Select Water Solutions, Inc. M&A announcement

Please go ahead, sir. Thank you, operator, and good morning, everyone.

We appreciate you joining us for Select Water Solutions conference call to discuss our announced acquisition of Pilot Water Solutions. 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 and 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 and accessible from our website at selectwater.com. There will also be a recorded telephonic replay until October 9, 2026. The access information for this replay was also included in the acquisition press release.

Please note that the information reported on this call speaks only as of today, September 25, 2026, 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 meanings of the U.S. federal security 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, our quarterly reports on Form 10-Q, and our other filings with the SEC to understand those risks, uncertainties, and contingencies as well as to review additional disclosures associated with the pending acquisition.

In addition, comments made by management during this conference call may contain discussions of certain non-GAAP financial metrics. For the definitions of such metrics, please refer to our SEC reports and the related disclaimers set forth therein. These non-GAAP measures should be considered in conjunction with the information contained in our financial statements prepared in accordance with GAAP. The pending transaction of Pilot Water Solutions, which is currently expected to close in the fourth quarter of 2026, is subject to customary closing conditions and receipt of required regulatory approvals, including the expiration or termination of the waiting period under the Hart-Scott-Rodino Act. Now, I'd like to turn the call over to John.

Thanks, Garrett. Good morning, and thank you for joining us. Today, we announce our agreement to acquire Pilot Water Solutions, a leading private water midstream company with a sizable produced water infrastructure footprint, most notably across the Permian's Delaware Basin. With Pilot Water, Select will add highly contracted production-related earning stream at an accretive valuation in the heart of the Delaware Basin. The Pilot Water acquisition strengthens Select's position as a diversified market-leading water midstream platform. While Select will continue to lead with its recycle-first strategy, with the integration of Pilot Water, we will have a well-balanced overall infrastructure network managing both scaled recycling and disposal across a market-leading presence in the broader Delaware Basin.

Pilot Water's infrastructure platform consists of approximately 2.7 million barrels per day of active permitted disposal capacity, nearly 900,000 barrels per day of incremental undeveloped permitted disposal capacity, and more than 700 miles of pipeline infrastructure. In the first half of 2026, Pilot Water has handled about 850,000 barrels per day of produced water, with more than 80% of these volumes coming from the Delaware Basin across both Texas and New Mexico. Additionally, a new 175,000 barrels per day MVC-based contract in the Delaware Basin is expected to increase Pilot Water's daily produced water volumes handled to 1 million barrels per day during 2027.

Importantly, Pilot Water's revenue are supported by an attractive contract portfolio with more than 80% of its annual revenue supported by long-term contracts with an average tender of more than seven years. These contracts include 480,000 barrels per day of minimum volume commitments and 306,000 dedicated acres. Select has successfully built a scaled acreage dedication contract portfolio in recent years, and I am very excited to strengthen Select's pro forma contract book with Pilot's sizable MVC contract base, in addition to the incremental dedications, adding greater predictability and durability to Select's future cash flows. Pilot Water's strategic disposal portfolio provides Select with immediately available capacity, which will allow for near-term utilization enhancements and long-term system optimization and water balancing capabilities across Select's broader recycling and disposal network.

When tied in to Select's existing Delaware Basin network, we will be well-positioned to efficiently capture the full life cycle economics of produced and treated produced water across a broader pro forma footprint. Additionally, Pilot Water's approximately 900,000 barrels of undeveloped permitted disposal capacity, largely in the Delaware Basin across both Texas and New Mexico, ensures Select is well-positioned to capture a growing percentage of the industry's produced water volumes in the region, which are expected to grow by more than 10% per year over the next decade. This capacity I outlined is before taking into account the broader leased and owned surface we will acquire in this transaction that provides access to additional high-value pore space, offering incremental optionality for long-term out-of-basin disposal or beneficial reuse solutions efficiently located related to Select's broader New Mexico network.

We will continue to prioritize local recycling as the most cost-advantage solution for every barrel. However, Pilot Water's available disposal capacity and permitted undeveloped pore space availability gives Select the flexibility to optimize volumes across an integrated system and the opportunity to capture the full growth potential of our contracted produced water in the future. Select has been on a steady, growth-oriented strategic path over the last five years to build out our water infrastructure segment and transform our business into a production-weighted midstream business supported by long-term contracts and durable and predictable cash flows. I believe we have been very successful at executing our strategy in recent years with our water infrastructure segment growing at an average annual growth rate of more than 50% over the last five years.

The Pilot Water acquisition is expected to immediately deliver another 60%-plus leg of growth for the water infrastructure segment in 2027. We have near-term visibility to growing our combined daily volumes to more than 2.5 million barrels per day during the first half of next year, supported by additional contracted MVC volumes. With multiple previously announced projects set to be completed by the end of 2027, we are well-positioned for additional contracted growth in the years ahead. To put that in perspective, in 2027, water infrastructure is now expected to comprise approximately 70% of Select's pro forma consolidated gross profit before depreciation and amortization, with the majority of this earning stream under long-term MVCs or acreage dedication commitments.

To conclude, I am very excited for what's to come for the integrated business, and I look forward to welcoming the new Pilot Water employees into the Select family soon. At this point, I'll hand it over to Chris to provide additional highlights around this accretive acquisition.

Chris? Thank you, John, and good morning, everyone.

We are pleased to announce the acquisition of Pilot Water for aggregate closing consideration of $700 million, including $600 million of cash and $100 million of shares of Select's Class A common stock. The sellers also have a right to an additional $15 million contingent cash payment payable upon the satisfaction of certain operational milestones expected in early 2027. Additionally, the sellers retain a right to a cash true-up payment if the 30-day volume-weighted average share price as of the six-month anniversary of the closing date is lower than the 30-day volume-weighted average price at the closing date.