Diamondback, Five Point Energy Create Water Infrastructure JV

Oil and natural gas producer Diamondback Energy, LLC and private equity firm Five Point Energy, LLC have formed a new joint venture, Deep Blue Midland Basin LLC, creating the largest independent water infrastructure platform in the Midland Basin – part of the Permian Basin in west Texas.

As part of the transaction, Diamondback entered a 15-year dedication for its produced water (water that comes out of a well with crude oil during oil production) 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 receive about $500 million in upfront cash proceeds, with potential for more cash proceeds through performance-based earnouts over the next two years.

The JV’s water infrastructure network comprises over 800 miles of pipelines for gathering, transport, disposal and reuse with permitted disposal capacity of about two million barrels per day and over 65 million barrels of water storage and recycle infrastructure in place with capacity to supply over 500,000 barrels per day of recycled water.

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 the JV, Houston and Midland, TX-headquartered Deep Blue 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.