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Greetings, and welcome to the Select Water Solutions 2025 First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Garrett Williams, Vice President of Corporate Finance and Investor Relations. Thank you, sir. You may begin.

Thank you, operator, and good morning, everyone. We appreciate you joining us for Select Water Solutions conference call and webcast through to our financial and operational results for the first quarter of 2025. With me today are John Schmitz, our Founder, Chairman, President and Chief Executive Officer; Chris George, Executive Vice President and Chief Financial Officer; Michael Skarke, Executive Vice President and Chief Operating Officer; and Mike Lyons, Executive Vice President and Chief Strategy and Technology Officer. Before I turn the call over to John, I have a few housekeeping items to cover. A replay of today's call will be available by webcast and accessible from our website at selectwater.com. There will also be a recorded telephonic replay available until May 21, 2025. The access information for this replay was also included in yesterday's earnings release. Please note that the information reported on this call speaks only as of today, May 07, 2025, and therefore, time sensitive information may no longer be accurate as of the time of the replay listening or transcript reading. In addition, the comments made by management during this conference call may contain forward-looking statements within the meaning of the United States Federal Securities Law. These forward-looking statements reflect the current view of Select's management. However, various risks, uncertainties and contingencies could cause our actual results, performance or achievements to differ materially from those expressed in the statements made by management. The listener is encouraged to read our annual report on Form 10-K, our current reports on Form 8-K, as well as our quarterly reports on Form 10-Q to understand those risks, uncertainties and contingencies. Please refer to our earnings announcement released yesterday for reconciliations of non-GAAP financial measures. Now, I would like to turn the call over to John.

Thanks, Garrett. Good morning and thank you for joining us. I am pleased to be discussing Select Water Solutions again with you today. The first quarter of 2025 was a strong start to the year for Select. I'd like to start with some of the key first quarter highlights, an overview of the several large contracts we recently secured and other strategic and market updates. Then I'll hand it over to Chris to discuss the first quarter results and forward outlook in more detail. In the first quarter, we increased revenue by 7%, outpacing the general macro environment, increased adjusted EBITDA by 14% and improved consolidated gross margins by 1 percentage point. We achieved strong revenue growth of 21% in chemical technologies and 8% in water services, while maintaining a strong 54% gross margins in water infrastructure. In addition to these operational gains, we reduced consolidated SG&A by 6% and grew net income by $12 million. Water Infrastructure saw an increase in both recycling and disposal volumes in the first quarter, a trend we anticipate will continue into the second quarter. While revenue was modestly down sequentially, this was consistent with our expectation and was driven entirely by reduced revenues from our legacy freshwater pipeline assets. This includes a 40 mile freshwater pipeline in the Northern Delaware that was taken offline, in order to convert the asset to transport produced water. This pipeline has since been integrated into our expanding Northern Delaware network and will provide tremendous operational and strategic benefits as the primary North South truck line for this system. Since the start of the year, we have signed several new agreements for large gathering, recycling, distribution and disposal projects that significantly add to our contracted and dedicated acreage position and provide substantial long-term revenue potential. These latest contract awards add to our industry-leading recycling footprint and further advance the weighting of our profitability coming from contracted and full lifecycle and production weighted revenues. Specifically looking at the Northern Delaware Basin in New Mexico, we have quickly developed a leading water infrastructure network with the recent wins, taking our total contracted footprint in the basin to more than 1,000,000 acres under dedication or right of first refusal agreements in this basin alone. The strategic location of our latest development projects encompassing a large portfolio of Tier 1 well inventory, combined with the structure of our contracts with industry-leading E&P partners give us confidence that these infrastructure assets will be strong contributors to our earnings, not only in late '25, but well into the future years to come. While macro pressure and potential activity dislocations caused by the recent tariff and global trade announcements have been major topics as of late, we are well-positioned with a diversified footprint across all major U.S. unconventional basins. This includes a rapidly growing asset base in the Permian Basin, as well as market-leading positions in natural gas basins, such as the Haynesville and the Marcellus Utica, which we expect to demonstrate resilience this year. Looking closer at the latest contract awards, the largest of the new agreements is an 11-year contract, supporting the largest single capital project in the history of this company, encompassing water recycling, storage, disposal and both gathering and distribution pipelines in the Northern Delaware Basin in Eddy County for existing key customers in the region. This agreement adds more than 265,000 additional dedicated and right of first refusal acres, supporting the customer's long-term development plans in the basin. Importantly, this project builds off the value of our existing Lea County infrastructure network and will add approximately 100 miles of incremental large diameter pipelines to our existing network. This buildout will provide a critical East West expansion into Eddy County and will allow us to fully maximize our water balancing and full lifecycle water capabilities across a much broader geographic footprint. Furthermore, we also capitalized on our existing right-of-first refusal agreements with this same customer, exercising our rights to convert an additional 25,000 acres into long-term dedication, supported by adding an incremental 14 miles of large diameter pipeline buildout. Upon the completion of these recently awarded projects, we will have more than 1,300,000 barrels per day of recycling throughput capacity in the Northern Delaware Basin, supported by long-term contracts with blue chip operators. On a pro forma basis, New Mexico will now represent 54% of our total fixed recycling capacity, a significant achievement for us over the last two years. Additionally, in the first quarter, we executed an agreement to expand our infrastructure on the Central Basin platform recycling project we announced last quarter with a large public E&P operator. The previous announced greenfield recycling facility in the Central Basin platform added a 124,000 acre dedication and is now being interconnected with 22 miles of parallel produced water gathering and treated produced water distribution pipelines. Finally, we are also highly encouraged by the long-term growth opportunities in our agricultural, industrial and municipal water pursuits and have continued to progress our AV farms investments as planned with an additional senior water rights acquisition during the first quarter. These opportunities should provide further stability and steady earnings to the Select for decades to come once fully developed over the next two to three years. Now, looking at the rest of the business, our Water Services and Chemical Technology segments continue to provide strong source of free cash flow for us with these two segments continuing to generate strong conversion of 70% or greater of their gross profit to free cash flow, helping to fund our water infrastructure growth plans. While we expect revenue to decrease sequentially for these two segments, we actually expect them to generate more free cash flow in the second quarter of 2025, relative to the first quarter due to the improved margins and reduced maintenance capital required during the quarter. Looking forward, we do expect a lower commodity price and supply chain dislocations resulting from the tariff and trade related uncertainty to impact the oil and gas industry overall. However, we believe the direct impacts on Select will be limited in near-term and we expect continued growth in our consolidated adjusted EBITDA of 6% to 12% during the second quarter. While we haven't seen a material impact to the overall activity levels yet, oil prices at current levels could drive decreases in activity through the second half of the year. We are fully preparing for the potential impact to the more completions-oriented parts of our business largely within the services and chemicals. However, we have built significant resilience into the business in recent years with our strategic focus on water infrastructure growth, increasing full lifecycle and production weighted revenues, the strength of our contract portfolio and uniqueness of our acreage and inventory we have underwritten. Looking back over the last 24 months, we are very proud of the contract and asset base we have put together in a relatively short period of time. And this gives us strong confidence in our positioning as we look ahead. At this point, I'll hand it over to Chris to speak to our financial results and outlook in a bit more detail. Chris?

Thank you, John, and good morning, everyone. Select made great strides in the first quarter, which included strong revenue, adjusted EBITDA and net income growth, very healthy water infrastructure gross margins before D&A of 54%, significant new water infrastructure contract wins, including sizable additional acreage dedications in the Permian Basin. Our first strategic partnership to support ultra long-term municipal industrial and agricultural water supply in Colorado, the rollout of our new ERP system across the company and the closing of our new five-year sustainability linked credit facility, including $300 million of revolver commitments and $250 million of funded term loan commitments. The additional capital and liquidity provided through our new credit facility provides a prudent source of financing to support our additional water infrastructure project wins and the initiation of our large scale senior water rights investments in Colorado. Maintaining a disciplined approach to the use of leverage has been a core tenant of Select over our history and has benefited us during times of cyclical stress in the market. We firmly expect to maintain this discipline and with the continued free cash flow generation from our base businesses and our enhanced overall liquidity, we are well-positioned to fund our capital projects, while maintaining a conservative leverage profile in a variety of market conditions. Looking at our recent first quarter segment performance in more detail, as I mentioned earlier, Water Infrastructure maintained a strong 54% gross margin before D&A during the period. While our Freshwater Pipeline business declined approximately $8 million in revenue during the quarter, continued gains in our strategic recycling and disposal divisions limited the reduction for the overall segment to $4 million sequentially. As John touched on earlier, a large driver of the impact was from our large diameter freshwater pipeline in New Mexico that we have now successfully converted into a produced water line tied into our expanded infrastructure network in the region. In addition to growing our recycling and disposal volumes sequentially, we also achieved a single facility record 500,000 barrel per day peak recycling rate at one of our Northern Delaware recycling facilities in Lea County during the first quarter. This improved rate helped us achieve a new monthly record during March for total barrels recycled at a single facility. With several projects set to come online for our water infrastructure business during the second quarter, we expect revenue to increase double-digit percentages in Q2 with margins remaining above 50%. While the overall macroeconomic outlook weighs on the market overall, we still expect a continued growth trajectory for water infrastructure over the second half of the year, compared to the first half of the year. On a full year-over-year basis, we believe we are currently still tracking within albeit towards the 15% lower end of our previously guided range for both revenue and gross profit growth for the segment in 2025, as we contemplate the potential impacts on near-term activity levels from a lower commodity price environment. Importantly though, with our latest new contract awards, we are adding additional capital projects that should continue to provide a further level of growth for this segment into 2026 and beyond, estimate to our water infrastructure strategy overall and the strength of its future earnings potential. Switching over to Water Services. This segment saw revenues increase by about 8% sequentially, driven primarily by improved activity levels coming out of a seasonal fourth quarter and strong gains in our Water Transfer business unit. This was at the higher end of our expected revenue guidance and our gross margins before D&A and services increased to 19.5% during Q1, a meaningful improvement compared to 16.4% in the fourth quarter. While we expect a 5% to 10% revenue decline in the second quarter for Water Services, as we see decreased traditional freshwater sourcing sales and legacy trucking revenues, resulting from ongoing operational consolidation decisions. We expect these decisions to support accretive gains for the segment, driving gross margins to improve further into the 20% to 22% range in Q2. On the Chemical Technologies side, this segment saw strong sequential revenue growth of 21% during the first quarter, well exceeding our guided expectations, driven by continued new product development, key customer wins and ongoing market share gains. During the second quarter, as variable activity levels modestly impact the business, we expect revenue to decrease mid-single-digit percentages, but expect to sustain relatively steady 14% to 16% gross margins during the second quarter. Looking back on a consolidated basis, in the first quarter, SG&A decreased to $37 million or just under 10% of revenue. We expect SG&A to stay at 10% to 11% of revenue in the second quarter of 2025. Altogether, we saw consolidated adjusted EBITDA of $64 million during the first quarter of 2025, just above the high end of our guidance, largely resulting from the stronger than expected margin performance in our Water Infrastructure segment and outsized top line performance from our Water Services and Chemical Technologies segments. For the second quarter of 2025, we expect an uplift in consolidated adjusted EBITDA to $68 million to $72 million, as strong sequential increases in the Water Infrastructure segment more than offset anticipated declines in Water Services and Chemical Technologies. While activity declines in the second half of the year, May further impact the outlook for our more completions-oriented Water Services and Chemical Technologies businesses after Q2, we are confident in the continued growth prospects for our Water Infrastructure business and the additional resilience that our latest contract awards will bring. With new projects slated to come online throughout the next 12 months, we expect to drive continued growth into 2026 and beyond for the Water Infrastructure segment. Looking at our other costs for the first quarter, depreciation, amortization and accretion remained fairly steady in Q1 at approximately $40 million. We expect D&A to remain in the low $40 million range per quarter, though modestly increasing from continued organic infrastructure investment and recent bolt-on acquisitions. Interest expense increased sequentially in conjunction with incremental borrowings under our new sustainability linked credit facility, and we expect it to remain at the $4 million to $5 million range per quarter. Our effective book tax rate applied to pretax operating income should stay in the low 20% range with cash taxes on the year remaining low at around $10 million or less. In the first quarter, we spent approximately $48 million of CapEx, primarily in support of Water Infrastructure projects. And as demonstrated by the announced project awards on today's call, we are seeing our large backlog materializing into actionable contracts. Following the recent project wins, we now expect $225 million to $250 million of net CapEx in 2025, up from $170 million to $190 million. We maintain our expectation of $50 million to $60 million of this CapEx going towards ongoing maintenance and margin improvement initiatives. Absent the sizable growth capital outlays, our business maintains a very maintenance like capital model and we have significant free cash flow generating capabilities and flexibility to manage this maintenance spend in accordance with market conditions without impacting our overall operational performance. While the additional growth CapEx will reduce our free cash flow expectations on the year, we believe these contracted capital projects are highly accretive investments that will greatly benefit Select for many years to come. Altogether, we are also adjusting our free cash flow expectation for the year to 5% to 15% conversion rate, relative to our adjusted EBITDA. During the first quarter, we also deployed $86 million towards various acquisition and investment opportunities. We deployed $14 million to acquire multiple disposal assets in the Midland Basin and key pipeline assets in the Delaware Basin, each strategically supporting our existing recycling and disposal networks. Additionally, as mentioned on our last call, we completed the initial $62 million funding of our investment in AV farms during the first quarter, supporting the consolidation of a large portfolio of land, water and storage rights in Colorado. We were pleased to further support the business with an incremental $10 million investment during the quarter to add additional senior water rights to the portfolio, taking our total investment to date up to $72 million, and thereby, increasing our ownership position of the partnership to 39%. Accordingly, our remaining future capital commitments for the partnership are now $74 million, which we expect to deploy over the next one to three years. We are very excited about the long-term water supply opportunities in this region and the economic development and jobs growth that these rights can create. We look forward to partnering with various agricultural, industrial and municipal partners in the region for the overall benefit of the Arkansas River Valley and the state of Colorado at large. Another notable achievement for Select in the first quarter of 2025 was the successful implementation of our new ERP system across the full company. Having previously rolled out the new system for our chemicals business more than a year ago, we are excited to now have the system integrated across all of our water related operations as well. While we expect this system will allow us to yield more efficiencies over time, in the first quarter, we did see the impact to operating cash flows from an outside $62 million increase to working capital, as we rolled this system out alongside strong revenue gains. However, we fully expect these higher working capital levels to abate in the coming quarters to more normalized levels releasing cash over the remainder of the year. As we think about our overall capital allocation framework, we maintain our prioritization of adding long-term contracts, full lifecycle and production weighted revenues and generally finding ways we can deliver a long-term resiliency, accretive growth and strong returns to our Water Solutions platform. In summary, during the first quarter of 2025, we hit a number of key milestones, advanced our strategic initiatives and improved our overall financial performance. Perhaps more importantly, even as we face economic uncertainty in a period of potential activity volatility, we have positioned the company with strong liquidity, resilient earnings streams and growing contract coverage spanning the best rock in the Lower 48. With that, I'll hand it over to the operator for any questions. Operator?

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] One moment please, while we poll for questions. Thank you. Our first question comes from the line of Bobby Brooks with Northland Capital. Please proceed with your question.

Hey, good morning, guys. Thank you for taking my question. First, I just wanted to touch on, you guys mentioned how the water, your water infrastructure footprint is really aligned with growth areas in the Permian and more specifically, where there's very low breakeven. So, just with that in mind, I'd assume you haven't seen much of an activity pullback in those areas. I just wanted to make sure I'm thinking about this right.

Hey, Bobby, this is Michael Skarke. That's correct. We have not seen any pullback to date. So, it's not to say that we won't see it further based on what operators do, but we feel really good about the assets we put in place. We feel really good about the contracts. We feel really good about the rock that we've underwritten to support those capital investments.

Got it. And then, just switching gears to the AV Farms Colorado project, I think this is something I continue to feel like this is really fascinating development for you and expanding outside of the traditional energy market. But just the question I had with it is, from our side of the table, what are kind of the upcoming panelists or pieces that you need to accomplish before eventually seeing it become a revenue generating opportunity?

Thanks, Bobby. Great question. So, at the moment, we're really engaging everybody in the region, all the relevant stakeholders. I think we're seeing demand actually be stronger than anticipated and we have LOIs in place with several potential off takers and customers. And so, I think really where we're focused is actively discussing with them, getting terms in place, and I think very much on track to meet the previously announced earnings potential of the asset. I think we're pretty bullish on timing, but of course, more details to come once we get those deals signed. So, there's more wood to chop here certainly, but this is going to be a fantastic asset for us and for the local partners that we're engaging. I mean, it creates a tremendous amount of economic growth and jobs locally and it really fits much needed shortfall in the market overall. So, we're really excited and we're focused on getting these early contracts in place that will fundamentally underpin the asset for decades to come following that.

Got it. That's super helpful color. And just to make sure I'm understanding it correctly, it seems like then, you're not going to, you won't, stuff won't move forward, in terms of like construction and kind of connecting these assets and building them up, until there's customer off take agreements under pinning them. Is that the right kind of cadence of it?

Yes, that's right. We've done the heavy lifting here around the consolidation. And so, I think you'll see this thing really spool up with those contracts underpinning it. And then, everything becomes quite clear around the economics and paybacks and so on. But it's exactly in line with what we had outlined before. We're again super optimistic on the asset.

Thank you. I appreciate it. Looking forward to hosting you guys in a couple of weeks here on the fireside chat, I'll return to the queue.

Our next question comes from the line of Tom Turrin with Seaport Global. Please proceed with your question.

Good morning, guys.

Good morning, Tom.

Just following up on AV Farm there, could you speak to the roles that C&A Companies is taking, both commercially, when it comes to the LOIs you're working on and then operationally? And specifically, on the operational side, if we fast forward two or three years from now, when you've invested the remaining $74 million you've committed, you've moved to 56% majority LP stage and then consolidated ABF. How should C&A's operational role evolve along the way? Or do you expect Select to sort of become ever more directly involved operationally sort of learn from C&A over the next two to three years? Will C&A continue to have a dominant or lead operational role even after you've hit 56% consolidated. Could you just expound on that for us?

Yes, sure. Thanks, Tom. So, I think we're treating this very much as the partnership that it is. So, I think we all play a role in commercializing the asset. I think longer term, certainly the plan and aligned with all of our partners is that Select will own and operate this asset. So, we were part of our core capabilities that we're bringing to the table is around operating deep, very attractive reservoirs, operating pipelines as needed, operating and doing the day-to-day water movements. I mean that's something that's been core across our services business for a long time and it's something we do extensively in our infrastructure business, which is why this asset is such a great fit for us now and for the decades to come because that system is a large system and it demands an operator that has the capabilities that we bring. So, I think it's both upfront, we're doing our standard commercialization of the asset, which we're very good at. And then, on the back end, if we signed a multi-decade contract, we are absolutely 100% committed to operating that asset in the long-term. And we're very good at it. So, that's part of the reason why we're here and why it's such a core fit.

And just so I'm clear then, I know C&A in particular has been a pioneer in lease following and it may bring some really unique differentiated expertise to that aspect of AVF. Is the expectation that at some point Select will also take over that aspect of AVF and sort of get up to speed on everything involved with NICE following?

Yes. I mean every aspect of the deal is something that we're comfortable with. And again, we brought the partners to the table because of their capabilities. So, I think to your specific point, everybody around the table for this deal plays a part. And I think we will certainly be the long-term owner operator in all respects here. So, happy to follow-up though.

Got it. No, that was helpful clarification. Thanks for that, Mike. And then, turning to water infrastructure. Could you speak to how your anchor tenant contracts are structured, when it comes to inflation and construction costs from raw materials, especially for large diameter pipe. Are there provisions in there to protect you, is it explicitly referred to tariffs?

Yes. Speaking on tariffs to start, just more broadly, Tom, we don't expect a material impact on water infrastructure as a result of tariffs or cost escalations. For water infrastructure, our supply chain is domestic and the pipelines are polyethylene and not steel. And so, we've run all of our projects back through kind of updated cost estimates and we're not going to see any material changes. So, our economics on the projects are intact and as underwritten.

Great to hear. Last one for me, similar, but for the Chemical Technologies division. Could you elaborate on CT's supply chain? How localized is it? And to the extent, it does rely on inputs that are imported, what's the nature of the exposure?

Yes, fair question, Tom. Obviously, being a chemicals manufacturing business, there is a supply chain of raw materials that is an important part of managing the operational cost structure of that business. We've been particularly coming out of the pandemic quite focused on adding resiliency to that supply chain and we've domesticated the vast majority of that supply chain into the U.S. and reduced our overall international product sourcing to less than 50% with less, with about half of that coming out of China. Obviously, if you think about base raw materials, a number of those are oil based. And so, any lower pricing on the oil side will actually benefit pricing on certain raw materials. And that can be managed against some of the other potential costs we might see through. I think it's less of a direct impact for us overall and more of an impact on other large scale manufacturers of base raw materials that we may source from as well. So, net-net, we don't expect anything to be materially disruptive to our near-term outlook. We've got a lot of resiliency in the supply chain and our team has done a really great job over the last few years of bringing the vast majority of that stateside. And even over the last 12 months, we've actually been focused on adding additional vertical integration into our manufacturing capabilities with some of our own base raw materials. That was a focus for us last year and that's something that's actually allowed us to increase the overall manufacturing capacity of our plant to near record levels here, as we integrated some of those raw materials into our own base manufacturing.

Makes sense. Thank you for taking my questions, Michael and Chris. I'll get back in the queue.

Thanks, Tom.

Our next question comes from the line of Don Crist with Johnson Rice. Please proceed with your question.

Good morning, guys. Hope you all are doing well. I had a question around water infrastructure kind of behind or looking forward past the second quarter. I went back and tried to count how many projects you have under construction right now and kind of lost count. As we look kind of towards the back half of '25 five and into '26, do you think you can kind of maintain a double-digit growth per quarter or somewhere near that as all these projects come on? I mean, obviously, you're spending a lot of capital now that will be and these projects will be completed somewhat around year end. Just kind of curious as you give us a little guidance on how that looks going into '26?

Yes, good question, Don. I'll maybe hit a couple of items and then let Michael add on if need be. As we think about the financial trajectory of Water Infrastructure, as we previously mentioned, you would expect to see a good trajectory coming out of the first quarter into Q2 and further into Q3. We expect that full year growth rate of that 15% or so to translate into subsequent growth into 2026 on a base case. And that Q3 run rate should be something that lends itself to materially above that 15%. So, as you look forward in 2026, you've got an established kind of base load of growth that's supporting the business and we've now supplemented that with additional projects being layered on here with the latest announcements. So, looking forward into '26, we expect to see something that market conditions notwithstanding think probably looks pretty comparable to 2025 on an overall trajectory of growth on both top line and the bottom line and maintaining a margin profile in that 50% plus range.

And maybe just to speak to a couple of points a little more specifically. The large project we just announced, that's going to really contribute in 2026. We're trying to get it online in the fourth quarter this year. There might be a small benefit, we'll see. But that's really going to be an uplift for 2026. And to your point Don, we have been very successful at finding accretive projects and it's really because the recycling first model we put forth is a superior economic model for our customer. And we're, as I mentioned, we're underwriting the rock. It's some of the best geology in the United States, and these are accretive deals and there's still more of them out there. The backlog is not, what it was last quarter because we just converted over $100 million, but there's still more opportunities and I think you'll see us continue to pursue those and be well-positioned to capture and add real growth to what is a very unique system in the Northern Delaware.

Yes. And maybe a couple of final things to add on. We previously indicated we thought we had a comparable opportunity to deploy similar growth capital next year that we were going to deploy this year. We've pulled forward some of that into this year, based on the pace we were able to execute on some of these additional contracts. So, some of that's a pull forward from a success standpoint in getting these contracts in place. I think we are optimistic that we're going to be able to backfill that with even further opportunities. What we're talking about from a guidance standpoint and a base case outlook is really based on the initial anchor tenant underwritings and there's a lot of commercialization opportunity to come from there. And the more we expand this network, the more capable we'll be with broad geographic coverage and water balancing capabilities that will add to that commercialization.

I appreciate all that color. And if I could just ask one kind of macro question. I mean, obviously, there's some uncertainty out there right now and we don't know what happens as we go into the back half of the year. But in your experience in past down cycles, have you seen a shift towards kind of recompletes and other kind of activity that may be smaller dollar rather than drilling a whole pad, to keep production up from these E&Ps? And are you seeing any kind of indications that that could be the shift in activity as we kind of move to the back half of the year?

Hey, Don, it's John Schmitz. The way I would answer it is, in the past and the length of the time that I spent in this industry, usually downturns are commodity price compression. A lot of focus gets on the assets that's already available to manage and increase because that's the best dollars that you can apply. And the second thing I would add to that, it's probably different more today than it used to be before unconventional is that the amount of your inventory that you can manage to the best of your ability for a higher commodity price, and the return profile in the first part of that wells life is very important, I think, today. It probably wasn't in the 80s and 90s, but today, it really is a very important piece. So, I think you will see the dollars that will get spent be reallocated and really thought through the current base assets, whether it's rate completion or get the most out of what you got, as well as protect your inventory.

Right. And kind of what I was driving at is, you could see a pickup in the Bakken or kind of Mid-Continent areas and kind of away from the Permian, which would obviously benefit you on the other side of the business.

Yes. I mean, we think about it and talk about it all the time. I mean, our exposure from gas to oil is extremely good. Our exposure to some of the best rock, whether it's in the Permian or in the United States, our exposure to, and we actually get affected by this to recompletion, whether it's the Eagle Ford, Bakken, even Barnett. I mean, we actually get good exposure to recompletions of current asset base, just because of our footprint and because of our gas to oil and where we started. I mean, we started in the very early stages of these plays and thereby, we got good exposure and good content to to recompletion opportunities.

I appreciate the color, John. I appreciate it. Thanks. I'll turn it back to the operator.

Thanks, Don.

Our next question comes from the line of Blake McLean with Daniel Energy. Please proceed with your question.

Hey, good morning, you all.

Good morning, Blake.

Good morning.

Yes, I'd like to just kind of stay on that high level macro conversation and I was hoping you guys could expand a little bit on the opportunity set in some of those dry gas basins. How are you seeing activity levels through conversations with customers evolving in the back half of this year and into '26 in places like the Haynesville and the Marcellus?

Yes, Blake, this is Michael. So, we've got a really strong footprint in the infrastructure side of both the Haynesville and the Marcellus. We're going to be the largest disposal provider in both those basins. We've seen activity pick up this year, relative to last year, and the outlook is certainly, at this stage is more consistent and more favorable than some of the weakness we're seeing in some of the oil plays. So, those are going to be areas of focus for us this year and should be areas of strength for us.

That makes sense. Anything you would point out as differentiated between the Haynesville and the more so, I mean, you're seeing more, you would expect to see a little bit more activity uplift in Haynesville near-term. Just curious, if there's any color you can provide on that.

Yes. I mean, I think that certainly as we look at the next couple of year outlook, the growth in LNG offtake that's coming to bear with both well underway and recently permitted projects is certainly going to be, I think, a substantial growth driver for the Haynesville from a demand standpoint. And we're certainly seeing a number of customers think through their next couple of year development planning and some of the conversations we're having around the off take for the produced waters. Certainly, I think ramping in the Haynesville side in particular.

Got it. Thank you for that. And then, maybe just another sort of bigger picture question. You guys have obviously been active in the M&A market. What does the current environment look like there? How are, how is some of the noise in a lot of things with regard to the macroeconomic environment impacting that and how do you guys think about that versus all of the organic growth opportunities you've got in front of you?

Yes, this is John. Like I would say, as it relates to Select, we continue to see more asset opportunity. We think of it as M&A, but we're really buying strategically located assets that really fit in a positive way throughout our networks. And those assets have become somewhat isolated and they become opportunities for us, as they become isolated. And we think we'll see more of that. We'll probably see more of it really in a down cycle like this, that the potential of lesser activity, if that's where we end up in the second half. But so, we still think there's good, we'd call it M&A, but it's really asset purchases for Select.

Yes. I'd say, first and foremost, the priority from a capital allocation standpoint remains on the organic backlog of new projects and getting those contracts in place. If we can supplement those projects with bolt-on acquisitions, that's a great opportunity for us and we're often doing that at below replacement costs, more attractively than a greenfield dollar. So, that's something that we'll continue to stay focused on. We just talked about our base and footprint across the U.S., as we think about capital allocation. We've got great opportunities to look at every base in the U.S., at those types of opportunities and it gives us a lot of clarity and conviction around making the right capital allocation choices that are competitive across the full scope of our footprint. But first and foremost, really excited about the latest contracts and the backlog we have to build out that water infrastructure base over the next 12 months or so and hope that there's more to come behind that that can continue to be an accretive use of the capital dollar.

Understood. Thank you, guys, very much for the time.

Thank you, Blake.

Our next question comes from the line of Jeff Robertson with Water Tower Research. Please proceed with your question.

Thank you. To follow-up on the commentary around natural gas basins, in particular, a place like the Haynesville. Michael, how much upside is there from greater capacity utilization? And is there a point you get to where there are opportunities for new growth capital projects like what you do, like what you've done in some of the oil basins where you're actually putting in new infrastructure and pipelines and integrating it into systems with disposal and recycling?

That's a great question, Jeff. The short answer is yes. So, we have existing capacity on our system in the Haynesville. And just as a reminder, I think we have a very unique asset in the Haynesville. We have an asset that the gathering pipeline that starts in the heart of DeSoto Parish or the Haynesville, and we pick up water all the way along and deposit it in disposal wells. We're working on, always working on using some of that for recycling as well. So, it's a very unique asset that I don't think could be easily replicated at all. We've had projects in the past where we expanded that pipeline, kind of wide off or teed off to reach new acreage and to service new customers. And those are conversations that are always ongoing and are certainly things that we would look to do as the Haynesville stabilizes or grows this year, and certainly, in preparation for the LNG expected off take in a few years to come. So, expanding the existing asset is something that we're looking at, something we're actively doing right now and I do expect we'll see more of. And then, in terms of existing capacity, we are not at capacity on the pipeline or from a disposal standpoint. And so, we do have the ability to support our operator partners, as they pick up activity or have greater production.

Yes. And as a reminder, we executed on a couple of acquisitions last year to add additional disposal capacity to that pipeline network to ensure we had the ability to grow with the basin. So, now, I feel like we're in a position to grow accretively on every incremental barrel of utilization we can put through that system. But the ability to tie in further gathering infrastructure and add that under contract is something that we're going to be very focused on. And our ability to invest that capital from a brownfield standpoint is going to be quite accretive when and if we do that.

Can you provide any color on how the margin uplift from increasing capacity utilization on those assets would compare to some of the other opportunities across the asset base?

Well, from a return on assets, that's going to be the most attractive dollar you can push through. In terms of just the accretion on the financial margin, it's highly accretive and it would be at or above what we would see from any of our new organic projects.

Just briefly, Michael, in the Northern Delaware Basin, if you did see much of a change in activity from completion activity, would that cause any issues for your gas balancing operation, I'm sorry, water balancing operations on those systems?

So, to the extent that we see a reduction in activity in and around our system in Northern Delaware, that is going to have some impact on our ability to balance the water. However, there's two points that I think are really important, Jeff. And the first is, you have to lean on a larger system, so that you can access more operators, more acreage and more completion activity. And that's exactly what we're building out. We're building out a system and we converted a freshwater pipeline that runs North South for the majority of New Mexico. We're building out an East West pipeline that's going to go from the far eastern edge of the formation to the far western edge into both large diameter pipelines. And our goal is to be able to affect and to serve all of the Northern, end of the Northern Delaware. And so, what we can do is, we can move water from one end of the basin to the other, to make sure that we're meeting our customers' needs and we're managing that. So, I think that's a really important point and it's something that is largely unique to what we've built. And then, on the second piece, recycling is, and I mentioned it earlier, it's a superior economic model for our customers. It is a meaningful cost savings to traditional disposal and sourcing of fresh water. And I think that cost savings is more important now than it is at $100 oil. And so, while we're delivering, while we're building out these systems, we have operators who are calling us saying, hey, we know you're laying a line here, we want to tie in. We would like to be able to provide interruptible service along your lines so that we can take advantage of reduced price compared to the traditional model. So, is activity something we're watching? Absolutely, something we're watching. But we feel really good about the savings that we can deliver our customers. We feel really good about the network, the contractual positions we have, both firm contracts and interruptibles.

Now, maybe to just add from a technology standpoint, I mean, we have a digital twin of these systems and we engage with our customers all the time. I mean, we're in most cases able to forecast 6 and 12 months out, in terms of both water that we're receiving and the jobs that we'll run down the pits. So, like, our team has proven to be extremely capable at finding these potential issues much before they become problems. And frankly, what we see a lot of is, these forecasted issues become opportunity because we're able to balance the basin pretty effectively. So, I think, just piggybacking on Michael's point there, I think this very large system is a core asset.

Thank you.

Thank you, Jeff.

Our next question is a follow-up question from Bobby Brooks with Northland Capital. Please proceed with your question.

Hey, just one quick one for me. The net, obviously you guys moved up the net CapEx guidance and you said that, mentioned how the maintenance CapEx is staying the same. I just wanted to confirm, I think the last time you talked about that net CapEx number you previously mentioned $10 million to $20 million in asset sales. Is that still the case?

From a base case standpoint, Bobby, yes, we expect to continue to have opportunities to see some asset sales net against that. I would say that, there's always additional opportunities there to monetize underutilized components of the business or things that may not be a needed fit going forward. And then, that maintenance spend that you mentioned can be quite flexible, if marketing conditions warrant without impacting the operational capabilities of the business. So, if you look at the overall capital program, we're absent the sizable growth capital, we're talking about 70% to 80% potential free cash flow yield on our adjusted EBITDA from a base maintenance standpoint. So, yes, we're increasing our CapEx and accordingly, that's going to reduce free cash flow, but this is a very attractive set of opportunities for us. It's going to anchor the company for many years to come. And so, we're very excited about the opportunity to deploy that capital to the extent that growth capital was not there. There's a significant free cash flow generating capability in the business, both within our traditional services and chemicals businesses that help underwrite our growth here and allow us to maintain a very disciplined balance sheet. But that water infrastructure business, to the extent that that growth capital is not there is an extremely high margin, low maintenance capital business that generates a lot of cash on its own. So, we're excited about deploying the capital near-term, but even more excited over the cash flow generating capabilities of these assets for the next decade.

Yes, I can for sure see why the excitement behind. That makes a lot of sense. Thank you, guys. I'll return to the queue.

This now concludes our question-and-answer session. I would now like to turn the floor back over to Mr. Schmitz for closing comments.

Thanks, everyone, for joining the call. We appreciate your continued support and interest in learning more about Select Water Solutions. I look forward to speaking to you again next quarter.