67.5k acres for $450MM (updated)

Permian Ranch Set to Fetch Almost Half a Billion Amid Water Rush

Full Bloomberg article linked above.

An obscure Texas company has bid $450 million to acquire the Hanging H Ranch in one of the state’s most desolate corners, aiming to make a big splash amid booming demand for water in the world’s busiest oil patch.

RRIG Water Solutions LLC has signed a letter of intent with the family that owns the 67,500-acre ranch located in West Texas, according to marketing materials from Jefferies Financial Group Inc., which is arranging financing for the deal. A representative for RRIG did not return messages seeking comment.

Drillers spent $11 billion on water management in the region last year and that’s set to grow to $18 billion in 2021, according to research firm Oilfield Water Connection LLC. RRIG already owns a 475-mile (764-kilometer) water pipeline in the Permian area that it acquired for an undisclosed sum in 2017.

The ranch is actually made up of a patchwork of parcels straddling three Texas counties: Reeves, Jeff Davis and Loving. Reeves and Loving counties alone produced about 600,000 barrels of crude a day last year, according to GlobalData Plc, more than OPEC member Ecuador.

One of the ranch’s most attractive assets is its location right up against the New Mexico border. Texas has less-stringent water-sale rules than its neighbor. In order to confirm that the ranch is rich in water, Lindsay said he had to drill wells.

WaterBridge @ $3B

Singapore’s GIC Bets on Wastewater Company, Takes Stake at $3 Billion Valuation

Singapore sovereign-wealth fund GIC has bought a stake in WaterBridge Resources LLC in a deal that values the Houston-based handler of oil-drilling wastewater at nearly $3 billion including debt, according to people familiar with the matter.

GIC bought 20% of the company from Five Point Energy, a Texas investment firm that started WaterBridge in 2016 with $200 million of seed money, one of the people said.

The deal—and the lofty valuation for the three-year-old company—highlights the rising importance of businesses that handle the lakes worth of briny, polluted water that energy producers extract along with oil and gas when they hydraulically fracture shale and other rock formations. While big investors have flocked to West Texas for its prolific oil wells, they are now scrambling to manage the cruddy water spewing out of the wells at much greater volumes than crude.

Overseas sovereign-wealth.

Water Heating Up

Chron: University Lands to expand water services in the Permian Basin

The state-owned mineral leasing and royalty company University Lands is expanding its water services in West Texas as water becomes a multibillion dollar business in the arid Permian Basin

University Lands,which also manages water rights on state lands, recently signed a deal with Fountain Quail Energy Services of Irving for a number of water-related services in the Andrews County, said University Lands CEO Mark Houser.

University Lands manages the mineral, surface and water rights for 2.1 million acres of land in West Texas with the proceeds going to the Permanent University Fund, or PUF. Founded in 1876, the fund supports both The University of Texas System and the Texas A&M University System. PUF received more than $1 billion of income from mineral rights during fiscal year 2018, state figures show.

University Lands’ concern for conserving water is part of the reason that it awarded the water management contract to Fountain Quail, which has a particular expertise in oilfield water recycling.

Fountain Quail deployed the first prototype of its water recycling technology in the Barnett Shale of North Texas in 2004. The company offers water recycling equipment that can be installed permanently at a busy site as well as a mobile version that can be moved from site to site.

On Water

The 1) wording around the opportunity and activity of the water business in the 10-K combined with 2) the capital spending on the water biz and 3) big hikes in executive comp are all signs (in my mind) that $TPL is going to get extremely aggressive with water.

This may be obvious to others but I think they are going to be more water-forward than most investors expect.

You don’t pay your top two dudes $2mm+ each to collect royalty checks and do small ticket land sales.  More is happening here…

Chron: Refining, Pipelines, and Solaris

Chron: California company seeks to build $1 billion refinery in Permian Basin

Kermit is directly east of $TPL’s surface land in Loving, Reeves, and Culberson counties. The quote below speaks to the sheer amount of physical activity in the Permian right now.

With the increase of 18-wheelers and other vehicles on the roads of the Permian Basin, Prentice said the refinery will take advantage of locally produced crude oil and sell the gasoline and diesel locally.

“If the refinery were in operation right now, every single barrel would be sold within 100 miles,” Prentice said. “There’s been such an increase in demand.”

Chron: Two pipelines hold joint open season to move crude oil from Permian Basin to Houston Ship Channel

This is some of the end-of-2019 capacity we’ve been hearing about.

As construction for the 850-mile Gray Oak Pipeline draws to a finish, a joint venture led by Phillips 66 Partners has teamed up with Houston pipeline operator Kinder Morgan to move crude oil to more destinations.

Designed to move 900,000 barrels of crude oil per day by the end of the year, one of the end points of the Permian Basin to Gulf Coast pipeline is the Phillips 66 Sweeny Refinery in Brazoria County.

Chron: Solaris Water Midstream begins water recycling operations in the Permian Basin

I may have saved the best information for last here.  Important to know that Solaris started its build out in 2015/2016.  Two year head start relative to $TPL.

Launched in November 2015 and financially backed by the private equity firm Trilantic Capital Partners North America, Solaris Water Midstream sources and delivers freshwater to drilling operations and moves and recycles oilfield wastewater.

The company reports having 16 current customers already either connected or in the process of connecting to its Pecos Star System.

A subsidiary of Marathon Oil Company signed a long-term contract for water services in a 369,000-acre area of Lea County, New Mexico that will allow for a 125-mile expansion of the Pecos Star pipeline network.

Once the construction for the expansion is complete, the Pecos Star System will include more than 300 miles of large diameter permanent pipelines and more than 200 miles of temporary pipelines.