Company to Build Water Pipeline in the Delaware Basin
Layne Christensen Company today announced its new energy infrastructure business and the construction of a new high-capacity water pipeline and infrastructure system to serve energy producers in the Delaware Basin of West Texas.
“This infrastructure business is an expansion of our water-focused platform, leveraging our extensive experience to better serve the rapidly growing demands for water in the energy sector,” Michael J. Caliel, President and Chief Executive Officer of Layne Christensen, said. “The recent increase in drilling activity, coupled with technology advancements driving greater horizontal lateral lengths, are creating a growing demand for water in fracking operations. Today, many fracking operations require between 500,000 and 700,000 barrels of water per well completion. Based upon industry forecasts of longer lateral lengths and increasing drilling activity, we expect water usage within the energy sector to more than double over the next two years, with much of the demand in areas such as the Delaware Basin.”
The water infrastructure system, which is currently in the final stages of construction, is anchored by nearly 1,000 acres of Company-owned, highly-productive water-producing land near Pecos, TX and will include wells, pump stations and in-ground storage facilities. The system encompasses more than 20 miles of high-capacity water pipeline extending northward towards Orla, TX into one of the most active oil and gas drilling areas in the United States. The system has initial production and delivery capacity of 100,000 barrels per day of non-potable water, with significant capacity to support further expansion from both additional water sources and delivery points. The capital investment for the system is approximately $18 million.
“Layne’s 135 years of experience in water sourcing, drilling and treatment provides us with a unique advantage over many industry competitors,” Caliel added. “This new investment is part of our longer-term strategy to leverage our substantial know-how in providing water infrastructure solutions to our clients. Our process of supplying water to energy producers through large capacity infrastructure under the Layne banner is a logical extension of our diversified end-market strategy serving clients in the municipal, agricultural and industrial sectors.”
Water sales are expected to commence during Layne’s fiscal third quarter. Once operational, financial returns from the system are anticipated to be immediately accretive to cash flow and earnings. Layne’s returns are back-stopped through an initial four-year contract containing minimum volume purchases from a large publicly-traded independent oil and gas producer that is actively drilling in the area. In the future, the company plans to expand capacity to deliver additional water volumes to other producers in the area.
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