Select Energy Services ((WTTR)) has held its Q1 earnings call. Read on for the main highlights of the call.
The latest earnings call for Select Energy Services reflected a strong start to 2025, showcasing significant achievements in revenue growth and strategic contract wins, particularly in the water infrastructure sector. Despite facing some challenges from sequential revenue declines in certain segments and potential impacts from tariffs and commodity prices, the company’s outlook remains optimistic with expectations for continued growth.
Strong Revenue and Growth Metrics
Select Energy Services reported a 7% increase in revenue, outpacing the general macro environment. The company also saw a 14% rise in adjusted EBITDA and a $12 million growth in net income, highlighting its robust financial performance.
Significant Growth in Chemical Technologies and Water Services
The company experienced a 21% increase in revenue from chemical technologies and an 8% growth in water services, all while maintaining a 54% gross margin in water infrastructure. This demonstrates the company’s strong position in these key segments.
Major Contract Wins and Strategic Developments
Select Energy Services secured several new agreements for large projects, expanding its contracted footprint in the Northern Delaware Basin to over 1,000,000 acres. Notably, the company signed an 11-year contract in Eddy County, underscoring its strategic growth initiatives.
Infrastructure Expansion in Northern Delaware Basin
The company transformed a 40-mile freshwater pipeline to transport produced water, enhancing the strategic benefits for its Northern Delaware network. This expansion is expected to bolster the company’s operational capabilities.
Positive Outlook for Water Infrastructure Segment
The water infrastructure segment maintained a strong 54% gross margin, with expectations for double-digit revenue increases in the second quarter and continued growth into 2026, reflecting a positive outlook for this segment.
Successful ERP System Rollout
Select Energy Services successfully implemented a new ERP system across the company, which is expected to drive efficiencies over time, further supporting the company’s operational improvements.
Sequential Revenue Decline in Certain Segments
Despite the overall positive performance, the company experienced a modest sequential revenue decline due to reduced revenues from legacy freshwater pipeline assets.
Potential Impact of Tariffs and Global Trade Uncertainty
There are concerns over potential activity dislocations caused by recent tariff and global trade announcements. However, direct impacts on Select Energy Services are expected to be limited.
Challenges with Commodity Price and Supply Chain
Lower commodity prices and supply chain dislocations pose challenges that could impact the oil and gas industry overall, potentially affecting the more completions-oriented parts of Select’s business.
Increased Capital Expenditure
The company has increased its net capital expenditure expectations for 2025 to $225 million to $250 million, up from $170 million to $190 million, which will reduce free cash flow expectations.
Forward-Looking Guidance
Looking ahead, Select Energy Services provided comprehensive guidance, expecting consolidated adjusted EBITDA growth of 6% to 12% in the second quarter. Despite potential activity declines in the oil and gas industry due to lower commodity prices and supply chain disruptions, the company remains confident in its strategic focus on water infrastructure growth and anticipates continued resilience and profitability.
In conclusion, the earnings call for Select Energy Services highlighted a strong start to 2025 with significant revenue growth and strategic contract wins. While facing some challenges, the company remains optimistic about its future prospects, particularly in the water infrastructure segment, and is committed to maintaining its growth trajectory.