Select Water Solutions Inc.

Company Overview

Business Model: Select Water Solutions, Inc. is a leading provider of sustainable water-management solutions to the energy industry in the U.S. The Company operates through three primary segments: Water Infrastructure, Water Services, and Chemical Technologies. The Water Infrastructure segment develops, builds, and operates permanent and semi-permanent infrastructure for full life cycle water management and waste treatment, including recycling and disposal of flowback and produced water. The Water Services segment provides complex services for new well completions and ongoing production, such as water transfer, sourcing, flowback and well testing, water containment, fluids hauling, water monitoring, and water network automation, utilizing proprietary technologies like WaterONE™ and AquaView®. The Chemical Technologies segment develops, manufactures, manages logistics, and provides a full suite of chemicals for hydraulic fracturing, stimulation, cementing, pipelines, and well completions, offering customized water treatment and flow assurance solutions through FluidMatch™. The Company emphasizes responsibly managing water resources, including recycling produced water to reduce reliance on fresh water and saltwater disposal wells (SWDs), and exploring beneficial reuse for non-energy applications.

Market Position: Select Water Solutions, Inc. is positioned as a leader in the water management industry. It is identified as one of the largest providers of water transfer services and high-capacity aboveground water storage tanks (ASTs) in the U.S. The Company is also among the largest manufacturers of friction reducers for the energy industry. Its extensive portfolio of active SWDs spans key unconventional basins. The Company differentiates itself through expansive scale, high-quality integrated solutions across the water lifecycle, regulatory expertise, skilled personnel, a strong safety record, and a commitment to environmental performance. The increasing complexity and scale of water management needs in the industry have driven a shift from smaller, local providers to larger regional and national players like Select Water Solutions, Inc.

Recent Strategic Developments: During 2024, Select Water Solutions, Inc. executed six strategic business combinations and eight asset acquisitions, totaling approximately $163 million. These transactions were primarily focused on enhancing the Company's water infrastructure capabilities. Key acquisitions included:

• Tri-State Water Logistics, LLC and Iron Mountain Energy, LLC, strengthening fluids and solids treatment and disposal assets in the Haynesville region.
• Trinity Acquisition Holdings, LLC, adding strategic saltwater disposal wells and pipelines in the Permian Basin.
• Rockies Infrastructure Acquisition, improving water disposal operations in the Rockies region.
• Buckhorn Waste Services, LLC and Buckhorn Disposal, LLC, expanding solids waste management capabilities with additional landfills in the Bakken region.
• Bobcat SWIW Holdings, LLC, enhancing Marcellus/Utica disposal operations. The Company is prioritizing investments in water infrastructure projects, which are expected to provide more predictable revenue streams through long-term contracts and higher gross margins. In February 2025, Select Water Solutions, Inc. entered into a new partnership arrangement through AV Farms, LP to consolidate and commercialize water holdings and storage in Colorado, with plans to partner with municipal, industrial, and agricultural customers. Select Water Reuse, LLC, a subsidiary, initially contributed $62 million in capital to AV Farms, LP, with an expected additional contribution of approximately $84 million over a three-year period.

Geographic Footprint: Select Water Solutions, Inc. maintains a diverse geographic footprint across the U.S., operating in most major unconventional shale plays.

• Water Infrastructure: Offerings are provided in the Permian Basin, MidCon, Bakken, Eagle Ford, Marcellus/Utica, Haynesville, and Rockies regions.
• Water Services: Offerings are provided in the Permian Basin, MidCon, Bakken, Eagle Ford, Marcellus/Utica, Haynesville, and Rockies regions.
• Chemical Technologies: Services are provided in the Permian Basin, MidCon, Bakken, Eagle Ford, Marcellus/Utica, Haynesville, and Rockies regions. The Permian Basin is the Company's largest operating region, accounting for approximately 48% of its total revenue in both 2024 and 2023.

Financial Performance

Revenue Analysis

Profitability Metrics:

• Gross Margin: 15.1% (2024) vs. 14.6% (2023)
• Operating Margin: 3.8% (2024) vs. 3.9% (2023)
• Net Margin: 2.4% (2024) vs. 5.0% (2023)

Investment in Growth:

• Capital Expenditures: $173,153 thousand (2024) vs. $135,866 thousand (2023).
• Strategic Investments: Acquisitions in 2024 totaled approximately $163 million. Initial capital contribution of $62 million by Select Water Reuse, LLC to AV Farms, LP, with an expected additional $84 million over three years.

Business Segment Analysis

Water Infrastructure

Financial Performance:

• Revenue: $290,900 thousand (+26.5% YoY)
• Gross Margin: 52.7% (2024) vs. 39.9% (2023)
• Key Growth Drivers: Additional revenue from 2024 acquisitions, organic growth in the recycling business line, higher disposal and landfill revenue, improved operational throughput and execution, and higher skim oil sales. This was partially offset by lower pipeline distribution volumes.

Product Portfolio:

• Major product lines and services include water recycling and reuse, pipelines and logistics, fluid disposal, and solids management.
• Water recycling and reuse operations offer tailored solutions using mechanical and chemical technologies, with a combined mobile and fixed recycling capacity of approximately 3.2 million barrels per day and 21 million barrels of storage.
• Pipeline networks encompass over 1,000 miles of temporary and permanent infrastructure in the Permian Basin, over 90 miles in the Bakken Shale, and a 60-mile dual-lined buried gathering and distribution pipeline system in the Haynesville Shale.
• Fluid disposal services are supported by an extensive portfolio of active SWDs across key unconventional basins, with a daily permitted disposal capacity of over 2.2 million barrels per day.
• Solids management includes four landfill and solids treatment facilities in the Bakken and Northeast regions, with significant permitted capacities (e.g., 5+ million cubic yards in North Dakota, 25,000+ tons annually in Montana, 360,000 tons annually in North Dakota, and 3,000 barrels per day liquids-equivalent treatment in Ohio).

Market Dynamics:

• Competitive positioning within segment: The Company differentiates itself through expansive scale, high-quality solutions, regulatory expertise, skilled personnel, safety, ability to move sufficient volumes at scale, and environmental performance. It also leverages the ability to integrate water infrastructure with water services and chemical technologies.
• Key customer types and market trends: Primarily serves major integrated and independent U.S. and international oil and gas producers. The segment benefits from a growing portfolio of long-term contractual agreements and an industry trend towards increased water recycling and reuse to reduce reliance on fresh water and SWDs.

Sub-segment Breakdown:

• Water Recycling & Reuse: $128,862 thousand revenue in 2024.
• Fluids Disposal: $112,384 thousand revenue in 2024.
• Pipelines & Logistics: $27,410 thousand revenue in 2024.
• Solids Management: $25,206 thousand revenue in 2024.

Water Services

Financial Performance:

• Revenue: $901,657 thousand (-12.7% YoY)
• Gross Margin: 20.0% (2024) vs. 21.1% (2023)
• Key Growth Drivers: The decrease in revenue was primarily due to lower customer activity levels, driven by macroeconomic factors, reduced frac crew deployments, and associated price reductions influenced by competitor price cuts. A slight increase in Water Sourcing revenue and improved Water Transfer and Flowback margins (due to effective cost controls) partially offset declines in Water Containment and Accommodation & Rentals margins.

Product Portfolio:

• Major product lines and services include water sourcing, water transfer, water containment, fluids hauling, flowback and well testing, water monitoring, water network automation, and accommodations and rentals.
• Water sourcing involves identifying, developing, and permitting water from various sources, with secured rights of approximately 2 billion barrels annually.
• Water transfer services utilize temporary above-ground pipeline systems, including layflat hose and mobile pumps, with active development and deployment of electric pumping units.
• Water network automation is provided through patented WaterONE™ automation services and proprietary AquaView® software platform, offering 24/7 monitoring, automated operations, and data analytics.
• Water containment solutions include high-capacity aboveground water storage tanks (ASTs) ranging from 4,500 to 82,000 barrels, with modular designs and secondary containment options.
• Fluids hauling operates a fleet of over 800 tractor trailers and body load trucks for transporting water and various drilling, completion, and production fluids.
• Flowback and well testing services provide well productivity data, fracturing support, and sand management, utilizing specialized equipment with advanced metering and telemetry, including closed-loop vapor tanks for emissions reduction.
• Accommodations and rentals provide workforce accommodations and surface rental equipment, including fully furnished offices, living quarters, and power generation.

Market Dynamics:

• Competitive positioning within segment: The industry is highly competitive and fragmented. Select Water Solutions, Inc. differentiates itself by delivering comprehensive, high-quality services and equipment, supported by fixed infrastructure networks, well-trained personnel, and a commitment to sustainability, superior execution, and safety.
• Key customer types and market trends: Primarily serves major integrated and independent U.S. and international oil and gas producers. The segment is influenced by the trend towards multi-well pad development, simultaneous well completions, and upstream acreage consolidation, which increases demand for complex, integrated water management solutions.

Sub-segment Breakdown:

• Water Transfer and Monitoring: $364,201 thousand revenue in 2024.
• Fluids Hauling: $242,186 thousand revenue in 2024.
• Flowback and Well Testing: $84,780 thousand revenue in 2024.
• Accommodations and Rentals: $78,729 thousand revenue in 2024.
• Water Sourcing: $76,176 thousand revenue in 2024.
• Water Containment: $63,037 thousand revenue in 2024.

Chemical Technologies

Financial Performance:

• Revenue: $259,518 thousand (-19.5% YoY)
• Gross Margin: 15.0% (2024) vs. 18.7% (2023)
• Key Growth Drivers: The decrease in revenue was primarily driven by macroeconomic factors, including lower frac crew deployments and associated price reductions due to competitor price cuts. Higher absorption costs in manufacturing facilities due to lower volumes also impacted profitability.

Product Portfolio:

• Major product lines and services include chemical manufacturing, completion chemicals, and water treatment solutions.
• Chemical manufacturing focuses on specialty products such as polyacrylamides, surfactants, and crosslinkers, with facilities in Midland, Texas, and Tyler, Texas, supported by in-house logistics and lab services.
• Completion chemicals provide technical solutions and a full suite of chemicals for hydraulic fracturing, stimulation, cementing, and well completions, sourced from both internal manufacturing and third-party producers.
• Water treatment services offer advanced solutions throughout the well lifecycle, including specialized stimulation flow assurance and integrity management, with chemical experts providing FluidMatch™ design solutions for water sampling, analysis, and customized treatment programs.

Market Dynamics:

• Competitive positioning within segment: The Chemical Technologies business is highly competitive, with competitors ranging from large manufacturers to pure distributors. Select Water Solutions, Inc. differentiates through technical expertise, manufacturing capacity, workforce competency, efficiency, safety record, and a dedicated focus on the oil and gas industry, including in-basin manufacturing capabilities and water management expertise.
• Key customer types and market trends: Primarily serves pressure pumpers and major integrated and independent U.S. and international oil and gas producers. The segment benefits from the increased reuse of produced water, which requires additional chemical treatment solutions and supports complex "on-the-fly" treatment applications.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: $7,912 thousand (1,242,678 shares) in 2024, compared to $61,770 thousand (8,617,986 shares) in 2023.
• Dividend Payments: $29,745 thousand in 2024, compared to $24,924 thousand in 2023. The quarterly dividend increased to $0.07 per share in Q4 2024.
• Future Capital Return Commitments: Approximately $21.2 million remains outstanding under prior share repurchase authorizations as of December 31, 2024. Future dividend payments are subject to quarterly review and approval by the board of directors.

Balance Sheet Position:

• Cash and Equivalents: $19,978 thousand as of December 31, 2024.
• Total Debt: $85,000 thousand as of December 31, 2024.
• Net Cash Position: -$65,022 thousand (net debt) as of December 31, 2024.
• Debt Maturity Profile: $85,000 thousand of debt matures in 2027.

Cash Flow Generation:

• Operating Cash Flow: $234,886 thousand in 2024, compared to $285,355 thousand in 2023.
• Free Cash Flow: $77,542 thousand in 2024, compared to $166,380 thousand in 2023.
• Cash Conversion Metrics: The Company implemented enhancements to its billing and collection processes, resulting in more efficient management of working capital and augmented cash generation, with strong collections throughout 2024.

Operational Excellence

Production & Service Model: Select Water Solutions, Inc. develops, builds, and operates permanent and semi-permanent infrastructure for water management, underpinned by long-term contractual agreements. Its service delivery methods for Water Services leverage advanced technologies like WaterONE™ automation and AquaView® software for efficient and safe operations. The Chemical Technologies segment benefits from in-basin manufacturing facilities in Texas, which reduce lead times for customers. The Company's operational philosophy prioritizes safe, environmentally responsible water management throughout the well lifecycle, with a focus on sustainability.

Supply Chain Architecture: Key Suppliers & Partners:

• Raw Materials: The Company purchases a substantial portion of raw materials for its Chemical Technologies business from third-party suppliers. While some raw materials have a limited number of suppliers or a single supplier, the Company mitigates potential supply constraints through supply agreements, evaluation of alternative sources, and alternative technologies.

Facility Network:

• Manufacturing: The Company owns two primary chemical manufacturing facilities in Texas (Midland and Tyler).
• Research & Development: The Company maintains an in-house team of chemists and R&D personnel dedicated to developing and optimizing chemical solutions, including FluidMatch™ solutions.
• Distribution: The Chemical Technologies segment utilizes three primary regional distribution centers across the U.S. shale basins. The Company also owns and leases numerous storage facilities, trucking facilities, and sales and administrative offices throughout its operating regions.
• Other Facilities: The Water Infrastructure segment includes an extensive portfolio of active saltwater disposal wells (SWDs) and four landfill and solids treatment facilities located in the Bakken and Northeast regions.

Operational Metrics:

• Water Recycling & Reuse: The Company has a combined mobile and fixed recycling capacity of approximately 3.2 million barrels per day of active produced water recycling and 21 million barrels of produced water storage.
• Fluid Disposal: The Company commands a daily permitted disposal capacity of more than 2.2 million barrels per day across its operational footprint.
• Solids Management: Facilities include a 50-acre special waste landfill in North Dakota with over 5 million cubic yards of permitted capacity, a 400-acre Montana facility permitted to manage over 25,000 tons of waste annually, a 565-acre North Dakota facility permitted for up to 360,000 tons of waste annually, and an Ohio solids treatment facility capable of treating up to 3,000 barrels per day of liquids-equivalent contaminated and residual solids.
• Water Sourcing: The Company has secured rights of approximately 2 billion barrels of water annually from hundreds of strategically located sources.
• Fluids Hauling: The Company operates a fleet of over 800 tractor trailers and body load trucks.

Market Access & Customer Relationships

Go-to-Market Strategy: Distribution Channels:

• Direct Sales: Select Water Solutions, Inc. directs its sales activities through a network of sales representatives and business development personnel, supporting customers at both the field and corporate levels.
• Digital Platforms: The Company utilizes a proprietary database that integrates market information, such as current rig, completion crew, and permit activity, along with the location of its strategic water sources and networks, to support its sales strategy.

Customer Portfolio: Enterprise Customers:

• The Company's customers primarily include major integrated and independent U.S. and international oil and gas producers. For its Chemical Technologies segment, customers also include pressure-pumping service companies.
• Customer Concentration: No single customer accounted for 10% or more of the Company's consolidated revenues for the year ended December 31, 2024. The filing did not provide complete information on customer concentration for receivables as of December 31, 2024.

Geographic Revenue Distribution:

• Permian Basin: 48.3% of total revenue
• Rockies: 14.5% of total revenue
• Eagle Ford: 10.7% of total revenue
• Marcellus/Utica: 9.7% of total revenue
• Bakken: 6.3% of total revenue
• Mid-Continent: 5.9% of total revenue
• Haynesville/E. Texas: 5.4% of total revenue

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: The U.S. oil and gas industry has experienced significant growth in production over the past two decades due to advancements in horizontal drilling and completions technologies. Water is essential for unconventional well development, with volumes required for a single horizontal well increasing from approximately 75,000 barrels in 2010 to over 750,000 barrels today, and multi-well pads requiring over 5 million barrels. The total volume of produced water in the U.S. oil and gas industry is estimated at over 24 billion barrels per year, significantly exceeding the approximately 6 billion barrels per year needed for new well completions. This has increased the complexity and importance of water-related services, shifting demand towards larger, more sophisticated providers.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors:

• Water Infrastructure: Includes certain large midstream companies (whose water services are generally ancillary to core businesses), public water-midstream-focused competitors, and private water midstream companies that often focus on more limited geographic areas or service offerings. Some E&P companies also invest in in-house water infrastructure.
• Water Services: The industry is highly competitive and fragmented, with numerous smaller, often private, service providers focusing on narrow geographic areas or service offerings. Some larger domestic and international oilfield services companies also offer water-oriented and environmental services, typically ancillary to their core businesses.
• Chemical Technologies: Competitors include both large manufacturers and companies that are pure distributors of commodities and specialty chemicals. Many competitors serve multiple industries outside of oil and gas.

Competitive Response Strategy: Select Water Solutions, Inc. seeks to differentiate itself by delivering comprehensive, high-quality services and equipment, supported by extensive fixed infrastructure networks. The Company emphasizes its well-trained personnel, commitment to sustainability, superior execution, and a safe working environment. Its ability to integrate water infrastructure, water services, and chemical technologies provides a competitive advantage. The Company's dedicated focus on the oil and gas industry and in-basin manufacturing capabilities further enhance its competitive edge.

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics:

• Global Economic Distress: Global economic distress, including that from the Russia-Ukraine war, Middle East instability, inflation, and high interest rates, may decrease demand for oil and natural gas, contributing to price volatility and reducing demand for the Company's services.
• OPEC+ Policy Decisions: Actions by OPEC+ regarding oil production levels can significantly impact crude oil prices and demand for services.
• Capital Spending by Oil and Gas Companies: Demand for services is directly affected by capital spending by customers, which is influenced by commodity prices, access to capital, and consolidation activity (e.g., in the Permian Basin).
• Technology Disruption: Advances or changes in well-completion technologies or practices, such as non-water fracturing techniques, could reduce demand for the Company's services.
• Customer Concentration: Approximately 48% of the Company's revenue is derived from the Permian Basin, making it vulnerable to region-specific factors like supply/demand, regulatory changes, severe weather, and water availability disputes (e.g., Texas v. New Mexico and Colorado lawsuit).

Operational & Execution Risks

Supply Chain Vulnerabilities:

• Production Disruptions: Chemical manufacturing facilities are subject to outages and disruptions from natural disasters, weather, strikes, transportation interruptions, or internal issues, which could impair production and increase costs.
• Supplier Dependency: Reliance on a limited number of suppliers or single suppliers for certain raw materials (chemicals, feedstocks) poses risks of price volatility or interruptions in supply, which could increase costs or reduce profitability if not passed on to customers. Geographic Concentration:
• Key infrastructure assets in Louisiana, North Dakota, New Mexico, and Texas are immobile and vulnerable to risks associated with conducting business in these specific regions. Other Operational Risks:
• Cybersecurity Risks: Increasing dependence on digital technologies exposes the Company to cybersecurity attacks, potentially leading to information theft, data corruption, operational disruption, and financial loss.
• Employee Turnover: The industry typically experiences a high rate of employee turnover, and the Company may struggle to find enough skilled labor, negatively affecting growth and operating results.
• Fuel Prices: Significant increases in fuel prices, a major operating expense, could adversely affect transportation costs and profitability if not offset by price increases to customers.
• Seasonal Weather and Natural Disasters: Operations are adversely affected by seasonal weather conditions (winter, spring) and natural disasters, which can disrupt equipment movement and service provision.
• Transportation Services Disruptions: Increased enforcement of truck weight limits or other restrictions on public roads could lead to delays and increased costs for transporting produced water.

Financial & Regulatory Risks

Market & Financial Risks:

• Global Financial Market Uncertainty: Uncertainty in global financial markets, economic downturns, inflation, and high interest rates may reduce customer spending, lead to non-payment, or impact the Company's ability to access capital.
• Pricing Power: The Company may be unable to implement price increases or maintain existing prices due to intense competition or new service capacity entering the market. Regulatory & Compliance Risks:
• Hydraulic Fracturing Regulations: Legislative and regulatory initiatives related to hydraulic fracturing or water management could impose operating restrictions, delays, or cancellations in customer operations, reducing demand for services.
• Climate Change Initiatives: Regulatory and societal efforts to reduce fossil fuel use and associated carbon emissions (e.g., Inflation Reduction Act of 2022 methane fee, EPA rules) could increase operating costs for customers and reduce demand for services.
• Chemical Control Laws: Stringent chemical control laws (e.g., TSCA) could limit chemical types used, increase testing/storage/transport costs, or require disclosure of confidential information.
• Disposal Operations and Seismicity: State and federal legislation and regulatory initiatives relating to disposal operations and induced seismicity could result in operating restrictions, suspensions, or shutdowns of disposal wells.
• Wastewater Disposal Facility Closure Obligations: Increased obligations and financial assurance requirements for closing wastewater disposal facilities could substantially increase operating costs.
• Environmental and Occupational Safety and Health Laws: Stringent federal, tribal, state, and local laws (RCRA, CERCLA, CWA, OPA, CAA, ESA, MBTA) impose numerous obligations, potentially leading to significant liabilities, penalties, or remediation costs.

Geopolitical & External Risks

Geopolitical Exposure:

• International Conflicts: Political instability or armed conflict in crude oil or natural gas producing regions (e.g., Russia-Ukraine war, Middle East hostilities) can cause volatility in commodity prices and supply chain disruptions, adversely affecting customer demand.
• Trade Relations: Changes in U.S. and international trade policies, such as the imposition of tariffs (e.g., on goods from China, or retaliatory tariffs on U.S. natural gas/crude oil), may adversely impact raw material sourcing and demand for services.

Innovation & Technology Leadership

Research & Development Focus: Core Technology Areas:

• Water Management Automation: Focus on WaterONE™ automation services and AquaView® software platform for 24/7 monitoring, automated pump operation, valve control, blending, manifolds, level monitoring, and data collection.
• Chemical Solutions Optimization: Development of FluidMatch™ solutions for comprehensive testing and analysis of customer application conditions, product chemistry, and performance requirements for well completion fluid-system design, including water profiling and treatment assessment.
• Environmental Solutions: Development of green completions through mobile production facilities to contain and combust flare gas, reducing methane and vapor emissions. Innovation Pipeline:
• The Company has a backlog of pending patents, including a proprietary water analytics and automation tool, technologies for creating fracturing fluids with produced water, evaporation methodologies, cross-linker/breaker mechanisms, and liquid distribution metering systems. Intellectual Property Portfolio:
• Patent Strategy: Select Water Solutions, Inc. owns numerous patents and actively files patent applications for new products and technologies, including U.S. patents related to completions technology (e.g., borate cross-linkers, slurry monitoring systems). The Company maintains a robust program to seek patents on new developments.

Technology Partnerships:

• The Company's Chemical Technologies team works closely with its Water Services and Water Infrastructure segments' water monitoring, reuse, and recycling teams to advise customers on optimal economic and operational solutions for water quality and chemical needs.

Leadership & Governance

Executive Leadership Team

Leadership Continuity: The Company recognizes the importance of intentional development through succession planning and maintains an online employee job portal to support internal career progression. Board Composition: The Board of Directors includes Troy W. Thacker, Robin Fielder, Douglas J. Wall, Richard A. Burnett, Gayle Burleson, Luis Fernandez-Moreno, and Timothy A. Roberts, and Bruce E. Cope. The Board delegates oversight of cybersecurity risks and practices to the Audit Committee.

Human Capital Strategy

Workforce Composition:

• Total Employees: More than 3,700 employees as of December 31, 2024.
• Geographic Distribution: Employees are located across the contiguous U.S.
• Skill Mix: The Company's operations require skilled workers capable of performing physically demanding tasks.

Talent Management: Acquisition & Retention:

• Hiring Strategy: The Company offers competitive wages and benefits, and fosters a strong company culture to attract and retain talent. An online employee job portal facilitates internal applications for open positions.
• Retention Strategies: The Company maintains a strong cadence of communication, including organizational announcements and quarterly leadership updates. It encourages employee development through regular, constructive dialogue, including semi-annual one-on-one conversations about well-being, performance, and growth, facilitated by a formal feedback program.
• Employee Value Proposition: The Company offers a competitive benefits package for regular, full-time employees, including medical, dental, vision, life and accident insurance, and an employee assistance program. The Select Family Fund, established in 2020, assists employees in crisis situations, funded by employee donations with an annual company match. Diversity & Development:
• Diversity Metrics: The Company is committed to promoting and encouraging respect for people and fundamental freedoms for all without distinctions of any kind, as demonstrated in its employment practices, Code of Conduct, Equal Employment Opportunity Employer Policy, and Anti-Harassment Policy.
• Development Programs: Employee development is encouraged through regular dialogue, job progression outlines in some service lines, and trainings from senior leadership.
• Culture & Engagement: The Company's culture is built on its WATER values: Working Safe, Accountability, Teamwork, Excellence, Respect. An employee recognition program, "Drop of Excellence," acknowledges employees who embody these values. Safety is prioritized through rigorous training, structured protocols, and ongoing automation.

Environmental & Social Impact

Environmental Commitments: Climate Strategy:

• The Company is committed to a corporate strategy that supports the long-term viability of its business model with a focus on environmental responsibility. Its sustainability-linked credit facility incorporates key performance indicator targets related to growing produced water recycling volumes and maintaining market-leading employee safety performance.
• Emissions Targets: The Company is actively developing and deploying electric pumping units to decrease emissions and reduce the environmental impact of its operations. It offers green completions through mobile production facilities to safely contain and combust flare gas, reducing methane and vapor emissions at the wellsite. The use of temporary hose and permanent pipeline systems significantly reduces diesel exhaust emissions from truck traffic. Supply Chain Sustainability:
• Responsible Sourcing: The Company is committed to delivering solutions that align with environmentally responsible practices.

Social Impact Initiatives:

• Community Investment: The Company is dedicated to being an exemplary neighbor in the communities where it operates, adhering to strict environmental standards, promoting workplace safety, and contributing to local communities. It collaborates with numerous non-profit organizations and industry groups focused on environmental and social causes.
• Product Impact: The Company's focus on water recycling and reuse aims to progressively reduce the industry’s reliance on fresh water and diminish the proportion of produced water reinjected into SWDs. It is pursuing recycling solutions for beneficial reuse of produced water in non-energy applications, such as general industry, agriculture, wildlife rehabilitation, carbon capture and sequestration, or drought mitigation. The use of pipe and hose infrastructure significantly reduces heavy vehicle traffic in local communities.

Business Cyclicality & Seasonality

Demand Patterns:

• Seasonal Trends: The Company's results of operations have historically been adversely affected by seasonal declines in customer activity levels, typically in the fourth quarter, due to holidays, inclement winter weather, and in some years, the exhaustion of customers’ annual drilling and completions capital expenditure budgets.
• Economic Sensitivity: Demand for the Company's services is directly influenced by the level of drilling and completion activity by E&P companies in the U.S., which in turn depends largely on the current and anticipated profitability of developing oil and natural gas reserves, as well as ongoing production activity. Demand is cyclical and subject to global geopolitical conflicts and other macroeconomic factors.
• Industry Cycles: The Company operates within the oil and gas industry, which is characterized by cyclical demand for its services.

Regulatory Environment & Compliance

Regulatory Framework: Industry-Specific Regulations:

• The Company's water-related operations are subject to stringent and comprehensive federal, tribal, state, and local laws and regulations in the U.S. governing occupational safety and health, environmental protection, and the discharge of materials into the environment. These include regulations enforced by the EPA, OSHA, and analogous state agencies.
• Hazardous Substances and Wastes: Operations are subject to the federal Resource Conservation and Recovery Act (RCRA) and comparable state statutes, regulating hazardous and non-hazardous wastes. Wastes containing naturally occurring radioactive materials (NORM) are subject to state radiation control regulations and OSHA. The federal Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) and comparable state laws impose liability for hazardous substance releases.
• Water Discharges and Use: The Federal Water Pollution Control Act (Clean Water Act - CWA) and analogous state laws impose restrictions on pollutant discharge into waters, requiring permits. The Oil Pollution Act of 1990 (OPA) sets standards for oil spill prevention, containment, and cleanup.
• Saltwater Disposal Wells and Induced Seismicity: Saltwater disposal via underground injection is regulated by the Underground Injection Control (UIC) program under the federal Safe Drinking Water Act (SDWA) and state laws. Some states have imposed restrictions or suspensions on disposal wells due to induced seismicity concerns.
• Hydraulic Fracturing Activities: While the Company does not directly engage in hydraulic fracturing, its services support these activities, which are subject to increasing scrutiny and regulation by federal, state, and local agencies, including permitting, disclosure, and well-construction requirements.
• Air Emissions: The U.S. Clean Air Act (CAA) and comparable state laws restrict air pollutant emissions, requiring permits and compliance with standards.
• Climate Change: Operations are subject to regulatory, political, litigation, and financial risks associated with fossil fuel production and greenhouse gas (GHG) emissions. The Inflation Reduction Act of 2022 (IRA 2022) imposes a federal fee on methane emissions.
• Endangered Species: The federal Endangered Species Act (ESA) and Migratory Bird Treaty Act (MBTA) restrict activities that may affect protected species or their habitats.
• Chemical Safety: The Company is subject to laws and regulations governing chemicals, including the Toxic Substances Control Act (TSCA), which may limit chemical use or increase costs.
• Motor Carrier Regulations: As a motor carrier, the Company is subject to regulation by the U.S. Department of Transportation (U.S. DOT) and analogous state agencies regarding operations, safety, and hazardous materials.

Legal Proceedings:

• The Company is not currently a party to any legal proceedings that, if determined adversely, would have a material adverse effect on its financial position, results of operations, or cash flows. It is named as a defendant in certain lawsuits, investigations, and claims arising in the ordinary course of business, including environmental and employee-related matters.

Tax Strategy & Considerations

Tax Profile:

• Effective Tax Rate: The Company's effective tax rate was 27.7% for 2024, (289.1%) for 2023, and 1.7% for 2022. The variability is influenced by net income allocated to noncontrolling interests, state income taxes, nondeductible items, and valuation allowances.
• Tax Reform Impact: The 1% U.S. federal excise tax on certain stock repurchases, enacted as part of the IRA 2022, applies to the Company's share repurchase program.

Tax Receivable Agreements:

• Select Water Solutions, Inc. is party to two Tax Receivable Agreements (TRAs) with Legacy Owner Holdco and Crestview Partners II GP, L.P. These agreements generally require the Company to pay 85% of the net cash savings in U.S. federal, state, and local income and franchise tax that it realizes or is deemed to realize from certain tax basis increases (resulting from acquisitions/exchanges of SES Holdings LLC Units) and net operating losses.
• Payments under the TRAs commenced in 2024.
• The estimated liability associated with the TRAs was $38,500 thousand as of December 31, 2024.
• Payments under the TRAs could be accelerated and/or significantly exceed actual benefits if the Company elects to terminate them early, or if they are terminated due to certain mergers, asset sales, or changes of control. For example, if terminated on December 31, 2024, the estimated termination payments would have been approximately $78.1 million (undiscounted $111.2 million).
• The Company had approximately $167.3 million of tax-affected U.S. federal net operating loss carryforwards (NOLs) as of December 31, 2024, with $87.8 million expected to expire unused by 2031 due to Section 382 limitations. State NOLs totaled approximately $15.9 million, with $6.9 million expected to expire unused and $9.0 million beginning to expire in 2025. Non-U.S. NOLs were approximately $1.4 million, beginning to expire in 2035.

Insurance & Risk Transfer

Risk Management Framework:

• Insurance Coverage: Select Water Solutions, Inc. maintains insurance coverage customary in the industry, including workers’ compensation, employer’s liability, sudden & accidental pollution, umbrella, directors & officers, comprehensive commercial general liability, business automobile, property, cybersecurity, and equipment physical damage insurance.
• Self-Insurance Retentions: The Company assumes risk of loss through deductibles and self-insured retentions up to certain levels: $1.0 million for general liability, $1.0 million for workers’ compensation and employer’s liability, $2.0 million for auto liability, and $0.4 million for health insurance. An excess loss policy provides coverage up to $100.0 million in aggregate over these retentions.
• Risk Transfer Mechanisms: The Company enters into master service agreements (MSAs) with most customers to delineate indemnification obligations. Generally, the Company assumes responsibility for pollution originating above the surface from its equipment or services, while customers assume responsibility for other pollution (e.g., seepage, uncontrolled flow of drilling fluids). Mutual indemnification provisions cover personal injury or death of employees, and loss or destruction of property or equipment, with certain exceptions for gross negligence or willful misconduct. Losses from catastrophic events, such as blowouts, are generally the responsibility of the customer.