Diamondback Energy Inc. and private equity firm Five Point Energy LLC have formed a new joint venture entity, Deep Blue Midland Basin LLC, an integrated midstream water infrastructure company in the Midland basin.
The joint venture’s water infrastructure network comprises over 800 miles of pipelines for gathering, transport, disposal, and reuse with permitted disposal capacity of about 2 million b/d and over 65 million bbl of water storage and recycle infrastructure in place with capacity to supply over 500,000 b/d of recycled water for completions activity, the companies said in a joint release Sept. 11.
As part of the transaction, Diamondback entered into a 15-year dedication for its produced water and supply water within a 12-county area of mutual interest in the Midland basin. Diamondback will retain a 30% equity interest in Deep Blue and received about $500 million in upfront cash proceeds, with potential for more cash proceeds through performance-based earnouts over the next 24 months.
Additionally, Five Point and Diamondback anticipate collectively contributing $500 million in follow-on equity capital to fund future growth projects and acquisitions.
In conjunction with closing the joint venture, Deep Blue also executed long-term acreage dedications with two unnamed customers, totaling over 20,000 acres with expected produced water volumes of over 75,000 b/d during 2024.