Company Quick10K Filing
Quick10K
Select Energy Services
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
8-K 2019-08-06 Earnings, Exhibits
8-K 2019-05-10 Amend Bylaw, Shareholder Vote, Exhibits
8-K 2019-05-07 Earnings, Regulation FD, Exhibits
8-K 2019-03-22 Officers, Regulation FD, Exhibits
8-K 2019-02-26 Earnings, Exhibits
8-K 2019-02-11 Regulation FD, Exhibits
8-K 2018-11-06 Earnings, Exhibits
8-K 2018-08-09 Earnings, Exhibits
8-K 2018-05-21 Officers, Other Events, Exhibits
8-K 2018-05-08 Officers, Regulation FD, Exhibits
8-K 2018-05-04 Shareholder Vote
8-K 2018-03-22 Other Events, Exhibits
8-K 2018-03-07 Earnings, Exhibits
SLB Schlumberger Limited 44,684
OII Oceaneering 1,250
HLX Helix Energy Solutions Group 1,055
CJ C&J Energy Services 628
NINE Nine Energy Service 284
TUSK Mammoth Energy Services 163
NGS Natural Gas Services Group 153
CCLP CSI Compressco 135
NCSM NCS Multistage Holdings 98
BAS Basic Energy Services 37
WTTR 2019-06-30
Part I - Financial Information
Item 1. Financial Statements
Note 1-Business and Basis of Presentation
Note 2-Significant Accounting Policies
Note 3-Acquisitions and Divestitures
Note 4-Revenue
Note 5-Leases
Note 6-Inventories
Note 7-Property and Equipment
Note 8-Goodwill and Other Intangible Assets
Note 9-Debt
Note 10-Commitments and Contingencies
Note 11-Equity-Based Compensation
Note 12-Fair Value Measurement
Note 13-Related-Party Transactions
Note 14-Income Taxes
Note 15-Noncontrolling Interests
Note 16-Earnings per Share
Note 17-Segment Information
Note 18-Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits
EX-10.1 wttr-20190630ex1019141f2.htm
EX-31.1 wttr-20190630ex311a6bfb1.htm
EX-31.2 wttr-20190630ex312fb976e.htm
EX-32.1 wttr-20190630ex321f3859d.htm
EX-32.2 wttr-20190630ex322ddc475.htm

Select Energy Services Earnings 2019-06-30

WTTR 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to ________________

Commission File Number 001-38066

SELECT ENERGY SERVICES, INC.

(Exact name of registrant as specified in its charter)

Delaware

81-4561945

(State of incorporation)

(IRS Employer

Identification Number)

1233 W. Loop South, Suite 1400

Houston, TX

77027

(Address of principal executive offices)

(Zip Code)

(713) 235-9500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Class A common stock, par value $0.01 per share

WTTR

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.   Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.

Indicate by check mark whether the registrant is a shell company.   Yes      No  

As of August 2, 2019, the registrant had 80,177,766 shares of Class A common stock and 26,026,843 shares of Class B common stock outstanding.

Table of Contents

SELECT ENERGY SERVICES, INC.

TABLE OF CONTENTS

Page

PART I—FINANCIAL INFORMATION

Item 1.

Financial Statements (Unaudited)

5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

39

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

56

Item 4.

Controls and Procedures

57

PART II—OTHER INFORMATION

Item 1.

Legal Proceedings

58

Item 1A.

Risk Factors

58

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

58

Item 3.

Defaults upon Senior Securities

59

Item 4.

Mine Safety Disclosures

59

Item 5.

Other Information

59

Item 6.

Exhibits

59

2

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (the “Quarterly Report”) includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements, other than statements of historical fact included in this Quarterly Report, regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this Quarterly Report, the words “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project,” “preliminary,” “forecast,” and similar expressions or variations are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on our current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements described under the heading “Risk Factors” included in our most recent Annual Report on Form 10-K and under the heading “Part II―Item 1A. Risk Factors” in this Quarterly Report. These forward-looking statements are based on management’s current belief, based on currently available information, as to the outcome and timing of future events.

Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, those summarized below:

the level of capital spending and access to capital markets by oil and gas companies;
trends and volatility in oil and gas prices;
demand for our services;
capacity constraints on regional oil, natural gas and water gathering, processing and pipeline systems that result in a slowdown or delay in drilling and completion activity, and thus a slowdown or delay in the demand for our services in our core markets;
our ability to retain key management and employees;
our ability to hire and retain skilled labor;
regional impacts to our business, including our key infrastructure assets within the Bakken and northern Delaware formation of the Permian Basin;
our access to capital to fund expansions, acquisitions and our working capital needs and our ability to obtain debt or equity financing on satisfactory terms;
our health, safety and environmental performance;
the impact of current and future laws, rulings and governmental regulations, including those related to hydraulic fracturing, accessing water, disposing of wastewater, transferring produced water, interstate freshwater transfer, chemicals and various environmental matters;
the impact of competition on our operations;
the degree to which our exploration and production (“E&P”) customers may elect to bring their water-management services in-house rather than source these services from companies like us;
our level of indebtedness and our ability to comply with covenants contained in our Credit Agreement (as defined herein) or future debt instruments;

3

Table of Contents

delays or restrictions in obtaining permits by us or our customers;
constraints in supply or availability of equipment used in our business;
the impact of advances or changes in well-completion technologies or practices that result in reduced demand for our services, either on a volumetric or time basis;
changes in global political or economic conditions, generally, and in the markets we serve;
accidents, weather, seasonality or other events affecting our business; and
the other risks identified in our most recent Annual Report on Form 10-K, and under the headings “Part I―Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Part II―Item 1A. Risk Factors” in this Quarterly Report.

These factors are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors also could have material adverse effects on our future results. Our future results will depend upon various other risks and uncertainties, including those described under the heading “Part I―Item 1A. Risk Factors” in our most recent Annual Report on Form 10-K and under the heading “Part II―Item 1A. Risk Factors” in this Quarterly Report. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. We undertake no obligation to update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise. All forward-looking statements attributable to us are qualified in their entirety by this cautionary note.

4

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

SELECT ENERGY SERVICES, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

June 30, 2019

December 31, 2018

    

(unaudited)

Assets

Current assets

 

Cash and cash equivalents

$

23,818

$

17,237

Accounts receivable trade, net of allowance for doubtful accounts of $4,921 and $5,329, respectively

 

324,918

 

341,711

Accounts receivable, related parties

 

3,105

 

1,119

Inventories

 

39,952

 

44,992

Prepaid expenses and other current assets

 

29,435

 

27,093

Total current assets

 

421,228

 

432,152

Property and equipment

 

1,069,496

 

1,114,378

Accumulated depreciation

 

(603,191)

 

(611,530)

Property and equipment held-for-sale, net

1,906

Total property and equipment, net

 

468,211

 

502,848

Right-of-use assets

75,302

Goodwill

 

266,934

 

273,801

Other intangible assets, net

 

142,438

 

148,377

Other assets

 

3,064

 

3,427

Total assets

$

1,377,177

$

1,360,605

Liabilities and Equity

 

 

  

Current liabilities

 

 

  

Accounts payable

$

53,107

$

53,847

Accrued accounts payable

43,311

62,536

Accounts payable and accrued expenses, related parties

 

3,417

 

5,056

Accrued salaries and benefits

 

16,734

 

22,113

Accrued insurance

 

15,799

 

14,849

Sales tax payable

1,282

5,820

Accrued expenses and other current liabilities

 

10,615

 

14,560

Current operating lease liabilities

19,553

Current portion of finance lease obligations

 

421

 

938

Total current liabilities

 

164,239

 

179,719

Long-term operating lease liabilities

 

75,169

 

16,752

Other long-term liabilities

 

10,921

 

8,361

Long-term debt

 

 

45,000

Total liabilities

 

250,329

 

249,832

Commitments and contingencies (Note 10)

 

 

  

Class A common stock, $0.01 par value; 350,000,000 shares authorized; 80,176,078 and 78,956,555 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively

 

802

 

790

Class A-2 common stock, $0.01 par value; 40,000,000 shares authorized; no shares issued or outstanding as of June 30, 2019 and December 31, 2018

 

 

Class B common stock, $0.01 par value; 150,000,000 shares authorized; 26,026,843 shares issued and outstanding as of June 30, 2019 and December 31, 2018

 

260

 

260

Preferred stock, $0.01 par value; 50,000,000 shares authorized; no shares issued and outstanding as of June 30, 2019 and December 31, 2018

 

 

Additional paid-in capital

 

821,968

 

813,599

Retained earnings

 

25,988

 

18,653

Accumulated other comprehensive deficit

(380)

(368)

Total stockholders’ equity

 

848,638

 

832,934

Noncontrolling interests

 

278,210

 

277,839

Total equity

 

1,126,848

 

1,110,773

Total liabilities and equity

$

1,377,177

$

1,360,605

The accompanying notes to consolidated financial statements are an integral part of these financial statements.

5

Table of Contents

SELECT ENERGY SERVICES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except share and per share data)

Three Months Ended June 30, 

Six Months Ended June 30,

    

2019

    

2018

2019

2018

Revenue

 

  

 

  

Water services

$

202,011

$

233,954

$

422,606

$

452,184

Water infrastructure

51,710

55,727

105,326

109,784

Oilfield chemicals

 

63,001

 

64,807

129,830

128,437

Other

 

7,165

 

38,759

28,771

79,237

Total revenue

 

323,887

 

393,247

686,533

769,642

Costs of revenue

 

  

 

  

Water services

155,151

176,571

318,272

341,201

Water infrastructure

38,456

37,884

79,886

77,980

Oilfield chemicals

 

54,051

58,500

113,578

115,584

Other

 

7,447

33,119

28,500

68,873

Depreciation and amortization

 

28,843

30,445

60,361

61,327

Total costs of revenue

 

283,948

 

336,519

600,597

664,965

Gross profit

 

39,939

 

56,728

85,936

104,677

Operating expenses

 

  

 

  

Selling, general and administrative

 

27,297

26,871

59,673

52,552

Depreciation and amortization

 

906

807

1,906

1,348

Impairment of goodwill

 

4,396

Impairment of property and equipment

374

2,282

893

2,282

Impairment of cost-method investment

 

2,000

Lease abandonment costs

 

183

1,973

1,256

3,097

Total operating expenses

 

28,760

 

31,933

68,124

61,279

Income from operations

 

11,179

 

24,795

17,812

43,398

Other income (expense)

 

  

 

  

(Losses) gains on sales of property and equipment, net

(1,709)

2,056

(6,200)

1,502

Interest expense, net

 

(839)

(1,342)

(1,932)

(2,493)

Foreign currency gain (loss), net

67

(340)

327

(740)

Other (expense) income, net

 

(59)

4

210

100

Income before income tax expense

 

8,639

 

25,173

10,217

41,767

Income tax expense

 

(571)

(150)

(749)

(612)

Net income

 

8,068

 

25,023

9,468

41,155

Less: net income attributable to noncontrolling interests

 

(1,868)

(8,060)

(2,133)

(14,093)

Net income attributable to Select Energy Services, Inc.

$

6,200

$

16,963

$

7,335

$

27,062

Net income per share attributable to common stockholders (Note 16):

 

Class A—Basic

$

0.08

$

0.24

$

0.09

$

0.40

Class A-2—Basic

$

$

$

$

0.40

Class B—Basic

$

$

$

$

Net income per share attributable to common stockholders (Note 16):

 

Class A—Diluted

$

0.08

$

0.24

$

0.09

$

0.39

Class A-2—Diluted

$

$

$

$

0.39

Class B—Diluted

$

$

$

$

The accompanying notes to consolidated financial statements are an integral part of these financial statements.

6

Table of Contents

SELECT ENERGY SERVICES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

(in thousands)

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2019

    

2018

2019

2018

Net income

$

8,068

$

25,023

$

9,468

$

41,155

Other comprehensive income

 

  

 

  

Foreign currency translation adjustment, net of tax of $0

(66)

(191)

(12)

(450)

Comprehensive income

 

8,002

 

24,832

9,456

40,705

Less: comprehensive income attributable to noncontrolling interests

 

(1,853)

 

(7,998)

(2,130)

(13,939)

Comprehensive income attributable to Select Energy Services, Inc.

$

6,149

$

16,834

$

7,326

$

26,766

The accompanying notes to consolidated financial statements are an integral part of these financial statements.

7

Table of Contents

SELECT ENERGY SERVICES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the six months ended June 30, 2019 and 2018

(unaudited)

(in thousands, except share data)

Class A

Class A-2

Class B

Preferred

Accumulated

Stockholders

Stockholders

Stockholders

Stockholders

Other

Class A

Class A-2

Class B

Additional

Comprehensive

Total

Common

Common

Common

Preferred

Paid-In

Retained

Income

Stockholders’

Noncontrolling

  

Shares

  

Stock

  

Shares

  

Stock

  

Shares

  

Stock

  

Shares

  

Stock

  

Capital

  

Earnings

  

(Deficit)

  

Equity

  

Interests

  

Total

Balance as of December 31, 2018

 

78,956,555

$

790

 

$

 

26,026,843

$

260

 

$

$

813,599

$

18,653

$

(368)

$

832,934

$

277,839

$

1,110,773

ESPP shares issued

5,667

58

58

(2)

56

Equity-based compensation

6,271

6,271

2,037

8,308

Issuance of restricted shares

 

1,373,930

 

14

 

 

 

 

 

 

 

3,549

 

 

 

3,563

 

(3,563)

 

 

Exercise of restricted stock units

 

1,250

 

 

 

 

 

 

 

 

4

 

 

 

4

 

(4)

 

 

Repurchase of common stock

(152,502)

(2)

(1,539)

(1,541)

25

(1,516)

Restricted shares forfeited

(8,822)

(23)

(23)

23

Distributions to noncontrolling interests, net

 

 

 

 

 

 

 

 

 

 

 

 

 

(225)

 

 

(225)

NCI income tax adjustment

49

49

(49)

Foreign currency translation adjustment

(12)

(12)

(4)

(16)

Net income

 

 

 

 

 

 

 

 

 

 

7,335

 

 

7,335

 

2,133

 

 

9,468

Balance as of June 30, 2019

 

80,176,078

$

802

 

$

 

26,026,843

$

260

 

$

$

821,968

$

25,988

$

(380)

$

848,638

$

278,210

$

1,126,848

Class A

Class A-2

Class B

Preferred

Accumulated

Stockholders

Stockholders

Stockholders

Stockholders

Retained

Other

Class A

Class A-2

Class B

Additional

Earnings

Comprehensive

Total

Common

Common

Common

Preferred

Paid-In

(Accumulated

Income

Stockholders’

Noncontrolling

  

Shares

  

Stock

  

Shares

  

Stock

  

Shares

  

Stock

  

Shares

  

Stock

  

Capital

  

Deficit)

  

(Deficit)

  

Equity

  

Interests

  

Total

Balance as of December 31, 2017

 

59,182,176

$

592

 

6,731,845

$

67

 

40,331,989

$

404

 

$

$

673,141

$

(17,859)

$

302

$

656,647

$

406,722

$

1,063,369

Conversion of Class A-2 to Class A

 

6,731,839

 

67

 

(6,731,839)

 

(67)

 

 

 

 

 

 

 

 

 

 

 

Conversion of Class B to Class A

10,948,669

110

(10,948,669)

(110)

111,803

111,803

(111,803)

ESPP shares issued

3,986

50

50

4

54

Equity-based compensation