Select Water to benefit from E&P water challenges, says Citi

Citi analyst Scott Gruber says recent exploration and production water challenges and regulatory changes have put a spotlight on the issue of produced water disposal. Select Water Solutions (WTTR) stands to benefit, the analyst tells investors in a research note. The firm reiterates a Buy rating on the shares with a $14 price target which represents over 70% potential upside. Citi says its bull case rests upon the company’s produced water volumes growing even if shale oil flattens longer term, and the need for more recycling driving pricing power for facility construction. While U.S. oil production is likely to slow, produced water volumes are projected to continuing rising likely straining disposal capacity and increasing demand for recycling, the analyst tells investors in a research note.