Issue #9 | Underhyped

Oilfield Water Weekly

Wednesday June 5, 2019

Is oilfield water overhyped or underhyped?

We were asked this same question in three unrelated conversations this week. Once by an institutional investor, once by a business development professional, and once by a podcast host.

Our short answer every time was “underhyped.” If you want to hear the long answer, you can listen to the interview we gave to the Texas Oil & Gas Podcast about industry trends and our upcoming conference (start at the 23-minute mark here).

Here are five key reasons why oilfield water’s newfound notoriety is warranted…

  1. Water handling and disposal is today’s most concerning oil production risk factor in the world’s busiest oilfield, the Permian Basin. And it’s a very complex problem to solve (not as simple as just building new equipment or hiring people like in other sectors).
  2. The sector’s commercial model and market structure are undergoing once-in-a-generation type changes.
  3. Unprecedented amounts of capital are required (and apparently available) to create lasting solutions.
  4. Water is a huge addressable market with a structural volume growth story. We estimate the Permian water market is >4x the size of the drilling rig market in dollar terms, yet rigs have received more attention until recently. And because its growth trajectory is more highly correlated with production than the drillbit, the water market is better insulated from oilfield downturns than other sectors.
  5. Although awareness is growing, the oilfield water sector is still relatively opaque and not well understood outside of its inner circle. That said, it is a sector with huge implications for the industry at large in terms of both public opinion and as a critical path function for oil production.

Before we get to this week’s news digest, we wanted to remind readers that our June 21 water business conference is now just several weeks away. Sponsorship opportunities have sold out, but it’s not too late to scoop up your pass to attend (here is a link to the agenda and signup form). We hope to see you there!

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

News Digest

Gravity Oilfield Services Buys Pyote Permian Water Disposal Assets

Clearlake-backed Gravity Oilfield Services bought "certain water disposal assets" from Pyote Water Systems yesterday. These assets are predominantly piped gathering and disposal capacity, scaling up Gravity's footprint in both the Midland and Delaware Basins...

The Oilfield Water Ownership Conundrum [Color Coded Roundup Of E&P Strategies]

Analysis on oilfield water infrastructure M&A including a review of 16 different operators' strategies for whether or not to own water management in house...

Two Weeks From This Friday...

Our oilfield water conference on M&A, finance, business model, and market trends is now just around the corner - June 21 in downtown Houston. Sponsorships sold out last week, but we still have a handful of passes left to attend. It's not too late to register...

NGP Energy Weighs Sale of Oilfield Water Logistics

Bloomberg reported last week that NGP Energy Capital Management, an energy-focused private equity firm, is considering options including a sale for Oilfield Water Logistics...

Oilfield Water Connection Conference Preview On Texas Oil And Gas Podcast

Oilfield Water Connection's Managing Partner Joseph Triepke talked with the Texas O&G Podcast team this week. This interview starts at the 23-minute mark in the podcast. Our conversation touched on trends, problem solving and M&A in oilfield water. We also previewed our June 21 conference for listeners...

The Permian Basin Is Booming With Oil. But At What Cost To West Texans?

“'Take care of your water. One day it will be worth more than all that oil and gas,' Michael Moore's grandfather-in-law, a long-time Permian Basin rancher, told him before he died 12 years ago." This long-form article on the Permian boom is worth a read (or at least scan if you are short on time - it is really really long)...

Milestone Begins Construction On Reeves County Landfill

Construction is underway on an RCRA-exempt oilfield waste landfill in Orla, Texas. The facility, which was permitted in March, will have capacity for approximately 6 million cubic yards and is scheduled to open 4Q19...

Waste To Water: O&G Industry Looks To Mitigate Water Waste During Boom Time

The predicted increasing water use, and flowback and produced water production in the Permian and Eagle Ford, are alarming given the extreme water scarcity in these regions...

Secret Conference Rooms, Intimidating Private Investigators, And Undisclosed Private Planes… Just Another Day In The TPL Power Struggle

Although the Texas Pacific Land Trust delayed the shareholder vote originally scheduled for May 22 twice (first to June 6 and then indefinitely with a lawsuit against the activist investor for alleged securities law violations), the activists held their vote anyway. And they claimed victory. In return, the incumbent Trustees declared the vote illegitimate, alleging in part that it occurred in a “secretly booked conference room.”...

JP Services Announces Launch of Water Management Division

JP Services has added a new Water Management Division to provide cradle-to-grave water services in coordination with JP Services midstream offering suite. The Water Management Division will fulfill water needs both in and out of service pipelines for intrastate, interstate and gathering system networks nationwide.

Lightning Strike Explodes Bakken Saltwater Disposal Plant

A fire broke out Monday night at a Hydro Clear Saltwater Disposal Plant after an explosion at the site. The McKenzie County Sheriff’s Office says the explosion was caused by a lightning strike....

B3 Insight Launches UIC Permit Application Monitor Report

As of May 15, there have already been over 220 permit applications for wells submitted in 2019, of which, 200 are for new wells as opposed to amendments to existing permits. This is a 150% increase in frequency of submitted applications (YTD) as compared to 2018. Most of the submitted permit applications fall in Reeves County, with 160 new well applications in all of 2018 and just over 80 as of May 15, 2019 alone.

Three Industry “Bigs” Delve Into Oil, Gas Waste Management As Market Surges

These ventures involve a long, intensive permitting process and answering to a different regulatory body with demanding rules...

Oilfield Water Eye Candy

Over the past few years oilfield water assets have become increasingly a part of the energy landscape. This is especially true in the drought prone areas of the Permian Basin, Eagle Ford, Oklahoma and Wyoming Basins. This gallery features oilfield water assets centered around frac water, produced water and water recycling...

ConocoPhillips Instagram Post On Produced Water

The two storage pools shown here, with a combined capacity of 1.5 million barrels, hold treated produced water until it's needed for the hydraulic fracturing of future wells.

Exterran Makes Splash In Permian With Produced Water Contract

Exterran secured a significant produced water treatment contract with a major operator in the Midland Basin involving a 30,000bpd water treatment system offered as a turnkey package...

Danos Continues To Win Big In Permian Water Market

Danos has recently entered into a contract with an independent land company based out of Dallas, Texas, to transition 50-60 crew members in a variety of positions. The transition will take place over the coming weeks to support water transfer at water treatment facilities in Midland and Orla, Texas. Additionally, Danos has been awarded a contract to construct two saltwater disposal facilities near Carlsbad, New Mexico...

Drilling Down: Pioneer Keeps On Drilling Despite Layoffs

Pioneer Natural Resources recently laid off a quarter of its workforce but continues to drill in the Permian Basin of West Texas...

Orion’s Hydra 1200™ Super DAF Unit Treating Frac Water On The Fly

With the growing demand for frac water in Permian Basin shale plays, the need for greater capacity in produced water treatment also grows. If left untreated or improperly treated in frac ponds, produced water is susceptible to invasions of bacteria that feed on the iron and total suspended solids common to produced water...

Federal Judge Sends Plaquemines O&G Damage Suit Back To State Court

The order is the first to return to a state court of 42 lawsuits charging that the historic operation of oil and gas companies in six parishes along Louisiana’s coastline -- including the construction of service canals, the improper disposal of hazardous wastes and saltwater, and other operations -- caused damage to wetlands that state law requires the companies to either pay compensation for or repair...


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