Select Energy Services Earnings Call Highlights Growth and Challenges

Select Energy Services ((WTTR)) has held its Q2 earnings call. Read on for the main highlights of the call.

The recent earnings call of Select Energy Services highlighted a robust financial performance, particularly in the Water Infrastructure segment, despite facing challenges in other areas. The overall sentiment was positive, with strategic expansions and future growth potential offering a promising outlook for the company.

Strong Financial Performance

Select Water Solutions reported a notable increase in net income by 22% and adjusted EBITDA by 13% in the second quarter of 2025. The company also achieved consolidated gross margin gains of nearly 2 percentage points, reflecting its strong financial health.

Water Infrastructure Segment Growth

The Water Infrastructure segment demonstrated impressive growth, with revenues rising by 12% and gross profit before depreciation and amortization (D&A) increasing by 15%. The segment achieved a remarkable gross margin of 55%, underscoring its strength.

Strategic Agreements and Expansions

Select Energy Services signed new long-term agreements for large projects in New Mexico, expanding its contracted and dedicated acreage by 60,000 acres. The company now has 385,000 acres under right of first refusal agreements, enhancing its strategic position.

OMNI Environmental Solutions Transaction

A strategic transaction with OMNI Environmental Solutions allowed Select to expand its infrastructure while streamlining non-core operations. This included acquiring a landfill and disposal facilities in the Bakken region, further strengthening its capabilities.

Peak Rentals Expansion

Peak Rentals is venturing into the distributed power sector, supported by new agreements and capital structure options. The appointment of a new CEO with extensive energy sector experience is expected to drive this expansion.

Future Growth Potential

The Water Infrastructure segment is poised for a 20% year-over-year growth in 2026, building on the double-digit growth anticipated in 2025. This growth potential highlights the segment’s critical role in the company’s future success.

Water Services Segment Decline

The Water Services segment experienced a 4% sequential revenue decline due to weakening activity levels. Further reductions are anticipated in the second half of the year, presenting challenges for the company.

Chemical Technologies Revenue Decline

The Chemical Technologies segment saw an 11% sequential revenue decline, primarily due to reduced activity from pressure pumping customers, indicating a need for strategic adjustments.

Trucking Operations Divestiture

Select Water Solutions divested certain trucking operations, which represented over one-third of the revenue and more than one-fifth of the gross profit before D&A of the trucking business unit, as part of its strategic realignment.

Potential Activity Declines

The macro activity environment may pose challenges for the more completions-oriented parts of the water services and chemical businesses in the latter half of 2025, necessitating careful management.

Forward-Looking Guidance

Select Water Solutions anticipates a strong 20% year-over-year growth in their Water Infrastructure segment for 2026, building on the expected double-digit growth in 2025. Despite challenges in the Water Services and Chemical Technologies segments, the company remains optimistic about its strategic initiatives and long-term growth prospects.

In summary, Select Energy Services’ earnings call conveyed a positive sentiment, driven by strong financial performance and strategic expansions. While challenges persist in certain segments, the company’s focus on growth and strategic initiatives positions it well for the future.