WTTR - Earnings call transcript Q4 2018 | Select Energy Services, Inc.

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Operator

Greetings and welcome to the Select Energy Services' Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] And as a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Chris George. you. Thank

begin. may You

Chris George

year and President the everyone. Chief call Select our Nick Chairman; Vice and to operator John Senior today joining our Swyka, Chief Schmitz, and appreciate Officer. Executive us Financial review Executive full quarter fourth for Energy Ladhani, XXXX and With good you, me We are our morning, Holli you webcast Results. and Thank President Services' and conference Officer;

housekeeping call by recorded Before There cover. I from Please over, items I speaks XXXX. few information call on available to as be replay of replay therefore, be a for be or this our the replay of as X, was only March time-sensitive webcast longer The today's transcript of a time reading. turn also XX, until release. will that also this selectenergyservices.com. information reported A information note included have XXXX. access call accurate today, accessible the earnings in February available website will of at no And, replay may the the yesterday's and

In current forward-looking within forward-looking management. meaning addition, this the management by Laws. of Securities States views the statements of United Federal Select statements the may call reflect the These made conference comments contain during Energy's

reports read subsequent and expressed current XX-Q, XX-K to XX, XXXX, various uncertainties encouraged December statements cause those on However, quarterly on for in management. to report our from listener Form the annual and reports Form our could is the actual contingencies report achievements ended to made the over refer of And which the risks, annual year materially results, XX, and our to performance our XXXX X-K, on reconciliations turn our year file differ Schmitz. or would The please fourth days our by now, uncertainties earnings to Also, understand Chairman, and non-GAAP call for ended to to Founder yesterday financial XX-K released for I Executive we John the Form like risks, those in quarter announcement on contingencies. coming December our expect Form measures.

John Schmitz

to Select Thank Services' like fourth would you, Chris. XXXX And everyone conference I quarter Energy call. to welcome the

the hand the over have taking outlook, at to we and to look and quarter's wanted I a review Nick recent XXXX by performance and to start few I Before Holli accomplished. call minutes to back what

water clear-cut While industry industry, XXXX was been a comprehensive the XXXX, over accounting period has we On grown merger, we have we revenues have year-over-year the $XX good free XX% And the Rockwater flow of and set XX% million in and the during that. focus generated believe back fourth very Rockwater by XXXX. year. quarter in a cash was for adjusted solutions. to done a out our for and basis, by EBITDA for leader soft originally combine Since we Select create to overall combined the

this and cash from our with announced that our services, support our strategically is that thrive capital endeavors recently customer's Northern balance executed infrastructure environment of is reducing and Delaware model a models an involving priorities capital our debt industry our And has business while that, undergoing expanded have the changed generation. our have growth are Select's sheet to to flow active We the free and our in business sheet is landscape. We and scope discipline for as and such balance and industry all transformation. It returned shareholders, healthy a this strengthening away built to project. market strategic changed outstanding towards cyclical future and believe water recently on clear our acquisitions,

solution our Nick providing on to and as Recent improving have around to uncertainty the the US focused efficiency, value we the of growing of solutions. prices over since activity efficiencies outlook some to through walk coming add secular that, operations believe across accomplishments been before for let levels. call near-term our behind she We over customers wide trends fundamentals, to water a remain scale, solutions remain you the me turn years come. chip Holli? able demand market blue volatility hands for the value growth the financials. supply provide center and trust said, demand and our year-end. With and global That are that recent some the to broader it to created and in The the supply, to them the year we customers lead of cover intact. oil need the safety continue that Our the gradually has range to climbing Holli expertise,

Holli Ladhani

everyone. morning, good and John, Thanks,

strategic which Looking back cash at and allowed team challenging delivered acquisitions, still more able from number the and After but double-digit the managed seen flow operations of million balance. cash of flow to to $XX roughly strong through our operational modestly operations repurchased $XX on quarter, million, closed in million shares, increased repaid decline the year-end. borrowings, objectives. $XXX CapEx million a cash were on generate $XX us net fourth outstanding our of execute of anticipated, $XX of approximately nonetheless we funding free We million than and activity

$XX mentioned, of full-year, we cash just the million free For as John flow. generated

to to XXXX to outlook remains recently expect also Delaware activity announced we pleased talk still are somewhat our of cash Northern I customers. am free excess we levels. project. in XXXX well-positioned infrastructure generate our our And flow XXXX for about support While certain, the during

five-year the a major for the system to We is construction pay have $XX expect to supported operational by company delivery have contract barrels with of XX and on begun take international integrated This of and the of system a or the investment oil million XXXX. water. purchase million in third quarter approximately invest

area important the XXX,XXX with this to strength critical the which existing in additional opportunity and water complements highly And our pleased the initial of commercialization of support provide the of services customers. of other will they long-term this to the new We day, value-added we per Select be infrastructure partner showcases This delivering barrels will to for out. in an have solutions operations the project to system, developing team build solutions and are with GRR customer developments. operators explore opportunities our need. in dynamic area capable Overall,

the receiving flow lower planned and high capital, X such amortization towards divestment stable efficiently unique of service our in million first during With on the approximately offerings, we're our infrastructure. million including more before and XX of to Canadian from non-core operations, from businesses, operations, commoditized for and investments two Gross more XX our margin fourth cash streams profit focused capital Affirm reallocating was initial the depreciation proceeds We as with working arriving anticipate million including quarter. proceeds these quarter. margin,

continue remain strengthen big us, our ahead also as digits New capabilities activity forward, with some oil we demonstrated decline from initiative, single we high challenges growth our support Looking conversations Mexico, could other by of the customers, and acquisition market by in improving difficulty] to there to service are Difficulty] prices of during Additionally believe while [Technical [Technical XXXX.

the our the the I as for the slow is As improving, mentioned. at that start we a I will look timing like the cold some much results And of overall, sentiment we quarter quarter just challenges look seen year. impacted divestitures anticipate quarter, impacting weather to such also of have gotten off operations, the fourth likely our conditions customers seasonal would note we've first by planned first will the many be

and capabilities While feel priority see and oil our on we focused view, to we uncertainty discussions with returns discussions will Despite current sit. we customers believe pricing, from in the about exclusive material impact the and We our good have pricing ability to and term through we service other on be that didn't partner more to customers. today. some having quarter offering differentiated have revenue our at with agreements a customers and more vendor fourth where these value our crude believe stability as customers pricing the business confident arrangements stream adding we we're longer levels generate our status, an expansion occur, macro

being can't control our we completed, of strategy. we cost control management the While capital and can't wells allocation number

agile and in We which gives cost have environment. investments an our changing us model, manage flexibility to business a

disciplined on cash flow. to return assets free continue approach a focus in and capital deployment will on with XXXX, to a drive We

additional continues While a the opportunities, evaluate are predict. team the of timing number infrastructure of to to such difficult opportunities

any infrastructure into incorporated major budget the our recently projects haven't we than Delaware such, northern XXXX other As system. announced

invested a Northern Delaware US business, the XXXX by capital million again To executed franchise of budgeting back million development the reiterate share project. are as believe said, in flexibility the million, the serve preserved our approach what through XXXX, our infrastructure We invested water we our and took built reducing capital we and XX does capital a the $XXX shale. to on John a of company we million looking the maintain core debt to decisions year. to of course include our which allocation by And we've acquisitions, organically modest for repurchase, program financial $XX over balanced growth $XXX

Nick? a like more Nick financial to over in approach XXXX. I'd You to hand details. performance can similar that, our expect in us from it to With through walk

Nick Swyka

John morning, everyone. good and and you, Holli, Thank

conditions. our mentioned, flow generate company flow $XXX an marked Continuing regardless just high to of for operating our cash of all-time totaled cash the our priority total XXXX overriding As cash the market for million operating $XXX flow Holli is for and million. quarter strong

$XXX targeting $XXX again million this XXXX. This million planning planned to CapEx flow to Supporting after budget we target, divestitures. $XX of are modestly are for reduced the is CapEx $XXX cash We flow prior net XXXX. million for free a to million cash

We CapEx. be to expect that budget related of this roughly half maintenance will

CapEx the forecast following customers. utilizes capital by approach a conservative provided forecast our the today - Our

an down share quarter. allocation their scope the see project quarter $X.X mindset. activity to maintaining the decline of our decline we year. grew to are XXXX of down value opportunities indicative XX quarter XXXX balance sheet. we continue evaluate cash capital still sequentially fourth under as Annually, million total of revenues specific in our factors shortly. We substantial we announced importance $XXX completions to an in XXXX. during activity opportunities declined adjusted increased We with of flow driven to in additional merger to budget reported third the as attractive fourth was provide generally and Rockwater excess accordingly. generally the effect while and return from the industry strong revenue limited million the on as are impact will attractive the $XXX we in XXXX in by quarter-on-quarter. third to of X% buyback expected for expectation executed capital investment detail forecasts from well. year-over-year from XXXX. generation in clients still quarter, decline of current The with is revenue to consistent Adjusted both the EBITDA such for segment oil XXX levels, shareholders, operating With the and disciplined a our reported on revenue year committed billion million by a to of XX Much from I'll million returning while free recently the believe the in fixed We in EBITDA we be million shareholders Similarly, this While drove infrastructure XXX believe capital XXXX, driven with return as investment, we've place is million that E&P by reported, prices growth this crafted

prices activity see flat oil and completions no revision. completions for in completions with is limited improving levels the that seasonally decline difficult the count from perfect this macro it in year the low, Fourth We available during to exacerbated a and visibility is trend. metric subject quarter this its readily we our expect even at time. to relatively frequently quarter do relevant later indicator QX there While as the if typically beyond this first for a activity business, but is time quarter quarter-over-quarter sharp look

to of to solutions by segment activity the We quarter margin third million profit as $XX focus $XX our expected as than the see XX.X% the XX.X%. calibrating from third from before generated to as million $XXX related water rapid fourth the to the in margins well Turning decreased the Gross XX% The on largely expenses million in during job lag through quarter. quarter revenues amortization did $XXX segment mix compared and in impacting in fourth depreciation period. results, quarter. declined bottom-line, a sequentially to million driven we declines employees lower customer with continued retaining modestly our gross

levels, activity better in solutions our as For we certain in we to line align QX, pricing Margins customers' rebound somewhat completions should water expect a with revenue factor although stabilize with resources areas. is the trend. pressure

increased million, just by from million to in depreciation before $XX field challenged segment million revenues amortization quarter. the tariff $XX million and Margins fourth third gross oil the $X X% costs, profit under were materials by during the of positions. generated quarter, $X from the higher driven While raw segment down chemical partly in

While low segment the quarter, we the quarter, this as teens in over materials expect in the to the raw higher see percentage third the we flat gross we revenue expect to to seen recapture recover margin as costs. first

Our Wellsite divestitures as million just see segment to which QX $XX in considerable saw Services QX. with in million forward compared upcoming revenues going will decline under exchanges to the $XX

We've be will our forward. recent market with are and its service returns business, the declined, While excited continued line. to-be rental known higher alongside This company Canada divested Affirm the on challenges the this peak strength expand to and continued going seen saw even services, in business, as potential. growth businesses staying oilfield though we

repaid Turning borrowings balance executing several sheet, of million strategic cash. to the quarter, $XX our while on of during fourth we another uses also

included This consolidated CapEx non-cash million in of to includes than $XX non-recurring operations, primarily made external in during special the totaled million policy our our a previously million and borrowings reconciliation of impairments asset back conditions cash I We $XX detail. measure of goodwill to change the and XXXX, impairments. driven for smaller total net Canadian $XX is items There our net less quarter with of a to of of on for relating on up non-recurring a $X adjustments impairment Affirm sales the for encourage chemicals to million balance additional This deterioration $XX of release for audits continued tables that costs, charge XX for year-end decline adjustments from were Our million of you the and Other within million adjustments market non-recurring our market. a EBITDA including the vacation ended tax by debt resulting businesses and quarter including adjusted the number sheet related revolver at businesses, of $X non-cash, million oilfield review reflecting press this years $X dating and for prior drove certain of items, $XX in to quarter. the other acquired items. million. million.

year-end SOX specifically a related and the material status in transitioned to property identified between XXX substantiation the of we and Rockwater in compliance, Finally, to it allocation company as of purchase, we assets connection from emerging internal equipment effectiveness weakness growth the purchase in our and related price identification controls to merger. with fixed goodwill the

be no upcoming property, price the from We will correcting financials. be prior goodwill approximately million days purchase XX-K, which plant of this equipment to and transferring our allocation will in our $XX filed to with in coming adjustment

of expenditure expect in budget. to be expect current capital based significant and taxpayer XXXX NOL incur to percentage we of benefit expect our forward, we state consisting low do mid XXXX to XXXX forwards Looking and attributes. expense, We from cash to flat remain tax a carry a other our to continue in and versus as primarily depreciation on amortization obligations, tax relatively remaining single-digit not

it back for do I'll agreement. either taxable to cash or related have we With our to our income hand material receivable not remarks. Additionally, some obligations expect that, concluding to tax related Holli

Holli Ladhani

on to of and we'll we prioritizing market our to very what will remain generation to just cash opportunities XXXX. We'll back cash we're Nick. be positioned and for against the it fourth a Thanks, flow are capital quarter high with dynamic long-term and of our shareholders XXXX. opportunities well the in in With In continue return seeking measure I'll questions. flow disciplined in we the over these to in year proud returning the as conclusion, growth did the and investments strength capital, we'll capitalize while good that, take turn operator

Operator

Thank from of you. with Riley B. FBR. Curran [Operator the Instructions] question Our is line Thomas first

Thomas Curran

morning. Good

Holli Ladhani

Good morning.

Thomas Curran

inclusive XQ when if divestitures. you divestitures Holli, if the pending correctly, the XQ, say within when does of to that's occur I is so, gave, it likely assume like understood XQ? guidance for the XQ And you look

Holli Ladhani

clarify, perspective, QX maybe going of of million closed be down total for in say obviously from Good the example, looks about of and a sale slope year, and was impact, question, better. We're I business Certainly sort XX to brought we Affirm the as would because will actually will one a when QX QX, look in an exited it proceeds. upward Tom, in Tom, of that's a thing number. QX, portion similar I trajectory in but versus the QX there we yesterday some

the over opportunities March, have execute to go will we of there. course probably and other So, ahead

say like impact going a slight I a So sales we're activity QX that but looks trajectory, level-wise, QX the would asset from with with different through.

Thomas Curran

just based on expect that should given then you there? ramp you'd would assume the now, of be coming already XQ have the a latest Great. XQ higher And from have out then customer the experienced we trajectory you indications, visibility continued and

Holli Ladhani

I think some also that's we an expect we improvement would have just not QX, be only some internal on activity efficiencies. QX that an that level, focus but to on additional fair from

their beyond our early. little commitments going live is I maybe think second cash the to that, a customers of the within do to So flow. half year are abide calling by

in QX as but activity So still from up, I we relative think get good. your QX is maybe a challenges, regions QX, part to few caught assumption that were so about did completions perspective leaves have think you think that I of weather the down, that'll your

Thomas Curran

million to you million give then idea pipeline remaining XXX total allocations? million the million taking XXXX turning XXX to an the extracting to is XXX the breakdown how us million, And of expected XXX budget, Delaware to could XX in terms of the new Great. that for of system, CapEx

Holli Ladhani

Sure.

We about of XXX million of will maintenance. say that to half is that million, XXX it

Delaware, sense pull we're in you XX gives asset million of looking once Northern base. And be you that obviously investments other continuing the a for beyond types technology. So that at that million that, of the to around our investment maintaining out XX current would

the water in, like and space certainly that. like with proportioning to our supplement something the a makes where in and to fresh continue it the able require things or and water adding have. on because stream we sticky we well customers we going taking us given then systems, reservoirs help automated water manifolds, us assist produced to be And to opportunities we the Certainly that we're our customers things be a shift are more pricing. at where water that pad, So it add automated a that is well invest source, a helps systems that to stream, hang other there'll

So growth should when think CapEx, expect you about that where that's to us it. you put additional

Operator

is question next our coming And from Tommy line the Moll you. Thank with Stephens. of

Tommy Moll

Good morning. taking questions. my for Thanks

Holli Ladhani

Tommy. morning, Good

Tommy Moll

us ready some relationship, with those. that in to news And the to supply industrial wanted that with in XQ? you the on you Northern how on I is could give just came Wanted a achieve the start sources. us to an order how be it Delaware, had you any need to milestones also what to on flagged then deepen if it background details give wonder in agreements works, just the start long are some it can the in been the positives you together, that customer, customer project is infrastructure existing new

Holli Ladhani

Sure.

our New So, first really when just solidified early back GRR XXXX, that you the if we all, look history, Mexico. in at acquired in presence of the

industrial part base secure. and were to last ties also on the relationships deep very customer stands able not from has only that the team that that sources that of question they the but your into So

course is XXXX. was So the was And and that's of this ongoing project active been it this one particularly interesting. a over

to I've with always right a getting at source As start described, rate. you the have high

very your right-aways because here New water enough, needs often. forward high source region to You rate the Mexico the to it. Interestingly water customer then that sources a have challenge into was find have the larger to in you deploy probably where able don't be

as can we easier while water program of rates [indiscernible] details the we'll customer leverage easy GRR of can't disclose in system. you system. active County do be than while easy years of as a really development was to there, with move to then a have able able So, had And was of context. things imagine, high long-term the our team next the the over already the was which on our what never gives right-aways, an none part of commitments was existed hopefully many we several it's you to team for the more that little commitments that but other do, that which finding And

Tommy Moll

absolutely, Yes, thank you. and

modeling just I want couple follow-up, points the a to a of hit As again.

few following want You've here. you just these budgets. mentioned I'm make a of I to sure

same So the they be ought I is ought are in that, follow-on quarter and the of in similar. as will the of items the there we anticipate you numbers the mean to any line, the share? to some And to then revenue then a XQ, to and by quarter-to-quarter impact that non-cash approximate terms earnings may terms of margin in reported below per in for that think divestitures, true to XQ there that look but roughly expect financials; as terms you'll of terms report, I headwind due

Holli Ladhani

Sure.

while or come think solutions today were will not certainly And to water on on lot businesses knowing there's the business. similar our when we're having in a bear exactly the perspective with than think about those From correct divested just we thinking above you're So XX% a line, I caveat gross we will able that the very more QX, of conversations fallout. margin pricing in to - be top margin were we mitigate. and on QX, that of

about improve going half for the about the that mid-XXs think to think opportunities hopefully sense low the forward. makes teens I of with is to to right I some for their way the way So first chemicals, low for to margins solutions right is year think think and gross their water margins

context. So hopefully some that you gives

Tommy Moll

you. I absolutely, it, thank appreciate Yes, and

Holli Ladhani

Sure.

Operator

the of line next with Johnson is Martin Rice. from Malloy Our question

Martin Malloy

morning. Good

Holli Ladhani

Good Marty morning,

Martin Malloy

could have and in produced developing? talk frac little maybe was I that grow you a see post bit about initiatives that you to the how hoping you water area

Holli Ladhani

Sure.

So you going of couple have a things on.

have you free operators trying within your where are First, to live cash to flow.

continue want in not, or they whether infrastructure. invest So to to water

a economics conversations But And our think of tell to user just identify to tend and that, there given us, the opportunities and is on be then relationships. into you multi-user there have also opportunity convert I do lot ongoing to the key make we're probably the already is an take for sense. the we're can are single more If that that those organic that's with and because system I'll underutilized today front, to a relationships able development system. what we on focused customers. we focused an

We solution it's designing customer. for the about complete surface a particular use really have agreements, a so

high the clear focused So Permian few or to relate that options And comments just you're associated to there. that's on have production cuts with my it's largely is be the and in that definitely on. increase working in we're something seeing because alternatives a water queue team the the where

Martin Malloy

Okay. talk the going And positives operations, I water see using trend negatives? forward, that how in terms the recycled towards frac just then impacting more and Select's of can about you guess, in you

Holli Ladhani

freshwater, seeing more on we what a is that us. water balance, the our it's of in in we're I services reduction Relatively Certainly, on moving while transfer. positive seen been produced we we've Sure. have haven't speaking, our would water that that demand for seen the things say one our is for

like are Permian, then that's stream we not water, the like system pre-frac stream become where just relates essentially Again, we've it as produced very things and in to water. produced associated XX% so the our also to but risks transfer Also customers with the our XX% because systems more helps active can a our automated output reuse impaired mitigate on spills. is an things you're the to, then And moving that And disinfection freshwater of some on and actually automated a design our for that. jobs stream, treatment can the up. water fall taking they of demand water in the important and going been the a it water So that. of proportioning the demand of with pumps only for water produced will world

[indiscernible] and on I customized water guess support that to systems the to changing be to side, you provides note develop So chemical the that quality I'd able customer. have - finally, help actually opportunities as more

So generally seeing the of again not in that more opportunities basins, we're focus but more a today. for absolutely us it's you're other much Permian on created seeing so speaking, in that

Martin Malloy

Thank you.

Holli Ladhani

Sure.

Operator

And line of with Mike our is next from question Seaport. the Urban

Mike Urban

Thanks. Good morning.

Holli Ladhani

Good morning.

Mike Urban

you're flow flow the job getting, quarter, be the outlook more hear XXXX. bit this and clear. correct? on proceeds includes cash number is little wanted that to cash free get the the any The to and CapEx to that Great love a XX million for excludes did completely that I project, free to just for new but the

Holli Ladhani

way EBITDA us that as And maybe the think a forward a be our look just that what certainly of pay back but then just Northern that have I that essentially becomes has some growth of shareholders mentioned, the maintenance could down of able on capital you to larger 'XX, fund we at saying lower been, about number certainly two-thirds to system, either is to Delaware well. sales completely is after our that be value of part CapEx. to we're is opportunities it business wellsite our wouldn't to XX or you we're allocate. of as on say to consider returning should after Mike little thinking Then debt opportunities bit if third you think that probably a proceeds about unallocated. our but is we strategy technology around list, additional right, add consider That's you we we it to that out model, future have million the allocation least then question into And stepping still be reduction have yet about leaves allocate investments, our services less to going they about will as you infrastructure, drypowder is around growth

Mike Urban

pulling good capital some thanks. you've have capital in the also is we think job result good how more and working guidance? of Great, in about to the do there there, done harvest How cash of that element of there much free in kind fourth you flow to and quarter. working should the more And there back really go

Nick Swyka

Sure, Mike.

million we total million there. through purely So to accounts receivable sales of outstanding, days about XX reducing pulled in XX that

million between half the We last of this $XX expectation total year. of have fourth through a call $XX first million and given in our between quarter

say, we're that way low-end. to versus and it that pretty towards the I'd well moves the So our high-end of expectation reaching probably on

do believe little I we it. cash say more there is million we to would operating effort This about $XXX of had XX flow. there. delivered value a of So XX bit

a there's from chunk the the business, there majority. So coming that's significant

obscure the working And so that the that to with capital we on front. want don't having success we're

Mike Urban

Okay, cash to is little to that? for so flow bit is the most a improvement do of interpret that but more there, operating way

Nick Swyka

That's right.

Mike Urban

come Thank you. I any from all questions. me. that's other I'll back if Okay, have

Holli Ladhani

Thanks.

Operator

from Kurt is next Our RBC. the Hallead of with line question

Kurt Hallead

Hey, good morning.

Holli Ladhani

Good morning, Kurt.

Kurt Hallead

from on think Can can as this wanted period anticipate of just that as new payback take-or-pay general pipeline how that you annualized may have what that investment? contract. some contract be So to sense generation we and of give revenue the us kind get Holli, general sense you think you about should about we

Holli Ladhani

Sure.

gross bit will has to oftentimes think sometime you it of annualized think maybe is a about it come about to a takes basis, to we things is capital just time being benefit, quarter, X And we And to way discipline, But for the third little to hurdle that operating right the get times, X rate is way when it always mentioned we'll meet as X million an margin. return it us. refer capital million online internal I add particular should return. times think efficiently. all's our threshold the in allocation, those about of our on as So to X - that for

times commercialize year have in payback. the also start, anchored that to bring look I that this we that of and with So the paybacks past, also to two then And gets said further say, we system, we've system want we can to we us that that a mentioned. balance as the three an return at but tenant in, we four

Kurt Hallead

so, And the my XX% about capacity the the the fact total I deal to accounts capacity, we annualized think use? about and XX% I is incremental for this say margin general given then that you pipeline you have you. when should understanding pipeline, think of gross how think aggregate take-or-pay about think for that Got only potential

Holli Ladhani

the full it that get day, the because to about commercialized. XXX% think but utilization you to margin you'll we fully unreasonable we to gross the its way every that think could have pipe can't not right I once fill think system it's think sort extent I contribution to is seldom double of

Kurt Hallead

longer fully that is take And does than or that? it once Okay. commercialized, XXXX meaning step into you

Holli Ladhani

working would on I'll it more have call. next you I say for feedback the we're probably today and on

Kurt Hallead

run annualized within then rate I you And was, Affirm divest what's had thanks. wellsite? the for extract kind revenue Great, when businesses as of you Okay. the follow-up that, remaining the business,

Holli Ladhani

a So actually rental we through, hauling water something business, is that sorry getting into out business, And I of even be the - the and it's is actually what solutions our about through I well we'll divest is of Nick quite to here that and the peak bit our it's Canada. fits We'll of divest a offering. we fourth so Affirm, construction way that, sand that the leaves business been construction performed clean business, that's well little quarter. the going wellsite am which me as up let describe, thought think we'll it,

think information the for divesting the businesses I quarter. I else X was that about the don't But so we'll to would add. margin that you indicate impact. But fourth what Nick, on the million we give in have we're total did gross And you more know

Nick Swyka

Yeah. gross but of That's right, idea an half going accounts to segment And a basis, there, you give forward, of of the two-thirds that for peak about under that profit it's Holli. revenues segment. Kurt, on

whole and about there and getting invest bit to performer really it's more a we're the to core expand company. in hopefully contribution its excited the So it

Kurt Hallead

Okay. Appreciate you. color. Thank And that. that's great

Operator

is Wells question line of Bailey Fargo. next the Our Jud from with

Jud Bailey

Good Thanks. morning.

Holli Ladhani

morning. Good

Jud Bailey

broadly your at maybe be achievable is bias higher speaking in help quarter have and about XXXX, about think could or guys Hey, is nice maintaining job water the level about maybe you but solutions completions, where you lower a margins, directionally year-on-year headwinds the same kind mind margins, you 'XX? is year-over-year given there talked done the there How keeping a us expectation. scenario think on would Holli, margins the us or help full-year for question a of for first of versus

Holli Ladhani

on as think given some some there'll think sight invest XXXX, dependent line activity and declines level headwinds will continue to out to but around we just like are and in have Sure. obviously operators' that but baking that technology, of we continue be to in levels, in in of pricing, do be It the I we make continue activity capital we will costs improvements drive some budgets we're our business where somewhat to things system. can

businesses total just maintain the if you for think XXXX we're to margins, which that over about is So the XX%. in that retaining,

there's probably plus on that's expect to or think I we more number. uplift pressure probably right than way be that But I think, downward minus is materially there different. that don't it the

Jud Bailey

of maybe assess opportunity think to interest likely standpoint, Okay. And the follow-up the something my that Mexico of how then Are the pipeline on growth that? us that more thoughts your you there do project, like you anything is that in side a from on do future color New would on you this opportunity or opportunities outlook I that. latest chemicals kind is same appreciate set. for is give after

Holli Ladhani

Sure.

efficiency, leverage. of to on inwardly think that an the operating capture up side, our operational getting focused chemicals volumes more I it's

volume water other focused there. have we're and to is that projects but and on build have [ph] opportunities the the we're we're our of solutions you on new continuing about So lines oriented looking and our into business again focused think think we're less a more queue product adding customers. oriented focused more and and to going the infrastructure, growth when process we we technology work there, that opportunities able about When pre-frac our and - have water source at that there and We're service off capital ability we around unique a post-frac, and natural, it Bakken, footprint we Permian to the it's And the Permian up as in think that still good. of Intake. that and to to our Bakken, because the relates our be Thomson then in we

So to consider that about allocate we we're generate. cash flow that think think then about being optimistic business to the still, options to going able us is to bring I how additional as forward for good

Jud Bailey

Okay. it appreciate I Thanks. back. that. I'll turn

Holli Ladhani

Thanks.

Operator

And line our Lowe with next from is Citi. question the of J.B.

J. B. Lowe

Hi, good morning everyone.

Holli Ladhani

morning. Good

J. B. Lowe

sizable produced freshwater margin you sounds for like It moving becoming other side. like a as up moving than differential there your is the it's sounds pretty is transfer cost make chunk any business. higher one Is produced versus transfer and of on water - water, revenue it do between

rule of kind what's Just thumb there? of

Holli Ladhani

of and me, move it are going risks. pumps to tend you price and the us that you What fewer that you're that have that things Excuse if implications the of the trust of, yes. because certainly fact automated find we how operators allow That some just produced will an and to of does think will distinguishes to is about issue you there people sort activity. like to those water, have mitigate help

really different benefit a that Our more that set choose a to again, a water. it's not of tools are I as say capable to execute operators the we that, an moving sense sense or to but don't to there of they're should use in maybe assist fewer impaired you have them is in using are different us of cost people are of

J. B. Lowe

maintenance if given more to you [indiscernible] like be your like lay anything replace the guess costs would have I flat higher often that?

Holli Ladhani

We haven't seen that yet.

any of can absolutely over water that much using but varying another is probably an sometimes is of over water we more corrosive some we're depends life going but imagine, more anticipate that different time. not to is to I as you the right, then it than to water, not it the water something actually or unreasonable, the monitor continue brackish hose be a on will impaired very the or something think of quality stream,

J. B. Lowe

saw guys were up impact tariff materials And in then material It there? did the sounds just you are thanks. China to cost and you cost raw tariffs, or higher the mitigating that what Okay, the XQ. XQ. was where you're those the going Oilfield in on from you sourcing margins get back like Chemicals, How tariff

Holli Ladhani

manufacturing, is costs going to then it's it stepping that to what of oil on or your due based maybe raw And usually product [indiscernible]. an a back, find has you lag and Sure. the on a material is the sort chemicals in we're depend product quarter

to it that you'll certain up to that as like falling, pricing. what material prices that oil our again, do pass tariffs pressure go these we but costs raw generally immediately. are sort then you of that that materials us that costs speaking, them, were customer in way but in odd So, it impact will China was more import back pumper you find in and it raw get able because the material the seems and and were is QX is can't is products QX, And the based we from through for was our changes in to that's something on came that QX

our believe QX costs improve we through. be to to why that that's able to is able that being will So additional in that of due pass - we part margins, those

J. B. Lowe

me. and beginning thanks, last guys to Did quarter? back do probably the the a stock? some your right, one opportunity there better of early was own repurchases of for any All in buy At year, the you

Holli Ladhani

to a that and starts for the end I year period you or think or quarter blackout we're of that to going answer days is aware it, that maybe be best we us abide XX by. have familiar there before may

Operator

concludes Okay. Thank today's would the question-and-answer back to I turn you. floor Holli closing comments. session. for like Ladhani to This

Holli Ladhani

absolutely you it's much that couple want and will guys XXXX. accountable generate at in be us positioned I were on we're how a we're to uncertainty and generated team what is again Certainly, the of least just flow disciplined 'XX to allocate that free going key things well, flow do four around delivering to there's you're cash we that's really with. I hold going and but some opportunities, have thoughts cash going what that's we our And make and operational to just around is then, to 'XX ensuring around we that free think be we nimble, growth of again, then ourselves we that the in cash focused proud high sure identifying that leave XXXX return Yes, approach execution, in see additional just have a and to free flow.

joining today. what that's us you So us thanks expect for from but in XXXX, all should

Operator

Thank concludes This you. today's teleconference.

you You at participation. may disconnect your your this for thank and lines time

Select Energy Services (WTTR) 27 Feb 192018 Q4 Earnings call transcript