Diamondback Energy, Five Point Form Water-Focused JV Deep Blue in Midland Basin

(P&GJ) — Diamondback Energy Inc. and Five Point Energy LLC have partnered to form a new joint venture entity, Deep Blue Midland Basin LLC. This strategic joint venture (JV) creates the largest independent water infrastructure platform in the Midland Basin with substantial excess capacity in place to pursue third-party growth.

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 MMbbl/d and over 65 MMbbl of water storage and recycle infrastructure in place with capacity to supply over 500,000 bbl/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 approximately $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 investment-grade customers, totaling over 20,000 acres with expected produced water volumes of over 75,000 barrels per day during 2024.

“Deep Blue is thrilled to announce our partnership with Diamondback and Five Point in the Midland Basin,” Scott Mitchell, CEO of Deep Blue, said. “This joint venture affords us the unique opportunity to execute on our vision of sustainable produced water management utilizing one of the largest platforms in the core of the Midland Basin.”

Skadden, Arps, Slate, Meagher & Flom LLP and Winston & Strawn LLP served as legal counsel to Deep Blue. Piper Sandler served as financial advisor, and Akin Gump Strauss Hauer & Feld LLP served as legal counsel to Diamondback.

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