Deep Blue to Acquire Environmental Disposal Systems from Diamondback in $750M Deal.

Deep Blue Midland Basin has agreed to acquire Environmental Disposal Systems from Diamondback Energy in a $750M deal, nearly doubling its water management scale. As part of the agreement, Diamondback will maintain a 30% equity interest in the acquired business. The acquisition is expected to enhance Deep Blue's water management capabilities and expand its service offerings.

Deep Blue Midland Basin LLC has agreed to acquire Environmental Disposal Systems (EDS) from Diamondback Energy Inc. (NASDAQ: FANG) in a $750M deal. The acquisition is set to nearly double Deep Blue's water management scale, marking a significant expansion in its operations. As part of the agreement, Diamondback will maintain a 30% equity interest in the acquired business.

The acquisition is expected to enhance Deep Blue's water management capabilities and expand its service offerings. The deal comes at a time when Deep Blue is rapidly building its position as the Midland Basin's largest independent water infrastructure platform. The acquisition of EDS will add 1.2 million barrels per day of treatment and recycling capacity, 1.6 million barrels per day of water gathered, and 1,871 miles of interconnected pipeline across the basin. Additionally, it will increase Deep Blue's permitted disposal capacity to 3.4 million barrels per day and expand its dedicated acres to 783,000.

Scott Mitchell, Chief Executive Officer of Deep Blue, stated, "This transaction enhances our footprint and accelerates our mission to optimize water management across the Midland Basin while prioritizing greater sustainability by recycling massive amounts of produced water for upstream development." The acquisition will provide Deep Blue with unmatched scale and innovative solutions, shaping the future of water management in the Midland Basin.

Diamondback, which will receive approximately $675 million in upfront cash proceeds, subject to customary closing conditions and adjustments, will also have the potential to receive up to $200 million of additional cash proceeds through performance-based earnouts until the end of 2028. Kaes Van’t Hof, Chief Executive Officer and Director of Diamondback, commented, "This transaction provides meaningful value for Diamondback while allowing us to remain closely aligned with Deep Blue as both a partner and a customer."

Five Point Infrastructure LLC, which is a joint venture partner with Diamondback in Deep Blue, is also pleased with the acquisition. David Capobianco, Chief Executive Officer of Five Point and Chairman of Deep Blue, said, "As a pioneer in produced water infrastructure and state-of-the-art water treatment practices, Five Point is proud to back Deep Blue, in partnership with Diamondback. Deep Blue is raising the bar and setting an industry standard for resource-efficient water management across U.S. energy production."

The acquisition is expected to close in the near future, subject to customary closing conditions. Skadden, Arps, Slate, Meagher & Flom LLP and Vinson & Elkins LLP served as legal counsel to Deep Blue, while Akin Gump Strauss Hauer & Feld LLP and Piper Sandler & Co. served as legal counsel and financial advisor to Diamondback, respectively.

References:
[1] https://seekingalpha.com/news/4491066-deep-blue-to-buy-diamondbacks-environmental-disposal-systems-business-in-750m-deal
[2] https://www.morningstar.com/news/globe-newswire/9521432/deep-blue-midland-basin-llc-acquires-environmental-disposal-systems-llc-from-diamondback-energy-inc