Diamondback Announces $750M Deal to Divest EDS to Deep Blue

Core Viewpoint - Diamondback Energy, Inc. (FANG) has entered into an agreement to sell Environmental Disposal Systems, LLC (EDS) to Deep Blue Midland Basin LLC for approximately $750 million, which will significantly enhance Deep Blue's water management capacity in the Midland Basin [1][10]. Transaction Details - FANG is expected to receive about $675 million in upfront cash, with the potential for an additional $200 million based on performance through 2028 [2][10]. - FANG will retain a 30% equity stake in Deep Blue, ensuring ongoing strategic alignment and collaboration [2][7]. Infrastructure Expansion - The acquisition will allow Deep Blue to manage water services across 12 key counties, with the capacity to treat and recycle 1.2 million barrels of water per day, gather 1.6 million barrels per day, and dispose of 3.4 million barrels per day [3][4]. - The infrastructure includes 1,871 miles of pipeline and covers 783,000 dedicated acres, facilitating efficient water collection, treatment, recycling, and disposal [4][10]. Sustainability Focus - Deep Blue's strategy emphasizes sustainability by integrating treatment, recycling, and disposal processes to minimize environmental impact in oil and gas operations [5][15]. - The reuse of produced water for hydraulic fracturing is expected to reduce freshwater consumption and lower the carbon footprint of upstream development [5][15]. Leadership and Strategic Commitment - Scott Mitchell, CEO of Deep Blue, stated that the transaction will enhance its footprint and accelerate water management optimization in the Midland Basin [6]. - Kaes Van't Hof, CEO of Diamondback, highlighted that the deal will create value while maintaining a strong partnership with Deep Blue, allowing FANG to focus on core operations [8]. Growth Potential - Since its formation in 2023, Deep Blue has quickly become the largest independent water infrastructure platform in the Midland Basin, with the acquisition of EDS expected to further enhance operational reliability and integrated water services [13][14]. - The growing demand for reliable and sustainable water management solutions in the Permian Basin positions Deep Blue as a key enabler of upstream development while prioritizing environmental responsibility [14][15].