Business Overview and History
Select Water Solutions, Inc. is a leading provider of sustainable water management and chemical solutions to the energy industry in the United States. Founded in 2006, the company has established itself as a pioneer in delivering environmentally responsible water services and infrastructure to support the evolving needs of its customers.
Select Water Solutions, Inc. was incorporated as a Delaware corporation on November 21, 2016, originally under the name Select Energy Services, Inc. The company changed its name to Select Water Solutions, Inc. on May 8, 2023 to reflect its strategic focus as a water-focused company.
Select Water Solutions is a leading provider of sustainable water-management solutions to the energy industry in the United States. The company places a strong emphasis on safe and environmentally responsible management of oilfield water throughout the lifecycle of a well. Over the past two decades, Select has developed expertise in sourcing, transferring, recycling, and disposing of water for its exploration and production (EP) customers.
Some key milestones in Select's history include the company's initial public offering in 2017, which raised $224 million and provided capital to fund growth initiatives. In 2022, Select completed several strategic acquisitions, including the acquisition of Breakwater Energy Services, LLC and the acquisition of certain assets and revenue-producing contracts in the Permian Basin. These acquisitions strengthened Select's geographic footprint and water logistics and infrastructure capabilities.
Challenges the company has faced include fluctuations in oil and gas prices, which can impact the capital spending and demand for services from Select's EP customers. The company has also had to navigate an evolving regulatory landscape, particularly around water management and disposal. Select has focused on diversifying its service offerings and infrastructure assets to be able to respond to changing customer needs and market conditions.
Today, Select operates through three reportable segments - Water Infrastructure, Water Services, and Chemical Technologies. The company provides a wide range of water-related services and infrastructure solutions to the oil and gas industry across the major U.S. unconventional shale plays. Select has built a strong reputation as a leader in sustainable water management in the energy sector.
Financial Performance and Ratios
Select Water Solutions has demonstrated robust financial performance over the past several years, despite the cyclical nature of the oil and gas industry. In 2024, the company reported consolidated revenue of $1.45 billion, a 26.5% increase from the prior year. This growth was primarily driven by a 26% year-over-year increase in revenue from the company's Water Infrastructure segment, which now accounts for 20% of total revenue.
The company's gross profit margin has also trended upwards, reaching 15.1% in 2024, up from 14.6% in the prior year. This improvement was largely attributable to the higher-margin nature of the company's water infrastructure and recycling businesses, which now represent a greater proportion of the overall revenue mix.
Select's balance sheet remains strong, with a debt-to-equity ratio of 0.17 as of December 31, 2024. The company's current ratio stands at 1.65, indicating a healthy liquidity position. Additionally, the company generated $235 million in operating cash flow and $78 million in free cash flow during the year, providing ample resources to fund ongoing operations and strategic initiatives.
For the full year 2024, Select Water Solutions reported net income of $35.45 million. The company's cash balance stood at $19.98 million as of December 31, 2024, with an available credit line of $114.80 million under the Prior Sustainability-Linked Credit Facility. The company's quick ratio was 1.49, further underlining its strong liquidity position.
In the most recent quarter (Q4 2024), the company reported revenue of $349.05 million, representing a 6% decrease compared to Q4 2023. This decline was primarily due to lower customer activity levels and price reductions impacted by competitor pricing. The company recorded a net loss of $1.64 million for the quarter.
Segmental Performance
Select Water Solutions operates through three main business segments: Water Infrastructure, Water Services, and Chemical Technologies.
Water Infrastructure: This segment, which accounts for 20% of the company's total revenue, has been a standout performer in recent years. Revenue in this segment grew by 26.5% in 2024, driven by increased volumes across the company's network of pipelines, recycling facilities, and disposal wells. Gross margins in this segment have also improved, reaching 53% in 2024, up from 47% in the prior year, as the company continues to scale its higher-margin infrastructure projects.
The Water Infrastructure segment consists of the company's fixed infrastructure assets, including operations associated with water distribution pipeline infrastructure, water recycling solutions, produced water gathering systems, saltwater disposal wells, and solids management facilities. This segment focuses on developing, building, and operating permanent and semi-permanent infrastructure solutions to support the full lifecycle of water management and waste treatment for EP customers. The company's operations in this segment are underpinned by a growing portfolio of long-term contractual agreements that encompass the delivery of water needed for near-term well development as well as long-term solutions for managing produced water over the entire production life of a well.
Water Services: The Water Services segment, which makes up 62% of total revenue, provides a range of services, including water sourcing, transfer, flowback and well testing, fluids hauling, and water containment. While revenue in this segment declined by 12.7% in 2024 due to lower customer activity levels, the company has been focused on improving margins through operational efficiencies and optimization of its service offerings.
This segment provides complex services needed to support new well completions as well as ongoing production over the life of the well. Through its patented WaterONE automation services and proprietary AquaView software platform, the Water Services segment provides extensive technology solutions that enable 24/7 monitoring and visibility for customers into all of their water-related operations.
Chemical Technologies: The Chemical Technologies segment, which contributes 18% of total revenue, develops, manufactures, and provides a suite of chemicals used in hydraulic fracturing, stimulation, and well completions. This segment experienced a 19.5% revenue decline in 2024, driven by lower industry activity, but the company remains focused on expanding its market share and developing innovative chemical solutions to support its customers' evolving needs.
The Chemical Technologies segment also provides customized water treatment and flow assurance solutions across the completion and production lifecycle. Through its FluidMatch solutions, the company provides comprehensive testing and analysis of customers' application conditions, product chemistry, and key performance requirements for oil and gas well completion fluid system design.
Geographic Footprint and Growth Opportunities
Select Water Solutions has a strong geographic presence across the major unconventional shale plays in the United States, including the Permian Basin, Marcellus/Utica, Haynesville, and Bakken regions. The company's extensive infrastructure network and diversified service offerings have enabled it to maintain a leading market position in these key basins. Select also operates in the MidCon, Eagle Ford, and Rockies regions.
Looking ahead, the company sees significant opportunities for growth in both its core energy markets as well as new adjacent sectors. In February 2025, Select announced a strategic investment of $62 million to consolidate and commercialize one of the largest water rights and storage portfolios in Colorado, positioning the company to serve the growing municipal, industrial, and agricultural water markets in the state. This initiative aligns with the company's broader strategy of leveraging its water expertise to expand into new verticals and provide long-term, high-margin contracted services.
Risks and Challenges
As with any company operating in the energy industry, Select Water Solutions faces a range of risks and challenges, including exposure to commodity price volatility, regulatory changes, and competition from both traditional and newer market participants.
The company's business is closely tied to the drilling and completion activities of its oil and gas customers, which can be impacted by fluctuations in crude oil and natural gas prices. While the company has taken steps to diversify its revenue streams and customer base, it remains vulnerable to industry downturns.
Additionally, the company operates in a highly regulated environment, with its water-related activities subject to a web of federal, state, and local laws and regulations. Changes to these regulations, such as restrictions on hydraulic fracturing or water disposal practices, could have a material impact on the company's operations and financial performance.
To mitigate these risks, Select Water Solutions has invested heavily in developing innovative technologies and sustainable water management solutions, positioning itself as a trusted partner to its customers. The company's diversification into adjacent markets, such as the municipal and industrial water sectors, also provides a hedge against the cyclicality of the oil and gas industry.
Industry Trends and Outlook
The oil and gas industry faced volatility in 2024 due to global economic factors, geopolitical tensions, and evolving energy policies. However, steady drilling and completion activities in most basins supported consistent demand for Select's services. The industry's focus on capital discipline and operational efficiency has intensified, driving demand for Select's integrated water management solutions that optimize costs and enhance environmental performance.
The ongoing energy transition is likely to accelerate water management challenges, as produced water volumes increase with well maturity and other growing industrial demand increases stress on overall water resources. This presents significant opportunities for Select's water recycling and disposal capabilities.
Looking ahead to 2025, Select Water Solutions expects a fairly steady commodity price environment across oil and natural gas markets, with potential medium-term upside in natural gas. While U.S. lower 48 activity levels are expected to modestly reduce compared to 2024, the company anticipates its Chemical Technology segment to drive solid revenue growth in 2025 and improve the margin profile of both the Chemical Technologies and Water Services segments.
In the Water Infrastructure segment, Select expects annual revenue and gross profit to continue growing 15% to 25% during 2025, with further growth anticipated into 2026. Across the entire company, Select firmly anticipates seeing stronger year-over-year adjusted EBITDA growth during 2025 and expects to pull through at least 30% of this adjusted EBITDA into free cash flow after accounting for all maintenance and growth capital expenditures.
Conclusion
Select Water Solutions has emerged as a leading provider of comprehensive water management solutions to the energy industry, leveraging its extensive infrastructure, technological expertise, and commitment to sustainability. The company's transformation from a water logistics provider to a diversified water solutions platform has been a key driver of its growth and profitability in recent years.
Looking ahead, Select's strategic investments in water infrastructure, recycling, and new market verticals position the company well to capitalize on the evolving needs of its customers and the broader shift towards more sustainable water practices. While the company faces inherent risks in its industry, its strong financial position, operational excellence, and innovative spirit suggest it is well-equipped to navigate the challenges and continue its growth trajectory in the years to come.
The company's record-setting performance in 2024, both operationally and financially, demonstrates its resilience and adaptability in a challenging market environment. With its continued focus on expanding its Water Infrastructure segment, enhancing its technological capabilities, and diversifying into new markets, Select Water Solutions is well-positioned to drive sustainable growth and create long-term value for its stakeholders.