.

Select Energy Services Reports 2017 First Quarter Results

May 17, 2017

Select Energy Services Reports 2017 First Quarter Results

GAINESVILLE, Texas, May 17, 2017 /PRNewswire/ -- Select Energy Services, Inc. (NYSE: WTTR) ("Select"), a leading provider of total water solutions to the U.S. unconventional oil and gas industry, today announced results for the quarter ended March 31, 2017.  Subsequent to the first quarter, Select completed its initial public offering at $14.00 per share on April 26, 2017.

Revenue for the first quarter of 2017 was $99.9 million compared to $86.7 million in the fourth quarter of 2016 and $78.8 million in the first quarter of 2016.  Net loss for the first quarter was $12.3 million as compared to a net loss of $24.7 million in the fourth quarter of 2016 and a net loss of $25.8 million in the first quarter of 2016.  Adjusted EBITDA was $13.8 million in the first quarter of 2017 compared to $6.7 million in the fourth quarter of 2016 and $5.7 million in the first quarter of 2016.  Please refer to the reconciliation of Adjusted EBITDA (a non-GAAP measure) to net loss (a GAAP measure) in this release.

John Schmitz, Select's Chairman & CEO, stated, "We are pleased to have completed our IPO in April and to be publicly reporting our financial results for the first time.  First quarter highlights included increased activity and demand for our services in several of our end markets, both in year-over-year and sequential comparisons.  These increases were primarily attributable to a higher level of drilling and completions activity due to the improved commodity price environment.  Additionally, we benefited from the growing trend by our customers to increase well completion intensity, which drives an increase in revenue per well.

"Another significant highlight occurred late in the first quarter with our acquisition of Gregory Rockhouse Ranch, Inc. and certain of its affiliates ("GRR"), a leading provider of water and water-related services to E&P companies in the Permian Basin.  With this acquisition, we have enhanced our unique inventory of strategic water sources and valuable rights-of-way.  The acquisition provides us with additional rights to a vast array of fresh, brackish and effluent water sources with access to significant volumes of water annually and established water transport infrastructure, including more than 900 miles of temporary and permanent pipelines and related storage facilities and pumps, all located in the northern Delaware region of the Permian Basin.  We look forward to working with GRR's management and expect GRR to make a substantial contribution to our growth going forward.

"We are very proud of what our management team and hard-working employees have built over the past 10 years.  We believe our differentiated service model and portfolio of strategic water sources, pipelines and infrastructure in all the major U.S. oil and gas shale basins will meet the needs for increased well completion intensity by our diversified customer base of major integrated and independent oil and gas companies for years to come," concluded Schmitz.

Conference Call

Select Energy Services has scheduled a conference call on Wednesday, May 17, 2017 at 5:00 p.m. eastern time.  Please dial 201-389-0872 and ask for the Select Energy Services call at least 10 minutes prior to the start time, or live over the Internet by logging on to the web at the address http://investors.selectenergyservices.com/events-and-presentations. A telephonic replay of the conference call will be available through May 24, 2017 and may be accessed by calling 201-612-7415 using passcode 13661529#.  A webcast archive will also be available at the link above shortly after the call and will be accessible for approximately 90 days. 

About Select Energy Services, Inc.

Select Energy Services is a leading provider of total water solutions to the U.S. unconventional oil and gas industry.  Select provides for the sourcing and transfer of water (both by permanent pipeline and temporary pipe) prior to its use in the drilling and completion activities associated with hydraulic fracturing, as well as complementary water-related services that support oil and gas well completion and production activities, including containment, monitoring, treatment, flowback, hauling, and disposal.  For more information, please visit http://selectenergyservices.com.

Forward Looking Statements

All statements in this news release other than statements of historical facts are forward-looking statements which contain our current expectations about our future results.  We have attempted to identify any forward-looking statements by using words such as "expect", "will", "estimate" and other similar expressions. Although we believe that the expectations reflected, and the assumptions or bases underlying our forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Such statements are not guarantees of future performance or events and are subject to known and unknown risks and uncertainties that could cause our actual results, events or financial positions to differ materially from those included within or implied by such forward-looking statements.

Factors that could cause our actual results to differ materially from the results contemplated by such forward-looking statements include, but are not limited to the factors discussed or referenced in the "Risk Factors" section of the prospectus we filed with the U.S. Securities and Exchange Commission on April 24, 2017, relating to our recently completed initial public offering.

You should not place undue reliance on our forward-looking statements. Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, unless required by law.

WTTR-ER

Contacts:

Select Energy Services


Gary Gillette, CFO & SVP


Justin Briscoe, SVP, Business Development


(940) 668-0259


IR@selectenergyservices.com




Dennard ▪ Lascar Associates


Ken Dennard / Lisa Elliott


713-529-6600


WTTR@dennardlascar.com

 

SELECT ENERGY SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except share data)



Three Months Ended March 31,


2017


2016

Revenue




   Water solutions

$          78,377


$          62,289

   Accommodations and rentals

9,515


8,514

   Wellsite completion and construction services

12,033


8,036

      Total revenue

99,925


78,839





Costs of revenue




   Water solutions

60,621


51,534

   Accommodations and rentals

7,923


6,238

   Wellsite completion and construction services

10,419


6,862

   Depreciation and amortization

21,204


26,142

      Total costs of revenue

100,167


90,776





      Gross profit (loss)

(242)


(11,937)





Operating expenses




   Selling, general and administrative

9,957


8,980

   Depreciation and amortization

446


634

   Lease abandonment costs

1,863


-

      Total operating expenses

12,266


9,614





Loss from operations

(12,508)


(21,551)





Other income (expense)




   Interest expense, net

(730)


(3,367)

   Other income (expense), net

1,064


(566)

Loss before tax expense

(12,174)


(25,484)

Tax expense

(106)


(309)





Net loss

(12,280)


(25,793)





Less: Net loss attributable to Predecessor

-


25,337

Less: Net loss attributable to noncontrolling interests

8,108


456





Net loss attributable to Select Energy Services, Inc.

$          (4,172)


$                 -





Allocation of net loss attributable to:




   Class A-1 stockholders

$          (3,363)



   Class A stockholders

(809)



   Class B stockholders

-




$          (4,172)



Weighted average shares outstanding:



   Class A-1 - Basic & Diluted

16,100,000



   Class A - Basic & Diluted

3,870,194



   Class B - Basic & Diluted

38,462,541



Net loss per share attributable to common stockholders:




   Class A-1 - Basic & Diluted

$            (0.21)



   Class A - Basic & Diluted

$            (0.21)



   Class B - Basic & Diluted

$                    -



 

SELECT ENERGY SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)



March 31, 2017


December 31, 2016


(unaudited)



Assets






Current assets




   Cash and cash equivalents

$                   8,048


$                 40,041

   Accounts receivable trade, net of allowance for doubtful accounts of $2,203 and $2,144, respectively

103,180


75,892

   Accounts receivable, related parties

279


135

   Inventories

940


1,001

   Prepaid expenses and other current assets

5,683


7,586

         Total current assets

118,130


124,655

Property and equipment

756,124


739,386

Accumulated depreciation

(500,541)


(490,519)

      Property and equipment, net

255,583


248,867

Goodwill

22,975


12,242

Other intangible assets, net

36,017


11,586

Other assets

8,410


7,716

            Total assets

$               441,115


$               405,066





Liabilities and Equity


Current liabilities




   Accounts payable

$                 13,012


$                 10,796

   Accounts payable and accrued expenses, related parties

666


648

   Accrued salaries and benefits

6,431


2,511

   Accrued insurance

9,351


10,338

   Accrued expenses and other current liabilities

24,031


22,091

         Total current liabilities

53,491


46,384

Accrued lease obligations

17,282


15,946

Other long term liabilities

7,771


8,028

Long-term debt, net of current maturities

34,000


-

         Total liabilities

112,544


70,358

Class A-1 common stock, $0.01 par value; 40,000,000 shares authorized; 16,100,000 shares issued and outstanding as of March 31, 2017 and December 31, 2016

161


161

Class A common stock, $0.01 par value; 250,000,000 shares authorized; 4,077,970 shares issued and outstanding as of March 31, 2017; 3,802,972 shares issued and outstanding as of December 31, 2016

41


38

Class B common stock, $0.01 par value; 150,000,000 shares authorized; 38,462,541 shares issued and outstanding as of March 31, 2017 and December 31, 2016

385


385

Preferred stock, $0.01 par value; 50,000,000 shares authorized; no shares issued and outstanding as of March 31, 2017 and December 31, 2016

-


-

Additional paid-in capital

115,891


113,175

Accumulated deficit

(5,215)


(1,043)

         Total stockholders' equity

111,263


112,716

Noncontrolling interests

217,308


221,992

         Total equity

328,571


334,708

            Total liabilities and equity

$               441,115


$               405,066

 

SELECT ENERGY SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)



Three Months Ended March 31,


2017


2016





Cash flows from operating activities




   Net loss

$           (12,280)


$           (25,793)

   Adjustments to reconcile net loss to net cash provided by operating activities




      Depreciation and amortization

21,650


26,776

      (Gain) loss on disposal of property and equipment

(1,105)


622

      Bad debt expense

334


158

      Amortization of debt issuance costs

309


651

      Equity-based compensation

643


308

   Changes in operating assets and liabilities




      Accounts receivable

(21,157)


18,994

      Prepaid expenses and other assets

1,337


2,006

      Accounts payable and accrued liabilities

2,333


(7,302)

         Net cash (used in) provided by operating activities

(7,936)


16,420





Cash flows from investing activities




   Acquisitions, net of cash received

(49,004)


-

   Purchase of property, equipment, and intangible assets

(10,806)


(22,275)

   Proceeds received from sale of property and equipment

1,753


2,736

         Net cash used in investing activities

(58,057)


(19,539)





Cash flows from financing activities




   Proceeds from revolving line of credit

34,000


8,500

   Payments on long-term debt

-


(7,625)

   Payment of debt issuance costs

-


(376)

   Member distributions

-


212

         Net cash provided by financing activities

34,000


711





Net decrease in cash and cash equivalents

(31,993)


(2,408)

Cash and cash equivalents, beginning of period

40,041


16,305

Cash and cash equivalents, end of period

$               8,048


$             13,897





Supplemental cash flow disclosure:




   Cash paid for interest

$                  427


$               2,711

   Cash paid for taxes

$                    12


$                  208





Supplemental disclosure of noncash investing activities:




Capital expenditures included in accounts payable and accrued liabilities

 

$               4,766


 

$                    28

 

Comparison of Non-GAAP Financial Measures

We view EBITDA and Adjusted EBITDA as important indicators of performance. We define EBITDA as net income, plus taxes, interest expense, and depreciation and amortization. We define Adjusted EBITDA as EBITDA plus/(minus) loss/(income) from discontinued operations, plus any impairment charges or asset write-offs pursuant to GAAP, plus/(minus) non-cash losses/(gains) on the sale of assets or subsidiaries, non-recurring compensation expense, non-cash compensation expense, and non-recurring or unusual expenses or charges, including severance expenses, transaction costs, or facilities-related exit and disposal-related expenditures.

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 and amortization) 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.

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 exclusion of some but not all items that affect the most directly comparable GAAP financial measures. You 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.

The following table presents a reconciliation of EBITDA and Adjusted EBITDA to our net income (loss), which is the most directly comparable GAAP measure for the periods presented: 


Three months ended,


March 31, 2017


December 31, 2016


March 31, 2016


(in thousands)







Net loss

$        (12,280)


$        (24,713)


$        (25,793)

   Interest expense

730


4,336


3,367

   Depreciation and amortization

21,650


21,589


26,776

   Tax (benefit) expense

106


(916)


309

EBITDA

10,206


296


4,659

   Lease abandonment costs

1,863


6,254


-

   Non-recurring severance expense

-


197


396

   Non-recurring deal costs

748


-


(280)

   Non-cash incentive compensation

643


-


309

   Non-cash loss on sale of subsidiaries and other assets

309


(68)


622

Adjusted EBITDA

$          13,769


$          6,679


$            5,706







 

 

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SOURCE Select Energy Services, Inc.