Diamondback and KKR to Buy Deep Blue Midland Basin Stake

Diamondback Energy and KKR have agreed to buy Five Point Infrastructure's 70% stake in Deep Blue Midland Basin, the West Texas water network that serves Diamondback's wells, the companies said on November 10, 2026. Diamondback already owns the other 30%, so the pair will own all of it once the deal closes, expected in the fourth quarter.

Key points

Diamondback Energy (Nasdaq: FANG) and KKR will jointly acquire Five Point Infrastructure's 70% interest in Deep Blue Midland Basin LLC, taking their combined ownership to 100%.
Deep Blue was formed in 2023 by Diamondback and Five Point and handles water sourcing, transportation, storage, recycling and disposal for oil and gas operators in the Midland Basin.
Diamondback says its core operations need reliable transportation of nearly 2 million barrels of water per day.
KKR is funding its share mainly through its fund KKR Global Infrastructure Investors V.
The deal is expected to close in the fourth quarter of 2026, subject to regulatory approvals and customary conditions.

Why does Permian produced water matter to Diamondback?

Because Permian wells bring up large volumes of salty water along with the oil, and all of it has to be moved, recycled or injected underground. The Texas Produced Water Consortium's 2026 report puts Permian Basin produced water at about 25.3 million barrels per day in 2025: 21% was recycled for hydraulic fracturing, 11% went to enhanced oil recovery, and 68% was sent to saltwater disposal wells.

The same report says disposal costs keep rising, in a range of $0.75 to $1.25 per barrel, and that the basin could see 2 to 7 million barrels per day more excess produced water by 2030.

The Deep Blue system is critical for Diamondback's core operations, which require reliable transportation of nearly 2 million barrels of water per day. — Kaes Van't Hof, Chief Executive Officer, Diamondback Energy

What is Deep Blue Midland Basin?

Deep Blue Midland Basin is a water infrastructure company that Diamondback and Five Point set up as a joint venture in 2023. It runs pipelines, storage, recycling and disposal across the Midland Basin, supplying water to oil and gas producers and taking their produced water away, and it has grown through acquisitions as well as new construction.

Diamondback is also its customer. According to Diamondback's quarterly report for the period ended September 30, 2026, Diamondback sold its water subsidiary Environmental Disposal Systems to Deep Blue on October 1, 2025 for about $694 million in net cash plus about $34 million of Deep Blue equity, and renewed a 15-year dedication of its produced water and supply water to Deep Blue across a 12-county area of the Midland Basin.

What changes for Diamondback with the Deep Blue deal?

Diamondback moves from minority partner to co-owner, alongside KKR, of the network its own operations rely on. Van't Hof says buying out Five Point with KKR secures that capability for the long term, and that the partnership could grow beyond oil and gas through new technology and possible industrial uses for water in the Permian Basin.

The 10-Q shows how much business already flows between them: Diamondback incurred about $81 million in costs for Deep Blue's water services in the third quarter of 2026 and $214 million over the first nine months. Under the 2025 sale, it can earn up to $200 million more if annual completion thresholds are met in 2026 through 2028, or owe Deep Blue up to $150 million if they are not.

KKR, which is funding its part mainly through KKR Global Infrastructure Investors V, says it sees the deal as the start of a wider partnership with Diamondback.

We view this investment as an important first step in building a broader relationship and look forward to exploring additional opportunities to invest together in essential infrastructure. — James Cunningham, Partner, KKR

What does the Deep Blue deal mean for Permian operators?

Our analysis: water handling has become core infrastructure in the Permian, and Diamondback, which has dedicated its Midland Basin water to Deep Blue for 15 years, is taking joint ownership of the network its wells rely on. For other operators that use Deep Blue, the network's owners change from a water specialist and a producer to a producer and an infrastructure investor. Diamondback and KKR describe the partnership as positioned for growth, including uses for water outside oil and gas.

The deal adds to a run of Permian infrastructure moves on Oil News, such as Occidental's CO2 offtake agreements for Delaware Basin enhanced oil recovery, and to the capital plans producers are setting for 2027, like Peyto's budget for a fifth rig.

Frequently asked questions

Who is selling its stake in Deep Blue?

Five Point Infrastructure is selling its 70% interest to Diamondback and KKR, ending the joint venture it formed with Diamondback in 2023.

When will the Deep Blue acquisition close?

Diamondback and KKR expect it to close in the fourth quarter of 2026, once regulatory approvals and customary closing conditions are met.

How is KKR paying for its part of the deal?

KKR says its investment comes mainly from KKR Global Infrastructure Investors V, one of its infrastructure funds.

What services does Deep Blue provide?

Deep Blue covers the whole water cycle for oil and gas producers: sourcing, transportation, storage, recycling and disposal.

Does Diamondback already send its water to Deep Blue?

Yes. Diamondback has a 15-year dedication of its produced water and supply water to Deep Blue across a 12-county area of the Midland Basin, renewed when it sold Environmental Disposal Systems to Deep Blue in 2025.

Diamondback and KKR buy out Five Point to own Deep Blue, the water network Diamondback's wells depend on