David Capobianco, co-founder of private equity firm Five Point, is capitalizing on the vast amounts of wastewater produced in the Permian Basin, the largest oil field in the U.S., to support the growing demand for AI data centers. Despite the arid conditions of West Texas, the region generates about 25 million barrels of water daily as a byproduct of oil extraction and hydraulic fracturing. This wastewater, though heavily contaminated with salt, minerals, and chemicals, represents a valuable resource in an area where water is scarce. Capobianco’s companies manage millions of barrels of this wastewater each day through an extensive network of pipelines and processing facilities across Texas and New Mexico.
Historically, wastewater from oil production was considered a costly waste product, often injected deep underground for disposal. However, Capobianco recognized the potential value in repurposing this water, especially as AI data centers require enormous amounts of water for cooling. His strategy involves transforming this “waste” into a critical resource, leveraging the region’s abundant wastewater alongside other advantages such as low-cost land and cheap natural gas to attract data center development. This approach positions the Permian Basin as a competitive hub for data centers, which are proliferating across Texas and the U.S.
Five Point’s portfolio includes several companies focused on consolidating water assets and infrastructure in the Permian Basin. These include WaterBridge, San Mateo Midstream, and Deep Blue, each operating in different parts of the basin to collect, process, and transport wastewater. Rather than building new infrastructure from scratch, Capobianco has strategically partnered with existing oil companies to utilize their pipelines and facilities. Notable deals include a $175 million joint venture with Matador Resources and a $675 million acquisition of water assets from Diamondback Energy, both generating significant earnings and expanding Five Point’s footprint.
Capobianco’s vision for Five Point is to provide a comprehensive solution for data center developers, offering everything from water and natural gas to land and infrastructure. Scott Mitchell, CEO of Deep Blue, likens this to selling all the necessary tools to build a massive data center with a single phone call. This integrated approach is designed to streamline the development process and capitalize on the increasing demand for AI infrastructure, which requires substantial cooling resources that Capobianco’s wastewater can supply sustainably.
Capobianco’s journey began in 2003 when he worked with Microsoft co-founder Paul Allen’s Vulcan Capital, investing heavily in pipeline infrastructure. In 2012, he founded Five Point with $15 million of his own money, focusing on consolidating water assets in the Permian Basin. Since then, the firm has invested around $2.5 billion and plans to invest up to $5 billion more over the next five years. His innovative approach to wastewater management and infrastructure development is reshaping the oil-rich region into a critical hub for the future of AI data centers, turning a previously discarded byproduct into a valuable asset.
