Diamondback Energy Inc. and Five Point Energy LLC have formed a joint venture, Deep Blue Midland Basin LLC, which creates the largest independent hydro infrastructure platform in the Midland Basin with substantial excess capacity to pursue third-party growth, Diamondback said.
The joint venture results in an integrated network of medium water infrastructure with more than 800 miles of pipelines for collection, transportation, disposal and reuse, Diamondback said in a news release Monday. Headquartered in Houston and Midland, Texas, Deep Blue also has a permitted disposal capacity of approximately two million barrels per day and more than 65 million barrels of water storage, extensive recycling facilities with capacity to supply more than 500,000 barrels per day of recycled water for the final activity. Deep Blue develops, owns and operates integrated midstream water infrastructure networks to manage water for exploration and production companies throughout the Midland Basin, with a mission to create value for its customers and stakeholder groups. interest by addressing their long-term water management requirements through integrated piping systems. and sustainable water management practices, according to the release.
As part of the transaction, Diamondback said it entered into a 15-year dedication of its produced water and water supply within a 12-county mutual interest area in the Midland Basin.
Diamondback, which will retain a 30 percent stake in Deep Blue, received approximately $500 million in initial cash proceeds, with the possibility of additional cash proceeds through performance-based earnings over the next 24 months. In addition, Five Point and Diamondback expect to collectively contribute $500 million in trailing equity capital to fund future growth projects and acquisitions, according to the press release.
Along with closing the deal for the joint venture, Deep Blue said it also executed long-term acreage dedications with two investment-grade clients, totaling more than 20,000 acres with volumes of water produced expected of more than 75,000 barrels per day during 2024. Customers were not disclosed.
“This joint venture gives us the unique opportunity to execute on our vision of sustainable produced water management using one of the largest platforms in the core of the Midland Basin,” said Scott Mitchel, CEO of Deep Blue. “In addition to supporting Diamondback’s long-term growth plans and advancing its reuse goals, Deep Blue plans to grow its footprint while driving the advancement of new technology solutions for our customers.”
“This strategic joint venture has the assets, management and producer support to create significant value for Diamondback shareholders. We have spent nearly a decade building a differentiated water infrastructure platform in the Midland Basin and believe that this is the right time to monetize this business while retaining a significant advantage through our ownership. The joint venture has already had significant third-party commercial success, and we look forward to participating in the future growth of this business.” said Kaes Van’t Hof, president and chief financial officer of Diamondback.
“Our joint venture with Diamondback reinforces Five Point’s leadership in environmental water management solutions and our status as the industry’s preferred partner,” said David Capobianco, CEO of Five Point and President of Deep Blue . “Deep Blue’s basin-wide footprint and excess capacity ideally position it to grow and consolidate in the Midland Basin while providing next-generation water management solutions to our customers, including recycling, enhanced evaporation and desalination”.
Association of water in the state region
In an earlier press release, WaterBridge NDB LLC, a Five Point portfolio company, said it partnered with WPX Energy Permian LLC, a subsidiary of Devon Energy Corp., to form NDB Midstream LLC. The resulting partnership is the largest private water infrastructure system in the prolific Stateline region of the Delaware Basin in Loving County, Texas, and Lea and Eddy counties in New Mexico, Waterbridge NDB said.
In connection with the transaction, Devon and NDB Midstream entered into a long-term agreement in which Devon committed all of its produced water within a large area of mutual interest, including an initial dedication of approximately 52,000 acres, and provide 18 saltwater disposal wells with about 375,000 barrels per day of permitted capacity and 210 miles of produced water pipelines for collection, transport, disposal and reuse. As part of the transaction, Devon received a 30 percent stake in NDB Midstream, as well as Five Point’s commitment to fund a portion of the initial construction of the system expansion, according to the release.
“We are excited about this partnership which will provide Devon with a significant increase in permitted water handling capacity, providing a reliable flow guarantee and access to abundant resources and infrastructure to support Devon’s future drilling plans and operations reuse and recycling of water produced by the company”. Greg Horne, Devon’s vice president of marketing and midstream and board member of NDB Midstream, said.
Capobianco, who is also chairman of WaterBridge NDB, said: “Our joint venture with Devon is one of the largest in the water sector to date and is transformative for WaterBridge as it significantly expands the scale, ‘commercial and strategic scope of our industry-leading platform. value Since the founding of WaterBridge in 2016, we have been pioneers in midstream water management, progressively addressing the produced water needs of our customers world-class and reducing reliance on freshwater sources for drilling and completion activities.The future of WaterBridge could not be brighter as we work to bring incredibly innovative solutions to market in the near future, including centers for desalination”.
To contact the author, send an email to rteodoro.editor@outlook.com
