Select Energy Services Reports Robust 2024 Earnings and Strategic Growth

Select Energy Services ((WTTR)) has held its Q4 earnings call. Read on for the main highlights of the call.

Select Energy Services’ recent earnings call reflected a robust sentiment, showcasing strong performance in 2024. The company reported record growth in both revenue and gross profit from its water infrastructure segment, alongside significant market expansions. Despite encountering some challenges within the water services and chemical technologies segments, Select Energy remains confident about its growth trajectory and commitment to sustainability.

Record Financial Performance in 2024

Select Energy Services experienced a remarkable 26% increase in annual revenue, coupled with an impressive 62% growth in annual gross profit from its water infrastructure segment. The company’s consolidated adjusted EBITDA reached an all-time high, bolstered by a strong cash flow from operations.

Water Infrastructure Growth

In 2024, Select achieved record volumes in water transportation, recycling, and disposal. The company increased its produced water disposal volumes by 43% year over year and signed eight major new organic infrastructure projects under long-term contracts, forecasting $150 million of growth capital for 2024 and 2025.

Expansion into Municipal Water Market

Select Energy Services made a strategic $62 million investment in Colorado’s municipal, industrial, and agricultural water markets. By acquiring one of the largest senior water rights and storage portfolios in the state, the company gains exposure to high-margin, long-term contracted cash flow opportunities.

Strong Contract Backlog

The company’s contract portfolio now includes over 2.5 million acres under long-term area dedication, with a record high backlog of future projects. This positions Select for continued growth in 2025 and beyond.

Sustainability Initiatives

Select set a new five-year goal to recycle over 400 million barrels of produced water annually by 2029. The company also renewed its sustainability-linked KPIs and maintained a market-leading employee safety record.

Decline in Water Services Revenue

The water services segment experienced a 10% revenue decline in the fourth quarter due to seasonal activity drops, negatively impacting gross margins.

Lower Than Expected Margins in Chemical Technologies

Despite sequential revenue growth, the chemical technologies segment saw lighter-than-expected margins, coming in at 13%.

Delayed Revenue from Water Infrastructure

Anticipated revenue was impacted by delays in taking certain key assets offline in Q4, with further deferrals expected to affect Q1 2025 revenue.

Forward-Looking Guidance

Looking ahead, Select Energy Services provided guidance for 2025, predicting annual water infrastructure segment revenue and gross profit growth between 15% to 25%. They aim to convert at least 30% of adjusted EBITDA into free cash flow and are expanding their water infrastructure platform into Colorado’s municipal, industrial, and agricultural water markets.

In conclusion, Select Energy Services’ earnings call highlighted a period of noteworthy growth and strategic expansion in 2024. While challenges in certain segments were acknowledged, the overall sentiment remains positive with a strong emphasis on sustainability and future growth plans.