Permian Basin 2017

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PERMIAN BASIN: MIDSTREAM 66 | November 2017 | The three Comanche processing plants are part of an ambitious program for crude and natural gas gathering in the southern Delaware Basin that Bra- zos announced in May. The plan also included more than 150 miles of gas-gathering pipelines, 35 miles of crude-gathering pipeline, and two crude storage terminals with a combined capacity of 50,000 bbl. The whole initiative is anchored by long-term acreage dedications from top tier Permian Basin producers. The gathering system stretches into Ward, Reeves and Pecos counties, Texas. "With multiple productive zones in and around our area of opera- tion, we expect drilling activity and volume growth to remain strong for years to come," said Brad Iles, CEO of Brazos Midstream, in announcing the expansion program. Brazos is supported by equity commitments from Old Ironsides Energy and a revolving credit facility. "In mid-August there were 12 rigs running on acreage dedicated to us," Luskey said. "There always seem to be new opportunities in the Delaware Basin. Over time as rigs continue to ramp up we will add midstream infrastructure to handle this growth." One of the challenges in construction, even in such a remote region, is the truck traffic generated by crude haulers. Eventually Brazos is likely to con- tribute to that because the Comanche complex will have the ability to receive and send condensate by truck, but for now it's just a matter of coordinating the arrival of components, equipment and person- nel on crowded desert roads. "These plants take 10 months to a year to install, and midstream companies like us are mak- ing plans to handle future volume increases," Lus- key said. "As long as the rigs keep running, we will continue to expand our processing complex. That is the reason we exist." Given the number of midstream projects across the Permian, it would not be surprising to hear of longer time lines for equipment, especially long- lead process units. Luskey said Brazos has not had any trouble getting goods. "Parts and pieces are readily available. You've got to take risks sometimes to be able to compete in this region. For example, some sizes of pipe are difficult to acquire right now if you haven't done a good job of planning ahead," he noted. Meeting multiple needs The only other constraint the growing midstream operators face is skilled labor. "You can always find people," Luskey noted dryly, "but you cannot always find good people. It's important to our suc- cess that we retain the best in the business, and fortunately thus far we have been able to do that." Accelerated gas processing capacity is not the only news in the Permian midstream. In late August WaterBridge Resources, a portfolio company of Five Point Capital Partners, closed a couple of deals, one to acquire another water management firm and the other with producers. While WaterBridge builds connections to deliver and collect water from existing fields, another Five Point portfolio company, San Mateo, is building gas, oil and water lines together from the start. San Mateo, a joint venture of Five Point and producer Matador Resources, has gas gath- ering and processing; crude gathering; and pro- duced-water gathering and disposal infrastructure in the northern Delaware Basin in West Texas and southeast New Mexico. The venture brought its first gas-processing plant, a 60-MMcf/d train earlier this year, and has plans to bring on a 200-MMcf/d processing plant early next year. "There is an incredible amount of wet gas in the Delaware," said David Capobianco, CEO and managing partner of Five Point. "The pace of pro- duction is not currently well understood, but it seems every new window and every new bench has great crude and massive gas. So much that in some zones it's hard to call it 'associated' gas." Despite the bonanza feel of the Delaware these days, Capobianco is keeping a cool head. "Capital formation always races to overcapitalize. We only build to contractual volumes in hand. To the extent that we are able to add incremental capacity beyond that we will, but we are not going to build specula- tive capacity." Five Point's third portfolio company active in the Permian is Twin Eagle, which has bookends on the unconventional growth in the basin. "Twin Eagle has a national sand business that has a great footprint in the Permian," Capobianco said. "And there is also a strong crude gathering and transpor-

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