In a statement to Rigzone, Enverus Intelligence director of research Andrew Dittmar described Ineos as a “relatively unexpected buyer” of Chesapeake’s Eagle Ford assets, “given its lack of an exploration and production business to the United States”.
“For Ineos, the deal marks its entry into the US upstream business as part of a global energy solutions suite,” Dittmar said in the statement.
“The entry of a global company like Ineos highlights the continued attractiveness of US shale assets in the global supply landscape as a reliable source of production in a politically stable country,” he added.
Dittmar stated that Ineos “will have a learning curve to master as it takes on these new assets” and said the company “will likely have Chesapeake’s help as they get up to speed.”
Enverus Intelligence Research Director also noted that, “in a changing global supply picture and high hydrocarbon margin, it would not be surprising to see other European companies consider US assets for acquisitions , even as they prepare for the energy transition.”
Sale price
In the statement, Dittmar emphasized that the sale price of the deal “appears to be the best case scenario for Chesapeake given the current market for Eagle Ford Tier 2 assets.”
“It is also a substantial improvement over the valuation Chesapeake received for its Brazos Valley assets,” he added.
“The addition of Ineos … potentially fetched a higher price for the assets than would otherwise have been received from the usual mix of E&P with private equity likely targeting a asset of its kind,” Dittmar continued.
Go to Pure Gas
Dittmar emphasized in the statement that Chesapeake “continues its march toward being a pure gas play” and noted that the sale leaves only a smaller position in the western end of the Eagle Ford in Chesapeake’s portfolio.
“With only a small parcel remaining in the Eagle Ford, Chesapeake is likely to become more selective in its sale price and potentially resist a higher bid, particularly as the asset has promising inventory in the Austin Chalk Dittmar said.
“Getting rid of legacy oil-focused assets allows Chesapeake to focus on its core gas plays in Appalachia and Haynesville. The company will almost certainly look at M&A opportunities in those regions, but getting a deal can be challenging given the volatility of the gas market and the wide gap between buyers and sellers,” he added.
“If the price is not favorable to M&A, or the company sees a better value proposition in its own stock, the proceeds are likely to be used for buybacks,” Dittmar said.
Earlier this week, Ineos Energy announced that it will enter US oil and gas production for the first time with the acquisition of a portion of Chesapeake Energy’s oil and gas assets in the Eagle Ford shale for $1.4 billion. Ineos described the deal as “significant” in a company statement.
To contact the author, please send an email andreas.exarcheas@rigzone.com
