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Year in review

A recap of the most significant developments regarding water in the oil & gas industry in 2019 .

M&A frenzy

Consolidation swept across the water management services sector in 2019, further solidifying the water midstream. Several services providers took over assets from producers, with Bison acquiring various water infrastructure and acreage dedications through at least four different deals in the Anadarko Basin’s SCOOP, STACK and Merge plays.

Several companies also used buyouts of their counterparts to strengthen their positions, especially across the Permian Basin. The most recent deal of significance was Gravity’s December acquisition of On Point Oilfield Holdings to establish an asset base of more than 50 saltwater disposal wells (SWDs) and 1 million bbl/d of disposal capacity. However, probably the most impressive expansion in the basin was achieved by NGL Energy Partners through the July acquisition of Mesquite Disposals for $892.5 million and the November purchase of Hillstone Environmental for $600 million.

The sector also saw the termination of TPG Capital’s highly anticipated acquisition of Goodnight Midstream. Following a mutual decision to cancel the nearly $1 billion deal, Goodnight’s majority shareholder, Tailwater Capital, announced an additional $500 million investment in the company.

Other notable mentions: Solaris’ cash and equity purchase of 13 SWDs and about 40 miles of pipelines from Concho Resources as well as H2O Midstream’s acquisition of nine SWDs, four Ellenburger SWD permits and 37 miles of pipelines from Sabalo Energy.

New water midstream backers

The emerging water midstream has also attracted new financial backers this year, such as Singapore’s GIC, which in May put up $2.8 billion to acquire a minority stake in WaterBridge Resources from private equity firm Five Point Energy. The purchase marked the first time a sovereign wealth fund had thrown its weight behind the sector.

The same month, Rattler Midstream became only the second company involved in the water midstream space to hold an initial public offering, raising $665 million.

Other notable mentions: Canadian infrastructure fund InstarAGF’s entrance into the sector through its acquisition of Oilfield Water Logistics

Pushes for Permian recycling

It’s no wonder that water recycling has become more attractive as US oil production reaches all-time highs, driven by the Permian Basin’s output of nearly 5 million bopd. While the basin-wide recycling rate is still estimated at below 20%, a few key producers have committed to much higher rates.

Moreover, several water services providers have announced plans for large-scale centralized recycling facilities, such as Antelope Water Management, which is working with technology provider Exterran to set up two 100,000-bbl/d plants in the northern Delaware Basin. XRI has built out its Northern Delaware Basin Supersystem, allowing it to supply 100 million bbl/y of industrial and non-potable water from its water exchange terminals, where it carries out treatment and blending operations. Solaris has also ramped up its recycling and blending capabilities with two 80,000-bbl/d facilities in New Mexico and intentions to construct others through 2021.

Legislation passed this year in both New Mexico (HB 546) and Texas (HB 3246) to clarify produced water liability and ownership has further bolstered the industry’s interest in recycling.

Produced water technology innovations abroad

Producers and water technology providers outside the US are making huge efforts to push water treatment and recycling to unseen levels. National oil company Petroleum Development Oman and its technology partner BauerNimr expanded the capacity of the Nimr reed beds treatment facility, a constructed wetlands system, to around 1.1 million bbl/d. The companies are now looking into using the resulting 723,000 bbl/d of treated produced water for aquaculture and agriculture projects.

The Canadian oil sands’ $145 million Water Technology Development Centre was also launched this year, bringing together Suncor, Canadian Natural Resources, China National Offshore Oil Corporation, Husky Energy and Canada’s Oil Sands Innovation Alliance for joint R&D. The partners will test technologies in real-life conditions at Firebag, one of Suncor’s steam-assisted gravity drainage projects.

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