Select Energy Services Reports Fourth Quarter And Full Year 2017 Results
Select Energy Services Reports Fourth Quarter And Full Year 2017 Results
HOUSTON, March 7, 2018 /PRNewswire/ -- Select Energy Services, Inc. (NYSE: WTTR) ("Select" or "the Company"), a leading provider of total water management and chemical solutions to the U.S. unconventional oil and gas industry, today announced results for the fourth quarter and fiscal year ended December 31, 2017. As previously announced, Select completed its merger with Rockwater Energy Solutions, Inc. ("Rockwater") on November 1, 2017. All reported financial results for Select for the fourth quarter and fiscal year ended December 31, 2017 include two months of contribution from Rockwater.
Revenue for the fourth quarter of 2017 was $304.2 million, a 98% increase compared to $153.9 million in the third quarter of 2017 and a 251% increase compared to $86.7 million in the fourth quarter of 2016. Net loss for the fourth quarter was $14.9 million as compared to net income of $2.6 million in the third quarter of 2017 and a net loss of $24.7 million in the fourth quarter of 2016. Adjusted EBITDA was $43.9 million in the fourth quarter of 2017 compared to $32.4 million in the third quarter of 2017 and $6.7 million in the fourth quarter of 2016. Additionally, given the timing of the merger close on November 1, 2017, fourth quarter results do not include Rockwater's operating results for the month of October, including approximately $70.1 million in revenue, $0.7 million in net income and $7.7 million in Adjusted EBITDA. Please refer to the reconciliation of Adjusted EBITDA (a non-GAAP measure) to net loss (a GAAP measure) in this release.
John Schmitz, Select's Executive Chairman, stated, "2017 marked a momentous year for Select as we executed on a number of strategic initiatives while the industry continued to make positive strides in its recovery. The completion of our IPO in the second quarter marked a significant step towards positioning Select as the clear pure-play market leader in the water solutions industry. We are pleased to have closed the transformative merger between Select and Rockwater during the fourth quarter and have made substantial progress in executing on our integration strategy. In addition to the Rockwater merger, we executed on five other strategic acquisitions throughout the year as we focus on expanding and solidifying our leading water solutions footprint across North America. We are excited about the future of the combined company, and as we enter the first quarter of 2018, we believe our prospects for this year remain strong."
Holli Ladhani, President and CEO, added, "Looking back on 2017, it is gratifying to see what Select has been able to accomplish in such a short period of time. The fourth quarter continued to provide an active industry environment, although it did present the expected seasonal fluctuations and other challenges towards the end of the year. While we saw modest sequential consolidated revenue growth on a combined-company basis in the fourth quarter, our margins were impacted by a combination of seasonality, revenue mix and merger-related expenses. We expect all of those factors to moderate in 2018 and we are extremely focused on delivering improved margins.
"Looking to 2018, I am confident that a resilient oil price environment, coupled with a robust economic outlook, can lead to improved performance as we continue to lead the water solutions and chemicals industries. We have built a business model that we believe will allow us to generate meaningful free cash flow and we are exploring several opportunities to re-invest portions of that cash flow at attractive returns. Over the past several years, we have assembled a strong management team with the skills and experience to manage our operations and the merger-integration process, and we believe the opportunities in front of us are tremendous," concluded Ladhani.
Conference Call
Select has scheduled a conference call on Thursday, March 8, 2018 at 10:00 a.m. eastern time. Please dial 201-389-0872 and ask for the Select Energy Services call at least 10 minutes prior to the start time of the call, or listen live over the Internet by logging on to the web at the address http://investors.selectenergyservices.com/events-and-presentations. A telephonic replay of the conference call will be available through March 15, 2018 and may be accessed by calling 201-612-7415 using passcode 13676696#. A webcast archive will also be available at the link above shortly after the call and will be accessible for approximately 90 days.
About Select Energy Services, Inc.
Select is a leading provider of total water management and chemical solutions to the North American unconventional oil and gas industry. Select provides for the sourcing and transfer of water, both by permanent pipeline and temporary hose, prior to its use in the drilling and completion activities associated with hydraulic fracturing, as well as complementary water-related services that support oil and gas well completion and production activities, including containment, monitoring, treatment and recycling, flowback, hauling, and disposal. Select, under its Rockwater Energy Solutions brand, develops and manufactures a full suite of specialty chemicals used in the well completion process and production chemicals used to enhance performance over the producing life of a well. Select currently provides services to exploration and production companies and oilfield service companies operating in all the major shale and producing basins in the United States and Western Canada. For more information, please visit Select's website, http://www.selectenergyservices.com.
Cautionary Statement Regarding Forward-Looking Statements
All statements in this communication other than statements of historical facts are forward-looking statements which contain our current expectations about our future results. We have attempted to identify any forward-looking statements by using words such as "expect," "will," "estimate" and other similar expressions. Although we believe that the expectations reflected, and the assumptions or bases underlying our forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Such statements are not guarantees of future performance or events and are subject to known and unknown risks and uncertainties that could cause our actual results, events or financial positions to differ materially from those included within or implied by such forward-looking statements. Factors that could materially impact such forward-looking statements include, but are not limited to, the factors discussed or referenced in the "Risk Factors" section of the prospectus we filed with the SEC on April 24, 2017 relating to our recently completed initial public offering and the "Risk Factors" section of our most recent Quarterly Report on Form 10-Q filed with the SEC. Investors should not place undue reliance on our forward-looking statements. Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, unless required by law.
WTTR-ER
SELECT ENERGY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except share data)
Three Months Ended December 31, Twelve Months Ended December 31,
------------------------------- --------------------------------
2017 2016 2017 2016
---- ---- ---- ----
Revenue
Water solutions $217,034 $68,298 $528,309 $241,455
Oilfield chemicals 41,586 - 41,586 -
Wellsite services 45,617 18,436 122,596 60,944
------ ------ ------- ------
Total revenue 304,237 86,734 692,491 302,399
Costs of revenue
Water solutions 169,150 55,746 395,887 200,399
Oilfield chemicals 37,024 - 37,024 -
Wellsite services 37,303 15,764 100,155 51,108
Depreciation and amortization 34,501 21,146 101,645 95,020
------ ------ ------- ------
Total costs of revenue 277,978 92,656 634,711 346,527
------- ------ ------- -------
Gross profit (loss) 26,259 (5,922) 57,780 (44,128)
Operating expenses
Selling, general and
administrative 33,105 8,715 82,403 34,643
Depreciation and amortization 492 443 1,804 2,087
Impairment of goodwill and
other intangible assets - - - 138,666
Impairment of property and
equipment - - - 60,026
Lease abandonment costs 701 6,254 3,572 19,423
--- ----- ----- ------
Total operating expenses 34,298 15,412 87,779 254,845
------ ------ ------ -------
Loss from operations (8,039) (21,334) (29,999) (298,973)
Other income (expense)
Interest expense, net (4,744) (4,336) (6,629) (16,128)
Foreign currency gains, net 281 - 281 -
Other income, net (2,973) 41 369 629
------ --- --- ---
Loss before tax benefit (15,475) (25,629) (35,978) (314,472)
Tax benefit 525 916 851 524
--- --- --- ---
Net loss (14,950) (24,713) (35,127) (313,948)
------- ------- ------- --------
Less: net loss attributable to
Predecessor - 21,122 - 306,481
Less: net loss attributable to
noncontrolling interests 5,298 2,548 18,311 6,424
----- ----- ------ -----
Net loss attributable to
Select Energy Services, Inc. $(9,652) $(1,043) $(16,816) $(1,043)
======= ======= ======== =======
Allocation of net loss
attributable to:
Class A stockholders $(8,851) $(199) $(12,560) $(199)
Class A-1 stockholders - (844) (3,691) (844)
Class A-2 stockholders (801) - (565) -
Class B stockholders - - - -
--- --- --- ---
$(9,652) $(1,043) $(16,816) $(1,043)
======= ======= ======== =======
Weighted average shares
outstanding:
Class A-Basic & Diluted 49,316,923 3,802,972 24,612,853 3,802,972
========== ========= ========== =========
Class A-1-Basic & Diluted - 16,100,000 7,233,973 16,100,000
=== ========== ========= ==========
Class A-2-Basic & Diluted 4,463,506 - 1,106,605 -
========= === ========= ===
Class B-Basic & Diluted 39,675,033 38,462,541 38,768,156 38,462,541
========== ========== ========== ==========
Net loss per share
attributable to common
stockholders:
Class A-Basic & Diluted $(0.18) $(0.05) $(0.51) $(0.05)
====== ====== ====== ======
Class A-1-Basic & Diluted $ - $(0.05) $(0.51) $(0.05)
=== === ====== ====== ======
Class A-2-Basic & Diluted $(0.18) $ - $(0.51) $ -
====== === === ====== === ===
Class B-Basic & Diluted $ - $ - $ - $ -
=== === === === === === === ===
SELECT ENERGY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands, except share data)
As of December 31,
------------------
2017 2016
---- ----
Assets
Current assets
Cash and cash equivalents $2,774 $40,041
Accounts receivable trade, net of
allowance for doubtful accounts of
$2,979 and $2,144, respectively 373,633 75,892
Accounts receivable, related parties 7,669 135
Inventories 44,598 1,001
Prepaid expenses and other current
assets 17,842 7,586
------ -----
Total current assets 446,516 124,655
------- -------
Property and equipment 1,034,995 739,386
Accumulated depreciation (560,886) (490,519)
-------- --------
Property and equipment, net 474,109 248,867
------- -------
Goodwill 273,421 12,242
Other intangible assets, net 156,066 11,586
Other assets 6,256 7,716
----- -----
Total assets $1,356,368 $405,066
========== ========
Liabilities and Equity
Current liabilities
Accounts payable $52,579 $10,796
Accounts payable and accrued expenses,
related parties 2,772 648
Accrued salaries and benefits 21,324 2,511
Accrued insurance 12,510 10,338
Sales tax payable 12,931 66
Accrued expenses and other current
liabilities 81,112 22,025
Current portion of capital lease
obligations 1,965 -
----- ---
Total current liabilities 185,193 46,384
------- ------
Accrued lease obligations 18,979 15,946
Other long term liabilities 13,827 8,028
Long-term debt 75,000 -
------ ---
Total liabilities 292,999 70,358
------- ------
Commitments and contingencies
Class A common stock, $0.01 par value;
350,000,000 shares authorized and
59,182,176 shares issued and
outstanding as of December 31, 2017;
250,000,000 shares authorized and
3,802,972 shares issued and outstanding
as of December 31, 2016 592 38
Class A-1 common stock, $0.01 par
value; no shares authorized, issued or
outstanding as of December 31, 2017;
40,000,000 shares authorized and
16,100,000 shares issued and
outstanding as of December 31, 2016 - 161
Class A-2 common stock, $0.01 par
value; 40,000,000 shares authorized,
6,731,845 shares issued and outstanding
as of December 31, 2017; no shares
authorized, issued or outstanding as of
December 31, 2016 67 -
Class B common stock, $0.01 par value;
150,000,000 shares authorized and
40,331,989 shares issued and
outstanding as of December 31, 2017;
150,000,000 shares authorized and
38,462,541 shares issued and
outstanding as of December 31, 2016 404 385
Preferred stock, $0.01 par value;
50,000,000 shares authorized and no
shares issued and outstanding as of
December 31, 2017 and 2016 - -
Additional paid-in capital 673,141 113,175
Accumulated deficit (17,859) (1,043)
Accumulated other comprehensive income 302 -
--- ---
Total stockholders' equity 656,647 112,716
------- -------
Noncontrolling interests 406,722 221,992
------- -------
Total equity 1,063,369 334,708
--------- -------
Total liabilities and equity $1,356,368 $405,066
========== ========
SELECT ENERGY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
Year Ended December 31,
-----------------------
2017 2016
---- ----
Cash flows from operating activities
Net loss $(35,127) $(313,948)
Adjustments to reconcile net loss to
net cash provided by operating
activities
Depreciation and amortization 103,449 97,107
Gain on disposal of property and
equipment (2,726) (97)
Gain realized on previously held
interest in Rockwater (1,210) -
Bad debt expense 1,542 2,385
Amortization of debt issuance costs 4,031 3,435
Equity-based compensation 7,691 317
Impairment of goodwill and other
intangible assets - 138,666
Impairment of property and equipment - 60,026
Other operating items, net (353) (1,619)
Changes in operating assets and
liabilities
Accounts receivable (100,485) 1,290
Prepaid expenses and other assets (2,177) 1,224
Accounts payable and accrued
liabilities 22,466 16,345
------ ------
Net cash (used in) provided by
operating activities (2,899) 5,131
------ -----
Cash flows from investing activities
Acquisitions, net of cash received (65,488) -
Purchase of property, equipment, and
intangible assets (98,722) (36,290)
Proceeds received from sale of
property and equipment 7,479 9,335
----- -----
Net cash used in investing activities (156,731) (26,955)
-------- -------
Cash flows from financing activities
Proceeds from 144A Offering, net of
underwriter fees and expenses - 297,248
Proceeds from revolving line of
credit and issuance of long-term
debt 109,000 27,500
Payments on long-term debt (111,000) (298,000)
Payment of debt issuance costs (3,442) (4,497)
Proceeds from initial public offering 140,070 -
Payments incurred for initial public
offering (11,566) -
Purchase of noncontrolling interests - (348)
(Distributions to) proceeds from
noncontrolling interests (368) 138
Purchase of treasury stock (297) -
Member contributions - 23,519
--- ------
Net cash provided by financing
activities 122,397 45,560
------- ------
Effect of exchange rate changes on
cash (34) -
--- ---
Net (decrease) increase in cash and
cash equivalents (37,267) 23,736
Cash and cash equivalents, beginning
of period 40,041 16,305
------ ------
Cash and cash equivalents, end of
period $2,774 $40,041
====== =======
Supplemental cash flow disclosure:
Cash paid for interest $1,999 $12,773
====== =======
Cash refunded for taxes $54 $192
=== ====
Supplemental disclosure of noncash
investing activities:
Capital expenditures included in
accounts payable and accrued
liabilities $11,137 $1,563
======= ======
Comparison of Non-GAAP Financial Measures
EBITDA and Adjusted EBITDA are not financial measures presented in accordance with GAAP. We believe that the presentation of these non-GAAP financial measures will provide useful information to investors in assessing our financial performance and results of operations. Net income is the GAAP measure most directly comparable to EBITDA and Adjusted EBITDA. Our non-GAAP financial measures should not be considered as alternatives to the most directly comparable GAAP financial measure. Each of these non-GAAP financial measures has important limitations as an analytical tool due to exclusion of some but not all items that affect the most directly comparable GAAP financial measures. You should not consider EBITDA or Adjusted EBITDA in isolation or as substitutes for an analysis of our results as reported under GAAP. Because EBITDA and Adjusted EBITDA may be defined differently by other companies in our industry, our definitions of these non-GAAP financial measures may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.
The following table presents a reconciliation of EBITDA and Adjusted EBITDA to our net income or net loss, which is the most directly comparable GAAP measure for the periods presented:
Three Months Ended Twelve Months Ended Rockwater
December 31, December 31, One Month Ended
------------ ------------
2017 2016 2017 2016 October 31, 2017 (1)
---- ---- ---- ---- --------------------
(unaudited)
(in thousands)
Net (loss) income $(14,950) $(24,713) $(35,127) $(313,948) $701
Interest expense 4,744 4,336 6,629 16,128 468
Tax (benefit) expense (525) (916) (851) (524) 121
Depreciation and amortization 34,993 21,589 103,449 97,107 4,806
------ ------ ------- ------ -----
EBITDA 24,262 296 74,100 (201,237) 6,096
Impairment - - - 198,692 -
Lease abandonment costs 701 6,254 3,572 19,423 50
Non-recurring severance expenses (2) 4,039 197 4,161 886 125
Non-recurring transaction costs (3) 4,717 - 10,179 (236) 627
Non-cash compensation expenses 5,910 1 7,691 (487) 387
Non-cash loss (gain) on sale of subsidiaries and other assets 965 (68) 1,740 (97) (3)
Non-recurring phantom equity and IPO-related compensation - - 12,537 - -
Foreign currency (gain) loss (281) - (281) - 404
Other non-recurring charges (4) 3,563 - 3,563 - 21
----- --- ----- --- ---
Adjusted EBITDA $43,876 $6,680 $117,262 $16,944 $7,707
======= ====== ======== ======= ======
(1) The selected stand-alone Rockwater
results for the month of October
31, 2017 are presented to provide
an understanding of the combined
company's fourth quarter 2017
results. This information is
voluntarily provided to reflect
the pre-merger historical
information of Rockwater and
reflects the accounting policies
of Rockwater prior to the merger.
Additionally, the information
provided does not reflect any
impacts related to the merger and
does not reflect what the results
are expected to be following the
merger. Accordingly, it is only
shown for supplemental purposes.
(2) For the three and twelve months
ended December 31, 2017, these
costs are associated with
severance incurred in connection
with the Rockwater merger. For the
three and twelve months ended
December 31, 2016, these costs are
associated with the reduction in
headcount as a result of the
industry downturn.
(3) For the three and twelve months
ended December 31, 2017, these
costs are primarily associated
with the Rockwater merger and GRR
acquisition. For the twelve months
ended December 31, 2016, these
costs are associated with our
evaluation and negotiation of
various transactions that never
materialized.
(4) Represents estimated sales tax
liability related primarily to
calendar years 2012-2015, offset
by gain realized on the Company's
previously held interest in
Rockwater stock.
Contacts: Select Energy Services
----------------------
Gary Gillette - CFO & SVP
Chris George - Sr. Director, Finance & Investor Relations
(713) 296-1073
IR@selectenergyservices.com
Dennard Lascar Investor Relations
---------------------------------
Ken Dennard / Lisa Elliott
713-529-6600
WTTR@dennardlascar.com
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SOURCE Select Energy Services, Inc.
