DENVER, Colo. (247marketnews.com) -- Vivakor (NASDAQ:VIVK) signed a non-binding letter of intent to acquire Direct Midstream for a proposed $40 million, aiming to expand its Permian Basin footprint and add produced-water infrastructure and oilfield waste services to its energy platform.
Vivakor is pursuing a bigger role in the Permian Basin energy-services market with a proposed acquisition that could broaden its infrastructure network and strengthen its position in oilfield waste management. The LOI is to acquire 100% of Direct Midstream, a Midland, Texas-based provider of produced-water infrastructure, saltwater disposal and related oilfield waste services.
The headline valuation is $40 million, based on four times Direct Midstream’s targeted 2027 free cash flow of $10 million. That valuation, however, assumes Vivakor makes a contemplated $10 million capital investment in the business. The proposed structure calls for that investment to reduce the consideration payable to the seller dollar-for-dollar, with the remaining consideration expected to include approximately $29 million in Vivakor Series B Preferred Stock and $1 million in common stock, before potential debt and working-capital adjustments.
Vivakor’s current float is pretty small, so expect some big swings.
The proposed purchase price would also be adjusted according to Direct Midstream’s actual 2027 free cash flow, with a stated range of $30 million to $50 million at the minimum and maximum adjustment thresholds. That makes future cash-flow performance a central factor in the deal’s eventual economics.
Vivakor CEO James Ballengee described the LOI as “an important next step toward the proposed acquisition of Direct Midstream.” He said the business would expand Vivakor’s Permian Basin infrastructure and add produced-water, disposal and oilfield waste capabilities that complement its existing operations and remediation-processing strategy.
The industrial logic is straightforward: oil and gas production generates substantial volumes of water and other waste streams that require specialized handling, treatment, disposal and recovery infrastructure. Direct Midstream’s services, including saltwater disposal, oil recovery and reclamation, and slop oil processing, could give Vivakor a broader suite of services to offer operators across the region.
Direct Midstream CEO Chris Early also pointed to the potential benefits of the combination, saying Vivakor’s broader platform and contemplated investment could provide resources to support the business’s continued growth.
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