Intrepid Potash Inc., Denver, announced that it will partner with NGL Energy Partners, Tulsa, in its burgeoning water sales business, and also said the two are acquiring acreage in Texas. Intrepid and NGL have entered into a five-year joint marketing agreement under which Intrepid will be responsible for the development, transportation, marketing, and sale of water across approximately 185,000 acres in the heart of the Northern Delaware Basin.
The agreement covers the developed and undeveloped water rights Intrepid acquired in the acquisition of the Dinwiddie Jal Ranch (GM May 10, p. 1; March 15, p. 1; Feb. 15, p. 23), now operated as Intrepid South, and NGL water rights on the neighboring Beckham Ranch and McCloy Ranch. Together, these ranches form a contiguous 185,000-acre footprint. Intrepid and NGL will share the associated revenues, expenses, and capital costs based on the respective proportions of their permitted and usable water rights.
“This agreement will allow Intrepid and NGL to quickly and economically expand the water infrastructure footprint of the three ranches,” said Bob Jornayvaz, Intrepid Executive Chairman of the Board, President, and CEO. “We are taking what would otherwise be three separate water systems and plan to combine them into one of the most complete water infrastructure systems in southeast New Mexico, vertically integrated from the wellhead to the end user.
“Over the next year, we plan to modernize our entire system, adding automation and new, permanent infrastructure that will enhance the reliability and lower the operating costs of moving water as we work to meet the growing demand for water on our properties,” Jornayvaz added. He said partnering with NGL, the leading water midstream company in the Delaware Basin, is a natural fit and will allow both companies to focus on their strengths.
The two have also announced the purchase of 652 acres in Loving County, Texas, which is near the Intrepid South ranch, for the purpose of developing a produced water disposal facility, which is expected to further enhance and facilitate the companies’ water recycling plans. The land was purchased for $6 million, with the companies each holding a 50 percent interest. After the acquisition, the companies successfully permitted five disposal wells on the property. Once complete, this facility is expected to have a total disposal capacity of 100,000-125,000 barrels per day.
“We believe this property is an ideal location to expand our oilfield solutions footprint, and it represents the type of small project with solid expected returns that we envisioned when we acquired the Intrepid South ranch,” added Jornayvaz.