Deep Blue Closes Acquisition of Environmental Disposal Systems from Diamondback

Core Insights - Deep Blue Midland Basin LLC has successfully acquired Environmental Disposal Systems, LLC from Diamondback Energy, marking a significant expansion in its water infrastructure platform in the Midland Basin [1][2][4] - Diamondback retains a 30% equity interest in Deep Blue and has received approximately $695 million in upfront cash, with potential additional earnings of up to $200 million based on performance until the end of 2028 [2] - Deep Blue operates nearly 2,000 miles of pipeline, providing comprehensive water management services, including gathering, transporting, treating, recycling, and disposing of produced water [3] Company Overview - Deep Blue was established in 2023 as a joint venture between Diamondback and Five Point Infrastructure, focusing on integrated midstream water infrastructure networks for exploration and production companies in the Midland Basin [1][6] - The company aims to create value through sustainable water management practices, minimizing disposal through recycling and advanced technologies [6] Financial Aspects - To finance the acquisition, Deep Blue closed a $950 million seven-year senior secured term loan B facility and paid down a revolving credit facility [4] - The company received inaugural corporate ratings of BB- from Fitch Ratings and S&P Global Ratings, and Ba3 from Moody's Investors Service, all with a stable outlook [4] Strategic Importance - The acquisition of EDS is expected to enhance operational excellence and commercial synergies, aligning with rising industry demand for water management solutions [4] - Deep Blue's growth strategy is focused on developing sustainable solutions that contribute to the Texas economy and U.S. energy leadership [4]