Diamondback Energy and private equity firm Five Point Energy have created a new joint venture (JV) entity dubbed Deep Blue Midland Basin, an independent water infrastructure platform in the Midland Basin, US.
Based in Texas, Diamondback Energy is an oil and natural gas company. It is involved in acquiring, developing, exploring, and exploiting unconventional, onshore oil and natural gas reserves located in the Permian Basin in West Texas.
According to the company, Deep Blue Midland Basin will have significant surplus capacity in place to pursue third-party expansion opportunities.
Deep Blue Midland Basin’s integrated midstream water infrastructure network will have more than 1,287km of pipelines for gathering, transport, disposal, and reuse.
Its permitted disposal capacity will be around two million barrels per day, along with the capability to store over 65 million barrels of water.
The company has also established extensive recycling facilities with the capacity to provide more than 500,000 barrels per day of recycled water for completion activities.
Furthermore, there is an initial dedication across a significant portion of Diamondback Energy’s acreage in the Midland Basin.
As part of the agreement, Diamondback Energy has committed to a 15-year dedication for both its produced water and supply water services within a 12-county area of mutual interest located in the Midland Basin.
In exchange, the oil and gas company retained a 30% equity stake in Deep Blue Midland Basin and has secured an initial cash payment of approximately $500m. Moreover, there is potential for additional cash payments based on performance metrics over the next 24 months.
Diamondback Energy president and CFO Kaes Van’t Hof said: “This strategic joint venture has the assets, management and producer support to create significant value for Diamondback stockholders.
“We have spent nearly a decade building a differentiated water infrastructure platform in the Midland Basin, and believe this is the opportune time to monetise this business while retaining meaningful upside through our equity 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.”
Additionally, both Five Point Energy and Diamondback anticipate jointly contributing $500m in follow-on equity capital of Deep Blue Midland Basin to support upcoming growth initiatives and acquisitions.
In parallel with the completion of the joint venture, Deep Blue Midland Basin also established long-term acreage dedications with two investment-grade customers. These cover more than 20,000 acres with projected produced water volumes exceeding 75,000 barrels per day in 2024.
Five Point Energy CEO and Deep Blue Midland Basin chairman David Capobianco said: “Our joint venture with Diamondback reinforces Five Point’s leadership in environmental water management solutions and our status as the industry’s preferred partner.
“Deep Blue’s basin-wide footprint and excess capacity ideally position it to grow and consolidate in the Midland Basin while bringing next-generation water management solutions to our customers, including recycling, enhanced evaporation and desalination technologies.”
