Select Energy Services Reports First Quarter 2021 Financial Results And Operational Updates
Select Energy Services (NYSE: WTTR) reported Q1 2021 revenue of $143.7 million, up 8% from Q4 2020, driven by the Oilfield Chemicals segment. Despite challenges from winter storms impacting margins and a net loss of $27.4 million, the company anticipates Q2 revenue guidance of $160-170 million with improved Adjusted EBITDA margins of 5-7%. Select's financial position remains strong, with no bank debt and liquidity of $262.2 million. Strategic investments in water recycling and geothermal energy reflect its commitment to sustainability and operational efficiency.
- 8% revenue growth in Q1 2021 compared to Q4 2020.
- Projected revenue of $160-170 million for Q2 2021.
- Strong liquidity position with $262.2 million available.
- Successful launch of water recycling facilities with blue-chip partners.
- Continued focus on sustainability and energy transition with investment in ICE Thermal Harvesting.
- Net loss of $27.4 million in Q1 2021, worsening from Q4 2020.
- Gross loss of $4.4 million and total gross margin at (3.1%).
- Weather disruptions in February led to lost revenue and margin compression.
HOUSTON, May 4, 2021 /PRNewswire/ -- Select Energy Services, Inc. (NYSE: WTTR) ("Select" or "the Company"), a leading provider of sustainable water and chemical solutions to the U.S. unconventional oil and gas industry, today announced results for the quarter ended March 31, 2021.
John Schmitz, Chairman of the Board, President and CEO, stated, "During the first quarter, we continued to see revenue improvements across all of our business segments with
"Our primary strategic objectives remain as outlined previously. We will drive value in this company, through improving and growing the base business in a recovering activity environment and advancing our leading position in integrated and sustainable full life cycle water and chemicals through our FluidMatch™ solutions, through deploying our expertise in water and chemicals across the value chain and through evaluating strategic investment opportunities and M&A. There's a lot of opportunity out there, and I'm confident we can execute our strategy.
"We continue to look for more ways to improve the business, and in doing so, we recently completed an organizational realignment, starting with the appointment of Michael Skarke as EVP and COO. Michael has been a longtime partner of mine, having joined the Company in 2009, and has served in a number of leadership roles within the organization across both Operations and Finance. He will oversee all aspects of the operational organization with a particular emphasis on the further integration of our efforts to support the total water and fluids life cycle. This realignment will also support further commercialization of integrated solutions on a regional basis, while allowing us to more efficiently control costs, drive margin improvement and take advantage of our significant operating leverage and further our initiatives around sustainable water and chemical solutions.
"As previously disclosed, we recently partnered with two blue-chip operators in the core of the Permian Basin to construct and operate two water recycling facilities supported by long-term contracts. These projects commenced operations in the first quarter and are off to very promising starts. This infrastructure streamlines our customers' water logistics, reduces their costs and helps our customers achieve their ESG targets by reducing their environmental impact through reduced fresh water usage and reduced waste disposal. We have already seen success in further commercializing these facilities, with two more customers either currently sending or contracted to send volumes during the second quarter, and the additional pull through of various service lines related to these facilities.
"While we continue to find new and interesting ways to invest in growth, we have also further demonstrated the asset-light nature of our base business model by limiting net capex during the first quarter to
"We are also furthering our efforts to innovate and find new ways to diversify our capabilities and advance our initiatives around the energy transition. As part of this effort, we are pleased to announce a strategic investment in ICE Thermal Harvesting. ICE is a new venture focused on providing zero-emission geothermal electric power to the oil and gas industry as well as industrial consumers across multiple sectors. We are excited to collaborate with the ICE team as both capital and strategic partners and look forward to the growth opportunities ahead for the business.
"Select sits in a very strong position in the marketplace, with no bank debt, strong cash flow capabilities and a substantial cash balance. In addition to this financial strength, we have the ability to leverage our competitive strengths as the oil and gas industry's leading sustainable water and chemical solutions provider to expand into new areas or other industries to take advantage of the energy transition. We are very excited about these recent water recycling and energy transition investments, and we continue to believe that additional opportunities lie ahead, particularly as we begin to see the benefits of the momentum in the activity landscape," concluded Schmitz.
Consolidated Financial Information
Revenue for the first quarter of 2021 was
Gross loss was
SG&A during the first quarter of 2021 was
Adjusted EBITDA was
Select's consolidated Adjusted EBITDA during the first quarter of 2021 includes
Business Segment Information
The Water Services segment generated revenues of
The Water Infrastructure segment generated revenues of
The Oilfield Chemicals segment generated revenues of
Cash Flow and Capital Expenditures
Cash flow from operations for the first quarter of 2021 was (
Additionally, cash flow from investing activities was reduced by the Company's recent investment in ICE Thermal Harvesting, a new venture focused on providing zero-emission geothermal electric power to industrial consumers across multiple sectors.
Balance Sheet and Capital Structure
Total cash and cash equivalents were
The Company had no borrowings outstanding under its revolving credit facility as of March 31, 2021 and December 31, 2020. As of March 31, 2021 and December 31, 2020, the borrowing base under the revolving credit facility was
Total liquidity was
Conference Call
Select has scheduled a conference call on Wednesday, May 5, 2021 at 11:00 a.m. Eastern time / 10:00 a.m. Central time. Please dial 201-389-0872 and ask for the Select Energy Services call at least 10 minutes prior to the start time of the call, or listen to the call live over the Internet by logging on to the website at the address http://investors.selectenergyservices.com/events-and-presentations. A telephonic replay of the conference call will be available through May 19, 2021 and may be accessed by calling 201-612-7415 using passcode 13718587#. A webcast archive will also be available at the link above shortly after the call and will be accessible for approximately 90 days.
About Select Energy Services, Inc.
Select Energy Services, Inc. and its consolidated subsidiaries (collectively referred to as "Select" or the "Company") is a leading provider of sustainable water and chemical solutions to the oil and gas industry. Select develops, manufactures and delivers a full suite of chemical products for use in oil and gas well completion and production operations as well as integration into the full water life-cycle. These solutions are supported by the Company's critical water infrastructure assets and water treatment and recycling capabilities. As a leader in sustainable water and chemical solutions, Select places the utmost importance on safe, environmentally responsible management of oilfield water throughout the lifecycle of a well. Additionally, Select believes that responsibly managing water resources throughout its operations to help conserve and protect the environment is paramount to the continued success of the Company. For more information, please visit Select's website, http://www.selectenergy.com.
Cautionary Statement Regarding Forward-Looking Statements
All statements in this communication other than statements of historical facts are forward-looking statements which contain our current expectations about our future results. We have attempted to identify
any forward-looking statements by using words such as "could," "believe," "anticipate," "expect," "project," "will," "estimate" and other similar expressions. Although we believe that the expectations reflected, and the assumptions or bases underlying our forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Such statements are not guarantees of future performance or events and are subject to known and unknown risks and uncertainties that could cause our actual results, events or financial positions to differ materially from those included within or implied by such forward-looking statements. Factors that could materially impact such forward-looking statements include, but are not limited to: the severity and duration of world health events, including the COVID-19 pandemic, related economic repercussions and the resulting severe disruption in the oil and gas industry and negative impact on demand for oil and gas, which is negatively impacting our business; actions by the members of OPEC+ with respect to oil production levels and announcements of potential changes in such levels, including the ability of the OPEC+ countries to agree on and comply with supply limitations; operational challenges relating to the COVID-19 pandemic and efforts to mitigate the spread of the virus, including logistical challenges, protecting the health and well-being of our employees, remote work arrangements, performance of contracts and supply chain disruptions; the level of capital spending and access to capital markets by oil and gas companies, trends and volatility in oil and gas prices, and our ability to manage through such volatility; and other factors discussed or referenced in the "Risk Factors" section of our most recent Annual Report on Form 10-K, our subsequently filed Quarterly Reports on Form 10-Q and those set forth from time to time in our other filings with the SEC. Investors should not place undue reliance on our forward-looking statements. Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, unless required by law.
WTTR-ER
SELECT ENERGY SERVICES, INC. | ||||||
Three months ended March 31, | ||||||
2021 | 2020 | |||||
Revenue | ||||||
Water Services | $ | 64,223 | $ | 149,511 | ||
Water Infrastructure | 37,803 | 57,762 | ||||
Oilfield Chemicals | 41,716 | 71,012 | ||||
Total revenue | 143,742 | 278,285 | ||||
Costs of revenue | ||||||
Water Services | 62,324 | 129,114 | ||||
Water Infrastructure | 26,399 | 47,813 | ||||
Oilfield Chemicals | 37,766 | 59,876 | ||||
Other | — | 4 | ||||
Depreciation and amortization | 21,650 | 26,182 | ||||
Total costs of revenue | 148,139 | 262,989 | ||||
Gross (loss) profit | (4,397) | 15,296 | ||||
Operating expenses | ||||||
Selling, general and administrative | 19,894 | 25,289 | ||||
Depreciation and amortization | 649 | 685 | ||||
Impairment of goodwill and trademark | — | 276,016 | ||||
Impairment and abandonment of property and equipment | — | 3,184 | ||||
Lease abandonment costs | 104 | 953 | ||||
Total operating expenses | 20,647 | 306,127 | ||||
Loss from operations | (25,044) | (290,831) | ||||
Other (expense) income | ||||||
Losses on sales of property and equipment and divestitures, net | (579) | (435) | ||||
Interest expense, net | (435) | (331) | ||||
Foreign currency gain (loss), net | 3 | (46) | ||||
Other (expense) income, net | (1,629) | 259 | ||||
Loss before income tax benefit | (27,684) | (291,384) | ||||
Income tax benefit | 263 | 164 | ||||
Net loss | (27,421) | (291,220) | ||||
Less: net loss attributable to noncontrolling interests | 4,314 | 45,358 | ||||
Net loss attributable to Select Energy Services, Inc. | $ | (23,107) | $ | (245,862) | ||
Net loss per share attributable to common stockholders: | ||||||
Class A—Basic | $ | (0.27) | $ | (2.86) | ||
Class B—Basic | $ | — | $ | — | ||
Net loss per share attributable to common stockholders: | ||||||
Class A—Diluted | $ | (0.27) | $ | (2.86) | ||
Class B—Diluted | $ | — | $ | — | ||
SELECT ENERGY SERVICES, INC. | ||||||
March 31, 2021 | December 31, 2020 | |||||
(unaudited) | ||||||
Assets | ||||||
Current assets | ||||||
Cash and cash equivalents | $ | 160,021 | $ | 169,039 | ||
Accounts receivable trade, net of allowance for credit losses of | 140,016 | 129,392 | ||||
Accounts receivable, related parties | 332 | 69 | ||||
Inventories | 34,410 | 33,384 | ||||
Prepaid expenses and other current assets | 20,774 | 19,621 | ||||
Total current assets | 355,553 | 351,505 | ||||
Property and equipment | 870,091 | 878,902 | ||||
Accumulated depreciation | (537,199) | (528,537) | ||||
Total property and equipment, net | 332,892 | 350,365 | ||||
Right-of-use assets, net | 49,881 | 52,331 | ||||
Other intangible assets, net | 113,463 | 116,079 | ||||
Other long-term assets, net | 6,869 | 5,079 | ||||
Total assets | $ | 858,658 | $ | 875,359 | ||
Liabilities and Equity | ||||||
Current liabilities | ||||||
Accounts payable | $ | 24,847 | $ | 12,995 | ||
Accrued accounts payable | 23,177 | 21,359 | ||||
Accounts payable and accrued expenses, related parties | 946 | 519 | ||||
Accrued salaries and benefits | 14,996 | 16,279 | ||||
Accrued insurance | 9,458 | 9,788 | ||||
Sales tax payable | 2,488 | 1,415 | ||||
Accrued expenses and other current liabilities | 13,325 | 12,077 | ||||
Current operating lease liabilities | 13,968 | 14,019 | ||||
Current portion of finance lease obligations | 287 | 307 | ||||
Total current liabilities | 103,492 | 88,758 | ||||
Long-term operating lease liabilities | 57,834 | 60,984 | ||||
Other long-term liabilities | 19,383 | 19,735 | ||||
Total liabilities | 180,709 | 169,477 | ||||
Commitments and contingencies | ||||||
Class A common stock, | 879 | 868 | ||||
Class A-2 common stock, | — | — | ||||
Class B common stock, | 162 | 162 | ||||
Preferred stock, | — | — | ||||
Additional paid-in capital | 910,688 | 909,278 | ||||
Accumulated deficit | (340,354) | (317,247) | ||||
Total stockholders' equity | 571,375 | 593,061 | ||||
Noncontrolling interests | 106,574 | 112,821 | ||||
Total equity | 677,949 | 705,882 | ||||
Total liabilities and equity | $ | 858,658 | $ | 875,359 | ||
SELECT ENERGY SERVICES, INC. | ||||||
Three months ended March 31, | ||||||
2021 | 2020 | |||||
Cash flows from operating activities | ||||||
Net loss | $ | (27,421) | $ | (291,220) | ||
Adjustments to reconcile net loss to net cash provided by operating activities | ||||||
Depreciation and amortization | 22,299 | 26,867 | ||||
Net loss on disposal of property and equipment and divestitures | 579 | 435 | ||||
Bad debt expense | 300 | 2,385 | ||||
Amortization of debt issuance costs | 172 | 172 | ||||
Inventory write-downs | 54 | 48 | ||||
Equity-based compensation | 1,422 | 574 | ||||
Impairment of goodwill and trademark | — | 276,016 | ||||
Impairment and abandonment of property and equipment | — | 3,184 | ||||
Unrealized loss on short-term investment | 1,831 | — | ||||
Other operating items, net | (129) | (47) | ||||
Changes in operating assets and liabilities | ||||||
Accounts receivable | (11,187) | 34,992 | ||||
Prepaid expenses and other assets | (2,696) | 6,633 | ||||
Accounts payable and accrued liabilities | 10,903 | (13,328) | ||||
Net cash (used in) provided by operating activities | (3,873) | 46,711 | ||||
Cash flows from investing activities | ||||||
Proceeds received from divestitures | — | 85 | ||||
Purchase of property and equipment | (4,534) | (11,338) | ||||
Purchase of equity method investment | (2,000) | — | ||||
Proceeds received from sales of property and equipment | 2,316 | 5,768 | ||||
Net cash used in investing activities | (4,218) | (5,485) | ||||
Cash flows from financing activities | ||||||
Payments of finance lease obligations | (75) | (65) | ||||
Proceeds from share issuance | 14 | 27 | ||||
Contributions from noncontrolling interests | — | 383 | ||||
Repurchase of common stock | (874) | (6,636) | ||||
Net cash used in financing activities | (935) | (6,291) | ||||
Effect of exchange rate changes on cash | 8 | (61) | ||||
Net (decrease) increase in cash and cash equivalents | (9,018) | 34,874 | ||||
Cash and cash equivalents, beginning of period | 169,039 | 79,268 | ||||
Cash and cash equivalents, end of period | $ | 160,021 | $ | 114,142 | ||
Comparison of Non-GAAP Financial Measures
EBITDA, Adjusted EBITDA, gross profit before depreciation and amortization (D&A) and gross margin before D&A are not financial measures presented in accordance with GAAP. We define EBITDA as net income (loss), plus interest expense, income taxes and depreciation and amortization. We define Adjusted EBITDA as EBITDA plus/(minus) loss/(income) from discontinued operations, plus any impairment charges or asset write-offs pursuant to accounting principles generally accepted in the U.S. ("GAAP"), plus non-cash losses on the sale of assets or subsidiaries, non-recurring compensation expense, non-cash compensation expense, and non-recurring or unusual expenses or charges, including severance expenses, transaction costs, or facilities-related exit and disposal-related expenditures and plus/(minus) foreign currency losses/(gains). We define gross profit before D&A as revenue less cost of revenue, excluding cost of sales D&A expense. We define gross margin before D&A as gross profit before D&A divided by revenue. EBITDA, Adjusted EBITDA, gross profit before D&A and gross margin before D&A are supplemental non-GAAP financial measures that we believe provide useful information to external users of our financial statements, such as industry analysts, investors, lenders and rating agencies because it allows them to compare our operating performance on a consistent basis across periods by removing the effects of our capital structure (such as varying levels of interest expense), asset base (such as depreciation and amortization) and non-recurring items outside the control of our management team. We present EBITDA, Adjusted EBITDA, gross profit before D&A and gross margin before D&A because we believe they provide useful information regarding the factors and trends affecting our business in addition to measures calculated under GAAP.
Net income (loss) is the GAAP measure most directly comparable to EBITDA and Adjusted EBITDA. Gross profit (loss) is the GAAP measure most directly comparable to gross profit before D&A. Our non-GAAP financial measures should not be considered as alternatives to the most directly comparable GAAP financial measure. Each of these non-GAAP financial measures has important limitations as an analytical tool due to exclusion of some but not all items that affect the most directly comparable GAAP financial measures. You should not consider EBITDA, Adjusted EBITDA or gross profit before D&A in isolation or as substitutes for an analysis of our results as reported under GAAP. Because EBITDA, Adjusted EBITDA and gross profit before D&A may be defined differently by other companies in our industry, our definitions of these non-GAAP financial measures may not be comparable to similarly titled measures of other companies, thereby diminishing their utility. For further discussion, please see "Item 6. Selected Financial Data" in our Annual Report on Form 10-K for the year ended December 31, 2020.
The following table presents a reconciliation of EBITDA and Adjusted EBITDA to our net loss, which is the most directly comparable GAAP measure for the periods presented:
Three months ended, | |||||||||||
(unaudited) (in thousands) | March 31, 2021 | December 31, 2021 | March 31, 2020 | ||||||||
Net loss | $ | (27,421) | $ | (21,208) | $ | (291,220) | |||||
Interest expense, net | 435 | 503 | 331 | ||||||||
Income tax benefit | (263) | (981) | (164) | ||||||||
Depreciation and amortization | 22,299 | 23,901 | 26,867 | ||||||||
EBITDA | (4,950) | 2,215 | (264,186) | ||||||||
Non-recurring severance expenses | 3,225 | — | 3,502 | ||||||||
Non-cash compensation expenses | 1,422 | 1,706 | 574 | ||||||||
Non-cash loss on sale of assets or subsidiaries | 697 | 2,866 | 1,627 | ||||||||
Non-recurring transaction costs | 412 | 1,289 | 12 | ||||||||
Lease abandonment costs | 104 | 1,857 | 953 | ||||||||
Impairment of goodwill and trademark | — | — | 276,016 | ||||||||
Impairment and abandonment of property and equipment | — | — | 3,184 | ||||||||
Yard closure costs related to consolidating operations | — | — | 1,950 | ||||||||
Other non-recurring charges | — | 347 | — | ||||||||
Foreign currency gain, net | (3) | (45) | 46 | ||||||||
Adjusted EBITDA | $ | 907 | $ | 10,235 | $ | 23,678 | |||||
The following table presents a reconciliation of gross profit before D&A to total gross profit (loss), which is the most directly comparable GAAP measure, and a calculation of gross margin before D&A for the periods presented:
Three months ended, | |||||||||
(unaudited) (in thousands) | March 31, 2021 | December 31, 2020 | March 31, 2020 | ||||||
Gross (loss) profit by segment | |||||||||
Water services | $ | (11,156) | $ | (9,646) | $ | 3,241 | |||
Water infrastructure | 5,149 | 4,091 | 2,921 | ||||||
Oilfield chemicals | 1,610 | 2,316 | 9,138 | ||||||
Other | — | (703) | (4) | ||||||
As reported gross (loss) profit | (4,397) | (3,942) | 15,296 | ||||||
Plus depreciation and amortization | |||||||||
Water services | 13,055 | 13,833 | 17,156 | ||||||
Water infrastructure | 6,255 | 6,992 | 7,028 | ||||||
Oilfield chemicals | 2,340 | 2,408 | 1,998 | ||||||
Other | — | — | — | ||||||
Total depreciation and amortization | 21,650 | 23,233 | 26,182 | ||||||
Gross profit before D&A | $ | 17,253 | $ | 19,291 | $ | 41,478 | |||
Gross profit (loss) before D&A by segment | |||||||||
Water services | 1,899 | 4,187 | 20,397 | ||||||
Water infrastructure | 11,404 | 11,083 | 9,949 | ||||||
Oilfield chemicals | 3,950 | 4,724 | 11,136 | ||||||
Other | — | (703) | (4) | ||||||
Total gross profit before D&A | $ | 17,253 | $ | 19,291 | $ | 41,478 | |||
Gross margin before D&A by segment | |||||||||
Water services | |||||||||
Water infrastructure | |||||||||
Oilfield chemicals | |||||||||
Other | n/a | n/a | n/a | ||||||
Total gross margin before D&A | |||||||||
Contacts: | Select Energy Services |
Chris George - VP, Investor Relations & Treasurer | |
(713) 296-1073 | |
IR@selectenergyservices.com | |
Dennard Lascar Investor Relations | |
Ken Dennard / Lisa Elliott | |
713-529-6600 | |
WTTR@dennardlascar.com |
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SOURCE Select Energy Services, Inc.
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