Select Water Solutions (NYSE:WTTR) is positioning its Water Infrastructure business as its primary growth engine, with the company expanding produced-water recycling, disposal, pipeline and storage systems for oil and gas operators, Chairman and Chief Executive Officer John Schmitz said in a company presentation.
Schmitz, who founded the company in 2007, said Select has evolved from a completion-oriented water services provider into a more contracted, life-of-well infrastructure business. The shift reflects the growing amount of water produced alongside oil and gas from horizontal wells, particularly in the Permian Basin’s Upper Delaware region.
Water Infrastructure Drives Growth
Select reports operations across Water Infrastructure, Water Services and Chemical Technologies. Water Infrastructure, which includes recycling plants, disposal wells, pipelines and water-and-solids management facilities, has received most of the company’s growth capital over the past six years, according to Schmitz.
The segment is supported by contracts tied to produced water generated over the life of oil and gas wells. Schmitz said Water Infrastructure generates gross margins of roughly 50% to 60%, compared with low-to-mid-20% margins in the company’s Water Services and Chemical Technologies businesses.
Select is managing approximately 1.5 million barrels per day of produced water, Schmitz said. Its network includes about 2.8 million barrels per day of recycling capacity, 500,000 barrels per day of mobile capacity, 118 disposal sites, more than 1,000 miles of pipeline and 2.5 million acres under dedication across the United States.
The company’s recently reported quarterly EBITDA was $93 million, which Schmitz described as a high point for Select. He said the company had guided for a stronger following quarter and had added to its contracted backlog through recently announced projects.
Schmitz said the company had effectively pulled forward goals it previously associated with 2027 into 2026, while continuing to invest in projects that are not yet contributing to earnings.
Upper Delaware Network
Select’s core Water Infrastructure asset is in Eddy and Lea counties in New Mexico’s Upper Delaware region. The company said the area accounts for about 1.7 million barrels per day of its 2.8 million barrels per day of recycling capacity, approximately 400 miles of pipeline, 1.5 million dedicated acres and roughly 29 million barrels of storage capacity.
The company has developed a dual-pipeline system in the region, with one line used to collect produced water and another to distribute treated recycled water for completion operations. Schmitz said the network enables Select to balance customers that have excess water requiring management with those that need water to complete wells.
Select’s “Recycle First, dispose second” strategy is intended to lower costs for both types of customers. Schmitz said operators can recycle water at about a 30% discount to disposal costs, while customers requiring water for completions can obtain recycled produced water at roughly a 30% lower cost than sourcing non-recycled barrels.
The company generally does not build infrastructure without a dedicated customer contract, Schmitz said. It targets a four-year cash-on-cash return and typically contracts about half of a facility’s capacity before seeking to commercialize the remaining capacity.
- Water Infrastructure includes disposal, recycling, water-and-solids management, and pipeline operations.
- Select’s Water Services business provides water sourcing, transport, containment, treatment and delivery for hydraulic fracturing operations.
- Its Chemical Technologies unit supplies chemistry used to treat recycled water and support fracturing operations.
Contract Expansion and Capital Investment
Schmitz said a recently announced agreement converted a large quantity of right-of-first-refusal acreage into dedicated acreage, extended one customer relationship by 12 years under contract and added another 800,000 acres to the company’s dedication and right-of-first-refusal program.
Under another arrangement announced during the company’s quarter, a customer conveyed 14 disposal wells to Select. Schmitz said the customer had reduced its need for disposal capacity as recycling expanded, allowing Select to add the wells to its network and potentially utilize them more fully.
The company has directed most of its announced growth capital to Eddy and Lea counties. Schmitz said Select had $200 million to $250 million of capital going into the ground in the region, much of it front-loaded during the first six months of the year. He said the company also recently announced an additional $160 million in capital opportunities.
Select has less than one turn of debt, Schmitz said. The company issued stock during the prior six months to support its front-end investment program, marking its first stock issuance since going public in April 2017. It also maintains a regular base dividend and has repurchased shares.
Recycling, Minerals and Beneficial Reuse
Beyond recycling water for completion activity, Select is exploring mineral extraction and beneficial-reuse opportunities. Schmitz said the company has announced three agreements with companies that place their own facilities alongside Select’s water infrastructure to extract lithium or iodine from produced water. Select receives a royalty from the extracted minerals before the water returns to its system for further processing.
The company has also completed a beneficial-reuse pilot in Texas with a large exploration and production partner, where treated water was used to grow crops. Schmitz noted that long-term, high-volume permitting standards for reintroducing treated produced water into the environment have not yet been established.
Looking ahead, Schmitz said Select sees potential to apply its experience converting waste streams into usable streams beyond oil and gas, including in other industries and municipal markets.
About Select Water Solutions (NYSE:WTTR)
Select Water Solutions, Inc, headquartered in Houston, Texas, is a water management services provider primarily serving the oil and gas industry. Formerly operating under the name Select Energy Services, the company rebranded to reflect its core focus on water treatment, recycling and disposal. Since its inception in 2016, Select Water Solutions has expanded to key U.S. basins—including the Permian, Eagle Ford, Marcellus and DJ Basin—and maintains strategic operations in select international regions.
The company’s offerings span the full water lifecycle, from produced water gathering and transportation to advanced treatment and beneficial reuse.
