Jordan Blum, editorial director, Hart Energy: We are here at the Executive Oil Conference in Midland in the heart of the Permian Basin. I'm joined by Stephen Lipscomb, partner of Tailwater Capital. Just to get into it, you all have a midstream presence in basically every key U.S. shale basin. Is that an intentional strategy and just how do you see that evolving going forward?

Stephen Lipscomb: Great question. When we started the firm in 2013, so this is actually our 10 year anniversary as a firm, there were opportunities all over the United States. The shale boom was happening everywhere, not just in the Permian Basin. And so our goal really at the time was to pick midstream management teams that had expertise in specific areas. And the areas that we ended up focusing on were pretty much all the major basins except for the Marcellus and Utica, which is just a difficult place to build midstream infrastructure. Going forward, I think we will probably narrow our focus a little bit, but we're still right now just focused on trying to maximize returns for our shareholders. And so if there are certain opportunities and basins that make a lot of sense, we're going to spend time focusing on it. And so we're pretty agnostic from a basin standpoint.

JB: So your main focus in the Permian here is Producers Midstream. Obviously, there's a lot of gas, NGL infrastructure needs in the Permian right now. How do you see producers fitting into that and what's on the plate, so to speak?

SL: Yeah, so Producers Midstream II owns a gas gathering and processing business, that's primarily in the, what's known as the Eastern Shelf of the Permian, so east of Midland Basin. And it was an area that was completely unserved by midstream at the time, so there was no gas gathering and processing in that area. And the CEO of Producers, a guy named Matt Flory, who's done a fantastic job with that business, he saw that opportunity, the gas that was going to come out of the ground or was coming out of the ground at the time was 13 GPM [NGL gallons per thousand cubic feet of gas], so really high gas content. And so there was need for processing, and we backed him to go build that. Now that business has grown substantially, and the producers have been drilling a lot out in that area, and the well economics are really attractive. But what's been interesting to watch is that the Producers Midstream team has acquired a business called Midcoast [Energy] and integrated that business into their Scurry-Fisher (counties, Texas) assets. And it's been a great opportunity for us to kind of reuse existing infrastructure and repurpose it for solving a gas problem out there.

JB: You are also investing a lot in water. There's a lot of water logistical issues in the Permian and elsewhere. Is that a key growth area for you? There's, I guess, Goodnight Midstream you all have here?

SL: Yes. It is a key growth area for us. For every barrel of oil that comes out of the ground, there's four to seven barrels of water that comes out of the ground. So I like to say that most of the folks that are drilling out here are really drilling water wells and oil's coming with it. Well, the interesting thing with Goodnight is that we're also approaching water in a pretty unique way. We backed a team called Ronovo Resources, which is a spinout of Veolia [North America], and they're focused on water desalination out in the Permian Basin and also in California. And so we're trying to bring a full suite of services to the producer community and the Permian in particular. We can take your water and gather and dispose of it. We can allow you to reuse it, and we can also take it and purify it and turn it into ag-friendly water or even potable water. And so water is a huge growth opportunity, and there's so many facets to play it, and we're excited to be a part of it.

JB: Great. Well, thank you so much again for joining us at Hart Energy's Executive Oil Conference here in Midland. To read and watch more, please visit us online at hartenergy.com.

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