Jul 25 at 9:18am

Woodlands water company completes $18M Permian project, eyes more

by Joshua Mann, Houston Business Journal

The Woodlands-based water infrastructure company, Layne Christensen Co. (Nasdaq: LAYN), is pushing further into the energy sector with the completion of a high-capacity water pipeline and the associated infrastructure in the Permian's Delaware Basin.

The $18 million system can move 100,000 barrels of water per day, CFO Michael Anderson said, and the pipeline itself has room to move up to 200,000 barrels per day with a few adjustments to the infrastructure.

"Plain and simple, the Delaware is the hottest place to be," Anderson said.

The system was built on top of an aquifer in the region, but to the north, east or west, water becomes a lot harder to find, Anderson said. Longer term, Anderson said Layne may extend its reach further afield in those directions.

"Traditionally, producers didn't need as much water as they do now," Anderson said. "We believe that the monstrous appetite for water continues to grow."

The project's design wasn't particularly challenging, but the project was carried out at a fast pace in order to meet customer demand, said Steve Gilbreath, a vice president for Lockwood, Andrews and Newnam Inc., the firm that handled the engineering for the project.

The project was built with a major anchor customer in mind, and part of the deal's terms was that Layne had to start shipping water by Aug. 1, Anderson said.

"We knew from the get go that it was going to be a tight schedule," Anderson said.

The timeline meant Gilbreath and the others at LAN had to think on their feet in a few situations. In one case Gilbreath recalled, the project had trouble finding a supplier for the physical pipe it needed to lay in the ground.

But the company managed to meet the deadline — and it's already moving water today, Anderson said.

The system should be able to maintain its volume for at least 15 years, and Anderson said he thinks the company is in an active enough region that there will be water demand for that duration.

The company has more than a century of experience in the water sector, but Anderson — who himself has a midstream background — started putting together a team about a year ago to develop Layne's presence in the energy industry.

Right now, Anderson said he and the company "really love" the Permian, and especially the Delaware, but that he can see opportunity in basins beyond the Permian. He named the shale basins in Oklahoma and the Eagle Ford as examples.

"We are looking at all these areas as places to go," he said. "But as of yet, no specific plans."

Anderson declined to reveal the anchor shipper around whom this project was built, but he said it is a large, publicly traded exploration and production company.

Layne reported a revenue of $602 million for its fiscal year that ended Jan. 31. That's down from $683 million in 2016, which was the latest in a longer decline in revenue over the last several years.

"This was at one point kind of a billion-dollar market cap company that stumbled on some hard times," Anderson said. "(CEO) Mike Caliel and I are trying to restore the greatness of Layne's history."

There has been more activity in the energy and water space recently. Two other companies focused on energy-related water management, Houston's Rockwater Energy Solutions Inc. and Gainesville, Texas-based Select Energy Services Inc. (NYSE: WTTR), just announced an all-stock merger. That comes shortly after Rockwater completed a merger with a separate company, Oklahoma City-based Crescent Companies LLC.

Joshua Mann covers energy for the Houston Business Journal.