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What changed in Select Water Solutions, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Select Water Solutions, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+594 added−591 removedSource: 10-K (2024-02-21) vs 10-K (2023-02-22)

Top changes in Select Water Solutions, Inc.'s 2023 10-K

594 paragraphs added · 591 removed · 434 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

329 edited+100 added−100 removed380 unchanged
Biggest changeIndustry conditions are influenced by numerous factors over which we have no control, including: ● domestic and foreign economic conditions, including rising interest rates and associated policies of the Federal Reserve, and supply of and demand for oil and gas; ● the level of prices, and expectations regarding future prices, of oil and gas; ● the level of global oil and gas exploration and production and storage capacity; ● the severity and duration of world health events, including the COVID-19 pandemic, related economic repercussions and operational challenges and the resulting severe disruption in the oil and gas industry and negative impact on demand for oil and gas, which is negatively impacting our business; ● actions by the members of OPEC+ with respect to oil production levels and announcements of potential changes in such levels, including the ability of the OPEC+ countries to agree on and comply with supply limitations; ● governmental regulations, including the policies of governments regarding the exploration for and production and development of their oil and gas reserves; ● taxation and royalty charges; ● political and economic conditions in oil and gas producing countries; ● global weather conditions, pandemics and natural disasters; 34 Table of Contents ● worldwide political, military and economic conditions; ● political or civil unrest in the U.S. or elsewhere, including the Russia-Ukraine war and the political instability in the Middle East; ● the cost of producing and delivering oil and gas; ● the discovery rates of new oil and gas reserves; ● activities by non-governmental organizations to limit certain sources of funding for the energy sector or restrict the exploration, development and production of oil and gas; ● the ability of oil and gas producers to access capital; ● technical advances affecting production efficiencies and overall energy consumption; and ● the potential acceleration of the development of alternative fuels, including as a result of the IRA 2022 or otherwise.
Biggest changeIndustry conditions are influenced by numerous factors over which we have no control, including: ● domestic and foreign economic conditions, including sustained periods of inflation, high interest rates and associated policies of the Federal Reserve, and supply of and demand for oil and gas; ● the level of prices, and expectations regarding future prices, of oil and gas; ● the level of global oil and gas exploration and production and utilization of storage capacity; ● actions by the members of OPEC+ with respect to oil production levels and announcements of potential changes in such levels, including the ability of the OPEC+ countries to agree on and comply with supply limitations; ● governmental regulations, including the policies of governments regarding the exploration for and production and development of, their oil and gas reserves; ● taxation and governmental royalty charges; ● political and economic conditions in oil and gas producing countries, including any political or social unrest; ● global weather conditions, pandemics or other public health crises and natural disasters; ● worldwide political, military and economic conditions; ● political or civil unrest in the U.S. or elsewhere, including the Russia-Ukraine war and the conflict in the Israel-Gaza region and related instability in the Middle East, including from Houthi rebels in Yemen; ● the cost of producing and delivering oil and gas; ● the discovery rates of new oil and gas reserves; ● the effects of consolidation on our customers or competitors; ● activities by non-governmental organizations to limit certain sources of funding for the energy sector or restrict the exploration, development and production of oil and gas; ● the ability of oil and gas producers to access capital; ● technical advances affecting production efficiencies and overall energy consumption; and ● the potential acceleration of the development of alternative fuels, including as a result of the IRA 2022 or otherwise. 34 Table of Contents Political instability or armed conflict in crude oil or natural gas producing regions, such as the ongoing war between Russia and Ukraine, the conflict in the Israel-Gaza region and related instability in the Middle East, including from the Houthi rebels in Yemen, and OPEC+ policy decisions could have a material adverse impact on our business, financial condition or future results.
In the event that new federal, state or local restrictions or bans on the hydraulic fracturing process are adopted in areas where we or our customers conduct business, we or our customers may incur additional costs or permitting requirements to comply with such requirements that may be significant in nature and our customers could experience added restrictions, delays or cancellations in their exploration, development, or production activities, which would in turn reduce the demand for our services and have a material adverse effect on our liquidity, consolidated results of operations, and consolidated financial condition.
In the event that new federal, state or local restrictions or bans on the hydraulic fracturing process are adopted in areas where we or our customers conduct business, we or our customers may incur additional costs or permitting requirements to comply with such requirements that may be significant in nature and our customers could experience added costs, restrictions, delays or cancellations in their exploration, development, or production activities, which would in turn reduce the demand for our services and have a material adverse effect on our liquidity, consolidated results of operations, and consolidated financial condition.
Our customers generally assume responsibility for, including control and removal of, all other pollution or contamination which may occur during operations, including that which may result from seepage or any other uncontrolled flow of drilling fluids. We may have liability in such cases if we are negligent or commit willful acts.
Our customers generally assume responsibility for, including control and removal of, all other pollution or contamination that may occur during operations, including that which may result from seepage or any other uncontrolled flow of drilling fluids. We may have liability in such cases if we are negligent or commit willful acts.
These laws and regulations may take the form of laws, regulations, executive actions and various other legal initiatives and result in 48 Table of Contents the imposition of numerous obligations on our operations and the operations of our customers. See Part I, Item 1. “Business – Environmental and Occupational Safety and Health Matters” for more discussion on these matters.
These laws 48 Table of Contents and regulations may take the form of laws, regulations, executive actions and various other legal initiatives and result in the imposition of numerous obligations on our operations and the operations of our customers. See Part I, Item 1. “Business – Environmental and Occupational Safety and Health Matters” for more discussion on these matters.
Any difficulty we experience replacing or adding personnel could have a material adverse effect on our operational performance, customer satisfaction, ability to retain existing business or secure new business, and therefore liquidity, results of operations and financial condition.
Any difficulty we experience replacing or adding personnel could have a material adverse effect on our operational performance, customer satisfaction, ability to retain existing business or secure new business, and therefore on our liquidity, results of operations and financial condition.
Further, we employ a comprehensive mentor program, where more experienced employees provide guidance and instruction to less experienced employees and use videos to train and develop our operational personnel. ​ ​ Competitive Strengths ​ We believe our ability to integrate the complexities of our water and chemical-related services through both temporary, customized services and longer-term solutions that include investments in sustainable infrastructure gives us a competitive advantage and is the foundation of our business.
Further, we employ a comprehensive mentor program, where more experienced employees provide guidance and instruction to less experienced employees and use videos to train and develop our operational personnel. ​ ​ ​ Competitive Strengths ​ We believe our ability to integrate the complexities of our water and chemical-related services through both temporary, customized services and longer-term solutions that include investments in sustainable water reuse infrastructure gives us a competitive advantage and is the foundation of our business.
We have well-established field operations in what we believe to be core areas of many of the most active shale plays, basins and regions in the U.S., including the Permian, Bakken, Eagle Ford, Haynesville, Marcellus, Utica, Rockies and Mid-Continent (“MidCon”) regions. Our broad geographic footprint enables us to service the majority of current domestic unconventional drilling and completion activity.
We have well-established field operations in what we believe to be core areas of the most active shale plays, basins and regions in the U.S., including the Permian, Bakken, Eagle Ford, Haynesville, Marcellus, Utica, Rockies and Mid-Continent (“MidCon”) regions. Our broad geographic footprint enables us to service the majority of current domestic unconventional drilling and completion activity.
The federal Resource Conservation and Recovery Act (“RCRA”), and comparable state statutes regulate the generation, transportation, treatment, storage, disposal and cleanup of hazardous and non-hazardous wastes. Pursuant to rules issued by the EPA, the individual states administer some or all of the provisions of RCRA, sometimes in conjunction with their own, more stringent requirements.
Hazardous substances and wastes. The federal Resource Conservation and Recovery Act (“RCRA”), and comparable state statutes regulate the generation, transportation, treatment, storage, disposal and cleanup of hazardous and non-hazardous wastes. Pursuant to rules issued by the EPA, the individual states administer some or all of the provisions of RCRA, sometimes in conjunction with their own, more stringent requirements.
Through our Chemical Technologies service line, we develop and provide a full suite of chemicals utilized in hydraulic fracturing, stimulation and cementing, including polymers that create viscosity, crosslinkers, friction reducers, surfactants, buffers, breakers and other chemical technologies. We source our products through our own manufacturing operations as well as through third party producers and distributors.
Through our Completion Chemicals service line, we develop and provide a full suite of chemicals utilized in hydraulic fracturing, stimulation and cementing, including polymers that create viscosity, crosslinkers, friction reducers, surfactants, buffers, breakers and other chemical technologies. We source our products through our own manufacturing operations as well as through third-party producers and distributors.
This has, and will likely continue to result in some (and perhaps a growing number of) institutions removing from their portfolios the shares of companies that do not meet their minimum investment standards. Further, banks and other capital providers are reassessing their capital allocation to our industry or making their participation conditional.
This has resulted, and will likely continue to result, in some (and perhaps a growing number of) institutions removing from their portfolios the shares of companies that do not meet their minimum investment standards. Further, banks and other capital providers are reassessing their capital allocation to our industry or making their participation conditional.
Additionally, we believe our ability to couple our water infrastructure with our water services and oilfield chemicals expertise provides an advantage relative to our competition. ​ Oilfield Chemicals Segment Within our Oilfield Chemicals segment, we develop, manufacture, manage logistics and provide a full suite of completion chemical products utilized in hydraulic fracturing, stimulation, cementing and related well completion processes.
Additionally, we believe our ability to couple our water infrastructure with our water services and oilfield chemicals expertise provides an advantage relative to our competition. ​ Chemical Technologies Segment Within our Chemical Technologies segment, we develop, manufacture, manage logistics and provide a full suite of completion chemical products utilized in hydraulic fracturing, stimulation, cementing and related well completion processes.
However, additional rules and regulations on federal lands may impact our customers. For example, the BLM has proposed new rules that would limit flaring from well sites on federal lands, as well as allow for the delay or denial of permits if the Bureau finds that an operator’s methane waste minimization plan is insufficient.
However, additional rules and regulations on federal lands may impact our customers. For example, the BLM has proposed new rules that would limit flaring from well sites on federal lands, as well as allow for the delay or denial of permits if the BLM finds that an operator’s methane waste minimization plan is insufficient.
Technology advancements in well service technologies, including those involving the replacement of water in fracturing fluid, could have a material adverse effect on our business, financial condition and results of operations. The oilfield services industry is characterized by rapid and significant technological advancements and introductions of new products and services using new technologies.
Technology advancements in well completion and service technologies, including those involving the replacement of water in fracturing fluid, could have a material adverse effect on our business, financial condition and results of operations. The oilfield services industry is characterized by rapid and significant technological advancements and introductions of new products and services using new technologies.
The trend in U.S. environmental regulation is typically to place more restrictions and limitations on activities that may affect the environment. In particular, President Biden has issued several executive orders since taking office, and has made combating of climate change a priority under his administration.
The trend in U.S. environmental regulation is typically to place more restrictions and limitations on activities that may affect the environment. In particular, President Biden has issued several executive orders since taking office, and has made combating climate change a priority under his administration.
This disposal process has been linked to increased induced seismicity events in certain areas of the country, particularly in Oklahoma, Texas, Colorado, and New Mexico. For example, Texas and Oklahoma have issued rules for wastewater disposal wells that imposed certain permitting and operating restrictions and reporting requirements on disposal wells in proximity to faults.
This disposal process has been linked to increased induced seismicity events in certain areas of the country, particularly in certain counties in Oklahoma, Texas, Colorado, and New Mexico. For example, Texas and Oklahoma have issued rules for wastewater disposal wells that imposed certain permitting and operating restrictions and reporting requirements on disposal wells in proximity to faults.
Environmental and Occupational Safety and Health Matters Our water-related operations in support of energy exploration, development and production activities pursued by our customers are subject to stringent and comprehensive federal, tribal, state and local laws and regulations in the U.S. governing occupational safety and health, the discharge of materials into the environment and environmental protection.
Environmental and Occupational Safety and Health Matters Our water-related operations in support of energy development and production activities pursued by our customers are subject to stringent and comprehensive federal, tribal, state and local laws and regulations in the U.S. governing occupational safety and health, the discharge of materials into the environment and environmental protection.
The occurrence or threat of terrorist attacks in the U.S. or other countries, anti-terrorist efforts and other armed conflicts involving the U.S. or other countries, including continued hostilities in the Middle East, and political or civil unrest in the U.S. may adversely affect the U.S. and global economies and could prevent us from meeting our financial and other obligations.
The occurrence or threat of terrorist attacks in the U.S. or other countries, anti-terrorist efforts and other armed conflicts involving the U.S. or other countries, including increased and continued hostilities in the Middle East, and political or civil unrest in the U.S. may adversely affect the U.S. and global economies and could prevent us from meeting our financial and other obligations.
For each calendar year, the “Applicable Sustainability Margin Adjustment” will equal the number of basis points (whether positive, negative or zero) equal to the sum of (i) the Applicable Water Stewardship Fee Adjustment plus (ii) Applicable Health and Safety Fee Adjustment (each as defined in the Sustainability-Linked Credit Facility.
For each calendar year, the “Applicable Sustainability Margin Adjustment” will equal the number of basis points (whether positive, negative or zero) equal to the sum of (i) the Applicable Water Stewardship Fee Adjustment and (ii) the Applicable Health and Safety Fee Adjustment (each as defined in the Sustainability-Linked Credit Facility).
The inability to maintain our pricing and to increase our pricing as costs increase could have a material adverse effect on our business, financial position and results of operations. We have operated at a loss in the past, including in 2021 and 2020, and there is no assurance of our profitability in the future.
The inability to maintain our pricing and to increase our pricing as costs increase could have a material adverse effect on our business, financial position and results of operations. We have operated at a loss in the past, including in 2021, and there is no assurance of our profitability in the future.
Our amended and restated certificate of incorporation provides that, to the fullest extent permitted by applicable law, we renounce any interest or expectancy in any business opportunity that involves any aspect of the energy business or industry and that may be from time to time presented to any member of (i) Legacy Owner Holdco; Crestview Partners II SES Investment, LLC; any funds, limited partnerships or other investment entities or vehicles managed by Crestview Partners or controlled by Crestview GP; B-29 Investments, LP; Sunray Capital, LP; Proactive Investments, LP and their respective affiliates, other than us (collectively, the “SES Group”); (ii) SCF-VI, L.P., SCF-VII, L.P. and SCF-VII(A), L.P. and their respective affiliates, other than us (collectively, the “SCF Group”); (iii) the other entities (existing and future) that participate in the energy industry and in which the SES Group and SCF Group own substantial equity 53 Table of Contents interests (the “Portfolio Companies”) or (iv) any director or officer of the corporation who is also an employee, partner, member, manager, officer or director of any member of the SES Group, the SCF Group or the Portfolio Companies, including our Chairman, President and CEO , John D.
Our amended and restated certificate of incorporation provides that, to the fullest extent permitted by applicable law, we renounce any interest or expectancy in any business opportunity that involves any aspect of the energy business or industry and that may be from time to time presented to any member of (i) Legacy Owner Holdco; Crestview Partners II SES Investment, LLC; any funds, limited partnerships or other investment entities or vehicles managed by Crestview Partners or controlled by Crestview GP; B-29 Investments, LP; Sunray Capital, LP; Proactive Investments, LP and their respective affiliates, other than us (collectively, the “SES Group”); (ii) SCF-VI, L.P., SCF-VII, L.P. and SCF-VII(A), L.P. and their respective affiliates, other than us (collectively, the “SCF Group”); (iii) the other entities (existing and future) that participate in the energy industry and in which the SES Group and SCF Group own substantial equity interests (the “Portfolio Companies”) or (iv) any director or officer of the corporation who is also an employee, partner, member, manager, officer or director of any member of the SES Group, the SCF Group or the Portfolio Companies, including our Chairman, President and CEO, John D.
When our monitoring systems detect that certain defined thresholds set by our customers are out of desired range, our equipment sends out an alert and then, through dynamic machine learning, takes action to keep operations running safely and smoothly.
When our monitoring systems detect that certain defined thresholds set by our customers are out of the desired range, our equipment sends out an alert and then, through dynamic machine learning, takes action to keep operations running safely and smoothly.
The SEC also maintains an internet website at www.sec.gov that contains reports, proxy and information statements and other information regarding issuers, including us, that file electronically with the SEC. ​ We also make available free of charge through our website, www.selectenergy.com , electronic copies of certain documents that we file with the SEC, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
The SEC also maintains an internet website at www.sec.gov that contains reports, proxy and information statements and other information regarding issuers, including us, that file electronically with the SEC. ​ We also make available free of charge through our website, www.selectwater.com , electronic copies of certain documents that we file with the SEC, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
Our business activities present risks of incurring significant environmental costs and liabilities, including costs and liabilities resulting from our handling of oilfield and other wastes, because of air emissions and wastewater discharges related to our operations, and due to historical oilfield industry operations and waste disposal practices.
Our business activities present risks of incurring significant environmental costs and liabilities, including costs and liabilities resulting from our handling of oilfield and other wastes, because of potential air emissions and wastewater discharges related to our operations, and due to historical oilfield industry operations and waste disposal practices.
Water Services Segment Our Water Services segment consists of our services businesses, including water transfer, flowback and well testing, fluids hauling, water monitoring, water containment and water network automation, primarily serving E&P companies. Additionally, this segment includes the operations of our accommodations and rentals business. ● Water Transfer.
Water Services Segment Our Water Services segment consists of our services businesses, including water transfer, flowback and well testing, water sourcing, fluids hauling, water monitoring, water containment and water network automation, primarily serving E&P companies. Additionally, this segment includes the operations of our accommodations and rentals business.
The amounts payable, as well as the timing of any payments, under the Tax Receivable Agreements are dependent upon future events and significant assumptions, including the timing of the exchanges of SES Holdings LLC Units, the market price of our Class A common stock at the time of each exchange (since such market price will determine the amount of tax basis increases resulting from the exchange), the extent to which such exchanges are taxable transactions, the amount of the exchanging unitholder’s tax basis in its SES Holdings LLC Units at the time of the relevant exchange, the depreciation and amortization periods that apply to the increase in tax basis, the amount of net operating losses available to us as a result of reorganization transactions entered into in connection with the Select 144A Offering, the amount and timing of taxable income we generate in the future, the U.S. federal income tax rate then applicable, and the portion of our payments under the Tax Receivable Agreements that constitute imputed interest or give rise to depreciable or amortizable tax basis.
The amounts payable, as well as the timing of any payments, under the Tax Receivable Agreements are dependent upon future events and significant assumptions, including the timing of the exchanges of SES Holdings LLC Units, the market price of our Class A 55 Table of Contents common stock at the time of each exchange (since such market price will determine the amount of tax basis increases resulting from the exchange), the extent to which such exchanges are taxable transactions, the amount of the exchanging unitholder’s tax basis in its SES Holdings LLC Units at the time of the relevant exchange, the depreciation and amortization periods that apply to the increase in tax basis, the amount of net operating losses available to us as a result of reorganization transactions entered into in connection with the Select 144A Offering, the amount and timing of taxable income we generate in the future, the U.S. federal income tax rate then applicable, and the portion of our payments under the Tax Receivable Agreements that constitute imputed interest or give rise to depreciable or amortizable tax basis.
Constructing and maintaining water infrastructure used in the oil and gas industry requires significant capital. We may require additional capital in the future to develop and construct water sourcing, transfer and other related infrastructure to execute our growth strategy.
Constructing and maintaining water infrastructure used in the oil and gas industry requires significant capital. We may require additional capital in the future to develop and construct water sourcing, transfer, recycling and other related infrastructure to execute our growth strategy.
In addition, the Sustainability-Linked Credit Facility restricts SES Holdings’ and Select LLC’s ability to make distributions on, or redeem or repurchase, its respective equity interests, except for certain distributions, including distributions of cash so long as, both at the time of the distribution and after giving effect to the distribution, no default exists under the Sustainability-Linked Credit Facility and either (a) excess availability at all times during the preceding 30 consecutive days, on a pro forma basis and after giving effect to such distribution, is not less than the greater of (1) 25% of the lesser of (A) the maximum revolver amount and (B) the then-effective borrowing base and (2) $33.75 million or (b) if SES Holdings’ and Select LLC’s fixed charge coverage ratio is at least 1.0 to 1.0 on a pro forma basis, and excess availability at all times during the preceding 30 consecutive days, on a pro forma basis and after giving effect to such distribution, is 51 Table of Contents not less than the greater of (1) 20% of the lesser of (A) the maximum revolver amount and (B) the then-effective borrowing base and (2) $27.0 million.
In addition, the Sustainability-Linked Credit Facility restricts SES Holdings’ and Select LLC’s ability to make distributions on, or redeem or repurchase, its respective equity interests, except for certain distributions, including distributions of cash so long as, both at the time of the distribution and after giving effect to the distribution, no default exists under the Sustainability-Linked Credit Facility and either (a) excess availability at all times during the preceding 30 consecutive days, on a pro forma basis and after giving effect to such distribution, is not less than the greater of (1) 25% of the lesser of (A) the maximum revolver amount and (B) the then-effective borrowing base and (2) $33.75 million or (b) if SES Holdings’ and Select LLC’s fixed charge coverage ratio is at least 1.0 to 1.0 on a pro forma basis, and excess availability at all times during the preceding 30 consecutive days, on a pro forma basis and after giving effect to such distribution, is not less than the greater of (1) 20% of the lesser of (A) the maximum revolver amount and (B) the then-effective borrowing base and (2) $27.0 million.
We demonstrate this commitment in our employment practices, including through our Code of Conduct, our Equal Employment Opportunity Employer Policy, and our Anti-Harassment Policy, as well as through our policies on safety and security for our employees.
We demonstrate this commitment in our employment practices, through our Code of Conduct, our Equal Employment Opportunity Employer Policy, and our Anti-Harassment Policy, as well as through our policies on safety and security for our employees.
The IRA 2022 contains hundreds of billions in incentives for the development of renewable energy, clean hydrogen, clean fuels, electric vehicles and supporting infrastructure and carbon capture and sequestration, amongst other provisions.
The IRA 2022 contains hundreds of billions of dollars in incentives for the development of renewable energy, clean hydrogen, clean fuels, electric vehicles and supporting infrastructure and carbon capture and sequestration, amongst other provisions.
Our Water Treatment team works closely with our Chemical Technologies service line as well as our water monitoring, reuse and recycling teams within our Water Services and Water Infrastructure segments to advise our customers on the best economic and operational solutions to manage their water quality and chemical solutions needs. ​ Oilfield Chemicals Geographic Areas of Operation We provide Oilfield Chemicals services in most of the major unconventional shale plays in the continental U.S.
Our Water Treatment team works closely with our Chemical Technologies service line as well as our water monitoring, reuse and recycling teams within our Water Services and Water Infrastructure segments to advise our customers on the best economic and operational solutions to manage their water quality and chemical solutions needs. ​ Chemical Technologies Geographic Areas of Operation We provide Chemical Technologies services in most of the major unconventional shale plays in the continental U.S.
In the chart below, a “ ✓ ” indicates that we offer the service line in the indicated geographic region. ​ ​ ​ ​ ​ ​ ​ ​ ​ Geographic Region ​ ​ ​ ​ ​ Marcellus / ​ ​ Services Provided Permian MidCon Bakken Eagle Ford Utica Haynesville Rockies Chemical Manufacturing ✓ — — — — ✓ — Completion Chemicals ✓ ✓ ✓ ✓ — ✓ ✓ Water Treatment ✓ ✓ ✓ ✓ — ✓ ✓ ​ Oilfield Chemicals Customers Our Oilfield Chemicals customers primarily include pressure pumpers, and major integrated and independent U.S. and international oil and gas producers.
In the chart below, a “ ✓ ” indicates that we offer the service line in the indicated geographic region. ​ ​ ​ ​ ​ ​ ​ ​ ​ Geographic Region ​ ​ ​ ​ ​ Marcellus / ​ ​ Services Provided Permian MidCon Bakken Eagle Ford Utica Haynesville Rockies Chemical Manufacturing ✓ — — — — ✓ — Completion Chemicals ✓ ✓ ✓ ✓ ✓ ✓ ✓ Water Treatment ✓ ✓ ✓ ✓ — ✓ ✓ ​ Chemical Technologies Customers Our Chemical Technologies customers primarily include pressure pumpers, and major integrated and independent U.S. and international oil and gas producers.
Our Chemical Technologies service line provides technical solutions, products and expertise related to chemical applications in the energy industry. We develop solutions, manage logistics and provide a full suite of chemicals used in hydraulic fracturing, stimulation, cementing, pipelines and well completions for customers ranging from major integrated and independent oil and gas producers to pressure pumpers.
Our Completion Chemicals service line provides technical solutions, products and expertise related to chemical applications in the energy industry. We develop solutions, manage logistics and provide a full suite of chemicals used in hydraulic fracturing, stimulation, cementing, pipelines and well completions for customers ranging from major integrated and independent oil and gas producers to pressure pumpers.
For example, our growing operations in New Mexico are subject to the risk of decreased access to water in New Mexico as a result of Texas v. New Mexico and Colorado .
For example, our operations in New Mexico are subject to the risk of decreased access to water in New Mexico as a result of Texas v. New Mexico and Colorado.
There have been recent increases in the cost of capital and rising interest rates, which may affect future borrowings and impact the financial benefit we may receive.
There have been recent increases in the cost of capital and interest rates, which may affect future borrowings and impact the financial benefit we may receive.
This trend has shifted many of our customers’ operational focus away from traditional small, local water service providers, to larger regional and national players like us, who have the expertise, technology and scale to provide high-quality, reliable, comprehensive and environmentally responsible water-management solutions for the full extent of the water lifecycle.
This trend has shifted many of our customers’ operational focus away from legacy small, local water service providers, to larger regional and national players like us, who have the expertise, technology and scale to provide high-quality, reliable, comprehensive and environmentally responsible water-management solutions for the full extent of the water lifecycle.
Increasing investor attention to ESG matters may impact our business. Companies across all industries are facing increasing scrutiny from stakeholders related to their ESG practices.
Increasing investor attention to ESG matters may impact our business. Companies across all industries are facing increased scrutiny from stakeholders related to their ESG practices.
Our dividend policy is based upon our directors’ current assessment of our business and the environment in which we operate, and that assessment could change based on business developments (which could, for example, increase our need for capital expenditures) or new growth opportunities. All future dividend payments are subject to quarterly review and approval by our board of directors.
Our dividend policy is based upon our directors’ current assessment of our business and the environment in which we operate, and that assessment could change based on business development opportunities (which could, for example, increase our need for capital expenditures) or new growth opportunities. All future dividend payments are subject to quarterly review and approval by our board of directors.
We sell chemicals and provide services primarily to leading E&P operators and pressure-pumping service companies in the U.S. We also provide customized water treatment and flow assurance solutions to our customers throughout the lifecycle of a well. Oilfield Chemicals Service Lines Our Oilfield Chemicals segment is made up of the following service lines: ● Chemical Manufacturing.
We sell chemicals and provide services primarily to leading E&P operators and pressure-pumping service companies in the U.S. We also provide customized water treatment and flow assurance solutions to our customers throughout the lifecycle of a well. Chemical Technologies Service Lines Our Chemical Technologies segment is made up of the following service lines: ● Chemical Manufacturing.
The threat of climate change continues to attract considerable attention in the U.S. and foreign countries. As a result, numerous proposals have been made and are likely to continue to be made at the international, national, regional and state levels of government to monitor and limit emissions of GHGs as well as to eliminate such future emissions.
The issue of climate change continues to attract considerable attention in the U.S. and foreign countries. As a result, numerous proposals have been made and are likely to continue to be made at the international, national, regional and state levels of government to monitor and limit emissions of GHGs as well as to eliminate such future emissions.
We also believe our expertise in water management provides a competitive advantage that allows us to assess and optimize our chemical solutions in a unique manner. Significant Customers There were no customers that accounted for 10% or more of our consolidated revenues for the year ended December 31, 2022.
We also believe our expertise in water management provides a competitive advantage that allows us to assess and optimize our chemical solutions in a unique manner. Significant Customers There were no customers that accounted for 10% or more of our consolidated revenues for the year ended December 31, 2023.
Additionally, destructive forms of protest and opposition by extremists and other disruptions, including acts of sabotage or eco-terrorism, against oil and natural gas development and production activities could potentially result in personal injury to persons, damages to property, natural resources or the environment, or lead to extended interruptions of our or our customers’ operations.
Additionally, destructive forms of protest and opposition by extremists, including acts of sabotage or eco-terrorism, against oil and natural gas development and production activities could potentially result in personal injury to persons, damages to property, natural resources or the environment, or lead to extended interruptions of our or our customers’ operations.
Historically, we have experienced periods of low demand for our services and have incurred operating losses, including in 2021 and 2020. In the future, we may not be able to reduce our costs, increase our revenues or reduce our debt service obligations sufficient to achieve or maintain profitability and generate positive operating income.
Historically, we have experienced periods of low demand for our services and have incurred operating losses, including during 2021. In the future, we may not be able to reduce our costs, increase our revenues or reduce our debt service obligations sufficient to achieve or maintain profitability and generate positive operating income.
In addition, certain cyber incidents, such as surveillance, may remain undetected for an extended period. Our systems for protecting against cybersecurity risks may not be sufficient. As cyber incidents continue to evolve, we may be required to expend additional resources to continue to modify or enhance our protective measures or to investigate and remediate any vulnerability to cyber incidents.
In addition, certain cyber incidents may remain undetected for an extended period. Our systems for protecting against cybersecurity risks may not be sufficient. As cyber incidents continue to evolve, we may be required to expend additional resources to continue to modify or enhance our protective measures or to investigate and remediate any vulnerability to cyber incidents.
For example, we intend to limit the number of unitholders of SES Holdings and Legacy Owner Holdco, and the SES Holdings LLC Agreement provides for limitations on the ability of unitholders of SES Holdings to transfer their SES Holdings LLC Units and will provide us, as managing member of SES Holdings, 57 Table of Contents with the right to impose restrictions (in addition to those already in place) on the ability of unitholders of SES Holdings to exchange their SES Holdings LLC Units pursuant to the SES Holdings LLC Agreement to the extent we believe it is necessary to ensure that SES Holdings will continue to be treated as a partnership for U.S. federal income tax purposes.
For example, we intend to limit the number of unitholders of SES Holdings and Legacy Owner Holdco, and the SES Holdings LLC Agreement provides for limitations on the ability of unitholders of SES Holdings to transfer their SES Holdings LLC Units and will provide us, as managing member of SES Holdings, with the right to impose restrictions (in addition to those already in place) on the ability of unitholders of SES Holdings to exchange their SES Holdings LLC Units pursuant to the SES Holdings LLC Agreement to the extent we believe it is necessary to ensure that SES Holdings will continue to be treated as a partnership for U.S. federal income tax purposes.
In the event that an ownership change has occurred, or were to occur, utilization of the relevant corporation’s NOLs would be subject to an annual limitation under Section 382 of the Code, determined by multiplying the value of the relevant corporation’s stock at the time of the ownership change by the applicable long-term tax-exempt rate as defined in Section 382 of the Code, and potentially increased for certain gains recognized within five years after the ownership change to the extent of certain net built-in gains at the time of the ownership change.
In the event that an ownership change has occurred, or were to occur, utilization of the relevant corporation’s NOLs would be subject to an annual limitation under Section 382 of the 57 Table of Contents Code, determined by multiplying the value of the relevant corporation’s stock at the time of the ownership change by the applicable long-term tax-exempt rate as defined in Section 382 of the Code, and potentially increased for certain gains recognized within five years after the ownership change to the extent of certain net built-in gains at the time of the ownership change.
Ultimately, our customers are required to manage more than 22 billion barrels of produced water annually, and we are focused on how we can create the most beneficial resource out of what has historically been viewed solely as a waste stream.
Ultimately, our customers are required to manage more than 24 billion barrels of produced water annually, and we are focused on how we can create the most beneficial resource out of what has historically been viewed solely as a waste stream.
Debt service requirements could represent a significant burden on our results of operations and financial condition and the issuance of additional equity or convertible securities could be dilutive to our existing stockholders. Furthermore, we may not be able to obtain additional financing on satisfactory terms.
Debt service requirements could represent a significant burden on our results of operations and financial condition and the issuance of additional equity or convertible securities could be dilutive to our existing stockholders. Furthermore, we may not be able to obtain additional financing on satisfactory terms, or at all.
In addition, Legacy Owner Holdco, Crestview Partners II SES Investment B, LLC and the SCF Group (as defined below) (collectively, the “Registration Rights Holders”), who collectively own in excess of 30 million shares of our common stock, are party to a registration rights agreement which provides, among other things, for parties to that agreement to initiate or participate in an underwritten public offering of all or a portion of their shares.
In addition, Legacy Owner Holdco, Crestview Partners II SES Investment B, LLC and the SCF Group (as defined below) (collectively, the “Registration Rights Holders”), who collectively own in excess of 20 million shares of our common stock, are party to a registration rights agreement that provides, among other things, for parties to that agreement to initiate or participate in an underwritten public offering of all or a portion of their shares.
Our Oilfield Chemicals segment, develops, manufactures, manages logistics and delivers a full suite of completion chemical products utilized in hydraulic fracturing, stimulation, cementing and related well completion and production processes. Our Chemical Technologies product lines support the fluid systems utilized primarily in the completion and development of unconventional resources.
Our Chemical Technologies segment, develops, manufactures, manages logistics and delivers a full suite of completion chemical products utilized in hydraulic fracturing, stimulation, cementing and related well completion and production processes. Our Chemical Technologies product lines support the fluid systems utilized primarily in the completion and development of unconventional resources.
As a result, the water infrastructure competitive landscape is highly fragmented and our main competitors, aside from E&P companies, can often be private water midstream companies and smaller water service providers that focus on a more limited geographic area or service offering.
As a result, the water infrastructure competitive landscape is highly fragmented and our main competitors, aside from E&P companies, can often be private water midstream companies that focus on a more limited geographic area or service offering.
The fair value of goodwill is based on estimates and assumptions applied by us such as revenue growth rates, operating margins, weighted- average costs of capital, market multiples, and future market conditions and as affected by numerous factors, including the general economic environment and levels of exploration and production activity of oil and gas companies, our financial performance and trends, and our strategies and business plans, among others.
The fair value of goodwill is based on estimates and assumptions applied by us such as revenue growth rates, operating margins, weighted-average costs of capital, market multiples, and future market conditions and as affected by numerous factors, including the general economic environment and levels of exploration and production activity of oil 59 Table of Contents and gas companies, our financial performance and trends, and our strategies and business plans, among others.
As a company, we continue to provide access to water as demanded by our customers and have significantly increased our focus on the recycling and reuse of produced water, as well as industrial water sources, to meet the industry’s water demand and align our operations with the goals of our customers.
As a company, we continue to provide access to water as demanded by our customers and have significantly increased our focus on the recycling and reuse of produced water, as well as assessing other industrial water sources, to meet the industry’s water demand and align our operations with the goals of our customers.
Additionally, our AquaView ® sensors give timely information about pH levels, water quality, temperature and flow rate to assure there is sufficient water at the right quality levels required by our customers and provide alarm notifications to prevent problems during the well completion.
Additionally, our AquaView ® sensors give timely information about pH levels, water quality, temperature and flow rate to ensure there is sufficient water at the right quality levels required by our customers and provide alarm notifications to prevent problems during the well completion.
Although we monitor the 25 Table of Contents injection process of our wells, any leakage from the subsurface portions of the injection wells could cause degradation of fresh groundwater resources, potentially resulting in suspension of our UIC permit, issuance of fines and penalties from governmental agencies, incurrence of expenditures for remediation of the affected resource and imposition of liability by third-parties claiming damages for alternative water supplies, property and personal injuries.
Although we monitor the injection process of our wells, any leakage from the subsurface portions of the injection wells could cause degradation of fresh groundwater resources, potentially resulting in suspension of our UIC permit, issuance of fines and penalties from governmental agencies, incurrence of expenditures for remediation of the affected resource and imposition of liability by third parties claiming damages for alternative water supplies, property and personal injuries.
In addition, the SEC has proposed a rule that would require registrants to make certain climate-related disclosures in registration statements and annual reports, including their governance of climate-related risks, material climate-related impacts on strategy, outlook and business model, climate risk management, Scope 1 and 2 GHG emissions and Scope 3 GHG emissions under certain circumstances, and if the registrant has set them, climate-related targets and goals.
In addition, the SEC has proposed a rule that would require registrants to make certain climate-related disclosures in registration statements and annual reports, including their governance of climate-related risks, material climate-related impacts on strategy, outlook and business model, climate risk management, Scope 1 and 2 GHG emissions and Scope 3 GHG emissions under certain circumstances, and if the registrant has set them, climate-related 29 Table of Contents targets and goals.
We endeavor to allocate potential liabilities and risks between the parties in the MSAs. Generally, under our MSAs, including those relating to our services, we assume responsibility for, including control and removal of, pollution or contamination which originates above the surface and originates from our equipment or services.
We endeavor to allocate potential liabilities and risks between the parties in the MSAs. Generally, under our MSAs, including those relating to our services, we assume responsibility for, including control and removal of, pollution or contamination that originates above the surface and originates from our equipment or services.
Furthermore, in response to seismic events in the past several years near underground disposal wells used for the disposal by injection of produced water resulting from oil and gas activities, federal and some state agencies are investigating whether such wells have caused increased seismic activity, and some states have restricted, suspended or shut down the use of such disposal wells in certain areas prone to increased seismic activity.
Furthermore, in response to seismic events in the past several years near underground disposal wells used for the disposal by injection of produced water resulting from oil and gas activities, federal and some state agencies are 25 Table of Contents investigating whether such wells have caused increased seismic activity, and some states have restricted, suspended or shut down the use of such disposal wells in certain areas prone to increased seismic activity.
Water Infrastructure operations are provided through or enabled by a network of permanent pipeline infrastructure, semi-permanent pipeline infrastructure, water recycling facilities, earthen pits, water sources and SWDs. Water Infrastructure Service Lines Our Water Infrastructure segment is divided into the following service lines: ● Water Sourcing.
Water Infrastructure operations are provided through or enabled by a network of permanent pipeline infrastructure, semi-permanent pipeline infrastructure, water recycling facilities, earthen pits, water sources and SWDs. Water Infrastructure Service Lines Our Water Infrastructure segment is divided into the following service lines: ● Water Recycling & Reuse.
The risk of such adverse development could reduce our ability to obtain or maintain access to water for our customers’ operations in the vicinity of our assets in New Mexico and have a corresponding adverse effect on our financial condition, results of operations and cash flows. ​ To the extent that the types of basin-specific events discussed above continue to arise or worsen, our operations and those of our customers may be materially and adversely affected. ​ Restrictions on the ability to procure water or changes in water sourcing or disposal requirements could decrease the demand for our water-related services.
The risk of any adverse development could reduce our ability to obtain or maintain access to water for our customers’ operations in the vicinity of our assets in New Mexico and have a corresponding adverse effect on our financial condition, results of operations and cash flows. ​ To the extent that the types of basin-specific events discussed above continue to arise or worsen, our operations and those of our customers may be materially and adversely affected. ​ Restrictions on the ability to procure water or changes in water sourcing or disposal requirements could add costs or decrease the demand for our water-related services.
The “Applicable Employee Health and Safety Fee Adjustment" is based on Select LLC’s ability to (i) remain above the Employee Health and Safety Threshold and (ii) reach the Employee Health and Safety Target, both metrics which are measured by the total recordable incident rates of employees with respect to SES Holdings and its Subsidiaries. ​ If we are unable to remain in compliance with the covenants of our Sustainability-Linked Credit Facility, then the lenders may declare all amounts outstanding under the Sustainability-Linked Credit Facility to be immediately due and payable.
The “Applicable Employee Health and Safety Fee Adjustment” is based on Select LLC’s ability to (i) remain above the Employee Health and Safety Threshold and (ii) reach the Employee Health and Safety Target, both metrics that are measured by the total recordable incident rates of employees with respect to SES Holdings and its Subsidiaries. ​ If we are unable to remain in compliance with the covenants of our Sustainability-Linked Credit Facility, then the lenders may declare all amounts outstanding under the Sustainability-Linked Credit Facility to be immediately due and payable.
We have identified the following four priorities as part of our comprehensive corporate responsibility initiative: Environmental Consciousness, Health and Safety, Human Capital Management and Community Outreach. As a service company, we compete with other service providers based on various factors, including safety and operational performance, technological innovation, process efficiencies and reputational awareness.
As a service company, we compete with other service providers based on various factors, including safety and operational performance, technological innovation, process 10 Table of Contents efficiencies and reputational awareness. We have identified the following four priorities as part of our comprehensive corporate responsibility initiative: Environmental Consciousness, Health and Safety, Human Capital Management and Community Outreach.
For 26 Table of Contents example, the EPA has asserted regulatory authority pursuant to the SDWA UIC program over hydraulic fracturing activities involving the use of diesel and issued guidance covering such activities, as well as published an Advanced Notice of Proposed Rulemaking regarding Toxic Substances Control Act (“TSCA”) reporting of the chemical substances and mixtures used in hydraulic fracturing.
For example, the EPA has asserted regulatory authority pursuant to the SDWA UIC program over hydraulic fracturing activities involving the use of diesel and issued guidance covering such activities, as well as published an Advanced Notice of Proposed Rulemaking regarding Toxic Substances Control Act (“TSCA”) reporting of the chemical substances and mixtures used in hydraulic fracturing.
Relatedly, the U.S. and European Union jointly announced at COP26 the launch of a Global Methane Pledge, an initiative which over 100 counties joined, committing to a collective goal of reducing global methane emissions by at least 30 percent from 2020 levels by 2030, including “all feasible reductions” in the energy sector.
Relatedly, the U.S. and European Union 28 Table of Contents jointly announced at COP26 the launch of a Global Methane Pledge, an initiative which over 100 counties joined, committing to a collective goal of reducing global methane emissions by at least 30 percent from 2020 levels by 2030, including “all feasible reductions” in the energy sector.
“Certain Relationships and Related Transactions, and Director Independence.” If SES Holdings were to become a publicly-traded partnership taxable as a corporation for U.S. federal income tax purposes, we and SES Holdings might be subject to potentially significant tax inefficiencies, and we would not be able to recover payments previously made by us under the Tax Receivable Agreements even if the corresponding tax benefits were subsequently determined to have been unavailable due to such status.
“Certain Relationships and Related Transactions, and Director Independence.” 56 Table of Contents If SES Holdings were to become a publicly-traded partnership taxable as a corporation for U.S. federal income tax purposes, we and SES Holdings might be subject to potentially significant tax inefficiencies, and we would not be able to recover payments previously made by us under the Tax Receivable Agreements even if the corresponding tax benefits were subsequently determined to have been unavailable due to such status.
In support of industry-wide efforts to reduce the demand for fresh water for hydraulic fracturing, we have a dedicated team of specialists focused on developing and deploying innovative water treatment and reuse services for our customers. We strive to fully understand local water issues, and to develop sustainable solutions with a commitment to conservation.
In support of industry-wide efforts to reduce the demand for fresh water for hydraulic fracturing, we have a dedicated team of specialists focused on developing and deploying innovative water treatment and reuse services for our customers. We 14 Table of Contents strive to fully understand local water issues, and to develop sustainable solutions with a commitment to conservation.
There can be no assurance that confidentiality and other agreements into which we enter and have entered will not be breached, that these agreements will provide meaningful protection for our trade secrets or proprietary know-how, or that adequate remedies will be available in the event of an unauthorized use or disclosure of such trade secrets and know-how.
There can be no assurance that confidentiality and other agreements into which we enter and have entered will not be breached, that these agreements will provide meaningful protection for our trade secrets or 31 Table of Contents proprietary know-how, or that adequate remedies will be available in the event of an unauthorized use or disclosure of such trade secrets and know-how.
For instance, some states require E&P companies to report certain information regarding the water they use for hydraulic fracturing and to monitor the quality of groundwater surrounding some wells stimulated by hydraulic fracturing. Any such decrease in the availability of water, or demand for water services, could adversely affect our business and results of operations.
For instance, some states require E&P companies to report certain information regarding the water they use for hydraulic fracturing and to 37 Table of Contents monitor the quality of groundwater surrounding some wells stimulated by hydraulic fracturing. Any such decrease in the availability of water, or demand for water services, could adversely affect our business and results of operations.
Significant mechanical, logistical, environmental and safety issues related to the sourcing, transfer, storage and treatment of such large volumes of water have increased both the total cost of water and related services and the complexity and importance of the services required.
Significant mechanical, logistical, environmental and safety issues related to the sourcing, transfer, storage and treatment of such large volumes of water and the rate of delivery have increased both the total cost of water and related services and the complexity and importance of the services required.
Certain large midstream companies offer some water-oriented and infrastructure services, though these are generally ancillary to their core businesses of gathering and transporting oil and gas volumes. There are also public water-midstream focused competitors. Additionally, certain of our E&P customers have invested in water infrastructure for their own operations.
Certain large midstream companies offer some water-oriented and infrastructure services, though these are generally ancillary to their core businesses of gathering and transporting oil and gas volumes. There are also public water-midstream-focused competitors. Additionally, certain of our E&P customers have invested in water infrastructure 20 Table of Contents for their own operations.
This can include actions such as raising a pump’s RPM to maintain desired flow rates, adjusting valves in a proportioning system to maintain the desired water quality in real time while blending fresh, brackish, produced or otherwise impaired water sources or shutting down the system and valves completely in the event of a detected failure.
This can include actions such as raising a pump’s RPM to maintain desired flow rates, adjusting valves in a proportioning system to maintain the desired water quality in real time while blending fresh, brackish, produced or otherwise impaired water sources or shutting down the system and valves completely in the event of a detected loss of pressure.
Oilfield Chemicals Competition The Oilfield Chemicals business is highly competitive. Our competitors include both large manufacturers and companies that are pure distributors of commodities and specialty chemicals. We believe that the principal competitive factors in the markets we serve are technical expertise, manufacturing capacity, workforce competency, efficiency, safety record, reputation, experience and price.
Chemical Technologies Competition The Chemical Technologies business is highly competitive. Our competitors include both large manufacturers and companies that are pure distributors of commodities and specialty chemicals. We believe that the principal competitive factors in the markets we serve are technical expertise, manufacturing capacity, workforce competency, efficiency, safety record, reputation, experience and price.
Sales and Marketing We direct our sales activities through a network of sales representatives and business development personnel, which allows us to support our customers at both the corporate and field level. Our sales representatives work closely 22 Table of Contents with local operations managers to target potential opportunities through strategic focus and regular customer interaction.
Sales and Marketing We direct our sales activities through a network of sales representatives and business development personnel, which allows us to support our customers at both the field and corporate level. Our sales representatives work closely with local operations managers to target potential opportunities through strategic focus and regular customer interaction.
Competition for acquisitions may increase the cost of, or cause us to refrain from, completing acquisitions. In addition, we may not have sufficient capital resources to complete any additional acquisitions. We may incur substantial indebtedness to finance future acquisitions and also may issue equity, debt or convertible securities in 59 Table of Contents connection with such acquisitions.
Competition for acquisitions may increase the cost of, or cause us to refrain from, completing acquisitions. In addition, we may not have sufficient capital resources to complete any additional acquisitions. We may incur substantial indebtedness to finance future acquisitions and also may issue equity, debt or convertible securities in connection with such acquisitions.
We maintain property, business interruption, products liability and casualty insurance policies which we believe are in accordance with customary industry practices, as well as insurance policies covering other types of risks, including pollution legal liability insurance, but we are not fully insured against all potential hazards and risks incident to our business.
We maintain property, business interruption, products liability, cybersecurity and casualty insurance policies that we believe are in accordance with customary industry practices, as well as insurance policies covering other types of risks, including pollution legal liability insurance, but we are not fully insured against all potential hazards and risks incident to our business.
Depending on the requirements of a project, layflat hose may run from a water source directly to a containment area, such as an above-ground pit or storage tank, or to a wellsite. Water can also be transferred from one containment area to another as part of managing a larger supply network.
Depending on the requirements of a project, layflat hose may run from a water source directly to a containment area, such as an above-ground pit or storage tank, or to a wellsite. Water can also be transferred from one containment 16 Table of Contents area to another as part of managing a larger supply network.
In addition, the actual integration may result in additional and unforeseen expenses, which could reduce the anticipated benefits of the Breakwater acquisition and such other acquisitions. It is possible that the integration process could result in the loss of key employees, as well as the disruption of our ongoing businesses or inconsistencies in our standards, controls, procedures and policies.
In addition, the actual integration may result in additional and unforeseen expenses, which could reduce the anticipated benefits of such acquisitions. It is possible that the integration process could result in the loss of key employees, as well as the disruption of our ongoing businesses or inconsistencies in our standards, controls, procedures and policies.
Under such circumstances, we may incur further operating losses and experience negative operating cash flow. We may be subject to claims for personal injury and property damage, which could materially adversely affect our financial condition and results of operations. We operate with most of our customers under MSAs.
Under such circumstances, we may incur further operating losses and experience negative operating cash flow. 38 Table of Contents We may be subject to claims for personal injury and property damage, which could materially adversely affect our financial condition and results of operations. We operate with most of our customers under MSAs.
Moreover, actual costs could exceed our current expectations, as a result of, among other things, federal, state or local government regulatory action, increased costs charged by service 47 Table of Contents providers that assist in closing wastewater disposal facilities and additional environmental remediation requirements.
Moreover, actual costs could exceed our current expectations, as a result of, among other things, federal, state or local government regulatory action, increased costs charged by service providers that assist in closing wastewater disposal facilities and additional environmental remediation requirements.
These climatic developments have the potential to cause physical damage to our assets and thus could have an adverse effect on our exploration and production operations. Additionally, changing meteorological conditions, particularly temperature, may result in changes to the amount, timing, or location of demand for energy or our production.
These climatic developments have the potential to cause physical damage to our assets and thus could have an adverse effect on our operations. Additionally, changing meteorological conditions, particularly temperature, may result in changes to the amount, timing, or location of demand for energy or our solutions.
As a 39 Table of Contents result, we may incur substantial losses, which could materially and adversely affect our financial condition and results of operations. We operate in a highly competitive industry, which may intensify as our competitors expand their operations, thereby causing us to lose market share, and which could negatively affect our ability to expand our operations.
As a result, we may incur substantial losses, which could materially and adversely affect our financial condition and results of operations. We operate in a highly competitive industry, which may intensify as our competitors expand their operations, thereby causing us to lose market share, and which could negatively affect our ability to expand our operations.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeHowever, we continue to evaluate the purchase or lease of additional properties or the sale or consolidation of our properties, as our business requires. ​ The following table shows our active leased and owned properties categorized by segment as of December 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Region ​ Water Services ​ Water Infrastructure ​ Oilfield Chemicals ​ Corporate & Other ​ Total ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Leased ​ 58 ​ 20 ​ 3 ​ 4 ​ 85 Owned ​ 41 ​ 22 ​ 6 ​ — ​ 69 ​ ​ 99 ​ 42 ​ 9 ​ 4 ​ 154 ​ ​ ​ ​
Biggest changeHowever, we continue to evaluate the purchase or lease of additional properties or the sale or consolidation of our properties, as our business requires. ​ The following table shows our active leased and owned properties categorized by segment as of December 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Region ​ Water Services ​ Water Infrastructure ​ Chemical Technologies ​ Corporate & Other ​ Total ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Leased ​ 59 ​ 16 ​ 4 ​ 3 ​ 82 Owned ​ 36 ​ 28 ​ 5 ​ — ​ 69 ​ ​ 95 ​ 44 ​ 9 ​ 3 ​ 151 ​ ​ ​ ​ 61 Table of Contents
In connection with our Oilfield Chemicals segment, we own two primary manufacturing facilities in Texas, and we lease three primary regional distribution centers through which we provide products to our customers in all major U.S. shale basins.
In connection with our Chemical Technologies segment, we own two primary manufacturing facilities in Texas, and we lease three primary regional distribution centers through which we provide products to our customers in all major U.S. shale basins.
Our leased properties are subject to various lease terms and expirations. ​ 60 Table of Contents We believe all the properties that we currently occupy are suitable for their intended uses. We believe that our current facilities are sufficient to conduct our operations.
Our leased properties are subject to various lease terms and expirations. ​ We believe all the properties that we currently occupy are suitable for their intended uses. We believe that our current facilities are sufficient to conduct our operations.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAs of December 31, 2022, the maximum number of shares of the Company’s Class A common stock available for future issuance under the 2017 Plan is 55,769 and under the 2018 Plan is 14,736. ​ ​ Issuer Purchases of Equity Securities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Approximate Dollar Value of ​ ​ Total Number of ​ Average Price ​ Shares that May Yet be Purchased Period ​ Shares Purchased ​ Paid per Share (1) ​ Under the Plans or Programs (2) October 1 through October 31, 2022 ​ — ​ $ — ​ $ 8,596,156 November 1 through November 31, 2022 ​ 27,564 ​ $ 8.88 ​ $ 8,596,156 December 1 through December 31, 2022 ​ — ​ $ — ​ $ 8,596,156 ​ (1) The average price paid per share includes commissions.
Biggest changeAs of December 31, 2023, the maximum number of shares of the Company’s Class A common stock available for future issuance under the 2017 Plan is 55,769 and under the 2018 Plan is 14,736.
The shares remaining available for issuance under the 62 Table of Contents Assumed Plans were converted into shares of the Company’s Class A common stock at a conversion rate of one Nuverra share to 0.2551 shares of the Company’s Class A common stock such that at the time of the Nuverra Acquisition an aggregate of 131,110 shares of the Company’s Class A common stock was available for issuance with respect to assumed awards and future awards under the 2017 Plan and an aggregate of 24,984 shares of the Company’s Class A common stock was available for issuance with respect to assumed awards and future awards under the 2018 Plan.
The shares remaining available for issuance under the Assumed Plans were converted into shares of the Company’s Class A common stock at a conversion rate of one Nuverra share to 0.2551 shares of the Company’s Class A common stock such that at the time of the Nuverra acquisition an aggregate of 131,110 shares of the Company’s Class A common stock was available for issuance with respect to assumed awards and future awards under the 2017 Plan and an aggregate of 24,984 shares of the Company’s Class A common stock was available for issuance with respect to assumed awards and future awards under the 2018 Plan.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our Class A common stock is listed on the New York Stock Exchange (the “NYSE”) under the ticker symbol “WTTR.” As of February 20, 2023, there were 189 stockholders of record of our Class A common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our Class A common stock is listed on the New York Stock Exchange (the “NYSE”) under the ticker symbol “WTTR.” As of February 19, 2024, there were 189 stockholders of record of our Class A common stock.
The Company registered the securities issuable under the Assumed Plans by filing a registration statement on Form S-8 with the Securities and Exchange Commission on February 23, 2022.
The Company registered the securities issuable under the Assumed Plans by filing a registration statement on Form S-8 with the Securities and Exchange 63 Table of Contents Commission on February 23, 2022.
Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights(1) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))(2) (a) (b) (c) Equity compensation plans approved by security holders 1,666,872 $17.10 2,894,308 Equity compensation plans not approved by security holders — (3) — 70,505 (4) Total 1,666,872 $17.10 2,964,813 ​ (1) Only stock options have an exercise price.
Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights(1) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))(2) (a) (b) (c) Equity compensation plans approved by security holders 1,654,952 $17.01 1,873,435 Equity compensation plans not approved by security holders — (3) — 70,505 (4) Total 1,654,952 $17.01 1,943,940 ​ (1) Only stock options have an exercise price.
The Assumed Plans were assumed in our acquisition of Nuverra, were not approved by our stockholders, and may only be used to grant awards to legacy Nuverra employees and service providers. See “Note 12 — Equity-Based Compensation” for a description of our equity compensation plans.
The Assumed Plans were assumed in our acquisition of Nuverra, were not approved by our stockholders, and may only be used to grant awards to legacy Nuverra employees and service providers.
Our future dividend policy is within the discretion of our board of directors, and all future dividend payments are subject to quarterly review and approval by our board of directors, and will depend upon then-existing conditions, including our results of operations and financial condition, capital requirements, business prospects, statutory and contractual restrictions on our ability to pay dividends, including restrictions contained in our Sustainability-Linked Credit Facility and other factors our board of directors may deem relevant. 61 Table of Contents Securities Authorized for Issuance under Equity Compensation Plans The Company maintains the Select Energy Services, Inc. 2016 Equity Incentive Plan (as amended, the “2016 Plan”), the Select Energy Services, Inc.
Our future dividend policy is within the discretion of our board of directors, and all future dividend payments are subject to quarterly review and approval by our board of directors, and will depend upon then-existing conditions, including our results of operations and financial condition, capital requirements, business prospects, statutory and contractual restrictions on our ability to pay dividends, including restrictions contained in our Sustainability-Linked Credit Facility and other factors our board of directors may deem relevant.
The following table provides information about our Class A common stock that may be issued under our equity compensation plans as of December 31, 2022.
See “Note 12 — Equity-Based Compensation” for a description of our equity compensation plans. 62 Table of Contents The following table provides information about our Class A common stock that may be issued under our equity compensation plans as of December 31, 2023.
A distribution of $0.05 per unit was also approved for those holders of units of SES Holdings, LLC, who also hold an equal number of shares of Class B common stock of the Company, which was subject to the same payment and record dates.
Dividend Policy The Company’s board of directors initiated a dividend program in 2022 under which the Company intends to pay regular quarterly dividends, which commenced with the first payment of a quarterly cash dividend of $0.05 per share of Class A common stock on November 17, 2022 (along with a comparable distribution of $0.05 per unit for holders of units of SES Holdings, LLC who also hold an equal number of shares of Class B common stock).
Removed
Dividend Policy On September 7, 2022, the Company announced that our board of directors approved the initiation of a dividend program under which the Company intends to pay regular quarterly dividends. Prior to this announcement, w e had not paid dividends to holders of our Class A common stock.
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The Company paid quarterly dividends at the same rate through the third quarter of 2023, then the board of directors increased the quarterly dividend paid on November 17, 2023 to $0.06 per share of Class A common stock (along with a comparable distribution of $0.06 per unit to the unitholders of SES Holdings, LLC) .
Removed
On October 27, 2022, our board of directors declared a quarterly cash dividend of $0.05 per share of Class A common stock that was paid on November 17, 2022 to shareholders of record as of the close of business on November 7, 2022.
Added
Securities Authorized for Issuance under Equity Compensation Plans The Company maintains the Select Energy Services, Inc. 2016 Equity Incentive Plan (as amended, the “2016 Plan”), the Select Energy Services, Inc.
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(2) Our board of directors has approved programs permitting the Company to repurchase a portion of its outstanding shares of Class A common stock in the open market not to exceed $25.0 million in the aggregate. 63 Table of Contents ITEM 6. RESERVED 64 Table of Contents
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Issuer Purchases of Equity Securities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Number of Shares ​ Maximum Dollar Value of ​ ​ Total Number of ​ Weighted-Average Price ​ Purchased as Part of Publicly ​ Shares that May Yet be Purchased Period ​ Shares Purchased ​ Paid Per Share (1) ​ Announced Plans or Programs ​ Under the Plans or Programs (2) October 1, 2023 to October 31, 2023 ​ 22,494 ​ ​ $7.49 ​ — ​ ​ $12,463,632 November 1, 2023 to November 30, 2023 ​ 748,521 ​ ​ $7.33 ​ 709,165 ​ ​ $27,323,825 December 1, 2023 to December 31, 2023 ​ 862,596 ​ ​ $7.20 ​ 853,627 ​ ​ $21,177,432 ​ (1) The average price paid per share includes commissions.
Added
(2) On March 21, 2023, our board of directors authorized a share repurchase program of up to $50 million of outstanding shares of Class A common stock. This new authorization was in addition to the $5.1 million remaining outstanding under our previous $25 million authorization, as of March 21, 2023.
Added
On November 8, 2023, our board of directors authorized a share repurchase program of up to $25 million of outstanding shares of Class A common stock. This new authorization was in addition to the $7.5 million remaining outstanding under our previous authorization, as of November 8, 2023.
Added
Repurchases under the share repurchase program may be made at any time or from time to time, without prior notice, in the open market or in privately negotiated transactions at prevailing market prices, or such other means as will comply with applicable state and federal securities laws and regulations, including the provisions of the Securities Exchange Act of 1934, including Rule 10b5-1 and, to the extent practicable or advisable, Rule 10b-18 thereunder, and consistent with the Company’s contractual limitations and other requirements. ​ ​ 64 Table of Contents STOCK PERFORMANCE GRAPH ​ The following performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall the information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, except to the extent that the Company specifically incorporates it by reference into such filing. ​ Set forth below is a line graph comparing the cumulative total stockholder return for the Company’s Class A common stock, based on the market price of the Class A common stock and assuming reinvestment of dividends, with the cumulative total stockholder return of companies with the New York Stock Exchange Market Value Index (the Company’s broad equity market index) and the Philadelphia Stock Exchange Oil Service Sector Index for the period commencing on December 31, 2018 and ending on December 31, 2023.
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The stock price performance included in this graph is not necessarily indicative of future stock price performance. ​ ​ 65 Table of Contents ITEM 6. RESERVED

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

90 edited+53 added−54 removed37 unchanged
Biggest changeThe results of operations for the year ended December 31, 2021 compared to the year ended December 31, 2020 is set forth in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ Change ​ ​ 2022 2021 Dollars Percentage ​ ​ ​ ​ (in thousands) ​ ​ ​ ​ ​ ​ Revenue ​ ​ ​ ​ ​ Water Services ​ $ 799,369 ​ $ 394,075 ​ $ 405,294 102.8 % ​ Water Infrastructure ​ ​ 270,412 ​ ​ 154,789 ​ ​ 115,623 ​ 74.7 % ​ Oilfield Chemicals ​ ​ 317,639 ​ ​ 215,756 ​ 101,883 47.2 % ​ Total revenue ​ 1,387,420 ​ 764,620 ​ 622,800 81.5 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Costs of revenue ​ ​ ​ ​ ​ ​ ​ Water Services ​ 644,097 ​ 346,730 ​ 297,367 85.8 % ​ Water Infrastructure ​ ​ 203,413 ​ ​ 115,887 ​ 87,526 75.5 % ​ Oilfield Chemicals ​ ​ 265,648 ​ ​ 191,115 ​ ​ 74,533 ​ 39.0 % ​ Depreciation and amortization ​ 113,507 ​ 90,028 ​ 23,479 26.1 % ​ Total costs of revenue ​ 1,226,665 ​ 743,760 ​ 482,905 64.9 % ​ Gross profit ​ 160,755 ​ 20,860 ​ 139,895 670.6 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating expenses ​ ​ ​ ​ ​ ​ ​ Selling, general and administrative ​ 118,935 ​ ​ 83,076 ​ 35,859 43.2 % ​ Depreciation and amortization ​ 2,209 ​ ​ 2,430 ​ (221) (9.1) % ​ Lease abandonment costs ​ 449 ​ ​ 894 ​ (445) (49.8) % ​ Total operating expenses ​ 121,593 ​ 86,400 ​ 35,193 40.7 % ​ Income (loss) from operations ​ 39,162 ​ (65,540) ​ 104,702 (159.8) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other income (expense) ​ ​ ​ ​ ​ ​ ​ Gain (loss) on sales of property and equipment and divestitures, net ​ ​ 2,192 ​ ​ (2,068) ​ ​ 4,260 206.0 % ​ Interest expense, net ​ (2,700) ​ ​ (1,711) ​ (989) 57.8 % ​ Foreign currency (loss) gain, net ​ ​ (8) ​ ​ 2 ​ ​ (10) NM ​ ​ Bargain purchase gain ​ ​ 13,352 ​ ​ 18,985 ​ ​ (5,633) NM ​ ​ Other ​ 4,726 ​ ​ 673 ​ 4,053 NM ​ ​ Income (loss) before income tax (expense) benefit ​ 56,724 ​ (49,659) ​ 106,383 214.2 % ​ Income tax (expense) benefit ​ (957) ​ (147) ​ (810) NM ​ ​ Equity in losses of unconsolidated entities ​ ​ (913) ​ (279) ​ (634) NM ​ ​ Net income (loss) ​ $ 54,854 ​ $ (50,085) ​ $ 104,939 209.5 % ​ ​ Revenue Our revenue increased $622.8 million, or 81.5%, to $1.4 billion for the year ended December 31, 2022, compared to $764.6 million for the year ended December 31, 2021.
Biggest changeThe results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021 is set forth in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ Change ​ ​ 2023 2022 Dollars Percentage ​ ​ ​ ​ (in thousands) ​ ​ ​ ​ ​ ​ Revenue ​ ​ ​ ​ ​ Water Services ​ $ 1,032,896 ​ $ 944,497 ​ $ 88,399 9.4 % ​ Water Infrastructure ​ ​ 229,970 ​ ​ 125,284 ​ ​ 104,686 ​ 83.6 % ​ Chemical Technologies ​ ​ 322,487 ​ ​ 317,639 ​ 4,848 1.5 % ​ Total revenue ​ 1,585,353 ​ 1,387,420 ​ 197,933 14.3 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Costs of revenue ​ ​ ​ ​ ​ ​ ​ Water Services ​ 814,609 ​ 764,569 ​ 50,040 6.5 % ​ Water Infrastructure ​ ​ 138,191 ​ ​ 82,941 ​ 55,250 66.6 % ​ Chemical Technologies ​ ​ 262,078 ​ ​ 265,648 ​ ​ (3,570) ​ (1.3) % ​ Depreciation and amortization ​ 138,813 ​ 113,507 ​ 25,306 22.3 % ​ Total costs of revenue ​ 1,353,691 ​ 1,226,665 ​ 127,026 10.4 % ​ Gross profit ​ 231,662 ​ 160,755 ​ 70,907 44.1 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating expenses ​ ​ ​ ​ ​ ​ ​ Selling, general and administrative ​ 155,548 ​ ​ 118,935 ​ 36,613 30.8 % ​ Depreciation and amortization ​ 2,276 ​ ​ 2,209 ​ 67 3.0 % ​ Impairments and abandonments ​ ​ 12,607 ​ ​ — ​ ​ 12,607 ​ NM ​ ​ Lease abandonment costs ​ 42 ​ ​ 449 ​ (407) (90.6) % ​ Total operating expenses ​ 170,473 ​ 121,593 ​ 48,880 40.2 % ​ Income from operations ​ 61,189 ​ 39,162 ​ 22,027 56.2 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other income (expense) ​ ​ ​ ​ ​ ​ ​ (Loss) gain on sales of property and equipment and divestitures, net ​ ​ (210) ​ ​ 2,192 ​ ​ (2,402) 109.6 % ​ Interest expense, net ​ (4,393) ​ ​ (2,700) ​ (1,693) 62.7 % ​ Bargain purchase gain ​ ​ — ​ ​ 13,352 ​ ​ (13,352) NM ​ ​ Tax receivable agreements expense ​ ​ (38,187) ​ ​ — ​ ​ (38,187) NM ​ ​ Other ​ 2,424 ​ ​ 4,718 ​ (2,294) NM ​ ​ Income before income tax benefit (expense) ​ 20,823 ​ 56,724 ​ (35,901) (63.3) % ​ Income tax benefit (expense) ​ 60,196 ​ (957) ​ 61,153 (6390.1) % ​ Equity in losses of unconsolidated entities ​ ​ (1,800) ​ (913) ​ (887) NM ​ ​ Net income ​ $ 79,219 ​ $ 54,854 ​ $ 24,365 44.4 % ​ ​ Revenue Our revenue increased $197.9 million, or 14.3%, to $1.6 billion for the year ended December 31, 2023, compared to $1.4 billion for the year ended December 31, 2022.
Costs of Conducting Our Business The principal expenses involved in conducting our business are labor costs, vehicle and equipment costs (including depreciation, repair, rental and maintenance and leasing costs), raw materials and water sourcing costs and fuel costs. Our fixed costs are relatively low.
Costs of Conducting Our Business The principal expenses involved in conducting our business are labor costs, vehicle and equipment costs (including depreciation, rental, repair and maintenance and leasing costs), raw materials and water sourcing costs and fuel costs. Our fixed costs are relatively low.
Subject to obtaining commitments from existing or new lenders, Select LLC has the option to increase the maximum amount under the senior secured credit facility by $135.0 million during the first three years following the Restatement Date. 77 Table of Contents Our Sustainability-Linked Credit Facility also contains a sustainability adjustments feature that could result in up to a 0.05% increase or reduction to the effective interest rate pursuant to an Applicable Sustainability Margin Adjustment depending on Select LLC’s ability to meet certain sustainability targets and thresholds starting in 2022.
Subject to obtaining commitments from existing or new lenders, Select LLC has the option to increase the maximum amount under the senior secured credit facility by $135.0 million during the first three years following the Restatement Date. 78 Table of Contents Our Sustainability-Linked Credit Facility also contains a sustainability adjustments feature that could result in up to a 0.05% increase or reduction to the effective interest rate pursuant to an Applicable Sustainability Margin Adjustment depending on Select LLC’s ability to meet certain sustainability targets and thresholds starting in 2022.
Goodwill and other intangible assets : The purchase price of acquired businesses is allocated to its identifiable assets and liabilities based upon estimated fair values as of the acquisition date. Goodwill and other intangible assets are initially recorded at their fair values.
Other intangible assets : The purchase price of acquired businesses is allocated to its identifiable assets and liabilities based upon estimated fair values as of the acquisition date. Other intangible assets are initially recorded at their fair values.
Sustainability-Linked Credit Facility On March 17, 2022 (the “Restatement Date”), SES Holdings, a subsidiary of the Company, and Select Energy Services, LLC (“Select LLC”), a wholly-owned subsidiary of SES Holdings, entered into a $270.0 million amended and restated senior secured sustainability-linked revolving credit facility (the “Sustainability-Linked Credit Facility”), by and among SES Holdings, as parent, Select LLC, as borrower and certain of SES Holdings’ subsidiaries, as guarantors, each of the lenders party thereto and Wells Fargo Bank, N.A., as administrative agent, issuing lender and swingline lender (the “Administrative Agent”) (which amended and restated the Prior Credit Agreement dated November 1, 2017).
Sustainability-Linked Credit Facility On March 17, 2022 (the “Restatement Date”), SES Holdings and Select Water Solutions, LLC (“Select LLC”), formerly Select Energy Services, LLC and a wholly-owned subsidiary of SES Holdings, entered into a $270.0 million amended and restated senior secured sustainability-linked revolving credit facility (the “Sustainability-Linked Credit Facility”), by and among SES Holdings, as parent, Select LLC, as borrower and certain of SES Holdings’ subsidiaries, as guarantors, each of the lenders party thereto and Wells Fargo Bank, N.A., as administrative agent, issuing lender and swingline lender (the “Administrative Agent”) (which amended and restated the Prior Credit Agreement dated November 1, 2017).
O ur FluidMatch™ design solutions enable our customers to economically use these alternative sources to optimize their fluid systems by providing water profiling and fluid assessment services working 66 Table of Contents towards real-time. This trend also supports more complex “on-the-fly” solutions that treat, proportion, and blend various streams of water and chemicals at the wellsite.
O ur FluidMatch™ design solutions enable our customers to economically use these alternative sources to optimize their fluid systems by providing water profiling and fluid assessment services working towards real-time. This trend also supports more complex “on-the-fly” solutions that treat, proportion, and blend various streams of water and chemicals at the wellsite.
The Oilfield Chemicals segment provides technical solutions, products and expertise related to chemical applications in the oil and gas industry. We develop, manufacture, manage logistics and provide a full suite of chemicals used in hydraulic fracturing, stimulation, cementing, pipelines and well completions for customers ranging from pressure pumpers to major integrated and independent oil and gas producers.
The Chemical Technologies segment provides technical solutions, products and expertise related to chemical applications in the oil and gas industry. We develop, manufacture, manage logistics and provide a full suite of chemicals used in hydraulic fracturing, stimulation, cementing and well completions for customers ranging from pressure pumpers to major integrated and independent oil and gas producers.
We define Adjusted EBITDA as EBITDA plus/(minus) loss/(income) from discontinued operations, plus any impairment charges or asset write-offs pursuant to generally accepted accounting principles in the U.S.
We define Adjusted EBITDA as EBITDA plus/(minus) loss/(income) from discontinued operations, plus any impairment and abandonment charges or asset write-offs pursuant to generally accepted accounting principles in the U.S.
The adjustments to EBITDA are generally consistent with such adjustments described in our Sustainability-Linked Credit Facility. See “—Comparison of Non-GAAP Financial 69 Table of Contents Measures—EBITDA and Adjusted EBITDA” for more information and a reconciliation of EBITDA and Adjusted EBITDA to net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP.
The adjustments to EBITDA are generally consistent with such adjustments described in our Sustainability-Linked Credit Facility. See “—Comparison of Non-GAAP Financial Measures—EBITDA and Adjusted EBITDA” for more information and a reconciliation of EBITDA and Adjusted EBITDA to net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP.
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 non-cash losses 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, plus/(minus) foreign currency losses/(gains) and plus/(minus) losses/(gains) on unconsolidated entities less bargain purchase gains from business combinations.
We define Adjusted EBITDA, as EBITDA plus/(minus) loss/(income) from discontinued operations, plus any impairment and abandonment charges or asset write-offs pursuant to GAAP, plus non-cash losses 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, plus/(minus) foreign currency losses/(gains), plus/(minus) losses/(gains) on unconsolidated entities and plus tax receivable agreements expense less bargain purchase gains from business combinations.
Goodwill and other intangible assets not subject to amortization are tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired.
Other intangible assets not subject to amortization are tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired.
(“GAAP”), plus non-cash losses 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, plus/(minus) foreign currency losses/(gains) and plus/(minus) losses/(gains) on unconsolidated entities less bargain purchase gains from business combinations.
(“GAAP”), plus non-cash losses 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, plus/(minus) foreign currency losses/(gains), plus/(minus) losses/(gains) on unconsolidated entities and plus tax receivable agreements expense less bargain purchase gains from business combinations.
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. ​ 74 Table of Contents ​ The following table sets forth our reconciliation of EBITDA and Adjusted EBITDA to our net (loss) income, which is the most directly comparable GAAP measure, for the years ended December 31, 2022 and 2021.
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. 75 Table of Contents The following table sets forth our reconciliation of EBITDA and Adjusted EBITDA to our net (loss) income, which is the most directly comparable GAAP measure, for the years ended December 31, 2023 and 2022.
Our primary uses of capital have been to fund current operations, maintain our asset base, implement technological advancements, make capital expenditures to support organic growth, fund acquisitions and minority investments, and when appropriate, repurchase shares of Class A common stock in the open market.
Our primary uses of capital have been to fund current operations, maintain our asset base, implement technological advancements, make capital expenditures to support organic growth, fund acquisitions and minority investments, pay dividends and distributions, and when appropriate, repurchase shares of Class A common stock in the open market.
We also assess incremental changes in revenue compared to incremental changes in direct operating costs and selling, general and administrative expenses across our reportable segments to identify potential areas for improvement, as well as to determine whether segment performance is meeting management’s expectations.
We also assess incremental changes in revenue compared to incremental changes in direct operating costs and selling, general and administrative expenses across our reportable segments to identify 70 Table of Contents potential areas for improvement, as well as to determine whether segment performance is meeting management’s expectations.
We also incur costs to employ personnel to sell and supervise our services and perform maintenance on our assets, which is not directly tied to our level of business activity.
We also incur costs to employ personnel to ensure safe operations, sell and supervise our services and perform maintenance on our assets, which is not directly tied to our level of business activity.
Refer to “Note 6—Leases” for operating lease obligations as of December 31, 2022 and “Note 10—Debt” for an update to our Sustainability-Linked Credit Facility as of December 31, 2022. ​ 76 Table of Contents Cash Flows ​ The following table summarizes our cash flows for the years ended December 31, 2022 and 2021.
Refer to “Note 6—Leases” for operating lease obligations as of December 31, 2023 and “Note 10—Debt” for an update to our Sustainability-Linked Credit Facility as of December 31, 2023. ​ 77 Table of Contents Cash Flows ​ The following table summarizes our cash flows for the years ended December 31, 2023 and 2022.
We incurred vehicle and equipment costs of $266.6 million, $165.1 million and $157.6 million for the years ended December 31, 2022, 2021 and 2020, respectively. We incur raw material costs in manufacturing our chemical products, as well as for water that we source for our customers.
We incurred vehicle and equipment costs of $318.9 million, $266.6 million and $165.1 million for the years ended December 31, 2023, 2022 and 2021, respectively. We incur raw material costs in manufacturing our chemical products, as well as for water that we source for our customers.
While these trends have advanced the most in the Permian Basin to date, they are beginning to emerge in other basins as well. ​ The trend of increased reuse of produced water will require additional chemical treatment solutions, and we have a dedicated team of specialists focused every day on developing and deploying innovative water treatment and reuse services for our customers.
While these trends have advanced the most in the Permian Basin to date, they are emerging in other basins as well. ​ The increased reuse of produced water requires additional chemical treatment solutions. We have a dedicated team of specialists focused every day on developing and deploying innovative water treatment and reuse services for our customers.
All future dividend payments are subject to quarterly review and approval by our board of directors. ​ As of December 31, 2022, cash and cash equivalents totaled $7.3 million and we had approximately $206.1 million of available borrowing capacity under our Sustainability-Linked Credit Facility.
All future dividend payments are subject to quarterly review and approval by our board of directors. ​ As of December 31, 2023, cash and cash equivalents totaled $57.1 million and we had approximately $250.3 million of available borrowing capacity under our Sustainability-Linked Credit Facility.
However, we note the continued efficiency gains in the well completions process can limit the days we spend on the wellsite and, therefore, negatively impact the total revenue opportunity for certain of our services utilizing day-rate pricing models. ​ This multi-well pad development, combined with recent upstream acreage consolidation and the growing trends around the recycling and reuse applications of produced water provides a significant opportunity for companies like us that can deliver increasingly complex solutions for our E&P customers across the full completion and production lifecycle of wells.
However, we note the continued efficiency gains in the well completions process can limit the days we 68 Table of Contents spend on the wellsite and, therefore, negatively impact the total revenue opportunity for certain of our services utilizing day-rate pricing models. ​ This multi-well pad development, combined with recent upstream acreage consolidation and corporate mergers as well as the growing trends around the recycling and reuse applications of produced water provides a significant opportunity for companies like us that can deliver increasingly complex solutions for our E&P customers across large swathes of acreage through our regional infrastructure networks, delivering solutions for the full completion and production lifecycle of wells.
This complexity favors service companies able to provide advanced technology solutions.
This complexity favors service companies that are able to provide advanced technology solutions.
While we have some long-term pricing arrangements, particularly in our Water Infrastructure segment, most of our water and water-related services are priced based on prevailing market conditions, giving due consideration to the specific requirements of the customer. We also generate revenue by providing completion and specialty chemicals through our Oilfield Chemicals segment.
While we have some long-term pricing arrangements, particularly in our Water Infrastructure segment, most of our water and water-related services are priced based on prevailing market conditions, giving due consideration to the customer’s specific requirements. 69 Table of Contents We also generate revenue by providing completion and specialty chemicals through our Chemical Technologies segment.
We invoice the majority of our Oilfield Chemicals customers for services provided based on the quantity of chemicals used or pursuant to short-term contracts as the customers’ needs arise.
We invoice the majority of our Chemical Technologies customers for services provided based on the quantity of chemicals used or pursuant to short-term contracts as customer needs arise.
See “—Recent Trends and Outlook” and “Note 3—Acquisitions” for a description of these transactions. ​ 70 Table of Contents Results of Operations The following table sets forth our results of operations, including revenue by segment, for the year ended December 31, 2022 compared to the year ended December 31, 2021.
See “—Recent Developments” and “Note 3—Acquisitions” for a description of these transactions. 71 Table of Contents Results of Operations The following table sets forth our results of operations, including revenue by segment, for the year ended December 31, 2023 compared to the year ended December 31, 2022.
We incurred raw material costs of $300.8 million, $209.7 million and $154.2 million for the years ended December 31, 2022, 2021 and 2020, respectively. 68 Table of Contents We incur variable transportation costs associated with our service lines, predominately fuel and freight.
We incurred raw material costs of $300.7 million, $300.8 million and $209.7 million for the years ended December 31, 2023, 2022 and 2021, respectively. We incur variable transportation costs associated with our service lines, predominately fuel and freight.
We incurred labor and labor-related costs of $476.2 million, $285.7 million and $243.6 million for the years ended December 31, 2022, 2021 and 2020, respectively. The majority of our recurring labor costs are variable and dependent on the then-current market environment and are incurred only while we are providing our operational services.
We incurred labor and labor-related costs of $554.4 million, $476.2 million and $285.7 million for the years ended December 31, 2023, 2022 and 2021, respectively. The majority of our recurring labor costs are variable and dependent on the market environment and are incurred only while we are providing our operational services.
Recoverability is measured by a comparison of their carrying amount to the estimated undiscounted cash flows to be generated by those assets. If the undiscounted cash flows are less than the carrying amount, we record impairment losses for the excess of their carrying value over the estimated fair value.
If the undiscounted cash flows are less than the carrying amount, we record impairment losses for the excess of their carrying value over the estimated fair value. Fair value is determined, in part, by the estimated cash flows to be generated by those assets.
The continued trend towards multi-well pad development, executed within a limited time frame, has increased the overall complexity of well completions, while increasing fracturing efficiency and the use of lower-cost in-basin sand has decreased total costs for our customers.
The continued trend towards multi-well pad development, executed within a limited time frame, combined with service price inflation and high interest rates, has increased the overall intensity, complexity and cost of well completions, while increasing fracturing efficiency and the use of lower-cost in-basin sand has decreased total costs for our customers.
Net cash used in investing activities was $53.2 million for the year ended December 31, 2022, compared to $64.5 million for the year ended December 31, 2021.
Net cash used in investing activities was $137.2 million for the year ended December 31, 2023, compared to $53.2 million for the year ended December 31, 2022.
Financing Activities. Net cash used in financing activities was $58.5 million for the year ended December 31, 2022, compared to $2.5 million for the year ended December 31, 2021.
Financing Activities. Net cash used in financing activities was $98.4 million for the year ended December 31, 2023, compared to $58.5 million for the year ended December 31, 2022.
As of December 31, 2022, we estimate the range of exposure to be from $15.3 million to $18.4 million and have recorded liabilities of $16.6 million, which represents management’s best estimate of probable loss related to workers’ compensation and employer’s liability, and auto liability.
As of December 31, 2023, we estimate the range of exposure to be from $16.2 million to $19.2 million and have recorded liabilities of $17.3 million, which represents management’s best estimate of probable loss related to workers’ compensation and employer’s liability, and auto liability.
Depending on available opportunities, market conditions and other factors, we may also issue debt and equity securities, in the future, if needed. 75 Table of Contents As of December 31, 2022, we had $16.0 million outstanding bank debt.
Depending on available opportunities, market conditions and other factors, we may also issue debt and equity securities, in the future, if needed. As of December 31, 2023, we had no outstanding bank debt.
Based on our current cash and cash equivalents balance, operating cash flow, available borrowings under our Sustainability-Linked Credit Facility and the ongoing actions discussed above, we believe that we will be able to maintain sufficient liquidity to satisfy our obligations and remain in compliance with our existing debt covenants through the next twelve months and beyond, prior to giving effect to any future financing that may occur. ​ We intend to finance most of our capital expenditures, contractual obligations and working capital needs with cash on hand, cash generated from operations and borrowings under our Sustainability-Linked Credit Facility.
We believe this approach provides us with additional flexibility to evaluate larger investments as well as improved resilience in a sustained downturn versus many of our peers. 76 Table of Contents Based on our current cash and cash equivalents balance, operating cash flow, available borrowings under our Sustainability-Linked Credit Facility and the ongoing actions discussed above, we believe that we will be able to maintain sufficient liquidity to satisfy our obligations and remain in compliance with our existing debt covenants through the next twelve months and beyond, prior to giving effect to any future financing that may occur. ​ We intend to finance most of our capital expenditures, contractual obligations and working capital needs with cash on hand, cash generated from operations and borrowings under our Sustainability-Linked Credit Facility.
The following accounting policies involve critical accounting estimates because they are dependent on our judgment and assumptions about matters that are inherently uncertain. 78 Table of Contents We base our estimates on historical experience and on various other assumptions we believe to be reasonable according to the current facts and circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
We base our estimates on historical experience and on various other assumptions we believe to be reasonable according to the current facts and circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
Additionally, this segment includes the operations of our accommodations and rentals business. ● Water Infrastructure. The Water Infrastructure segment consists of the Company’s infrastructure assets, including operations associated with our water sourcing and pipeline infrastructure, our water recycling solutions, and our produced water gathering systems and SWDs, as well as solids disposal facilities, primarily serving E&P companies. ● Oilfield Chemicals.
The Water Infrastructure segment consists of the Company’s fixed infrastructure assets, including operations associated with our water distribution pipeline infrastructure, our water recycling solutions, and our produced water gathering systems and SWDs, as well as solids disposal facilities, primarily serving E&P companies. ● Chemical Technologies.
Net cash provided by operating activities was $33.2 million for the year ended December 31, 2022, compared to cash used in operating activities of $16.2 million for the year ended December 31, 2021.
Net cash provided by operating activities was $285.4 million for the year ended December 31, 2023, compared to $33.2 million for the year ended December 31, 2022.
In many areas, we have also acquired sources of non-potable water, such as brackish water or municipal or industrial effluent. Through our expertise in chemical technologies and our FluidMatch™ design solutions, we provide water profiling and fluid assessment services for our customers to support the optimization of their fluid systems, enabling the economic use of these alternative sources.
Through our expertise in chemical technologies and our FluidMatch™ design solutions, we provide water profiling and fluid assessment services for our customers to support the optimization of their fluid systems, enabling the economic use of these alternative sources.
Gross margin as a percent of revenue was 11.6% and 2.7% during the years ended December 31, 2022 and December 31, 2021, respectively. Selling, General and Administrative Expenses Selling, general and administrative expenses increased $35.9 million, or 43.2%, to $118.9 million for the year ended December 31, 2022, compared to $83.1 million for the year ended December 31, 2021.
Gross margin as a percent of revenue was 14.6% and 11.6% during the years ended December 31, 2023 and December 31, 2022, respectively. Selling, General and Administrative Expenses Selling, general and administrative expenses increased $36.6 million, or 30.8%, to $155.5 million for the year ended December 31, 2023, compared to $118.9 million for the year ended December 31, 2022.
“Risk Factors – Risks Related to Our Organizational Structure – In certain cases, payments under the Tax Receivable Agreements may be accelerated and/or significantly exceed the actual benefits, if any, we realize in respect of the tax attributes subject to the Tax Receivable Agreements.” We have assessed the amount of any liability under the Tax Receivable Agreements required under the provisions of ASC 450 in connection with preparing the consolidated financial statements.
“Risk Factors – Risks Related to Our Organizational Structure. In certain cases, payments under the Tax Receivable Agreements may be accelerated and/or significantly exceed the actual benefits, if any, we realize in respect of the tax attributes subject to the Tax Receivable Agreements.
This resulted in a financing outflow of $6.0 million in the fourth quarter of 2022, and this quarterly dividend program is expected to continue into 2023 and beyond.
This program resulted in a financing outflow of $24.9 million and $6.0 million during the years ended December 31, 2023 and 2022, respectively. This quarterly dividend program is expected to continue into 2024 and beyond.
Adjusted EBITDA was $194.8 million for the year ended December 31, 2022 compared to $50.0 million for the year ended December 31, 2021. The $144.8 million increase is primarily attributable to many of the items discussed above.
Adjusted EBITDA was $258.3 million for the year ended December 31, 2023 compared to $194.8 million for the year ended December 31, 2022. The $63.5 million increase is primarily attributable to the items discussed above.
The summary of our cash flows for the years ended December 31, 2021 and 2020 is set forth in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Cash Flow Changes Between the Years Ended December 31, 2022 and 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ Change ​ ​ 2022 2021 Dollars Percentage ​ ​ ​ (in thousands) ​ ​ ​ ​ ​ ​ Net cash provided by (used in) operating activities ​ $ 33,231 ​ $ (16,248) ​ $ 49,479 ​ 304.5 % Net cash used in investing activities ​ ​ (53,246) ​ ​ (64,456) ​ ​ 11,210 ​ 17.4 % Net cash used in financing activities ​ ​ (58,451) ​ ​ (2,542) ​ ​ (55,909) ​ (2199.4) % Subtotal ​ ​ (78,466) ​ ​ (83,246) ​ ​ ​ ​ ​ ​ Effect of exchange rate changes on cash and cash equivalents ​ ​ (13) ​ ​ 8 ​ ​ (21) ​ NM ​ Net decrease in cash and cash equivalents ​ $ (78,479) ​ $ (83,238) ​ ​ ​ ​ ​ ​ ​ Operating Activities.
The summary of our cash flows for the years ended December 31, 2022 and 2021 is set forth in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Cash Flow Changes Between the Years Ended December 31, 2023 and 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ Change ​ ​ 2023 2022 Dollars Percentage ​ ​ ​ (in thousands) ​ ​ ​ ​ ​ ​ Net cash provided by operating activities ​ $ 285,355 ​ $ 33,231 ​ $ 252,124 ​ 758.7 % Net cash used in investing activities ​ ​ (137,168) ​ ​ (53,246) ​ ​ (83,922) ​ (157.6) % Net cash used in financing activities ​ ​ (98,423) ​ ​ (58,451) ​ ​ (39,972) ​ (68.4) % Subtotal ​ ​ 49,764 ​ ​ (78,466) ​ ​ ​ ​ ​ ​ Effect of exchange rate changes on cash and cash equivalents ​ ​ (3) ​ ​ (13) ​ ​ 10 ​ NM ​ Net increase (decrease) in cash and cash equivalents ​ $ 49,761 ​ $ (78,479) ​ ​ ​ ​ ​ ​ ​ Operating Activities.
For the year ended December 31, 2022, our Water Services, Water Infrastructure and Oilfield Chemicals revenues constituted 57.6%, 19.5% and 22.9% of our total revenue, respectively, compared to 51.6%, 20.2 % and 28.2%, respectively, for the year ended December 31, 2021. The revenue changes by reportable segment are as follows: ​ Water Services .
For the year ended December 31, 2023, our Water Services, Water Infrastructure and Chemical Technologies revenues constituted 65.2%, 14.5% and 20.3% of our total revenue, respectively, compared to 68.1%, 9.0 % and 22.9%, respectively, for the year ended December 31, 2022. The revenue changes by reportable segment are as follows: ​ Water Services .
Impairment of goodwill, long-lived assets and intangible assets : Long-lived assets, such as property and equipment and finite-lived intangible assets, are evaluated for impairment whenever events or changes in circumstances indicate that their carrying value may not be recoverable.
Impairment of long-lived assets and intangible assets : Long-lived assets, such as property and equipment and finite-lived intangible assets, are evaluated for impairment whenever events or changes in circumstances indicate that their carrying value may not be recoverable. Recoverability is measured by a comparison of their carrying amount to the estimated undiscounted cash flows to be generated by those assets.
Bargain Purchase Gain Bargain purchase gain of $13.4 million in 2022 was comprised of $6.7 million related to the Nuverra acquisition and $6.7 million in adjustments related to acquisitions that occurred in 2021.
Bargain Purchase Gain A bargain purchase gain of $13.4 million in 2022 was comprised of $6.7 million related to the Nuverra acquisition and $6.7 million in adjustments related to acquisitions that occurred in 2021. The Nuverra acquisition resulted in a bargain purchase gain as Nuverra was experiencing financial distress and actively evaluating strategic alternatives leading up to the transaction.
As of December 31, 2022, the borrowing base under the Sustainability-Linked Credit Facility was $245.0 million, we had $16.0 million in outstanding borrowings, and outstanding letters of credit totaled $22.9 million.
As of December 31, 2023, the borrowing base under the Sustainability-Linked Credit Facility was $267.4 million, we had zero in outstanding borrowings, and outstanding letters of credit totaled $17.1 million.
“Risk Factors.” We assume no obligation to update any of these forward-looking statements. Overview We are a leading provider of comprehensive water-management and chemical solutions to the oil and gas industry in the U.S.
“Risk Factors.” We assume no obligation to update any of these forward-looking statements. Overview We are a leading provider of sustainable water-management and chemical solutions to the energy industry in the U.S. As a leader in the water solutions industry, we place the utmost importance on safe, environmentally responsible management of oilfield water throughout the lifecycle of a well.
How We Generate Revenue We currently generate the majority of our revenue through our water-management services associated with well completions, provided through our Water Services and Water Infrastructure segments. The majority of this revenue is realized through customer agreements with fixed pricing terms and is recognized when delivery of services is provided, generally at our customers’ sites.
Most of this revenue is realized through customer agreements with fixed pricing terms and is recognized when delivery of services is provided, generally at our customers’ sites.
Costs of Revenue Costs of revenue increased $482.9 million, or 64.9%, to $1.2 billion for the year ended December 31, 2022, compared to $743.8 million for the year ended December 31, 2021.
Costs of Revenue Costs of revenue increased $127.0 million, or 10.4%, to $1.4 billion for the year ended December 31, 2023, compared to $1.2 billion for the year ended December 31, 2022.
Retentions : We assume risk of loss through deductibles and self-insured retentions, up to certain levels for losses related to general liability, workers’ compensation and employer’s liability, vehicle liability, and health insurance.
Changes to our key assumptions related to future performance, market conditions and other economic factors could adversely affect our impairment valuation. Retentions : We assume risk of loss through deductibles and self-insured retentions, up to certain levels for losses related to general liability, workers’ compensation and employer’s liability, vehicle liability, and health insurance.
As of February 20, 2023, we had $50.0 million in outstanding indebtedness, the borrowing base under the Sustainability-Linked Credit Facility was $228.0 million, the outstanding letters of credit totaled $22.6 million, and the available borrowing capacity under the Sustainability-Linked Credit Facility was $155.4 million. ​ During 2022, our trade accounts receivable increased from $232.8 million to $430.0 million.
As of February 19, 2024, we had $55.0 million in outstanding indebtedness, the borrowing base under the Sustainability-Linked Credit Facility was $218.4 million, the outstanding letters of credit totaled $17.1 million, and the available borrowing capacity under the Sustainability-Linked Credit Facility was $146.3 million. ​ In 2022, our trade accounts receivable experienced a notable surge, rising from $232.8 million to $430.0 million.
The increase was composed of a $405.3 million increase in Water Services revenue, a $115.6 million increase in Water Infrastructure revenue and a $101.9 million increase in Oilfield Chemicals revenue. These increases were driven primarily by higher demand for our services coupled with increased pricing in comparison to the year ended December 31, 2021.
The increase was composed of an $88.4 million increase in Water Services revenue, a $104.7 million increase in Water Infrastructure revenue and a $4.8 million increase in Chemical Technologies revenue. These increases were driven primarily by higher demand for our services 72 Table of Contents coupled with increased pricing in comparison to the year ended December 31, 2022.
As a result, the U.S., the United Kingdom, the member states of the European Union and other public and private actors have levied severe sanctions on Russian financial institutions, businesses and individuals.
As a result of the Russian invasion of the Ukraine, the U.S., the United Kingdom, the member states of the European Union and other public and private actors have sustained severe sanctions on Russian financial institutions, businesses and individuals. In October 2023, Hamas militants conducted attacks in Israel and an armed conflict has ensued between Israel and Hamas.
Cost of revenue as a percent of revenue decreased to 80.6% from 88.0%, due primarily to economies of scale from higher revenue activity Water Infrastructure . Costs of revenue increased $87.5 million, or 75.5%, to $203.4 million for the year ended December 31, 2022, compared to $115.9 million for the year ended December 31, 2021.
Costs of revenue increased $50.0 million, or 6.5%, to $814.6 million for the year ended December 31, 2023, compared to $764.6 million for the year ended December 31, 2022. Cost of revenue as a percent of revenue decreased to 78.9% from 80.9%, d ue primarily to higher pricing for our services and economies of scale from higher revenue activity.
As a leader in the water solutions industry, we place the utmost importance on safe, environmentally responsible management of oilfield water throughout the lifecycle of a well. Additionally, we believe that responsibly managing water resources through our operations to help conserve and protect the environment in the communities in which we operate is paramount to our continued success.
Additionally, we believe that responsibly managing water resources through our operations to help conserve and protect the environment in the communities in which we operate is paramount to our continued success.
The increase was due primarily to a $6.1 million increase in equity-based compensation costs,$5.9 million from higher wages, associated payroll taxes and employer 401k match contributions, $5.2 million of costs from the additional personnel and related back-office expenses as a result of our recent acquisitions, comprised of $1.9 million of personnel costs and $3.3 million of other back-office costs, a $4.4 million increase in short-term incentive compensation cost, a $3.0 million increase in business development costs, $2.6 million in higher vehicle lease costs, $2.5 million in higher legal and professional fees, a $1.8 million increase in bad debt expense, a $1.3 million increase in travel, meals and entertainment costs, $1.0 million in higher subscription costs, a $1.0 million increase in information technology costs, a $1.0 million increase in insurance costs and $3.2 million from a combination of other expenses partially offset by $3.2 million in severance expense during the year ended December 31, 2021.
The increase was due primarily to $14.7 million in rebranding costs, $9.5 million in higher wages, associated payroll taxes and employer 401(k) match contributions, a $6.6 million increase in legal and professional fees, a $3.2 million increase in bad debt expense, a $3.0 million increase in incentive and equity-based compensation cost, $2.0 million in higher contract labor, $1.9 million in higher information technology costs, and $1.8 million from a combination of other expenses partially offset by a $3.0 million decrease in transaction costs, a $2.4 million decrease in vehicle lease costs, and a $0.6 million decrease in insurance costs.
We prioritize sustained positive free cash flow and a strong balance sheet, and evaluate potential acquisitions and investments in the context of those priorities, in addition to the economics of the opportunity. We believe this approach provides us with additional flexibility to evaluate larger investments as well as improved resilience in a sustained downturn versus many of our peers.
We prioritize sustained positive free cash flow and a strong balance sheet, and evaluate potential acquisitions and investments in the context of those priorities, in addition to the economics of the opportunity.
We incurred fuel and freight costs of $118.1 million, $58.5 million and $35.6 million for the years ended December 31, 2022, 2021 and 2020, respectively. Rising fuel prices impact our transportation costs, which affect the pricing and demand for our services and, therefore, our results of operations.
We incurred fuel and freight costs of $115.7 million, $118.1 million and $58.5 million for the years ended December 31, 2023, 2022 and 2021, respectively. Rising fuel prices impact our transportation costs, which affect the results of our operations. How We Evaluate Our Operations ​ We use a variety of operational and financial metrics to assess our performance.
Included in the increases in Water 71 Table of Contents Services and Water Infrastructure were incremental revenue contributions from the Complete, Agua Libre and Basic, HB Rentals, Nuverra, Breakwater and Cypress acquisitions.
Included in the increases in Water Services and Water Infrastructure were incremental revenue contributions from the Breakwater, Nuverra, Cypress and other asset acquisitions.
Revenue increased $405.3 million, or 102.8%, to $799.4 million for the year ended December 31, 2022, compared to $394.1 million for the year ended December 31, 2021. The increase was primarily attributable to higher demand for our services coupled with increased pricing in comparison to the year ended December 31, 2021.
Revenue increased $88.4 million, or 9.4%, to $1.0 billion for the year ended December 31, 2023, compared to $944.5 million for the year ended December 31, 2022. The increase was primarily attributable to incremental revenue contributions from the Breakwater acquisition and higher demand for our services coupled with increased pricing in comparison to the year ended December 31, 2022.
Gross profit increased by $107.9 million in our Water Services segment, $28.1 million in our Water Infrastructure segment and $27.4 million in our Oilfield Chemicals segment. Partially offsetting the increase in gross profit was a $23.5 million increase in depreciation and amortization expense.
Gross profit increased by $38.4 million in our Water Services segment, $49.4 million in our Water Infrastructure segment and $8.4 million in our Chemical Technologies segment. Partially offsetting the increase in gross profit was a $25.3 million increase in depreciation and amortization expense.
The $11.2 million decrease in net cash used in investing activities was due primarily to a $27.8 million decrease spent on acquisitions, net of cash received during the year ended December 31, 2022 compared to the year ended December 31, 2021, an $18.8 million increase in proceeds received from sales of property and equipment partially offset by a $31.9 million increase in purchases of property and equipment and a $4.4 million increase in investments.
The $83.9 million increase in net cash used in investing activities was due primarily to a $64.0 million increase in purchases of property and equipment, a $14.4 million decrease in proceeds received from sales of property and equipment and an increase of $10.7 million spent for acquisitions, net of cash and restricted cash received partially offset by a decrease of $7.2 million in investments made in non-controlled entities.
Any such deferred payments under the Tax Receivable Agreements generally will accrue interest. We intend to account for any amounts payable under the Tax Receivable Agreements in accordance with Accounting Standards Codification (“ASC”) Topic 450, Contingent Consideration. For further discussion regarding such an acceleration and its potential impact, please read Part I, Item 1A.
Any such deferred payments under the Tax Receivable Agreements generally will accrue interest. We account for any amounts payable under the Tax Receivable Agreements in accordance with Accounting Standards Codification (“ASC”) Topic 450, Contingencies.
Our Segments Our services are offered through three reportable segments: (i) Water Services; (ii) Water Infrastructure; and (iii) Oilfield Chemicals. ● Water Services. The Water Services segment consists of the Company’s services businesses, including water transfer, flowback and well testing, fluids hauling, water monitoring, water containment and water 67 Table of Contents network automation, primarily serving E&P companies.
The Water Services segment consists of the Company’s services businesses, including water sourcing, water transfer, flowback and well testing, fluids hauling, water monitoring, water containment and water network automation, primarily serving E&P companies. Additionally, this segment includes the operations of our accommodations and rentals business. ● Water Infrastructure.
How We Evaluate Our Operations ​ We use a variety of operational and financial metrics to assess our performance. Among other measures, management considers each of the following: ● Revenue; ● Gross Profit; ● Gross Margins; ● EBITDA; and ● Adjusted EBITDA.
Among other measures, management considers each of the following: ● Revenue; ● Gross Profit; ● Gross Margins; ● EBITDA; and ● Adjusted EBITDA. Revenue We analyze our revenue and assess our performance by comparing actual monthly revenue to our internal projections and across periods.
Such volatility may lead to a more difficult investing and planning environment for us and our customers.
Such volatility, coupled with an increased cost of capital, due, in part to higher rates of inflation and interest rates, may lead to a more difficult investing and planning environment for us and our customers.
Development of future cash flows also requires management to make assumptions and to apply judgment, including the timing of future expected cash flows, using the appropriate discount rates and determining salvage values. The estimate of fair value represents our best estimates of these factors based on current industry trends and reference to market transactions and is subject to variability.
Our cash flow estimates are based upon, among other things, historical results adjusted to reflect our best estimate of future market rates, utilization levels, and operating performance. Development of future cash flows also requires management to make assumptions and to apply judgment, including the timing of future expected cash flows, using the appropriate discount rates and determining salvage values.
The reconciliation of EBITDA and Adjusted EBITDA for the years ended December 31, 2021 and 2020 is set forth in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2022 2021 ​ ​ (in thousands) Net income (loss) ​ $ 54,854 ​ $ (50,085) Interest expense, net ​ ​ 2,700 ​ ​ 1,711 Income tax expense ​ ​ 957 ​ ​ 147 Depreciation and amortization ​ ​ 115,716 ​ ​ 92,458 EBITDA ​ ​ 174,227 ​ ​ 44,231 Non-cash compensation expenses ​ ​ 15,570 ​ ​ 9,469 Non-recurring severance expenses (1) ​ ​ — ​ ​ 3,225 Non-cash loss on sale of assets or subsidiaries (2) ​ ​ 4,400 ​ ​ 4,596 Non-recurring transaction costs (3) ​ ​ 11,672 ​ ​ 5,656 Lease abandonment costs ​ ​ 449 ​ ​ 894 Bargain purchase gain ​ ​ (13,352) ​ ​ (18,985) Other non-recurring charges (3) ​ ​ — ​ ​ 608 Equity in losses of unconsolidated entities ​ ​ 913 ​ ​ 279 Foreign currency loss (gain), net ​ ​ 8 ​ ​ (2) Non-recurring change in vacation policy (4) ​ ​ 918 ​ ​ — Adjusted EBITDA ​ $ 194,805 ​ $ 49,971 ​ (1) For 2021, these costs related to severance costs associated with our former CEO.
The reconciliation of EBITDA and Adjusted EBITDA for the years ended December 31, 2022 and 2021 is set forth in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ 2023 2022 ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 79,219 ​ $ 54,854 Interest expense, net ​ ​ 4,393 ​ ​ 2,700 Income tax (benefit) expense ​ ​ (60,196) ​ ​ 957 Depreciation and amortization ​ ​ 141,089 ​ ​ 115,716 EBITDA ​ ​ 164,505 ​ ​ 174,227 Tax receivable agreements expense ​ ​ 38,187 ​ ​ — Non-cash compensation expenses ​ ​ 17,369 ​ ​ 15,570 Non-cash loss on sale of assets or subsidiaries (1) ​ ​ 3,350 ​ ​ 4,400 Transaction and rebranding costs (2) ​ ​ 20,447 ​ ​ 11,672 Lease abandonment costs ​ ​ 42 ​ ​ 449 Impairments and abandonments ​ ​ 12,607 ​ ​ — Bargain purchase gain ​ ​ — ​ ​ (13,352) Equity in losses of unconsolidated entities ​ ​ 1,800 ​ ​ 913 Other ​ ​ 6 ​ ​ 926 Adjusted EBITDA ​ $ 258,313 ​ $ 194,805 ​ (1) For all periods presented, the losses were primarily due to sales of real estate and underutilized, excess or obsolete property and equipment.
Revenue increased $101.9 million, or 47.2%, to $317.6 million for the year ended December 31, 2022, compared to $215.8 million for the year ended December 31, 2021. The increase was primarily attributable to higher demand for our services, particularly our proprietary friction reducer product offerings, in comparison to the year ended December 31, 2021.
Revenue increased $4.8 million, or 1.5%, to $322.5 million for the year ended December 31, 2023 compared to $317.6 million for the year ended December 31, 2022. The increase was primarily attributable to higher demand for our services in comparison to the year ended December 31, 2022 and was not directly impacted by acquisition activity.
Depreciation and amortization expense increased $23.5 million, or 26.1%, to $113.5 million for the year ended December 31, 2022, compared to $90.0 million for the year ended December 31, 2021, due primarily to a higher fixed asset base related to acquisitions occurring after June 30, 2021. 72 Table of Contents Gross Profit Gross profit was $160.8 million for the year ended December 31, 2022 compared to $20.9 million for the year ended December 31, 2021.
Depreciation and amortization expense increased $25.3 million, or 22.3%, to $138.8 million for the year ended December 31, 2023, compared to $113.5 million for the year ended December 31, 2022, due primarily to a higher fixed asset base related to the Breakwater acquisition and investments in pipeline and recycling infrastructure in our Water Infrastructure segment. 73 Table of Contents Gross Profit Gross profit was $231.7 million for the year ended December 31, 2023 compared to $160.8 million for the year ended December 31, 2022.
Many of our customers have demonstrated their resolve to manage their capital spending within budgets and cash flow from operations and increase redemptions of debt and/or returns of capital to investors. Additionally, consolidation among our customers can disrupt our market in the near-term and the resulting demand for our services.
The pandemic had a material negative impact on our financial results for prior periods and may affect the comparability of our results. ​ Many of our customers have demonstrated their resolve to manage their capital spending within budgets and cash flow from operations and increase redemptions of debt and/or returns of capital to investors.
Working with our customers and local communities, we strive to be an industry leader in the development of cost-effective alternatives to fresh water. Specifically, we offer services that enable our E&P customers to treat and reuse produced water, thereby reducing the demand for fresh water while also reducing the volumes of saltwater that must be disposed by injection.
Working with our customers and local communities, we strive to be an industry leader in the development of sustainable cost-effective alternatives to fresh water.
The $55.9 million increase in cash used in financing activities was primarily due to a $22.0 million purchase of noncontrolling interests, a $19.0 million increase in repurchases of shares of Class A common stock during the year ended December 31, 2022 compared to the year ended December 31, 2021, the pay down of debt, net of borrowings of $6.0 million, dividend and distribution payments of $6.0 million and $2.1 million in debt issuance costs paid during the year ended December 31, 2022.
The $40.0 million increase in net cash used in financing activities was due primarily to a $41.6 million increase in repurchases of shares of Class A common stock, an $18.9 million increase in dividends paid and debt repayments net of borrowings increasing $9.9 million partially offset by a $22.0 million purchase of noncontrolling interests in 2022 resulting in 100% ownership of the Big Spring Recycling System, which includes significant pipeline, storage, recycling and disposal infrastructure assets in the Midland Basin , $6.3 million of cash received net of cash paid from/to noncontrolling interest holders during the year ended December 31, 2023, and $2.1 million in debt issuance costs paid during the year ended December 31, 2022.
Overall however, the financial health of the oil and gas industry and many of our customers specifically, as reflected in debt metrics, recent capital raises, and equity valuations, greatly improved over the year ended December 31, 2021 and through the year ended December 31, 2022. ​ From an operational standpoint, many of the recent trends still apply to ongoing unconventional oil and gas development.
Overall however, the financial health of the oil and gas industry and many of our customers specifically, as reflected in debt metrics, recent capital raises, and equity valuations, has greatly improved over the course of the year ended December 31, 2022, and through the year ended December 31, 2023. ​ When one customer acquires another, it can lead to larger blocks of consolidated development and production acreage, which can increase the demand for our longer term integrated full water lifecycle solutions.
Refer to “Note 10—Debt” for further discussion of the Sustainability-Linked Credit Facility. Tax Receivable Agreements We intend to fund any obligation under the Tax Receivable Agreements with cash from operations or borrowings under our Sustainability-Linked Credit Facility.
Additionally, as of December 31, 2023, accrued health insurance and accrued general liabilities were $6.7 million and $1.3 million, respectively. Tax Receivable Agreements : We intend to fund any obligation under the Tax Receivable Agreements with cash from operations or borrowings under our Sustainability-Linked Credit Facility.
The increase was also impacted by incremental revenue contributed by the Complete, Basic, HB Rentals, Nuverra and Breakwater acquisitions. Water Infrastructure. Revenue increased by $115.6 million, or 74.7%, to $270.4 million for the year ended December 31, 2022, compared to $154.8 million for the year ended December 31, 2021.
Revenue increased by $104.7 million, or 83.6%, to $230.0 million for the year ended December 31, 2023, compared to $125.3 million for the year ended December 31, 2022. The increase was primarily attributable to incremental revenue contributed by Breakwater, Nuverra, Cypress and other asset acquisitions.
Between July 2021 and December 2022, we completed seven business combinations, one asset acquisition and the buyout of all noncontrolling interests in a recycling system joint venture. Our historical financial statements for periods prior to the respective date each acquisition was completed do not include the results of operations of such acquisition.
Our historical financial statements for periods prior to the respective date each acquisition was completed do not include the results of operations of that acquisition.
(2) For all periods presented, the losses were primarily due to sales of real estate and underutilized, excess or obsolete property and equipment. (3) For all periods presented, these costs were primarily legal-related due diligence costs as well as costs related to certain acquired subsidiaries.
(2) For all periods presented, these costs were primarily legal-related due diligence costs as well as costs related to certain acquired subsidiaries and rebranding costs. EBITDA was $164.5 million for the year ended December 31, 2023 compared to $174.2 million for the year ended December 31, 2022.
The $49.5 million increase is comprised of an increase of $135.2 million of net income combined with non-cash adjustments, partially offset by $85.7 million of increased working capital primarily due to the timing of collecting trade receivables connected with increased revenue. Investing Activities.
The $252.1 million improvement is comprised of an increase of $64.5 million of net income combined with non-cash adjustments and $187.6 million of decreased working capital primarily due to collecting trade receivables favorably impacted by improvements in the billing and collection process. These trade receivables were previously elevated due to the factors noted above. Investing Activities.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeInterest Rate Risk As of December 31, 2022, we had $16.0 million outstanding under our Sustainability-Linked Credit Facility. As of February 20, 2023, we had $50.0 million in outstanding indebtedness and $155.4 million of available borrowing 80 Table of Contents capacity under our Sustainability-Linked Credit Facility.
Biggest changeInterest Rate Risk As of December 31, 2023, we did not have any indebtedness under our Sustainability-Linked Credit Facility. As of February 19, 2024, we had $55.0 million in outstanding indebtedness and $146.3 million of available borrowing capacity under our Sustainability-Linked Credit Facility.
The level of drilling and completion activity is influenced by numerous factors over which we have no control, including, but not limited to: global health events, including the COVID-19 pandemic; the supply of and demand for oil and gas; war, economic sanctions and other constraints to global trade and economic growth; current price levels as well as expectations about future prices of oil and gas; the magnitude and timing of capital spending by our customers; the cost of exploring for, developing, producing and delivering oil and gas; the extent to which our E&P customers choose to drill and complete new wells to offset decline from their existing wells; the extent to which our E&P customers choose to invest to grow production; discoveries of new oil and gas reserves; available storage capacity and pipeline and other transportation capacity; weather conditions; domestic and worldwide economic conditions; political instability in oil-producing countries; environmental regulations; technical advances in alternative forms of energy (e.g. wind and solar electricity, electric vehicles) that encourage substitution for or displacement of oil and gas consumption in end-use markets; the price and availability of alternative fuels; the ability of oil and gas producers to raise equity capital and debt financing; merger and acquisition activity and consolidation in our industry, and other factors.
The level of drilling and completion activity is influenced by numerous factors over which we have no control, including, but not limited to: the supply of and demand for oil and gas; war, armed conflicts, economic sanctions and other constraints to global trade and economic growth; current price levels as well as expectations about future prices of oil and gas; the magnitude and timing of capital spending by our customers; the cost of exploring for, developing, producing and delivering oil and gas; the extent to which our E&P customers choose to drill and complete new wells to offset decline from their existing wells; the extent to which our E&P customers choose to invest to grow production; discoveries of new oil and gas reserves; available storage capacity and pipeline and other transportation capacity; weather conditions; domestic and worldwide economic conditions; political instability in oil-producing countries; environmental regulations; technical advances in alternative forms of energy (e.g. wind and solar electricity, electric vehicles) that encourage substitution for or displacement of oil and gas consumption in end-use markets; the price and availability of alternative fuels; the ability of oil and gas producers to raise equity capital and debt financing; global health events; merger and acquisition activity and consolidation in our industry, and other factors.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The demand, pricing and terms for oilfield services provided by us are largely dependent upon the level of drilling and completion activity in the U.S. oil and gas industry.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The demand, pricing and terms for oilfield services provided by us are largely dependent upon the level of drilling and completion activity in the U.S. oil and gas industry as well as the level of oil and gas production.

Other WTTR 10-K year-over-year comparisons