DEEP BLUE MIDLAND BASIN LLC ACQUIRES LAGOON OPERATING - MIDLAND, LLC

Rhea-AI Summary

Deep Blue Midland Basin, a joint venture between Diamondback Energy and Five Point Energy, has acquired Lagoon Operating - Midland. This acquisition strengthens Deep Blue's presence in the Midland Basin with assets in Martin County, including 105 miles of large-diameter pipeline, 240,000 bpd disposal capacity, and 544,000 bpd additional permitted capacity. The acquisition enhances Deep Blue's recycling capabilities and includes 60,000 dedicated acres from seven new counterparties. Post-acquisition, the company has 2.5 million bpd disposal capacity and over 1,000 miles of pipeline. The deal underscores Deep Blue's leadership in sustainable water management.

Positive

• Acquisition expands Deep Blue's footprint in the Midland Basin.
• 105 miles of large-diameter pipeline added.
• 240,000 bpd disposal capacity and 544,000 bpd additional permitted capacity acquired.
• Enhances recycling capabilities.
• New commercial agreements add 60,000 dedicated acres from seven new counterparties.
• Post-acquisition, Deep Blue has 2.5 million bpd disposal capacity and over 1,000 miles of pipeline.
• Reinforces position as a leading sustainable water solutions provider.
• Potential for growth through synergies and enhanced efficiency.

Negative

• Integration risks associated with merging Lagoon's assets.
• Potential over-reliance on a concentrated geographic area in the Midland Basin.
• High capital expenditures needed for asset maintenance and expansion.
• Operational risks related to managing a larger asset base.

Financial Analyst

The acquisition of Lagoon Operating by Deep Blue Midland Basin LLC represents a significant strategic move in the water management industry. This acquisition expands Deep Blue's infrastructure significantly, adding 105 miles of large diameter pipeline and 240,000 bpd of disposal capacity. For investors, this translates to increased operational efficiency and potential for higher revenue streams due to the expanded capabilities.

Moreover, the added 544,000 bpd of additional permitted disposal capacity sets the stage for future growth opportunities. This acquisition allows Deep Blue to offer more comprehensive services to its customers, which can aid in securing long-term contracts and driving consistent revenue.

One potential drawback is the financial cost associated with such an acquisition. If the deal was heavily financed through debt, it could impact the company's financial flexibility. Additionally, integrating Lagoon’s assets might bring initial operational challenges.

Money values like these can impact short-term financial performance, but if managed well, the long-term benefits could outweigh the initial costs.

Market Research Analyst

From a market perspective, Deep Blue’s acquisition positions the company strongly in the Midland Basin, a critical area for oil and gas production. This move could lead to increased market share in the region. Securing 60,000 dedicated acres with new counterparties is a positive sign of growing demand for their services.

The integrated water management solutions, including recycling and desalination technologies, offer advanced and environmentally-friendly options. This is increasingly important for oil and gas producers who face mounting pressure to adopt sustainable practices. Such capabilities could be a differentiator in attracting and retaining customers.

However, investors should keep an eye on how well Deep Blue can integrate these technologies and manage operational efficiencies. The market is competitive and the ability to deliver on promises will be crucial.

Tech Expert

The technical aspects of this acquisition are noteworthy. The addition of advanced water management technologies like recycling, enhanced evaporation and desalination could provide Deep Blue with a significant edge over competitors. These technologies not only enhance the company’s service offering but also align with industry trends towards sustainability and environmental responsibility.

For investors, the adoption of such technologies could mean better long-term growth prospects as regulatory pressures increase. Companies offering sustainable solutions are more likely to secure long-term contracts with major producers who prioritize ESG (Environmental, Social and Governance) criteria.

However, the successful deployment of these technologies is crucial. Any technical mishaps could lead to operational disruptions and financial losses. Thus, continuous investment in R&D and maintaining technological leadership will be key.

Strategic Acquisition Expands Deep Blue's Footprint in the Midland Basin

MIDLAND, Texas, June 3, 2024 /PRNewswire/ -- Deep Blue Midland Basin LLC ("Deep Blue" or the "Company"), a joint venture between Diamondback Energy (NASDAQ: FANG) and Five Point Energy LLC ("Five Point"), announced today it has acquired Lagoon Operating – Midland, LLC ("Lagoon"). This strategic acquisition further solidifies Deep Blue's position as a key player in sustainable water management in the core of the Midland Basin.

The Lagoon assets are located primarily in Martin County and include approximately 105 miles of large diameter pipeline, 240,000 bpd of disposal capacity and 544,000 bpd of additional permitted disposal capacity. Lagoon's assets significantly expand Deep Blue's existing recycling capabilities and are underpinned by a strong portfolio of acreage dedications and MVCs from leading producers in the Midland Basin.

"The acquisition of Lagoon brings together complementary water systems that expand our footprint and unlock synergies across the broader business that will enhance efficiency, reliability and growth opportunities," said Scott Mitchell, CEO of Deep Blue. "The combined business reinforces Deep Blue's position as a leading sustainable water solutions provider, capable of navigating the changing needs of our customers in the Midland Basin."

Since the formation of the joint venture in September 2023, Deep Blue has added multiple third-party commercial contracts and continues to expand the Company's asset footprint. These commercial agreements represent approximately 60,000 dedicated acres with seven new counterparties. With the closing of the Lagoon transaction, the Company has approximately 2.5 million bpd of permitted produced water disposal capacity and over 1,000 miles of large-diameter pipeline with redelivery capacity of over 600,000 bpd.

David Capobianco, CEO of Five Point and Chairman of Deep Blue, said, "We are proud to have built the premier sustainable water management platform in the Midland Basin, and to count among our partners many of the Permian Basin's most respected producers. Deep Blue will continue to expand its customer base, bringing next generation water management solutions, including recycling, enhanced evaporation and desalination technologies to our partners."

Jackson Walker LLP and Skadden, Arps, Slate, Meagher & Flom LLP served as legal counsel to Deep Blue.

About Deep Blue

Deep Blue is headquartered in The Woodlands and Midland, Texas and develops, owns, and operates integrated midstream water infrastructure networks to manage water for exploration and production companies throughout the Midland Basin. The Company's mission is to create value for its customers and stakeholders by addressing their long-term water management requirements through integrated pipeline systems and sustainable water management practices. Deep Blue's goal is to minimize disposal through water recycling and advanced technologies such as desalination and enhanced evaporation. For more information about Deep Blue, please visit: www.deepbluewater.com.

About Diamondback Energy

Diamondback is an independent oil and natural gas company headquartered in Midland, Texas focused on the acquisition, development, exploration and exploitation of unconventional, onshore oil and natural gas reserves in the Permian Basin in West Texas. For more information about Diamondback please visit: www.diamondbackenergy.com.

About Five Point Energy

Five Point Energy is a private equity firm focused on building businesses within the environmental water management and sustainable infrastructure sectors. The firm was founded by industry veterans who have had successful careers investing in, building, and running midstream infrastructure companies. Five Point's strategy is to buy and build assets, create companies, and grow them into sustainable enterprises with premier management teams and industry-leading E&P partners. Based in Houston, Five Point targets equity investments up to $1 billion and has approximately $5 billion of assets under management across multiple investment funds. For more information about Five Point Energy, please visit: www.fivepointenergy.com.

Deep Blue Media Contact
Robert Norton
+1 (303) 775-3562
robert@deepbluewater.com

Diamondback Investor Contact
Adam Lawlis
+1 (432) 221-7467
alawlis@diamondbackenergy.com

Five Point Media Contact
Daniel Yunger
+1 (917) 574-8582
daniel.yunger@kekstcnc.com 

 

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SOURCE Deep Blue Midland Basin LLC

FAQ

What did Deep Blue Midland Basin acquire?

Deep Blue Midland Basin acquired Lagoon Operating - Midland, adding significant assets like 105 miles of pipeline and 240,000 bpd disposal capacity.

How does the acquisition of Lagoon Operating affect Deep Blue's capabilities?

The acquisition enhances Deep Blue's recycling capabilities and disposal capacity, reinforcing its position as a leading sustainable water solutions provider.

What are the new assets included in Deep Blue's acquisition of Lagoon Operating?

The new assets include 105 miles of pipeline, 240,000 bpd disposal capacity, and 544,000 bpd additional permitted capacity.

How many dedicated acres have been added through new commercial agreements?

New commercial agreements have added 60,000 dedicated acres from seven new counterparties.

What is Deep Blue Midland Basin's disposal capacity post-acquisition?

Post-acquisition, Deep Blue Midland Basin's disposal capacity is approximately 2.5 million bpd.