NGL Energy Partners LP (NYSE: NGL) continues to cast more and more of its money into water.
NGL said Nov. 24 it bought two Bakken saltwater disposal facilities from WaterWorks Corral Creek LLC and Saltwater Disposal Systems LLC in the core of the play.
NGL, of Tulsa, paid $34.6 million cash for facilities in McKenzie and Dunn counties, N.D. Peak revenue for wells in McKenzie and Dunn is more than $1 million per month.
The treatment and disposal facilities will bolster NGL’s position in the Bakken Shale and bring NGL's U.S. capacity to about 800,000 barrels per day (bbl/d), said J. Marshall Adkins, analyst, Raymond James.
As a business segment, Water Solutions contributes 25% of NGL’s business, according to the company. The company controls 19 million gallons of above ground storage and more than 3.8 million barrels of leased underground storage. Since 2008, the company has recycled about 1.4 billion gallons of water.
“Water solutions have been a significant area of growth for NGL and additional growth into the Bakken region was anticipated,” Adkins said. “These two facilities will allow NGL to move closer to their goal of 2 MMbbl/d in the next 24-26 months. As NGL continues to grow through water services, their income becomes increasingly fee based which is more stable over the long run.”
The acquisition includes 13 employees and represents NGL Water Solutions’ entrance into the Bakken Shale play in North Dakota.
Jim Burke, president, said NGL Water Solutions has evaluated opportunities to enter the Bakken Shale play for some time.
“With the addition of the WaterWorks and Saltwater Disposal Systems assets, NGL is pleased to enter this market with high quality assets and employees,” he said. “We look forward to establishing NGL Water Solutions in the Bakken, as well as identifying opportunities to expand our footprint and apply our extensive technical expertise in water treatment.”
NGL has invested in the water business year-round. Among other transactions in 2014, the company bought two separate Texas businesses for $151.6 million in cash and $6.8 million in units.
As NGL continues to grow through water services, its income will become increasingly fee based, which is more stable over the long run, Adkins said.
That’s “also in line with their plan to spend approximately 50% of future capex to grow the water services segment.”
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