Select Water Solutions at East Coast IDEAS: Strategic Growth in Water Infrastructure

On Wednesday, 11 June 2025, Select Water Solutions (NYSE:WTTR) presented its strategic vision at The 15th Annual East Coast IDEAS Conference. The company, pivoting towards a water infrastructure focus, highlighted both opportunities and challenges in its expansion into municipal applications. While leveraging its oil and gas roots, Select Water Solutions aims to stabilize revenues through long-term contracts and water recycling innovations.

Key Takeaways

• Select Water Solutions is transitioning into a water infrastructure company, expanding beyond oil and gas into municipal markets.
• The company is leveraging its leadership in water recycling within the Permian Basin to drive growth.
• Long-term contracts averaging 10.1 years provide stable revenue streams.
• A significant investment in water rights in South Denver aims to generate $40 to $60 million in earnings.
• The company has raised dividends by 17% and is committed to stock buybacks, enhancing shareholder value.

Financial Results

• Conversion of 70% to 80% of gross profit into cash from call-out services.
• Approximately $200 million worth of stock buybacks in recent years.
• 2018 revenue was about $1.6 billion, with an EBITDA of slightly less than $260 million.
• The Colorado municipal project requires $260 million in capital, with expected earnings of $40 to $60 million.

Operational Updates

• Leader in water recycling, with the first plant in the Permian Basin established in 2021.
• Recycling operations have grown from 31 million barrels in 2020 to 282 million barrels currently.
• Holds 21 million barrels of storage capacity and 2.5 million acres under contract or with rights of first refusal.
• Colorado project includes 16,600 acre-feet of fresh water, with plans to own 56% of the water rights.

Future Outlook

• Plans to lease water rights long-term with escalators in Texas and Colorado.
• Anticipates finalizing a deal in the Colorado project within 24 to 36 months.
• Focus on high free cash flow, gross margins, and contracted revenues for stability.

Q&A Highlights

• Commitment to a leasing model for both municipal and industrial sectors.
• Deployment of combustors across all battery sites, enhancing operational efficiency.
• Upper Delaware operations produce significant water volumes alongside oil extraction.

Readers are encouraged to refer to the full transcript for more detailed insights.

Full transcript - The 15th Annual East Coast IDEAS Conference:

Earl Gergen, Three Part Advisors, Three Part Advisors: Morning everybody, my name is Earl Gergen, I’m here with Three Part Advisors, thank you all for coming to the conference. Up next we have Select Water Solutions traded on the NYSE under WTTR. On behalf of the company we have John Schmitz, Chairman and CEO. John?

John Schmitz, Chairman and CEO, Select Water Solutions: Yeah. Thank you very much for having us, and thanks for the interest today. As I said, I’m the Chairman and CEO. I founded the company in July. We took the company public in ’17.

And we’ll walk through the slides here, but primarily it is very much of a water infrastructure company. It’s in and around the oil and gas business and the transition of what’s going on with water in the oil and gas business, but then we’ve now branched out at the municipal side of the business. It is a public company and here’s the disclaimer. Some of the positions that are important within the company today, as I said, it’s a water infrastructure platform company. We introduced recycling application.

We were the there in ’twenty one. We put the recycling plant in Permian, so we’re the leader in that avenue. This is a position that’s really launched the infrastructure side of the business. It’s a clear market leading They’re really free cash flow conversion, low CapEx. They are services business.

They are cyclical in the application of completing oil and gas wells. But they’re really low CapEx, low CapEx maintenance. They could convert 70% to 80% of the cash or the earnings to cash. The infrastructure, the growth arm, once it’s built out and you’re through the cycle of build out, they’re like plants, they are fixed. The maintenance of those are very low and so they’re high free cash flow conversion as well, just higher gross margin.

It’s a strong balance sheet. It does have some debt that we put on it because of this infrastructure build out primarily, but it’s still very conservative in less than a year a turn of EBITDA or within our working capital contraction opportunity, whether it’s accounts receivable or inventory. Is really a growth story in the build out of water infrastructure. There is a lot of M and A around it, but that water M and A is primarily building out networks that you can balance water, manage water through the whole life cycle of the well. So you’re sitting in the middle of it with big networks.

You’ve taken asset purchases through M and A, added it to the network, you’re simply solving the solution for the customer or water balancing, so whoever’s long water, bring them a solution that’s cheaper in dealing with the long water, and whoever’s short water, you’re using that solution to bring a solution that’s actually better for actually contracting the water to do the completion on it. We are a dividend paying company. We did raise it last year, and we’ve done a lot of stock buybacks really until we got in this growth phase of building out this infrastructure. We bought back roughly $200,000,000 worth of stock in the shorter history here. We are a water sustainability business.

I mean, we’re taking a waste stream, treating that waste stream and making a usable piece of water. Right now that is very focused on oil and gas so that water is getting recycled back into use the water to frack the well or the completion side. We also have some pilot programs where we’re gonna take that waste stream of produced water and actually reclaim some of it to take back into the environment instead of disposing as a waste stream to grow crops or do something in the industrial side of water needs. The company is reported under three segments. The one is our growth, the water infrastructure.

It really has two sides to it. The recycling, there’s your fixed plants, long term contracts, that’s dealing with taking the produced water that comes out with the oil and gas and making it usable back to completing wells instead of using fresh water, and then the actual gathering and disposal of the waste stream. We do have a solids management in there too. It’s smaller than those two, but that’s managing separations of solids, water, oil at the surface and disposing of the water or capturing the oil or taking the solids to the land fields. This is sizable, position, so our water recycling is probably three times as big as number two, primarily in the Permian Basin.

Our gathering systems, the lines to gather the water or take the water back out to where it’s gonna be used is substantial now. And our storage, which we would believe would be the strongest position really to the network because when you’re long water or short water, your balancing ability is really important. So that 21,000,000 barrels of storage is a big asset to the company. We have, and we’ll talk about it, we have entered into the municipal industrial space. We just made an investment in South Of Denver, Colorado of taking water and accumulating in diameter hose you laid out for the job and extension of that network to the job site.

That’s primarily what’s in that water service business. And then chemical technologies business, what our chemicals is, it’s an in basin manufacturing plant in Midland, Texas shelf. It makes chemistry to either make the water usable to frac with or the chemistry that goes in the water to frac the well. This is a diagram. Everything on

Earl Gergen, Three Part Advisors, Three Part Advisors: the left really is where we started, Yohl. It’s sourcing, movement, that last mile logistics, containment, large quantities, treating the water, making it usable to frack with, and then adding the chemistry going into the frac job. That’s kinda where we started. If the right side of the screen, it’s when after you

John Schmitz, Chairman and CEO, Select Water Solutions: either have completed the well, the well starts its production life. Everything in the lower right hand corner is all to do with disposal, so it’s what the industry did do, gather the water, take it to a disposal well, pump it in the ground, and dispose it in reservoirs. What we added is a recycled piece right above the fluid separation and control, And you can see that we took it back and made it a water source into the frac operation. And you can see to the right there the beneficial non oil and gas application, that’s the pilots that I’m describing. But in these boxes, y’all were either gonna be one, largest player in the boxes, or if you think of it at network, it’s gonna be sizable and contracted positions as we added this infrastructure.

This slide takes you to across The United States. The company’s also different in the sense that it goes across all basins. So it has the flexibility of oil activity or gas activity. So we’d have the biggest disposal opportunity or position in the Haynesville Shale or up in the Northeast in the Utica and the Marcellus. But we also have the biggest recycling position in the Permian Basin, where all that water production is and where the water management is in need of a solution.

But these are the different areas of The United States and this is our systems across those areas. A very unique, flexible between oil and gas. This is the customer base. Primarily, it’s

Earl Gergen, Three Part Advisors, Three Part Advisors: gonna

John Schmitz, Chairman and CEO, Select Water Solutions: be upstream players, so people who drill and complete and produce wells. You will see a couple of frack companies in there, Liberty, Halliburton, Patterson UTI. Our chemistry that we make to frack wells with, some of that chemistry is sold through the frack horsepower companies. So that’s why they’re on the page. But basically, we sell the NP companies.

They’re our customers. They’re the people signing the long term contracts. They’re the people that we’re building these recycling facilities and pipelines and gathering systems on their land or in partnership with them. This is the performance of the company coming out of COVID. It was an oil field service business, that Last Mile Logistics.

We developed this infrastructure. Logically, the industry actually rebounded after COVID as well, but this is the growth of the revenue and the growth of the earnings and the transition between OFS or the services side of our business to the industrial side of our business and the chemistry side of our business. You can see that the infrastructure is the growth. That’s where the capital growth dollars are going. As I said in the at the water services chemistry, it is a call out service business.

It is very driven by completion activity. So we are tuned to cyclicality in those businesses. But they are free cash flow conversion, so we convert about 70% to 80% of the cash out of the gross profit of those businesses. And we’re using that cash today to do the right side, which is the water infrastructure business. Heavily weighted to oil and gas now, but as I said, we just invested in that municipality deal in Colorado.

It’s a high gross margins. These are underwritten by contracts. They are tied to the land. So if there’s consolidation, between these oil and gas companies, our contract follows the actual asset base across it. But we’re using the profits out of the left to fuel the right and build out that infrastructure business.

It’s about a little more than two times the gross margin of the left side of the page. This is a picture of one of the recycling facilities. And the interesting thing is this one, what we’ve been able to do, of all, it’s a value prop. We’re bringing value to the customer. This is a better answer than what they were doing, which is just disposing of waste stream.

So when you can water balance and you got long water and short water, you can bring value to both one years. We do them up to eighteen years. Some of them is eight years, but if you look at all the contracts across the company now, it’s about ten point one years. And the most important piece, very important piece, is the left hand side that showed the water recycling facility. When you put these facilities in place and put these long contracts in place, you actually get dedicated position.

That’s to the asset base. As I said, it follows the land. So we have about, two and a half million acres now in some of the best rock in The United States under dedication or with ROFRs tied to these contracts. So it is truly the full cycle life of the well as it develops itself and produces itself throughout its life. This is a page that shows, as I said, we were the to bring in recycle.

So the top left hand side of the page, twenty twenty, 31,000,000 barrels were two eighty two million. So this is to our company, in the recycling application. And you can see the right side of the page, we also grew disposal. We’re more recycling because we think it’s the best economic solution, but if you don’t need water to frack with or what you can do with it, you’re gonna have to have a disposal solution. So we do both, and this is the growth that we’ve had both in revenue and volumes.

This is the conversion of the company. If you take 2018, y’all, this was basically an oil field service business. 80% of the business was that last call out service business. It’s roughly a 22 to 25% gross margins business. That ran about $1,600,000,000 and a little less than $260,000,000 of EBITDA in 2018, but it took about 5,500 to 6,000 employees to do that.

We started our conversion of the infrastructure and the opportunity and development of recycling. And this year, we’ll have about 50 on this with about 3,800 employees today. Alright. Now this is really how we came up with it. So we went through COVID, and coming out of COVID, there was a lot of disruption.

The left hand side of the page is a lot of bankruptcies that we bought, and these were systems. If you think about water infrastructure, so we bought systems. We bought the water side of Basic Energies. That was Aqua Libre. Their bankruptcy, Cypress was a disposal system out of a bankruptcy.

Navara was a full company bankruptcy that gave us our Haynesville position we got in gathering and disposal, and then we bought back the waterside of Complete that gave us really good systems and opportunities in the DJ and the Mid Con and some other places, but that’s the two big ones with it. So that’s kind of the systems and bankruptcies distress on the left. The right is really assets. So if you think of the systems, you can go out and do M and A to buy a disposal well. That is, if it’s a single disposal well, not part of a system, it’s got a certain value to it.

But when you put it in the system and make it part of network on it, it has a better value. So we go out and buy assets that fit within our networks, and then we build out that network to add those assets to it. We usually buy them at about a of their cost to replacement is kinda where we can buy them. But the biggest thing, we buy them off the economics as a standalone asset, and once they bring into the network, they become more valuable. And that’s primarily what the right side is.

We did enter into the municipal industrial water space. It’s not something we’re not used to. We were the biggest freshwater source frac water need in The United States before we converted the company, coming out of ’21. So we had water rights all over The United States. It was all big water rights going into frac horsepower.

We know how to contract water in Colorado and manage that. We’ve now taken that knowledge and that rolodex, if you will, and we moved into the municipal space. Our one is off the Arkansas River Basin. It’s South Of Denver. And this is about 16,600 acre feet of fresh water that we now own.

We have consolidated that. It was nine or 10 different transactions. We consolidated that. So it’s a size now that you can go to a municipality and contract it long term, lease it to them. It’s non depleting.

But you have also being a river you’ve got to have storage opportunity because flow rates come and go throughout the year and the rights to the water you’ve got to capture it when you can and you’ve got to have a reserve base that you can deliver to your customer underneath your contracted obligation. We put $62,000,000 in it to do the consolidation of the nine or 10 pieces and then we put another 10 to buy some more water and then we got the rights to put the next 72 in. When we put that 72 in, we’ll own about 56% of it, so we’ll own control and we’ll run it. There’s a mechanism on the backside of that that actually could give us 100% of it if we choose to do that. If you think about it, we put in the 146 or have the rights to put in the 146 but on a total enterprise this one would be about $260,000,000 of committed capital and an opportunity depends on if you’re municipal or industrial.

One’s better than the other. Opportunity of creating forty to sixty million dollars worth of earnings power out of that $2.60. These contracts are long life, so some of these contracts with municipalities can be thirty to fifty years. They got escalators in them. You’re leasing them the water.

It’s a non depleting asset. They’re very senior water rights. If you do it with a municipality, you’re getting into a utility type arrangement in your lease with them. That’s a picture of it. So this is, as I said, the Arkansas.

We And you end up with a hole in the ground. That hole in the ground is the right spot to fill it up with water and have that water storage swing for your municipalities as the river flow changes over the course of the twelve months. I talked about the balance sheet. We did borrow money to continue our build out of our infrastructure, but it’s got plenty of liquidity. It’s very conservative debt.

It’s within one year of EBITDA. If you look at working capital in a business that can go up and down with activity in the services side and the chemistry side, it’s within AR and inventory, so it’s very manageable. And we look at it that way. It will change as we continue down the municipal and industrial side with long term contracts. We do pay a dividend.

We did raise it last year by 17%. We fully believe that we’re building a business that is gonna be high free cash flow. It’s gonna be high gross margins. It’s gonna be contracted. It actually, I think, has a bridge into even a better stability in the municipal and industrial side than just the water infrastructure for oil and gas.

So we expect the ability of this company to have the choices of capital allocation in a very positive way for the investor base. We did buy back stock over the time period of 21 ups. We bought back about $200,000,000 worth of stock over that time period. Company does think of itself as an opportunity of distribution to the shareholders that probably is gonna get better because of the contracted nature and high gross margins and low capex requirements. Just kind of going back over everything I just talked about so I won’t do that, but I’ll sure take any questions that anybody has.

Yes sir? So our business model is a leasing model regardless of whether it’s a municipal or industrial. That’s our direction of what we’re gonna do with our water rights is lease them long term on long term contracts with escalators. We’re not gonna be in the utility business. We’re not gonna deliver the water, run it through a meter and send somebody a bill.

That’s not we’re gonna do. We’re gonna lease water. You’re completely correct. If it’s a municipality, this is going into their fresh water utility for drinking water for expansion of housing that you’re seeing at different parts of the country right now. On the industrial side, it’s a little different.

It could be agricultural grow houses, so where they’re growing vegetables and stuff like that. It could be data centers in the use of water. It’s a little different because some data centers are cooling, some are used in operation application itself. But regardless, it is a water source for that. And it could be a water source in other industries that use water for cooling or processing.

They’re actually higher in value than a municipality, but they’re not necessarily a utility that have exposure to utility capital on it. But that’s the arrangement. That’s the business model. That’s what we’re gonna do with it. We’re gonna target Texas and Colorado because we kinda know Waterloo pretty good in those states and we think the growth and the opportunity within them states are gonna hand us more Arkansas River farms or Arkansas Valley farm.

Yes sir? No sir. Yeah, I will talk to it. It’s methane capture. Inside of water services we have two pieces of that business that’s still there today that don’t fit within the water thesis that we just went over and described.

We have an accommodations with a portable power generation business inside there, and then we have what you call a flowback business in it. In that flowback business, you it’s in water services but it does not fit the water thesis.

Earl Gergen, Three Part Advisors, Three Part Advisors: So

John Schmitz, Chairman and CEO, Select Water Solutions: it is an area in the industry that has got a lot of pressure to expand because the regulations that are coming down, combustors are getting not only used during the completion and flowback process of the well where we participate, but they’re actually setting combustors on every battery site now. Any fumes coming out of the battery while they produce oil and gas, they capture and eliminate, with it. Is it an expansion area that is opportunistic? Yes, it is. Does it fit the water thesis?

No, it does not. Yes, sir?

Earl Gergen, Three Part Advisors, Three Part Advisors: Timing a Colorado project.

John Schmitz, Chairman and CEO, Select Water Solutions: Yeah, I didn’t. Sorry about that. We expect that we will thirty six months. And what will drive that is either buying more water rights, developing the storage, and what really will drive it is landing a contract with a municipal or industrial user that we can underwrite and spend that capital properly. But we would expect we probably will ink something in the next twenty four to thirty six months.

Yes sir, sorry about that. Thank you all very much. I appreciate it. Yes sir? There’s some large infrastructure companies that are either going to be a certain area, they’re not going to be brought across The United States like we are, and they’ll have either strengths in volumes because of the gathering they laid for customers or the disposals they put in.

There’s not gonna be a lot of competitiveness in fixed recycling facilities because we were kind of there. We built out the one. We actually announced, we built it out South Of Midland and it just had itsactually two of them now just had their milestone of 50,000,000 barrels of recycled produced water. So we’re heavily number one in the recycling space because we were to market. We’re very special in the sense of crossing The United States for all the development of oil and gas except the West Coast.

And so we would be very different then. And we would be the only company that would have water and chemistry. Chemistry is an important piece. Does it fit the water thesis? It does in the sense you use chemistry to treat the water to make it usable to frack with.

You use chemistry to actually do beneficial reuse if you get to that point, and you use chemistry to go in the water to actually frack the well. And that’s what this chemistry is, and we’re the only one like that. Yes, sir? So you got seismicity as it relates to injection which is starting to have regulatory limitations to injection. So that means water’s getting moved around, if you will, to find a way to manage it differently than what they were.

And then you got the development of recycling. And then you got, to your point about pore space, water is a big issue in the oil and gas industry. It’s a big issue in a lot of places now. Especially the Upper Delaware in Eddy and Lee County. New Mexico does not want you using fresh water to frack with now.

New Mexico don’t have a lot of water to begin with. So the development of of that acreage, which is probably some of the best acreage in The United States for oil and gas development, it needs a solution to a problem both on source to be able to drill and complete as well as management because that area comes kind of the highest water oil ratio in The United States. That 2,000 barrel well that you read about in the Upper Delaware, that 2,000 barrel oil well comes with 12,000 barrels of water. So it’s a growing problem. It’s limited to certain solutions.

We believe recycle is a great solution. Disposaland it’s the cheapest. Disposal is up the line. That’s going to be a challenge because of seismicity or limitations by government or pore space. Then you’ve got out of basin.

I should say you’ve got the opportunity of beneficial reuse. Can you take thirty, forty, 50% of that volume and make it a piece of water that can be entered back into the environment instead of disposal? That’s more expensive than disposal. And then you’ve got out of basin. Move the water long distances to get it away from that pore space that’s filling up or the seismicity or the growth.

And that’s the most expensive. Select has exposure to all of it. We like Recycle First because we think it’s the best economic solution that fits the regulatory body, that fits the need. If you look at all of our growth, all them capital dollars that we keep announcing, all of that, really, majority of it, y’all, is Eddy and Lee County, New Mexico because that’s where the good rock is and that’s where the need is the most. Thank you all very much.

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