A subsidiary of Legacy Reserves Inc. has signed a long-term agreement that will have Houston-based H2O Midstream gathering, disposing and redelivering produced water for reuse from horizontal wells in the Permian Basin.

Under terms of the water services agreement, which applies to wells in Howard County in West Texas, H2O Midstream would continue to deliver third-party produced water to Legacy for its hydraulic fracturing operations.

The Howard County water storage and disposal hub consists of two 500,000 barrel ponds connected to a network of 13 disposal wells totaling 265,000 b/d of capacity via a pipeline network of more than 150 miles.

The backlog of drilled but uncompleted (DUC) wells in the Permian Basin has risen this year to 8.5 months from seven months, according to Raymond James & Associates Inc. The Energy Information Administration in its latest Drilling Productivity Report said Permian DUCs climbed 194 month/month in September to 3,528.

The Permian Basin bottleneck, which has led to sharp pricing discounts, is impacting the number of fracture crews and well completions, according to a recent analysis of more than 15,000 wells across the region. In September, the number of observed well completions in the Permian's Midland and Delaware sub-basins decreased by 6% to 472 wells from the August total of 502, and completions were down from 510 wells during the peak month of June, according to Westwood Global Energy Group. The decrease in activity equated to the estimated loss of 185,000 tons of frack sand demand for September and a decline in 375 million gallons of water demand for pressure pumping jobs.

Legacy Reserves Inc. and Legacy Reserves LP last month completed a reorganization, transitioning the Midland, TX-based exploration and production company into a corporation from a master limited partnership. Legacy shares now trade on the Nasdaq Global Select Market under the symbol "LGCY."

The independent's operations are focused on the horizontal development of unconventional plays in the Permian and the cost-efficient management of shallow-decline oil and natural gas wells in the Permian, East Texas, Rocky Mountain and Midcontinent regions.