Select Water Solutions (WTTR) 17th Annual Southwest IDEAS Conference summary

Strategic focus and business evolution

• Operations are structured across water infrastructure, water services, and chemical technologies, with a primary focus on the Permian Basin and a shift from service-based to infrastructure-based revenue streams.

• Water infrastructure, especially recycling and disposal, now constitutes the majority of income, with infrastructure expected to reach 60% of the business mix in the near future.

• Aggressive infrastructure build-out in New Mexico, particularly Lea County, is supported by long-term contracts averaging 11 years and nearly a million acres under dedication or right of first refusal.

• The company is expanding its water solutions beyond oil and gas, targeting municipal, agricultural, and industrial markets with long-term water rights investments, notably in Colorado.

• Consolidated EBITDA remains flat due to the transition, but infrastructure EBITDA is growing, masking the underlying growth story.

Recycling, economics, and regulatory environment

• Recycling is prioritized due to its economic and environmental advantages, costing $0.50 per barrel versus $1–$1.25 for disposal or beneficial reuse, and offering 25–50% cost savings over traditional water sourcing and disposal.

• The main impediment to increasing recycling rates from 50% to 85% is infrastructure build-out, not technical or economic feasibility.

• Beneficial reuse is seen as a long-term solution, with successful pilots completed and ongoing regulatory engagement, though meaningful revenue is not expected within 24 months.

• Regulatory risks are mitigated by a recycling-first approach, with contracts structured to pass through or share increased costs and include CPI escalators and regulatory clauses.

Competitive landscape and capital allocation

• Main competitors in New Mexico are disposal-first companies, while this company differentiates itself as recycling-first, providing flexibility to recycle or dispose as needed.

• Infrastructure investments are funded primarily through free cash flow from services and chemicals, maintaining a conservative balance sheet with low leverage.

• Capital expenditures for 2024 are projected at $250–$275 million, with 80% allocated to New Mexico infrastructure; this is expected to decrease in subsequent years.

• Dividend policy is a core tenet, with increases since inception and tactical share buybacks; as infrastructure spend slows, shareholder returns will become a larger focus.

• The company is positioned to benefit from industry consolidation, as scale becomes increasingly important for large operator partnerships.