Select Energy Services, Inc. (NYSE: WTTR) reported Q1 EPS of ($0.27), $0.11 worse than the analyst estimate of ($0.16). Revenue for the quarter came in at $144 million versus the consensus estimate of $140.33 million.

John Schmitz, Chairman of the Board, President and CEO, stated, "During the first quarter, we continued to see revenue improvements across all of our business segments with 8% consolidated revenue growth, led by our Oilfield Chemicals segment. Overall industry activity improved sequentially during the first quarter despite challenging winter storm weather conditions in February, which resulted in supply chain disruptions and roughly a week of lost revenue, negatively impacting our overall margin performance during the first quarter. Looking forward, with COVID-19 vaccine rollouts expanding, governments providing strong economic support, and oil demand steadily improving, we feel confident that steadying commodity prices should support continued constructive activity growth throughout the rest of the year. We believe revenues will grow to $160 – $170 million in the second quarter, with Adjusted EBITDA margins recovering from the weather-related compression seen in the first quarter to a range of 5 –7%.

"Our primary strategic objectives remain as outlined previously. We will drive value in this company, through improving and growing the base business in a recovering activity environment and advancing our leading position in integrated and sustainable full life cycle water and chemicals through our FluidMatch™ solutions, through deploying our expertise in water and chemicals across the value chain and through evaluating strategic investment opportunities and M&A. There's a lot of opportunity out there, and I'm confident we can execute our strategy.

"We continue to look for more ways to improve the business, and in doing so, we recently completed an organizational realignment, starting with the appointment of Michael Skarke as EVP and COO. Michael has been a longtime partner of mine, having joined the Company in 2009, and has served in a number of leadership roles within the organization across both Operations and Finance. He will oversee all aspects of the operational organization with a particular emphasis on the further integration of our efforts to support the total water and fluids life cycle. This realignment will also support further commercialization of integrated solutions on a regional basis, while allowing us to more efficiently control costs, drive margin improvement and take advantage of our significant operating leverage and further our initiatives around sustainable water and chemical solutions.

"As previously disclosed, we recently partnered with two blue-chip operators in the core of the Permian Basin to construct and operate two water recycling facilities supported by long-term contracts. These projects commenced operations in the first quarter and are off to very promising starts. This infrastructure streamlines our customers' water logistics, reduces their costs and helps our customers achieve their ESG targets by reducing their environmental impact through reduced fresh water usage and reduced waste disposal. We have already seen success in further commercializing these facilities, with two more customers either currently sending or contracted to send volumes during the second quarter, and the additional pull through of various service lines related to these facilities.

"While we continue to find new and interesting ways to invest in growth, we have also further demonstrated the asset-light nature of our base business model by limiting net capex during the first quarter to $2.2 million and, accordingly, we have reduced our full year net capex guidance to $30 – $40 million, which includes $10 – $20 million of targeted growth projects. Though working capital remained a modest headwind during the first quarter, we continue to project positive free cash flow generation for the full year in 2021.

"We are also furthering our efforts to innovate and find new ways to diversify our capabilities and advance our initiatives around the energy transition. As part of this effort, we are pleased to announce a strategic investment in ICE Thermal Harvesting. ICE is a new venture focused on providing zero-emission geothermal electric power to the oil and gas industry as well as industrial consumers across multiple sectors. We are excited to collaborate with the ICE team as both capital and strategic partners and look forward to the growth opportunities ahead for the business.

"Select sits in a very strong position in the marketplace, with no bank debt, strong cash flow capabilities and a substantial cash balance. In addition to this financial strength, we have the ability to leverage our competitive strengths as the oil and gas industry's leading sustainable water and chemical solutions provider to expand into new areas or other industries to take advantage of the energy transition. We are very excited about these recent water recycling and energy transition investments, and we continue to believe that additional opportunities lie ahead, particularly as we begin to see the benefits of the momentum in the activity landscape," concluded Schmitz.

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