H2O Midstream – Selected as Provider for UL in the Delaware Basin

Midland Basin
Delaware Basin
HSER
Case Study

University Lands Water Midstream LLC (ULWM)

ULWM LLC, a joint venture between H₂O Midstream and Layne Water Midstream, was selected by University Lands to be the preferred water service provider for its 167,000 acres in Loving, Winkler and Ward counties of the Delaware Basin. Selection was based on ULWM’s integrated midstream approach, proven execution capabilities across the full water value chain and ability to bring full-cycle water midstream solutions to E&P companies operating on University Lands.

The University Lands – ULWM Preferred Provider Agreement provides incentives for H₂O Midstream and Layne Water Midstream to rapidly build source, gathering, reuse, storage and disposal infrastructure to reduce water logistics costs, enhance mineral development and increase sustainability on UL acreage.

Why the Partnership?

The ULWM Joint Venture and UL/ULWM preferred provider agreement allow for a holistic and efficient approach to full-cycle water management by combining the experience and unique core competencies of H₂O Midstream and Layne Water Midstream with University Lands’ acreage position in the Permian Basin.

H₂O Midstream: Produced water handling, transportation, storage, disposal and reuse
Layne Water Midstream: Freshwater sourcing, transportation and delivery
Undisclosed Investor: Investment across entire platform aligns interests and provides access to significant capital
University Lands: Access to resource and surface easements across contiguous acreage

How Do We Create Value for University Lands?

The partnership benefits UL directly and indirectly in a number of ways:

Long Term Royalties: Under the preferred partner agreement, UL receives a direct share of the gross revenue ULWM earns across each segment of the oilfield water value chain (sourcing, gathering, disposal, skim, and recycling).
Enhanced Minerals Revenue: Implementation of a full-cycle water midstream model which utilizes interconnected storage, pipeline, treatment and disposal infrastructure will bring significant economies of scale and capital efficiency to operators across University Lands. These efficiencies and the potential for producers to limit capital expenditures and reduce LOE provides a powerful incentive to drill on University Lands, unlocking additional mineral royalties over the term of the contract and beyond.
Environmental Sustainability:
1. Elimination of materially all trucking for water operations by using interconnected pipeline networks (our Howard County system has a 99.97% run-time rate)
2. Acceleration of produced water recycling by leveraging common infrastructure across contiguous acreage to fundamentally change the economics for smaller producers
3. Stewardship of best practices by a world class water midstream team

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Overview

		Layne Water Midstream		H₂O Midstream
Overview ULWM combines leading expertise in source and produced water logistics with a highly experienced management team and strong capital backing		Founded as part of Layne Christensen, a 135-year old water company Began developing midstream water infrastructure in the Permian Basin in 2016 Experienced water and energy management team with significant financial commitment to further water infrastructure network		Formed in 2016 by midstream industry veterans to focus exclusively on water Backed by investors with $100B+ in assets under management
Assets Best-in-class Full-Cycle Water Management		35 miles of source water pipelines and over 500,000 bpd of source water production Exclusive water infrastructure partnership with Texas General Land Office in Reeves and Culberson Counties Growing produced water network in Reeves County with existing operations and over 20 SWD permits in regulatory approval process		200-mile produced water pipeline network 700,000 bpd of active permitted disposal capacity from 27 SWD (15 owned and 12 third-party) 7 customers are pipeline-connected to 2 million barrels of produced water storage via 2 produced water storage hubs and a commercial recycling facility

University Lands

University Lands (UL) manages the surface and mineral interests of 2.1 million acres of land across 19 counties in West Texas for the benefit of The Permanent University Fund (PUF). The PUF is one of the largest university endowments in the United States and benefits more than 20 educational and health institutions across both The University of Texas System and Texas A&M University System.

UL’s mission is to maximize the revenue from The PUF Lands by applying intensive management, accounting, conservation and environmental programs, which improve and sustain the productivity of The PUF Lands, protect the interests of The University of Texas System and promote awareness and sensitivity for the environment.

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University Lands’ Water Midstream Request for Proposal (RFP)

UL completed an extensive process to select service providers to bring cost effective, sustainable full-cycle water midstream solutions to its Operators.

UL Water Midstream Provider Selection Process

Approximately 25 interested parties
Received 8 Regional Full-Cycle Water Management Proposals

Selected ULWM LLC as the exclusive provider for the Delaware Basin

What does this mean for Producers in the Delaware Basin? An Opportunity to Outsource Water Management?

Redirect Capital to Drilling
Reduce Disposal Demand
Utilize Scale of PUF Lands
Reduce Costs
Increase Sustainable Recycling

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ULWM Current Activities

Develop an integrated water midstream business encompassing brackish source water as well as gathering, reuse, storage and disposal infrastructure.
Analyze hydrogeology to identify ideal locations for brackish water development
Survey locations for injectivity, seismicity and volume fundamentals to permit new shallow and deep disposal wells
Design system with multiple, strategically located storage hubs and pipeline networks to facilitate reuse and recycling

For more information on UL Water Midstream, go to www.ULwatermidstream.com