Issue #21 | Water Supersystems & Tallgrass Going Private?

Oilfield Water Weekly

Wednesday August 28, 2019

Late yesterday evening, Tallgrass Energy announced that Blackstone has offered to acquire all outstanding publicly-available Class A shares of the midstream company in a deal that would take Tallgrass private at a 36% premium to yesterday’s stock price. Blackstone currently owns 44% of the company. 

This is our lead story in today’s water weekly news digest below. It’s just the latest potential transaction in a steady stream of deals involving oilfield water assets (several others from last week appear in our digest as well).

Our rapidly approaching oilfield water business and finance conference in early-October is designed to shed light on the key trends driving all these deals, which are rapidly reshaping the oilfield water business model with lasting implications. We hope to see you there for a timely knowledge sharing and networking experience with some unique tier one speakers that can only be heard at this event (here’s a link to the agenda and registration page).

Meanwhile an old gas gathering term, “supersystem,” is becoming more commonly used to describe expansive Permian Basin water midstream systems. We noticed it printed in two growth/acquisition press releases from water midstream companies last week (H2O Midstream and XRI). 

After the H2O Midstream acquisition of Sabalo Energy’s water system last week, we had a chance to catch up by phone with CEO Jim Summers (who spoke at our most recent event). In our conversation with Jim, we asked about the supersystem term’s application in water handling and what it means to Jim’s team as they expand their water infrastructure portfolio.

Jim said that while the term clearly implies scale, it’s not just about size or being the biggest system around. H2O Midstream is thinking strategically about critical suspersystem attributes such as reliability, inter-connectivity, cost structure optimization, integrated storage, and broader reach to tie in with and follow customer development programs. The company’s vision of an oilfield water supersystem also means incorporating disposal and recycling capabilities in a fully integrated solution – marrying these two features is how H2O Midstream is approaching long-term contracts with customers including Sabalo Energy.

All of these aspects factor into H2O Midstream’s definition of an oilfield water supersystem, which is clearly what this team has put together and is growing in the Midland Basin.

And now for this week’s top oilfield water industry headlines…

News Digest

Tallgrass Energy Receives "Take Private" Proposal From Blackstone

Late yesterday evening, Tallgrass Energy, LP (NYSE: TGE) announced that it received a non-binding preliminary proposal letter, dated August 27, 2019, from Blackstone Infrastructure Partners to acquire all of the outstanding Class A shares representing limited partner interests in TGE not already owned by the sponsors...

H2O Midstream Inks Deal To Acquire Sabalo Energy Produced Water Assets In Conjunction With A 15-Year Agreement

Last week, H2O Midstream announced the acquisition of produced water assets in the Midland Basin from their long-time customer Sabalo Energy. The assets were acquired along with a 15-year term contract for H2O Midstream to provide produced water gathering, disposal and recycling services to Sabalo. AND, H2O Midstream's financial backers upped their commitment concurrent with the M&A deal...

A New Buzzword In Oilfield Water Plus More Big M&A Deals

The Infill Thinking team analyzed the three big oilfield water deals announced last week, noting that two of the announcements involved handing legacy E&P water platforms over to third-party water midstream teams to run as profit centers instead of cost centers. Also, two of the announcements inserted a new oilfield water buzzword into the industry's conversation and a common thread in these transactions is the signal that more dealmaking lies ahead in this sector...

A Closed Session Was Held Yesterday On Possible Litigation Involving WaterBridge Resources In Fort Stockton

The Fort Stockton City Council had a busy agenda for its Tuesday, Aug. 27 Regular meeting. According to the agenda, a closed session was held to discuss possible litigation with WaterBridge Resources LLC regarding the Water Purchase Agreement with the city and, in a separate matter, to discuss possible litigation between Cockrell Farms and the city regarding the City’s Use of Three (3) Water Wells near the Belding Prison...

BLM Seeks Input On O&G Lease Sale: New Mexico Parcels In Eddy And Lea County Proposed

The proposed parcels in New Mexico include 48 in Eddy County, eight in Sandoval County, three in Lea County and one in Rio Arriba County. The parcel in Kansas is in Cheyenne County. The parcels in Oklahoma include 12 in Roger Mills County, two each in Kingfisher and Ellis counties, and one each in Canadian and Blaine counties...

Casillas Petroleum And Energy Water Services Have Partnered To Create A New Water Midstream Company: Woody Creek

Casillas Petroleum Resource Partners, a private-equity backed E&P focused on the MidCon, is forming a stand-alone water midstream company with Energy Water Services. The JV arrangement will create Woody Creek Midstream, which has initiated construction on...

TCEQ & ODEQ Seek Authority To Issue Permits For Oilfield Wastewater [Locke Lord Analysis]

In a potentially substantial move for the oil and gas industry, the Texas Commission on ‎Environmental Quality (“TCEQ”) and the Oklahoma Department of Environmental Quality ‎‎(“ODEQ”) are seeking delegation from the EPA to take over ‎federal National Pollutant Discharge Elimination System (“NPDES”) primary enforcement ‎authority, or primacy, for certain wastewater discharges...

State Proposes Quadrupling Montana's Radioactivity Limit For Oilfield Waste

The Montana Department of Environmental Quality (DEQ) last week released an update to proposed rules guiding the disposal of radioactive oil waste in Montana...

WATER TALENT POOL: The B3 Insight Team Is Expanding

The B3 Insight team continues to grow and expand its talent and expertise, recently welcoming Eric Aspeitia, B3 Customer Success Manager, and Ryan Ocken, B3 Account Executive, to the team...

WATER TALENT POOL: Permian Sales Position Opening At AID, Related To Saltwater Disposal

Advanced Industrial Devices is seeking an Outside Sales Account Manager for the West Texas Region....

The Permian Boom Collides With A Governor's Climate-Change Push

New Mexico’s Lujan Grisham pushes an ambitious pro-environment agenda for an industry whose receipts dominate the state budget...

After Selling Off Delware Water Midstream Assets In May, PDC Merger With SRC Energy Cements Their Position As A Leading Colorado E&P

In May, PDC Energy signed definitive agreements to divest its gas and water midstream assets in the Delaware Basin for $310mm. This week, they inked a $1.7bn deal to combine with SRC Energy. On the M&A conference call with investors, PDC management said they: "get things that [SRC] is doing that are different than us, that we haven't really completely jumped all the way into yet... they've done some good work with water on pipe... those kinds of things will be things that we'll be looking at relative to what we've been doing..."

Being A Good Water Steward

Southwestern discusses their freshwater neutral program and approach to sustainable water use in operations...

Going Once... Going Twice... There's Only 3 Spots Left For Sponsors At The Premier Oilfield Water Business Conference This Fall

Check out our exciting agenda happening in early-October. This event will set the tone for the oilfield water business conversation into year-end. Then click on "Discover Sponsorships" to pounce on the last couple available opportunities remaining to gain exposure to the high caliber attendees of this premier event. Our final 3 exhibitor spots are first come first serve...

Post On Bakken Water Production

Joe Dancy: "Got a tour of a badlands horizontal well yesterday compliments of NPR in Billings County, North Dakota. Sweet, initial production was roughly 600 barrels per day. Water cut is roughly 50% right now. Water has a salinity of 280,000 ppm and downhole temperatures are 300°F...."

Kansas State Representative Offers Idea To Gather Quake Data

State Rep. Jason Probst, D-Hutchinson, thinks allowing the Kansas Geological Survey to put data-gathering equipment in non-operating Class II disposal wells could yield clues about what is causing earthquakes in the Hutchinson area and other parts of the state...

City Of Odessa Sets Public Meetings For Proposed Tax Rate And Budget

The highlights in the proposed budget include giving an additional $5.6 million for street maintenance and increasing the water/sewer budget by $1.2 million for one-time projects...

Cavitation Technologies Announces Update On Produced Water Treatment System Trial

Cavitation Technologies, Inc. announced its completion of successful trials of its Low Pressure Nano Reactors (LPN’s) in produced water treatment...

Drilling Down: Exxon Mobil Permian Permitting Trends

Exxon Mobil’s shale drilling arm XTO Energy is preparing for another round of drilling in the Permian Basin of West Texas. The company is seeking permission from the Railroad Commission of Texas to drill 20 horizontal wells split between Glasscock, Pecos and Midland counties...

Siemens Piece On Oilfield Water Demand – What’s Behind It And A New Water Treatment Industry

For companies moving into the water reclamation space, proven process automation techniques can be leveraged to increase capacity and reduce operator involvement to lower costs, improve efficiency and offer safe working conditions...

And In Big International Gas Midstream News... Mexico Reaches Deal With Pipeline Operators On Gas Delivery Contracts

Mexico’s president yesterday announced a deal to end a standoff with several natural-gas pipeline operators over contract prices, allowing them to avoid international arbitration and begin increasing gas deliveries across the country.


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