BofA says Select Water is becoming an energy infrastructure play
Investing.com -- Bank of America initiated coverage on Select Water Solutions with a ‘Buy’ rating and a $22 price target, as company undergoes a major transformation from a cyclical oilfield services provider into a higher-margin water infrastructure operator with more stable cash flows.
The brokerage said Select’s growing exposure to produced-water recycling and infrastructure in the Permian Basin should reduce earnings volatility and improve long-term profitability. BofA expects water infrastructure to account for 58% of adjusted EBITDA by 2030, up from 45% in 2025 and just 8% in 2019.
Analysts forecast adjusted EBITDA of $315 million in 2026, rising to $417 million by 2028, driven by expanding recycling capacity, higher water handling volumes and a rebound in U.S. oil completions activity.
BofA highlighted tightening disposal capacity in the Delaware Basin as a major growth catalyst. The firm estimates U.S. oil production generates more than four barrels of water for every barrel of oil produced, creating sustained demand for recycling and disposal infrastructure.
Select currently has 2.8 million barrels per day of recycling capacity under contract or construction, including 1.7 million barrels per day in the Northern Delaware Basin. The company has also nearly doubled acreage dedications since early 2025 to more than 2.5 million acres with average contract durations exceeding 11 years.
The report also pointed to emerging opportunities tied to AI-driven data center growth, noting that recycled water could increasingly be used for cooling infrastructure. BofA estimated Texas alone could eventually require between 1 million and 6.5 million barrels per day of water demand from data centers under construction or announced.
Despite the stock’s roughly 64% gain year to date, BofA said Select still trades below pure-play water infrastructure peers on an EV/EBITDA basis and offers an attractive risk-reward profile as earnings visibility improves.
The bank warned that risks include weaker oil prices, execution challenges tied to infrastructure expansion and rising competition in the Permian water market.