, he said.

“So 80% of the profits you generate in the U.K. North Sea get taken by the government. Here in the U.S., it's about half that,” he said.

“So when you're thinking of rates of return, where you deploy new capital, do you want to deploy capital somewhere where 80% is going to go to the government or 40%?”

The U.S. also appreciates affordable energy supply as well as the security that comes with it, he added, while rules encourage development. “The U.S. is firmly in that camp.”

Germany, for example, hasn’t prioritized energy resources, he said. “And so what was an industrial powerhouse kind of country has now, in a large part, been brought down in size,” Collins said.

“It has not been near as effective because their cost of energy has gone so high because they've made certain bets, which kind of haven't panned out.”

Ineos has put $3 billion to work in the U.S. over the past three years, “So obviously we believe the U.S. is attractive at this point. Will that continue? I think really it is to be determined by all the factors that are outside of our control.

“But I think what everyone kind of knows is, if you put the incentives in place to encourage investment, it likely will encourage investment and the dollars will come.

“And if you do take actions that go against that, which is actually what's happened in the U.K. with the government over there where they're stopping new investment, the capital dollars will leave.”

‘Aren’t dumb’

Ineos’ founder, Sir Jim Ratcliffe, commented in mid-January on the U.K.’s transition ambitions: “De-industrialising Britain achieves nothing for the environment. It merely shifts production and emissions elsewhere.”

The remarks were made in a press release about Ineos closing its last synthetic ethanol plant in the U.K., which ended several hundred jobs.

The U.K.’s policy has closed 10 large chemical plants in the past five years “and, in complete contrast to the U.S.A, has not had one new chemical plant built for a generation,” he said.

“Energy prices have doubled in the U.K. in the last five years and now stand five times higher than those in the U.S.A. The U.K. cannot compete with such a huge disadvantage.”

He concluded, “We are witnessing the extinction of one of our major [U.K.] industries as chemical manufacture has the life squeezed out of it.”

A chemical engineer, Ratcliffe formed Ineos in 1998 to buy a former BP Plc petchem plant in Antwerp, Belgium, from Inspec Group Plc.

With a string of acquisitions since then, the company has grown to more than $50 billion of annual sales and between 5% and 10% of net profit, Collins said. Its assets are in 29 countries.

Net debt was about $11 billion at year-end 2024, according to a financial statement.

Collins said, “People that have built organizations from nothing aren't dumb. … You're going to put the capital on things that you think generate the best risk-adjusted returns over time.

“So I'm optimistic and I think the U.S. has a good outlook in front of us.”