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Select Water Solutions (WTTR) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Energy· Aug 5, 2026

Source: earnings call transcript

Executive summary

Select Water Solutions Q2 FY26 — Record Revenue and Strong Growth Across Segments

Select Water Solutions reported a very strong Q2 FY26, driven by record revenues and margin expansion in its Water Infrastructure and Chemical Technologies segments. The company secured a significant 7-year MVC contract and acquired 14 strategic SWDs, reinforcing its Permian Basin network. While capital expenditures are increasing to support growth, the company is establishing long-term contracted cash flows and expects improved free cash flow potential in 2027 and beyond.

Highlights

5

  • Consolidated revenue increased by 8% sequentially to $396 million, and adjusted EBITDA by 19% sequentially to $93 million.

  • Water Infrastructure segment delivered record revenue of $102 million, up 26% year-over-year, with 58% gross margins before D&A.

  • Chemical Technologies segment achieved record revenue of $96 million, up 23% sequentially, with 20% gross margins before D&A.

  • Executed a new 7-year agreement with a large public operator, including a 128 million barrel MVC and conveyance of 14 strategic SWDs.

  • Generated $87 million in operating cash flow, a meaningful improvement compared to Q1.

Concerns

3

  • Net capital expenditures increased to $250 million to $290 million for 2026, up from the prior $250 million high end of guidance.

  • Chemical Technologies revenue is forecast to modestly retrench to $85 million to $90 million in Q3 from $96 million in Q2.

  • The ongoing build phase for Northern Delaware water infrastructure will limit free cash flow potential in 2026.

Guidance & targets

CategoryTargetConfidence
Water Infrastructure full year growth
upper end of 25% to 30%
high materiality
High
Water Infrastructure Q3 revenue growth
5% to 10%
medium materiality
Medium
Water Infrastructure Q3 gross margins
56% to 58%
medium materiality
Medium
Water Services Q3 revenue
generally steady
low materiality
Medium
Water Services Q3 gross margins
20% to 22%
medium materiality
Medium
Chemical Technologies Q3 revenue
$85 million to $90 million
medium materiality
Medium
Chemical Technologies Q3 margins
20% to 21%
medium materiality
Medium
Consolidated Adjusted EBITDA Q3
$90 million to $94 million
high materiality
High
D&A expense Q3
$48 million to $52 million
low materiality
Medium
Net interest expense near term
$4 million to $6 million per quarter
low materiality
Medium
Net capital expenditures 2026
$250 million to $290 million
high materiality
High
Water Infrastructure growth 2027
double-digit growth
high materiality
High
Free cash flow potential
improved
high materiality
Medium

Segment performance

SegmentRevenueYoYQoQMargin
Water Infrastructure
Achieved record revenue and gross profit, outpacing guidance. Driven by increased produced water volumes and improved skim oil recovery. Bolstered outlook with new contracts, MVCs, and 16 new active SWDs added in the region.
Produced water volumes handled: 1.5 million barrels per day
$102 million26%5%58% gross margins before D&A
Water Services
Outperformed expectations with sequential revenue growth, driven by slightly improved activity levels and continued strength in last-mile logistics and rental offerings.
——approximately 4%23% gross margins before D&A
Chemical Technologies
Posted a stellar quarter with significant sequential revenue gains and outperformance. Driven by market share gains, increased completion intensity, and demand for high-spec surfactant products.
$96 million—23%20% gross margin before D&A

Orderbook & backlog

Minimum Volume Commitment (MVC) 128 million barrels Q2 FY26

Part of a new 7-year agreement with a large public operator in the Northern Delaware Basin, expected to be operational within 12 months.

Deals & partnerships

Large public operator 7-year agreement for water management services 128 million barrel MVC 7 years

Includes conveyance of 14 underutilized SWDs across Eddy and Lea County, New Mexico, to be tied into Select's existing water infrastructure network.

Black River Ranch Strategic surface acquisition

Multipurpose surface acquisition in Eddy County, New Mexico, closed during Q2 as part of $42 million strategic bolt-ons.

Two separate entities Acquisition of disposal wells

Acquired 2 separate SWDs in the Delaware Basin during Q2 as part of $42 million strategic bolt-ons.

New strategic partner Mineral extraction agreement for iodine

Executed a new mineral extraction agreement for iodine extraction across the portfolio.

Capital programs

Northern Delaware MVC Project underway $25 million to $30 million
Start: Q2 FY26

Benefit:14 underutilized SWDs conveyed, tied into existing network

Project associated with a large 128 million barrel MVC award, enhancing disposal capacity and network reliability in the Northern Delaware Basin.

Risks & headwinds

Increased capital expenditures 2026

Net capital expenditures to increase to $250 million to $290 million in 2026, up from the $250 million high end of our prior guidance.

Mitigation:Investing in attractive growth opportunities, establishing a tremendous portfolio of long-term contracted cash flows, and building an actively scaling infrastructure platform.

Limited free cash flow potential 2026

Ongoing build phase will limit our free cash flow potential this year.

Mitigation:Establishing a tremendous portfolio of long-term contracted cash flows; improved free cash flow potential expected in 2027 and beyond.

Modest sequential revenue retrenchment in Chemical Technologies Q3 FY26

Forecast a modest retrenchment to $85 million to $90 million of revenue based on current customer schedules forecasted for the third quarter, down from $96 million in Q2.

Mitigation:Continued healthy demand for high-spec, higher-margin friction reducer and specialty surfactant product offerings; margins expected to remain strong at 20% to 21%.

What to watch in Q3 FY26

Water Infrastructure Segment Growth

Full year 2026
Current 26% YoY revenue growth in Q2
Target Upper end of 25% to 30% full year growth

Why it matters

Indicates continued success in expanding the core infrastructure network and securing long-term contracts, crucial for future earnings.

We expect to see further growth in the third quarter, and we are well on track to achieve the upper end of our 25% to 30% full year growth guidance for the segment, setting the stage for additional run rate growth looking into 2027.

Find out whether WTTR delivers this. Inve re-checks your case every morning.

Q&A highlights

Inquiring about the expected growth rate for Water Infrastructure in 2027, given the current run rate and project momentum.

Management expects another year of double-digit growth for Water Infrastructure in 2027, with opportunities to add to this profile through project wins and bolt-on acquisitions. They highlighted the strategic value of the recently acquired SWDs for network expansion and commercialization.

“I think on a base case, as we sit here today, on a run rate, you're looking to execute on another year of double-digit growth into 2027.”

asked by Jim Rollyson (Raymond James) · answered by Chris George

2 min read 6 chapters

Detailed narrative

Water Infrastructure Growth Strategy

Select's Water Infrastructure segment achieved record revenue of $102 million in Q2 FY26, representing a 26% year-over-year growth. This performance was driven by increased produced water volumes handled (1.5 million barrels per day) and improved skim oil recovery. The company is well on track to reach the upper end of its 25-30% full-year growth guidance for the segment, setting the stage for additional run-rate growth in 2027.

Strategic MVC and SWD Acquisition

A new 7-year agreement was executed with a large public operator in the Northern Delaware Basin, supported by a sizable 128 million barrel Minimum Volume Commitment (MVC) contract. This deal also included the conveyance of 14 underutilized but strategic Saltwater Disposal (SWD) wells across Eddy and Lea County, New Mexico. The associated project, costing $25 million to $30 million, is expected to be operational within the next 12 months, enhancing the network's disposal capacity and reliability.

Chemical Technologies Outperformance

The Chemical Technologies segment posted a stellar Q2 FY26, with revenue of $96 million, a 23% sequential increase, and gross margins before D&A of 20%. This outperformance was attributed to market share gains, increased completion intensity and complexity, and growing interest in higher-spec surfactant technology, despite increases in oil-based raw material input costs.

Capital Allocation and Free Cash Flow Outlook

Select increased its 2026 net capital expenditure guidance to $250 million-$290 million, up from the prior $250 million high end, to support the expanding Northern Delaware water infrastructure network. While this ongoing build phase will limit free cash flow potential in 2026, the company is establishing a portfolio of long-term contracted cash flows and expects improved free cash flow potential in 2027 and beyond.

Mineral Extraction Opportunities

The company executed a new mineral extraction agreement for iodine across its portfolio with a new strategic partner, in addition to previously announced lithium projects. These opportunities are viewed as margin-enhancing to existing infrastructure investments. Select anticipates dollars flowing from the minerals side in 2027, with potential for scaling up over time and diverse inbound interest from various offtakers.

Data Center Water Solutions

Select is engaged in multiple conversations regarding water sourcing, movement, treatment, and disposal for data centers in West Texas and beyond. The company's core competency in large-scale, cost-efficient water logistics positions it as a premier solution provider. In Q2 FY26, $6 million in revenue was generated from the services side of the business supporting data center construction projects, indicating a tangible opportunity.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.