Key Takeaways
Disposal constraints and rising produced water volumes are increasing the need for interconnected pipeline networks and alternative outlets. Reliable capacity, backup connections, and service commitments are becoming more important to producers’ development decisions.
Beneficial reuse could create new outlets for produced water through industrial applications, including data centers and power generation. Commercial success depends on reliable treatment, committed end users, suitable infrastructure, and workable economics.
Water infrastructure valuations reflect contract quality, the remaining life of disposal capacity, and future capital requirements. Consolidation can strengthen networks and expand access to capacity, while differences in business mix, growth prospects, and operating characteristics help explain variations in transaction multiples.
Produced water continues to shape the outlook for oil and gas development in the Permian Basin. As disposal becomes more challenging, producers and water companies are expanding pipeline networks, exploring new uses for water, and rethinking how they work together. Those efforts were central to Oilfield Water Connection’s 8th Annual Oilfield Water Industry Update, held November 3, 2026. The conference brought together operators, water infrastructure companies, technology providers, and investors to discuss how the industry is preparing for the years ahead.
In our previous oilfield water article, The Evolving Economics of Oilfield Water, we considered disposal constraints, the potential role of data centers, and growing investor interest in water infrastructure. The 2026 conference returned to those themes, with particular attention to expanding transport networks and putting reuse projects into commercial operation. The discussions underscored the practical challenges of turning these opportunities into reliable services for producers and other customers.
Disposal Constraints Are Driving Change
Pressure and limited disposal capacity remain central concerns for the industry. The produced water trends presentation highlighted the potential for water volumes to keep growing even without a corresponding increase in oil production. As operators develop acreage with higher water-to-oil ratios, the need to handle additional water can persist through changes in drilling activity. Meanwhile, pressure constraints and more difficult permitting processes are making it harder to add disposal capacity in the areas that need it most.
These conditions are pushing water companies to look beyond local disposal options. Moving water to less constrained areas is becoming a larger part of the industry’s response, with long-haul pipelines and interconnected systems receiving considerable attention. The value of those networks extends beyond their reach. Access to multiple outlets gives producers more flexibility when a well or part of a system becomes unavailable. As speakers noted, however, some new infrastructure is needed simply to offset capacity losses elsewhere.
The operator panel reinforced why this matters. Reliable water handling supports continued production and influences where producers can economically develop their acreage. Operators are therefore taking a more strategic approach to water, including closer evaluation of their providers’ disposal capabilities and greater attention to backup connections and service commitments. That approach requires continuing collaboration between producers and midstream water companies, particularly when long-term contracts must be supported by capacity that can change over time.
These considerations also affect acquisition decisions. Buyers must assess how long a system’s disposal capacity can support its contracted volumes and how much additional capital will be needed to maintain service. Strong current earnings may be less attractive if sustaining them requires substantial investment in replacement capacity.
Beneficial Reuse Is Moving Toward Commercial Application
Beneficial reuse remained a prominent topic, with discussion centered on how potential outlets could develop into reliable commercial applications. In his keynote address, Robert Crain of Texas Pacific Water Resources discussed the potential connections between produced water, data centers, and power generation. Industrial development in West Texas could create new demand for water and provide an outlet for a stream that has historically required disposal. For water companies, that possibility is drawing the conversation beyond recycling within oilfield operations toward a broader range of customers and applications.
Turning that opportunity into a dependable business remains a substantial undertaking. Throughout the day, speakers emphasized that successful treatment must be paired with an end user, suitable infrastructure, and workable economics. The level of treatment should fit the intended use, while the facility must perform consistently as water quality and operating conditions change. Experiences moving from pilot projects toward commercial facilities illustrated how much work remains between demonstrating a process and operating it reliably at scale.
Mineral recovery offered another example of the industry’s efforts to find additional value in produced water. The untapped opportunities panel discussed lithium extraction and other potential applications that could complement water handling and reuse. These possibilities add to the commercial appeal of treatment, but they also reinforce the need for partnerships. Producers, infrastructure owners, technology providers, and customers must agree on how costs and risks will be shared. Regulatory coordination and public confidence will also influence how quickly new outlets can develop.
Consolidation and Investment Follow the Need for Capacity
The need for additional water infrastructure also shaped the discussions of M&A and investment. Consolidation can connect systems, broaden geographic coverage, and provide access to permits and disposal capacity. The water midstream panel emphasized that buyers are examining these operating attributes alongside earnings. Contract quality, the remaining useful life of disposal capacity, and opportunities to expand an existing network all influence the value of a water infrastructure business.
The investment fireside chat compared produced water businesses with municipal waste infrastructure. Both collect a waste stream and move it to a permitted destination, making established networks and disposal access important business attributes. The speaker described traditional midstream companies as trading at approximately 10–11x EBITDA, compared with multiples in the upper teens to approximately 20x for municipal waste companies. The discussion suggested that waste infrastructure companies can provide additional valuation references for produced water businesses, subject to differences in their operations, growth, and capital requirements.
GFL’s acquisition of SECURE was discussed as a case study. After assigning a separate value to SECURE’s transportation business, the speaker estimated an implied multiple of approximately 14x EBITDA for its produced water operations. This segment-level estimate illustrates how business mix and valuation assumptions affect the interpretation of transaction multiples. For individual water businesses, the discussion reinforced the importance of evaluating contract durability, disposal longevity, and the capital required to sustain cash flow when selecting and applying valuation benchmarks.
Mercer Capital continues to monitor developments in oilfield water management and related infrastructure markets. For more information on how these trends may impact valuations in the energy sector, contact a Mercer Capital professional to discuss your needs in confidence.