Colgate Flips Occidental Petroleum Water Asset in Sale to WaterBridge

Following back-to-back transformational acquisitions in the Delaware Basin, privately held Colgate Energy LLC has struck again.

Colgate agreed to sell the produced water infrastructure associated with its recent asset acquisition from Occidental Petroleum Corp. in a transaction with WaterBridge Holdings LLC on Sept. 10. Though terms of the transaction weren’t disclosed, the deal also includes an expanded produced water management agreement with WaterBridge for all of Colgate’s operated acreage in the Delaware Basin.

“Colgate’s decision to expand their relationship with WaterBridge further validates our position as the water solutions provider of choice in the Delaware Basin,” commented Jason Long, co-CEO and COO of WaterBridge, in a release by the company.

Since its launch in 2015, Colgate Energy has assembled a formidable position within the Delaware Basin primarily through its purchase of Occidental acreage and all-stock Luxe Energy acquisition earlier this year. The transaction with Occidental alone was worth $508 million and included roughly 25,000 net acres adjacent to Colgate’s existing position in Reeves and Ward counties, Texas.

“These two transactions complement each other perfectly, creating a scaled business with increased relevance in public markets, and ample liquidity to execute on our highly accretive development program,” Colgate Co-CEO James Walter said in a statement in June.

Pro forma for its two acquisitions, Colgate’s position in the Permian Basin was set to cover roughly 83,000 net acres located primarily in Reeves and Ward counties, Texas and New Mexico’s Eddy County. The company said it anticipated running a five to six rig program by year-end 2021 with estimated average net daily production of about 55,000 boe/d.

In its transaction with WaterBridge announced Sept. 10, Colgate sold 10 water handling facilities and associated water midstream infrastructure located in the Delaware Basin with aggregate handling capacity of approximately 100,000 bbl/d and about 50 miles of produced water pipelines. Additionally, Colgate consolidated its existing produced water management contracts into a new 15-year produced water management services agreement with WaterBridge.

In the new agreement, Colgate dedicated all of the operated acreage recently acquired from Occidental, as well as the legacy Colgate and Luxe Energy acreage previously dedicated to WaterBridge, resulting in a significantly expanded area of mutual interest in Reeves and Ward counties. Subsequent to the transaction, Colgate will have over 86,100 gross operated acres in the southern Delaware Basin dedicated to WaterBridge, a portfolio company of Five Point Energy. 

“This transaction further enhances our ability to manage and distribute over two million barrels per day of produced and recycled water across our Permian platform,” Long noted in the Sept. 10 release.

With the closing of the transaction, WaterBridge has approximately 600,000 acres operated by over 20 blue-chip producers under long-term dedication in the southern Delaware Basin. 

The newly acquired infrastructure from Colgate will be integrated into WaterBridge’s extensive Delaware Basin water network, which, following the transaction, provides over 2.1 million bbl/d of water handling, reuse and redelivery capacity via 959 miles of large-diameter pipelines and 97 water handling facilities. 

“Five Point and WaterBridge have built the leading water solutions platform in the Permian by continuing to support the success of our customers,” said David Capobianco, chairman of the board of WaterBridge and CEO of Five Point Energy, in the release.

Five Point Energy is a leading private equity firm focused on building businesses within the midstream and energy infrastructure sectors. Based in Houston, the firm targets equity investments ranging from $10 million to over $500 million and has over $3 billion of capital under management across multiple investment funds. 

“We are excited to strengthen our relationship and to further expand our operations to support Colgate’s growth in the region,” Capobianco added.