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Texas Ranch to Fetch Almost Half a Billion Amid Water Rush

David Wethe
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Texas Ranch to Fetch Almost Half a Billion Amid Water Rush

(Bloomberg) -- An obscure Texas company has bid $450 million to acquire the Hanging H Ranch in one of the state’s most desolate corners, aiming to make a big splash amid booming demand for water in the world’s busiest oil patch.

RRIG Water Solutions LLC has signed a letter of intent with the family that owns the 67,500-acre ranch located in West Texas, according to marketing materials from Jefferies Financial Group Inc., which is arranging financing for the deal. A representative for RRIG did not return messages seeking comment.

The draw is a huge underground cache of fresh water that’s as precious to oil explorers as rigs or crews. Harvesting crude from the Permian Basin’s multiple layers of shale requires vast quantities of water, which is injected into wells along with sand under enormous pressure to create fractures that release the oil.

Drillers spent $11 billion on water management in the region last year and that’s set to grow to $18 billion in 2021, according to research firm Oilfield Water Connection LLC. RRIG already owns a 475-mile (764-kilometer) water pipeline in the Permian area that it acquired for an undisclosed sum in 2017.

The Hanging H was originally cobbled together by family patriarch Roy O. Lindsay Sr., who reared cattle across the spread until his death in 2012. Since then, the estate has been in legal dispute among family members and a court-appointed receiver was named in October to help sell the ranch.

On The Map

RRIG made an unsolicited offer in February with hopes of cashing in on the booming oilfield water business, both by selling fresh supplies to frackers and then disposing of dirty water after wells are finished by reinjecting it into the ground.

“It’s a bold thing they’re trying to put together,” said Steve Spurgin, an El Paso-based attorney for Roy “Sonny” Lindsay Jr., one of five voting family members who control the ranch. “If they do it, they’re on the map.”

Word of the acquisition follows two other major water deals. Earlier this month, WaterBridge Resources LLC sold a stake in itself to the Singaporean sovereign wealth fund GIC Pte in a transaction that would value it at $2.8 billion.

The KC7 Ranch, located not far from Hanging H, sold earlier this year for $33 million, with water rights being the land’s biggest marketing pitch.

Family Meeting

Acquiring Hanging H has been anything but swift for RRIG. The five shareholders of Hanging H had to unanimously agree late last week to extend RRIG’s exclusivity agreement by three weeks. Closing is set for late June, according to a Jefferies marketing slide.

The ranch is actually made up of a patchwork of parcels straddling three Texas counties: Reeves, Jeff Davis and Loving. Reeves and Loving counties alone produced about 600,000 barrels of crude a day last year, according to GlobalData Plc, more than OPEC member Ecuador.

State Line

One of the ranch’s most attractive assets is its location right up against the New Mexico border. Texas has less-stringent water-sale rules than its neighbor. In order to confirm that the ranch is rich in water, Lindsay said he had to drill wells.

“We weren’t sure if there was any water down there,” Lindsay said. “Over the last five years I guess, we developed a lot more water than we dreamed we’d ever have. It kind of fell together.”

--With assistance from Kiel Porter.

To contact the reporter on this story: David Wethe in Houston at dwethe@bloomberg.net

To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Joe Carroll, Carlos Caminada

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