Permian water company Solaris says it's closing in on new deal

By Rachel Adams-Heard on 4/16/2019
Photo: Solaris Water Midstream water treatment facility.

HOUSTON (Bloomberg) -- Solaris Water Midstream, which handles water supplies and disposal for Marathon Oil, is closing in on a deal with another driller as explorers increasingly outsource one of the key components of fracing.

Backed by private equity investor Trilantic North America, Solaris has “a couple” letters of intent with oil producers in the works and expects to be handling the wastewater needs for another driller in the future, Greg Mullin, the company’s senior vice president of commercial, said at a conference in Fort Worth, Texas.

The Permian basin’s budding water business is only getting bigger as oil producers seek to cash in on infrastructure used to transport water to wells and to dispose of it after it’s been blasted into shale rock with sand and chemicals. Private equity-backed companies like Solaris have been buying the assets from drillers to become their service providers.

“We think that there are some strategic acquisitions that are out there for us,” Mullin said. “We’re actually under a couple LOIs right now with producers looking at their assets.”

About 20% of the wastewater produced by the top 10 explorers in the Permian is now handled by third-party water companies, according to East Daley Capital Advisors. As Wall Street pressures producers to streamline their operations, that could grow to about 50% as early as next year.

Despite the growth expected for water companies, finding a natural buyer for them is difficult in today’s environment, Mullin said. Last month, Tailwater Capital sold a majority stake in its Goodnight Midstream to TPG Capital, another private equity firm, for $930 million.

“There’s really no exit for a water midstream business today,” Mullin said. “As of today, there’s really no appetite for any strategic to come in and buy someone out like ourselves."

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