Colorado-based independent producer Centennial Resource Development Inc. is selling its saltwater disposal wells and associated produced water infrastructure in Reeves County, Texas, to WaterBridge Holdings LLC for $225 million, Kallanish Energy reports.
WaterBridge will pay $150 million in cash at closing and an additional $75 million over three years if incentive thresholds are met. The deal is expected to close in March.
The divested infrastructure assets currently dispose of roughly 50% of Centennial’s gross produced water in Texas. WaterBridge is a long-standing partner. The divested assets, combined with WaterBridge’s broader Southern Delaware system, will provide flexibility and additional capacity to service Centennial’s water disposal needs, according to the company.
Centennial will pay a market disposal rate on incremental water volumes WaterBridge doesn’t already gather and dispose of, and these incremental costs are incorporated into Centennial’s 2020 lease operating expense guidance.
“This transaction represents a significant premium to Centennial’s current trading valuation and will essentially offset any outspend this year, assuming current prices,” said chairman and CEO Mark Papa. “It also significantly reduces the amount of infrastructure capex needed to maintain and grow these assets in the future.”
The companies also will enter into a 15-year produced water management agreement for Centennial’s operated acreage.
When the deal closes, WaterBridge’s Southern Delaware Basin assets will serve over 600,000 acres operated by more than 23 producers under long-term dedication. The company’s 1,140 miles of large-diameter pipelines and 87 handling facilities provide nearly 2 million barrels per day of water handling capacity.
In the WaterBridge-Centennial deal, Winston & Strawn LLP served as legal adviser to WaterBridge, and Barclays acted as exclusive financial advisor to Centennial.
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