Diamondback Energy Inc. and KKR & Co. agreed to buy out the majority owner of Deep Blue Midland Basin LLC, the water-handling network that serves Diamondback’s core Permian Basin drilling, in a cash deal valued at about $2.1 billion.
The two will acquire Five Point Infrastructure’s 70% stake, the companies said on Tuesday. Diamondback, the largest Permian-focused independent producer, already owns the remaining 30%, and after closing it and KKR will jointly own all of Deep Blue. The companies didn’t disclose financial terms. The consideration for Five Point’s stake is about $2.1 billion, according to people familiar with the matter.
Water as infrastructure
Shale wells bring up several barrels of salty produced water for every barrel of oil, and drillers need fresh or recycled water to complete new wells. Deep Blue, formed in 2023 as a joint venture between Diamondback and Five Point, handles that cycle from sourcing and pipelines to storage, recycling and disposal. It manages more than 2.2 million barrels of water a day, owns more than 2,000 miles of pipe and has permits for nearly 5 million barrels a day of produced-water capacity, according to Five Point. Diamondback said its own operations depend on moving nearly 2 million barrels of water a day through the system.
For Diamondback, the deal locks up control of a service it can’t drill without. For KKR, which is funding its share mainly through KKR Global Infrastructure Investors V, it is an entry into a business with long contracts and a captive anchor customer. The two said they see room to work together on other Permian infrastructure, including possible industrial uses of treated water beyond oil and gas.
Next steps
The transaction is expected to close in the fourth quarter, subject to regulatory approvals. Latham & Watkins advised Diamondback. Permian water assets have drawn steady buyer interest as disposal limits tighten and operators push more recycling, and the deal joins a run of energy infrastructure sales tracked on MERGER MONDAY, including DTE Energy’s sale of DTE Vantage last week.
