Select Water Solutions (WTTR) 2024 Southwest IDEAS Conference summary

Business Overview and Strategy

• Focuses on sustainable water solutions for oil and gas, including sourcing, treating, storing, distributing, and disposing of water, with a growing emphasis on beneficial reuse programs.

• Holds a leading integrated water and chemical solutions position in the oil and gas sector, serving a diversified blue-chip customer base with no single customer over 9% of revenue.

• Operates three reporting segments: infrastructure (growth area), water services (high free cash flow), and chemicals.

• Maintains a conservative balance sheet and disciplined approach to M&A and project investments, prioritizing long-term contracts and high gross margins.

• Committed to shareholder returns, with a 17% dividend increase in Q3 2024 and over $188 million returned since 2018 through dividends and share repurchases.

Segment Performance and Growth

• Infrastructure segment drives growth, with 84% YoY revenue growth in 2023 and a target of over 50% of gross profit from Water Infrastructure by 2025.

• Water services and chemicals segments have achieved 70%-80% free cash flow conversion since 2022, funding infrastructure investments and M&A.

• Revenue mix has shifted from over 90% completion activity pre-COVID to a more balanced 64% completions and 36% production life.

• Strategic M&A and infrastructure investments have expanded the company’s footprint, especially in prolific regions like the Permian, Haynesville, Bakken, Rockies, and Northeast.

• Asset footprint spans every major U.S. unconventional basin, with over 1,000 miles of pipelines, 21 million barrels of produced water storage, and nearly 2 million barrels/day of permitted disposal capacity.

Financial and Operational Performance

• 2023 revenue reached $1.6 billion (up 14% YoY), with net income of $79.2 million (up 44% YoY) and adjusted EBITDA of $258 million (up 33% YoY).

• Water Infrastructure revenue grew to $230 million (up 84% YoY), and recycled produced water volumes hit 248 million barrels (up 183% YoY).

• Operating cash flow surged to $285 million in 2023 (up 759% YoY), with gross margins before D&A at 23.4%.

• $160 million in transactions completed this year, with $120 million in announced new build projects for recycling, pipelines, and storage.

• Conservative net debt position (~$70 million) and $133 million in liquidity as of September 30, 2024.