Kimmeridge’s Ben Dell: International Investors Return to US Shale Gas

Foreign investment is returning to U.S. shale gas, looking to take part in the integrated wellhead-to-water model, says Kimmeridge Managing Partner Ben Dell.

The latest example: Kimmeridge is selling a 24.1% stake in its upstream shale gas and LNG operation to Mubadala Energy, a subsidiary of Abu Dhabi’s sovereign wealth fund Mubadala Investment Co.

Fresh off announcing the deal April 10, Dell spoke with Hart Energy by phone from Abu Dhabi on a wide range of topics, including the deal, the burgeoning U.S. LNG trade and returning international interest in U.S. gas.

Kimmeridge’s deal with Mubadala is an expansion of a seven-year relationship between the two firms.

"[Mubadala] as a group are a big believer in the integrated gas story and the ability to scale that up," Dell said. "That's ultimately how the partnership came together."

Kimmeridge is selling a 24.1% stake in its SoTex HoldCo LLC holding company, which manages Kimmeridge Texas Gas (KTG) and Commonwealth LNG.

KTG holds 200,000 net acres in the dry gas window of the western Eagle Ford. Production currently averages over 500 MMcf/d.

The company aims to boost production to 1 Bcf/d in the coming years, CEO David Lawler said at Hart Energy’s DUG Gas Conference & Expo last month. KTG aims to ramp up production to 1.5 Bcfe/d by 2031.

Kimmeridge still aims to reach a final investment decision (FID) for Commonwealth LNG by the third quarter, Dell said. The capital injection from Mubadala helps propel Commonwealth further toward FID, he said.

The Commonwealth project, sited near Cameron, Louisiana, is designed to export 9.3 million metric tons per annum of LNG. First offtake from the plant is planned for 2029.

Kimmeridge wants to retain 51% ownership of Commonwealth LNG post-FID.

RELATED

Abu Dhabi’s Mubadala Buys Stake in Kimmeridge Shale Gas, LNG Ventures

‘Belief in a global gas market’

International interest is returning to the U.S. shale patch, fetching investment from the Middle East, Asia and Europe.

Foreign investors poured billions of dollars into U.S. shale over the past decade-plus, with varying results.

“When the first wave of the Totals and Statoils [Equinor] [got] involved in natural gas, there really wasn’t the ability to fully integrate into an international market,” Dell told Hart Energy.

That situation has changed today with the expansion of U.S. LNG exports, he said.

The two primary participants supplying the global gas market over the next decade will be the U.S. and Qatar, he said. So, foreign investors seeking exposure to global natural gas are bringing capital to the U.S.

“I think what you’re seeing now is a belief in a global gas market,” Dell said.

Mubadala Energy has operated and non-op assets across 11 countries, including in the Middle East, North Africa, Russia and Southeast Asia.

But the minority stake in KTG’s South Texas gas assets marks Mubadala’s entrance into the U.S. upstream space, the firm said.

Other Middle Eastern firms, like Saudi Aramco and the Abu Dhabi National Oil Co. (ADNOC), have signed on as LNG buyers from several projects planned on the U.S. Gulf Coast.

Earlier this week, NextDecade Corp. announced a 20-year sale and purchase agreement with a subsidiary of Saudi Aramco for LNG from the Rio Grande LNG plant in South Texas.

Japanese companies have been more active in U.S. upstream.

On March 31, supermajor Chevron Corp. announced a $525 million sale of 70% of its East Texas assets to TG Natural Resources (TGNR), a subsidiary of Japanese utility Tokyo Gas.

Chevron will retain a 30% non-operated stake in the shale gas asset in Panola County, Texas.

Japanese firm Mitsui spudded a test well earlier this month near the emerging western Haynesville play, adjacent to acreage held by Comstock Resources. It could be the third company exploring deep Haynesville gas in the area.

JAPEX U.S. Corp. (JUS), the U.S. arm of Japan Petroleum Exploration Co. Ltd., made an equity investment into U.S. E&P Peoria Resources, the companies said last month.

RELATED

Japan’s Mitsui Testing Western Haynesville Alongside Comstock, Aethon

KTG’s ‘world class asset’

Production from KTG’s South Texas leasehold recently eclipsed 500 MMcf/d.

Development costs are low compared to peers; finding and development costs average $1 or less, Dell said.

“We really think we have a world-class asset,” he said.

KTG holds nearly 700 net undeveloped drilling locations (~92% working interest).

KTG was founded in 2020 and launched operations in 2022. The company aggregated leases in Webb County, Texas, through an acquisition from Laredo Energy.

Leasehold in Karnes, La Salle and McMullen counties, Texas, was added through transactions with BlackBrush Oil & Gas.

“To me, the well economics we’re delivering now are competitive with areas like Appalachia,” Dell said, “but the asset is adjacent to the Gulf Coast.”

KTG is “a preeminent asset base” for its location and proximity to liquefaction projects on the Gulf Coast, he said.

KTG is in full-scale manufacturing mode today. It’s such a repeatable, scalable manufacturing operation in South Texas that it’s frankly a bit boring, Dell joked.

“It’s getting a little boring because it’s just sort of mowing down the inventory and delivering.”

KTG will probably look to expand its natural gas empire with M&A in the future.

“Ultimately, there’s going to be bolt-on opportunities and other scenarios where we can scale up,” Dell said.

KTG’s expansions could also lead the company into East Texas or Louisiana for Haynesville shale gas, Lawler said at DUG Gas. “That’s part of the reason I’m here today,” Lawler said on stage.

RELATED

Kimmeridge to Grow to 1 Bcf/d Via Bits and Bids, Including Haynesville