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Sourcewater Acquires Competitor’s Assets, Eyes Further Buys, CEO Says

Sourcewater, a Houston-based oilfield water intelligence company, recently acquired a competitor and is considering further acquisitions, said CEO Josh Adler.

Adler, who is the principal owner, initially founded the company in 2014 as an online oilfield water and recycling marketplace, he said. He soon realized that the developing water ecosystem was generating demand for more services than simply connecting buyers and sellers, and Sourcewater began to build out a “holistic geospatial intelligence platform.”

It recently acquired DigitalH20 from data company Genscape, which acquired it in 2015 and is itself owned by London-based DMGT. The data and technology that comprised the acquisition will add significantly to Sourcewater’s existing business, he said. Jon Ecker, CEO of Genscape said, “We were pleased to reach an agreementforSourcewater, Inc. to acquire the technology and data of Digital H2O to expand their service. Through this transaction, Sourcewaterwill solidifies its leading position in oilfield water intelligence and provide a truly comprehensive, end-to-end solution for its customers.”

When asked whether the company sees other complementary acquisitions, he said “I am working on something else,” declining to elaborate.

Sourcewater’s technology helps E&Ps and service companies find, trade and value water, particularly produced water, which comes along with the produced hydrocarbons, and flowback water, which comes back up after being used for hydraulic fracturing, he said. Government and third-party database data from DigitalH20, as well as satellite data, also provide proprietary information on activities such as site construction prior to drilling and construction of frac pits, he said.

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Sourcewater is also initiating partnerships with data sensor companies that can provide real-time market data on items like frac pit levels, water quality, tank battery levels, waiting times for disposal, and others, he said. It is also conducting its own outbound market research, he added.

This evolution from marketplace into intelligence platform will allow Sourcewater’s customers to not only source, recycle and dispose of water but to make strategic decisions on M&A, investments, logistics, and drilling costs, said Adler. The company uses its various data sources to generate data service products such as its digital map interface, custom research reports, and real-time logistical optimization.

The company’s ultimate goal is to become something like a commodity exchange for water, and in order for that to happen, the water market will need to continue its trajectory of fast growth and infrastructure buildout, he said. He noted that in the Permian, billions of dollars are being invested in building water infrastructure, and “that is what creates the opportunity for a true commodity trading market,” he said. Other elements that support a trading market, such as regulatory oversight and standardization of the commodity, are likely to follow, he added.

Its revenue model is mainly software-as-a-service (Saas), though it also gets requests for custom reports, he said. Pipeline integrity testing, solar farms, and other industries also have water needs that can be served by the company, he said.

It did not use an advisor for the DigitalH20 transaction. Its corporate law firms are WilmerHale and Chamberlain Hrdlicka.

In September 2017, Sourcewater announced an undisclosed amount of strategic funding from Marubeni Corporation.

Adler has experience as an angel investor and entrepreneur, as well as having served as Chief Speechwriter to the US Treasury.

by Hana Askren

Mergermarket, the leading provider of forward-looking M&A intelligence and data to M&A professionals and corporates around the world

www.mergermarket.com

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