Ownership of Goodnight Midstream LLC, a Dallas-based produced water infrastructure company operating in major U.S. shale plays, is changing hands as the result of a $930 million sale on March 11 to TPG Capital LLC.

TPG Capital, a private-equity firm headquartered in Fort Worth, Texas and San Francisco, agreed to buy a majority stake in Goodnight Midstream from its previous owner, Tailwater Capital. The firm also said it will provide Goodnight with more than $300 million of capital from additional growth equity and proceeds through a committed debt financing to fund continued expansion.

The investment in Goodnight Midstream comes as challenges related to water management have become as costly and often as problematic as producing oil and gas itself. For example, the water logistics segment, which includes hauling, disposal and transfer, drove over 65% of spending for upstream oil and gas operations in the U.S in 2018, according to a report by IHS Markit in late last year.

As a result, IHS said many E&P companies are looking at water management as an integral part of their business model and are looking to choose between internal or external water management options.

“The team at Goodnight Midstream has created a differentiated approach to providing produced water services through a dynamic midstream model,” Christopher Ortega, partner at TPG Capital, said in a statement. “As the midstream water sector continues to develop and mature, we believe the company is well positioned to emerge as a leading provider of scale.”

Goodnight Midstream gathers, transports and disposes more than 350,000 barrels per day (bbl/d) of produced water in the three largest oil-producing basins in North America—the Permian, Bakken and Eagle Ford.

Instead of the traditional method of trucking produced water, Goodnight has developed a network of 420 miles of dedicated produced water gathering and transportation pipelines and more than 50 saltwater disposal wells.

Patrick Walker, CEO of Goodnight Midstream, said the use of pipeline infrastructure rather than trucking helps minimize environmental impact and allows for safer transportation and disposal plus is more cost effective.

“Our business is focused on building long-term innovative and cost-effective produced water solutions,” Walker said in a statement. “Our piped systems save our customers money while reducing the environmental impact of oil and gas production.”

Goodnight Midstream’s network of pipeline infrastructure has 1.4 million bbl/d of permitted water disposal capacity. The company also has over 800,000 dedicated gross acres and long-term contracts with some of the most active producers in the regions, according to the company press release.

Dallas-based Tailwater Capital had backed Goodnight Midstream since an initial equity commitment of $80 million in 2016. Existing shareholders, including management, will retain a significant minority interest in Goodnight following the close of the sale to TPG Capital, the release said.

TPG Capital’s other energy investments have included Discovery Midstream, EnLink Midstream, Jonah Energy and Copano Energy.

BMO Capital Markets was TPG Capital’s financial adviser and Kirkland & Ellis LLP served as its legal counsel. Jefferies LLC was lead financial adviser to Goodnight Midstream and Credit Suisse Securities (USA) LLC served as its joint financial adviser. Vinson & Elkins LLP provided legal counsel to Goodnight and Willkie Farr & Gallagher LLP represented the company’s management.

Emily Patsy can be reached at epatsy@hartenergy.com.

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