Select Water Solutions, Inc.

Greetings. Welcome to Select Energy Services first quarter earnings conference call. At this time, all participants are in a 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 Chris George, Senior Vice President. Thank you. You may begin.

Thank you, operator, and good morning, everyone. We appreciate you joining us for the Select Energy conference call and webcast to review our financial and operational results for the first quarter of 2022. With me today are John Schmitz, our founder, chairman, president, and chief executive officer, Nick Swyka, senior vice president and chief financial officer, and Michael Skarkey, executive vice president and chief operating officer. Before I turn the call over, I have a few housekeeping items to cover. A replay of today's call will be available by webcast and accessible from our website at selectenergy.com. There will also be a recorded telephonic replay available until May 18, 2022. The access information for this replay was also included in yesterday's earnings release. Please note that the information reported on this call speaks only as of today, May 4, 2022, and therefore time-sensitive 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 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 report on Form 10Q to understand those risks, uncertainties, and contingencies. Also, please refer to our earnings announcement released yesterday for reconciliations of non-GAAP financial measures. Now I'd like to turn the call over to our founder, chairman, president, CEO, John Schmidt.

Thanks, Chris. Good morning, and thank you for joining us. I'm excited to be discussing Select Energy again with you today. Overall, I'm very pleased with the continued progress we have made made during the first quarter, executing on our strategy of improving and bolstering our base business, advancing our technology, sustainability, diversification efforts, and executing on our strategic M&A. The first quarter saw strong sequential revenue growth, increasing 16% quarter over quarter. with each segment achieving revenue levels not seen since the third quarter of 2019, well before the pandemic began. We also expanded margins and continued to generate positive net income. Adjusted EBITDA increased 22% sequentially, growing to $32.2 million during the first quarter. While free cash flow during the first quarter was impacted by additional working capital build and the settlement of certain Navarro liabilities, I feel confident in our ability to generate free cash flow over the course of 2022. Accordingly, we strategically reinitiated our efforts to return capital to shareholders with a $16 million open market share buyback executed during the first quarter. On the sustainability front, we executed on a number of initiatives, including closing on a $270 million sustainability-length ABL, issuing our inaugural sustainability report, and contracting additional recycling facilities and infrastructure development projects. I'll let Nick speak to the credit facility in more detail. But I'd encourage listeners to give our sustainability report a full read, which is available on our website. As a market leader in sustainable water chemical solutions, we take our commitment to water stewardship seriously. We're proud of the accomplishments we've achieved to date and remain confident in our ability to set the bar high with ambitious targets for water stewardship and safety performance accountability for the future. From a business development standpoint, we've seen a number of recent successes as outlined in yesterday's earnings release. During the quarter, we signed long-term contracts for the development of additional recycling facilities, additional gathering lines tying to existing recycling and disposal facilities, the expansion of existing recycling and disposal facilities, and the activation of acquired assets that were previously shut in or underutilized. We've even obtained a long-term contract with another water midstream company to recycle their gathered produced water volumes. The scope and the diversity of these opportunities is very exciting. We are starting to see the benefits of the sizable infrastructure footprint we acquired with our recent acquisitions as these new opportunities utilize legacy select infrastructure as well as assets we acquired from each of the complete Aguilibre and Novera acquisitions. The contracts range from 2 to 10 years and are supported by acreage and wellbore dedication and minimum volume commitments or take-or-pay agreements. Importantly, these opportunities also span across multiple basins, including the Permian, Haynesville, MidCon, and Rockies. We remain very focused on growing our production-related revenue and adding contractual revenues through our full lifecycle pipeline, recycling, and disposal infrastructure. Ultimately, this will further enhance and stabilize our cash flow generation capabilities, differentiate Select from its competitors, and provide additional capital allocation opportunities. We're having additional constructive conversations with our customers every day, and I believe we will continue to build on our recent success with more long-term contracts and development opportunities in 2022. On the M&A front, we closed on the Nevera acquisition on February 23rd. We're quickly making progress with the integration of Nevera's operation, though we did and we'll see some modest operational inefficiencies and additional costs associated with the integration in the first and second quarters. We continue making progress with yard consolidation across each of the acquisitions, and I have identified a significant amount of underutilized, obsolete, or non-core assets within the acquired companies that we have been able to sell for cash. With more than $12 million of year-to-date cash proceeds through March, we've been able to largely self-fund our CapEx program so far this year. I think we'll find more equipment and more real estate that we can turn into cash in the coming quarters as well. Looking at our strategic investments and partnerships, we made additional commitments during the first quarter of about $3.5 million between Aquanex Midstream and ice thermal harvesting. Aquanix continues to make progress in its development strategy and provide additional complementary options for our infrastructure strategy in the MidCon region. ICE continues to see tremendous demand for its unique renewable thermal power solutions, and we are very excited about the potential of energy transition opportunities this investment provides. As we look forward, we will continue to look for unique opportunities to invest in and advance our technology, sustainability, and diversification initiatives. While the first quarter saw a meaningful double-digit percentage increase in drilling activity, completion activity modestly lagged as the incremental drilling was necessary to replenish the dwindling duct backlog. While there remain a number of unknowns in the macro and geopolitical landscape, we expect to see more activity growth during the second quarter supported by a strong overall commodity price environment. I'll let Nick speak to our first and second quarter financial performance and outlook in more detail. But again, I am pleased with our recent financial performance, our recent acquisitions, our technology and sustainability strategy, our recycling and infrastructure projects, and our other strategic investments and initiatives. With growing activity, strong commodity prices, improved operational and financial performance, 2022 is setting up to be an exciting year for Select. With that, I'll hand it over to Nick to discuss the financial performance and outlook in more detail.