Even if you’re only active offshore, you’re still a shale player—we all are these days, said Steve Weyel, founder, chairman and CEO of EnVen Energy Corp., at the recent meeting of the Houston Energy Finance Group. By that, he meant that the shale plays affect every E&P company, bank and investor in the industry, thanks to prolific production that in turn affects commodity prices, supply and economics.

Weyel described the industry’s current state of affairs as volatile and sensitive. Markets are so sensitive that in one week, the price of oil declines 3% but three drilling rigs are added in the U.S. onshore, he said.

Although capital markets love the shales and rewarded their growth profile in the past, markets won’t fund more drilling now, only acquisitions, because markets now mandate discipline. They don’t want to see drilling that will drive up production and drive down oil prices, “and yet, drilling is the main point of the industry. It’s what we do. And now, the new technology just adds to it [the oil supply glut],” Weyel said.

Weyel spoke from his vantage point of 40 years of entrepreneurship in oil and gas and power throughout the world. In addition to founding EnVen Energy Corp., a private Houston-based company active in the Flex Trend in the Gulf of Mexico, Weyel was formerly a top executive at Dynegy and InterGen North America. In 2005, he was a co-founder, president and COO of Energy XXI Ltd.

EnVen is growing via acquisitions and drilling, and plans to IPO or do a reverse merger to become public, possibly with a distressed firm active in the Gulf of Mexico. As part of that plan, EnVen acquired substantial Gulf of Mexico reserves from Marathon Oil Corp. (NYSE: MRO) in December 2015 in a negotiated sale.

Initially the company purposely remained a stealth player, Weyel said. However, today it is becoming more visible: EnVen closed a 144A private offering last October via FBR Capital Markets, going on NASDAQ under the symbol “ENVN,” raising $133.5 million toward the Marathon purchase. The deal doubled EnVen’s production and tripled cash flow.

The company plans to go public on a larger exchange when the markets allow.

“We believe in the opportunity set for a Gulf of Mexico public equity again, but it’s been difficult with $100 [oil] baggage … Our goal is to IPO and leverage our assets and management team,” Weyel said.

The near-term strategy is to focus on liquidity and create value without degradation, vs. taking a do-nothing approach, he said. The company’s borrowing base was recently reaffirmed. EnVen also has funding from EIG Global Energy Partners and Sankaty.

Weyel said he is mindful of the value destroyed throughout the industry during the shale boom.

“Some 90% of our [industry] cash flow went to paying debt interest; so yes, I guess we were over-levered. In the Gulf of Mexico, you can pick your story: one company files bankruptcy and the other one kicks the can down the road,” he said, without naming names.

“I can’t deal with the shale acquisition economics,” he said. “It didn’t work out for the majors; maybe it did for some independents. I ‘get’ the technology drivers; they are real. What’s happened is phenomenal and I was surprised by the shales’ resiliency. The annuity we’ve created with these resource plays is amazing.”

EnVen has $466 million of PV-10 reserves, 79% PDP and 80% oil, with estimated 2016 production averaging 19,000 barrels of oil equivalent per day with EBITDA of about $95 million.

“We’ve said we’re not going to be reactive in this market; we want to be proactive,” he said. “So that’s why we approached Marathon about these assets. It took us 18 months. We went from ‘it’s not for sale; to it is for sale but not to us; to it is for sale to us.’”

Weyel said the advantages of the Flex Trend play, found in 500 ft to 2,500 ft of water, include high cash flows typical of the Gulf of Mexico yet without the expense and risk of working in even deeper waters. It is underexploited. For years the Flex Trend was solely the province of the majors, then of the largest independents when the majors began their search in ultra-deepwater plays.

“Effectively the majors did a hop-skip over the Flex Trend, but we like it because it’s got deepwater-type cash flows and reserves without the deepwater risks,” he said.

The benefit of being in the Gulf of Mexico is the cash on cash returns it generates, he added, but the challenge with working offshore today is that “you don’t want to own a lot of wellbores because that drives up expenses and bonding liabilities.”

Leslie Haines can be reached at lhaines@hartenergy.com.