Select Water Solutions: A 128 Million-Barrel Vote of Confidence in the Northern Delaware Network
Record infrastructure revenue, a landmark MVC contract, and a raised outlook underscore a growth story that's becoming harder to ignore.
WTTR · Earnings Call · 2026-08-05
The Big Win
Select Water Solutions' second-quarter results were strong, but the real story is the Water management contract that will define the next decade. CEO John Schmitz highlighted the execution of a new 7-year agreement with a large public operator in the Northern Delaware Basin, supported by a sizable 128 million barrel MVC. This wasn't just a volume commitment—it included the conveyance of 14 underutilized but strategically located saltwater disposal wells (SWDs) in Eddy and Lea Counties, New Mexico. As Schmitz explained:
This reduced the operators' need for owning disposal wells in the region. This speaks to the value our integrated recycling and disposal infrastructure network brings to our customers and more broadly, to the Northern Delaware region.
This is a textbook example of the network effect: the operator realized the disposal capacity is more valuable inside Select's broader commercial platform than as a standalone asset. Chris George added that this isn't the first time customers have directly conveyed assets, but the scale here is notable. The system now extends toward the Texas state line, a geographic expansion that increases the optionality of the Northern Delaware network.
Infrastructure Inflection
Water Infrastructure delivered record quarterly revenue of $102 million, a 26% year-over-year increase and a 5% sequential gain. Gross margins before D&A hit 58%, well above the guided range. Chris George guided to another 5-10% revenue growth in Q3 and reiterated the high end of the full-year 25-30% growth range.
This performance is underpinned by a growing backlog that now includes multiple dedicated acres and interruptible tie-ins across the Permian, Bakken, MidCon, and Northeast. The company also added 16 new SWDs in the quarter and closed the Black River Ranch surface acquisition. As Michael Skarke noted, the system is purposely oversized—“we upsized the system whether the throughput of the pipes by about 50% or doubled to get 50% underutilized capacity” — Michael Skarke · 2026-08-05—which means incremental volumes flow through at high incremental margins. The 128 million-barrel MVC, along with the new disposal capacity, should push utilization closer to the ceiling over the next couple of years.
Beyond the Core
Two ancillary themes are worth monitoring: mineral extraction and data centers. On minerals, Select signed a new iodine extraction agreement and has previously announced lithium projects. John Schmitz framed these as “margin enhancing and return enhancing to the existing investments we're consistently making.” — John Schmitz · 2026-08-05 The company expects initial financial contributions in 2027, scaling to multiple facilities over time.
On data centers, the conversation is heating up. Select is in multiple dialogues around West Texas water sourcing, treatment, and even power support. John Schmitz noted, “our core competency is sourcing water, moving it, treating it and disposing of it and doing so in very large quantities in a cost-efficient manner.” — John Schmitz · 2026-08-05 The company already booked $6 million of services revenue from data center construction support in Q2, a tangible early contribution.
This diversification aligns with the company's strategy to build a more predictable, contracted cash flow stream—something that was a recurring theme in prior calls. In May, Chris George said, “we're certainly not putting in any formal guidance out yet on the back half or into '27. But what I would say, Jim, is that with the strength of Q1, the opportunity set in front of us, we certainly see growth in the second half of the year.” — Chris George, Chief Financial Officer · 2026-05-06 That growth is now materializing faster than expected.
Financial Trajectory
Consolidated revenue reached $396 million in Q2, up 8% sequentially, while adjusted EBITDA hit a record $93 million, well above the high end of guidance. Total Revenue reflects the acceleration. The company raised net CapEx guidance to $250-$290 million as it continues to fund the Northern Delaware build-out, but it remains confident in improved free cash flow in 2027. The balance sheet is healthy, with Effective Net Cash improving 14% year-over-year.
Shares have run +30% over the past 90 days and hit an all-time high of $22.26 on the earnings date, though they've since pulled back ~11%. The market is beginning to price in the scale of the infrastructure platform, but the long-term contracted nature of the cash flows—backed by firm capacity and 128 million barrels of committed volume—suggests the rerating may have room to continue.
Select Water Solutions is no longer just a cyclical water services name; it is building a utility-like infrastructure franchise in the heart of the Permian. The second quarter demonstrated that the network has pricing power, volume visibility, and a mechanism to convert underutilized assets into high-margin growth. The key risk is execution—timely completion of the $25-30 million project and the ability to integrate the acquired SWDs. But if past performance is any guide, this team has earned the benefit of the doubt.