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. Its core value proposition focuses on safe, environmentally responsible management of water throughout the lifecycle of a well, aiming to conserve and protect environmental resources. Revenue is generated through permanent infrastructure solutions for full lifecycle water management and waste treatment, complex services supporting new well completions and ongoing production, and the development, manufacturing, and logistics of chemicals for hydraulic fracturing, stimulation, cementing, and well completions.

Market Position: Select Water Solutions, Inc. is positioned as a leader in the water management industry, operating the largest network of centralized recycling facilities in the industry for gathering, recycling, and reuse of flowback and produced water. The Company holds market-leading disposal positions in the Haynesville and Northeast regions, and a leading solids management position in the Bakken region. Its competitive advantages stem from expansive scale, high-quality integrated solutions across the water lifecycle, extensive regulatory expertise, well-trained personnel, and a commitment to superior execution and safety. The integration of its Water Infrastructure, Water Services, and Chemical Technologies expertise provides a differentiated offering.

Recent Strategic Developments:

• Strategic Acquisitions (2025): Acquired assets totaling $25.4 million to expand water infrastructure in the Permian Basin (surface acreage, multiple saltwater disposal wells, water storage assets, pipeline system) and Northeast Region (three saltwater disposal wells in Ohio). Also acquired wastewater treatment facilities for accommodations and rentals in Permian and Eagle Ford for $1.7 million.
• Omni Environmental Solutions Transaction (July 1, 2025): Acquired a high-margin Bakken platform from Omni Environmental Solutions, including a special-waste landfill (3.2 million cubic yards remaining capacity), a processing and recovery facility, one permitted Class II saltwater disposal well (12,000 barrels per day capacity), and a commercial tank farm (24,000 barrels of oil storage). Concurrently divested certain lower-margin trucking operations in the Bakken, Northeast, and MidContinent regions, rental operations in the Bakken, and one MidContinent saltwater disposal well.
• AV Farms Investment (February 2025): Made a $72.1 million equity method investment in AV Farms, a newly formed partnership focused on consolidating and commercializing a large-scale portfolio of senior water rights, irrigated farmland, and reservoir storage assets in Colorado. Select Water Solutions, Inc. holds an approximate 39% ownership interest in AV Farms and a 25% interest in AV GP. An additional $74 million is expected to be contributed over a multi-year period for future water rights acquisitions and infrastructure buildout.
• Streamlining Fluids Hauling: Wound down fluids hauling operations in the Haynesville region and divested remaining lower-margin operations in the MidContinent region to prioritize higher-margin, infrastructure-integrated markets.
• Peak Rentals Strategic Evaluation (August 2025): Initiated an evaluation of strategic alternatives for the Peak Rentals business (accommodations and rentals platform, well testing, and flowback operations) within the Water Services segment, including capital structure initiatives and portfolio optimization opportunities. No transaction is pending or imminent as of December 31, 2025.
• New Sustainability-Linked Credit Facility (January 24, 2025): Entered into a $550.0 million sustainability-linked senior secured credit facility, consisting of a $300.0 million revolving credit facility and a $250.0 million term loan, both with a five-year maturity. This facility replaced prior debt, enhancing liquidity and extending the maturity profile through 2030, and aligns capital structure with long-term infrastructure growth.

Geographic Footprint: Select Water Solutions, Inc. operates across major unconventional shale plays in the continental U.S. Key regions include the Permian Basin, Rockies, Marcellus/Utica, Eagle Ford, Mid-Continent, Bakken, and Haynesville/East Texas. The Permian Basin is the largest and most strategically important region, accounting for approximately 51% of total revenue in 2025.

Financial Performance

Revenue Analysis

Profitability Metrics (2025):

• Gross Margin: 14.4%
• Operating Margin: 2.0%
• Net Margin: 1.5%

Investment in Growth (2025):

• Capital Expenditures: $294.6 million
• Strategic Investments: $72.1 million equity method investment in AV Farms; $53.6 million in acquisitions (net of cash received).

Business Segment Analysis

Water Infrastructure

Financial Performance:

• Revenue: $313.2 million (+7.7% YoY)
• Gross Margin: 54.0% (calculated as (313.2-143.9)/313.2)
• Key Growth Drivers: Higher recycling revenue supported by long-term contracts and organic buildout of recycling infrastructure; increased disposal and solids revenues from recently acquired assets. Product Portfolio:
• Water Recycling & Reuse: Market leader in produced water recycling infrastructure, including fixed and mobile facilities.
• Pipelines & Logistics: Extensive pipeline networks for produced water gathering and treated water distribution.
• Fluid Disposal: Over one hundred saltwater disposal facilities.
• Solids Management: Landfill facilities for oilfield waste. Market Dynamics:
• Competitive positioning: Critical existing infrastructure, track record, skill, pricing, safety, scale, environmental performance. Differentiates through expansive scale and high-quality solutions across the water lifecycle.
• Key customer types: Major integrated and independent U.S. and international oil and gas producers.
• Market trends: Increasing demand for recycling solutions due to freshwater availability concerns and seismicity concerns, shift from truck-based to pipeline infrastructure. Geographic Presence: Permian Basin, Bakken, Haynesville, Northeast, Rockies, Mid-Continent.

Water Services

Financial Performance:

• Revenue: $786.5 million (-12.8% YoY)
• Gross Margin: 19.2% (calculated as (786.5-635.2)/786.5)
• Key Growth Drivers: Higher Accommodation and Rentals revenue driven by increased power generation activity and organic growth.
• Factors Impacting Performance: Lower Fluids Hauling revenue due to divestiture of operations (Omni transaction), lower Water Sourcing revenue from transition to produced water operations, macroeconomic softness impacting Water Transfer and Well Testing. Product Portfolio:
• Water Transfer: Layflat hose solutions (including TideLine™ proprietary hose), mobile pumps, electric pumping units.
• Water Network Automation: AquaView® automation services and proprietary software platform for 24/7 monitoring, leak detection, and asset tracking.
• Water Sourcing: Freshwater and non-potable alternative water sources (brackish groundwater, municipal/industrial effluent).
• Water Containment: Diverse set of above-ground pits and storage tanks.
• Fluids Hauling: Transportation of produced water and other fluids (streamlined to higher-margin, infrastructure-integrated markets).
• Peak Rentals: Mobile power solutions (generators, battery storage), on-site rental equipment, accommodation offerings, flowback and well testing solutions. Market Dynamics:
• Competitive positioning: Comprehensive, high-quality services and equipment, supported by fixed infrastructure networks, well-trained personnel, and commitment to sustainability.
• Key customer types: Major integrated and independent U.S. and international oil and gas producers.
• Market trends: Demand for integrated water management solutions, focus on operational efficiency and environmental performance, 24/7 operations, multi-well pad development. Geographic Presence: Permian Basin, Mid-Continent, Bakken, Eagle Ford, Marcellus/Utica, Haynesville, Rockies.

Chemical Technologies

Financial Performance:

• Revenue: $307.6 million (+18.5% YoY)
• Gross Margin: 18.3% (calculated as (307.6-251.3)/307.6)
• Key Growth Drivers: Continued success in new product development, market share gains across key customer segments, improved sales team execution. Product Portfolio:
• Chemical Manufacturing: Specialty manufacturer of chemicals for hydraulic fracturing, stimulation, cementing, and well completions.
• Completion Chemicals: Full suite of chemicals (polymers, crosslinkers, friction reducers, surfactants, buffers, breakers).
• Water Treatment: Customized water treatment and flow assurance solutions, FluidMatch™ solutions for comprehensive testing and analysis. Market Dynamics:
• Competitive positioning: Technical expertise, manufacturing capacity, workforce competency, efficiency, safety record, reputation, experience, price. Differentiates through dedicated focus on oil and gas, in-basin manufacturing, and water management expertise.
• Key customer types: Pressure pumpers, major integrated and independent U.S. and international oil and gas producers.
• Market trends: Increased reuse of produced water requires additional chemical treatment solutions, demand for complex "on-the-fly" solutions. Geographic Presence: Permian Basin, Mid-Continent, Bakken, Eagle Ford, Marcellus/Utica, Haynesville, Rockies.

Capital Allocation Strategy

Shareholder Returns (2025):

• Share Repurchases: $7.3 million (764,259 shares repurchased in connection with cashless exercise of options and tax withholding requirements).
• Dividend Payments: $33.7 million (quarterly cash dividend of $0.07 per share of Class A common stock and comparable distribution per unit for SES Holdings, LLC).
• Future Capital Return Commitments: Quarterly dividend program expected to continue into 2026 and beyond, subject to quarterly review and approval by the board of directors.

Balance Sheet Position (as of December 31, 2025):

• Cash and Equivalents: $18.1 million
• Total Debt: $320.0 million (outstanding borrowings under Sustainability-Linked Credit Facility)
• Net Cash Position: -$301.9 million (Net Debt)
• Credit Rating: Not disclosed.
• Debt Maturity Profile: Term Loan Facility amortizes in quarterly installments of $15.625 million, with maturities of $31.25 million in 2026, $62.5 million in 2027, $62.5 million in 2028, $62.5 million in 2029, and $31.25 million in 2030. Revolving Credit Facility matures in 2030 ($70.0 million outstanding).

Cash Flow Generation (2025):

• Operating Cash Flow: $214.7 million
• Free Cash Flow: -$64.6 million

Operational Excellence

Production & Service Model: Select Water Solutions, Inc. focuses on providing end-to-end water solutions, from sourcing and transfer to treatment, recycling, and disposal. The Company emphasizes integrated solutions that combine physical assets (pipelines, recycling facilities, saltwater disposal wells) with logistics services and chemical solutions. Its operational philosophy prioritizes safety, environmental responsibility, and efficiency, leveraging technology for 24/7 monitoring and automation.

Supply Chain Architecture: Key Suppliers & Partners:

• Raw Materials: Relies on third-party suppliers for a substantial portion of raw materials for its Chemical Technologies segment, with some sole-source suppliers. The Company mitigates risks by evaluating alternative sources and technologies.
• Logistics: Utilizes internal logistics execution for chemical freight and temporary pipe/hose infrastructure for water transfer, reducing reliance on third-party trucking.

Facility Network:

• Manufacturing: Operates specialty chemical manufacturing facilities.
• Research & Development: In-house team of chemists and R&D personnel, FluidMatch™ solutions for customized water treatment and fluid system design.
• Distribution: Extensive network of permanent pipeline infrastructure, fixed and mobile recycling facilities, water storage facilities, saltwater disposal wells (43 active in Permian, 23 in Haynesville, 22 in Bakken, 21 in Northeast, 3 in Rockies), and landfill facilities (4 permitted in Bakken). Operates a remote operating center at its Gainesville, Texas headquarters.

Operational Metrics (as of December 31, 2025):

• Fixed Recycling Capacity: 2.4 million barrels per day (current); 3.3 million barrels per day (expected post-completion of projects).
• Permitted Disposal Capacity: 2.3 million barrels per day.
• Produced Water Storage Capacity: 35 million barrels (current); 41 million barrels (expected post-completion of projects).

Market Access & Customer Relationships

Go-to-Market Strategy: Distribution Channels:

• Direct Sales: Business development personnel and sales representatives engage with customers at both field and corporate levels.
• Digital Platforms: AquaView® automation services and proprietary software platform provide 24/7 monitoring and visibility for customers.

Customer Portfolio: Enterprise Customers:

• Tier 1 Clients: Primarily serves major integrated and independent U.S. and international oil and gas producers.
• Strategic Partnerships: Underpins operations with long-term contractual agreements, including acreage dedications, wellbore dedications, minimum volume commitments (MVCs), areas of mutual interest (AMIs), and right of first refusals (ROFRs). These contracts often span more than a decade.
• Customer Concentration: One customer accounted for 10% of consolidated revenues for the year ended December 31, 2025. One customer accounted for 11% of consolidated receivables as of December 31, 2025.

Geographic Revenue Distribution (2025):

• Permian Basin: 51.5% of total revenue
• Rockies: 11.7% of total revenue
• Marcellus/Utica: 11.2% of total revenue
• Eagle Ford: 9.6% of total revenue
• Mid-Continent: 6.5% of total revenue
• Bakken: 6.2% of total revenue
• Haynesville/E. Texas: 4.3% of total revenue

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: The oilfield water management business is highly competitive and fragmented, with numerous small local companies and larger diversified competitors. The industry has seen significant growth in U.S. oil and natural gas production driven by horizontal drilling and completions technologies. Water management is critical, with produced water volumes significantly exceeding new well completion water demand. There is a growing trend towards recycling and reuse of produced water, and a shift from truck-based to pipeline infrastructure. Multi-well pad development and simultaneous well completions increase the intensity and complexity of water management.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors: The industry is highly fragmented. Main competitors include smaller, often private, service providers focused on narrow geographic areas or service offerings. Some large domestic and international oilfield services companies offer ancillary water-oriented and environmental services. Certain E&P customers have also invested in their own water infrastructure.

Emerging Competitive Threats: New entrants, disruptive technologies such as non-water fracturing techniques (e.g., utilizing propane, carbon dioxide, or nitrogen), and the potential for customers to vertically integrate their water management operations.

Competitive Response Strategy: Select Water Solutions, Inc. differentiates itself through its expansive scale, delivery of high-quality solutions across the entire water lifecycle (sourcing, recycling, disposal), extensive regulatory expertise, well-trained personnel, and a commitment to superior execution and a safe working environment. The Company leverages its ability to couple Water Infrastructure with Water Services and Chemical Technologies expertise to provide integrated solutions.

Risk Assessment Framework

Strategic & Market Risks

• Market Dynamics: Business depends on capital spending by the U.S. oil and gas industry, which is sensitive to oil and gas prices, global geopolitical instability, OPEC+ actions, and the transition to renewable energy. Volatility in commodity prices can lead to reduced demand for services, lower rates, and asset underutilization.
• Technology Disruption: Rapid technological advancements in well completion and service technologies, including non-water fracturing techniques, could render existing services obsolete or place the Company at a competitive disadvantage, requiring substantial investment in new technologies.
• Customer Concentration: Approximately 51% of revenue is derived from the Permian Basin, making the Company vulnerable to regional supply/demand factors, regulatory changes, and severe weather. Consolidation among customers may lead to reduced capital spending or demands for pricing concessions.
• Water Procurement Restrictions: Limitations on access to water due to drought or inability to acquire/maintain permits, or changes in water sourcing/disposal requirements, could increase costs or decrease demand for water-related services, particularly in regions like New Mexico.
• IRA 2022 Impact: The Inflation Reduction Act of 2022 could accelerate the transition to new energy sources and impose new costs on customers' operations, potentially reducing demand for hydrocarbons and the Company's services.
• Pricing Inability: Operating in a highly competitive industry, the Company may be unable to implement price increases or maintain existing prices to offset rising costs (e.g., labor, inflation), impacting profitability.
• Global Financial Markets Uncertainty: Worldwide economic downturns, volatility in debt/equity markets, inflation, and international conflicts can negatively affect customer spending, lead to non-payment, or restrict access to capital for the Company.

Operational & Execution Risks

• Supply Chain Vulnerabilities: Disruptions in chemical manufacturing facilities or supply of raw materials (some from limited or sole-source suppliers, e.g., 8% of raw material feedstock from China in 2025) could increase costs or disrupt operations. Constraints in equipment and replacement parts supply could affect growth strategies.
• Claims for Personal Injury & Property Damage: Operations involve inherent hazards (chemical spills, pipeline leaks, accidents, blowouts), leading to potential lawsuits, substantial losses, and adverse effects on operating costs and insurability.
• Competition: Highly competitive industry with numerous small local companies and larger diversified players, potentially leading to market share loss or inability to expand operations.
• High Employee Turnover: The industry typically experiences high employee turnover, making it challenging to find and retain skilled labor, which could negatively affect growth and operating results.
• Seasonal Weather & Natural Disasters: Operations are adversely affected by seasonal declines (winter/spring) due to heavy snow, ice, or rain, hindering equipment movement and service delivery. Extended drought conditions can impact water sourcing.
• Transportation Disruptions: Increased enforcement of truck weight limits, curfews, or other restrictions on roadways could lead to delays and increased costs for transporting produced water. Significant increases in fuel prices can adversely affect transportation costs.

Financial & Regulatory Risks

• Hydraulic Fracturing Regulations: Laws, regulations, and executive actions relating to hydraulic fracturing could increase costs, impose operating restrictions, or delay/cancel drilling and completion activities for customers, reducing demand for services.
• Climate Change Risks: Increasing attention to climate change, energy conservation measures, and initiatives for alternative energy could result in increased operating and capital costs for customers, restrictions on drilling, and reduced demand for the Company's products and services.
• Chemical Control Laws: Stringent chemical control laws (e.g., TSCA) can limit or ban chemicals used, increase testing/storage/transport costs, or require disclosure of confidential information.
• Disposal Facility Closure Obligations: Increased obligations and financial assurance requirements for closing wastewater disposal facilities could substantially increase operating costs.
• Seismicity Regulations: State and federal legislation and regulatory initiatives linking disposal operations to induced seismicity could restrict or prohibit fluid disposal in certain areas, limiting volumes or requiring well shutdowns.
• Environmental & Occupational Health and Safety Laws: Stringent federal, tribal, state, and local laws (RCRA, CERCLA, CWA, OPA, SDWA UIC, CAA, ESA, MBTA) expose the Company to significant liabilities for penalties, damages, or remediation costs.
• Tax Law Changes: Changes to U.S. federal, state, and local tax laws, including interpretations or challenges by tax authorities, could adversely affect operating results and cash flows.

Geopolitical & External Risks

• Geopolitical Exposure: Political instability or armed conflict (Russia-Ukraine war, Middle East conflicts, U.S. intervention in Venezuela) can cause volatility in commodity prices, disrupt supply chains, and negatively impact the global economy, affecting customer demand and the Company's ability to raise capital.
• Trade Relations: Changes in U.S. and international trade policies, such as the imposition of tariffs (e.g., on Chinese imports or retaliatory tariffs on U.S. oil/gas), can increase raw material costs, reduce profitability, or decrease demand for customer products.
• Sanctions & Export Controls: Sanctions on oil-producing nations (e.g., Venezuela, Russia) can impact global oil supply and prices, potentially depressing markets if lifted.

Innovation & Technology Leadership

Research & Development Focus: Core Technology Areas:

• Water Treatment & Reuse: Dedicated team focused on developing and deploying innovative water treatment and reuse services.
• Fluid System Optimization: FluidMatch™ solutions for comprehensive testing and analysis of application conditions, product chemistry, and key performance requirements for well completion fluid-system design.
• Automation & Monitoring: AquaView® automation services and proprietary software platform for 24/7 monitoring, hydrographic mapping, water volume/quality monitoring, remote pit/tank monitoring, and leak detection.
• Sustainable Operations: Development and deployment of electric pumping units to decrease emissions, green completions through mobile production facilities for methane control. Innovation Pipeline:
• New technology development: Proprietary water analytics and automation tool.
• Fracturing fluids: Creating fracturing fluids with produced water.
• Water management methodologies: Evaporation methodologies, cross-linker/breaker mechanisms, liquid distribution metering systems.

Intellectual Property Portfolio:

• Patent Strategy: Owns numerous patents and actively files patent applications for new products and technologies. Examples include AquaView® technology and completions technology (borate cross-linkers, slurry monitoring systems).
• Trademarks: Owns a number of trademarks used in connection with its businesses, protected through federal registration and state common law.

Technology Partnerships: Not explicitly detailed as formal external partnerships, but internal R&D personnel work directly with customers to optimize water quality and fracturing fluid systems.

Leadership & Governance

Executive Leadership Team

Leadership Continuity: The Company recognizes the importance of intentional development through succession planning and encourages employee development through regular dialogue and an online job portal for career progression.

Board Composition: The Board of Directors has delegated oversight of cybersecurity risks and practices to the Audit Committee. The Board and Audit Committee receive regular updates on cybersecurity from the Chief Technology Officer and Technology Team.

Human Capital Strategy

Workforce Composition (as of December 31, 2025):

• Total Employees: Approximately 3,300 employees.

Talent Management: Acquisition & Retention:

• Hiring Strategy: Invests in workforce by offering competitive wages and benefits.
• Retention Metrics: Focuses on creating a strong company culture and engaging talent.
• Employee Value Proposition: Industry-leading safety program, competitive benefits package (medical, dental, vision, life/accident insurance, employee assistance program), Select Family Fund (employee-funded, company-matched crisis assistance).

Diversity & Development:

• Diversity Metrics: Committed to promoting and encouraging respect for people and fundamental freedoms for all without distinctions of any kind.
• Development Programs: Encourages employee development through regular, constructive dialogue, semi-annual one-on-one conversations, and a formal feedback program. Offers an online employee job portal and outlines job progression paths.
• Culture & Engagement: Core values (WATER: Working Safe, Accountability, Teamwork, Excellence, Respect) are central to operations. Employee recognition program ("Drop of Excellence") celebrates employees embodying these values. Strong communication cadence (organizational announcements, leadership updates) keeps employees informed.

Environmental & Social Impact

Environmental Commitments: Climate Strategy:

• Emissions Targets: Sustainability-linked credit facility incorporates key performance indicator targets related to growing produced water recycling volumes and maintaining market-leading employee safety performance.
• Carbon Neutrality: Aims to reduce environmental impact and carbon footprint by limiting truck traffic and diesel exhaust emissions through pipeline infrastructure and electric pumping units.
• Renewable Energy: Actively developing and deploying electric pumping units. Supply Chain Sustainability:
• Supplier Engagement: Committed to partnering with vendors and other stakeholders that share its commitment to human rights and social responsibility.
• Responsible Sourcing: Focuses on responsible management of water resources. Social Impact Initiatives:
• Community Investment: Dedicated to being an exemplary neighbor, adhering to strict environmental standards, promoting workplace safety, and contributing to local communities. Collaborates with non-profit organizations and industry groups on environmental and social causes.
• Product Impact: Advancing solutions for beneficial reuse of produced water for non-energy applications (e.g., general industry, agriculture, wildlife rehabilitation, carbon capture and sequestration, drought mitigation) to preserve freshwater sources.

Business Cyclicality & Seasonality

Demand Patterns:

• Seasonal Trends: Historically, results of operations are adversely affected by seasonal declines in customer activity levels, typically in the fourth quarter, due to holidays, inclement winter weather, and exhaustion of annual drilling and completions capital expenditure budgets.
• Economic Sensitivity: Demand for services is directly affected by capital spending by customers, which is dependent on views of future oil and gas demand and prices, global geopolitical instability, and access to capital. Sustained market uncertainty or low commodity prices can lead to lower demand.
• Industry Cycles: The oilfield services industry is characterized by volatility. Efficiency gains in well completions can limit days spent on wellsite, negatively impacting day-rate pricing models. Multi-well pad development and upstream acreage consolidation, however, create opportunities for integrated, full water lifecycle solutions.

Planning & Forecasting: The Company monitors evolving regulatory landscapes, especially concerning emissions and water management, and anticipates continued customer emphasis on sustainable production.

Regulatory Environment & Compliance

Regulatory Framework: Industry-Specific Regulations: Operations are subject to stringent federal, tribal, state, and local laws and regulations in the U.S. governing occupational safety and health, environmental protection, and discharge of materials. Key regulations include:

• Hazardous Substances and Wastes: Resource Conservation and Recovery Act (RCRA), Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), and state statutes. Oil and gas wastes are currently exempt from hazardous waste classification under RCRA, but this could change.
• Wastes with NORM: Naturally Occurring Radioactive Material (NORM) is subject to state radiation control regulations and OSHA.
• Water Discharges and Use: Federal Water Pollution Control Act (Clean Water Act - CWA), Oil Pollution Act of 1990 (OPA), and analogous state laws, regulating pollutant discharge, spill prevention, and dredge/fill material. Uncertainty exists regarding the scope of "waters of the U.S." (WOTUS).
• Saltwater Disposal Wells and Induced Seismicity: Regulated by the Underground Injection Control (UIC) program under the Safe Drinking Water Act (SDWA) and state laws. Some states (Oklahoma, Texas) have imposed restrictions or shut down disposal wells due to induced seismic activity.
• Hydraulic Fracturing Activities: Primarily regulated by state oil and natural gas commissions, but also subject to federal scrutiny (e.g., EPA's UIC program for diesel use). New regulations could limit water withdrawals/usage or restrict additives.
• Air Emissions: U.S. Clean Air Act (CAA) and state laws restrict air pollutants, requiring permits and emission controls. Methane emissions from oil and gas operations are subject to federal rules (e.g., EPA's Quad Ob and Quad Oc, though reconsideration and compliance deadline extensions are ongoing).
• Endangered Species: Federal Endangered Species Act (ESA) and Migratory Bird Treaty Act (MBTA) restrict activities affecting protected species or habitats.
• Chemical Safety: Subject to laws like the Toxic Substances Control Act (TSCA), regulating chemical substances and inventories, which can impact product use and costs.
• Motor Carrier Operations: Regulated by the U.S. Department of Transportation (U.S. DOT) and state agencies for authorization, safety, and hazardous materials. International Compliance: Not explicitly detailed beyond U.S. operations.

Trade & Export Controls:

• Export Restrictions: U.S. trade policies, including tariffs and sanctions (e.g., on Venezuelan oil, Russian hydrocarbons), can impact global commodity prices and demand for customer products.
• Sanctions Compliance: Monitors evolving global trade landscape, including sanctions, tariffs, and anti-dumping regulations.

Legal Proceedings: 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. Expects to be named in similar lawsuits, investigations, and claims in the future.

Tax Strategy & Considerations

Tax Profile:

• Effective Tax Rate: (8.1)% in 2025, 27.7% in 2024, (316.4)% in 2023. The 2025 benefit was driven by a favorable adjustment to the valuation allowance and tax credits.
• Geographic Tax Planning: Subject to U.S. federal, state, and local income taxes. SES Holdings and most subsidiaries are flow-through entities for U.S. federal income tax. The Texas Margin Tax is classified as an income tax.
• Tax Reform Impact: The Inflation Reduction Act of 2022 (IRA 2022) included a Waste Emissions Charge for methane emissions, which was repealed by Congress in February 2025, and its implementation delayed until 2034 by the OBBBA. The Company's ability to use Net Operating Loss (NOL) carryforwards may be limited by Section 382 of the Internal Revenue Code.

Tax Receivable Agreements (TRAs):

• Select Water Solutions, Inc. is party to two TRAs with certain affiliates of SES Holdings LLC Units holders. These agreements generally provide for payments of 85% of net cash savings in U.S. federal, state, and local income/franchise tax realized from tax basis increases (due to acquisitions of SES Holdings LLC Units) and net operating losses from reorganization transactions.
• The Company retains 15% of these cash savings. Payments commenced in 2024.
• As of December 31, 2025, the estimated TRA liability was $43.4 million (undiscounted liability of $107.3 million, estimated termination payment of $79.1 million if terminated early).
• Payments can be substantial and may be accelerated upon early termination or change of control, potentially exceeding actual cash tax savings.

Insurance & Risk Transfer

Risk Management Framework:

• Insurance Coverage: 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. Coverage limits include $1.0 million for general liability, $1.0 million for workers’ compensation/employer’s liability, $2.0 million for auto liability, and $0.4 million for health insurance, with an excess loss policy of $100.0 million in aggregate.
• Risk Transfer Mechanisms: Enters into Master Services Agreements (MSAs) with most customers to delineate indemnification obligations. Generally, the Company assumes responsibility for above-surface pollution from its equipment/services, while customers assume responsibility for other pollution (e.g., seepage, uncontrolled flow of drilling fluids) and catastrophic events (e.g., blowouts). Customers also generally indemnify the Company for personal injury/death of their employees, and vice versa for the Company's employees, unless due to gross negligence or willful misconduct.