Select Energy Services, Inc. intends to
become Select Water Solutions, Inc., further aligning the brand
with the Company's vision to be the recognized leader and trusted
partner in sustainable water management solutions
Generated revenue of $1.4 billion for full year 2022 and $382 million during the fourth quarter of 2022,
up 81% annually from 2021 and up 2% sequentially from the third
quarter of 2022
Acquired strategic portfolio of Permian
Basin water infrastructure, including water gathering, disposal,
sourcing, storage and distribution assets from multiple
parties
Acquired joint venture interests in certain
strategic recycling facilities in the Permian Basin from minority
partners
Announced significant new Delaware Basin recycling infrastructure
project supported by multiple long-term contracts
HOUSTON, Feb. 21,
2023 /PRNewswire/ -- Select Energy Services, Inc.
(NYSE: WTTR) ("Select" or the "Company"), a leading provider of
sustainable water and chemical solutions to the energy industry,
today announced its intent to rename itself Select Water Solutions,
Inc. and its successful completion of multiple water infrastructure
acquisitions in the Permian Basin, as well as its financial and
operating results for the full year and quarter ended December 31, 2022.
John Schmitz, Chairman of the
Board, President and CEO, stated "Over the last couple of years,
Select has remained steadfastly focused on a strategy of building
and bolstering the core water and chemicals businesses, advancing
our technology, sustainability and diversification efforts, and
executing on strategic M&A. In recent years, we have closed on
a dozen strategic acquisitions, while simultaneously divesting
non-core businesses and assets that were not strategic to our
vision. During 2022, we grew our revenues by more than 300%
relative to our pandemic lows and generated all-time-high levels of
net income. We have accomplished this while simultaneously
protecting the strength of our balance sheet, returning capital to
shareholders and positioning Select for further growth.
"Through both organic development and acquisitions, we have put
together one of the largest strategic water infrastructure
footprints across the U.S. Through a series of bolt-on asset
transactions completed in December
2022 and January 2023, we've
further expanded this footprint in recent months, adding a
portfolio of strategic pipeline, storage and disposal assets that
have been quickly and readily integrated into the extensive
recycling infrastructure network we acquired from the previously
announced Breakwater acquisition.
"I'm also excited to further expand this footprint through a new
commercial full lifecycle organic recycling development project in
the Delaware Basin, backed by
multiple long-term contracts. Additionally, we have continued to
develop new and creative chemistry technologies that have grown our
market share and helped lead the energy industry transition towards
sustainable full lifecycle recycling and reuse solutions. During
2022, Select recycled 174 million barrels of produced water for
reuse, or more than 7 billion gallons, with approximately
two-thirds coming from fixed facilities and one-third coming from
mobile operations. Select's recycling solutions significantly
diminish the amount of freshwater demanded by the industry,
currently reducing freshwater usage by an amount of water
equivalent to that consumed by more than 240,000 Americans for
personal consumption per day, according to the Department of the
Interior's U.S. Geological Survey.
"At our core, Select is dedicated to our vision to be the
recognized leader and trusted partner in sustainable water
management solutions. 2022 represented a culmination of sorts for
this strategy, as well as a new beginning. Select was initially
built to service the energy industry, and I believe we have become
a technology leader with uniquely integrated water and chemistry
capabilities in the industry. We will remain steadfast in our
dedication towards advancing new and sustainable solutions for our
customers and other stakeholders that are responsible for producing
the fuels needed to provide mobility, the energy needed to power
our homes, and the refined products needed to engineer advanced
materials and technologies. However, we strongly believe our
expertise in sustainable water and chemical solutions has a diverse
range of applications beyond the unconventional energy industry as
well.
"Accordingly, I'm excited to announce our corporate rebranding
initiative. During the first half of 2023, Select intends to become
Select Water Solutions, Inc. and will retain our current stock
ticker "WTTR" trading on the New York Stock Exchange. We expect the
change to become effective shortly after the Company's annual
meeting of shareholders. For now, our corporate and financial
reporting structures will not change. This rebranding more
efficiently aligns our employees and field operations,
consolidating more than a dozen brands and DBAs currently operating
nationwide, while also simplifying our external communications with
our customers. Our organization has experienced tremendous growth
in recent years and to better meet the needs of our customers in a
rapidly changing market, we've strategically added new products,
services, infrastructure and most importantly, talented and capable
people. At the most fundamental level, our business is all about
creating connections, whether it is about further uniting our teams
around integrated water and chemistry, creating sustainable
partnerships with our customers, integrating large infrastructure
networks or being good stewards for the surrounding communities.
This change prepares Select for the future as our business evolves
and we assess additional diversification opportunities. Whether
it's molecules or pipelines or people, we are all connected by
water. I'm very excited about what the future holds for Select and
look forward to further executing on this vision through additional
profitability growth, shareholder returns and strategic execution
throughout 2023 and beyond.
"While the fourth quarter was impacted by integration and
weather challenges, ultimately I am very pleased with our overall
financial performance over the course of 2022. Supported by our
recent acquisitions, advanced chemical technologies, organic
infrastructure growth opportunities and our other strategic
investments, we expect to see meaningful revenue, EBITDA and net
income growth in 2023. Subject to market conditions and the
realization of certain projects, we expect to deploy between
$90 and $130
million of net capex during 2023, with an objective of
converting two-thirds of our EBITDA into free cash flow, supported
by substantial working capital improvements. I look forward to
building upon our 2022 results and significantly expanding our free
cash flow generation during 2023. This will provide ample
opportunities for incremental growth, while also allowing us to
advance our support of committed capital returns for our
shareholders," concluded Schmitz.
Full Year 2022 Consolidated Financial Information
Revenue for full year 2022 was $1.4
billion as compared to $765
million during full year 2021. Net income for full year 2022
was $54.9 million as compared to a
net loss of $50.1 million during full
year 2021.
For full year 2022, gross profit was $160.8 million, as compared to $20.9 million during full year 2021. Total gross
margin was 11.6% during full year 2022 as compared to 2.7% during
full year 2021. Gross margin before depreciation and amortization
("D&A") for full year 2022 was 19.8% as compared to 14.5% for
full year 2021.
Selling, general and administrative expense ("SG&A") during
full year 2022 was $118.9 million as
compared to $83.1 million during full
year 2021. SG&A during full year 2022 and 2021 was impacted by
non-recurring transaction costs, primarily related to our recent
acquisitions, of $8.7 million and
$5.0 million, respectively.
Adjusted EBITDA was $194.8 million
during full year 2022 as compared to $50.0
million during full year 2021. Adjusted EBITDA during 2022
was impacted by the deduction of $13.4
million of non-recurring bargain purchase price gains that
benefited net income during the year related to the Company's
recent acquisition activity. Additionally, Adjusted EBITDA during
full year 2022 was impacted by $11.7
million of non-recurring transaction costs, $4.4 million of non-cash losses on asset sales
and $2.3 million in other
adjustments. Non-cash compensation expense accounted for an
additional $15.6 million adjustment
during full year 2022. Please refer to the end of this release for
reconciliations of gross profit before D&A (non-GAAP measure)
to gross profit and of Adjusted EBITDA (non-GAAP measure) to net
income (loss).
Fourth Quarter 2022 Consolidated Financial
Information
Revenue for the fourth quarter of 2022 was $381.7 million as compared to $375.1 million in the third quarter of 2022 and
$255.1 million in the fourth quarter
of 2021. Net income for the fourth quarter of 2022 was $7.6 million as compared to $24.7 million in the third quarter of 2022 and
$11.2 million in the fourth quarter
of 2021.
For the fourth quarter of 2022, gross profit was $41.6 million, as compared to $58.8 million in the third quarter of 2022 and
$17.9 million in the fourth quarter
of 2021. Total gross margin was 10.9% in the fourth quarter of 2022
as compared to 15.7% in the third quarter of 2022 and 7.0% in the
fourth quarter of 2021. Gross margin before D&A for the fourth
quarter of 2022 was 19.0% as compared to 22.8% for the third
quarter of 2022 and 16.6% for the fourth quarter of 2021. Gross
profit for the fourth quarter of 2022 was impacted by approximately
$8 million of non-ordinary expenses,
consisting of approximately $7
million related to insurance expense and actuarial reserve
adjustments, including the impact of recently acquired operations
and legacy obligations, and approximately $1
million of asset write-offs.
SG&A during the fourth quarter of 2022 was $34.1 million as compared to $29.8 million during the third quarter of 2022
and $25.2 million during the fourth
quarter of 2021. SG&A during the fourth and third quarters of
2022 and the fourth quarter of 2021 was impacted by non-recurring
transaction costs of $3.9 million,
$0.7 million and $2.0 million, respectively.
Adjusted EBITDA was $52.2 million
in the fourth quarter of 2022 as compared to $62.8 million in the third quarter of 2022 and
$26.4 million in the fourth quarter
of 2021. Adjusted EBITDA during the fourth quarter of 2022 was
impacted by $4.2 million of
non-recurring transaction costs, $1.3
million of non-cash losses on asset sales, a $0.4 million reduction in bargain purchase gain
adjustment and $1.3 million in other
adjustments. Non-cash compensation expense accounted for an
additional $4.5 million adjustment
during the fourth quarter of 2022. Please refer to the end of this
release for reconciliations of gross profit before D&A
(non-GAAP measure) to gross profit and of Adjusted EBITDA (non-GAAP
measure) to net income (loss).
Business Segment Information
The Water Services segment generated revenues of
$218.5 million in the fourth quarter
of 2022 as compared to $221.2 million
in the third quarter of 2022 and $140.7
million in the fourth quarter of 2021. Gross margin
before D&A for Water Services was 18.5% in the fourth quarter
of 2022 as compared to 22.8% in the third quarter of 2022 and 15.4%
in the fourth quarter of 2021. Revenues for this segment were
impacted by regional weather-related challenges during December and
modest seasonal activity reductions by certain customers, offset
partially by contributions from acquired Breakwater operations.
Segment gross profit during the fourth quarter of 2022 was impacted
by lower revenue and approximately $5.2
million of non-ordinary insurance expense and actuarial
reserve adjustments. For the first quarter of 2023, the Company
expects to see modestly increased revenue with gross margins before
D&A improving by 200–300 basis points, as early January weather
challenges are overcome by continuing operational efficiencies.
The Water Infrastructure segment generated
revenues of $77.2 million in the
fourth quarter of 2022 as compared to $74.4
million in the third quarter of 2022 and $46.9 million in the fourth quarter of 2021.
Gross margin before D&A for Water Infrastructure was 22.4% in
the fourth quarter of 2022 as compared to 27.2% in the third
quarter of 2022 and 25.8% in the fourth quarter of 2021.
Revenues improved 4% sequentially, with weather-related challenges
delaying certain customer activities into the first quarter of 2023
and resulting in incremental weather-related and integration costs.
Additionally, segment gross profit during the fourth quarter of
2022 was impacted by approximately $1.0
million of non-ordinary insurance expense and actuarial
reserve adjustments. For the first quarter of 2023, the Company
anticipates strong 20-25% revenue growth, with gross margins before
D&A in the high-20 to 30 percent range, as full quarter
contributions from our recent acquisitions complement our existing
base business and organic project execution.
The Oilfield Chemicals segment generated revenues
of $86.0 million in the fourth
quarter of 2022 as compared to $79.4
million in the third quarter of 2022 and $67.5 million in the fourth quarter of
2021. Gross margin before D&A for Oilfield Chemicals was
17.4% in the fourth quarter of 2022 as compared to 18.8% in the
third quarter of 2022 and 12.6% in the fourth quarter of 2021. We
continue to see strong demand for our proprietary chemical
technologies as well as advanced water treatment applications, with
revenues outpacing expectations and margins holding relatively
steady. For the first quarter of 2023, the Company anticipates
relatively stable revenue and margins for the Oilfield Chemicals
segment as the segment continues to perform at its recent all-time
high-water mark levels.
Cash Flow and Capital Expenditures
Cash flow from operations for the fourth quarter of 2022 was
$35.3 million as compared to
$5.4 million in the third quarter of
2022 and ($2.4) million in the fourth
quarter of 2021.
Net capital expenditures for the fourth quarter of 2022 were
$11.2 million, comprised of
$21.1 million of capital expenditures
partially offset by $9.9 million of
cash proceeds from asset sales, including the divestment of
underutilized equipment and real estate from recently acquired
businesses. Cash flow from operations less net capital expenditures
was $24.2 million during the fourth
quarter of 2022.
Cash flow used in investing activities during the fourth quarter
of 2022 included $12.6 million of
outflows for acquisitions and other equity investments. Cash flows
from financing activities included $22.0
million of cash consideration to purchase certain joint
venture minority interests, $16.0
million of net borrowings on our sustainability-linked
credit facility, $6.0 million of
dividends paid, $3.3 million to
settle acquired debts, and $2.2
million of other net outflows.
Balance Sheet and Capital Structure
Total cash and cash equivalents were $7.3
million as of December 31,
2022 as compared to $13.2
million as of September 30,
2022. The Company had $16.0
million of borrowings outstanding under its
sustainability-linked credit facility as of December 31, 2022 and no borrowings outstanding
under its sustainability-linked credit facility or its prior credit
facility as of September 30, 2022 and
December 31, 2021, respectively.
As of December 31, 2022 and
September 30, 2022, the borrowing
base under the sustainability-linked credit facility was
$245.0 million and $254.4 million, respectively. The Company had
available borrowing capacity under its sustainability-linked credit
facility as of December 31, 2022 and
September 30, 2022, of approximately
$206.1 million and $231.5 million, respectively, after giving effect
to $22.9 million of outstanding
letters of credit as of both December 31,
2022 and September 30,
2022.
Total liquidity was $213.4 million
as of December 31, 2022, as compared
to $244.7 million as of September 30, 2022. The Company had
101,096,360 weighted average shares of Class A common stock
outstanding and 16,221,101 weighted average shares of Class B
common stock outstanding during the fourth quarter of 2022.
Permian Basin Infrastructure Acquisitions
During December 2022 and
January 2023, Select completed a
series of transactions in the Midland Basin area of the Permian
Basin for total consideration of approximately $44 million, including $36
million of cash consideration and approximately 900,000
shares of Select Class A common stock. During December 2022, Select closed on the acquisition
of two joint venture interests in certain produced water recycling
facilities in Howard County, Texas
for cash and stock consideration. These acquisitions complete the
buyout of all minority partner interests in certain recycling
facilities that Select owned and operated following the acquisition
of Breakwater, which previously closed in November 2022.
Additionally, Select acquired approximately 35 miles of
gathering and distribution pipelines, 3.5 million barrels of water
storage, approximately 120 brackish source water wells and 25,000
barrels per day of permitted disposal capacity. In conjunction with
the acquisitions, Select initiated the construction of additional
pipeline connections to interconnect the acquired assets to
existing Select facilities. This will provide significant
optionality long-term and expand the scope and reach of our
operations across a broader acreage footprint in the core of the
Midland Basin.
Delaware Basin Recycling
Project
Select has entered into a 10-year agreement with a public
independent operator in the Northern
Delaware Basin, whereby Select will build a produced water
recycling facility capable of recycling 100,000 barrels per day of
produced water with 1.5 million barrels of treated produced water
storage capacity. Select also plans to construct approximately 5
miles of large diameter pipeline to distribute treated produced
water to pad sites throughout the operator's acreage footprint. The
project is supported by a 10-year acreage dedication under which
the operator has agreed to purchase from Select's recycling
facility all recycled completions water required for its operations
within the dedicated area. The dedication covers approximately
18,000 acres in the Northern
Delaware Basin with an additional right-of-first-offer to
construct produced water recycling and processing infrastructure on
an additional approximately 10,000 acres in Lea County, New Mexico.
In conjunction with the recycling agreement, Select has also
entered into a long term produced water takeaway agreement with a
downstream and logistics company in the vicinity of the planned
recycling facility. Select will connect via pipeline from the
recycling facility to the downstream and logistics company's
existing infrastructure to further supplement the operator's
drilling and completion activities and associated water demand in
the area. The total project cost is estimated between $10 – $11 million
and the Company expects the recycling facility and associated
infrastructure to be built and fully operational by year-end
2023.
Breakwater & Cypress Acquisitions
As previously announced, on November 1,
2022, Select completed the acquisition of Breakwater Energy
Partners, LLC through a stock-for-stock transaction and the
acquisition of a portfolio of water gathering pipeline and disposal
assets in the Bakken Shale from Cypress Environmental Services,
LLC. In connection with the closings, Select issued a total of
approximately 10.1 million shares of Select Class A common stock
and repaid or assumed approximately $12.6
million of outstanding indebtedness and other obligations,
subject to customary post-closing adjustments.
Conference Call
Select has scheduled a conference call on Wednesday, February 22, 2023 at 11:00 a.m. Eastern time / 10:00 a.m. Central time. Please dial
201-389-0872 and ask for the Select Energy Services call at least
10 minutes prior to the start time of the call, or listen to the
call live over the Internet by logging on to the website at the
address
https://investors.selectenergy.com/events-presentations/current.
A telephonic replay of the conference call will be available
through March 8, 2023, and may be
accessed by calling 201-612-7415 using passcode 13736020#. A
webcast archive will also be available at the link above shortly
after the call and will be accessible for approximately 90
days.
About Select Energy Services, Inc.
Select is a leading provider of sustainable water and chemical
solutions to the energy industry. These solutions are supported by
the Company's critical water infrastructure assets, chemical
manufacturing and water treatment and recycling capabilities. As a
leader in sustainable water and chemical solutions, Select places
the utmost importance on safe, environmentally responsible
management of oilfield water throughout the lifecycle of a well.
Additionally, Select believes that responsibly managing water
resources throughout its operations to help conserve and protect
the environment is paramount to the continued success of the
Company. For more information, please visit Select's website,
https://www.selectenergy.com/.
Cautionary Statement Regarding Forward-Looking
Statements
All statements in this communication other than statements of
historical facts are forward-looking statements which contain our
current expectations about our future results. We have attempted to
identify any forward-looking statements by using words such as
"could," "believe," "anticipate," "expect," "intend," "project,"
"will," "estimate" and other similar expressions. Although we
believe that the expectations reflected, and the assumptions or
bases underlying our forward-looking statements are reasonable, we
can give no assurance that such expectations will prove to be
correct. Such statements are not guarantees of future performance
or events and are subject to known and unknown risks and
uncertainties that could cause our actual results, events or
financial positions to differ materially from those included within
or implied by such forward-looking statements. These risks and
uncertainties include the risks that the benefits contemplated from
our recent acquisitions may not be realized, the ability of Select
to successfully integrate the acquired businesses' operations,
including Breakwater's employees, and realize anticipated synergies
and cost savings and the potential impact of the consummation of
the acquisitions on relationships, including with employees,
suppliers, customers, competitors and creditors. Factors that could
materially impact such forward-looking statements include, but are
not limited to: the global macroeconomic uncertainty related to the
Russia-Ukraine war; actions by the members of OPEC+
with respect to oil production levels and announcements of
potential changes in such levels, including the ability of the
OPEC+ countries to agree on and comply with supply limitations; the
severity and duration of world health events, including the
COVID-19 pandemic, which had a negative impact on our business; the
level of capital spending and access to capital markets by oil and
gas companies, trends and volatility in oil and gas prices, and our
ability to manage through such volatility; and other factors
discussed or referenced in the "Risk Factors" section of our most
recent Annual Report on Form 10-K and those set forth from time to
time in our other filings with the SEC. Investors should not place
undue reliance on our forward-looking statements. Any
forward-looking statement speaks only as of the date on which such
statement is made, and we undertake no obligation to publicly
update or revise any forward-looking statement, whether as a result
of new information, future events, changed circumstances or
otherwise, unless required by law.
WTTR-ER
SELECT ENERGY
SERVICES, INC. CONSOLIDATED STATEMENTS OF
OPERATIONS (unaudited) (in thousands, except
share and per share data)
|
|
|
|
Three months
ended
|
|
Twelve months
ended
|
|
|
|
December 31,
2022
|
|
September 30,
2022
|
|
December 31,
2021
|
|
December 31,
2022
|
|
December 31,
2021
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Water
Services
|
|
$
|
218,524
|
|
$
|
221,243
|
|
$
|
140,727
|
|
$
|
799,369
|
|
$
|
394,075
|
|
Water
Infrastructure
|
|
|
77,178
|
|
|
74,396
|
|
|
46,873
|
|
|
270,412
|
|
|
154,789
|
|
Oilfield
Chemicals
|
|
|
85,974
|
|
|
79,433
|
|
|
67,528
|
|
|
317,639
|
|
|
215,756
|
|
Total
revenue
|
|
|
381,676
|
|
|
375,072
|
|
|
255,128
|
|
|
1,387,420
|
|
|
764,620
|
|
Costs of
revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Water
Services
|
|
|
178,146
|
|
|
170,845
|
|
|
118,994
|
|
|
644,097
|
|
|
346,730
|
|
Water
Infrastructure
|
|
|
59,899
|
|
|
54,197
|
|
|
34,757
|
|
|
203,413
|
|
|
115,887
|
|
Oilfield
Chemicals
|
|
|
70,978
|
|
|
64,519
|
|
|
59,012
|
|
|
265,648
|
|
|
191,115
|
|
Other
|
|
|
—
|
|
|
(1)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Depreciation and
amortization
|
|
|
31,082
|
|
|
26,672
|
|
|
24,456
|
|
|
113,507
|
|
|
90,028
|
|
Total costs of
revenue
|
|
|
340,105
|
|
|
316,232
|
|
|
237,219
|
|
|
1,226,665
|
|
|
743,760
|
|
Gross
profit
|
|
|
41,571
|
|
|
58,840
|
|
|
17,909
|
|
|
160,755
|
|
|
20,860
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative
|
|
|
34,143
|
|
|
29,782
|
|
|
25,248
|
|
|
118,935
|
|
|
83,076
|
|
Depreciation and
amortization
|
|
|
573
|
|
|
543
|
|
|
595
|
|
|
2,209
|
|
|
2,430
|
|
Lease abandonment
costs
|
|
|
113
|
|
|
83
|
|
|
414
|
|
|
449
|
|
|
894
|
|
Total operating
expenses
|
|
|
34,829
|
|
|
30,408
|
|
|
26,257
|
|
|
121,593
|
|
|
86,400
|
|
Income (loss) from
operations
|
|
|
6,742
|
|
|
28,432
|
|
|
(8,348)
|
|
|
39,162
|
|
|
(65,540)
|
|
Other income
(expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) on sales
of property and equipment and divestitures, net
|
|
|
287
|
|
|
(479)
|
|
|
(147)
|
|
|
2,192
|
|
|
(2,068)
|
|
Interest expense,
net
|
|
|
(870)
|
|
|
(616)
|
|
|
(457)
|
|
|
(2,700)
|
|
|
(1,711)
|
|
Foreign currency gain
(loss), net
|
|
|
1
|
|
|
(6)
|
|
|
1
|
|
|
(8)
|
|
|
2
|
|
Bargain purchase
gain
|
|
|
(416)
|
|
|
(3,273)
|
|
|
18,985
|
|
|
13,352
|
|
|
18,985
|
|
Other
|
|
|
2,449
|
|
|
1,153
|
|
|
1,629
|
|
|
4,726
|
|
|
673
|
|
Income (loss) before
income tax (expense) benefit
|
|
|
8,193
|
|
|
25,211
|
|
|
11,663
|
|
|
56,724
|
|
|
(49,659)
|
|
Income tax
expense
|
|
|
(285)
|
|
|
(276)
|
|
|
(358)
|
|
|
(957)
|
|
|
(147)
|
|
Equity in losses of
unconsolidated entities
|
|
|
(337)
|
|
|
(218)
|
|
|
(150)
|
|
|
(913)
|
|
|
(279)
|
|
Net income
(loss)
|
|
|
7,571
|
|
|
24,717
|
|
|
11,155
|
|
|
54,854
|
|
|
(50,085)
|
|
Less: net (income) loss
attributable to noncontrolling interests
|
|
|
78
|
|
|
(3,393)
|
|
|
(1,662)
|
|
|
(6,576)
|
|
|
7,860
|
|
Net income (loss)
attributable to Select Energy Services, Inc.
|
|
$
|
7,649
|
|
$
|
21,324
|
|
$
|
9,493
|
|
$
|
48,278
|
|
$
|
(42,225)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per
share attributable to common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class
A—Basic
|
|
$
|
0.08
|
|
$
|
0.23
|
|
$
|
0.11
|
|
$
|
0.51
|
|
$
|
(0.48)
|
|
Class
B—Basic
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per
share attributable to common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class
A—Diluted
|
|
$
|
0.07
|
|
$
|
0.22
|
|
$
|
0.10
|
|
$
|
0.50
|
|
$
|
(0.48)
|
|
Class
B—Diluted
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
SELECT ENERGY
SERVICES, INC. CONSOLIDATED BALANCE
SHEETS (in thousands, except share data)
|
|
|
|
As of
December 31,
|
|
|
2022
|
|
2021
|
Assets
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
7,322
|
|
$
|
85,801
|
Accounts receivable
trade, net of allowance for credit losses of $4,918 and $4,401,
respectively
|
|
|
429,983
|
|
|
232,824
|
Accounts receivable,
related parties
|
|
|
5,087
|
|
|
219
|
Inventories
|
|
|
41,164
|
|
|
44,456
|
Prepaid expenses and
other current assets
|
|
|
34,380
|
|
|
31,486
|
Total current
assets
|
|
|
517,936
|
|
|
394,786
|
Property and
equipment
|
|
|
1,084,005
|
|
|
943,515
|
Accumulated
depreciation
|
|
|
(584,451)
|
|
|
(551,727)
|
Total property and
equipment, net
|
|
|
499,554
|
|
|
391,788
|
Right-of-use assets,
net
|
|
|
47,662
|
|
|
47,732
|
Other intangible
assets, net
|
|
|
138,800
|
|
|
108,472
|
Other long-term assets,
net
|
|
|
18,901
|
|
|
7,414
|
Total
assets
|
|
$
|
1,222,853
|
|
$
|
950,192
|
Liabilities and
Equity
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
61,539
|
|
$
|
36,049
|
Accrued accounts
payable
|
|
|
67,462
|
|
|
52,051
|
Accounts payable and
accrued expenses, related parties
|
|
|
3,305
|
|
|
1,939
|
Accrued salaries and
benefits
|
|
|
28,686
|
|
|
22,233
|
Accrued
insurance
|
|
|
26,180
|
|
|
13,408
|
Sales tax
payable
|
|
|
3,056
|
|
|
2,706
|
Accrued expenses and
other current liabilities
|
|
|
23,292
|
|
|
19,544
|
Current operating
lease liabilities
|
|
|
17,751
|
|
|
13,997
|
Current portion of
finance lease obligations
|
|
|
19
|
|
|
113
|
Total current
liabilities
|
|
|
231,290
|
|
|
162,040
|
Long-term operating
lease liabilities
|
|
|
46,388
|
|
|
53,198
|
Long-term
debt
|
|
|
16,000
|
|
|
—
|
Other long-term
liabilities
|
|
|
45,447
|
|
|
39,780
|
Total
liabilities
|
|
|
339,125
|
|
|
255,018
|
Commitments and
contingencies
|
|
|
|
|
|
|
Class A common
stock, $0.01 par value; 350,000,000 shares authorized and
109,389,528 shares issued and outstanding as of December 31, 2022;
350,000,000 shares authorized and 94,172,920 shares issued and
outstanding as of December 31, 2021
|
|
|
1,094
|
|
|
942
|
Class A-2 common
stock, $0.01 par value; 40,000,000 shares authorized; no shares
issued or outstanding as of December 31, 2022 and December 31,
2021
|
|
|
—
|
|
|
—
|
Class B common
stock, $0.01 par value; 150,000,000 shares authorized and
16,221,101 shares issued and outstanding as of December 31, 2022
and December 31, 2021
|
|
|
162
|
|
|
162
|
Preferred stock, $0.01
par value; 50,000,000 shares authorized; no shares issued and
outstanding as of December 31, 2022 and December 31,
2021
|
|
|
—
|
|
|
—
|
Additional paid-in
capital
|
|
|
1,075,915
|
|
|
950,464
|
Accumulated
deficit
|
|
|
(311,194)
|
|
|
(359,472)
|
Total stockholders'
equity
|
|
|
765,977
|
|
|
592,096
|
Noncontrolling
interests
|
|
|
117,751
|
|
|
103,078
|
Total equity
|
|
|
883,728
|
|
|
695,174
|
Total liabilities
and equity
|
|
$
|
1,222,853
|
|
$
|
950,192
|
SELECT ENERGY
SERVICES, INC. CONSOLIDATED STATEMENTS OF CASH
FLOWS (unaudited) (in thousands)
|
|
|
|
Three months
ended
|
|
Twelve months
ended
|
|
|
December 31,
2022
|
|
September 30,
2022
|
|
December 31,
2021
|
|
December 31,
2022
|
|
December 31,
2021
|
Cash flows from
operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
7,571
|
|
$
|
24,717
|
|
$
|
11,155
|
|
$
|
54,854
|
|
$
|
(50,085)
|
Adjustments to
reconcile net income (loss) to net cash provided by (used in)
operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
31,655
|
|
|
27,215
|
|
|
25,051
|
|
|
115,716
|
|
|
92,458
|
(Gain) loss on
disposal of property and equipment and divestitures
|
|
|
(287)
|
|
|
479
|
|
|
147
|
|
|
(2,192)
|
|
|
2,068
|
Equity in losses of
unconsolidated entities
|
|
|
337
|
|
|
218
|
|
|
150
|
|
|
913
|
|
|
279
|
Bad debt (recovery)
expense
|
|
|
(68)
|
|
|
828
|
|
|
512
|
|
|
2,023
|
|
|
(139)
|
Amortization of debt
issuance costs
|
|
|
122
|
|
|
122
|
|
|
172
|
|
|
661
|
|
|
688
|
Inventory
adjustments
|
|
|
(125)
|
|
|
(801)
|
|
|
100
|
|
|
(737)
|
|
|
239
|
Equity-based
compensation
|
|
|
4,547
|
|
|
3,804
|
|
|
3,221
|
|
|
15,570
|
|
|
9,469
|
Bargain purchase
gain
|
|
|
416
|
|
|
3,273
|
|
|
(18,985)
|
|
|
(13,352)
|
|
|
(18,985)
|
Unrealized (gain) loss
on short-term investment
|
|
|
—
|
|
|
(40)
|
|
|
638
|
|
|
—
|
|
|
2,044
|
Other operating items,
net
|
|
|
(1,279)
|
|
|
(232)
|
|
|
(1,486)
|
|
|
(1,989)
|
|
|
(1,795)
|
Changes in operating
assets and liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(20,789)
|
|
|
(51,815)
|
|
|
(47,618)
|
|
|
(162,257)
|
|
|
(80,127)
|
Prepaid expenses and
other assets
|
|
|
1,464
|
|
|
(5,820)
|
|
|
(4,824)
|
|
|
1,264
|
|
|
(15,108)
|
Accounts payable and
accrued liabilities
|
|
|
11,774
|
|
|
3,413
|
|
|
29,415
|
|
|
22,757
|
|
|
42,746
|
Net cash provided by
(used in) operating activities
|
|
|
35,338
|
|
|
5,361
|
|
|
(2,352)
|
|
|
33,231
|
|
|
(16,248)
|
Cash flows from
investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of
securities
|
|
|
—
|
|
|
—
|
|
|
730
|
|
|
—
|
|
|
730
|
Purchase of property
and equipment
|
|
|
(21,069)
|
|
|
(19,839)
|
|
|
(10,069)
|
|
|
(71,884)
|
|
|
(39,994)
|
Investment in note
receivable
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,101)
|
Purchase of equity
method investments
|
|
|
(900)
|
|
|
(2,500)
|
|
|
—
|
|
|
(7,667)
|
|
|
(2,200)
|
Collection of note
receivable
|
|
|
—
|
|
|
—
|
|
|
167
|
|
|
184
|
|
|
167
|
Distribution from cost
method investment
|
|
|
—
|
|
|
—
|
|
|
60
|
|
|
60
|
|
|
180
|
Acquisitions and
divestitures
|
|
|
(11,671)
|
|
|
984
|
|
|
(16,096)
|
|
|
(5,259)
|
|
|
(34,740)
|
Proceeds received from
sales of property and equipment
|
|
|
9,887
|
|
|
3,750
|
|
|
6,011
|
|
|
31,320
|
|
|
12,502
|
Net cash used in
investing activities
|
|
|
(23,753)
|
|
|
(17,605)
|
|
|
(19,197)
|
|
|
(53,246)
|
|
|
(64,456)
|
Cash flows from
financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings from
revolving line of credit
|
|
|
61,000
|
|
|
52,000
|
|
|
—
|
|
|
143,000
|
|
|
—
|
Payments on revolving
line of credit
|
|
|
(45,000)
|
|
|
(52,000)
|
|
|
—
|
|
|
(127,000)
|
|
|
—
|
Payments on long-term
debt
|
|
|
(3,295)
|
|
|
—
|
|
|
—
|
|
|
(22,075)
|
|
|
—
|
Payments of finance
lease obligations
|
|
|
(4)
|
|
|
(5)
|
|
|
(82)
|
|
|
(112)
|
|
|
(320)
|
Payment of debt
issuance costs
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,144)
|
|
|
—
|
Dividends
paid
|
|
|
(6,020)
|
|
|
—
|
|
|
—
|
|
|
(6,020)
|
|
|
—
|
Proceeds from share
issuance
|
|
|
18
|
|
|
10
|
|
|
15
|
|
|
53
|
|
|
58
|
Purchase of
noncontrolling interests
|
|
|
(22,000)
|
|
|
—
|
|
|
—
|
|
|
(22,000)
|
|
|
—
|
Distributions to
noncontrolling interests
|
|
|
(1,943)
|
|
|
—
|
|
|
—
|
|
|
(1,943)
|
|
|
(1,074)
|
Repurchase of common
stock
|
|
|
(243)
|
|
|
(272)
|
|
|
—
|
|
|
(20,210)
|
|
|
(1,206)
|
Net cash used in
financing activities
|
|
|
(17,487)
|
|
|
(267)
|
|
|
(67)
|
|
|
(58,451)
|
|
|
(2,542)
|
Effect of exchange rate
changes on cash
|
|
|
2
|
|
|
(9)
|
|
|
4
|
|
|
(13)
|
|
|
8
|
Net decrease in cash
and cash equivalents
|
|
|
(5,900)
|
|
|
(12,520)
|
|
|
(21,612)
|
|
|
(78,479)
|
|
|
(83,238)
|
Cash and cash
equivalents, beginning of period
|
|
|
13,222
|
|
|
25,742
|
|
|
107,413
|
|
|
85,801
|
|
|
169,039
|
Cash and cash
equivalents, end of period
|
|
$
|
7,322
|
|
$
|
13,222
|
|
$
|
85,801
|
|
$
|
7,322
|
|
$
|
85,801
|
Comparison of Non-GAAP Financial
Measures
EBITDA, Adjusted EBITDA, gross profit before depreciation and
amortization (D&A) and gross margin before D&A are not
financial measures presented in accordance with accounting
principles generally accepted in the U.S. ("GAAP"). We define
EBITDA as net income (loss), plus interest expense, income taxes
and depreciation and amortization. We define Adjusted EBITDA as
EBITDA plus/(minus) loss/(income) from discontinued operations,
plus any impairment charges or asset write-offs pursuant to GAAP,
plus non-cash losses on the sale of assets or subsidiaries,
non-recurring compensation expense, non-cash compensation expense,
and non-recurring or unusual expenses or charges, including
severance expenses, transaction costs, or facilities-related exit
and disposal-related expenditures, plus/(minus) foreign currency
losses/(gains) and plus/(minus) losses/(gains) on unconsolidated
entities less bargain purchase gains from business combinations. We
define gross profit before D&A as revenue less cost of revenue,
excluding cost of sales D&A expense. We define gross margin
before D&A as gross profit before D&A divided by revenue.
EBITDA, Adjusted EBITDA, gross profit before D&A and gross
margin before D&A are supplemental non-GAAP financial measures
that we believe provide useful information to external users of our
financial statements, such as industry analysts, investors, lenders
and rating agencies because it allows them to compare our operating
performance on a consistent basis across periods by removing the
effects of our capital structure (such as varying levels of
interest expense), asset base (such as depreciation and
amortization) and non-recurring items outside the control of our
management team. We present EBITDA, Adjusted EBITDA, gross profit
before D&A and gross margin before D&A because we believe
they provide useful information regarding the factors and trends
affecting our business in addition to measures calculated under
GAAP.
Net income (loss) is the GAAP measure most directly comparable
to EBITDA and Adjusted EBITDA. Gross profit is the GAAP measure
most directly comparable to gross profit before D&A. Our
non-GAAP financial measures should not be considered as
alternatives to the most directly comparable GAAP financial
measure. Each of these non-GAAP financial measures has important
limitations as an analytical tool due to exclusion of some but not
all items that affect the most directly comparable GAAP financial
measures. You should not consider EBITDA, Adjusted EBITDA or gross
profit before D&A in isolation or as substitutes for an
analysis of our results as reported under GAAP. Because EBITDA,
Adjusted EBITDA and gross profit before D&A may be defined
differently by other companies in our industry, our definitions of
these non-GAAP financial measures may not be comparable to
similarly titled measures of other companies, thereby diminishing
their utility.
The following table presents a reconciliation of EBITDA and
Adjusted EBITDA to our net income (loss), which is the most
directly comparable GAAP measure for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended,
|
|
Year Ended December
31,
|
|
|
|
December 31,
2022
|
|
September 30,
2022
|
|
December 31,
2021
|
|
2022
|
|
2021
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
(in
thousands)
|
|
(in
thousands)
|
Net income
(loss)
|
|
|
$
|
7,571
|
|
$
|
24,717
|
|
$
|
11,155
|
|
$
|
54,854
|
|
$
|
(50,085)
|
Interest expense,
net
|
|
|
|
870
|
|
|
616
|
|
|
457
|
|
|
2,700
|
|
|
1,711
|
Income tax
expense
|
|
|
|
285
|
|
|
276
|
|
|
358
|
|
|
957
|
|
|
147
|
Depreciation and
amortization
|
|
|
|
31,655
|
|
|
27,215
|
|
|
25,051
|
|
|
115,716
|
|
|
92,458
|
EBITDA
|
|
|
|
40,381
|
|
|
52,824
|
|
|
37,021
|
|
|
174,227
|
|
|
44,231
|
Bargain purchase
gain
|
|
|
|
416
|
|
|
3,273
|
|
|
(18,985)
|
|
|
(13,352)
|
|
|
(18,985)
|
Non-cash loss on sale
of assets or subsidiaries
|
|
|
|
1,259
|
|
|
1,608
|
|
|
1,560
|
|
|
4,400
|
|
|
4,596
|
Non-recurring severance
expenses
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,225
|
Non-cash compensation
expenses
|
|
|
|
4,547
|
|
|
3,804
|
|
|
3,221
|
|
|
15,570
|
|
|
9,469
|
Non-recurring
transaction costs
|
|
|
|
4,211
|
|
|
965
|
|
|
2,386
|
|
|
11,672
|
|
|
5,656
|
Lease abandonment
costs
|
|
|
|
113
|
|
|
83
|
|
|
414
|
|
|
449
|
|
|
894
|
Non-recurring change in
vacation policy
|
|
|
|
918
|
|
|
—
|
|
|
—
|
|
|
918
|
|
|
—
|
Other non-recurring
charges
|
|
|
|
—
|
|
|
—
|
|
|
608
|
|
|
—
|
|
|
608
|
Equity in losses of
unconsolidated entities
|
|
|
|
337
|
|
|
218
|
|
|
150
|
|
|
913
|
|
|
279
|
Foreign currency (gain)
loss, net
|
|
|
|
(1)
|
|
|
6
|
|
|
(1)
|
|
|
8
|
|
|
(2)
|
Adjusted
EBITDA
|
|
|
$
|
52,181
|
|
$
|
62,781
|
|
$
|
26,374
|
|
$
|
194,805
|
|
$
|
49,971
|
The following table presents a reconciliation of gross profit
before D&A to total gross profit (loss), which is the most
directly comparable GAAP measure, and a calculation of gross margin
before D&A for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended,
|
|
Year Ended December
31
|
|
|
December 31,
2022
|
|
September 30,
2022
|
|
December 31,
2021
|
|
2022
|
|
2021
|
|
|
(unaudited)
|
|
(unaudited)
|
|
|
(in
thousands)
|
|
(in
thousands)
|
Gross profit (loss) by
segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Water
services
|
|
$
|
20,479
|
|
$
|
33,471
|
|
$
|
7,047
|
|
$
|
87,516
|
|
$
|
(6,432)
|
Water
infrastructure
|
|
|
7,892
|
|
|
12,728
|
|
|
4,720
|
|
|
30,272
|
|
|
11,945
|
Oilfield
chemicals
|
|
|
13,200
|
|
|
12,640
|
|
|
6,142
|
|
|
42,967
|
|
|
15,347
|
Other
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
As reported gross
profit
|
|
|
41,571
|
|
|
58,840
|
|
|
17,909
|
|
|
160,755
|
|
|
20,860
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plus depreciation and
amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Water
services
|
|
|
19,899
|
|
|
16,927
|
|
|
14,686
|
|
|
67,756
|
|
|
53,777
|
Water
infrastructure
|
|
|
9,387
|
|
|
7,471
|
|
|
7,396
|
|
|
36,727
|
|
|
26,957
|
Oilfield
chemicals
|
|
|
1,796
|
|
|
2,274
|
|
|
2,374
|
|
|
9,024
|
|
|
9,294
|
Total depreciation and
amortization
|
|
|
31,082
|
|
|
26,672
|
|
|
24,456
|
|
|
113,507
|
|
|
90,028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit before
D&A
|
|
$
|
72,653
|
|
$
|
85,512
|
|
$
|
42,365
|
|
$
|
274,262
|
|
$
|
110,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit before
D&A by segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Water
services
|
|
|
40,378
|
|
|
50,398
|
|
|
21,733
|
|
|
155,272
|
|
|
47,345
|
Water
infrastructure
|
|
|
17,279
|
|
|
20,199
|
|
|
12,116
|
|
|
66,999
|
|
|
38,902
|
Oilfield
chemicals
|
|
|
14,996
|
|
|
14,914
|
|
|
8,516
|
|
|
51,991
|
|
|
24,641
|
Other
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
Total gross profit
before D&A
|
|
$
|
72,653
|
|
$
|
85,512
|
|
$
|
42,365
|
|
$
|
274,262
|
|
$
|
110,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin before
D&A by segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Water
services
|
|
|
18.5 %
|
|
|
22.8 %
|
|
|
15.4 %
|
|
|
19.4 %
|
|
|
12.0 %
|
Water
infrastructure
|
|
|
22.4 %
|
|
|
27.2 %
|
|
|
25.8 %
|
|
|
24.8 %
|
|
|
25.1 %
|
Oilfield
chemicals
|
|
|
17.4 %
|
|
|
18.8 %
|
|
|
12.6 %
|
|
|
16.4 %
|
|
|
11.4 %
|
Other
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
Total gross margin
before D&A
|
|
|
19.0 %
|
|
|
22.8 %
|
|
|
16.6 %
|
|
|
19.8 %
|
|
|
14.5 %
|
Contacts:
|
Select Energy
Services
|
|
Chris George – Senior
Vice President, Corporate
|
|
Development, Investor
Relations & Sustainability
|
|
(713)
296-1073
|
|
IR@selectenergyservices.com
|
|
|
|
Dennard Lascar Investor
Relations
|
|
Ken Dennard
|
|
(713)
529-6600
|
|
WTTR@dennardlascar.com
|
View original
content:https://www.prnewswire.com/news-releases/select-energy-services-announces-corporate-rebranding-initiative-multiple-new-acquisitions-and-reports-fourth-quarter-and-full-year-2022-financial-results-and-operational-updates-301752251.html
SOURCE Select Energy Services, Inc.