Evan, Produced Water Society, Canadian Infrastructure Fund discussed on World Oil's Shale Water Management
They're basically farming that out. They're not trying to keep that in house. They're they're hiring some firm. That handles all the water management for them. Is that right so I time I mean like about ten years ago most operated with doing it themselves and then they were talking some of the water to some mom and pop as WBZ's like especially with water is lower quality and most of it was done in house but it was always a little bit of an afterthought then around twenty fourteen fifteen that the media became starting to become very important to a lot of those operators cost started to increase because of volume came up became very important and we started to see some of those on water midstream companies being established and it was still very small operators. We're still doing it themselves. They were investing heavily in spades and they were starting to build their own midstream infrastructure and they were researching on technology. And now what we're seeing is. We're seeing a reversal now. That a lot of the operators are becoming more comfortable with those of Water Midstream. Companies who have become a lot larger. They are starting to outsource all that produced water-management to parties and that is a new trend because a few years ago the only thing that we had heard from different operative. I don't know if that what I've mentioned him. Company is GonNa Survive on Dante and that was a major concern opposes operators but I think those companies have grown sufficiently big operated the number comfortable all right quite a reversal. Actually because you have those companies were concerned about the water providers being around to to service them. Now they're using this opportunity to to sell those assets to them to raise funds to carry out their own operations right especially now with the constraints on on you know having to work within capital and stuff. So that's that's a good way for them to raise money and outsource and also you know if things change or new technology comes along. They don't have to worry about that. Oh I just invested millions of millions of dollars in this. You Know Bruce Water Recycling. Now there's a new thing that's not on them anymore so I think it's a good trend for them but now now really to the really good stuff. This is the exciting stuff that they do. Wood Mackenzie is. They know about all the deals. And what's going on because Evan was saying that there's a lot of consolidation right. You're seeing you know deals coming in and venture capital coming in from the outside so tell it. Tell us about some of the hot deals now. This is our first one. Our first episode. So you know I don't know go back as far as you think is is important but I mean it's happening all the time. These deals right. Yemen. Tia's why don't I walk through the the general trend that we've seen in deals and then if you think one's interesting hopping and talk about it so I think in the last twenty four months? We've we've seen thirty plus deals and a lot of these are are happening in the Permian because of the amount of produced water. That's coming out of the ground. That's that's really where a lot of the investment capital and the consolidation is taking place and deals have started to pick up in the in the last three months in so h two o midstream purchased Water assets follows any MP so in this case. They sold their water infrastructure. And T P G. Who's one of the world's largest private equity firms invested in good night about six months ago and that deal recently fell through so we can get more into why that was the case and just a few weeks ago? Ngo Energy Partners Bought Hill Stone. That was out in the Delaware and just this week at the conference. Jim and I are at we We heard from owl. Who's a water midstream? Company out in the Permian that they just got a new investment from a Canadian Infrastructure Fund. Wow so you think about the differences all the different in these deals. And there's a there's a lot of moving parts. Yeah it's it's amazing but the most amazing thing to me is that you know while investors seemed to be running away from oil and gas right when you're talking about like mutual funds. You know big money. Because they're getting pushback from their investors and stuff about we want you investing that dirty business water seems to be the exception of that right because everybody's that's green thing because we're trying to recycle it or we're trying to figure better ways to use it. I think that definitely any as cheapest bacteria in the sense that it makes to make a lot of sense to dot managing those resources carefully and therefore that is something that is open for infrastructure funds especially for example European funds that are a lot more green constraint or mm-hmm conduct greed and conscious thinking about and therefore especially when you're talking about recycling managing water. That is something that resonates another was those funds. Yeah I think I think the deals that have gotten the most attention in the market was the Was was what's been going on with good night. So maybe you wanted to talk about the TV deal and then more recently tail waters recapitalization and then after that you can talk about millstone and N. G. L. to. We're just getting so many questions about these deals. Yes so what we have seen is that the deal is what we need to see. What the trend in the market has been. I mean when we going back like Evan was mentioning seen a lot of deals over the last two years but at the beginning it was like two years ago it was still a lot of small deals. Small little private deals like Mo investments and not not very significant. And we're seeing now that a lot of the deals that becoming larger and has to do with that at the beginning if you're thinking about what a midstream. We had a little bit the kid a few years ago now in but teenage years and the whole industries county maturing meaning that the deal that getting bigger and that that also renewal of the type of investors that it needed we had a lot of smaller investors like that. You know a lot of those water companies. Were trying to get money from whoever they could get money from. And now we're seeing a lot of like a bigger investments so we discussed example T. PG looking into space. 'cause we also see for example. Asian Fund with ged investing in water bridge an estimate. So we're seeing a lot of Asian money infrastructure funds and very large private equity entering the market. And then we also have those even public company that are starting to look into the into space and a good example of data. Ngo Buying Mesquite like several months ago and now known as well and we know from our discussions that we're seeing a lot more strategic to meetings or the midstream companies looking at the space. That a lot of them have been waiting for those multiples to come down. And I think that was also one of the issues that repower g and the good nice deal had like a very high elevation so Ten almost eleven times a multiple. Meaning you have to wait eleven times to pay you a bit up. That was a nine hundred thirty million dollars deal and that was extremely expensive. And of course some of the you're not realized in-depth for the deal fell through and not one of the. Hey I've got a question. I got a question for you on the on the N. G. L. Dill. Why was why was that? A goodbye for hill stone. Wh- excuse me. I said that backward why was hill stone? Goodbye for N. G. L. N. G. L. that was a strategic acquisition. I The valuation became a lot more reasonable. They spend six million dollars at seven eggs multiple which we which is more in line with what we're seeing in the regular midstream industry like All in gas midstream. It becomes a little bit more at the end when he looking at where how what. Ngo actually thought in. If you're looking at the announcement day bought two different. They bought the long term contracts. That helps done was able to get find the last couple years. Additionally have also a great company that a great management team as well so it is like combinations of long term contracts and over one hundred and ten thousand acres under contract it out down some right of way as well and of course the Great Asset Management Team and therefore they can easily integrate it with mosquitoes and and yelled existing infrastructure Yeah I think I think the newest the newest announcement that's come out of the space is that owl isn't GonNa get sold to another water midstream company but rather they're just switching from one private equity sponsor to another and if you would add asked Evan for crystal ball. A few months ago I would have said they're probably going to sell their assets. Outright and their management team is GonNa go to the golf course overseen here is that just like what? Matiz was saying about it. It's not your traditional finance years of of lower forty-eight energy assets you've had the Europeans show interest and now you have a Canadian infrastructure fund coming in sinking a few hundred million dollars into a water company out in West Texas. It's fascinating stuff. Yeah now that that's crazy. And you know so good to have you guys on because I mean you guys have a vast amount of knowledge for listening world. All is really a technology magazine for for the upstream and so the deals part of it and the financing part of it. We don't really get into that so for me. It's fascinating I mean. What about for you camera do you? You're the one who puts all the digital stuff online. And do you see any I mean? Do we ever post anything about the finance end of it. Well we do cover. These deals in the new section of the website. So we do try to keep up with it but to your point it is instructive for me. I think for a lot of people to get to hear the totality of what's happening here and not just these little piecemeal. Here's something one company has done to get to look at the macro for the industry and for me. I deal with the tech companies a lot because yeah I mean. That's that's where I see it so for me. Having that having that you know ten thousand foot view really really helps. It puts everything into perspective. And and you can see it and you know on on future episodes. We're GONNA have you guys back. You can tell us about about the deals that are that that happened since the last month. So let's be every month you tell us about the deals in the last month and we can talk more in depth on some of the other trends. You guys are seeing so evan impetus. I really really appreciate you guys being on the show and we look forward to having you back absolutely. This is GonNa be a lot of fun and there's one other thing I forgot as an extra added bonus you will find in the show notes link to a pdf of that produced water tree that we were talking about. So if you're interested in it just look in the show notes click on that and you can get that free from McKenzie you guys. Don't waste our free offer only for you. Jim Alright. Alright guys thanks a lot. We'll talk to you next and this is Cameron Wallace. I'd like to thank our other sponsor. The Produced Water Society. The mission of the produced water society is to improve produced water management to the benefit of the environment and the.