Lagoon, Water Energy Services Scoop Up Permian Water Assets
Lagoon becomes a multibasin player in water management while WES locks down assets that could drive future deals.
A pair of active water management players have completed separate deals to expand their individual offerings in the Permian Basin of west Texas. Lagoon Water Midstream has closed a deal to acquire Double Drop Resources, a water management company located in the Midland Basin. Financial terms of the transaction were not disclosed. With ongoing support from Macquarie Infrastructure Partners, the purchase expands Lagoon’s operations and establishes it as a multibasin water management company with a presence in the heart of the Permian. Founded in 2017, Lagoon had previously operated only in the Anadarko Basin.
Lagoon will take on all Double Drop employees, will maintain an office in downtown Midland, and has near-term plans to add additional disposal and water recycling facilities in the basin.
“Lagoon’s acquisition of Double Drop Resources is a key part of our continued growth strategy as we enter the Permian Basin,” said Kevin Lafferty, president and chief executive of Lagoon Water Midstream. “The strategic decision to have a multibasin presence strengthens the portfolio and builds upon our platform to sustainably offer full-cycle water management solutions.”
In the past year, Double Drop Resources has commissioned three new disposal wells with a fourth under construction, all connected by a large-diameter trunkline in Midland and Martin counties. Additionally, Double Drop assets are capable of sourcing more than 300,000 B/D of water for completion operations, and Lagoon plans to invest in continued growth of its sourcing capability by installing recycling facilities.
Double Drop Resources has doubled its produced water volumes since January and anticipates volumes will double again over the next 12 months.
Lagoon is not the only water management company looking to increase its exposure to the Permian. WaterBridge Holdings recently closed a transaction with Colgate Energy to acquire the produced water infrastructure associated with Colgate’s purchase of Occidental acreage in June.
Elsewhere, Water Energy Services (WES) purchased the FMS Business from Key Energy Services. WES provides water logistics services, fluid containment, oil reclamation, saltwater disposal (SWD), and water recycling in the Eagle Ford Shale and the Permian Basin. The FMS Business includes 32 SWD wells, frac tanks, transport vehicles, and other equipment located in Texas and New Mexico. Terms of the deal were not disclosed.
“With the addition of the FMS Business, WES is positioned to proceed with several other OFS businesses we are planning to acquire in the Permian and other locations which will be complementary to our business,” said Nicholas Atkins, chief executive at WES.
Treated water disposal increased onshore in the US from 1.3 billion to more than 2.3 billion bbl in 2019, with roughly 40% of the 2019 tally coming from the Permian Basin, according to Rystad Energy. Disposal slowed in 2020 but is now on the rebound and is expected to hit 1.7 billion bbl for 2021, with around 700 million bbl attributable to the Permian.
Rystad estimated that by the end of 2022, the Permian Basin could be able to meet between 40% and 43% of frac water demand from recycled produced water. To meet this target, the forecasters said additional investment from the midstream space will be required to drive costs down further.