Tailwater More Than Triples Support for Goodnight Midstream

(Bloomberg) -- Private equity firm Tailwater Capital LLC is committing to another $420 million to Goodnight Midstream LLC after a deal to sell the U.S. oilfield water management company fell through.

A portion of the commitment will come from Tailwater’s fourth midstream energy fund and the rest from a co-investment fund specifically targeting Goodnight, according to people familiar with the matter, who asked not to be identified because the information is private. Tailwater has now committed over $500 million to Goodnight after originally committing about $120 million in 2016, of which $80 million has been deployed.

TPG Capital, a separate private equity firm, said last month that it canceled an agreement to buy Goodnight for $930 million.

The deal was said to hinge in part on Dallas-based Goodnight securing a contract with an unidentified oil producer that hasn’t materialized. Negotiations for that contract are still ongoing, the people said. Goodnight recently signed five new contracts with producers in the Permian’s Delaware sub-basin and the Bakken oilfield in North Dakota, according to a statement Tuesday.

“We are thrilled to have the opportunity to support the next phase of Goodnight’s growth,” Edward Herring, co-founder and managing partner of Tailwater, said in the statement.

Over the past year, private equity-backed newcomers have flocked to U.S. oilfields to help drillers. In the Permian Basin of West Texas and New Mexico alone, more than 16 million barrels of wastewater a day is produced by fracking. The U.S. oil and gas industry spent $34 billion on water management in 2018, with $12 billion of that spent in the Permian, according to industry consultant IHS Markit.

Goodnight now has 500 miles of pipelines that can shuttle 1.6 million barrels a day of wastewater from fracking, according to the statement. The company is projecting an eighth consecutive year of double-digit volume growth on Goodnight’s network.

To contact the reporter on this story: Rachel Adams-Heard in Houston at radamsheard@bloomberg.net

To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Joe Carroll, Christine Buurma

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