Select Water (WTTR) Q3 2026 Earnings Call Transcript

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DATE

Monday, Nov. 9, 2026

CALL PARTICIPANTS

• Vice President of Corporate Finance and Investor Relations - Garrett Williams
• Founder, Chairman, President, and Chief Executive Officer - John Schmitz
• Executive Vice President and Chief Financial Officer - Chris George
• Executive Vice President and Chief Commercial Officer - Michael Skarke
• Executive Vice President, Chief Strategy and Technology Officer - Mike Lyons

TAKEAWAYS

• Consolidated Revenue -- $412.2 million, growing 28% year over year.
• Net Income -- $22.9 million, increasing by $20.6 million compared to the third quarter of 2025.
• Adjusted EBITDA -- $93.5 million, rising 57% year over year to a company record for the third quarter.
• Produced Water Volumes -- 1.7 million barrels per day, increasing 30% year over year and 14% sequentially.
• Water Infrastructure Revenue -- $110.1 million, growing 40% year over year due to expansion in produced water volumes.
• Water Infrastructure Margin -- 57.2%, reflecting relatively steady performance compared to 58.3% in the second quarter of 2026.
• Senior Notes Offering -- $900 million, issued at a 7.6% interest rate to fund the Pilot Water acquisition and refinance existing debt.
• Revolving Credit Facility -- $500 million, providing nearly double the available liquidity of the previous facility.
• Pro Forma Leverage Ratio -- 2.0, representing the net debt to Adjusted EBITDA ratio following the Pilot Water acquisition.
• Peak Rentals Divestment -- $76.8 million, including $41.5 million in cash and a $35.3 million seller note for a 55% majority stake.
• Water Services Revenue -- $212.3 million, growing 7% sequentially driven by Permian Basin activity.
• Chemical Technologies Revenue -- $89.8 million, reaching the high end of management guidance.
• Adjusted EBITDA Guidance -- $95 million to $100 million for the fourth quarter, factoring in a partial contribution from Pilot Water and the Peak Rentals divestiture.
• Net Capital Expenditures Guidance -- $300 million to $310 million for 2026, increasing to reflect the Pilot Water acquisition.
• Maintenance Capital Program -- $80 million to $90 million annually, adjusted for the larger infrastructure footprint.
• Water Infrastructure Q4 Guidance -- $150 million to $160 million in revenue, representing sequential growth of 35% to 45%.
• Chemical Technologies Q4 Guidance -- $75 million to $80 million in revenue, reflecting seasonal customer activity trends.
• Water Services Q4 Guidance -- $150 million to $160 million in revenue, impacted by the Peak Rentals divestiture and seasonality.
• Northern Delaware Basin Expansion -- 250,000 new acres, added under dedication through a contract with an investment-grade customer.
• Interest Expense Guidance -- $15 million to $17 million for the fourth quarter, increasing due to the new senior notes.

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RISKS

• George warned that integration-related costs and seasonal expenses are expected to impact segment margins in the fourth quarter. George stated, "We expect gross margins in the 52% to 56% range during Q4, as certain integration-related costs and seasonal expenses impact the margins of the segment during the quarter."

SUMMARY

Select Water Solutions, Inc. (NYSE:WTTR) reported record operational performance for the first nine months of the year, driven by significant volume growth in its infrastructure segment. Management stated that the recent acquisition of Pilot Water expands the company's disposal capacity and complements its existing recycling network in the Delaware Basin. The company indicated that the divestment of a majority stake in Peak Rentals was a strategic move to concentrate resources on core water management and chemical technologies. Management noted that new contract expansions and acreage dedications are expected to provide a strong growth profile for contracted earnings heading into 2027.

• Michael Skarke noted that win rates for infrastructure projects have increased due to the ability to provide integrated recycling and disposal solutions.
• Mike Lyons reported that the company has two active mineral extraction projects under construction with plans for additional facilities next year.
• Chris George indicated that the company intends to maintain a strategic relationship with Peak Rentals to support future infrastructure build-out.
• Management stated that the Pilot Water acquisition adds approximately 900,000 barrels per day of approved permitted disposal capacity.
• The company reported that its surfactant product suite now represents more than 10% of the overall Chemical Technologies portfolio.
• Michael Skarke indicated that the company is evaluating various methods to interconnect the New Mexico recycling network with the acquired Pilot system.
• Michael Skarke noted that change in law provisions in existing contracts allow the company to pass through potential regulatory costs to customers.

INDUSTRY GLOSSARY

• MVC: Minimum Volume Commitment; a contractual obligation where a customer agrees to pay for a specified minimum volume of service over a set period.
• Delaware Basin: A sub-basin of the Permian Basin located in West Texas and Southern New Mexico known for significant oil and gas production.
• Skim Oil: Oil that is recovered from produced water during the water treatment and disposal process.
• Surfactants: Chemical compounds used in hydraulic fracturing to reduce surface tension and improve the recovery of hydrocarbons.
• SWD: Salt Water Disposal; the process of injecting produced water into deep underground formations for permanent storage.
• ROFR: Right of First Refusal; a contractual right that gives a party the opportunity to enter into a business transaction before any other third party.
• Pore Space: The empty spaces within a rock formation that can be used for the storage of fluids such as produced water.

Full Conference Call Transcript

Operator: Greetings. Welcome to Select Water Solutions Third Quarter 2026 Earnings Conference Call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Garrett Williams, Vice President of Corporate Finance and Investor Relations. Thank you. You may begin.

Garrett Williams: Thank you, operator, and good morning, everyone. We appreciate you joining us for Select Water Solutions conference call and webcast to review our financial and operational results for the third quarter of 2026. With me today are John Schmitz, our Founder, Chairman, President, and Chief Executive Officer; Chris George, Executive Vice President and Chief Financial Officer; Michael Skarke, Executive Vice President and Chief Commercial Officer; and Mike Lyons, Executive Vice President, Chief Strategy and Technology Officer. Before I turn the call over to John, I have a few housekeeping items to cover. A replay of today's call will be available by webcast, accessible from our website at selectwater.com.

There will also be a recorded telephonic replay available until November 23rd, 2026. The access information for this replay was also included in today's earnings release. Please note that the information reported on this call speaks only as of today, November 9th, 2026, and therefore, times of the information may no longer be accurate as of the time of the replay listening or transcript reading. In addition, the comments made by management during this conference call may contain forward-looking statements within the meaning of the United States Federal Securities Laws. These forward-looking statements reflect the current views of Select's management.

However, various risks, uncertainties, and contingencies could cause our actual results, performance, or achievements to differ materially from those expressed in the statements made by management. The listener is encouraged to read our annual report on Form 10-K, our current reports on Form 8-K, as well as our quarterly reports on Form 10-Q to understand risks, uncertainties, and contingencies. Please refer to our earnings announcement released today for reconciliations of non-GAAP financial measures. Now, I would like to turn the call over to John.

John Schmitz: Thanks, Garrett. Good morning, and thank you for joining us. I am pleased to be discussing Select Water Solutions again with you today. The third quarter of 2026 was another strong quarter for Select. I would like to start with some of the key third quarter highlights and other strategic and market updates. Then I will hand it over to Chris to discuss the third quarter results, transaction updates, and financial outlook in more detail. In the third quarter, Select delivered strong overall performance across all three operating segments and made significant progress on our strategic objectives.

During the third quarter of 2026, we delivered consolidated revenue and gross profit growth, resulting in $23 million of net income and $93 million of Adjusted EBITDA. Of note, with $264 million of year-to-date Adjusted EBITDA through the third quarter of 2026, we have already surpassed 2025's full-year Adjusted EBITDA record in just three quarters so far this year before considering any pro forma contributions from the Pilot Water acquisition. Underpinning this performance, we grew produced water volumes to 1.7 MMbpd during the third quarter of 2026. This is a 14% increase relative to the second quarter of 2026 and a significant year-over-year increase of more than 30% relative to the third quarter of 2025.

These volume gains drove Water Infrastructure segment revenues up by more than 40% year-over-year to a record level of $110 million for the third quarter of 2026. With ongoing strength in our base Water Infrastructure business, we anticipate a strong finish to the year for this segment. Furthermore, as recently announced earlier this month, we closed on our strategic acquisition of Pilot Water Solutions. We expect Pilot Water to finish the year in line with its prior 2026 guidance, and the business remains on track to achieve the 2027 outlook we underwrote for this acquisition.

Accordingly, on a combined basis, with a partial fourth quarter contribution from Pilot Water, we expect to drive significant incremental revenue growth of more than 40% in the fourth quarter for this segment on a reported basis. We are already underway with post-closing customer outreach and integration planning, and I am increasingly excited about what this transaction will do for the company long term. With new contracted projects coming online from both Select's base business and the acquired Pilot Water business in 2027, and significant remaining capacity available for commercial expansion, we are well-positioned for a strong growth profile in the years ahead.

With the continued execution of our organic growth backlog and the high volume of inbound calls from our customers post-acquisition, we have increased conviction around the commercialization opportunities of the combined network. We continue to win additional projects that underwrite our network and volume expansion, and I believe 2027 will be an active year for new commercialization activities. We expect the combination of our complementary recycle and disposal assets will deliver superior end-to-end water management that reduces costs for our customers and allows Select to maximize the value out of every barrel that comes through our network. Elsewhere, our Water Services and Chemical Technologies segments also generated strong performance relative to guided expectation for the third quarter.

On the Water Services side, we completed our efforts to streamline this segment with a successful recapitalization and divestment of the majority interest in our Peak Rentals business late in the third quarter. This transaction further concentrates our business around our core water solutions and Chemical Technologies thesis, and we are pleased to retain long-term exposure to Peak Rentals' growth potential through our minority ownership position in the business. Looking ahead, we anticipate current customer activity levels to support solid results in our Water Services and Chemical Technologies segments, while acknowledging standard near-term seasonality in the fourth quarter ahead.

In our Water Infrastructure segment, we expect to see benefits from our strong secular tailwinds, ongoing organic project development, and a growing opportunity set for the combined Select and Pilot Water networks. I am proud of our year-to-date performance, which has set the stage for another record year for the company. While the broader macro and geopolitical environment continues to evolve, we remain confident in the company's future, and I look forward to another record year ahead for Select in 2027 with the full-year benefit of the Pilot Water acquisition. In summary, our growth initiatives and optimization efforts, combined with our strong balance sheet and contracted earnings profile, position Select to deliver continued value creation for our shareholders.

At this point, I will hand it over to Chris to speak to our financial results and our outlook in a bit more detail. Chris?

Chris George: Thank you, John, and good morning, everyone. Select made great strides in the third quarter of 2026, which included consolidated revenue, gross margin, net income, and Adjusted EBITDA growth relative to the second quarter, record Water Infrastructure revenue, and another quarter of record Adjusted EBITDA. Additionally, subsequent to quarter end, Select completed a debut senior unsecured notes offering, raising $900 million of long-term eight-year financing at 7.5%, 8%. The offering, which was very well received and successfully upsized by $100 million from initial launch, was primarily used to fund the acquisition of Pilot Water, as well as to refinance Select's prior sustainability-linked credit facility and term loan.

Additionally, in connection with the closing of the Pilot Water acquisition, Select also closed on a new five-year, $500 million cash flow revolving credit facility. This new revolving credit facility remains undrawn as of today and nearly doubles Select's available liquidity as compared to our prior credit facility. These efforts position Select with a strong balance sheet and one of the leading credit ratings and leverage profiles amongst our water midstream peer group, including a leverage ratio of approximately 2x net debt to Adjusted EBITDA on a pro forma basis following the close of the Pilot Water acquisition.

Of note, this is before taking into account the expected growth we forecast for 2027 or the benefit of synergies from the Pilot Water integration. Looking at our third quarter consolidated financial performance in more detail, we grew revenue to $412 million, generating net income of $23 million and Adjusted EBITDA of more than $93 million. The Water Infrastructure segment delivered another solid quarter marked by top-line growth and the execution of key strategic objectives. We grew produced water volumes handled in the third quarter to 1.7 MMbpd, driving record revenues of $110 million and relatively steady 57% gross margins before D&A.

This represents an 8% increase in revenue and a 6% increase in gross profit before D&A as compared to the second quarter of 2026. Importantly, though, this equates to year-over-year growth in revenue and gross profit before D&A of about 40% and 50%, respectively, relative to Q3 2025. Looking ahead to the fourth quarter, the Water Infrastructure segment will benefit from a partial quarter contribution from the Pilot Water business, resulting in anticipated revenue growth of 35%-45%, or about $150 million-$160 million for the segment. On a combined basis, we expect gross margins in the 52%-56% range during Q4, as certain integration-related costs and seasonal expenses impact the margins of the segment during the quarter.

With our strong year-to-date performance and forecasted sequential growth in the base business, we are well-positioned to deliver above the high end of our previously increased 2026 guidance of 25%-30% year-over-year growth, before taking into consideration any benefit of the Pilot Water acquisition. As John mentioned, we expect the Pilot Water business to finish full year 2026 within the previously outlined guidance range of $250 million-$270 million of revenue and $100 million-$110 million of Adjusted EBITDA. Similarly, the business remains on track to achieve the 2027 outlook of $120 million-$130 million of Adjusted EBITDA, driven primarily by new MVCs and other capital projects coming online in early 2027.

Additionally, we continue to set the stage for further organic Water Infrastructure growth in the base business in 2027, with additional contract wins. Most notable was our previously announced Northern Delaware Basin contract expansion we signed during August with a key investment-grade customer, which added more than 250,000 new acres under dedication and converted more than 100,000 acres from ROFR to base dedication, while also extending the term another 12 years with increased rate on an existing contract. Switching over to Water Services, this segment saw revenues grow by approximately 7% quarter-over-quarter, outpacing our guidance of flat revenue sequentially, driven by continued strength in the Permian Basin.

Gross margins before D&A in Water Services increased to 24% during Q3, an improvement compared to 23% in the second quarter. Notably, as John referenced, from a strategic standpoint, we completed the recapitalization and divestment of the majority interest in Peak Rentals during late September. The transaction resulted in the sale of a 55% majority interest in the business, with Select receiving $77 million of consideration, subject to customary fees and post-closing adjustments, including $42 million of cash proceeds and a $35 million seller note, while retaining a 45% minority ownership interest in the business.

While we benefited from Peak's contribution to the income statement for effectively the full third quarter, with the transaction closing in late September, we ultimately deconsolidated Peak Rentals' financials from our balance sheet at quarter end, resulting in an equity method investment retained on the balance sheet. Going forward, this divestment and deconsolidation will reduce Water Services' financial results, with Peak having represented about 21% of the segment's revenue year to date, while generating relatively comparable gross margins to the overall segment.

Additionally, concurrent with the transaction closing, Peak Rentals entered into new long-term financing agreements on a non-recourse basis to Select, providing the Peak business with its own capital structure and liquidity moving forward, allowing the business to independently fund its own future growth capital while allowing Select to benefit from Peak's future growth through its retained equity interests. Looking ahead to the fourth quarter specifically, we anticipate revenue of $150 million-$160 million for Water Services, driven primarily by the impact of the Peak divestiture, along with standard fourth quarter seasonality. We also forecast margins before D&A in the 21%-24% range for the quarter.

Comparing the year-to-date performance with our fourth quarter guidance, even with the absence of Peak in Q4, we are well on track to surpass our original full year 2026 guidance for the segment. Overall, we believe Water Services remains well-positioned to protect its leading market share position and improve its margin profile over time. Elsewhere, the Chemical Technologies segment generated revenue of $90 million during the third quarter, coming in on the high end of our $85 million-$90 million guidance, as we pulled forward certain customer activity into the third quarter, which, along with standard Q4 seasonality, is expected to result in $75 million-$80 million of revenue in Q4.

Gross margins before D&A are expected to remain relatively steady in the 17%-18% range during Q4 relative to the 18% result in the third quarter. While the fourth quarter will likely see a modest pullback in the Chemical Technologies segment, this segment has performed very well year to date, and with full year 2026 revenue expected to increase approximately 10%-12% on a year-over-year basis, we should finish the year well above our original 2026 guidance for this segment. We remain optimistic about the outlook for this business, as our new product development efforts continue to see great results and strong interest with the customer base.

On a consolidated basis in the third quarter, SG&A increased to $54 million, or approximately 13% of revenue, attributable primarily to increased transaction-related costs associated with the Peak Rentals and Pilot Water transactions. Looking ahead, we anticipate SG&A of 11%-12% of revenue in the fourth quarter of 2026 before returning to more normalized levels of approximately 10%-11% of revenue in 2027. Looking back on a consolidated basis, supported by revenue gains and strong gross margins, altogether, we generated consolidated Adjusted EBITDA of $93.5 million during the third quarter of 2026, on the high end of our guidance range of $90 million-$94 million, resulting from healthy performance across all three segments.

Looking forward, we anticipate Adjusted EBITDA of $95 million-$100 million for the fourth quarter of 2026, as continued strong performance in the Water Infrastructure business and a partial quarter contribution from the Pilot Water business more than offset the full quarter impact from the sale of Peak Rentals and fourth quarter seasonality. Additionally, we remain poised for meaningful year-over-year growth in 2027, as incremental Pilot MVC volumes and previously announced projects already under development for Select drive continued contracted expansion of our Water Infrastructure business in the year ahead. With Pilot now closed and consolidated budget efforts well underway, I look forward to providing more specific details on the full year 2027 outlook on our year-end call.

Looking at our other costs for the near term, D&A expense should climb slightly in the fourth quarter to $50 million-$55 million after giving effect to both the Peak and Pilot transactions during the quarter, though this remains subject to preliminary purchase price accounting estimates and allocations. Net interest expense increased sequentially to $8 million and is expected to increase further to $15 million-$17 million in the fourth quarter, driven by Select's recently closed senior notes offering, which was completed subsequent to quarter end. From a cash flow perspective, we saw relatively steady operating cash flow of $84 million in the third quarter relative to $87 million in the second quarter.

On the investing side, we deployed $96 million in the third quarter towards a combination of CapEx, acquisitions, and deconsolidation adjustments associated with the Peak transaction. Net CapEx during Q3 was $88 million, with bolt-on acquisitions totaling another $2 million, primarily supporting projects in our Water Infrastructure business. With the addition of Pilot Water, our full-year maintenance capital program on a go-forward basis is expected to increase to approximately $80 million-$90 million, though still very representative of a maintenance-like business model given the overall earnings power of the business.

We do anticipate some incremental spend in the fourth quarter of 2026 associated with Pilot Water's ongoing capital projects, as well as a modest amount of initial CapEx associated with upgrading and integrating the networks. Accordingly, for 2026, we now anticipate net capital expenditures to modestly increase to $300 million-$310 million, attributable primarily to the Pilot Water acquisition. Overall, I am very pleased with the strong year-over-year trajectory across all parts of the business so far in 2026.

We have made significant progress in strengthening Select as a company this year, including scaling our Water Infrastructure platform through both investment and acquisition, increasing our liquidity position with our latest financings, and enhancing the contractual weighting of our earnings with a sizable and growing MVC and acreage dedication contract portfolio. With that, I will hand it over to the operator for any questions. Operator?

Operator: Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Jim Rollyson with Raymond James. Please proceed.

Jim Rollyson: Hey, good morning, everyone. Nice job, and you guys certainly got a lot of things done this quarter. Chris, maybe to start, just a little quick bridge on sequential EBITDA from 3Q to 4Q. Obviously, you had this kind of $93.5 million in 3Q, and just trying to get some of the math on adding Pilot for a partial quarter, subtracting Peak for an entire quarter, and then obviously the balance is kind of more seasonal factors. I do not know if you could walk through a quick synopsis of those numbers just so we kind of know how to think about it, because obviously $100 million-$110 million divided by four is about $17 million.

I just want to make sure we have the math right.

Chris George: Yeah. Maybe to put a couple of data points on it, Jim. As we mentioned, Peak contributed about 21% of the services segment year-to-date revenue. On a consolidated company basis, a little north of 10% from a gross profit contribution, going to be pretty ratable to the overall segment contribution to the revenue dollar. But on a combined company, given the margin uplift you get from infrastructure, going to be a shade under 10% of the overall gross profit contribution for the business that was effectively seen for a full Q3 basis.

So when you translate that through to the impact of Peak overall, it is obviously going to take a full quarter impact into Q4 of something in the $7 million-$10 million range on an EBITDA basis, with Pilot coming in on a couple of months contribution. We are not going to see kind of the full run rate benefit of Pilot for those two months, just given the timeline of the seasonality of when it is coming in, as well as some of the upfront costs we are going to incur. So it will be a little underweight there, but overall, the business is contributing, as I said, in line with our expectations overall on the full year for 2026.

So that $100 million-$110 million full year is going to be achieved, but November, December will be slightly under that, just given some of the upfront costs that we are going to incur as we immediately bring the assets online and start to work on integration.

Jim Rollyson: Got it. That makes sense. When you kind of think out, I know it is not 2027 guidance time just yet, but when I kind of look at the $300 million-$310 million of CapEx now that includes Pilot, you look at the backlog of what you guys already are working on, and including the recent announcements, you look at the integration of Pilot. Directionally, how do we think about net CapEx in 2027 versus 2026, and maybe whatever that kind of trends, how do you think about that relating to free cash flow?

Chris George: We will obviously have more to provide in terms of a full-year outlook on CapEx next year as we get through our budget exercise and start to work on the integration planning for putting the two systems together in the couple of months ahead. That said, I would say as a base case, we certainly think there is likely going to be a capital program next year that looks fairly similar to this year as a starting point. But given the earnings power trajectory and the growth we expect, we should see free cash flow build next year as we see the earnings growth, and certainly accelerate past the capital program we are looking to undertake.

We will certainly see maintenance CapEx pick up modestly next year as we outlined. Growth CapEx, we will continue to look at additional projects we might be able to layer onto the overall program. But as we sit here today, thinking about next year as a starting point, looking pretty similar to this year overall is how we think about it, and we will obviously fine-tune that in the months ahead as we budget and start the integration thought process more detailed.

Jim Rollyson: Yep. Appreciate that, and look forward to seeing those inbounds turn into projects.

Operator: Our next question is from Robert Brooks with Northland Capital Markets. Please proceed.

Robert Brooks: Hey, good afternoon, team. Thank you for taking my question. I wanted to first ask about the evolution and competition you face in Water Infrastructure. Is it fair to be thinking that the win rates that you are seeing on projects that you go after have risen as the overall footprint has continued to grow? On the flip side, what are some of the most common reasons you might lose out on a bid for a project, or a most common reason that you might not go after a certain project?

Michael Skarke: Yeah, Bobby, thank you for the question. This is Michael Skarke. As we have built out the system, we have seen our win rates increase, and it is because we are touching more acreage, we are servicing more customers, we are able to more effectively balance the longs and shorts, and we are just able to provide a more reliable recycling-first solution to our customer base. Now, obviously, with the addition of Pilot, we are adding more fixed infrastructure, more customers, more contracts, and we think we can further commercialize those. But the key there is that we are combining our recycling-first solution with their disposal-first solution.

When you provide the economics of the recycling with the firm capacity of the disposal, and then layer in our large diameter dual pipeline network, we think it is a truly unique system, and we would expect the win rates and the percentage of our hit rates to continue to increase. I would say that in the past when we have lost an opportunity, it is usually been around our reluctance or inability to provide firm capacity on the disposal side. Obviously, Pilot, once we interconnect the system between the available capacity they have and the extensive permits of approved permits and undrilled capacity they have, that will largely resolve that issue.

So, we are really focused on commercializing the collective system, and we are focused on growing recycling and disposal in tandem to find the largest or highest marginal profitable barrel.

Robert Brooks: That is super helpful. Thank you, Michael. It is great to hear the biggest hole, the biggest reason why you were previously losing, or would lose out on a bid, you just filled in with this Pilot acquisition. So, I think that is great for other people to hear on the call too. Just maybe shifting gears a bit, something not mentioned on today is your partnership with LibertyStream Infrastructure Partners. Last week, they announced another offtake deal that will likely require them to stand up another facility. That is even with the first commercial facility they are working on with you, right outside Midland.

So, I just want to get your sense on your thoughts on that trend, on how things have been going there? Is it also fair to be thinking that you want to continue to partner with them on other recycling facilities to help you then capture some incremental royalty Adjusted EBITDA? Just any color there.

Mike Lyons: Yeah, thanks, Bobby. This is Mike Lyons here. We took a pretty broad strategy with our partners so that we could create this royalty revenue stream as quickly as possible across our entire network. Right now, we do have two active in-construction projects and two more coming in the wings of that. We would expect to have several facilities up and running next year, both on the lithium and iodine side. This does include LibertyStream, to your exact question. Yeah, we continue to, we love it when our partners are out in the market and are successful commercializing and securing offtake.

I mean, that is one of the most important parts of these projects, apart from just good solid execution on our side and on their side. Yeah, we remain very excited, and I think with the addition of Pilot and some of these areas of nice collections of volume, I think that will even further expand our total potential around minerals.

Robert Brooks: That makes perfect sense. I'll return to the queue. Congrats on the great quarter, guys.

Michael Skarke: Thank you, Bobby.

Operator: Our next question is from Scott Gruber with Citigroup. Please proceed.

Scott Gruber: Yeah, good morning. We had a pretty big election result here in Texas last week that elicited some questions from investors. So, wanted to get your guys' opinion on, given the shifting political backdrop in Texas, what it could mean for your business if we do see more stringent regulation of wastewater. If there's additional fees that are applied to disposal, do you think those are easily passed along to your customers? And would the changing regulatory backdrop put any of your disposal capacity at risk? Or conversely, does it make permitted capacity more valuable? Just trying to think through how that could shake out.

Michael Skarke: Yeah, sure, Scott. This is Michael. Thanks for the question. I'd start off by saying that most importantly, we've got a very strong record of growing our business in highly regulated environments. So, when you look at kind of what we've been able to do, specifically in New Mexico, I think we're very well positioned to operate in stringent environments, from a recycling and disposal side, and just really partnering with the governing bodies.

In terms of disposal capacity, we do think that it puts a premium on disposal capacity, which is why we're so excited that we were able to close the Pilot acquisition when we did, because it comes with a considerable amount, almost 900,000 bbl a day of approved permitted capacity. That we could tap into and drill and expand our network to the extent that you have constraints on existing capacity or the demand to provide more firm capacity than what the existing network can do. In terms of the ability to pass along, that's an important component. Our contracts have change in law provisions that allow us to pass any sort of change in pricing along to the customer.

We feel like we're well-positioned in the event that we see meaningful changes in the regulatory environment. I would say, though, that in general, as you start to see change in regulations, it generally creates opportunities for solution-oriented service companies like Select. Overall, in summary, I'd say that we're really not expecting any material changes to the business, and to the extent that some come, we think we're very well-positioned to deal with them.

Scott Gruber: I appreciate all that color. Then maybe turn into Peak Rentals. Good to see the transaction that you guys have been contemplating for a while take place. Can you just give us any flavor for the strategic plan for Peak Rentals in the hands of the new majority owner? Where do you think they take that business here over the medium to longer term?

Chris George: Yeah, I'll hit on some of the high points there, Scott. So, obviously, the relationship between Select and Peak has been one that we've benefited from in terms of building out our own infrastructure footprint in the Permian, and in particular in New Mexico, where power is at a premium and solutions are continuing to be needed, just given the limitations on infrastructure build-out. So, we certainly look to anticipate maintaining a strategic operational relationship with the business to ensure that we can execute on the build-out of our own infrastructure, and that's been a great solution for us.

Obviously, with the transaction we undertook here, the expectation is that their future growth capital needs will be met with their incremental financing opportunities and other solutions. So, we think they've got great opportunities ahead on both the base business as well as some of the incremental power solutions opportunities. We look forward to the opportunity to maintain upside to that relationship with the ownership position. They've now got more flexibility of choice to pursue those opportunities in whatever form they may take, whether that's within the traditional oil field on the production side facilities or more on the industrial solutions side elsewhere.

So, they've now got much more flexibility of choice, and we look forward to maintaining some upside position there. It'll be deconsolidated, so to the extent there is opportunity there, it won't be represented holistically within our financials, but gives us an opportunity to focus on the core, gives them an opportunity to focus on making different choices long term, and we'll maintain some exposure to that.

Scott Gruber: I appreciate the color, Chris. I'll turn it back. Thank you.

Operator: Our next question is from Derrick Whitfield with Texas Capital. Please proceed.

Derrick Whitfield: Good morning, guys, and thanks for taking my questions.

Michael Skarke: Morning, Derrick.

Derrick Whitfield: Wanted to start with the Pilot acquisition. Since the announcement, how would you characterize the change in your customer discussions, and are you getting more inbounds for disposal now?

Michael Skarke: Hey, Derrick, this is Michael. That's a great question. We've had a number of customers reach out. We've reached out to a number of customers. We get a lot of customers who reach out directly to us wanting to engage now that we've closed on Pilot. It's been, frankly, surprising and very encouraging. They're looking for what we can do with the combined system, as I mentioned, but also specifically, as you alluded to, around our ability to provide firm capacity. We had one customer tell us that they're looking forward to doing even more with us now through our platform, that we're going to have these assets and greater abilities than we had before Pilot.

As I mentioned, it's really encouraging and looking forward to how those conversations materialize during the course of 2027.

Derrick Whitfield: Perfect. As my follow-up, I wanted to touch on the chemicals business. We continue to hear a very constructive dialogue from E&P industry, and we're seeing clearly a positive trajectory for the adoption of advanced chemicals and surfactants. I guess since the last quarter, how would you guys characterize what you're seeing in a progression of, with the progression of your client discussions?

Chris George: Yeah, I'd say, Derrick, the conversations continue to be very constructive. We've said it before, but we think last year, this year was really more of a continuation of the trialing and development of the technology suite to really accelerate what we think is going to be an opportunity set looking into 2027. We're certainly seeing that from some of the customers in both the direct conversations we're having as well as some of the external information they're putting out for the market to digest. So, we feel very good about what that opportunity set can translate to as we look to the year ahead.

For our business as it sits today, we've seen that surfactant suite grow on a year-over-year basis to now more than 10% of the overall product portfolio on a Q3 versus Q3 basis. So, we continue to see that advancement for the business. We'll see a little bit of a slowdown in Q4 as we just get into the end of the year, but we feel very confident around that technology suite and the new products we developed, the test results we're getting, the well results we're getting back from the customer, and think that's going to translate through to continued growth for the surfactant product suite over the year.

Derrick Whitfield: That's great. Congrats on the quarter.

Chris George: Thanks.

Michael Skarke: Thank you, Derrick.

Operator: Our next question is from Eli Jossen with JPMorgan. Please proceed.

Eli Jossen: Hey, good morning. Thanks for taking the questions. Obviously, a lot of discussion on the complementary nature of Pilot and the kind of growth that platform brings, but just wanted to dive a bit more into the ability to build a large pipeline out of basin. Obviously, seen some peers do it, and it kind of fits with the produced water product. Can you just discuss whether that's kind of in the growth plans or how you think about that?

Michael Skarke: Sure, Eli, and I appreciate the question. With the Pilot acquisition, it brings about a couple of different solutions for taking produced water out of New Mexico, several of which are truly out of the Delaware Basin. As we kind of continue to look at the overall produced water solution, recycling, local disposal, distant disposal, and potentially beneficial reuse, that's certainly one of the things that we're looking at, and it's one of the alternatives that we now have available to us post-acquisition or post-closing.

Chris George: Yeah, one of the things I would add is, as we look at the overall portfolio now and the choices we can make around what to do with a barrel, at the end of the day, with the scale of putting Pilot's disposal capacity with our recycling capacity, it gives us much more flexibility of harvesting the maximum value out of every barrel we put onto the network. First and foremost, we'll continue to prioritize recycling those barrels for the industry's demand, our customers' needs.

To the extent those barrels can be deployed elsewhere or need to find a home, whether that's local disposal or long-distance disposal, the combined network gives us much more flexibility of choice, whether that's moving barrels south, east, or north, throughout the footprint that we have. It gives us much more flexibility of choice from a competitive standpoint. It gives us the opportunity to really add competitive scale on traditional disposal. At the end of the day, we think there's more value in the integrated network, pairing it with recycling to provide even more competitive outlets for deploying those barrels on a commercial basis.

Eli Jossen: Got it. That's helpful. It's early, and I know that the 2027 guide is going to come alongside 4Q, but just from a sneak peek perspective on the revenue synergies, how should we be thinking about those in terms of order of magnitude and how low you could compress this multiple? Any kind of high-level color there would be great.

Chris George: Yeah, I think we'll obviously have more to provide on the year-end call, but at this stage, I would say given the volume of customer inbounds we've had, given the ability that we think we have to maximize the disposal potential with the recycling footprint we have, we continue to, I think, get more optimistic around the opportunity set to add revenue synergies and add them in a timeframe that might be more accelerated than what we initially were looking to accomplish.

Whether it's the cost synergies that we expected to harvest by the time we got to the end of 2027 and 2028 or pulling those revenue synergies forward into next year, I think we continue to feel like there's upside opportunity to accelerate the potential out of the combined platform. As we sit here today, I would say that we're probably already pretty comfortable with what we've put out from a guidance standpoint, looking into next year on the base business, and the ability to add to that has probably been strengthened in what we've been able to see and learn from the opportunity set, both on the combined basis and with the customer base so far.

Eli Jossen: Great. Appreciate the color.

Operator: Our next question is from Jeff Robertson with Water Tower Research. Please proceed.

Jeff Robertson: Thank you. Michael, can you talk about what you can do in 2027 to bring the Northern Delaware and the Southern Delaware Basin systems together so you can leverage the entire footprint of the company?

Michael Skarke: Sure, Jeff. I mean, that's really our goal, and I know we've said it, but that's what makes this consolidated platform so exciting, because the two systems are highly complementary from a geographic standpoint. They're not very far apart, but there's also not a lot of overlap. We're currently evaluating a number of different ways to tie in our primarily New Mexico large-diameter recycling-first solution with the Pilot system that exists in southern Lea County, but really goes throughout the Texas, Delaware.

It's not as simple as just running a pipeline from the southernmost portion of our system to the northernmost portion of theirs, which is why we're going through and looking at a couple of different ways to make sure that we're managing the hydraulics and tying in our large-diameter line with the northern part of their large-diameter line. I'd note that the large MVC that we signed earlier this year in the second quarter, it's taking our system down into Loving County. That's going to serve as one of the major arteries, and that asset becomes even more important as we look forward to tying in our system with Pilot's system.

Really, when you back up, the key here is we think we're going to have the largest system, and collectively, we think we'll be able to grow recycling because of the firm disposal capacity that we can now offer, and we think we can grow the firm disposal capacity because of the network and the recycling solutions we offer.

Chris George: I would add, fortunately, that from a timing standpoint, given the recency of some of the recent contracts and the build-out of that is going to take place over the next 12-18 months, we have been able to reassess the opportunity set and the approach of how we build that out to make sure that we can optimize the build-out and the interconnectivity with the Pilot system as part of that construction timeline over the next 18 months. It gives us the opportunity to reassess, maximize the value potential of how we put it together, and build that out in a manner that fits the combined basis of both systems over that timeframe.

Jeff Robertson: Do you anticipate the type of solutions that you can offer to customers on the legacy Pilot asset base for organic growth projects would have a similar margin profile to what you all have been so successful doing up in the Northern Delaware Basin?

Chris George: Yeah. From a margin standpoint, Jeff, we certainly expect the margin profile of the future development opportunities to look consistent with the overall segment. Obviously, there is a little bit of a swing factor with regards to skim oil, but as you put the two systems together, the ability to harvest that skim oil potential, improve the capture rates across the combined platform, we think will continue to improve. The way we underwrite these new contracts is generally going to be consistent, whether it is recycle or disposal or a pure pipeline project. We are generally underwriting all of those on a consistent basis in that 50%-60% margin profile, consistent with the current platform.

Michael Skarke: When we put the—

Chris George: I was just going to say, when we do put the two together, Jeff, we do think there's opportunities to create efficiency and improve the margin profile of the acquired assets as well. We think that's another area where you've got both revenue and cost synergy potential from what we acquired.

Jeff Robertson: Lastly, on the permitted disposal, do those permits have a shelf life where they might need to be renewed at some point in the future?

Michael Skarke: They do have a shelf life where they need to be renewed or extended, something that we're monitoring, and it's not something that is going to become a restriction at this point. We're thrilled to have them. It's going to be a big part of our solution as we go forward, because again, you need recycling. It is the most economic solution. It's the most friendly from a pore space perspective, but you're also going to need local disposal and distant disposal, and we're very focused on providing the full suite of services.

Jeff Robertson: Thank you.

Michael Skarke: Thank you, Jeff.

Operator: Our next question is from Sean Mitchell with Daniel Energy Partners. Please proceed.

Sean Mitchell: Hey, guys. Thanks for taking the question. Maybe a follow-on to Derrick's question around surfactants. We've heard several E&Ps talk about it on their earnings calls last week. It's been a pretty hot topic, I think, over the last two or three quarters. When you think about these guys are mostly in the testing phase today, what needs to happen for adoption to accelerate on this front? Is that measured in months, quarters, years? Is that something you expect in later 2027, or any color around adoption?

Chris George: I'd say generally, the adoption timelines are moving as we would expect based upon the history of the test results we've been able to undertake today. I think you're starting to get well results that are getting into that 12, 18-month timeframe where you can have true conviction around the outcome and the comparative results on a side-by-side basis. That we really do think does set 2027 up to allow for more adoption over the overall industry. Some of the customers that we've been, I think, undertaking longer live testing programs with so far are already changing the behavior of their new well completions.

We think that's going to continue to translate through to a lot of fast adopters and fast followers from a customer standpoint. We feel like 2027 is really the year where it is going to start to accelerate, and the pace of that over the course of the year we will continue to see. But we would be very surprised if you did not see a lot of fast movement in the industry behind the

Michael Skarke: The only thing I would add is we think you are going to see some of the large operators continue to talk about it, about the success they are having as their well results come in, like Chris mentioned. And when you see some of the larger operators talk about that success, you are going to have everyone else follow pretty quickly, as Chris alluded to.

Chris George: A lot of the phone calls we are getting now are based on customers that are not using the technology today or seeing the results and want to learn more. That is going to continue to accelerate.

Sean Mitchell: Got it. Thanks for the color.

Michael Skarke: Thanks, Sean.

Operator: This concludes the question-and-answer session. I would like to turn the call back over to John Schmitz for any final comments.

John Schmitz: Thanks to everyone for joining the call. We appreciate your continued support and interest in learning more about Select Water Solutions. We look forward to speaking to you again next quarter.

Chris George: Thanks, everyone.

Operator: Thank you. This will conclude today's conference. You may disconnect at this time, and thank you for your participation.

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