Diamondback (FANG) and Five Point Energy LLC Join Forces
Diamondback Energy, Inc. (FANG) and private equity firm Five Point Energy LLC announced the formation of a new joint venture entity — Deep Blue Midland Basin LLC. With significant additional capacity in place to explore third-party growth, this strategic joint venture establishes the largest independent water infrastructure platform in the region.
Per the agreement, FANG has entered into a 15-year dedication for its produced water and supply water within a 12-county area of mutual interest in the Midland Basin. In return, FANG will retain a 30% equity interest in Deep Blue and has already received approximately $500 million in upfront cash proceeds, with the potential for more cash proceeds through performance-based earnouts over the next 24 months.
Moreover, Diamondback and Five Point Energy plan to collectively contribute an additional $500 million in follow-on equity capital, earmarked for future growth projects and acquisitions.
Deep Blue executed long-term acreage dedications with two investment-grade customers, encompassing more than 20,000 acres. These dedications are projected to yield produced water volumes surpassing 75,000 barrels per day by 2024, setting the stage for substantial growth in the years to come.
Scott Mitchell, CEO of Deep Blue, expressed enthusiasm for the partnership, highlighting the venture's potential to revolutionize sustainably produced water management. He emphasized that in addition to aiding Diamondback's long-term growth plans and advancing their reuse objectives, Deep Blue intends to expand its footprint while promoting the advancement of technological solutions for customers.
Kaes Van’t Hof, president and CFO of Diamondback, underlined the joint venture's capacity to deliver significant value to FANG stockholders. He emphasized the strategic timing of this move, leveraging a decade-long investment in water infrastructure to seize the market's potential.
Zacks Rank & Key Picks
Currently, Diamondback carries a Zack Rank #3 (Hold).
Some better-ranked players in the energy sector are USA Compression Partners, LP USAC, currently sporting a Zacks Rank #1 (Strong Buy), and Global Partners GLP and Evolution Petroleum Corporation EPM, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
USA Compression Partners is one of the largest independent natural gas compression service providers across the United States in terms of fleet horsepower. USAC has witnessed an upward earnings estimate revision for 2024 in the past seven days.
Global Partners is a Delaware limited partnership, formed by affiliates of the Slifka family. The partnership owns, controls or has access to one of the largest terminal networks of refined petroleum products in New England. GLP is one of the largest wholesale distributors of distillates. It has witnessed an upward earnings estimate revision for 2023 and 2024 in the past 60 days.
Evolution Petroleum is an independent energy company. It was formed to acquire and develop oil and gas fields, and apply both conventional and specialized technology to accelerate production, particularly in low-permeability reservoirs. EPM has witnessed an upward earnings estimate revision for 2023 in the past seven days.
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