Tailwater Bets Big on Delaware Basin Non-Op Position

Tailwater Capital is doubling down on the Delaware Basin's most productive acreage, acquiring a sprawling non-operated working interest position that provides exposure to drilling activity by some of the Permian's most active operators without the capital intensity of running the drill bit itself.

The Dallas-based energy and infrastructure private equity firm announced today that its upstream platform, Tailwater E&P, has acquired approximately 35,000 gross acres across Lea and Eddy counties in New Mexico's northern Delaware Basin. The position includes exposure to more than 900 gross wells operated by Coterra Energy, Mewbourne Oil Company, Devon Energy, and Matador Resources—a who's who of Permian producers known for operational excellence and aggressive development programs.

Financial terms were not disclosed, but the transaction reflects a strategic shift in how private equity approaches upstream oil and gas investing. Rather than backing new operators or acquiring producing assets that require hands-on management, Tailwater is positioning itself to capture economics from premier operators' drilling programs while maintaining a capital-light profile. The acreage is over 97% held by production, eliminating near-term lease expiration risk and providing immediate cash flow from existing wells.

"This transaction underscores our ability to source high-quality, off-market opportunities in core basins and to leverage Tailwater's technical underwriting expertise and platform advantages," said Doug Prieto, Partner at Tailwater Capital, in the announcement.

The acquisition represents a pure-play bet on the Delaware Basin's continued development intensity, with Tailwater securing working interest positions in acreage being actively drilled by operators with proven track records in the play. The deal closed January 20, 2026, according to the firm's announcement.

The asset includes access to more than 250 near-term drilling locations across DUCs (drilled but uncompleted wells), AFEs (approved for expenditure), and permitted wells, along with what Tailwater characterizes as a deep inventory of more than 10 years of highly economic undeveloped drilling locations. This development runway provides visibility into future production growth and cash flow generation without requiring Tailwater to make operational decisions or deploy capital for drilling and completion operations.

Non-operated working interest strategies have gained traction among private equity investors seeking upstream exposure with lower operational risk and capital requirements. By acquiring minority working interests in acreage operated by established producers, investors like Tailwater can participate in the economics of new well development while the operators handle permitting, drilling, completion, and production operations.

The strategy offers several advantages. Capital calls are predictable and tied to AFE approvals, allowing for more disciplined budgeting than operated positions where cost overruns and operational challenges can strain returns. Diversification across multiple operators reduces single-operator risk—if one operator slows development or encounters operational issues, the other operators continue drilling. And in a basin as prolific as the Delaware, where operators are competing to hold acreage and maximize NPV, development activity tends to remain robust even during commodity price volatility.

Tailwater's selection of operators is particularly strategic. Coterra Energy, formed from the 2021 merger of Cabot Oil & Gas and Cimarex Energy, has emerged as one of the Delaware Basin's most efficient operators with a track record of delivering wells at or below cost guidance. Devon Energy, one of the largest independent producers in the United States, has consistently ranked among the top Delaware Basin operators by rig count and completion activity. Mewbourne Oil Company, a privately held Oklahoma-based producer, has built a reputation for technical excellence and aggressive development in the Permian. Matador Resources has been one of the most active drillers in the Delaware Basin, with a focus on maximizing returns through operational efficiency.

The acquisition also creates operational synergies within Tailwater's broader portfolio. Meaningful portions of the acreage are dedicated to Producers Midstream II, a gathering and transportation system owned by Tailwater Capital. This vertical integration allows Tailwater to capture midstream margins on production from the acquired working interests, enhancing overall returns and creating a natural hedge against commodity price volatility.

The northern Delaware Basin has emerged as one of the most economic oil and gas plays in North America, with operators consistently delivering well results that rank among the best in the Lower 48. The Wolfcamp and Bone Spring formations that dominate the stratigraphic column in Lea and Eddy counties offer multiple stacked pay zones, allowing operators to drill numerous wells from a single pad and maximize capital efficiency.

Tailwater's acquired position benefits from several key attributes that enhance its value. The 97%-plus held-by-production status means virtually all of the acreage is secured by existing production, eliminating the need for defensive drilling to hold leases and allowing operators to focus on maximizing NPV rather than racing against lease expiration deadlines. This is particularly valuable in the current environment, where operators are prioritizing capital discipline and returns over production growth.

The 250-plus near-term drilling locations provide immediate visibility into production growth and cash flow generation over the next 12 to 24 months. DUCs represent wells that have already been drilled and are awaiting completion, requiring only completion capital to bring online. AFE locations have been approved by the operators and working interest owners, with drilling and completion activity expected to commence in the near term. Permitted locations have received regulatory approval and are ready for development when operators choose to allocate capital.

Beyond the near-term inventory, Tailwater highlighted a deep bench of more than 10 years of highly economic undeveloped drilling locations. This long-runway inventory is critical for private equity investors operating on finite fund lives, as it provides optionality to develop the asset over time or position it for a strategic exit to a longer-duration buyer such as a public E&P company or a mineral and royalty aggregator.

The dedication to Producers Midstream II adds another layer of value. By controlling both the upstream working interests and the midstream infrastructure, Tailwater can optimize field development plans, ensure takeaway capacity for new production, and capture gathering and processing margins that would otherwise accrue to third-party midstream providers. This integrated approach has become increasingly common among private equity energy investors seeking to maximize returns across the value chain.

The non-operated working interest acquisition market has seen significant activity over the past several years as investors seek exposure to premier basins without the operational complexity and capital intensity of operated positions. According to industry data, non-op transactions in the Permian Basin have accounted for an increasing share of upstream M&A activity, with buyers ranging from private equity-backed platforms to publicly traded mineral and royalty companies.

The Delaware Basin, in particular, has been a focal point for non-op investment. The basin's combination of high well productivity, multiple stacked pay zones, and concentration of well-capitalized operators makes it an attractive target for investors seeking predictable development activity and strong well economics. Recent comparable transactions underscore the market's appetite for Delaware Basin non-op positions:

While specific transaction multiples are difficult to ascertain given the private nature of most non-op deals, industry participants suggest that high-quality Delaware Basin non-op positions have been trading at valuations reflecting $40,000 to $60,000 per flowing barrel of oil equivalent, with premiums for positions offering significant undeveloped inventory and exposure to top-tier operators.

The broader M&A environment for upstream oil and gas has been characterized by consolidation among large-cap producers and selective acquisitions by private equity-backed platforms. Major transactions in 2025 included ExxonMobil's acquisition of Pioneer Natural Resources, Diamondback Energy's merger with Endeavor Energy Resources, and Occidental Petroleum's acquisition of CrownRock—all focused on the Permian Basin. These mega-deals have reshaped the operator landscape, creating larger, better-capitalized operators with the scale to drive operational efficiencies and maintain robust drilling programs.

For non-op investors like Tailwater, this consolidation trend is generally positive. Larger operators tend to have more predictable development plans, better access to capital, and stronger operational track records, reducing the risk that development activity will slow or that cost overruns will erode returns. The presence of Coterra, Devon, Mewbourne, and Matador as operators on Tailwater's acquired acreage provides confidence that drilling activity will continue at a steady pace.

Dallas-based Tailwater Capital has established itself as one of the most active private equity investors in the energy and infrastructure sectors since its founding. The firm has raised more than $6 billion in committed equity capital and executed over 235 transactions representing more than $28 billion in total value, according to its website.

Tailwater's investment strategy spans the energy value chain, with a focus on upstream, midstream, and energy services opportunities in North America. The firm's upstream platform, Tailwater E&P, specializes in acquiring and managing minerals, royalties, and both operated and non-operated working interests in premier resource plays. This diversified approach allows Tailwater to deploy capital across different risk-return profiles, from lower-risk mineral and royalty positions to higher-risk operated drilling programs.

The firm's track record includes numerous successful exits and portfolio company buildups. Tailwater has backed management teams across multiple energy subsectors, providing growth capital, acquisition financing, and strategic support to help portfolio companies scale. The firm's technical underwriting capabilities—highlighted in Doug Prieto's comments about the Delaware Basin acquisition—enable it to evaluate complex subsurface opportunities and identify off-market deals that may not be widely marketed.

Tailwater's ownership of Producers Midstream II, the gathering and transportation system to which portions of the acquired acreage are dedicated, exemplifies the firm's integrated approach to energy investing. By owning both upstream and midstream assets in the same basin, Tailwater can create operational synergies, optimize capital deployment, and capture value across multiple points in the value chain. This strategy has become increasingly common among energy-focused private equity firms seeking to differentiate themselves in a competitive market.

The firm's emphasis on "working constructively with proven management teams" suggests a partnership-oriented approach rather than a purely financial engineering strategy. In the energy sector, where operational expertise and relationships with service providers, regulators, and mineral owners are critical to success, this collaborative approach can be a significant competitive advantage.

Tailwater's acquisition signals continued confidence in the Delaware Basin's long-term development potential despite ongoing volatility in commodity markets. Oil prices have fluctuated significantly over the past year, with WTI crude trading in a range of $65 to $85 per barrel, but Delaware Basin operators have demonstrated an ability to generate strong returns even at the lower end of that range thanks to operational efficiencies and well productivity improvements.

The non-operated strategy provides Tailwater with optionality as market conditions evolve. If oil prices strengthen, operators are likely to accelerate development activity, increasing the pace of new well completions and production growth on Tailwater's acreage. If prices weaken, operators may slow drilling, but the existing production base and held-by-production status ensure that Tailwater continues to generate cash flow from the asset.

The 10-year-plus development inventory also positions the asset for a potential strategic exit. Public E&P companies seeking to add low-risk, high-return inventory in core basins could view Tailwater's position as an attractive bolt-on acquisition. Mineral and royalty aggregators, which have been active acquirers of non-op positions in recent years, may also see value in the asset's long-runway development potential and exposure to premier operators.

Risks remain, of course. Commodity price volatility could pressure operator development plans, particularly if oil prices fall below $60 per barrel for an extended period. Regulatory changes at the federal or state level could impact permitting timelines or impose additional costs on operators. And while Tailwater's diversification across multiple operators reduces single-operator risk, a broader slowdown in Permian drilling activity would impact the asset's near-term production growth.

The transaction also reflects broader trends in private equity energy investing. As public market valuations for E&P companies have compressed and traditional operated upstream strategies have faced scrutiny from investors concerned about capital intensity and returns, private equity firms have increasingly turned to non-operated, mineral, and royalty strategies that offer lower risk profiles and more predictable cash flows. Tailwater's acquisition fits squarely within this trend, leveraging the firm's technical expertise to source an off-market opportunity in one of North America's premier oil and gas basins.

For the Delaware Basin, the deal underscores the region's enduring appeal to investors across the risk spectrum. From mega-cap public companies like ExxonMobil and Chevron to private equity-backed operators and non-op investors like Tailwater, capital continues to flow to the basin in search of the high-return drilling opportunities that have made it the engine of U.S. oil production growth over the past decade. As long as operators continue to deliver strong well results and maintain disciplined capital programs, that capital is likely to keep coming.