WTTR - Earnings call transcript Q2 2024 | Select Energy Services, Inc.

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Operator

Greetings, and welcome to the Select Water Solutions Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. The question-and-answer session will follow the formal presentation. (Operator Instructions.) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Chris George, Executive Vice President and Chief Financial Officer. may you Chris, you, begin. Thank

Chris George

and and Thank Chairman, Executive With you webcast me Chief everyone. the President financial appreciate and today Skarke, are our Chief morning, us you, to quarter for Founder, XXXX. our and and operator, Michael joining call Select We conference Executive Vice for and Schmitz, good President Water of results Officer. operational John Operating review second Solutions Officer

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

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

are Please our announcement reconciliations materially financial However, read various our understand risks, to Form measures. XX-K, to for on reports differ those to in performance those from of quarterly well Form earnings risks, contingencies. on by encouraged reports and current X-K on to uncertainties report yesterday and non-GAAP achievements as expressed management. Listeners our as released uncertainties XX-Q contingencies statements could results, cause our our or actual Form the annual made refer

Now I'd John. call to to like over the turn

John Schmitz

for with I Solutions you us. Thanks, pleased today. discussing be Water you thank joining am again Select to morning, and Chris. Good

consolidated generating operating improving such points by improve During margins on progress able strong infrastructure and executing our the sequentially. basis, objectives, a consolidated continued we quarter, flow our key free on to water margins, we percentage second as cash On were two our to make gross strategy.

these $XX strategy, net gains, adjusted during quarter allowing X% grew our and execution progress consolidated infrastructure XX% gross by $XX continued the EBITDA quarter, gross by flat profit XX% of D&A segment grow very towards growth income we've revenues the us a on the by In we and before water we high relative by reduced operational of million sequentially. I'm level, to pleased the revenue quarter. a first revenue for record another addition with resulting made in to margin SG&A improvement to water and At second infrastructure by and the segment. profit million

we utilization steady and Our have accretive disposal organic continue infrastructure projects of recycling acquisitions delivered assets and legacy well. to as performance, increase the the recent and

margin second In water addition able increasing improving progress during in this much earlier we so, XX% the segment achieve than made the profitability to for to D&A infrastructure XX% doing segment, set the planned. revenue gains, to the target margins tremendous before more gross quarter. been importantly, the we've of In we we've for

operational to market Looking share become our across consolidated support flow has recent confident improve continued Chemicals outlook efficiency. the in generation. margin the months, at Water reduce efforts challenging steady can I cash we capital, gain while the improvements maintenance These and segments, and more activity continue am ways business Services and free find our to

well On acquisitions during primarily per XXX,XXX the announced permitted one these second in of in previously primary Northeast front, the available Permian. addition wells, of of we've barrels to regions six This completed than combined future On the XX operating deals, our our acquisition development added the active additional platforms the infrastructure across capacity, assets Environmental basis, our year, quarter now XX. disposal in for Lower this we acquisitions in April first Services, a disposal permits Trinity of strategic and substantial to includes additional scale the completed leading day quarter. seven development. Including acquisition the XX M&A disposal in disposal more adding region

our While business grow business we new water also continue through to through grow acquisitions, organic we infrastructure continue to development.

of XXX,XXX and XX,XXX signed right Northern acres that for operators development we the XX,XXX with construction capacity total dedication potential first XXX,XXX water four Delaware quarter, future contributed a the Basin. and up day the XXX,XXX more second barrels incremental water leading additional produced underwrite These Delaware forward Northern of the and I combined brings quarter footprint significantly contracts to acres expand facilities dedication and system. our under These capacity more look primary contracts and of by remains of new refusal clear and these in of to than new of first getting dedication another XXXX. more per right under recycling, system barrels than acreage market of projects. This the running than During the refusal. the under multiple will Northern first acres Delaware added of acres agreements million geographic to recycling of leader up storage and new in Select

our the full in with I safe, them continued ability through More remain value new and importantly, water create Select's and lifecycle trust customers provide these to I'm solutions. their grateful excited efficient for to projects, for sustainable

business development in I to has mentioned set size increase our opportunity continued quarter, last certainty. and As

finish get number of rest long-term negotiate forward, projects, to continue see into of I'm looking the We other very and and XXXX. will the we XXXX a confident throughout that additional potential to line to contracts continue

shareholder breadth differentiators. our diversity long-term drive believe with optionality and I decision is strengths of quality value. Select's make the allocation of prospects of wide and and and us As that to projects, that recent operational a geographic core best and This demonstrated us acquisitions provides by our diversity one capital allows array to the competitive

on focus our acquisitions recent and continue Water our Technologies believe I grow within base and production contracted to continuing services revenue our Chemical and expand we While refine long-term each our these segment. water Chris of to segments, will and and Infrastructure is with to core performance discuss period detail. pleased reduced But ability industry trends. increasing during team's align activity more this overall, projects of quarter's I'm consolidated second a in financial deliver operating with the our changing strategy. margins

our financial Chris? and are our remaining more to We Chris strong growing while this generate a returning investing continue XXXX on and to shareholders quarter our to I'll outlook in capital cash to positioned well hand assets results flow and it in free detail. back point, second to bit return business. At and a review

Chris George

John. you, Thank

Accordingly, quarter, and in on our second overall continued Infrastructure infrastructure our strong strategic continued generated growth during results the its free saw trajectory, profit revenue once support cash flow Water During we growth to profitability, gross solid quarter. growth water and high acquisitions the our second to quarterly steady segment again execute achieving strategy. record

While natural oil held gas overall have steady that the levels attractive prices activity at an challenging, generally levels for the been provide in pressuring our prices have more first customers, year. of economic return half

Chemical side. levels, on these Our Technologies activity have completion of the seen impact segments and the particularly Water Services and

commercial core we agreement significantly challenges created into with industry particularly a to secular a contracts ability drivers growth profitability entered We dedication as we XXXX generally initiatives leading to with infrastructure, generation through growth ongoing Northern However, remain lifecycle water key with transition continues driver volumes, add align which well is objectives. unique strategic in Basin to recycling, water water Delaware balancing. business, a continued achieving these region. The continue expanded Furthermore, increasing positioned future support water infrastructure during the latest our infrastructure-based critical including produced increasing in cash and more solve of of by industry's on produced Select's creative XX-year production-levered to be to we portfolio, the the Select our for seek flow customer and as and our more such QX, induced the networks continues track towards large water into the to our our growing solutions company full partnership challenges to seismicity. expanded the long-term in believe acreage our strategic

as continue operators growth networks to for consolidators, partners and largest extract size, opportunities growing scope the for industry our there with will value we be continued to Select. Additionally, serve the through and believe E&P supporting customers demand consolidation, high-quality

segment benefit of from the QX, well these Water the We multiple seeing second growth benefited to trends, Infrastructure million. During increased assets both strategic $XX as as the recycling quarter, revenue acquisitions. of increased volumes utilization X% existing during of approximately generating disposal and

D&A This depreciation, slightly represents in we more from ago. profit, than just to a margin were basis, of Infrastructure prior increase outperformed QX compared still a percentage QX, to growth points one customarily year tremendous of XX% improved came lower significantly point and amortization of margin the Although growth an a were XX-percentage XX% a and accretion and $XX strong where sequential our which QX rate terms segment to million. gross before year increase XX% four to revenue we Water we gross increased ago. On during to QX delivered and expected, compared an in relative importantly, where from increase provide gross revenue expectations.

this we've a segment the improvements margin period target about the terrific of a reaching of for plan the of made time the achievement and excited was profitability in are We ahead such in significant XX% team. short

supported we utilization immediate gross single-digit ongoing reducing enhanced percentage XX% efficiently to QX, during improvement. In to the the costs also development steady acquisitions XX%. while and near integrate way margin of expect our and by revenue further existing additional assets to been able projects high term, drive growth under our recent into and opportunity to construction have comparably long-term steady We the and mid- margin assets future under acquired of provide believe to along portfolio, see

see the still to end during contribution Bakken XXXX. anticipate delays expected region we originally in though from construction permitting the third timeline, we small coming pipeline certain pipeline new quarter, of online have by While impacted the Thompson the the a fully our

margin high-margin we moving to seasonal some to streams. largest predictable, Though forward margins XXXX, otherwise XX-plus by track into segment expect end more believe component of and out repeatable, continue deal and term, strong to the on maintain XXXX. the the our that percent remains become impacts in infrastructure potentially Looking see to quarter, project water profitability we with for profile a may backlog, fourth we contracted medium upon improve the very this and of revenue underpinned by

utilization high to contracts will wins our the we that to executing were industry improving Water sourcing while networking future segment, and Delaware. forward were the as through opportunities two in capabilities in traditional Bakken Our to Services our in tenant will and and make both highly project enhanced to expanded ability pull by X%, own existing about the the infrastructure anchor Northern gains driven more continued deliver during part able to These were quarters two add the water in systems Delaware, these we percentage Northern look activity Revenue trimming accretive, these XXXX. Offsetting notably Delaware to margins revenue range of Notably, Water forward outperform balancing expect are where signed and the commercialization. the demonstrate Thompson our the is come. Switching facilities the pipeline, points projects single-digit value region, opportunities for to we to in remains new will internal to water volumes. the contracts to sourcing in with networks growing the the and sourcing yard XX% costs. the incremental our key on the efficiency these mid- quarter These both activities expectations, in modestly in and key revenues for Northern customers margins focus well getting by early to fluids XX.X%. with able same as levels by In water ahead as transport decline what over up line. in Services, gains two revenues to hauling term, This QX continued driver additional of the service via from spite new legacy increase volume develop ongoing of also consolidation new just efforts though primary continue of a act water projects be with is we their short additional to amount business, XX% customers closure we pipeline other area we we to in an and traditional recycling continue our infrastructure cost the to we time. maintain supplement we in of areas as expected running

segment. push we for and time continue that in in further believe this remain our can We vigilant over search to margins efficiency

On the chemical technology side, a we challenging more had quarter. certainly second

in anticipated. decrease growth in plants, gross overall volumes through a we in X% XX.X%. quarter the With lower margins saw Accordingly, our our levels, a modest the slightly activity of industry continued volumes manufacturing rather absorption than during manufacturing decreased decline we resulted the the delivering lower roughly rate

from third There identified continued crews overall have been of a the quarter, have additional In suite. of pumping E&P volumes. that some our recently a volume expect chemical recouping our had number steady are we to for reductions see that pressure completion idling QX Looking full response, been utilizing believe seeing demand towards direct-to-operator while from customers, high-margin we path activity are we at during these customers. we our retreated

we be However, meantime, year. the expected we a to back in by we a cost do, number to margins end the to until will target the that undertaking are of constrained are get reduction likely of our of see ability the initiatives near XX% completed term. In

with margins the quarter, third flat the to we range. low to revenues For modestly percentage XX% in XX% down single-digit anticipate

efforts, than reduction second million first quarter. to $X SG&A the relative or cost other by at XX% during quarter more decreased the Looking

have throughout a While and year, costs during balance in continuing continue the the will quarter. QX, transaction acquisitions earlier of slowed the modest to to we compared integration-related third with transaction-related incur costs

during to we million generated back of half Looking of and $XX and the $XX.X to closer forward, the to year. relative quarter, ahead income quarter of adjusted to expect our XXXX, million. million of continue $XX we trend million the $XX XX% EBITDA million for guidance net during to substantial first the a second $XX revenue of increase quarter of of of the second Altogether, SG&A

our relatively expect million steady XXXX, $XX of is and efforts QX profit ongoing of are the continued consolidated expected, the between end course offset by see gross water consolidated as Services $XX EBITDA and segment. Driven water For growth of XX% by and the continued the a as the million, the infrastructure continue consolidation in in the gains third XXXX. Water segment to into will some reach growth to Chemical over of infrastructure believe great infrastructure well and we quarter, elimination our segment Technologies Infrastructure we Water adjusted we of by for on year, path water substantial

exceeded with million we last efforts for balance of outstanding time a and period, the of CapEx us substantial accounts below to from days receivable during Now the looking to on quarter. Operating $XX decrease ending still to further cash cash pushing EBITDA of acquisitions leave capital with flow QX, debt mere With XX the borrowings. XX% tremendous adjusted facility second quarters our of year $XX $XX as help capital, utilized fund we and our $XX and our operating during the working decreasing an during at were working to $XX revenue in continue for flow acquisitions make total million the the million These of actually of ago. able cash a $XX balance conservative very limit million increase the QX, we generated hand in reducing ample four days in a credit liquidity net additional sustainability-linked sheet. to during addition sheet, after the million quarter outstanding to third materially a even progress quarter million

flow disciplined organically. to of while We have of levered our relatively borrowings higher-margin leverage, should but good choose, will in revenue still cash visibility of with we fund the our streams, into contribution our to use generating we the production period growth a of so short ability and time repay contracted the these in outstanding business remain growing

year-to-date. closer end to quarter additional steady, remain so amortization Additionally, with and to $X.XX capital of this could Early to share, accretion million $XX the per our shareholders of we deployment. million remained quarterly returned of year fairly capital to $XX by though increase the shareholders equating capital depreciation, dividend committed per to returning with far

up our modestly a during execute expense growing modestly a decent anticipated. As expense to pretax expected, growth effective million tax accelerates. Net during represented acquisitions, up our QX step of lending as and our around CapEx rate recent well we quarterly interest ticked employed as at link organic income moved income water XX% as our $XX alongside sustainability as facility QX up infrastructure CapEx our

earlier, that CapEx mentioned wins recent will half the in growth increase the additional we back year. the long-term of Given contract

we XX% our and to helping CapEx to flow projects. contracted strong spending CapEx, $XX after Services flow combined modestly $XXX million Put our increase in provide cash XX% updated generated latest a fund and an still free the to year to maintenance $XX remain and pulling on expect in year expect with year now segments targets, to spend. on accounting disciplined million build approach XXXX debt. With also the reduced EBITDA maintenance at cash for each we we we into during all an XXXX, full flows XXXX, maintenance of our of free year. see Even first returning to believe water flow our of of million cash XX% of in to Technologies with increased a $XX the the Water maintenance low $XX $XXX of our half CapEx we outlook, of of CapEx their net adjusted However, net we and of capital cash XX% million intensity profits the after CapEx reduction continue growth expect million target CapEx the of to together, full growth infrastructure quite in million for to through will free Chemical

questions. Operator? impacted that events the that, for forward recent to thanking employees ahead execute up We weather open wrap like including to have to With of a on like Beryl. our their and of by hard work strategy. continuing all and up Hurricane I severe continued of once amount our look I'd those again support, tremendous us, opportunity around by Texas, especially it to were I'd still to

Operator

come Lemoine from session. be a of (Operator now question-and-answer questions Piper Sandler. with line first the will Luke conducting Instructions.) We Our

Luke Lemoine

about about of of of about You should all two the other you the been do I do? and in like balance service and of this? the just incremental CapEx returns have investing that. over the we should the projects, the variety associated just next could returns think projects lag of that So, here how you CapEx, as you mean, growth North kind American growth thinking frame have when kind kind How it in Delaware that new well. And help think detailed companies, you've don't can they we with you'll looks And and projects year, a this? you how incremental time.

Michael Skarke

This Luke. A couple Sure, thoughts Michael Skarke. is of there.

I core a think growth infrastructure Delaware. as and of we're is specifically, recycling with challenges and the as the There's sourcing the a the to of part really traditional in secular there tailwind area. that at profile probably that freshwater around bit and we've looking focus Northern got it exist more relates competing disposal

So, upon past. a seeing with to The discussed of returns we've a unfortunately, our what with time, connect trying we're we've return the the capital as the under the of lead said We're Most lot projects to really the know traction it beyond other on return. we've are to contract underwritten in in that consistent there. I a long get improve three-year there's announced, ability that operators past. with

projects. But and a we looking build contribution then as system that network, the the this capital so, get those to year. And more try meaningful end we're get expecting to out on that spend finding year. year projects--really we're by we the And literally from we next for are of

more more opportunities, optionality operators. connections, more So, extensions, with more

we forward of the we that really is around water look enthusiasm our backlog All XXXX. infrastructure as and what's to driving really have

Chris George

components how unique capital points. optionality around platform services landscape. of flexibility think around leading maybe U.S. to facilities competitive of strength logistical kind add some around whether and supply of take the maybe to point, providing a diversified opportunities. But of as a or economics recycling infrastructure, into side the that application around that. different through I'll about us The wins at with Luke, the to a specifically in think To different and water question to expertise find But we and all board rapidly a we're the look are generally underwriting ability seeing one growth best a of part pipelines, as I infrastructure us but a I your our the the our mean, platform recent chemicals. have on the as And well that the compares the I and of services of I lot Select really well underwriting quite the approach differentiated we outlay the more the and and gives things kind definitely chain and the that clear some we similar it's on support, returns platform, our is mean, to integrate to are particularly segment, clearly, to allocation infrastructure the of well growing bit of with of project success that and of Michael's across disposal there. capital recycling entry we we as have platform able across self-fund our towards solid around basins that couple of business. that

for So, but allocation utilize of point business lot of here to rapidly the that growing pace of those for a of terms some us here out it's in capital facility But in reasons. have our the of although liquidity up year, the has quite the in making base is the that we a right recently, of us and effective self-fund the decisions. back been the for ability definitely half picking obviously

Luke Lemoine

about infrastructure you sure happened allowed the and the pretty happen there acceleration of quicker I'm not you that well. mean then about drove water sooner a kind But And Okay. I expected? [those important, lot if the to which it just guys this we hopped] than over talk what mark, soon margins, expected than is as XX% could and expected,

Chris George

Sure.

potentially to in us by year. XX% pleased getting but half here the of targeting that XX%. was get there get the in I first certainly certainly, see XXXX, there point to So, We to were very striving

we a ability second about our the infrastructure contributed pretty base the think get that. contributed things When facility -- to pipe incremental or you business well through basis, of revenue quarter. of of both growth incremental the able been. We've of pace the as as of couple that a the than It organic higher on on utilization barrel throughput half margin, the were there capacity through So, able development to every and anticipated. a bringing accretive of in year existing than to the attractive a been piece drive fixed incremental costs we've provides was of pleased some a that's out within in take to the with first contributed to segment margin of where business, acquisitions recent acquisitions faster

the still there's them Texas. we integrated east get the we've quickly assets particularly we've in get bit out been So, to of sooner anticipated. the into work able and some utilize costs out a But system, able that networks, been bring little to speaking, to generally into than

and material expect continued ability foremost, So, volumetric that into clear so. into a further take and just think margins continued QX assets I see those to year higher next stabilize think, that's XX% give we the through and or us visibility at all above over pace those contributing. here I drive continuing really throughput to rate, first the that to of should it's But a of a

Operator

James. Raymond of Jim from Our the Rollyson line come next with questions

James Rollyson

if hoped it But start Just third guidance. you to maybe about for, and circling you to quarter didn't Thompson this Chris, you infrastructure. talked on originally I relates quarter recall the pipeline the about as infrastructure growth the just that talked of quite back correctly, big delay in of somewhere kind water step-up year, that sequential Thompson pretty thinking are of when you still XQ pipeline? XX%. in and between that think hits. revenues the probably were a going given obviously, to XX% Curious up Because be water if kind if implies and you get

Chris George

top Thompson Yes, quarter say to the going good Jim. that the question, the fourth line contribution a pushing certainly into the is expectations for I'd impact year. it's

a So, profit the has likely XX% on importantly, in such that's of top potentially XX% something side, towards towards the profitability that coming end guide. was at think be at But of growth end the end to we're I to the which pace or that growth. top expected exceeding the the improved year-over-year probably tracking bottom

think I position we of that in range top we're the able be the might push to So, above on profitability end a side.

gross basis, even potentially if to than still line a track getting assets we might we is liked. the question going really to a those dollar be lower and at And those and should we pretty growth be to where on of on be up certainly, QX, of projects -- from expected in pace a those nine So, new timing top come in this point, margin they the new the as online a to be heavy But QX that's little running. months six of once have of and or continue some to see just in additive next the ahead should projects, profile obviously, well.

James Rollyson

sure you for you kind target. what on, say, water through half on infrastructure? contracted ongoing to that. up if now trying do as the this I there going kind on then are what add the is the -- -- year, of I already second when you XQ probably you're based all on contracted for And Just up projects. all Absolutely. run leaning timing this recent have an we opportunities But is ramping appreciate into growth kind I'm just right. projects CapEx make moving to already XXXX high-return plus revenue this of M&A, realize have we get next in for how in today. kind you understand of as have already rate hand are unpacks of of trying you let's visibility it's what or the that,

Chris George

Jim. from into get standpoint to with in -- half ton year, we it's the of spending the be of a not Yes, and revenue going of projects from those Obviously, contribution next in until we're a first be continued back year. a the there's question, there'll a spend half of good this pace dollars that

seeing that towards have I comparable from with growth capital spend that growth year a high next think overall pretty contract year an think standpoint, see this we confidence of additional a wins. we of I level level

through of approach the to that gross think a thinking projects a as the of think starts can translates and of kind XX-plus generally how about about capital the on about organic terms from three-year and good percent In overall announced into take the capital pull and to timing think as to guide, margin, full that line growth. the cash-on-cash growth based pretty you growth that actively rate, going way contributing the year well to now deploying deployment that's our we're be I top capital

Operator

Our of Tower come Robertson next Water questions Research. the line from with Jeff

Jeffrey Robertson

Chris, margins. up follow just on to the

margins on XX% before your XXXX? to on will of in you getting should Infrastructure, accelerate year-end ahead you're profitability we gross goal plus Water think If that the

Chris George

think services But of and think way time pull certainly certainly I there to the based half to the of XXXX, would frame parts weighting still us under this contracts little an forward belt the Jeff, our for of of more some us it the get the get obviously, of year. additional relative and and Jeff, into opportunity as an an infrastructure the chemicals, getting our appropriate providing line that's here. environment, backlog governor back timing out opportunity, here on of those say potentially, we completions that think certainly, in there's it that with And to we business to deployed, faster. gives additional around I'd profit see but layer projects require expectations look I when of expect of it projects provides the kind activity we in underwritten term. I an a a on near

Jeffrey Robertson

flow and cash the an you Does increasing by Water revenue capital years, being segment. expand way think over infrastructure about to to think underwritten of growth you the budgeting that as just about shareholders plan ability share long-term business the the next impact and several compound continuing projects. to that into cash And with return Infrastructure and the

Chris George

certainly of a little a bit deployment. of to repurchase quite dividend capital from it's been standpoint a We've of deploy the able over an more been organic growth as the active we've year. we flow. standpoint No, the picking have grow a out ability that year, the free we've great We constrained up pace We've buyback to Yes. us were cash this -- front last think this question. the from in got capital year year last we

underwritten opportunity Looking as at stability going more books I the capital in underwrite definitely give and how the now we balance contracts to sheet look terms that now, business, flexibility getting both well on the XX as the us growth. into is think optionality months taking from for more shareholder return the a and structure of in

deployment. standpoint M&A can work continue the But in of that the of tactical for front here of for now, if opportunity XX, an first of $XX contracts XX-year I in best on put back we add water think authorization growth have us in rate a for half the good is think organic I pace standpoint repurchase opportunity from share at an million that us deployment of certainly year So, to standpoint in an this underwritten remain organic to to capital focus new that's the infrastructure. picking capital a we've we'll the the project We kind with from long-term towards up to shifted year. continue half for

Michael Skarke

fact And really that and our going on networks, continue more we focused more that working. the really to as as strategy we I And is it's I driving systems. revenue systems fueled at seeing of through by are we earlier, And existing more I execute more so those expansions networks, that's to as volume point. are existing water mentioned. Chris expand and we're just deals also, our and important and systems successful and mentioned think growing strategy. and infrastructure profitability We've mean anticipated that really been a than far,

despite kind we're opportunity of is really further uncertain macro what excited to drive growth the So, about softer environment. a

Chris George

majority And of that segment's of end with make revenue XXXX. the infrastructure that specific maybe and forward around long-term into online, contract we is next -- substantial year, to of and half profitability coming contracts, the to the up the your Jeff, segment get today projects looking supported a by probably by time question around should new

make So, to the to of large underwritten opportunity But that optionality growing ultimately, a to going a having make to with give definitely segment good give that visibility us going contracts it's different into us decisions. decisions. base is

Operator

Seaport Partners. Our next Curran line come questions Research with of Tom from the

Thomas Patrick Curran

Chris, Water barrel. annual my the division per Infrastructure recycled by calculations, revenue that is average

on So, the fly this revenue. Chemical Technologies excluding is

that XX% annual for division, barrel calculation then Water another my grows in Just doubled roughly so average recycled that per and Infrastructure XXXX revenue in XXXX.

Assuming to my revenue XXXX? uptrend then into continue could accurate driver that break math you intensity by expect enough, is down And steps contribution? those do in up you key

Chris George

to it, way It's look at an certainly Tom. interesting Yes.

the side whereas rapid volumetric seen growth been and the been it's adding top standpoint We line through acquisition a have from this to that business of across we've the the From disposal business. organic both standpoint and of recycling on recycling the side, disposal standpoint, very more through of a year, a development. adding project part a pace obviously

from of we parts that's channels to to pace we're continue saw pick of think actual substantial barrels similar rapid up about, So, rate growth XXX Tom. to going recycled in million strategic recycling of there. From that, up adding a things you some and the growth the kind of XXXX, growth, of excess we a talking an of were both in to --

that forward, facilities bill announced recycling-based are think contracts really looking out. the -- just we that I

the the more and into is the split, see with pace of recycling year in those growth acquisitions whereas be this the probably we assets So, this them as into that recycling continued to going majority year, system. was network driver of year we the last of utilization disposal weighted more XXXX, be the should weighted

think to growth recycling to back heavy-weighted So, you're reverting this I of year. next a have probably being inversion that going growth an year,

Michael Skarke

point recycling, made and disposal you I is a on XX% capacity expand the Maybe, the script our we've available earnings acquisitions from on Tom, what And the us a have finer referenced XX%. in that's by put going it, fixed given we our Chris to uplift capacity. to capacity, think had about which facilities, a just in just what said, announcements the

quarter for kind first capacity a first facility today XX% quarter, to of recycling. really from mid-late So, in of next have year, our fixed uplift should we

Chris George

base the basis. interconnections a at But in a opportunity quite And come a to than. system that's that grow comparable And an into on or expansion. provides existing increased that's utilization to rate got, asset us we've ability bit obviously, the of through of pull obviously the play really capacity where higher

that's importance those the two. So, of

Chris George

Yes.

Thomas Patrick Curran

I could was by market expanded, it. yourself dig with maybe scaling more tenant into the but reputations pushing then trying and further additional and ramp pricing up by follow-up tying your improved more Got to that in into sort get you a disaggregating I of call. then as customers facility anchor in

the Northern then set, percentage an the high finish winning, Infrastructure the And you optimistic the the you're can recycling the give what Just, it's Michael, of for ones Midland whether that probability regarding line projects build here us Water second between how opportunity half, fixed and construction? those split about is rough most Delaware? division's about across Permian organic again, we're what over most expansion those new confident awards, brownfield many of the getting a or include capacity, idea

Michael Skarke

Sure.

about and diverse footprint, you that. excited know, a got as are Tom, really we've So,

opportunities and -- geographic think I basins. executed exactly right. business our got six. had diversity in strategic he's differentiators I M&A John we've operational of mean that five we've is We've the strengths and in development and mentioned one

but is it's It's business everywhere, in trending. we where market lies. recycling. announced the just the water around focused two We're that's development where is market deals, the Most opportunity set the is And these really of -- of Delaware recycling. that's we're focused. Northern leader majority we're that where So, primarily water high-confidence the where our

a We have frankly, of it's first-mover kind but ours. -- become competency of a advantage, it's core

and why suspect we're advance that's the looking increase where seeing it's year. contracts capitalize seeing we half will and in I increase real that strength, and continue it's the That's why you're this so, execute of you're to the And a and back over something on, -- that's to in CapEx.

John Schmitz

is I this coming relates about thing getting two weighted developing exchange. freshwater John. Mexico, point, that really as it's to needing recycled mean, Delaware, the Tom, upper water. to and the It's It's solutions add developing in One Michael's has. water heavily Select to counties really it New to produced on in off

be to this correctly. the So, developed for and solutions it the acreage and demands really developed capital

So, we feel position in really about Northern Delaware. strong our the

Thomas Patrick Curran

for already last for just and monetizing reuse, on with all would commercially point hear and at management, to for solids economically into you Got stick like one management closer describe the Select's to plan beneficial would But to mineral expand bromine? you it. me. what you advancing you of do valuable now? intend I front, deposits separation of And disposal and seek to the ever this. how this on strategy weigh wastewater then and treatment scope in in love extracting cambium to and or viable, do three you cleanup toward specifically Or solids do lithium, full

Michael Skarke

Tom, take shot. Michael. I'll this a is

question. think I a that's probably four-part three or

have you'll with as through I it. wade So, bear to me

total customer. waste So, with stream, the from the to profile, all the it operational infrastructure. water It -- we're water provide our footprint. nicely to with us financial employee the starting that it infrastructure existing solution solid total the The returns, very an allows fits financial management, manage really well mean, matches I perspective, for operations, be leverages and excited to and able intensity

kind we've from as to think far. look So, I really we of so that a were solid reuse, of right the to acquired And pleased separate certainly management. it. if we expand we're opportunity arise. Beneficial with of would what really There's strategically component think

with a We back this half one, year the gearing have large We on team trial it. agreement. a a focused very partnered earlier of are We're successful another in and in had joint year. this very for development another field operator strong up a trial

years money and and do of last it's so. the invested couple to are So, we've something time continuing in real

really The challenge Our primary that effectiveness. taking is the more cost technical of economic focus but on there system. feasibility, out is the the not

while CapEx reducing adaptable and developing both focused on water qualities. system, we're the still obviously to so And OpEx in reliable and systems that changing

do a and we're with know different to economics We that's do attention something extraction. to. and something have there continue evaluating that to in we've earlier But would the play. I on, that market talked we're produced beneficial think what of stages going in something something reuse to seeing that what would of, would it's about, paying it, engaged in extensive that So, our least We've that that across are see like is to we're companies who lot we're but going role again, do ready and and similar it extracting direction, working are measured that would that to what, economic work the true that be. that's it the recall, becoming for was economic it. The and aware a viability. But obviously in the water still what we exist footprint is we're last elements part, heading around be not solution. of look terms That's at one mineral several we

Chris George

solids, side on And generally of maybe managed. heavy have a management to side fresh beneficial water add around a treating of to cost be and to brine around that when Michael's you that as well on the solids concentrated one couple you're of the quality other water side level a you things is have beneficial a quality as and ultimately reuse your the things of have one point point Tom, I'd it, come bear to to reuse,

more more that around extraction mineral a kind management optionality as of of that have if as a already that part a get And beneficial then to water we solids brine integrated that an that provides piece backside that's on provides of solution. integrated to part treatment necessary get cost approach also at it a So, treatment vertically you quality. system looking the that for concentrated

a approach So, of the how it might of provide you as you kind across does opportunity go set different full this. applications

waste and on the geographic like what certainly those discrepancies that analyzing basis the as both And various management as for extraction. and between demand as so, as water well qualities we're the technologies well look various looking integrated stream the the an at

Thomas Patrick Curran

Got for answers. all it. thoughtful Thank you the

Operator

Thank you.

with Bobby Our come Markets. Brooks the line of next Capital Northland questions from

Robert Brooks

got the low divestments you could I've headwind The you given. single-digit Water just was that up consolidations have that guide of assets is much slightly one sequentially were guys the help decline segment quantify noncore First revenue Services? within above and a how of

to the to are quarter the single-digit the what the factor causing the on So, just more in of factors bit expected little maybe high looking color for drove more or a is that you to that execute. second quarter decline those in looking strength, given third decline a dissipate strength mid- and divestments are

Just that. for on color looking

Chris George

Bobby. question, Good Yes.

to if think about So, the what get that largely that and -- infrastructure thought do opportunities we key water of we'd you and be some with was the obviously, forward we, we able the quarter, back think, on were able to in sourcing customers. our outperformed contracts I second the pull kind of of

able both build couple continue those over their the completions quarters. customer do kind to to were next up we in in Delaware get we to with as demand system side as North projects Dakota things that that the the So, of as of off out Thompson in near meet of well the term

the growth piece to the to the efforts, company. of mentioned, can margin was that pipe primarily to more Everything we of around get us is we've application got onto of some kind that a consolidation as obviously of what what do high continues benefit substantial active to counteract So, fluid commoditized hauling. water driver a be to

year-to-date, volume entire of a kind fluids services segment at or revenue water hauling are off approach the majority last an six build that standpoint volumes you the we time, focus months, out systems. But to to a seen definitely off application the truck the out the if come the continuing relative there's QX, on we've continue on the from towards so, dollars of over And really as look of getting you'll see to segment. that and and pipe year-to-date, of

of quite particularly supporting business our around and a infrastructure. parts core other So, to in we've overall stability that's services, of pretty seen logistics the water bit around efforts transfer

efforts to ultimately half like I be the so, accretive strategic volume beneficial of overall, and look the And what over time. pipe continue to on the that into focus making back might getting margin to segment put here. And we'll on that we're time infrastructure of over over decisions networks. should the overall But they're think that year the our

Robert Brooks

growth revenue color. water Appreciate sequential it. that a there. X% switching to nice infrastructure, Got Then

of driving have factor also You mentioned a but couple of but utilization, guys that you have a talked in terms right, increased there, there. acquisitions, about would guys contributed -- had you

So, acquisitions that get I was sense utilization development how just was through versus there? inorganic increased legacy much assets on growth or of of looking growth to a organic

Chris George

Yes.

build project to bit into still undertaking second we of the acquisition, those to asset XX-XX On utilization gains account, organic gross system. of quite number weighting a of And There's even that have quarter, base. the back from the reason year networked quite a half infrastructure the continue say taking for can to little assets. as we profit But bit be opportunity utilization There's to towards really around a these certainly from out of utilization the get a get enhanced those get assets. growth a the networked, of will it's it's though split would enhance year-to-date and higher the on and more a basis. of contribution of a the acquisitions in acquired to of organic basis, existing and strategic us additional going going For the give out. quarter the focused deals. a first probably the contribution was those acquired I XX-XX That's split bit of year-to-date enhancement into a about effort

but the we've the to will recent one as acquired think kind to existing that been And quarter business, forward, on basis of or be looking deals. the drive from assets assets be able see beyond improvement I on well the able forward what so, utilization both as recently day a across we'll

Robert Brooks

you're -- first right? comparing split, Got you saying comparatively, XXXX, the you're on comparative comparatively it. to that are And when the year-to-date, half

Chris George

that coming I off sequentially of was question. comparing Good QX.

first basis in of consolidated was half year on QX the and So, at sequential basis. looking picking and of up on acquisitions XXXX forward the XXXX, relative a that the January first split early QX of part the in a into

Robert Brooks

your for just the is Got it. system current there. effectively last on Delaware Thanks for you expansion that the triple clarification. mentioned the me how question system And will PR, capacity of Northern

all XXXX, quarter all is capacity dedicated already is essentially, and so, running be and to be is added all the production tripling added and financial the be so, sorry. first is terms translate long-term capacity its that's already XXX%. utilized agreements Does that's certain in where So, when in all the that up of tripling going if is, -- to that a added the that I'm of once impact? capacity that in if is capacity essentially to at my it's And to of will up going question riding? And utilization

Michael Skarke

Bobby, side the this it. is Michael to talk about operational of

So, all operator. dedicated of that single a capacity is not to

between third customer So, of the a we the by half commercialize on and and the have right probably asset. of we we projects, of portion. somewhere then work cornerstone it, going they're remaining capacity to these the underwrite the refusal to first kind closer to underwrite really But

But system. expect expect a tenant do have ramp meaningful do of really area. with in so, additional we operators to and And we we the system work some would inefficiencies building up of the through we kind in commercialize of the QX that QX online and anchor to come excess offset in as excess on the early capacity capacity

Chris George

customer to up value facilities get water need to the for I opportunity marketplace manage ramp demand across the in these that operators. an of, manage effectively provides rid the one clear of water Bobby, match to -- the and completion they running, it and it provides also produced benefits adds disposal and but multiple getting mean, And strategic recycling to of the a is off and the

to that that a with multiple flexibility And is overall. into the in you you that towards operators, a multiple development that provides So, of into it network operators system effort it have optionality really a operators, from steady additional coming to can add operators back pace multiple water the barrel redeploy bring balancing effective treated more creates more those as well. then so and assets production new across balanced

Robert Brooks

Got a return cycle. to I'll That's very I good it. Congrats the the back queue. and on appreciate time. virtuous quarter,

Operator

Partners. next Daniel Our Instructions.) questions from John line Energy the Daniel with come of (Operator

John Daniel

assets, my keeping refusal And dedication and you've the when to if I'm the extra, for simply activity acres rigs point, is XXX look And to visibility advance into you expansion [XX,XXX] the do, one at it XXXX? this questions. the incremental at XXX,XXX? for water call going to the apologize forth that in gains it is XXX,XXX for first Northern so But do you if you from right have, other? and of of Delaware, moving this -- exercise were the then customers' in they got to area levels you Or are going. for Thank you

Michael Skarke

partner with we're sure understand We the the when it we enter like we So, an near-term operator. of long-term well make to they need to -- it correctly, needs their out agreement as we're development out to this, plan we're John, need sizing as built that their building system first. kind where

really the And operators. with we're partnered so,

schedules. But working accommodate our schedules, they this So, customer. planning a we those changes. drilling do we're Obviously, is long-term and regular get with change, to

in they're what XXXX know we so, And and beyond. doing

Chris George

Yes. look active the It's that the the ongoing John. acreage. relates And a as dedicated approach and a are to underway. acreage are relationship well material there, change towards partnership dialogues as and opportunity Those ROFR active the it to as the

And also of from into the acquisition their we do have as period in into well. translates that add what own around current visible what needs visibility months? how around really potentially the how and they meet footprint XX think then acreage opportunities about their XX, of schedules acreage they the we larger as do it's So, the over future

Michael Skarke

is balancing the the and other solution but importance the a or we Chris of short to operator, well, as the there have -- for just the as both it a Again, within really system And for it mentioned. little us because and important bit once you see is natural long speaking ROFR operator. here operators expanding

-- customers' system to well that to we and the larger the interest, as operators grow period take we're needs but so, that really within and there And our of offset so how ROFR looking expand customers can expand see our care as dedicated those well. within

Chris George

are particularly frankly, John in And New to these earlier John to northern well. the of they I solutions develop as some critical ability mean, But it areas, Mexico. in these acreage even mentioned becoming customer's -- the have

way that way water, think changed opportunities side. and water. It's way the to they them their partner the the changes I they it's with that around grow that on So, we further evaluate changed it own approach

we and are on match their what needs they see So, how to we definitely focused solutions their those as opportunity.

John Schmitz

place and that plan poor of base that's in out plus the drill, many time asset XX% kind when hands are we drill, really going stuff, system planning. it, invest of what future ROFR as that that sure that John, going I to holding that can been water we that to they're we three-year we money to going that around or we the can full put wrap in to bring properly to make gross to that, do conversations that dedicated we where they're contact about move we to got we sure But make know how say position, cash-on-cash that they're planning duplicate and them dedicated, because is with think margin. to get and when them value and as we that already the don't

John Daniel

on Okay. the XX,XXX about talk want to constructing then recycling and the facilities for if the when is multiple Or up But that hang you a for the is the that's And cool. me just -- that few more, upgrades, the you and XX-plus acres? XXX,XXX?

Chris George

be just XX,XXX, the for would That John.

that. will and ROFR incremental beyond well acreage the So, be

for us. additional development So, potential that's long-term

John Daniel

it. Got

Okay.

But for well? one volumes, lot $X and of that the XX all and that to, is get in created this active just are at you of compare recognize not where per essentially assume that you uncompleted to Trinity there Northeast -- SWD million, there's one, differences when well you a and you where got Turning buy the you deal perhaps Northeast sort the the is the look -- facilities acquisitions. I the one stuff. and than equally. suggestive SWDs market other the I say, Or capacity Permian? structurally Is compare better

Michael Skarke

just considerably Permian. that in smaller better the different. than The in the it's ones I the the Permian, wouldn't Northeast it's wells John, disposal are say than

a disposal day in the So, XX,XXX barrel XX,XXX, Permian. can well XX,XXX, have you a

like anything that the in have don't You Northeast.

Northeast it to that the different well. I in, going mean most a the and a and pricing barrels You're is day have or X,XXX back to of might be The the we the and in probably Permian. X,XXX well. well, materially participate markets that good those two the gets of extreme are volume

if in a So, how consistent they're just We're fundamentally the wells disposal And basins, compare a our have different more particularly would acquisition. challenging valuation. I different say different make It's Texas markets. it's whether similar accretive It's disposal to -- case, you the depth. really million can in it Permian, basin wells is consistent, or within or that to compare the of is made depths. What we've though, much that $X acquisition historic go-forward pretty that's $XX sure on East a acquisitions, basis. the going a and whether it's or we're million Northeast is they

John Daniel

Thank John? you. Yes,

John Schmitz

it pretty pipe But need then a systems just to certain disposing of or on get in are lower and dispose needed buying a value to they complete ways John, cost developed a water higher about it. But able actually you different large and now we got in certain three in that One, truck, systems it under realized that it is because place money now it at we can that They creating is company of bit that it, to dispose pipe save some to nose this a disposal of it. in on these bring -- think what be they're you different water have area. little as respect also have exchange water that this when the we is if these areas. looking you're off and probably wells wells, get volume we've systems. take that at to really our volumes a gather customer,

it's these of You getting but sometimes, piece wells for is all you dispose because completion. disposal of water needed not that recycled, and -- that recycled sometimes a needed that times fit into capacity have barrel are a

assets equations system all ways. So, those three it balancing. exchange fit into becomes these of water And in a water

John Daniel

it. Got

call, XX% Well, margin the congrats congrats hitting and on on the threshold. Okay.

Operator

now session. back our to concludes closing now floor for over turn question-and-answer I this like would remarks. John you, the Thank Schmitz to

John Schmitz

Thank you again support more and today forward to Select everyone earnings and I that look your call to in you quarter. Solutions. speaking to for joined next about continued interest our learning Water

Operator

thank today's teleconference. gentlemen, conclude participation. you and your Ladies for does This

your disconnect at a lines time. wonderful You this may day. Have

Select Energy Services (WTTR) 31 Jul 242024 Q2 Earnings call transcript