Oil and gas waste water companies merge amid Permian Basin boom

Adrian Hedden
Carlsbad Current-Argus

A Permian Basin oil and gas infrastructure company purchased a water disposal company and claimed the deal would establish the largest commercial produced water injection operation in the Midland Basin, on the Texas side of the Permian.

Gravity Energy services announced it signed the agreement to acquire On Point Oilfield Holdings from White Deer Energy in a Wednesday news release.

The deal added 17 saltwater disposal (SWD) wells and 432,500 barrels per day of permitted capacity to Gravity’s existing water midstream business, the release read.

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On Point also obtained an additional 120,000 barrels per day of disposal capacity, and the rights to develop another 305,000, targeting the Ellenburger formation in north Texas.

The financial terms were not publicly disclosed, read the release.

Following the transaction’s closure, Gravity would own and manage 50 active SWD wells, with more than 1 million barrels per day of total capacity.

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Gravity Chief Executive Officer Rob Rice said the deal was intended to expand his company’s water midstream infrastructure as production continues to grow in the Permian.

Hydraulic fracturing, an extraction process widely used in the region, creates millions of barrels of waste and produced water each day.

The SWDs reinject the produced water back into the underground formations it came from, and Rice said the company would continue to expand the service it offers to oil and gas producers throughout the basin.

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"This acquisition is transformational for Gravity and enables the company to offer expanded water handling infrastructure for producers operating in the core of the Midland Basin,” he said.

“Gravity continues to focus on providing the most reliable and efficient produced water gathering and disposal infrastructure for its customers. We are excited to expand our platform and welcome On Point and its proven management team to Gravity."

José Feliciano, Gravity chairman said the move led the company to be a major player in produced water handling in the Midland Basin, one of the most active regions of the Permian.

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The company has facilities and operations across the country’s oil- and gas-producing regions, including the Eagle Ford in south Texas, Bakken in North Dakota and Marcellus Basin in Pennsylvania, but hoped to increase its focus on the Permian through the deal with On Point, he said.

"This transaction represents a critical step in Gravity's continued evolution into a premier, integrated water midstream platform with leading scale in the Permian Basin,” he said. “Gravity is the dominant produced water platform in the core of the Midland Basin, which is one of the most active oil and gas regions in the country."

Oil prices grow to highest point since September

The early fall saw the price of West Texas Intermediate (WTI) – a grade of crude oil used as a domestic-pricing benchmark – grow to more than $62 per barrel on Sept. 16, but prices slumped between $52 and $55 per barrel for most of October, per data from NASDAQ.

More:Oil and gas water facilities coming to Permian, production continues growth in New Mexico

Wednesday saw the highest price in more than a month at about $57 per barrel, following a drop down to about $52 per barrel at the start of last month, records show.

A report from Enverus, formerly Drillinginfo, pointed to more possible production cuts from the Organization of Petroleum Exporting Countries (OPEC) as leading the growth in U.S. oil prices, along with a potential increase in China’s oil import quotas.

"There are conflicting reports on whether Russia will be interested in participating in additional production cuts, and lingering concerns regarding global economic growth seemed to fuel the selling until Friday,” the report read.

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Market optimism was also strengthened, read the report, by positive manufacturing data released by China, indicating an increase in demand for oil, and reports that the U.S. and China are close to signing an initial phase of a trade deal to reduce tariffs on imported goods.

“Good economic news from the Labor Department on the U.S. economy, surprising positive manufacturing data released from China, and supportive news on the upcoming signing of the initial phase of the trade deal between the U.S. and China sent both the U.S. equities market and the crude market up on the bullish economic outlook,” read the report.

WTI was expected to continue to trend between $53 and $57 per barrel, and continued global economic growth could push prices up to September’s highs between $58 and $59 per barrel, the report read.

But declining rig counts across the country, including in the Permian, could also indicate a slump in prices, closer to the low-end of the predicted range around $53 per barrel.

Adrian Hedden can be reached at 575-628-5516, achedden@currentargus.com or @AdrianHedden on Twitter.