March 11, 2019 / 11:58 AM / 6 months ago

Buyout firm TPG Capital to buy majority stake in Goodnight Midstream

(Reuters) - Private equity firm TPG Capital said on Monday it will acquire a majority stake in Goodnight Midstream, a U.S. pipeline company that transports water to and from oil and gas drilling sites, for $930 million.

The deal will see TPG also contributing around $300 million of growth capital to expand Goodnight’s pipeline network, which currently consists of more than 420 miles in three U.S. shale basins, it said in a statement.

While U.S. oil projection has reached record levels on account of the shale revolution of the last decade, much of the supporting infrastructure has failed to keep up, including how to transport the large quantities of water used in the hydraulic fracturing process.

While much of the water, such as in the Permian basin of Texas and New Mexico, is transported by trucks - exacerbating traffic congestion around production sites - Goodnight uses pipelines which energy producers pay to utilize.

“The water infrastructure theme is something we’ve developed for the last two years, as we think water infrastructure management will become as significant for operators as gathering and processing solutions in the next decade,” Christopher Ortega, a partner at TPG Capital, told Reuters.

“We looked at a number of water opportunities but believe that we’ve found the best assets and the best team to work with in Goodnight.”

TPG is acquiring Goodnight from Tailwater Capital, which originally invested in the business in 2016. Tailwater and management will retain a “significant minority interest” in Goodnight, with the former also contributing to the announced growth capital, the statement said.

Goodnight gathers, transports and disposes of around 350,000 barrels of waste water a day and has operations in the Bakken shale in North Dakota, as well as the Permian and Texas’ Eagle Ford shale play.

BMO Capital Markets and Kirkland & Ellis LLP provided financial and legal advice respectively to TPG. Jefferies and Credit Suisse were Goodnight’s financial advisors, with Vinson & Elkins LLP its legal advisor.

Reporting by David French in Houston; Editing by Rashmi Aich

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