H2O Midstream recently announced its acquisition of “produced water infrastructure” from Sabalo Energy in Howard County – 37 miles of pipeline, nine salt water disposal wells, four Ellenburger salt water disposal well permits, and other assets. This brings H2O Midstream’s produced water network up to a combined “supersystem” for handling produced water of up to 435,000 barrels per day, 190 total miles of pipeline, and 40,000 barrels per day of recycling capacity. The deal includes a 15-year “acreage dedication” of Sabalo’s leases to provide produced water gathering, disposal and recycling services to Sabalo. H2O Midstream is funded by EIV Capital and its institutional partners.
H2O is one of several companies trying to create supersystem produced-water handling systems in the Permian and the Eagle Ford. Like H2O’s deal with Sabalo, these acquisitions typically involve transferring produced water infrastructure assets to the company and dedication of the seller’s leases to the system – a commitment to pay an agreed amount to the company for produced water disposal services.
From landowners’ point of view, this development presents some interesting questions and challenges.