Diamondback, KKR to Take Full Control of Deep Blue in $2.1 Billion Water Deal

By Priya Raman

Diamondback Energy and KKR have agreed to buy Five Point Infrastructure's 70% stake in Deep Blue Midland Basin, in a transaction worth roughly $2.1 billion, according to a source familiar with the deal cited by Reuters. The companies themselves did not disclose financial terms. Note the gap: the headline number is unsourced by the parties.

Deep Blue is not a drill-bit story. It is the plumbing underneath one.

What does the deal change?

Diamondback currently holds 30% of Deep Blue, a venture it formed with Five Point in 2023. Post-closing, Diamondback and KKR each expect to hold equal 50% interests. The deal is expected to close in the fourth quarter of 2026, subject to regulatory approvals and customary conditions.

That is a long runway. Two years of regulatory review and integration risk sits between signing and closing.

Deep Blue runs an integrated water infrastructure network across the Midland Basin, the eastern lobe of the Permian. Its services span sourcing, transportation, storage, recycling and disposal of water for exploration and production companies. The scale figures, per the company:

• More than 2.2 million barrels of water managed daily, including recycling
• More than 800,000 barrels per day delivered
• More than 2,000 miles of pipeline
• Nearly 5 million barrels per day of permitted produced-water disposal capacity (produced water: formation water brought to surface with oil and gas)
• Roughly 142 million barrels of storage capacity

Diamondback CEO Kaes Van't Hof said the network is essential to the company's operations, which require reliable transportation of nearly 2 million barrels of water per day. That is Diamondback's own demand alone — roughly 90% of what Deep Blue manages today. Takeaway: Diamondback bought control of an asset it cannot operate without.

Who pays what?

Truist Securities analysts estimate Diamondback could contribute about $602 million to lift its stake from 30% to 50%, with KKR investing about $1.51 billion for its 50%. Those estimates assume proportional pricing and exclude financing adjustments and transaction costs. Attribution matters here: neither company has confirmed the split.

KKR will finance its side primarily through its fifth global infrastructure fund. Institutional capital keeps flowing into midstream-style water assets that carry recurring service revenue — the same logic that built the pipelines, applied to the water that comes back up.

Why water, and why now?

Permian wells generate substantial produced-water volumes that must be moved, treated, reused or disposed of. Long-term access to that infrastructure increasingly gates production growth for operators. The deal also expands recycling capacity and reduces freshwater reliance — a stated benefit, though the companies offered no volume targets for it.

The partners also flagged opportunities beyond oilfields: industrial applications and emerging technologies. West Texas data center development has raised interest in alternative water supplies, including treated produced water for industrial cooling. But the companies' own caveat is blunt — such uses would require additional treatment technology, commercial agreements and compliance with water quality and environmental rules. That is optionality, not a sanctioned business line.

The agreement establishes a broader Diamondback-KKR relationship that could support further regional infrastructure investment. Could, not will.

Long-term returns depend on regional drilling activity, water volumes, operating costs, regulation, and the pace of recycling and industrial reuse expansion — none of which the deal guarantees. Takeaway: this is a bet that Permian water volumes stay high and that disposal capacity stays scarce.

Watch item: regulatory approvals and the Q4 2026 closing date, plus any disclosure of the actual price — the $2.1 billion figure remains a single-source report.