Deep Blue Closes Acquisition of Environmental Disposal Systems from Diamondback

Rhea-AI Summary

Deep Blue Midland Basin has completed its acquisition of Environmental Disposal Systems (EDS) from Diamondback Energy (NASDAQ:FANG). The transaction includes $695 million in upfront cash and potential additional earnouts of up to $200 million through 2028.

Deep Blue, formed in 2023 as a joint venture between Diamondback and Five Point Infrastructure, operates the largest independent water infrastructure platform in the Midland Basin, with nearly 2,000 miles of pipeline. To fund the acquisition, Deep Blue secured a $950 million seven-year senior secured term loan B facility and received corporate ratings of BB- from Fitch and S&P, and Ba3 from Moody's.

Positive

• Significant expansion of Deep Blue's water infrastructure operations in the Midland Basin
• Substantial upfront cash proceeds of $695 million for Diamondback
• Potential for additional $200 million through performance-based earnouts until 2028
• Successful securing of $950 million term loan facility with stable ratings outlook
• Diamondback maintains 30% equity interest in Deep Blue

Negative

• Increased debt burden with new $950 million term loan facility
• Integration risks associated with combining operations
• Significant capital expenditure required for the acquisition

Insights

Financial Analyst

Diamondback's $695M water infrastructure sale strengthens balance sheet while maintaining strategic 30% stake in growing Deep Blue platform.

This transaction represents a significant monetization event for Diamondback Energy (FANG), generating $695 million in immediate cash proceeds while maintaining a 30% equity stake in Deep Blue. The deal structure is noteworthy as it includes potential additional compensation of up to $200 million through performance-based earnouts through 2028, creating ongoing upside opportunity.

The transaction reflects a strategic approach to Diamondback's midstream water assets. By selling EDS to Deep Blue (a JV that Diamondback formed with Five Point Infrastructure in 2023), the company effectively monetizes infrastructure assets while maintaining partial ownership in what has become the largest independent water infrastructure platform in the Midland Basin. This allows Diamondback to focus capital on core upstream operations while still benefiting from the growth of these essential midstream assets.

Deep Blue's successful closing of a $950 million seven-year senior secured term loan B facility demonstrates strong institutional confidence in the water management business. The solid inaugural credit ratings (BB- from Fitch and S&P, Ba3 from Moody's) with stable outlooks suggest favorable financing terms despite the significant debt load. The water infrastructure business provides relatively stable cash flows, which likely supported these ratings.

For Permian Basin operators, water management represents a critical and growing expense. Deep Blue's expanded scale positions it as the dominant player in this essential service sector, potentially creating competitive advantages through economies of scale and comprehensive service offerings across the water management value chain.

Doubles scale in the Midland Basin and further solidifies leadership in sustainable produced water management

MIDLAND, Texas, Oct. 01, 2025 (GLOBE NEWSWIRE) -- Deep Blue Midland Basin LLC (“Deep Blue”), the Midland Basin’s largest independent water infrastructure platform, today announced the closing of its previously announced acquisition of Environmental Disposal Systems, LLC (“EDS”) from Diamondback Energy, Inc. (“Diamondback”). Deep Blue was formed in 2023 as a joint venture between Diamondback and Five Point Infrastructure.

Diamondback maintained a 30% equity interest in Deep Blue and received approximately $695 million in upfront cash proceeds. Diamondback will also have the potential to receive up to $200 million of additional cash proceeds through performance-based earnouts until the end of 2028.

With nearly 2,000 miles of pipeline and millions of barrels per day of capacity, Deep Blue delivers comprehensive water management services in the critically important Midland Basin – from gathering and transporting to treating, recycling and disposing of produced water.

“We’re excited to add EDS to our rapidly growing independent water infrastructure platform, the largest in the Midland Basin,” said Scott Mitchell, Chief Executive Officer of Deep Blue. “The integration of EDS will create tremendous value for current and prospective customers who seek operational excellence and commercial synergies. This acquisition exemplifies our ability to scale alongside rising industry demand, as we continuously develop sustainable solutions that contribute to the Texas economy and U.S. energy leadership.”

In conjunction with the transaction, Deep Blue successfully closed a $950 million seven-year senior secured term loan B facility to fund a portion of the purchase price and pay down a revolving credit facility. Deep Blue received inaugural corporate ratings of BB- from Fitch Ratings and S&P Global Ratings and Ba3 from Moody’s Investors Service, with a stable outlook from all three agencies.

J.P. Morgan Securities LLC served as lead financial advisor to Deep Blue.

About Deep Blue

Deep Blue is headquartered in The Woodlands and Midland, Texas and develops, owns and operates integrated midstream water infrastructure networks to manage water for exploration and production companies throughout the Midland Basin. The Company’s mission is to create value for its customers and stakeholders by addressing their long-term water management requirements through integrated pipeline systems and sustainable water management practices. Deep Blue’s goal is to minimize disposal through water recycling and advanced technologies such as desalination and enhanced evaporation. For more information about Deep Blue, please visit: www.deepbluewater.com.

Deep Blue Media Contact

Shahreen Abedin

+1 (347) 419-2657
sabedin@themach1group.com

About Diamondback Energy

Diamondback is an independent oil and natural gas company headquartered in Midland, Texas focused on the acquisition, development, exploration and exploitation of unconventional, onshore oil and natural gas reserves in the Permian Basin in West Texas. For more information about Diamondback please visit: www.diamondbackenergy.com.

Diamondback Investor Contact
Adam Lawlis
+1 (432) 221-7467
alawlis@diamondbackenergy.com

About Five Point Infrastructure

Five Point Infrastructure LLC is a private equity and infrastructure investor focused on investments within the North American powered land, surface management, water management, and sustainable infrastructure sectors. The firm was founded by industry veterans with demonstrated records of success investing in, building, and running infrastructure companies. Based in Houston, Texas, Five Point has approximately $8 billion of assets under management across multiple investment funds. For more information about Five Point, please visit: www.fpinfra.com.

Five Point Infrastructure Media Contact
Daniel Yunger / Nathaniel Shahan
Kekst CNC
Daniel.yunger@kekstcnc.com / Nathaniel.shahan@kekstcnc.com

FAQ

How much did Deep Blue pay for Environmental Disposal Systems?

Deep Blue paid $695 million in upfront cash to Diamondback, with potential additional earnouts of up to $200 million through 2028.

What is Deep Blue's infrastructure capacity in the Midland Basin?

Deep Blue operates nearly 2,000 miles of pipeline with millions of barrels per day of capacity for water management services in the Midland Basin.

How did Deep Blue finance the EDS acquisition?

Deep Blue secured a $950 million seven-year senior secured term loan B facility to fund the purchase price and pay down a revolving credit facility.

What are Deep Blue's current credit ratings after the acquisition?

Deep Blue received inaugural corporate ratings of BB- from Fitch and S&P, and Ba3 from Moody's, all with stable outlooks.

What is Diamondback's ownership stake in Deep Blue after the transaction?

Diamondback maintains a 30% equity interest in Deep Blue following the transaction.