Diamondback Energy, a U.S. shale oil producer, has formed a joint venture with private equity firm Five Point Energy LLC to create a sustainable water infrastructure network in the Midland Basin, which is part of the oil-rich Permian in Texas.
The joint venture, called Deep Blue Midland Basin LLC, aims to create a sustainable management platform for produced water, which is the water that comes out of a well during oil production. Diamondback will retain a 30% equity interest in the new joint venture and received a $500 million upfront payment from Five Point.
Photo by Enzo Tommasi
Diamondback is also entitled to more cash proceeds through performance-based earnouts over the next 24 months.
The joint venture is expected to collectively contribute $500 million in follow-on equity capital to fund future growth projects and acquisitions.
The companies plan to create the largest independent water infrastructure platform in the Midland Basin, with more than 800 miles of pipelines for gathering, transport, disposal, and reuse. The new platform will provide sustainable produced water management and technology solutions for the oil and gas industry.
The joint venture aims to monetize the business while retaining meaningful upside through equity ownership.
The companies expect significant value creation for stockholders and sustainable water management for investment-grade customers. Diamondback’s President and CFO, Kaes Van’t Hof, said that the joint venture is the opportune time to monetize the business after spending nearly a decade building a differentiated water infrastructure platform in the Midland Basin.
