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Select Energy Services Reports 2018 First Quarter Results

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Select Energy Services Reports 2018 First Quarter Results

Net Income of $16.1 million and Adjusted EBITDA(1) of $59.6 million

Operating Cash Flow of $35.2 million which fully funded capital expenditures

Total liquidity of $166.9 million, including cash and cash equivalents of $6.1 million

PR Newswire

HOUSTON, May 10, 2018 /PRNewswire/ -- Select Energy Services, Inc. (NYSE:WTTR) ("Select" or "the Company"), a leading provider of total water management and chemical solutions to the North American unconventional oil and gas industry, today announced results for the first quarter ended March 31, 2018.

Revenue for the first quarter of 2018 was $376.4 million as compared to $304.2 million in the fourth quarter of 2017 and $99.9 million in the first quarter of 2017.  Net income for the first quarter of 2018 was $16.1 million as compared to a net loss of $14.9 million in the fourth quarter of 2017 and a net loss of $12.3 million in the first quarter of 2017.  Adjusted EBITDA was $59.6 million in the first quarter of 2018 as compared to $43.9 million in the fourth quarter of 2017 and $13.8 million in the first quarter of 2017.  Due to the timing of Select's merger with Rockwater Energy Solutions, Inc. ("Rockwater")  that closed on November 1, 2017, results in the fourth quarter of 2017 do not include Rockwater's operating results for the month of October, which included approximately $70.1 million in revenue, $0.7 million in net income and $7.7 million in Adjusted EBITDA.  

Holli Ladhani, President and CEO, stated, "We are very encouraged by how the company progressed during the first quarter. The integration of Rockwater has gone well and is reflected in our first quarter results with solid net income and cash flow. With a supportive backdrop of rising oil prices and overall strong market fundamentals, we will continue to remain focused on further improving our margins in the second quarter."

_____________________________

(1) "Adjusted EBITDA" is not presented in accordance with generally accepted accounting principles in the United States ("GAAP"). Please see the supplemental financial information in the table under "Comparison of Non-GAAP Financial Measures" at the end of this earnings release for a reconciliation of the non-GAAP financial measure of Adjusted EBITDA to its most directly comparable GAAP financial measure.

Cash Flow and Balance Sheet

Cash Flow from Operations for the first quarter was $35.2 million. Capital expenditures for the quarter were $32.6 million, which were fully funded with Cash Flow from Operations, which also included $18.2 million of working capital build. Total cash during the quarter increased $3.3 million and, at March 31, 2018, cash and cash equivalents totaled $6.1 million and outstanding borrowings under our revolving credit facility of $75.0 million. In addition to cash and cash equivalents, the Company had approximately $160.8 million of available borrowing capacity under our revolving credit facility after giving effect to $19.8 million of outstanding letters of credit, providing total liquidity of $166.9 million.

Conference Call

Select has scheduled a conference call on Friday, May 11, 2018 at 10:00 a.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 of the call, or listen 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 18, 2018 and may be accessed by calling 201-612-7415 using passcode 13676696#.  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 is a leading provider of total water management and chemical solutions to the North American unconventional oil and gas industry.  Select provides for the sourcing and transfer of water, both by permanent pipeline and temporary hose, 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 and recycling, flowback, hauling, and disposal.  Select, under its Rockwater Energy Solutions brand, develops and manufactures a full suite of specialty chemicals used in the well completion process and production chemicals used to enhance performance over the producing life of a well.  Select currently provides services to exploration and production companies and oilfield service companies operating in all the major shale and producing basins in the United States and Western Canada.  For more information, please visit Select's website, http://www.selectenergyservices.com.

Cautionary Statement Regarding Forward-Looking Statements

All statements in this communication 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 materially impact such forward-looking statements include, but are not limited to, the factors discussed or referenced in the "Risk Factors" section of our Annual Report on Form 10-K for the year ended December 31, 2017 and in any subsequently filed quarterly reports on Form 10-Q or current reports on Form 8-K.  Investors 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

SELECT ENERGY SERVICES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except share and per share data)



Three Months Ended March 31, 


2018


2017

Revenue






Water solutions and related services

$

281,555


$

78,377

Accommodations and rentals


14,744



9,515

Wellsite completion and construction services


16,466



12,033

Oilfield chemical product sales


63,630



Total revenue


376,395



99,925

Costs of revenue






Water solutions and related services


215,425



60,621

Accommodations and rentals


10,665



7,923

Wellsite completion and construction services


14,390



10,419

Oilfield chemical product sales


57,084



Depreciation and amortization


30,882



21,204

Total costs of revenue


328,446



100,167

Gross profit (loss)


47,949



(242)

Operating expenses






Selling, general and administrative


25,681



9,957

Depreciation and amortization


541



446

Impairment of investment


2,000



Lease abandonment costs


1,124



1,863

Total operating expenses


29,346



12,266

Income (loss) from operations


18,603



(12,508)

Other income (expense)






Interest expense, net


(1,151)



(730)

Foreign currency losses, net


(400)



Other (expense) income, net


(458)



1,064

Income (loss) before tax expense


16,594



(12,174)

Tax expense


(462)



(106)

Net income (loss)


16,132



(12,280)

Less: net (income) loss attributable to noncontrolling interests


(6,033)



8,108

Net income (loss) attributable to Select Energy Services, Inc.

$

10,099


$

(4,172)







Net income (loss) per share attributable to common stockholders:






Class A—Basic

$

0.15


$

(0.21)

Class A-1—Basic

$


$

(0.21)

Class A-2—Basic

$

0.15


$

Class B—Basic

$


$







Net income (loss) per share attributable to common stockholders:






Class A—Diluted

$

0.15


$

(0.21)

Class A-1—Diluted

$


$

(0.21)

Class A-2—Diluted

$

0.15


$

Class B—Diluted

$


$

 

SELECT ENERGY SERVICES, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

(in thousands, except share data)



March 31, 2018


December 31, 2017


(unaudited)



Assets






Current assets






Cash and cash equivalents

$

6,117


$

2,774

Accounts receivable trade, net of allowance for doubtful accounts of $3,341 and $2,979, respectively


407,046



373,633

Accounts receivable, related parties


7,206



7,669

Inventories


44,501



44,598

Prepaid expenses and other current assets


20,295



17,842

Total current assets


485,165



446,516

Property and equipment


1,051,970



1,034,995

Accumulated depreciation


(578,220)



(560,886)

Property and equipment, net


473,750



474,109

Goodwill


275,795



273,421

Other intangible assets, net


152,215



156,066

Other assets


4,084



6,256

Total assets

$

1,391,009


$

1,356,368

Liabilities and Equity






Current liabilities






Accounts payable

$

62,415


$

52,579

Accounts payable and accrued expenses, related parties


2,600



2,772

Accrued salaries and benefits


20,222



21,324

Accrued insurance


11,928



12,510

Sales tax payable


12,570



12,931

Accrued expenses and other current liabilities


91,400



81,112

Current portion of capital lease obligations


1,706



1,965

Total current liabilities


202,841



185,193

Accrued lease obligations


18,321



18,979

Other long term liabilities


13,577



13,827

Long-term debt


75,000



75,000

Total liabilities


309,739



292,999

Commitments and contingencies






Class A common stock, $0.01 par value; 350,000,000 shares authorized and 66,258,163 shares issued and outstanding as of March 31, 2018; 350,000,000 shares authorized and 59,182,176 shares issued and outstanding as of December 31, 2017


662



592

Class A-2 common stock, $0.01 par value; 40,000,000 shares authorized, no shares issued or outstanding as of March 31, 2018; 40,000,000 shares authorized, 6,731,845 shares issued and outstanding as of December 31, 2017




67

Class B common stock, $0.01 par value; 150,000,000 shares authorized and 40,331,989 shares issued and outstanding as of March 31, 2018; 150,000,000 shares authorized and 40,331,989 shares issued and outstanding as of December 31, 2017


404



404

Preferred stock, $0.01 par value; 50,000,000 shares authorized and no shares issued and outstanding as of March 31, 2018 and December 31, 2017




Additional paid-in capital


675,895



673,141

Accumulated deficit


(7,760)



(17,859)

Accumulated other comprehensive income


43



302

Total stockholders' equity


669,244



656,647

Noncontrolling interests


412,026



406,722

Total equity


1,081,270



1,063,369

Total liabilities and equity

$

1,391,009


$

1,356,368

 

SELECT ENERGY SERVICES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)



Three Months Ended March 31,


2018


2017

Cash flows from operating activities






Net income (loss)

$

16,132


$

(12,280)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities






Depreciation and amortization


31,423



21,650

Loss (gain) on disposal of property and equipment


554



(1,105)

Bad debt expense


485



334

Amortization of debt issuance costs


172



309

Equity-based compensation


2,481



643

Impairment of investment


2,000



Other operating items, net


117



Changes in operating assets and liabilities






Accounts receivable


(33,691)



(21,157)

Prepaid expenses and other assets


(1,017)



1,337

Accounts payable and accrued liabilities


16,549



2,333

Net cash provided by (used in) operating activities


35,205



(7,936)

Cash flows from investing activities






Acquisitions, net of cash received




(49,004)

Purchase of property and equipment


(32,612)



(10,806)

Proceeds received from sale of property and equipment


1,609



1,753

Net cash used in investing activities


(31,003)



(58,057)

Cash flows from financing activities






Proceeds from revolving line of credit and issuance of long-term debt




34,000

Payments of capital lease obligations


(511)



Proceeds from share issuance


130



Distributions to noncontrolling interests


(161)



Share repurchases


(264)



Net cash (used in) provided by financing activities


(806)



34,000

Effect of exchange rate changes on cash


(53)



Net increase (decrease) in cash and cash equivalents


3,343



(31,993)

Cash and cash equivalents, beginning of period


2,774



40,041

Cash and cash equivalents, end of period

$

6,117


$

8,048

Supplemental cash flow disclosure:






Cash paid for interest

$

991


$

427

Cash paid for taxes

$

344


$

12

Supplemental disclosure of noncash investing activities:






Capital expenditures included in accounts payable and accrued liabilities

$

9,632


$

4,766

Comparison of Non-GAAP Financial Measures

EBITDA and Adjusted EBITDA are not financial measures presented in accordance with GAAP. We define EBITDA as net income, plus interest expense, taxes and depreciation & amortization. We define Adjusted EBITDA as EBITDA, plus impairment of investment, lease abandonment costs, non-recurring severance expenses, non-recurring transaction costs, non-cash compensation expenses, plus/(minus) non-cash loss (gain) on sale of subsidiaries and other assets, plus/(minus) foreign currency loss (gain), plus inventory write downs and other non-recurring charges. EBITDA and Adjusted EBITDA are supplemental non-GAAP financial measures that we believe provide useful information to external users of our financial statements, such as industry analysts, investors, lenders and rating agencies 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 non-recurring 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.

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. For further discussion, please see "Item 6. Selected Financial Data" in our 2017 Annual Report on Form 10-K.

The following tables present a reconciliation of EBITDA and Adjusted EBITDA to our net loss, which is the most directly comparable GAAP measure for the periods presented:




Rockwater





Three Months Ended


One Month
Ended
October 31,


Three Months
Ended


March 31, 2018


December 31, 2017


2017


March 31, 2017


(unaudited)


(in thousands)

Net income (loss)

$

16,132


$

(14,950)


$

701


$

(12,280)

Interest expense


1,151



4,744



468



730

Tax expense (benefit)


462



(525)



121



106

Depreciation and amortization


31,423



34,993



4,806



21,650

EBITDA


49,168



24,262



6,096



10,206

Impairment of investment


2,000







Lease abandonment costs


1,124



701



50



1,863

Non-recurring severance expenses




4,039



125



Non-recurring transaction costs


2,694



4,717



627



748

Non-cash compensation expenses


2,481



5,910



387



643

Non-cash loss (gain) on sale of subsidiaries and other assets


1,515



965



(3)



309

Foreign currency loss (gain)


400



(281)



404



Inventory write downs


266







Other non-recurring charges




3,563



21



Adjusted EBITDA

$

59,648


$

43,876


$

7,707


$

13,769

 

Contacts:

Select Energy Services


Gary Gillette - CFO & SVP


Chris George - Sr. Director, Finance & Investor Relations


(713) 296-1073


IR@selectenergyservices.com




Dennard Lascar Investor Relations


Ken Dennard / Lisa Elliott


713-529-6600


WTTR@dennardlascar.com

 

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SOURCE Select Energy Services, Inc.

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