ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes thereto in Part II, Item 8. “Financial Statements and Supplementary Data”. This discussion and analysis contains forward-looking statements based on our current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors as described under “Cautionary Note Regarding Forward-Looking Statements” and Part I, Item 1A. “Risk Factors.” The following information updates the discussion of our financial condition provided in our previous filings, and analyzes the changes in the results of operations between the years ended December 31, 2025 and 2024. Refer to our 2024 Annual Report filed February 19, 2025 for discussion and analysis of the changes in results of operations between the years ended December 31, 2024 and 2023. We assume no obligation to update any of these forward-looking statements.
Overview
We are a leading provider of sustainable water and chemical solutions to the energy industry in the U.S. As a leader in the water solutions industry, we place the utmost importance on safe, environmentally responsible management of oilfield water throughout the lifecycle of a well. Additionally, we believe that responsibly managing water resources through our operations to help conserve and protect the environment in the communities in which we operate is paramount to our continued success.
Across many of the regions in which we operate, there is growing concern surrounding the volumes of water required for new well completions, as well as the volumes of produced water injected into subterranean formations where induced seismicity may occur. In response, we are working collaboratively with our customers and local communities to advance more sustainable, cost-effective water management solutions that reduce both freshwater consumption and disposal volumes. Through our integrated infrastructure networks, we provide permanent and mobile solutions that enable the gathering, treatment, and reuse of produced water, which in turn reduces demand for freshwater resources and limits reliance on saltwater disposal wells. In select regions, we have also secured access to non-potable alternative water sources, including brackish groundwater and municipal or industrial effluent, to further support water reuse and reduce competition for freshwater. Leveraging our in-house chemical expertise and proprietary FluidMatch™ design platform, we provide tailored water profiling, treatment assessment, and fluid system optimization to enable the economic use of these alternative sources without compromising well performance. Additionally, we help our customers lower emissions and minimize environmental impact through the deployment of combustion solutions for field-based methane control and the use of temporary layflat hose systems and permanent pipeline infrastructure. These water delivery systems are supported by our real-time automation and remote monitoring technologies, including leak detection, pressure monitoring, and volume tracking, which the safety, reliability, and of our operations. By reducing the reliance on trucked water logistics, these solutions materially reduce greenhouse gas emissions, public safety, and help limit traffic congestion and road in the local communities where we operate.
Recent Developments
Recent Acquisitions
During 2025, we executed a series of strategic asset acquisitions totaling $25.4 million to expand our water infrastructure footprint across both the Permian Basin and the Northeast Region. In the Permian, we acquired surface acreage, multiple SWDs, water storage assets, and a pipeline system connecting a key customer’s operations to a Select recycling facility. These assets are located across Lea County and Eddy County in New Mexico, as well as Howard County, Upton County, and Winkler County in Texas, further strengthening our integrated network of treatment, disposal, gathering, and recycling infrastructure in core production areas of the Permian Basin. In addition, certain acquired SWD sites allow for the potential development of additional wells or recycling facilities in the future. In the Northeast, we acquired three SWDs in Ohio, expanding our market leading disposal presence in the region. Collectively, these transactions enhance Select’s ability to deliver full-cycle water management solutions across its footprint,
Table of Contents
supporting both near-term operations and long-term growth. Additionally, we also acquired certain wastewater treatment facilities for the accommodation and rentals business line in the Permian and Eagle Ford regions for $1.7 million.
Omni Transaction
On July 1, 2025, we acquired a high-margin Bakken platform anchored by long-lived infrastructure from Omni: a special-waste landfill with approximately 3.2 million cubic yards of remaining capacity, a processing and recovery facility for reclaiming diesel and other hydrocarbons from oilfield waste, a permitted Class II SWD with capacity of approximately 12,000 barrels per day, and a commercial tank farm with approximately 24,000 barrels of oil storage. As part of the same transaction, we divested certain lower-margin operations including trucking operations in the Bakken, Northeast and MidCon regions, rental operations in the Bakken and one MidCon SWD. Approximately 280 fluids-hauling employees moved with those businesses, which together represented approximately 8 percent of Water Services segment revenue in the first half of 2025. This transaction expanded our market leading solids management business in the Bakken, while reducing exposure to noncore trucking and hauling.
Streamline Fluids Hauling
As part of our continued focus on capital discipline and portfolio optimization, we also took steps to streamline our fluids hauling operations to prioritize higher-margin, infrastructure-integrated markets. Specifically, we wound down our fluids hauling operations in the Haynesville region and divested the remaining lower-margin operations in the MidCon region. We continue to operate our more integrated and higher-margin fluids hauling businesses in the Permian, Rockies, and Eagle Ford regions, where these services are closely aligned with our operational infrastructure.
See “Note 3—Acquisitions” for further discussion.
AV Farms Investment
In February 2025, we made a $72.1 million equity method investment in a newly formed partnership focused on consolidating and commercializing a large-scale portfolio of senior water rights, irrigated farmland, and reservoir storage assets in Colorado. The investment, centered in the Arkansas River Valley region, is intended to support long-term water infrastructure development and reliable delivery to agricultural, municipal, and industrial stakeholders. As of December 31, 2025, we had contributed $72.1 million to AV Farms and held an approximate 39% ownership interest in the partnership and a 25% interest in the general partner. We expect to contribute up to an additional $74 million over a multi-year period to support future water rights acquisitions and infrastructure buildout. The governing agreements also include call and put option structures beginning in 2028 that could result in our acquisition of the remaining ownership interests, subject to defined valuation mechanics and partial equity settlement provisions. This investment reflects our strategic focus on long-term water resource development and positions us to participate in sustainable water solutions across high-priority basins in the Western United States (Refer to “Note 2—Significant Accounting Policies” for further discussion on AV Farms).
Peak Rentals Update
In August 2025, we announced that we had started an evaluation of strategic alternatives for Peak Rentals, our equipment rental and distributed power business within the Water Services segment. Peak currently includes our accommodations and rentals platform, as well as our well testing and flowback operations. This evaluation includes a range of potential paths forward, including capital structure initiatives and other portfolio optimization opportunities. As of December 31, 2025, no transaction is pending or imminent, and we continue to own 100% of the business. We are continuing to evaluate strategic alternatives for Peak Rentals in the ordinary course; however, there can be no assurance that any particular outcome will ultimately be pursued or completed.
New Sustainability-Linked Credit Facility
On January 24, 2025, we entered into a $550.0 million sustainability-linked senior secured credit facility and extinguished our prior debt. The new facility consists of a $300.0 million revolving credit facility and a $250.0 million
Table of Contents
term loan, both with a five-year maturity, and provides the flexibility to upsize by an additional $200.0 million. Proceeds from the term loan were used to repay all outstanding borrowings under our prior facility, which was concurrently terminated. This new structure enhances our liquidity position and extends our maturity profile through 2030. It also better aligns our capital structure with our long-term infrastructure growth strategy by supporting investment in contracted, production-linked assets and enhancing our flexibility to pursue disciplined, return-focused capital deployment (Refer to “Note 10—Debt” for further discussion of the Sustainability-Linked Credit Facility).
Infrastructure Investments and Contracted Growth Initiatives
Select is prioritizing investments in Water Infrastructure projects, which often bring a more predictable and steady revenue stream through long-term contracts and production-related operations. These investments typically produce higher gross margins and also foster stronger partnerships with customers, as Select becomes an integral partner in ensuring well productivity for ongoing customer production over the life of a well. Our focus is on integrated solutions that enhance contracted infrastructure projects with logistics services and chemical solutions, and expanding the value we provide to our customers. Our approach has been to streamline operations and offer a more comprehensive and valuable overall package to customers that is built around optimizing the entire water lifecycle, as such integrated solutions drive revenue growth and enhance overall value to clients.
During 2025 and 2024, Select has made strategic Water Infrastructure investments across five of the seven regions in which we operate. A summary of the resulting system capacity and current state of operations and resulting competitive advantages is outlined below.
Permian
The Permian remains our largest and most strategically important Water Infrastructure region, anchored by a fully integrated network of 43 active SWDs, 17 active recycling facilities, as well as pipeline connectivity both within our system and with key customer infrastructure. We signed multiple new long-term customer agreements throughout 2025, including dedicated acreage, ROFR acreage and MVCs. A number of these commercial arrangements are expected to commence in 2026 and are anticipated to drive incremental system utilization, expand our high-margin recurring revenue base, and deepen customer relationships across the basin.
The platform was expanded through the 2024 acquisition of Trinity, which added SWDs, pipelines and customer connectivity. During 2025, we completed seven additional bolt-on acquisitions, further enhancing our regional scale and footprint across disposal and pipeline infrastructure. These transactions were highly complementary and have strengthened our ability to provide integrated solutions with improved connectivity to both new and existing customer operations. As of December 31, 2025, our total recycling capacity was approximately 2.4 million barrels per day, with total storage capacity of approximately 35 million barrels. Additionally, we are continuing to drill new SWDs and build new recycling facilities.
Haynesville
Including the Iron Mountain, and Tri-State acquisitions completed in 2024, we have established the largest disposal footprint in the Haynesville region. We now operate an integrated network of disposal assets, the majority of which are tied into basin-wide gathering infrastructure. As of 2025, our Haynesville system includes over 23 active SWDs supported by a regional pipeline network anchored by a 60-mile buried produced water gathering system. We also have a solids facility that processes drilling muds and water, removes solids for landfill disposal, and injects the remaining fluids into our SWDs. This scaled platform enhances flow assurance, improves route density, and strengthens commercial alignment with key customers across the region. Additionally, we are continuing to drill new SWDs in strategic locations to accommodate customer activity.
Looking ahead, we expect increased basin activity, supported by improved natural gas pricing and demand, to drive increased produced water volumes and higher system demand. Our existing gathering
Table of Contents
footprint, available disposal capacity, and flexible operating model position us to capture additional volumes while leveraging the operational efficiencies of the system.
Bakken
We continued to scale our Water Infrastructure platform in the Bakken throughout 2024 and 2025 through a combination of targeted acquisitions and organic growth initiatives. On March 1, 2024, we closed the acquisition of Buckhorn, expanding our permitted landfill footprint across North Dakota and Montana and integrating those assets into our existing solids waste network. This was followed by the acquisition of Omni on July 1, 2025, which added a high-capacity landfill, a hydrocarbon recovery and processing facility, one saltwater disposal well, and a commercial oil storage site. Following these transactions, we now operate four permitted landfills and 22 active SWDs in the region, and an expansive freshwater pipeline distribution network. This positions us as the market leader of full-cycle water and waste infrastructure solutions in the Bakken, with integrated capabilities across pipeline transportation, disposal, recovery, and solids handling. The expanded footprint enhances commercial alignment with key operators in the basin, and we are actively evaluating opportunities to broaden the range of accepted waste streams at our landfills to drive incremental revenue, increase throughput, and improve overall asset utilization.
Northeast
Following the Nuverra acquisition, a business combination and two asset acquisitions in 2024 that added three SWDs, and a subsequent asset acquisition in 2025 that added three additional SWDs, Select has established a scaled disposal platform in the Northeast. Our current operations include 21 active SWDs, representing the largest disposal network in the region. Additionally, we operate a permitted landfill that offers waste handling solutions tailored to the oil and gas industry. The expanded footprint enhances our ability to provide reliable disposal and produced water solutions to Northeast operators. Produced water volumes in the region are primarily delivered via truck, with limited pipeline connectivity, which continues to shape the commercial and operating model for the area.
Rockies
Effective January 1, 2024, we acquired two saltwater disposal wells along with acreage that offers future expansion potential. Our Rockies platform now includes three active SWDs, a recycling facility and a mobile recycling system, with an additional SWD expected to come online in the first quarter of 2026. We leverage a combination of customer integration points and available third-party infrastructure to enhance gathering, disposal and recycling connectivity. These efforts are improving alignment with key customers and supporting more efficient system utilization across the region.
Market Trends and Outlook
We are navigating through various evolving external factors that create uncertainty and volatility in our operating environment, including, but not limited to, global geopolitical conflicts, volatility in energy prices and inflation due to geopolitical dynamics, increased tariffs and their impact on costs of goods and services and developing trends among our customers, including increased consolidation in the industry and demand for produced water recycling services.
The armed conflict between Ukraine and Russia has continued into 2026, as well as ongoing conflicts in the Middle East, including heightened tensions with Iran. As a result of the Russian invasion of Ukraine, the U.S., the United Kingdom, the member states of the European Union and other public and private actors have imposed severe sanctions on Russian financial institutions, businesses and individuals. In the Middle East, various conflicts have resulted in increased hostilities and instability in oil and gas producing regions in the Middle East as well as in key adjacent shipping lanes and supply chains, including elevated tensions with Iran, a major oil producer. In addition, in July of 2025, the U.S. government threatened additional sanctions on Russia and additional tariffs on countries that import energy from Russia.
Table of Contents
The Russia-Ukraine conflict, and the resulting sanctions and concerns regarding global energy security, have contributed to, and conflicts in the Middle East may contribute to, increases and volatility in the prices for oil and natural gas. Further, beginning in late 2025, the U.S. seized several oil tankers suspected of transporting oil from Venezuela, and, in early 2026, the U.S. launched a limited military intervention in Venezuela which culminated in the capture of Venezuela’s incumbent president. As the situation stabilizes and U.S.-Venezuela relations improve, it is expected that approximately 50 million barrels of sanctioned oil may become available for export as U.S. sanctions are lifted. The resumption of such exports may cause a depression in global oil prices as the market adjusts to such an increase in supply. Such volatility, coupled with an increased cost of capital, due, in part to elevated rates of inflation and interest rates, may lead to a more investing and planning environment for us and our customers. The ultimate geopolitical and macroeconomic consequences of these and associated sanctions and/or international responses cannot be predicted, and such events, or any further hostilities elsewhere, could impact the world economy and may affect our financial condition. An end to these and an or elimination of the related sanctions and/or international response could result in a significant fall in commodity prices as hydrocarbons become more readily accessible in global markets, which could have an effect on our customers, and therefore affect our customers’ demand for our services. An intensification of that could also have an effect on our customers and their demand for our services.
Since 2021, OPEC+ countries have instituted production cuts (as well as voluntary production cuts), which currently cut output by approximately 3.2 million barrels/day in the aggregate. Most recently, in November 2025, OPEC+ announced it would maintain current oil production cuts of approximately 3.2 million barrels per day and reaffirmed its decision to not increase production. OPEC+ may, at its discretion, continue to decrease, or increase, production, which will continue to impact crude oil and natural gas price volatility. The actions of OPEC+ countries with respect to oil production levels and announcements of potential changes in such levels, including agreement on and compliance with production targets, may result in volatility in the industry in which we and our customers operate. The average price of WTI crude oil decreased in 2025 versus 2024 due to a combination of factors, including heightened trade tensions, weakening global demand, rising domestic and global production, the threat of a global recession and increased production from OPEC+ countries and the gradual unwinding of OPEC+ production cuts. During the year ended December 31, 2025, the average spot price of WTI crude oil was $65.39 versus an average price of $76.63 for the year ended December 31, 2024. The average Henry Hub natural gas spot price during the year ended December 31, 2025 was $3.52 versus an average of $2.19 for the year ended December 31, 2024. Henry Hub natural gas price levels in 2025 have increased relative to 2024 due to a variety of factors, including increased demand driven by power consumption, sanctions on Russian hydrocarbons, weather events, infrastructure , lower than expected inventories, and the ongoing liquified natural gas (“LNG”) export growth in the U.S., and have impacted activity levels in natural gas basins.
Global macroeconomic developments, such as the development or change in international trade policies, including the imposition of tariffs, may adversely affect our ability to source raw materials and the demand for our services. While we have positioned ourselves to largely not be reliant on any sole supplier and believe we would be able to find alternative sources for our raw materials, any trading disruption (such as tariffs, product restrictions, etc.) in the trading relationships between the U.S. and other nations may adversely impact our business. For instance, beginning in the first quarter of 2025, the U.S. imposed new or additional tariffs, through executive orders, on a variety of imported raw materials and products, including steel and aluminum. In response to the U.S. tariffs on steel and aluminum, the European Union and several other countries, including Canada and China, have threatened and/or imposed retaliatory tariffs. We continue to monitor the effects of the ever-evolving global trade landscape, including with respect to sanctions, tariffs, existing trade agreements, anti-dumping and countervailing duty regulations and more. President Trump has threatened additional increased tariffs on goods imported from China as result of current Chinese trade policy. A portion of those tariffs might by depending on the resolution of certain U.S. . Specifically, the U.S. Supreme Court has agreed to hear a case determining whether a federal law giving the president certain emergency powers allowed President Trump to levy tariffs on nearly all goods imported into the United States through a series of executive orders. Tariffs and any additional changes in U.S. trade policy could result in one or more other jurisdictions adopting responsive trade policies. The adoption and expansion of trade restrictions, the occurrence of a trade war, or other governmental action related to tariffs or trade agreements or policies has the potential to impact us and the global economy.
Table of Contents
Additionally, heightened inflation in recent years has resulted in higher interest rates and increased cost of capital for Select and for our customers. As costs of capital have increased, many of our customers have demonstrated their resolve to manage their capital spending within budgets and cash flow from operations and increase redemptions of debt and/or returns of capital to investors. Furthermore, consolidation among our customers, such as the consolidation of E&P companies in the Permian Basin, can disrupt our market in the near term and the resulting demand for our services. When one customer acquires another, drilling and completions activity levels may decrease overall, but acquisitions can lead to larger blocks of consolidated development and production acreage, which can increase the demand for our longer-term integrated full water lifecycle solutions. This consolidation may streamline operations, as Select can offer integrated solutions to clients with larger water volumes to manage in certain areas. The Company’s position in the market may strengthen, as it becomes an essential partner for long-term production integrity in larger, more comprehensive water projects. However, it also means Select must meet the changing needs and structures of these consolidated entities to maintain and grow these relationships. While customers involved in acquisitions may initially slow activity to focus on integration and portfolio management, we believe we are well-positioned to meet the increased responsibilities of overall water management, including water reuse, recycling, transmitting and balancing across customers and regions, and ultimately disposal, for these larger customers and blocks of contiguous acreage.
Overall, however, even though commodity prices have moderated recently, the financial health of the oil and gas industry is in a generally healthy position, including many of our customers specifically, as reflected in revenues and earnings, debt metrics, recent capital raises, and recurring shareholder returns . The industry may face additional changes due to recent and future legislative and regulatory changes under the current presidential administration. Most recently, the OBBBA, signed into law in July 2025, includes many provisions intended to expand onshore oil and gas leasing and drilling on federal land, such as increased federal oil and gas lease sales and lower royalty rates on federal oil and gas leases. While the financial health of the broader oil and gas industry has shown improvement as compared to prior periods, central bank policy actions and associated liquidity risks and other factors may negatively impact the value of our equity and that of our customers, and may reduce our and their ability to access liquidity in the bank and capital markets or result in capital being available on less favorable terms, which could negatively affect our financial condition and that of our customers.
From an operational standpoint, many of the recent efficiency trends still apply to ongoing unconventional oil and gas development. The continued trend towards multi-well pad development and simultaneous well completions, executed within a limited time frame, combined with service price inflation and elevated interest rates, has increased the overall intensity, complexity and cost of well completions, while increasing fracturing efficiency and the use of lower-cost in-basin sand has decreased total costs for our customers. However, we note the continued efficiency gains in the well completions process can limit the days we spend on the wellsite and, therefore, negatively impact the total revenue opportunity for certain of our services utilizing day-rate pricing models.
This multi-well pad development, combined with upstream acreage consolidation and corporate mergers as well as the growing trends around the recycling and reuse applications of produced water provides a significant opportunity for companies like us that can deliver increasingly complex solutions for our E&P customers across large swathes of acreage through our regional infrastructure networks, delivering solutions for the full completion and production lifecycle of wells. While these trends have advanced the most in the Permian Basin to date, they are emerging in other basins as well and Select has recently performed recycling projects in the Haynesville, Rockies and South Texas regions as well.
The increased reuse of produced water requires additional chemical treatment solutions. We have a dedicated team of specialists focused every day on developing and deploying innovative water treatment and reuse services for our customers. Our FluidMatch™ design solutions enable our customers to economically use these alternative sources to optimize their fluid systems by providing water profiling and fluid assessment services working towards real-time. This trend also supports more complex “on-the-fly” solutions that treat, proportion, and blend various streams of water and chemicals at the wellsite. This complexity favors service companies that are able to provide advanced technology solutions. Ultimately, we intend to play an important role in the advancement of water and chemical solutions that are designed to meet the sustainability goals of key stakeholders.
Table of Contents
Our water logistics, treatment, and chemical application expertise, in combination with advanced technology solutions, are applicable to other industries beyond oil and gas. We are working to further commercialize our services in other businesses and industries through our industrial solutions group and equity method investments.
Our Segments
Our services are offered through three reportable segments: (i) Water Infrastructure; (ii) Water Services; and (iii) Chemical Technologies.
Water Infrastructure. The Water Infrastructure segment consists of the Company’s fixed infrastructure assets, including operations associated with our water distribution pipeline infrastructure, our water recycling facilities, our produced water gathering pipelines, SWDs, and our solids management facilities, primarily serving E&P companies.
Water Services. The Water Services segment primarily consists of the Company’s water-related services businesses, including water sourcing, water transfer, fluids hauling, water monitoring, water containment and water network automation, primarily serving E&P companies. Additionally, this segment includes the operations of our Peak Rentals businesses.
Chemical Technologies. The Chemical Technologies segment provides technical solutions, products and expertise related to chemical applications in the oil and gas industry. We develop, manufacture, manage logistics and provide a full suite of chemicals used in hydraulic fracturing, stimulation, cementing and well completions for customers ranging from pressure pumpers to major integrated and independent oil and gas producers. This segment also utilizes its chemical experience and lab testing capabilities to customize tailored water treatment solutions designed for the recycling and treatment of produced water and to optimize the fracturing fluid system in conjunction with the quality of water used in well completions.
How We Generate Revenue
Water Infrastructure. The Water Infrastructure segment comprises our extensive infrastructure network, including produced water gathering pipelines, water distribution lines, water recycling facilities, saltwater disposal wells, and solids management operations. We primarily generate revenue through fixed fees per barrel handled, which may include gathering, transportation, recycling, or disposal, pursuant to long-term commercial agreements that may incorporate acreage dedications, MVCs, and periodic escalators. Additional revenue is earned from the sale of skim oil, based on the volume of skim oil sold at prevailing market rates, as well as from recycled water sales and capacity optimization on an interruptible basis. Revenue is recognized as volumes are received and processed across our network.
Contract structures becoming more prevalent in our Water Infrastructure segment include dedicated acreage, ROFRs, interruptible agreements, MVCs, wellbore dedications, AMIs and WPAs. These contracts underpin the economics of our newly built facilities to an anchor tenant, with the opportunity for further commercialization of the asset. Most of our contracts are an acreage dedication structure, and we often utilize a ROFR structure in tandem with these dedications to secure upside with our customers should they expand their activities outside the dedicated acreage position.
Table of Contents
Dedicated Acreage
We believe in the geology we’re investing in and, as such, view acreage dedications as the optimal structure for both us and our customers, as they align long-term development incentives on both sides. Under these agreements, the operator is generally obligated to deliver produced water to us for recycling or disposal, and to take treated water from us for completions within the dedicated position. Importantly, for most of our contracts, we hold the right, but not the obligation, to accept water under these dedications, meaning we are not penalized in the event we’re unable to take water we cannot consume. That said, we do have a limited number of firm takeaway commitments, under which we incur monetary penalties for failure to perform. Due to the high quality of our dedicated acreage positions, we typically see strong and consistent activity levels and maintain a backlog of high-confidence well inventory. Dedicated acreage remains our most common contract structure, with tier-one inventory conversion, and development is a matter of when, not if.
ROFR
ROFR acres provide potential upside to our dedicated acreage revenue stream and are incorporated in many of our acreage dedication contract structures. These are typically acreage positions in proximity to the core dedicated area, but are often excluded initially due to their later place in the development timeline. Should the anchor customer expand or initiate operational activity within the ROFR area, we generally hold the first right to build out the necessary water infrastructure to support that activity. Subject to mutual agreement on the exercise of the ROFR, that acreage is then converted to Dedicated Acreage under the original contract framework. We typically see ROFR conversion through operator expansion on adjacent leaseholds, acreage trades, or acquisitions that fall within ROFR boundaries. While less certain than committed dedicated volumes, ROFRs represent meaningful incremental upside to our contracted revenue base.
Interruptible Agreements
Interruptible agreements allow new or existing customers into our system to take advantage of our expansive water networks for produced water disposal and/or recycling. Operators can tie-in, and we can provide treated water for completions or accept produced water into our system for disposal or treatment. Our anchor tenants will typically continue to have primary rights to both our disposal and recycling capacity for their continued operations. Interruptible contracts are our way of commercializing the product we have created, particularly in the Northern Delaware Basin.
MVCs
Contractual arrangements under which an operator commits to receive or deliver a defined minimum volume of water-related services, typically measured in barrels, with predetermined financial true-up mechanisms for any shortfall below the committed volumes. These MVCs encompass the sourcing, supply, transportation, recycling, and disposal of water used across the operator’s drilling, completion, and production activities.
Wellbore dedication
The dedication of specifically identified wells owned or operated by a customer whereby all water required to complete the wells or produced by the wells are dedicated to Select.
AMIs
Designated areas in which producers will dedicate subsequently acquired or leased acreage and oil and natural gas wells to Select.
WPA
Water purchase agreements where customers agree to purchase water.
Table of Contents
Water Services . The Water Services segment comprises our short-cycle, field-based service offerings, including water transfer, water sourcing, fluids hauling, monitoring, containment, water-network automation and the services associated with Peak Rentals. We generally earn revenue via market-based day rates, time-and-materials, or per-barrel delivered under MSAs and short-term work orders. Peak Rentals’ services are typically billed per job/day plus consumables. Revenue is recognized as services are performed at customer sites.
Chemical Technologies. The Chemical Technologies segment provides technical products and services for hydraulic fracturing, stimulation, cementing and completions, serving pressure pumpers and E&P operators. Revenue is primarily price-per-unit of chemicals delivered or consumed, supplemented by application engineering, lab testing and field service fees, under short-term supply arrangements and MSAs. We also formulate and supply tailored water-treatment chemistries that support produced-water recycling and optimization of fracturing fluids. Revenue is recognized upon delivery or consumption of product and performance of services.
Costs of Conducting Our Business
The principal expenses involved in conducting our business are labor costs, vehicle and equipment costs (including depreciation, rental, repair and maintenance and leasing costs), raw materials including water sourcing costs and fuel costs. Overall, our fixed costs are relatively low and most of the costs of serving our customers are variable, i.e., they are incurred only when we provide water and water-related services, or chemicals and chemical-related services to our customers.
Labor costs associated with our employees and contract labor comprise the largest portion of our costs of doing business. We incurred labor and labor-related costs of $484.2 million, $530.7 million and $554.4 million for the years ended December 31, 2025, 2024 and 2023, respectively. The majority of our recurring labor costs are variable and dependent on the market environment and are incurred only while we are providing our operational services. We also incur costs to employ personnel to ensure safe operations, sell and supervise our services and perform maintenance on our assets, which is not directly tied to our level of business activity. Additionally, we incur selling, general and administrative costs for compensation of our administrative personnel at our field sites and in our operational and corporate headquarters, as well as for third-party support, permitting, licensing and services.
We incur significant vehicle and equipment costs in connection with the services we provide, including depreciation, repairs and maintenance, rental and leasing costs. We incurred vehicle and equipment costs of $306.0 million, $312.9 million and $318.9 million for the years ended December 31, 2025, 2024 and 2023, respectively.
We incur raw material costs in manufacturing our chemical products, as well as for water that we source for our customers. We incurred raw material costs of $255.2 million, $242.7 million and $299.9 million for the years ended December 31, 2025, 2024 and 2023, respectively.
We incur variable transportation costs associated with our service lines, predominately fuel and freight. We incurred fuel and freight costs of $75.0 million, $83.4 million and $115.6 million for the years ended December 31, 2025, 2024 and 2023, respectively. Changes to fuel prices impact our transportation costs, which affect the results of our operations.
Table of Contents
How We Evaluate Our Operations
We use a variety of operational and financial metrics to assess our performance. Among other measures, management considers each of the following:
Revenue;
Gross Profit;
Gross Margins;
Earnings before Interest, Taxes, Depreciation and Amortization (“EBITDA”);
Adjusted EBITDA;
Cash Flows; and
Free Cash Flow.
Revenue
We analyze our revenue and assess our performance by comparing actual monthly revenue to our internal projections and across periods. We also assess incremental changes in revenue compared to incremental changes in direct operating costs and selling, general and administrative expenses across our reportable segments to identify potential areas for improvement, as well as to determine whether segment performance is meeting management’s expectations.
Gross Profit
To measure our financial performance, we analyze our gross profit, which we define as revenues less direct operating expenses (including depreciation, amortization and accretion expenses). We believe gross profit provides insight into profitability and the true operating performance of our assets. We also compare gross profit to prior periods and across segments to identify trends as well as underperforming segments.
Gross Margins
Gross margins provide an important gauge of how effective we are at converting revenue into profits. This metric works in tandem with gross profit to ensure that we do not seek to increase gross profit at the expense of lower margins, nor pursue higher gross margins at the expense of declining gross profits. We track gross margins by segment and service line and compare them across prior periods and across segments and service lines to identify trends as well as underperforming segments.
EBITDA and Adjusted EBITDA
We view EBITDA and Adjusted EBITDA as important indicators of performance. We define EBITDA as net income/(loss), plus interest expense, income taxes, and depreciation, amortization and accretion. We define Adjusted EBITDA as EBITDA plus any impairment and abandonment charges or asset write-offs pursuant to U.S. Generally Accepted Accounting Principles (“GAAP”), plus non-cash losses on the sale of assets or subsidiaries less remeasurement gains on fixed assets related to business combinations, 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, plus/(minus) foreign currency losses/(gains), plus/(minus) losses/(earnings) on unconsolidated entities and plus TRAs expense. The adjustments to EBITDA are generally consistent with such adjustments described in our Sustainability-Linked Credit Facility. See “—Comparison of Non-GAAP Financial Measures—EBITDA and Adjusted
Table of Contents
EBITDA” for more information and a reconciliation of EBITDA and Adjusted EBITDA to net income, the most directly comparable financial measure calculated and presented in accordance with GAAP.
Cash Flows and Free Cash Flow
We define FCF as net cash provided by (used in) operating activities less purchases of property and equipment, plus proceeds received from sale of property and equipment. Our board of directors and executive management team use FCF to assess our liquidity and ability to repay maturing debt, fund operations and make additional investments. We believe FCF provides useful information to investors because it is an important indicator of our liquidity including our ability to reduce net debt, make strategic investments, pay dividends and distributions and repurchase common stock. Our measure of FCF may not be directly comparable to similar measures reported by other companies. Furthermore, FCF is not a substitute for, or more meaningful than, net cash provided by (used in) operating activities nor any other measure prescribed by GAAP, and there are limitations to using non-GAAP measures such as FCF. Accordingly, FCF should not be considered a measure of the income generated by our business or discretionary cash available to it to invest in the growth of our business.
Factors Affecting the Comparability of Our Results of Operations to Our Historical Results of Operations
Our future results of operations may not be comparable to our historical results of operations for the periods presented, primarily for the reasons described below and those described in “—Recent Developments” above.
Acquisition Activity
As described above, we continuously evaluate potential investments, particularly in water infrastructure and other water-related services and technology. To the extent we consummate acquisitions, any pre-transaction revenues or expenses from such transactions are not included in our historical results of operations.
Between January 2024 and December 2025, we completed seven business combinations and approximately eighteen asset acquisitions. Our historical financial statements for periods prior to the respective date each acquisition was completed do not include the results of operations of that acquisition. See “—Recent Developments” and “Note 3—Acquisitions” for a description of these transactions.
Table of Contents
Results of Operations
The following table sets forth our results of operations, including revenue by segment, for the year ended December 31, 2025 compared to the year ended December 31, 2024. The results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023 is set forth in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Year Ended December 31, 2025 Compared to the Year Ended December 31, 2024
Year ended December 31,
Change
Dollars
Percentage
(in thousands)
Revenue
Water Infrastructure
Water Services
Chemical Technologies
Total revenue
Costs of revenue
Water Infrastructure
Water Services
Chemical Technologies
Depreciation, amortization and accretion
Total costs of revenue
Gross profit
Operating expenses
Selling, general and administrative
Depreciation and amortization
Impairments and abandonments
Lease abandonment costs
Total operating expenses
Income from operations
Other income (expense)
Gain on sales of property and equipment and divestitures, net
Interest expense, net
Remeasurement gain on business combination
Tax receivable agreements expense
Other
Income before income tax benefit (expense) and equity in losses of unconsolidated entities
Income tax benefit (expense)
Equity in losses of unconsolidated entities
Net income
Revenue
Our revenue decreased $44.7 million, or 3.1%, to $1.407 billion for the year ended December 31, 2025, compared to $1.452 billion for the year ended December 31, 2024. The decrease was composed of a $115.1 million decrease in Water Services revenue partially offset by a $48.1 million increase in Chemical Technologies revenue and a $22.3 million increase in Water Infrastructure revenue. The net $44.7 million decrease was driven primarily by
Table of Contents
macroeconomic conditions, including fewer hydraulic fracturing crews, as well as divested Fluids Hauling operations from the Omni transaction, partially offset by increases as a result of recent capital investments as well as the ramp-up of long-term contractual agreements in our Water Infrastructure segment and enhanced sales performance in Chemical Technologies. For the year ended December 31, 2025, our Water Infrastructure, Water Services and Chemical Technologies revenues constituted 22.3%, 55.9% and 21.9% of our total revenue, respectively, compared to 20.0%, 62.1 % and 17.9%, respectively, for the year ended December 31, 2024. The revenue changes by reportable segment are as follows:
Water Infrastructure. Revenue increased by $22.3 million, or 7.7%, to $313.2 million for the year ended December 31, 2025, compared to $290.9 million for the year ended December 31, 2024. The increase was primarily driven by higher recycling revenue, supported by long-term contracts and the continued organic buildout of our recycling infrastructure, as well as higher disposal and solids revenues reflecting contributions from recently acquired assets. These gains were partially offset by a combination of macroeconomic factors, including a reduction in hydraulic fracturing crews impacting activity and key customer activity timing and reduced activity levels in the Bakken.
Water Services . Revenue decreased $115.1 million, or 12.8%, to $786.5 million for the year ended December 31, 2025, compared to $901.7 million for the year ended December 31, 2024. The decrease was primarily driven by lower Fluids Hauling revenue following the divestiture of operations in connection with the Omni transaction, as well as lower Water Sourcing revenue associated with the transition from certain freshwater to produced water operations. Broader macroeconomic softness also contributed to lower Water Transfer and Well Testing revenue. This was partially offset by higher Accommodation and Rentals revenue driven by increased power generation activity and underlying organic growth.
Chemical Technologies . Revenue increased $48.1 million, or 18.5%, to $307.6 million for the year ended December 31, 2025 compared to $259.5 million for the year ended December 31, 2024. The increase in revenues was primarily driven by continued success in new product development, which has supported market share gains across key customer segments, as well as improved sales team execution.
Costs of Revenue
Costs of revenue decreased $27.7 million, or 2.2%, to $1.205 billion for the year ended December 31, 2025, compared to $1.233 billion for the year ended December 31, 2024. The decrease was primarily composed of an $85.7 million decrease in Water Services costs partially offset by a $30.7 million increase in Chemical Technologies costs, a $6.4 million increase in Water Infrastructure costs and an increase of $21.0 million in depreciation, amortization and accretion. The costs of revenue changes by reportable segment are as follows:
Water Infrastructure . Costs of revenue increased $6.4 million, or 4.6%, to $143.9 million for the year ended December 31, 2025, compared to $137.6 million for the year ended December 31, 2024. Cost of revenue as a percent of revenue decreased to 46.0% from 47.3% primarily driven by higher margins in gathering, disposal, and solids operations, reflecting both the accretive impact of recently acquired assets and effective integration execution. Pipeline margins were also higher in the period. These increases were partially offset by modest declines in higher margin recycling operations, primarily reflecting changes in service mix, though recycling margins remained above 50% for the year despite the year-over-year decline.
Water Services . Costs of revenue decreased $85.7 million, or 11.9%, to $635.2 million for the year ended December 31, 2025, compared to $720.9 million for the year ended December 31, 2024. Cost of revenue as a percent of revenue increased to 80.8% from 80.0% primarily impacted by lower revenue levels in the Water Transfer, Well Testing business lines, as not all costs could be proportionally reduced. This increase was also impacted by a decline water sourcing revenue and margins, reflecting a transition of certain fresh water to produced water operations. Further, Accommodations and Rental’s margins declined due to customer and activity mix. This was partially offset by improved gross margins in our Fluids Hauling business line, favorably impacted by the divestment of lower margin operations in connection with the Omni transaction.
Chemical Technologies . Costs of revenue increased $30.7 million, or 13.9%, to $251.3 million for the year ended December 31, 2025, compared to $220.6 million for the year ended December 31, 2024. Cost of revenue as a
Table of Contents
percent of revenue decreased to 81.7% from 85.0% primarily attributable to a higher proportion of sales from higher margin products, coupled with reduced freight costs resulting from a shift from third-party providers to internal logistics execution.
Depreciation amortization and accretion . Depreciation, amortization and accretion expense increased $21.0 million, or 13.6%, to $174.5 million for the year ended December 31, 2025, compared to $153.5 million for the year ended December 31, 2024 primarily due to a higher fixed asset base resulting from investments made into new organic infrastructure projects as well as recent acquisitions. Also contributing to the increase was higher accretion expense resulting from a change in estimated plug and abandonment costs on previously acquired inactive SWDs.
Gross Profit
Gross profit was $202.4 million for the year ended December 31, 2025 compared to $219.5 million for the year ended December 31, 2024. The decrease was primarily driven by a $29.5 million decrease in gross profit from our Water Services segment and a $21.0 million increase in depreciation, amortization and accretion expense partially offset by a $17.4 million increase in our Chemical Technologies segment and a $16.0 million increase in gross profit from our Water Infrastructure segment. Gross margin as a percentage of revenue was 14.4% and 15.1% during the years ended December 31, 2025 and December 31, 2024, respectively.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $1.3 million, or 0.8%, to $161.3 million for the year ended December 31, 2025, compared to $160.0 million for the year ended December 31, 2024. The increase was p rimarily driven by $5.4 million in higher information technology costs, a $5.4 million increase in wages and associated taxes and benefits and contract labor, $0.9 million higher bad debt expense and $0.8 million in higher severance expense partially offset by a $6.6 million decline in incentive and equity-based compensation, $2.9 million in lower transaction and rebranding costs, and a $1.7 million reduction in legal and professional fees and other expenses.
Gain on Sales of Property and Equipment and Divestitures, Net
During the year ended December 31, 2025, we recognized $10.3 million in gains on sales of property and equipment and divestitures, primarily consisting of $6.4 million in underutilized or obsolete property and equipment in our Water Services segment, $2.9 million in our Water Infrastructure segment comprised of a $4.7 million gain from the sale of excess land in the Haynesville/East Texas region partially offset by $1.8 million of losses on sales of obsolete and underutilized property and equipment, and $1.0 million of obsolete property and equipment in our Chemical Technologies segment. During the year ended December 31, 2024, amounts recognized were due primarily to sales of underutilized or obsolete property and equipment.
Impairments and Abandonments
For the year ended December 31, 2025, we recognized $6.2 million in impairments and abandonments, consisting of $4.4 million in the Water Infrastructure segment primarily associated with SWD abandonments and the termination of a disposal lease, $1.2 million in Other related to abandonment of back-office software development costs previously classified as Other long-term assets and $0.6 million in the Water Services segment related to the relocation of operations from a leased facility. For the year ended December 31, 2024, we recorded $1.2 million of abandonment that was primarily attributable to abandoned property and equipment.
Net Interest Expense
Net interest expense increased by $16.2 million, or 232.8%, to $23.2 million for the year ended December 31, 2025, compared to $7.0 million for the year ended December 31, 2024 due to interest expense on the new Term Loan Facility as well as higher amortization of deferred debt issuance costs in connection with our new Sustainability-Linked Credit Facility and extinguishment costs related to our Prior Sustainability-Linked Credit Facility.
Table of Contents
Remeasurement Gain on Business Combination
For the year ended December 31, 2025, a remeasurement gain of $14.9 million was recognized in connection with Water Services property and equipment that was part of the purchase consideration transferred to Omni.
Tax Receivable Agreements Expense
As of December 31, 2025 and 2024, we determined that we were in a position to reasonably estimate the amount of the liability associated with the TRAs and determined that future payments under the terms of the TRAs were probable, and therefore recorded expense of $5.0 million and $0.8 million for the years ended December 31, 2025 and 2024, respectively.
Income Tax Benefit (Expense)
For the years ended December 31, 2025 and December 31, 2024, we recorded $1.6 million in income tax benefit and $13.6 million in income tax expense, respectively . The current year $1.6 million benefit was primarily driven by a favorable adjustment to the valuation allowance, as well as research and development and energy investment tax credits.
Net Income
Net Income decreased by $14.0 million, to a net income of $21.5 million for the year ended December 31, 2025 compared to $35.5 million for the year ended December 31, 2024, d riven primarily by lower gross profit, an increase in interest expense, equity investment losses and tax receivable agreements expense during 2025 partially offset by 2025 income tax benefit compared to 2024 income tax expense, the remeasurement gain on business combination and increased gains on sales of property and equipment and divestitures, net.
Comparison of Non-GAAP Financial Measures
Our board of directors, management and investors use EBITDA and Adjusted EBITDA to assess our financial performance 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, amortization and accretion) and items outside the control of our management team. We present EBITDA and Adjusted EBITDA because we believe they provide useful information regarding the factors and trends affecting our business in addition to measures calculated under GAAP.
Note Regarding Non-GAAP Financial Measures
EBITDA and Adjusted EBITDA
EBITDA and Adjusted EBITDA are not financial measures presented in accordance with GAAP. We believe that the presentation of these non-GAAP financial measures will provide useful information to investors in assessing our financial performance and results of operations. Net income is the GAAP measure most directly comparable to EBITDA and Adjusted EBITDA. 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 the exclusion of some but not all items that affect the most directly comparable GAAP financial measures. One should not consider EBITDA or Adjusted EBITDA in isolation or as substitutes for an analysis of our results as reported under GAAP. Because EBITDA and Adjusted EBITDA 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.
Table of Contents
The following table sets forth our reconciliation of EBITDA and Adjusted EBITDA to our net income, which is the most directly comparable GAAP measure, for the years ended December 31, 2025 and 2024.
Year Ended December 31,
(in thousands)
Net income
Interest expense, net
Income tax (benefit) expense
Depreciation, amortization and accretion
EBITDA
Tax receivable agreements expense
Non-cash compensation expenses
Non-recurring severance expenses (1)
Non-cash loss on sale of assets or subsidiaries
Transaction and rebranding costs
Lease abandonment costs
Impairments and abandonments
Remeasurement gain on business combination
Equity in losses of unconsolidated entities
Other
Adjusted EBITDA
For the year ended December 31, 2025, these costs relate to severance expense in connection with the termination of certain former management employees related to a reorganization. For the year ended December 31, 2024, these costs related to severance costs associated with our former chief financial officer (“CFO”).
EBITDA was $222.9 million for the year ended December 31, 2025 compared to $212.9 million for the year ended December 31, 2024. The $10.0 million increase in EBITDA was driven primarily by a $14.9 million remeasurement gain on business combination with Omni, a $7.1 million increase in gains on asset sales and $3.9 million in higher gross profit partially offset by a $5.0 million increase in impairments and abandonments, $4.5 million less in equity earnings in unconsolidated investments, $4.2 million increase in tax receivable agreements expense and a $1.3 million increase in selling, general and administrative expenses. Adjusted EBITDA was $260.3 million for the year ended December 31, 2025 compared to $258.4 million for the year ended December 31, 2024.
Liquidity and Capital Resources
Overview
Our primary sources of liquidity are cash on hand, borrowing capacity under the Sustainability-Linked Credit Facility, cash flows from operations and proceeds from the sale of excess property and equipment. Our primary uses of capital have been to fund current operations, maintain our asset base, implement technological advancements, make capital expenditures to support organic growth, fund acquisitions and equity investments, pay dividends and distributions, make payments under the TRAs, and when appropriate, repurchase shares of Class A common stock in the open market. Depending on available opportunities, market conditions and other factors, we may also issue debt and equity securities, in the future, if needed.
We prioritize sustained positive FCF and a strong balance sheet, and evaluate potential acquisitions and investments in the context of those priorities, in addition to the economics of the opportunity. We believe this approach provides us with additional flexibility to evaluate larger investments as well as improved resilience in a sustained downturn versus many of our peers.
Based on our current cash and cash equivalents balance, operating cash flow, available borrowings under our Sustainability-Linked Credit Facility and the ongoing actions discussed above, we believe that we will be able to
Table of Contents
maintain sufficient liquidity to satisfy our obligations and remain in compliance with our existing debt covenants through the next twelve months and beyond, prior to giving effect to any future financing that may occur.
We intend to finance most of our capital expenditures, contractual obligations and working capital needs with cash on hand, cash generated from operations and borrowings under our Sustainability-Linked Credit Facility. For a discussion of the Sustainability-Linked Credit Facility, see “—Sustainability-Linked Credit Facility” below. Although we cannot provide any assurance, we believe that our current cash balance, operating cash flow and available borrowings under our Sustainability-Linked Credit Facility will be sufficient to fund our operations for at least the next twelve months. In addition, we may opportunistically seek to raise additional capital through securities offerings or other avenues, as appropriate, based on market circumstances and other factors.
During the fourth quarter of 2022, we initiated a quarterly dividend and distribution program of $0.05 per share and $0.05 per unit for holders of Class A and Class B shares, respectively. We paid quarterly dividends at the same rate through the third quarter of 2023, then the board of directors increased the quarterly dividend paid on November 17, 2023 to $0.06 per share and $0.06 per unit for holders of Class A and Class B shares, respectively. We paid quarterly dividends at the same rate through the third quarter of 2024, then the board of directors increased the quarterly dividend paid on November 15, 2024 to $0.07 per share and $0.07 per unit for holders of Class A and Class B shares, respectively. This program resulted in a financing outflow of $33.7 million and $29.7 million during the years ended December 31, 2025 and 2024, respectively. This quarterly dividend program is expected to continue into 2026 and beyond. All future dividend payments are subject to quarterly review and approval by our board of directors.
As of December 31, 2025, cash and cash equivalents totaled $18.1 million and we had approximately $145.5 million of available borrowing capacity under the Revolving Credit Facility under our Sustainability-Linked Credit Facility. As of December 31, 2025, we had $320.0 million in outstanding indebtedness, the borrowing base for the Revolving Credit Facility under the Sustainability-Linked Credit Facility was $235.1 million, the borrowing base for the Term Loan Facility under the Sustainability-Linked Credit Facility was $426.3 million and outstanding letters of credit totaled $19.6 million. As of February 16, 2026, we had $363.5 million in outstanding indebtedness, the borrowing base for the Revolving Credit Facility under the Sustainability-Linked Credit Facility was $214.5 million, the borrowing base for the Term Loan under the Sustainability-Linked Credit Facility was $426.3 million, the outstanding letters of credit totaled $19.6 million, and the available borrowing capacity under the Sustainability-Linked Credit Facility was $81.4 million.
As of December 31, 2025, we had no material off-balance sheet arrangements. As such, we are not exposed to any material financing, liquidity, market or credit risk that could arise if we had engaged in such financing arrangements.
Our contractual obligations include, among other things, our Sustainability-Linked Credit Facility and operating leases. Refer to “Note 6—Leases” for operating lease obligations as of December 31, 2025 and “Note 10—Debt” for an update to our Sustainability-Linked Credit Facility as of December 31, 2025.
Table of Contents
Cash Flows
The following table summarizes our cash flows for the years ended December 31, 2025 and 2024. The summary of our cash flows for the years ended December 31, 2024 and 2023 is set forth in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Cash Flow Changes Between the Years Ended December 31, 2025 and 2024
Year Ended December 31,
Dollar Change
Percentage Change
(in thousands)
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by financing activities
Subtotal
Effect of exchange rate changes on cash and cash equivalents
Net decrease in cash and cash equivalents
Operating Activities. Net cash provided by operating activities was $214.7 million for the year ended December 31, 2025, compared to $234.9 million for the year ended December 31, 2024. The $20.2 million decrease is comprised of $14.9 million of net income combined with non-cash adjustments and a $5.3 million decrease in converting working capital to cash.
Investing Activities. Net cash used in investing activities was $405.0 million for the year ended December 31, 2025, compared to $318.6 million for the year ended December 31, 2024. The $86.3 million increase in net cash used in investing activities was due primarily to a $121.4 million increase in purchases of property and equipment, a $72.1 million investment in unconsolidated entities during the year ended December 31, 2025 and $0.6 million in lower proceeds received from sales of property and equipment partially offset by a $107.7 million decrease in spending for acquisitions net of cash received.
Financing Activities. Net cash provided by financing activities was $188.4 million for the year ended December 31, 2025, compared to $46.6 million for the year ended December 31, 2024. The $141.7 million increase in net cash provided by financing activities was due primarily to a $150.0 million increase in borrowings net of repayments and $2.9 million of cash received from noncontrolling interest holders during the year ended December 31, 2025 partially offset by $7.9 million of debt issuance costs during the year ended December 31, 2025 and a $3.9 million increase in dividends and distributions paid.
Free Cash Flow
The following table summarizes our FCF for the periods indicated:
Year ended December 31,
(in thousands)
Net cash provided by operating activities
Purchase of property and equipment
Proceeds received from sale of property and equipment
Free cash flow
Table of Contents
Sustainability-Linked Credit Facility
On January 24, 2025 (the “Closing Date”), SES Holdings, a subsidiary of the Company, Select Water Solutions, LLC, a subsidiary of SES Holdings (the “Select LLC”), Bank of America, N.A., as administrative agent, issuing lender and swingline lender (the “Administrative Agent”), and the other lenders party thereto, entered into that certain sustainability-linked senior secured credit facility (the “Sustainability-Linked Credit Facility”), which initially provides for $300.0 million in revolving commitments (the “Revolving Credit Facility”) and $250.0 million in term commitments (the “Term Loan Facility”), in each case, subject to a borrowing base. The Sustainability-Linked Credit Facility also has a sublimit of $50.0 million for letters of credit and a sublimit of $30.0 million for swingline loans. Subject to obtaining commitments from existing or new lenders, Select LLC has the option to increase the maximum amount under the sustainability-linked senior secured credit facility by (i) $150.0 million for additional revolving commitments and (ii) $50.0 million for additional term commitments, in each case, during the first four years following the Closing Date. As of the Closing Date, (i) there were no borrowings outstanding under the Revolving Credit Facility and approximately $20.0 million of letters of credit issued and outstanding thereunder and (ii) the Term Loan Facility was fully funded. Capitalized terms used but not defined herein have the meaning ascribed to them in the Sustainability-Linked Credit Facility.
Refer to “Note 10—Debt” for further discussion of the Sustainability-Linked Credit Facility.
Critical Accounting Policies and Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures about any contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Our critical accounting policies are described below to provide a better understanding of how we develop our assumptions and judgments about future events and related estimations and how they can impact our financial statements. The following accounting policies involve critical accounting estimates because they are dependent on our judgment and assumptions about matters that are inherently uncertain.
We base our estimates on historical experience and on various other assumptions we believe to be reasonable according to the current facts and circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Estimates and assumptions about future events and their effects are subject to uncertainty and, accordingly, these estimates may change as new events occur, as more experience is acquired, as additional information is obtained, and as the business environment in which we operate changes. We believe the current assumptions, judgments and estimates used to determine amounts reflected in our consolidated financial statements are appropriate, however, actual results may differ under different conditions. This discussion and analysis should be read in conjunction with our consolidated financial statements and related notes included in this Annual Report.
Goodwill and other intangible assets : The purchase price of acquired businesses is allocated to its identifiable assets and liabilities based upon estimated fair values as of the acquisition date. Goodwill and other intangible assets are initially recorded at their fair values. Goodwill represents the excess of the purchase price of acquisitions over the fair value of the net assets acquired in a business combination. Goodwill and other intangible assets not subject to amortization are tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. Intangible assets with finite useful lives are amortized either on a straight-line basis over the asset’s estimated useful life or on a basis that reflects the pattern in which the economic benefits of the intangible assets are realized.
Impairment of goodwill, long-lived assets and intangible assets : Long-lived assets, such as property and equipment and finite-lived intangible assets, are evaluated for impairment whenever events or changes in circumstances indicate that their carrying value may not be recoverable. Recoverability is measured by a comparison of their carrying amount to the estimated undiscounted cash flows to be generated by those assets. If the undiscounted cash flows are less than the carrying amount, we record impairment losses for the excess of their carrying value over the estimated fair
Table of Contents
value. Fair value is determined, in part, by the estimated cash flows to be generated by those assets. Our cash flow estimates are based upon, among other things, historical results adjusted to reflect our best estimate of future market rates, utilization levels, and operating performance. Development of future cash flows also requires management to make assumptions and to apply judgment, including the timing of future expected cash flows, using the appropriate discount rates and determining salvage values. The estimate of fair value represents our best estimates of these factors based on current industry trends and reference to market transactions and is subject to variability. Assets are generally grouped at the lowest level of identifiable cash flows. We operate within the oilfield service industry, and the cyclical nature of the oil and gas industry that we serve and our estimates of the period over which future cash flows will be generated, as well as the predictability of these cash flows, can have a significant impact on the estimated fair value of these assets and, in periods of prolonged down cycles, may result in impairment charges. Changes to our key assumptions related to future performance, market conditions and other economic factors could adversely affect our impairment valuation.
We conduct our annual goodwill impairment tests in the fourth quarter of each year, and whenever impairment indicators arise, by examining relevant events and circumstances which could have a negative impact on its goodwill such as macroeconomic conditions, industry and market conditions, cost factors that have a negative effect on earnings and cash flows, overall financial performance, acquisitions and divestitures and other relevant entity-specific events. If a qualitative assessment indicates that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we are required to perform a quantitative impairment test for goodwill comparing the reporting unit’s carrying value to its fair value. Our reporting units are based on our organizational and reporting structure. In determining fair values for the reporting units, we rely primarily on the income and market approaches for valuation. In the income approach, we discount predicted future cash flows using a weighted-average cost of capital calculation based on publicly-traded peer companies. In the market approach, valuation multiples are developed from both publicly-traded peer companies as well as other company transactions.
If the fair value of a reporting unit is less than its carrying value, goodwill impairment is calculated by subtracting the fair value of the reporting unit from the carrying value. Application of the goodwill impairment test requires judgment, including the identification of reporting units, allocation of assets (including goodwill) and liabilities to reporting units and determining the fair value. The determination of reporting unit fair value relies upon certain estimates and assumptions that are complex and are affected by numerous factors, including the general economic environment and levels of E&P activity of oil and gas companies, our financial performance and trends and our strategies and business plans, among others. Unanticipated changes, including immaterial revisions, to these assumptions, could result in a provision for impairment in a future period. Given the nature of these evaluations and their application to specific assets and time frames, it is not possible to reasonably quantify the impact of changes in these assumptions.
Retentions : We assume risk of loss through deductibles and self-insured retentions, up to certain levels for losses related to general liability, workers’ compensation and employer’s liability, vehicle liability, and health insurance. Our exposure (i.e., the self-insured retention or deductible) per occurrence is $1.0 million for general liability, $1.0 million for workers’ compensation and employer’s liability, $2.0 million for auto liability and $0.4 million for health insurance. We also have an excess loss policy over these coverages with a limit of $100.0 million in the aggregate. Management reviews its estimates of reported and unreported claims and provides for losses through reserves. We use actuarial estimates to record our liability for future periods. If the number of claims or the costs associated with those claims were to increase significantly over our estimates, additional charges to earnings could be necessary to cover required payments. As of December 31, 2025, we estimate the range of exposure to be from $18.1 million to $22.4 million and have recorded liabilities of $20.1 million, which represents management’s best estimate of probable related to workers’ compensation and employer’s liability, and auto liability. Additionally, as of December 31, 2025, accrued health insurance and accrued general liabilities were $3.9 million and $4.0 million, respectively.
Tax Receivable Agreements : We intend to fund any obligation under the TRAs with cash from operations or borrowings under our Sustainability-Linked Credit Facility. With respect to obligations under each of our TRAs (except in cases where we elect to terminate the TRAs early, the TRAs are terminated early due to certain mergers or other changes of control or we have available cash but fail to make payments when due), generally we may elect to defer payments due under the TRAs if we do not have available cash to satisfy our payment obligations under the TRAs or if
Table of Contents
our contractual obligations limit our ability to make these payments. Any such deferred payments under the TRAs generally will accrue interest.
We account for any amounts payable under the TRAs in accordance with Accounting Standards Codification (“ASC”) Topic 450, Contingencies. For a discussion regarding an acceleration of the amounts payable under the TRAs if we elect to terminate the TRAs early or they are terminated early due to our failure to honor a material obligation thereunder or due to certain mergers, asset sales, other forms of business combinations or other changes of control and the potential impact of such an acceleration and the potential impact of such acceleration, please read Part I, Item 1A. “Risk Factors – Risks Related to Our Organizational Structure. In certain cases, payments under the TRAs may be accelerated and/or significantly exceed the actual benefits, if any, we realize in respect of the tax attributes subject to the TRAs.
We have assessed the amount of any liability under the TRAs required under the provisions of ASC 450 in connection with preparing the consolidated financial statements. As of December 31, 2025 and 2024, we determined that we were in a position to reasonably estimate an amount of liability associated with the TRAs and determined that future payments under the terms of the TRAs were probable, and therefore recorded liabilities of $43.4 million and $38.5 million, respectively. The projection of future taxable income and utilization of tax value attributes associated with the TRAs involve estimates which require judgment. The amount of the Company’s actual taxable income, passage of future legislation, or consummation of significant transactions in the future may impact the liability related to the TRAs.
Realizability of Deferred Tax Assets: We establish valuation allowances when necessary to reduce deferred tax assets to the amounts more likely than not to be realized. Deferred income tax assets are evaluated quarterly to determine if valuation allowances are required or should be adjusted. The ability to realize deferred tax assets depends on the ability to generate sufficient taxable income within the carryback or carryforward periods provided for in the tax law for each applicable tax jurisdiction. The assessment regarding whether a valuation allowance is required or should be adjusted is based on an evaluation of possible sources of taxable income and also considers all available positive and negative evidence factors. Our accounting for the realization of deferred tax assets incorporates, amongst other factors, our best estimate of future events. Changes in our current estimates, due to unanticipated market conditions, governmental legislative actions or events, could have a material effect on our ability to utilize deferred tax assets. As of December 31, 2025, valuation allowances against deferred tax assets were $100.2 million. See “Note 15—Income Taxes” for additional information.
Recent Accounting Pronouncements
Refer to “Note 2—Significant Accounting Policies” for recent accounting pronouncements.
