●

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;

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~~the impacts of advancements in drilling and well service technologies;~~

●

changes in global political or economic conditions, generally, and in the markets we serve;

●

acts of terrorism, war or political or civil unrest in the U.S. or elsewhere;

●

the ability to source certain raw materials globally on a timely basis from economically advantaged sources;

●

accidents, weather, ~~seasonality~~natural disasters or other events affecting our business; and

●

the other risks ~~described under “Risk Factors”~~identified in ~~the Final Prospectus~~our most recent Annual Report on Form 10-K and under the ~~heading “Item~~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 ~~“Risk~~the heading “Part I―Item 1A. Risk Factors” in ~~the Final Prospectus~~our most recent Annual Report on Form 10-K and under the heading ~~“Item~~“Part II―Item 1A. Risk Factors” in this Quarterly ~~Report.~~Report on Form 10-Q. 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 ~~statement.~~note.

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

SELECT ENERGY SERVICES, INC. ~~AND SUBSIDIARIES~~

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

September 30, 2017

December 31, 2016

(unaudited)


Assets

Current assets




Cash and cash equivalents

$
42,393

$
40,041
Accounts receivable trade, net of allowance for doubtful accounts of $2,867 and $2,144, respectively

148,372

75,892
Accounts receivable, related parties

433

135
Inventories

852

1,001
Prepaid expenses and other current assets

13,495

7,586
Total current assets

205,545

124,655
Property and equipment

815,002

739,386
Accumulated depreciation

(535,456)

(490,519)
Property and equipment, net

279,546

248,867
Goodwill

25,091

12,242
Other intangible assets, net

35,351

11,586
Other assets

7,216

7,716
Total assets

$
552,749

$
405,066
Liabilities and Equity




Current liabilities




Accounts payable

$
11,751

$
10,796
Accounts payable and accrued expenses, related parties

1,246

648
Accrued salaries and benefits

8,595

2,511
Accrued insurance

11,008

10,338
Accrued expenses and other current liabilities

39,713

22,091
Total current liabilities

72,313

46,384
Accrued lease obligations

18,100

15,946
Other long term liabilities

8,008

8,028
Long-term debt, net of current maturities

—

—
Total liabilities

98,421

70,358
Commitments and contingencies (Note 8)




Class A-1 common stock, $0.01 par value; 40,000,000 shares authorized; no shares issued and outstanding as of September 30, 2017; 16,100,000 shares issued and outstanding as of December 31, 2016

—

161
Class A common stock, $0.01 par value; 250,000,000 shares authorized and 30,468,249 shares issued and outstanding as of September 30, 2017; 3,802,972 shares issued and outstanding as of December 31, 2016

305

38
Class B common stock, $0.01 par value; 150,000,000 shares authorized and 38,462,541 shares issued and outstanding as of September 30, 2017 and December 31, 2016

385

385
Preferred stock, $0.01 par value; 50,000,000 shares authorized; no shares issued and outstanding as of September 30, 2017 and December 31, 2016

—

—
Additional paid-in capital

206,158

113,175
Accumulated deficit

(8,207)

(1,043)
Total stockholders’ equity

198,641

112,716
Noncontrolling interests

255,687

221,992
Total equity

454,328

334,708
Total liabilities and equity

$
552,749

$
405,066


	March 31, 2022		December 31, 2021
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	24,797	$	85,801
Restricted cash		2,602		—
Accounts receivable trade, net of allowance for credit losses of $4,972 and $4,401, respectively		293,595		232,824
Accounts receivable, related parties		157		219
Inventories		43,074		44,456
Prepaid expenses and other current assets		33,979		31,486
Total current assets		398,204		394,786
Property and equipment		997,229		943,515
Accumulated depreciation		(556,764)		(551,727)
Total property and equipment, net		440,465		391,788
Right-of-use assets, net		54,933		47,732
Other intangible assets, net		105,881		108,472
Other long-term assets, net		12,437		7,414
Total assets	$	1,011,920	$	950,192
Liabilities and Equity
Current liabilities
Accounts payable	$	57,311	$	36,049
Accrued accounts payable		49,935		52,051
Accounts payable and accrued expenses, related parties		2,375		1,939
Accrued salaries and benefits		16,517		22,233
Accrued insurance		18,664		13,408
Sales tax payable		2,609		2,706
Accrued expenses and other current liabilities		20,100		19,544
Current operating lease liabilities		18,101		13,997
Current portion of finance lease obligations		57		113
Total current liabilities		185,669		162,040
Long-term operating lease liabilities		55,464		53,198
Other long-term liabilities		47,395		39,780
Total liabilities		288,528		255,018
Commitments and contingencies (Note 9)
Class A common stock, $0.01 par value; 350,000,000 shares authorized and 98,111,119 shares issued and outstanding as of March 31, 2022; 350,000,000 shares authorized and 94,172,920 shares issued and outstanding as of December 31, 2021		981		942
Class A-2 common stock, $0.01 par value; 40,000,000 shares authorized; 0 shares issued or outstanding as of March 31, 2022 and December 31, 2021		—		—
Class B common stock, $0.01 par value; 150,000,000 shares authorized and 16,221,101 shares issued and outstanding as of March 31, 2022 and December 31, 2021		162		162
Preferred stock, $0.01 par value; 50,000,000 shares authorized; 0 shares issued and outstanding as of March 31, 2022 and December 31, 2021		—		—
Additional paid-in capital		971,282		950,464
Accumulated deficit		(352,670)		(359,472)
Total stockholders’ equity		619,755		592,096
Noncontrolling interests		103,637		103,078
Total equity		723,392		695,174
Total liabilities and equity	$	1,011,920	$	950,192

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

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SELECT ENERGY SERVICES, INC. ~~AND SUBSIDIARIES~~

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except share and per share data)

Three Months Ended September 30,

Nine Months Ended September 30,


2017

2016

2017

2016

Revenue









Water solutions

$
125,086

$
60,975

$
311,275

$
173,157

Accommodations and rentals

15,615

5,838

38,457

19,585

Wellsite completion and construction services

13,179

7,094

38,522

22,923

Total revenue

153,880

73,907

388,254

215,665

Costs of revenue









Water solutions

88,087

49,996

226,737

144,653

Accommodations and rentals

11,976

4,969

30,697

15,527

Wellsite completion and construction services

10,888

6,299

32,155

19,817

Depreciation and amortization

23,420

21,613

67,144

73,874

Total costs of revenue

134,371

82,877

356,733

253,871

Gross profit (loss)

19,509

(8,970)

31,521

(38,206)

Operating expenses









Selling, general and administrative

16,087

8,764

49,298

25,928

Depreciation and amortization

375

363

1,312

1,644

Impairment of goodwill and other intangible assets

—

—

—

138,666

Impairment of property and equipment

—

—

—

60,026

Lease abandonment costs

590

13,169

2,871

13,169

Total operating expenses

17,052

22,296

53,481

239,433

Income (loss) from operations

2,457

(31,266)

(21,960)

(277,639)

Other income (expense)









Interest expense, net

(484)

(4,343)

(1,885)

(11,792)

Other income, net

326

431

3,342

588

Income (loss) before tax expense

2,299

(35,178)

(20,503)

(288,843)

Tax benefit (expense)

294

(26)

326

(392)

Net income (loss)

2,593

(35,204)

(20,177)

(289,235)

Less: Net loss attributable to Predecessor

—

34,931

—

285,359

Less: Net (income) loss attributable to noncontrolling interests

(1,369)

273

13,013

3,876

Net income (loss) attributable to Select Energy Services, Inc.

$
1,224

$
—

$
(7,164)

$
—

Allocation of net income (loss) attributable to:









Class A-1 stockholders

$
—



$
(2,679)

Class A stockholders

1,224



(4,485)

Class B stockholders

—



$
1,224



$
(7,164)

Weighted average shares outstanding:







Class A-1—Basic

—



9,671,795

Class A—Basic

30,336,923



16,189,997

Class B—Basic

38,462,541



38,462,541

Net income (loss) per share attributable to common stockholders:







Class A-1—Basic

$
—



$
(0.28)

Class A—Basic

$
0.04



$
(0.28)

Class B—Basic

$
—



$
—

Weighted average shares outstanding:







Class A-1—Diluted

—



9,671,795

Class A—Diluted

30,357,572



16,189,997

Class B—Diluted

38,462,541



38,462,541

Net income (loss) per share attributable to common stockholders:







Class A-1—Diluted

$
—



$
(0.28)

Class A—Diluted

$
0.04



$
(0.28)

Class B—Diluted

$
—



$
—


	Three months ended March 31,
	2022		2021
Revenue
Water Services	$	163,606	$	64,223
Water Infrastructure		58,554		37,803
Oilfield Chemicals		72,609		41,716
Total revenue		294,769		143,742
Costs of revenue
Water Services		137,046		62,324
Water Infrastructure		44,378		26,399
Oilfield Chemicals		62,163		37,766
Depreciation and amortization		26,500		21,650
Total costs of revenue		270,087		148,139
Gross profit (loss)		24,682		(4,397)
Operating expenses
Selling, general and administrative		28,315		19,894
Depreciation and amortization		567		649
Lease abandonment costs		91		104
Total operating expenses		28,973		20,647
Loss from operations		(4,291)		(25,044)
Other income (expense)
Gain (loss) on sales of property and equipment and divestitures, net		1,653		(579)
Interest expense, net		(720)		(435)
Foreign currency gain, net		3		3
Bargain purchase gain		11,434		—
Other		249		(1,629)
Income (loss) before income tax (expense) benefit		8,328		(27,684)
Income tax (expense) benefit		(214)		263
Equity in losses of unconsolidated entities		(129)		—
Net income (loss)		7,985		(27,421)
Less: net (income) loss attributable to noncontrolling interests		(1,183)		4,314
Net income (loss) attributable to Select Energy Services, Inc.	$	6,802	$	(23,107)

Net income (loss) per share attributable to common stockholders (Note 15):
Class A—Basic	$	0.07	$	(0.27)
Class B—Basic	$	—	$	—

Net income (loss) per share attributable to common stockholders (Note 15):
Class A—Diluted	$	0.07	$	(0.27)
Class B—Diluted	$	—	$	—

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

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SELECT ENERGY SERVICES, INC. ~~AND SUBSIDIARIES~~

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ~~(LOSS)~~

(unaudited)

(in thousands)

Three Months Ended September 30,

Nine Months Ended September 30,


2017

2016

2017

2016

Net income (loss)

$
2,593

$
(35,204)

$
(20,177)

$
(289,235)

Other comprehensive income (loss)









Interest rate derivatives designated as cash flow hedges









Unrealized holding loss arising during period

—

—

—

(106)

Net amount reclassified to earnings

—

—

—

113

Net change in unrealized gain

—

—

—

7

Comprehensive income (loss)

2,593

(35,204)

(20,177)

(289,228)

Less: Comprehensive loss attributable to Predecessor

—

34,931

—

285,352

Less: Comprehensive (income) loss attributable to noncontrolling interests

(1,369)

273

13,013

3,876

Comprehensive income (loss) attributable to Select Energy Services, Inc.

$
1,224

$
—

$
(7,164)

$
—


	Three months ended March 31,
	2022		2021
Net income (loss)	$	7,985	$	(27,421)
Comprehensive income (loss)		7,985		(27,421)
Less: comprehensive (income) loss attributable to noncontrolling interests		(1,183)		4,314
Comprehensive income (loss) attributable to Select Energy Services, Inc.	$	6,802	$	(23,107)

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

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SELECT ENERGY SERVICES, INC. ~~AND SUBSIDIARIES~~

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

~~(unaudited)~~For the three months ended March 31, 2022 and 2021

(unaudited)

(in thousands, except share data)

Class A-1

Class A

Class B

Preferred

Stockholders

Stockholders

Stockholders

Stockholders

Class A-1

Class A

Class B

Additional

Total

Common

Common

Common

Preferred

Paid-In

Accumulated

Stockholders’

Noncontrolling


Shares

Stock

Shares

Stock

Shares

Stock

Shares

Stock

Capital

Deficit

Equity

Interests

Total
Balance as of December 31, 2016

16,100,000

$
161

3,802,972

$
38

38,462,541

$
385

—

$
—

$
113,175

$
(1,043)

$
112,716

$
221,992

$
334,708
Conversion of Class A-1 to Class A

(16,100,000)

(161)

16,100,000

161

—

—

—

—

—

—

—

—

—
Issuance of shares for acquisitions

—

—

560,277

6

—

—

—

—

4,360

—

4,366

5,514

9,880
Issuance of shares for initial public offering

—

—

10,005,000

100

—

—

—

—

87,835

—

87,935

40,569

128,504
Equity-based compensation

—

—

—

—

—

—

—

—

788

—

788

993

1,781
Noncontrolling interest in subsidiary

—

—

—

—

—

—

—

—

—

—

—

(368)

(368)
Net loss

—

—

—

—

—

—

—

—

—

(7,164)

(7,164)

(13,013)

(20,177)
Balance as of September 30, 2017

—

$
—

30,468,249

$
305

38,462,541

$
385

—

$
—

$
206,158

$
(8,207)

$
198,641

$
255,687

$
454,328


	Class A			Class B
	Stockholders			Stockholders
		Class A			Class B		Additional				Total
		Common			Common		Paid-In		Accumulated		Stockholders’		Noncontrolling
	Shares	Stock		Shares	Stock		Capital		Deficit		Equity		Interests		Total
Balance as of December 31, 2021	94,172,920	$	942	16,221,101	$	162	$	950,464	$	(359,472)	$	592,096	$	103,078	$	695,174
ESPP shares issued	1,549		—	—		—		11		—		11		1		12
Equity-based compensation	—		—	—		—		2,805		—		2,805		470		3,275
Issuance of restricted shares	2,337,795		23	—		—		2,049		—		2,072		(2,072)		—
Stock options exercised	70,000		1	—		—		583		—		584		24		608
Issuance of shares for acquisitions	4,203,323		42	—		—		34,456		—		34,498		1,356		35,854
Repurchase of common stock	(2,660,328)		(27)	—		—		(19,080)		—		(19,107)		(409)		(19,516)
Restricted shares forfeited	(14,140)		—	—		—		(13)		—		(13)		13		—
NCI income tax adjustment	—		—	—		—		7		—		7		(7)		—
Net income	—		—	—		—		—		6,802		6,802		1,183		7,985
Balance as of March 31, 2022	98,111,119	$	981	16,221,101	$	162	$	971,282	$	(352,670)	$	619,755	$	103,637	$	723,392


	Class A			Class B
	Stockholders			Stockholders
		Class A			Class B		Additional				Total
		Common			Common		Paid-In		Accumulated		Stockholders’		Noncontrolling
	Shares	Stock		Shares	Stock		Capital		Deficit		Equity		Interests		Total
Balance as of December 31, 2020	86,812,647	$	868	16,221,101	$	162	$	909,278	$	(317,247)	$	593,061	$	112,821	$	705,882
ESPP shares issued	2,145		—	—		—		14		—		14		—		14
Equity-based compensation	—		—	—		—		1,202		—		1,202		220		1,422
Issuance of restricted shares	1,487,448		15	—		—		1,529		—		1,544		(1,544)		—
Repurchase of common stock	(144,078)		(1)	—		—		(888)		—		(889)		15		(874)
Restricted shares forfeited	(301,395)		(3)	—		—		(315)		—		(318)		318		—
Noncontrolling interest in subsidiary	—		—	—		—		(140)		—		(140)		(934)		(1,074)
NCI income tax adjustment	—		—	—		—		8		—		8		(8)		—
Net loss	—		—	—		—		—		(23,107)		(23,107)		(4,314)		(27,421)
Balance as of March 31, 2021	87,856,767	$	879	16,221,101	$	162	$	910,688	$	(340,354)	$	571,375	$	106,574	$	677,949

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

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contract; (iii) determine the transaction price; (iv) allocate the transaction price to ~~close 15 facilities~~the performance obligations in the contract; and ~~consolidate operations~~(v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company applies the five-step model only to contracts when it is probable that we will collect the consideration the Company is entitled to in exchange for the ~~purpose~~goods or services the Company transfers to the customer. The accommodations and rentals revenue continues to be guided by ASC 842 – Leases, which is discussed further below.

The following factors are applicable to all 3 of ~~improving operating efficiencies.~~ the Company’s segments for the Current Quarter and Prior Quarter, respectively:

●

The vast majority of customer agreements are short-term, lasting less than one year.

●

Contracts are seldom combined together as virtually all of our customer agreements constitute separate performance obligations. Each job is typically distinct, thereby not interdependent or interrelated with other customer agreements.

●

Most contracts allow either party to terminate at any time without substantive penalties. If the customer terminates the contract, the Company is unconditionally entitled to the payments for the services rendered and products delivered to date.

●

Contract terminations before the end of the agreement are rare.

●

Sales returns are rare and no sales return assets have been recognized on the balance sheet.

●

There are minimal volume discounts.

●

There are no service-type warranties.

●

There is no long-term customer financing.

In the Water Services and Water Infrastructure segments, performance obligations arise in connection with services provided to customers in accordance with contractual terms, in an amount the Company ~~recorded $2.9 million~~expects to collect. Services are generally sold based upon customer orders or contracts with customers that include fixed or determinable prices. Revenues are generated by services rendered and measured based on output generated, which is usually simultaneously received and consumed by customers at their job sites. As a multi-job site organization, contract terms, including pricing for the Company’s services, are negotiated on a job site level on a per-job basis. Most jobs are completed in a short period of ~~charges related~~time, usually between one day and one month. Revenue is recognized as performance obligations are completed on a daily, hourly or per unit basis with unconditional rights to ~~exit and disposal activities and reclassified $0.2 million~~consideration for services rendered reflected as accounts receivable trade, net of ~~deferred rent related to accrued lease~~allowance for credit losses. In cases where a prepayment is received before the Company satisfies its performance obligations, ~~related to exited facilities during the nine months ended September 30, 2017. The Company had~~ a ~~remaining balance of $20.0 million, inclusive of a short‑term balance of $1.9 million~~contract liability is recorded in accrued expenses and other current ~~liabilities,~~liabilities. Final billings generally occur once all of the proper approvals are obtained. Mobilization and demobilization are factored into the pricing for services. Billings and costs related to mobilization and demobilization are not material for customer agreements that start in one period and end in another. As of March 31, 2022, the Company had sixcontracts in place for these segments lasting over one year. The Company has recorded an $8.2 million contract liability associated with one of the six long-term contracts as of ~~September 30, 2017 related~~March 31, 2022, recognized in other long-term liabilities in the accompanying consolidated balance sheets. The Company expects this contract liability to ~~accrued lease obligations~~be converted to revenue under the terms of the contract as it is earned.

Accommodations and ~~terminations at exited facilities within its~~rentals revenue is included in the Water ~~Solutions segment. As of September 30, 2017,~~Services segment and the Company ~~has completed its exit~~accounts for accommodations and rentals agreements as an operating lease. The Company recognizes revenue from ~~underperforming facilities but will continue to make non‑cancelable~~renting equipment on a straight-line basis. Accommodations and rental contract periods are generally daily, weekly or monthly. The average lease ~~payments for related~~term is less than three months and as of March 31, 2022, there were no material rental agreements in effect lasting more than one year. During the Current Quarter and Prior Quarter, approximately $15.6 million and $6.2

1620

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million of accommodations and rentals revenue was accounted for under ASC 842 lease guidance, with the remainder accounted for under ASC 606 revenue guidance.

In the Oilfield Chemicals segment, the typical performance obligation is to provide a specific quantity of chemicals to customers in accordance with the customer agreement in an amount the Company expects to collect. Products and services are generally sold based upon customer orders or contracts with customers that include fixed or determinable prices. Revenue is recognized as the customer takes title to chemical products in accordance with the agreement. Products may be provided to customers in packaging or delivered to the customers’ containers through a hose. In some cases, the customer takes title to the chemicals upon consumption from storage containers on their property, where the chemicals are considered inventory until customer usage. In cases where the Company delivers products and recognizes revenue before collecting payment, the Company usually has an unconditional right to payment reflected in accounts receivable trade, net of allowance for credit losses. Customer returns are rare and immaterial and there were no material in-process customer agreements for this segment as of March 31, 2022, lasting greater than one year.

The following table sets forth certain financial information with respect to the Company’s disaggregation of revenues by geographic location:


	Three months ended March 31,
	2022		2021

	(in thousands)
Geographic Region
Permian Basin	$	136,484	$	71,204
Rockies		33,478		10,022
Eagle Ford		32,854		20,785
Mid-Continent		29,264		8,476
Haynesville/E. Texas		26,475		17,265
Marcellus/Utica		23,829		11,667
Bakken		13,451		6,903
Eliminations and other regions		(1,066)		(2,580)
Total	$	294,769	$	143,742

In the Water Services segment, the top 4 revenue-producing regions are the Permian Basin, Eagle Ford, Marcellus/Utica and Rockies, which collectively comprised 82% and 87%, of segment revenue for the Current Quarter and Prior Quarter, respectively. In the Water Infrastructure segment, the top 3 revenue-producing regions are the Permian Basin, Eagle Ford and Bakken, which collectively comprised 94% and 97%, of segment revenue for the Current Quarter and Prior Quarter, respectively. In the Oilfield Chemicals segment, the top 3 revenue-producing regions are the Permian Basin, Haynesville/E. Texas and Mid-Continent, which collectively comprised 80% and 88% of segment revenue for the Current Quarter and Prior Quarter, respectively.

NOTE 5—INVENTORIES

Inventories, which are comprised of chemicals and raw materials available for resale and parts and consumables used in operations, are valued at the lower of cost and net realizable value, with cost determined under the weighted-average method. The significant components of inventory are as follows:



	March 31, 2022		December 31, 2021

	(in thousands)
Raw materials	$	20,676	$	20,396
Finished goods		22,398		24,060
Total	$	43,074	$	44,456

~~facilities through~~Table of Contents

During the ~~year ended 2027.~~Current Quarter and Prior Quarter, the Company recorded charges to the reserve for excess and obsolete inventory of 0 and $0.1 million, respectively, which were recognized within costs of revenue on the accompanying consolidated statements of operations. The Company’s ~~abandonment~~inventory reserve was $4.1 million and $3.9 million as of ~~these facilities~~March 31, 2022 and December 31, 2021, respectively. The reserve for excess and obsolete inventories is ~~not a part~~determined based on the Company’s historical usage of ~~a formalized exit plan.~~

Provision during  the

Usage during the

Balance as of

nine months ended

nine months ended

Balance as of

December 31, 2016

September 30, 2017

September 30, 2017

September 30, 2017

(in thousands)
Lease obligations and terminations

$
18,000

$
2,871

$
2,153

$
18,718
Reclassification of deferred rent

1,069





1,254
Total

$
19,069





$
19,972

inventory on hand, as well as future expectations and the amount necessary to reduce the cost of the inventory to its estimated net realizable value.

NOTE 5—6—PROPERTY AND EQUIPMENT

Property and equipment are stated at cost less accumulated depreciation. Depreciation (and amortization of finance lease assets) is calculated on a straight-line basis over the estimated useful life of each asset. Property and equipment consists of the following as of ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016:~~2021:



	March 31, 2022		December 31, 2021

	(in thousands)
Machinery and equipment	$	644,948	$	626,633
Buildings and leasehold improvements		116,344		108,177
Pipelines		72,829		72,829
Gathering and disposal infrastructure		78,153		63,228
Vehicles and equipment		29,173		28,502
Land		20,896		16,873
Computer equipment and software		4,947		5,395
Office furniture and equipment		758		764
Machinery and equipment - finance lease		544		544
Vehicles and equipment - finance lease		242		324
Computer equipment and software - finance lease		56		412
Construction in progress		28,339		19,834
		997,229		943,515
Less accumulated depreciation⁽¹⁾		(556,764)		(551,727)
Total property and equipment, net	$	440,465	$	391,788

September 30, 2017

December 31, 2016

(in thousands)
Land

$
7,106

$
8,593
Buildings and leasehold improvements

83,328

83,352
Vehicles and equipment

38,547

24,114
Machinery and equipment

564,741

534,303
Computer equipment and software

11,438

11,102
Office furniture and equipment

3,709

4,275
Disposal wells

67,778

67,566
Helicopters

497

497
Construction in progress

37,858

5,584

815,002

739,386
Less accumulated depreciation and impairment

(535,456)

(490,519)
Total property and equipment, net

$
279,546

$
248,867

(1)

Includes $0.8 million and $1.1 million of accumulated depreciation related to finance leases as of March 31, 2022 and December 31, 2021, respectively.

Total depreciation and amortization expense related to property and equipment and finance leases presented in the table above, as well as amortization of intangible assets presented in “Note 7— Other Intangible Assets” is as follows:

~~Long‑lived assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount~~


	Three months ended March 31,
	2022		2021

	(in thousands)
Category
Depreciation expense from property and equipment	$	23,953	$	19,587
Amortization expense from finance leases		60		82
Amortization expense from intangible assets		2,725		2,617
Accretion expense from asset retirement obligations		329		13
Total depreciation and amortization	$	27,067	$	22,299

Table of ~~an asset may not be recoverable.~~Contents

~~The Company had no capital lease obligations as of September 30, 2017 and December 31, 2016.~~

NOTE ~~6—GOODWILL AND~~ 7—OTHER INTANGIBLE ASSETS

Goodwill is evaluated for impairment on at least an annual basis as of December 31, or more frequently if indicators of impairment exist. The annual impairment tests are based on Level 3 inputs. The changes in the carrying

~~Table of Contents~~

~~amounts of goodwill by reportable segment for the nine months ended September 30, 2017 and the year ended December 31, 2016 are as follows:~~

Wellsite Completion




Water

and Construction

Accommodations

Solutions

Services

and Rentals

Total

(in thousands)
Balance as of December 31, 2015

$
137,534

$
12,242

$
995

$
150,771
Impairment

(137,534)

—

(995)

(138,529)
Balance as of December 31, 2016

—

12,242

—

12,242
Additions

12,849

—

—

12,849
Balance as of September 30, 2017

$
12,849

$
12,242

$
—

$
25,091

The components of other intangible assets, net as of March 31, 2022 and December 31, 2021 are as follows:

September 30, 2017


Gross

Accumulated

Net

Value

Amortization

Value

(in thousands)
Customer relationships

$
80,131

$
54,987

$
25,144
Other

13,222

3,015

10,207
Total other intangible assets

$
93,353

$
58,002

$
35,351


							As of March 31, 2022						As of December 31, 2021
							Gross		Accumulated		Net		Gross		Accumulated		Net
							Value		Amortization		Value		Value		Amortization		Value

	December 31, 2016
	Gross		Accumulated		Net
	Value		Amortization		Value
	(in thousands)
							(in thousands)						(in thousands)
Definite-lived
Customer relationships	$	56,826	$	48,236	$	8,590	$	116,554	$	(40,637)	$	75,917	$	116,554	$	(38,371)	$	78,183
Patents and other intellectual property								12,772		(4,660)		8,112		12,772		(4,313)		8,459
Other		5,491		2,495		2,996		7,367		(6,906)		461		7,234		(6,795)		439
Total other intangible assets	$	62,317	$	50,731	$	11,586
Total definite-lived								136,693		(52,203)		84,490		136,560		(49,479)		87,081
Indefinite-lived
Water rights								7,031		—		7,031		7,031		—		7,031
Trademarks								14,360		—		14,360		14,360		—		14,360
Total indefinite-lived								21,391		—		21,391		21,391		—		21,391

Total other intangible assets, net							$	158,084	$	(52,203)	$	105,881	$	157,951	$	(49,479)	$	108,472

~~Intangibles obtained through acquisitions~~The weighted-average amortization period for customer relationships, patents and other intellectual property, and other definite-lived assets was 8.5 years, 6.2 years, and 2.9 years, respectively, as of March 31, 2022. See “Note 6—Property and Equipment” for the amortization expense during the Current Quarter and Prior Quarter, respectively. The indefinite-lived water rights and trademarks are ~~initially recorded at estimated fair value based on preliminary information that is~~generally subject to ~~change until final valuations are obtained. Customer relationships and non‑compete agreements are being amortized over estimated useful lives ranging from~~ renewal every five to ~~seven~~ten years at immaterial renewal costs. Annual amortization of intangible assets for the next five years and three to five years, respectively. Other intangible assets primarily relate to certain water rights that are amortized over estimated useful lives ranging from three to eight years. Intangible assets obtained in the GRR Acquisition consisted of customer relationships and non-compete agreements that will be amortized over estimated useful lives of thirteen and five years, respectively, with a weighted-average estimated useful life of 12.5 years. As a result of the GRR Acquisition, the Company also obtained water rights totaling $3.7 million that have indefinite lives and will be evaluated periodically for impairment. Intangible assets obtained in the Resource Water Acquisition consisted of customer relationships and non-compete agreements that will be amortized over estimated useful lives of ten and three years, respectively, with a weighted-average estimated useful life of 8.6 years. The Company acquired patents of $1.9 millionbeyond is as ~~part of the DAWS Acquisition, which are being amortized over the estimated useful lives of ten years. See Note 3 – Acquisitions for further discussion.~~follows:

Amortization expense was $2.6 million and $2.1 million for the three months ended September 30, 2017 and 2016, respectively, and $7.3 million and $6.7 million for the nine months ended September 30, 2017 and 2016, respectively.


	Amount
	(in thousands)
Remainder of 2022	$	7,980
Year ending December 31, 2023		10,627
Year ending December 31, 2024		10,547
Year ending December 31, 2025		10,382
Year ending December 31, 2026		10,285
Thereafter		34,669
Total	$	84,490

1823

Table of Contents

NOTE 7—8—DEBT

~~Credit Facility term loans~~Sustainability-linked credit facility and revolving line of credit

Select Energy Services’ Credit Facility, originally executed in May 2011, has been amended over time. Effective December 20, 2016, the Company amended its Credit Facility to extend the maturity date from February 28, 2018 to February 28, 2020 and reduce the revolving line of credit to $100.0 million. The agreement also amended certain financial covenants and restrictions and outlined a new pricing grid that is effective after receipt of the third quarter 2017 compliance certificate. Accrued interest is payable at the end of each quarter. The Credit Facility has a variable interest rate that ranges from either (i) the London interbank rate (“LIBOR”On March 17, 2022 (the “Restatement Date”) plus a margin for Eurodollar advances or (ii) the applicable base rate plus a margin for base rate advances based on the Company’s Leverage Ratio (as defined in the Credit Facility) falling between 2.00% and 4.00% as outlined below. In addition, a commitment fee related to the revolving line of credit is payable at the end of each calendar quarter based on a rate of 0.500% per annum on any unused portion of the commitment under the Credit Facility. Effective June 13, 2017, the Company amended its Credit Facility to permanently waive the default associated with the DAWS Acquisition. This waiver is specifically for such acquisition and does not remedy any other present or future defaults associated with the Credit Facility.

Leverage Ratio Before Receipt of Fourth Quarter 2017

Eurodollar

Base Rate

Compliance Certificate

Advances

Advances

< 4.00

4.00
%
3.00
%
≥ 4.00

4.50
%
3.50
%

Leverage Ratio After Receipt of Fouth Quarter 2017

Eurodollar

Base Rate

Compliance Certificate

Advances

Advances

< 2.00

3.00
%
2.00
%
≥ 2.00 < 2.50

3.25
%
2.25
%
≥ 2.50 < 3.00

3.50
%
2.50
%
≥ 3.00 < 3.50

3.75
%
2.75
%
≥ 3.50 < 4.00

4.00
%
3.00
%
≥ 4.00

4.50
%
3.50
%

Select Energy Services had no debt outstanding under the revolving line of credit as of September 30, 2017 and December 31, 2016. The borrowing capacity under the revolving line of credit was reduced by outstanding letters of credit of $14.1 million as of September 30, 2017. The Company’s letters of credit have a variable interest rate between 3.00% and 4.50% based on the Company’s Leverage Ratio as outlined above. The unused portion of the available borrowings under the revolving line of credit was $85.9 million at September 30, 2017.

Debt issuance costs are amortized to interest expense over the life of the debt to which they pertain. Total unamortized debt issuance costs as of September 30, 2017 were $3.0 million. As these debt issuance costs relate to a revolving line of credit, they are presented as a deferred charge within other assets on the consolidated balance sheet.

The Company’s obligations under its Credit Facility are secured by substantially all of its assets. The Credit Facility contains customary events of default and covenants and limits its ability to incur additional indebtedness, pay dividends or make other distributions, create liens and sell assets. The Company was in compliance with all debt covenants as of September 30, 2017.

~~Table of Contents~~

~~NOTE 8—COMMITMENTS AND CONTINGENCIES~~

~~Litigation~~

The Company is named from time to time in various legal proceedings in the ordinary course of business. The legal proceedings are at different stages; however, the Company does not believe the resolution of any of these proceedings would be material to its financial position or results of operations.

~~General Business Risk~~

As discussed in Note 1, the substantial majority of the Company’s customers are in the oil and gas industry. The oil and gas industry is currently facing unique challenges due to the continued volatility and depressed state of oil and gas prices.

~~NOTE 9—EQUITY‑BASED COMPENSATION~~

~~The~~, SES Holdings, 2011 Equity Incentive Plan, (“2011 Plan”) was approved by the Predecessor’s board of managers in April 2011. In conjunction with the 144A Offering, the Company adopted the Select Energy Services, Inc. 2016 Equity Incentive Plan (as amended from time to time, the “2016 Plan”) for employees, consultants and directorsa subsidiary of the Company, and ~~its affiliates. Options that were outstanding under the 2011 Plan immediately prior to the 144A Offering were cancelled in exchange for new options granted under the 2016 Plan.~~

~~On July 18, 2017, the~~ Select Energy Services, ~~board of directors approved the First Amendment to the 2016 Plan (the “Equity Plan Amendment”~~LLC (“Select LLC”), which clarifies the treatment of substitute awards under the 2016 Plan (including substitute awards that may be granted in connection with the Merger (as defined in Note 17 below)) and allows for the assumption by the Company of shares eligible under any pre-existing stockholder-approved plan of an entity acquired by the Company or its affiliate (including the Rockwater Energy Solutions Inc. Amended and Restated 2017 Long Term Incentive Plan (the “Rockwater Equity Plan”)), in each case subject to the listing rules of the stock exchange on which Select Class A Common Stock is listed. The effectiveness of the Equity Plan Amendment was subject to approval by the Company's stockholders and the consummation of the transactions contemplated by the Merger Agreement (as defined in Note 17 below). The Company’s consenting stockholders, who hold a majority of the outstanding common stock of Select Energy Services, approved the Equity Plan Amendment on July 18, 2017. The Equity Plan Amendment became effective on November 1, 2017 upon the consummation of the Merger.

The maximum number of shares initially reserved for issuance under the 2016 Plan was 5,400,400 shares of Select Class A Common Stock, subject to adjustment in the event of recapitalization or reorganization, or related to forfeitures or the expiration of awards. Stock options are granted with terms not to exceed ten years. After giving effect to the Equity Plan Amendment, the maximum number of shares of Select Class A Common Stock reserved for issuance under the 2016 Plan is equal to (i) 5,400,400 shares plus (ii) 1,011,087 shares that became available on account of the assumption of the Rockwater Equity Plan, subject to adjustment in the event of recapitalization or reorganization, or related to forfeitures or the expiration of awards. The maximum number of shares described in the preceding sentence does not take into account 2,887,048 shares of Select Class A Common Stock related to substitute awards that were granted under the 2016 Plan following the conversion of outstanding equity awards originally granted under the Rockwater Equity Plan in accordance with the Merger Agreement. For additional information on such substitute awards, please see Note 17 below.

Phantom unit awards granted under the 2011 Plan, upon vesting, entitled each participant with the right to receive an amount of cash based in part on the fair market value of a share of Select Class A Common Stock on the date of the IPO. Based on the fair market value of a share of Select Class A Common Stock of $14.00 on the date of the IPO, each participant received a cash payment equal to $5.53 for each phantom unit on May 5, 2017. Refer to “Phantom Unit Awards” for details related to the payments made in respect of outstanding phantom units in connection with the IPO.

~~Table of Contents~~

~~Stock option awards~~

Stock options were granted with an exercise price equal to or greater than the fair market value of a share of Select Class A Common Stock as of the date of grant. The Company historically valued Select Class A Common Stock on a quarterly basis using a market approach that includes a comparison to publicly traded peer companies using earnings multiples based on their market values and a discount for lack of marketability. The fair value measurement relies on Level 3 inputs. The estimated fair value of its stock options is expensed over their vesting period, which is generally three years from the applicable date of grant. However, certain awards that were granted during 2016 in exchange for cancelled awards were immediately vested and fully exercisable on the date of grant because they were granted in exchange for the cancellation of outstanding options granted under the 2011 Plan that were fully vested and exercisable prior to such cancellation. The Company utilizes the Black‑Scholes model to determine fair value, which incorporates assumptions to value equity‑based awards. The risk‑free interest rate is based on the U.S. Treasury yield curve in effect for the expected term of the option at the time of grant. At the time of grant, there was no public market for the Company’s equity. Therefore, the Company considered the historic volatility of publicly traded peer companies when determining the volatility factor. The expected life of the options was based on a formula considering the vesting period and term of the options awarded, which is generally seven to ten years.

~~A summary of the Company’s stock option activity and related information for the nine months ended September 30, 2017 is as follows:~~

For the nine months ended September 30, 2017

Weighted-average

Equity Options

Exercise Price
Beginning balance

620,721

$
16.50
Granted

455,130

20.00
Forfeited

(98,499)

20.00
Ending balance

977,352

$
17.78

The weighted‑average grant date fair value of stock options granted during the nine months ended September 30, 2017 was $7.85. The relevant assumptions for stock options granted during the period are as follows:

$20.00 Strike

Underlying Equity

$
20.00

Strike Price

$
20.00

Dividend Yield (%)

0.0
%
Risk free rate (%)

1.68 - 2.00
%
Volatility (%)

46.6 - 46.8
%
Expected Term (Years)

4-6

~~There was no vested stock option activity, or exercise of vested stock options, during the nine months ended September 30, 2017.~~

~~A summary of the Company’s restricted stock unit activity and related information for the nine months ended September 30, 2017 is as follows:~~

For the nine months ended September 30, 2017

Weighted-average

Restricted Stock

Grant Date Fair Value

Beginning balance

—

$
—

Granted

41,117

19.91

Forfeited

(10,757)

20.00

Ending balance

30,360

$
19.88

~~Table of Contents~~

The Company recognized approximately $0.6 million and $0.0 million of compensation expense related to stock options and restricted stock unit awards during the three months ended September 30, 2017 and 2016, respectively. The Company recognized approximately $1.8 ~~million and $0.3 million of compensation expense related to stock options and restricted stock unit awards during the nine months ended September 30, 2017 and 2016, respectively.~~

~~Phantom unit awards~~

The Company’s phantom unit awards were cash settled awards that were contingent upon meeting certain equity returns and a liquidation event. The settlement amount was based on the fair market value of a share of Select Class A Common Stock on the date of completion of the IPO, which constituted a liquidation event with respect to such phantom unit awards. As a result of the cash‑settlement feature of these awards, the Company considered these awards to be liability awards, which are measured at fair value at each reporting date and the pro rata vested portion of the award is recognized as a liability to the extent that the performance condition is deemed probable. On May 5, 2017, the Company settled its outstanding phantom unit awards for an aggregate amount equal to $7.8 million as a result of the completion of its IPO, which constituted a liquidity event with respect to such phantom unit awards. Based on the fair market value of a share of Select Class A Common Stock on the date of the IPO of $14.00, the cash payment with respect to each phantom unit was approximately $5.53, before employer taxes. The Company recognized compensation expense of $7.8 million during the nine months ended September 30, 2017 related to the settlement of its phantom unit awards. As of September 30, 2017 there are no phantom units outstanding.

~~NOTE 10—DERIVATIVE FINANCIAL INSTRUMENTS~~

The Company had variable rate debt outstanding which was subject to interest rate risk based on volatility in underlying interest rates. In April 2013, the Company entered into a pay fixed, receive variable interest rate swap, with an aggregate notional amount of $125.0 million, which the Company designated as a cash flow hedge. The derivative contract matured in April 2016. The change in value and amounts reclassified to interest expense during the nine months ended September 30, 2016 were nominal. There was no activity during the nine months ended September 30, 2017.

Changes in the fair values of the Company’s derivative instruments are presented on a net basis in the accompanying consolidated statements of operations. Changes in the fair value of the Company’s interest rate swap derivative instruments are as follows:


	~~For the Nine Months Ended~~
~~Derivatives designated as cash flow hedges~~	~~September 30, 2016~~
	~~(in thousands)~~
~~Beginning fair value of interest rate swap derivative instruments~~	$	~~(7)~~
~~Amount of unrealized losses recognized in OCI~~		~~(106)~~
~~Amount of gains reclassified from AOCI to earnings (effective portion)~~		~~113~~
~~Net change in fair value of interest rate swap derivative instruments~~		7
~~Ending fair value of interest rate swap derivative instruments~~	$	—

~~NOTE 11—FAIR VALUE MEASUREMENT~~

The Company utilizes fair value measurements to measure assets and liabilities in a business combination or assess impairment of property and equipment, intangible assets and goodwill. Fair value is defined as the amount at which an asset (or liability) could be bought (or incurred) or sold (or settled) in an orderly transaction between market participants at the measurement date. Further, ASC 820, Fair Value Measurements, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value, and includes certain disclosure requirements. Fair value estimates are based on either (i) actual market data or (ii) assumptions that other market participants would use in pricing an asset or liability, including estimates of risk.

~~Table of Contents~~

ASC 820 establishes a three‑level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy categorizes assets and liabilities measured at fair value into one of three different levels depending on the observability of the inputs employed in the measurement. The three levels are defined as follows:

~~Level 1—Unadjusted quoted prices for identical assets or liabilities in active markets.~~

~~Level 2~~—Quoted prices for similar assets or liabilities in non‑active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

~~Level 3—Inputs that are unobservable and significant to the fair value measurement (including the Company’s own assumptions in determining fair value).~~

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. There were no transfers into, or out of, the three levels of the fair value hierarchy for the nine months ended September 30, 2017 or the year ended December 31, 2016.

~~Other fair value considerations~~

The carrying values of the Company’s current financial instruments, which include cash and cash equivalents, accounts receivable trade and accounts payable, approximate their fair value at September 30, 2017 and December 31, 2016 due to the short‑term maturity of these instruments. The Company had no outstanding debt as of September 30, 2017 and December 31, 2016. The estimated fair values of the Company’s financial instruments are not necessarily indicative of the amounts that would be realized in a current market exchange. The consideration transferred and the purchase price allocation of identified assets acquired and liabilities assumed related to the GRR Acquisition and Resource Water Acquisition are based on the Company’s estimate of fair value utilizing Level 3 inputs at the date of acquisition. Refer to Note 3 – Acquisitions for further discussion.

~~NOTE 12—RELATED PARTY TRANSACTIONS~~

The Company considers its related parties to be those stockholders who are beneficial owners of more than 5.0% of its common stock, executive officers, members of its board of directors or immediate family members of any of the foregoing persons. The Company has entered into a significant number of transactions with related parties. The Company’s board of directors regularly reviews these transactions; however, the Company’s results of operations may have been different if these transactions were conducted with non‑related parties.

During the three months ended September 30, 2017, sales to related parties were $0.4 million and purchases from related party vendors were $2.1 million. These purchases comprised $0.7 million relating to purchases of property and equipment, less than $0.1 million relating to inventory and consumables, $0.8 million relating to rent of certain equipment or other services used in operations, and $0.5 million relating to management, consulting and other services. During the three months ended September 30, 2016, sales to related parties were $0.2 million and purchases from related party vendors were $0.9 million. These purchases comprised $0.4 million relating to purchases of property and equipment, less than $0.1 million relating to inventory and consumables, less than $0.1 million relating to rent of certain equipment or other services used in operations, and $0.4 million relating to management, consulting and other services.

During the nine months ended September 30, 2017, sales to related parties were $1.5 million and purchases from related party vendors were $5.0 million. These purchases comprised $1.4 million relating to purchases of property and equipment, $0.2 million relating to inventory and consumables, $1.7 million relating to rent of certain equipment or other services used in operations, and $1.7 million relating to management, consulting and other services. During the nine months ended September 30, 2016, sales to related parties were $0.8 million and purchases from related party vendors were $2.6 million. These purchases comprised $0.6 million relating to purchases of property and equipment,

~~Table of Contents~~

$0.1 million relating to inventory and consumables, $0.4 million relating to rent of certain equipment or other services used in operations, and $1.5 million relating to management, consulting and other services.

~~Tax receivable agreements~~

In connection with the 144A Offering, the Company entered into two tax receivable agreements (the “Tax Receivable Agreements”) with Legacy Owner Holdco, Crestview Partners II GP, L.P. (“Crestview GP”), and certain affiliates of Predecessor unitholders (collectively, the “TRA Holders”).

The first of the Tax Receivable Agreements, which the Company entered into with Legacy Owner Holdco and Crestview GP, generally provides for the payment by the Company to such TRA Holders of 85% of the net cash savings, if any, in U.S. federal, state and local income and franchise tax that the Company actually realizes (computed using simplifying assumptions to address the impact of state and local taxes) or is deemed to realize in certain circumstances in periods after the 144A Offering as a result of, as applicable to each such TRA Holder, (i) certain increases in tax basis that occur as a result of the Company’s acquisition (or deemed acquisition for U.S. federal income tax purposes) of all or a portion of such TRA Holder’s SES Holdings LLC Units in connection with the 144A Offering or pursuant to the exercise of the Exchange Right or the Company’s Call Right and (ii) imputed interest deemed to be paid by the Company as a result of, and additional tax basis arising from, any payments the Company makes under such Tax Receivable Agreement.

The second of the Tax Receivable Agreements, which the Company entered into with an affiliate of the Contributing Legacy Owners and Crestview GP, generally provides for the payment by the Company to such TRA Holders of 85% of the net cash savings, if any, in U.S. federal, state and local income and franchise tax that the Company actually realizes (computed using simplifying assumptions to address the impact of state and local taxes) or is deemed to realize in certain circumstances in periods after the 144A Offering as a result of, as applicable to each such TRA Holder, (i) any net operating losses available to the Company as a result of certain reorganization transactions entered into in connection with the 144A Offering and (ii) imputed interest deemed to be paid by the Company as a result of any payments the Company makes under such Tax Receivable Agreement.

On July 18, 2017, the Company’s board of directors approved amendments to each of the Tax Receivable Agreements revising the definition of a “change of control” for purposes of the Tax Receivable Agreements and acknowledging that the Merger would not result in such a change of control.

~~NOTE 13—INCOME TAXES~~

The Company is subject to U.S. federal and state income taxes as a corporation. SES Holdings and its subsidiaries, with the exception of certain corporate subsidiaries, are treated as flow‑through entities for U.S. federal income tax purposes, and as such, are generally not subject to U.S. federal income tax at the entity level. Rather, the tax liability with respect to their taxable income is passed through to their members or partners. Accordingly, prior to our reorganization in connection with the 144A Offering, the Predecessor only recorded a provision for Texas franchise tax and U.S. federal and state provisions for certain corporate subsidiaries as the Predecessor’s taxable income or loss was includable in the income tax returns of the individual partners and members. However, for periods following our reorganization in connection with the 144A Offering, Select Energy Services recognizes a tax liability on its allocable share of SES Holdings’ taxable income.

The Company’s effective tax rates for the three months ended September 30, 2017 and 2016 were (12.8)% and 0.1%, respectively. The Company’s effective tax rates for the nine months ended September 30, 2017 and 2016 were (1.6)% and 0.1%, respectively. The effective tax rates for the three and nine months ended September 30, 2017 differ from the statutory rate of 35% due to net income allocated to noncontrolling interests, state income taxes, other permanent differences between book and tax accounting, and valuation allowances.

~~Table of Contents~~

~~The Company recorded income tax expense (benefit) of $(0.3) million and less than $0.1 million for~~ ~~the three months ended September 30, 2017 and 2016, respectively. The Company recorded income tax expense (benefit) of $(0.3) million and $0.4 million for the nine months ended September 30, 2017 and 2016, respectively.~~

The tax benefits of deferred tax assets are recorded as an asset to the extent that management assesses the utilization of such assets to be more likely than not. When the future utilization of some portion of deferred tax assets is determined not to be more likely than not, a valuation allowance is provided to reduce the recorded tax benefits from such assets. As of September 30, 2017, management’s assessment as to the realizability of certain deferred tax assets has resulted in the recording of a valuation allowance to reduce deferred tax assets to the amounts that are considered more likely than not to be realized. Management believes there will be sufficient future taxable income based on the reversal of temporary differences to enable utilization or sustainability of those deferred tax assets that do not have a valuation allowance recorded against them.

Separate federal and state income tax returns are filed for Select Energy Services, SES Holdings, and certain consolidated affiliates. The tax years 2013 through 2016 remain open to examination by the major taxing jurisdictions to which the Company is subject to income tax. Select Energy Services and SES Holdings are not currently under any income tax audits.

Accounting for uncertainty in income taxes prescribes a recognition threshold and measurement methodology for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. As of September 30, 2017 and December 31, 2016, there was no material liability or expense for the periods then ended recorded for payments of interest and penalties associated with uncertain tax positions or material unrecognized tax positions and the Company’s unrecognized tax benefits were not material.

~~NOTE 14—NONCONTROLLING INTERESTS~~

The Company has ownership interests in multiple subsidiaries that are consolidated within the Company’s financial statements but are not wholly owned. During the nine months ended September 30, 2017 and 2016, the Company entered into transactions that impacted its ownership interest in certain of these subsidiaries while maintaining control over such subsidiaries. As a result of the Company’s change in ownership interest in these subsidiaries, the Company reduced its noncontrolling interests and recognized an increase in equity related to transactions with holders of noncontrolling interests. The Company reports a noncontrolling interest representing the common units of SES Holdings held by Legacy Owner Holdco. Changes in Select Energy Services’ ownership interest in SES Holdings while it retains its controlling interest are accounted for as equity transactions.

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~~The following table summarizes the effects of changes in noncontrolling interests on equity for the nine months ended September 30, 2017:~~

For the nine months ended September 30,


2017

2016

(in thousands)
Net loss attributable to Select Energy Services, Inc. and its Predecessor

$
(7,164)

$
(285,359)
Transfers from noncontrolling interests:




Increase in additional paid-in capital as a result of the contribution of proceeds from the IPO to SEC Holdings, LLC in exchange for common units

87,835


—
Increase in additional paid-in capital as a result of the contribution of assets acquired to SES Holdings, LLC in exchange for common units

4,360


—
Increase in contributed capital due to purchase of noncontrolling interest

—


135
Change to equity from net loss attributable to Select Energy Services, Inc. and its Predecessor and transfers from noncontrolling interests

$
85,031

$
(285,224)

~~NOTE 15—EARNINGS PER SHARE~~

Earnings per share are based on the amount of income allocated to the shareholders and the weighted‑average number of shares outstanding during the period for each class of common stock. Outstanding options to purchase 597,749 and 977,352 shares are not included in the calculation of diluted weighted-average shares outstanding for the three and nine months ended September 30, 2017 as the effect is antidilutive.

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Earnings related to periods prior to the reorganization and 144A Offering are attributable to the Predecessor. The following table presents the Company’s calculation of basic and diluted earnings per share for the three and nine months ended September 30, 2017 and 2016 (dollars in thousands, except share and per share amounts):

Three months ended September 30,

Nine months ended September 30,

2017

2016

2017

2016

Net income (loss)

$
2,593

$
(35,204)

$
(20,177)

$
(289,235)

Net loss attributable to Predecessor

—

34,931

—

285,359

Net (income) loss attributable to noncontrolling interests

(1,369)

273

13,013

3,876

Net income (loss) attributable to Select Energy Services, Inc.

$
1,224

$
—

$
(7,164)

$
—

Allocation of net income (loss) attributable to:









Class A-1 stockholders

$
—



$
(2,679)



Class A stockholders

1,224



(4,485)



Class B stockholders

—



—



$
1,224



$
(7,164)



Weighted average shares outstanding:









Class A-1-Basic

—



9,671,795



Class A-Basic

30,336,923



16,189,997



Class B-Basic

38,462,541



38,462,541



Net income (loss) per share attributable to common stockholders:









Class A-1-Basic

$
—



$
(0.28)



Class A-Basic

$
0.04



$
(0.28)



Class B-Basic

$
—



$
—



Weighted average shares outstanding:









Class A-1-Diluted

—



9,671,795



Class A-Diluted

30,357,572



16,189,997



Class B-Diluted

38,462,541



38,462,541



Net income (loss) per share attributable to common stockholders:









Class A-1-Diluted

$
—



$
(0.28)



Class A-Diluted

$
0.04



$
(0.28)



Class B-Diluted

$
—



$
—

~~NOTE 16—SEGMENT INFORMATION~~

Select Energy Services is an oilfield services company that provides solutions to the North American onshore oil and natural gas industry. The Company’s services are offered through three operating segments. Operating segments are defined as components of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and assess performance. The Company’s chief operating decision maker assesses performance and allocates resources on the basis of the three reportable segments. Corporate and other expenses that do not individually meet the criteria for segment reporting are reported separately as Corporate. Each operating segment reflects a reportable segment led by separate managers that report

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~~directly to the Company’s CODM. The Company’s CODM assesses performance and allocates resources on the basis of the following three reportable segments:~~

~~Water Solutions~~—The Water Solutions segment provides water‑related services to customers that include major integrated oil companies and independent oil and natural gas producers. These services include: the sourcing of water; the transfer of the water to the wellsite through permanent pipeline infrastructure and temporary pipe; the containment of fluids off‑ and on‑location; measuring and monitoring of water; the filtering and treatment of fluids, well testing and handling of flowback and produced formation water; and the transportation and recycling or disposal of drilling, completion and production fluids.

~~Accommodations and Rentals~~—The Accommodations and Rentals segment provides workforce accommodations and surface rental equipment supporting drilling, completion and production operations to the U.S. onshore oil and gas industry.

~~Wellsite Completion and Construction Services~~—The Wellsite Completion and Construction Services segment provides oil and natural gas operators with a variety of services, including crane and logistics services, wellsite and pipeline construction and field services. These services are performed to establish, maintain and improve production throughout the productive life of an oil or gas well, or to otherwise facilitate other services performed on a well.

~~Financial information as of September 30, 2017 and December 31, 2016 and for the three and nine months ended September 30, 2017 and 2016, by segment, is as follows:~~

For the three months ended September 30, 2017




Income (loss) before

Depreciation and

Capital

Revenue

taxes

Amortization

Expenditures

(in thousands)
Water Solutions

$
125,142

$
9,844

$
19,433

$
22,260
Accommodations and Rentals

15,974

(304)

2,908

3,541
Wellsite Completion and Construction Services

13,301

(2)

1,079

1,303
Elimination

(537)

—

—

—
Income from operations



9,538




Corporate

—

(7,081)

375

—
Interest expense, net

—

(484)

—

—
Other income, net

—

326

—

—

$
153,880

$
2,299

$
23,795

$
27,104

For the three months ended September 30, 2016




Income (loss) before

Depreciation and

Capital

Revenue

taxes

Amortization

Expenditures

(in thousands)
Water Solutions

$
61,082

$
(28,278)

$
17,690

$
4,668
Accommodations and Rentals

5,881

(2,786)

2,644

268
Wellsite Completion and Construction Services

7,156

(1,325)

1,279

95
Elimination

(212)

—

—

—
Loss from operations



(32,389)




Corporate

—

1,123

363

—
Interest expense, net

—

(4,343)

—

—
Other income, net

—

431

—

—

$
73,907

$
(35,178)

$
21,976

$
5,031

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For the nine months ended September 30, 2017




Income (loss) before

Depreciation and

Capital

Revenue

taxes

Amortization

Expenditures

(in thousands)
Water Solutions

$
311,645

$
5,652

$
55,623

$
57,273
Accommodations and Rentals

39,056

(3,813)

8,367

8,311
Wellsite Completion and Construction Services

38,951

56

3,154

6,598
Elimination

(1,398)

—

—

—
Loss from operations



1,895




Corporate

—

(23,855)

1,312

—
Interest expense, net

—

(1,885)

—

—
Other income, net

—

3,342

—

—

$
388,254

$
(20,503)

$
68,456

$
72,182

For the nine months ended September 30, 2016




Income (loss) before

Depreciation and

Capital

Revenue

taxes

Amortization

Expenditures

(in thousands)
Water Solutions

$
173,294

$
(264,416)

$
61,574

$
28,533
Accommodations and Rentals

19,750

(8,303)

8,197

834
Wellsite Completion and Construction Services

23,098

(3,820)

4,103

215
Elimination

(477)

—

—

—
Loss from operations



(276,539)




Corporate

—

(1,100)

1,644

—
Interest expense, net

—

(11,792)

—

—
Other income, net

—

588

—

—

$
215,665

$
(288,843)

$
75,518

$
29,582

Total Assets

As of

As of

September 30, 2017

December 31, 2016

(in thousands)
Water Solutions

$
448,585

$
324,171
Accommodations and Rentals

50,057

38,874
Wellsite Completion and Construction Services

38,827

29,994
Corporate

15,280

12,027

$
552,749

$
405,066

~~NOTE 17—SUBSEQUENT EVENTS~~

~~Completion of the Merger~~

On November 1, 2017, the Company completed the transactions contemplated by the Agreement and Plan of Merger, dated as of July 18, 2017 (the “Merger Agreement”), by and among the Company, SES Holdings, Raptor Merger Sub, Inc. (“Corporate Merger Sub”), Raptor Merger Sub, LLC (“LLC Merger Sub”), Rockwater Energy Solutions, Inc. (“Rockwater”) and Rockwater Energy Solutions, LLC (“RES Holdings”). Pursuant to the Merger Agreement, Corporate Merger Sub merged with and into Rockwater, with Rockwater continuing as the surviving entity as a wholly owned subsidiary of the Company (the “Corporate Merger”), and LLC Merger Sub merged with and into RES Holdings, with RES Holdings continuing as the surviving entity as an indirect wholly ownedwholly-owned subsidiary of SES Holdings, ~~(the “LLC Merger”).~~

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At the effective time of the Corporate Merger (the “Corporate Merger Effective Time”), subject to certain exceptions, (x) each share of Rockwater’s Class A common stock, $0.01 par value per share (“Rockwater Class A Common Stock”), then outstanding was converted into the right to receive a number of shares of Select Class A Common Stock equal to 0.7652 per each such share (the “Exchange Ratio”), (y) each share of Rockwater’s Class A-1 common stock, $0.01 par value per share, then outstanding was converted into the right to receive a number of shares of the Company’s Class A-2 common stock, par value $0.01 per share (“Select Class A-2 Common Stock”), equal to the Exchange Ratio, and (z) each share of Rockwater’s Class B common stock, $0.01 par value per share, then outstanding was converted into the right to receive a number of shares of Select Class B Common Stock equal to the Exchange Ratio. At the effective time of the LLC Merger (the “LLC Merger Effective Time”), subject to certain exceptions, each unit of RES Holdings (each, an “RES Holdings Unit”) then outstanding (including RES Holdings Units held by Rockwater) was converted into the right to receive a number of units in SES Holdings equal to the Exchange Ratio. The original exchange ratio of 0.7777 set forth in the Merger Agreement was adjusted downwards to 0.7652 in accordance with the terms of the Merger Agreement.

Shares of the Company’s common stock outstanding immediately prior to the Corporate Merger Effective Time remain outstanding and have not been exchanged, converted or otherwise changed in the Corporate Merger. Based on the number of shares of Rockwater common stock issued and outstanding immediately prior to the Corporate Merger Effective Time, a total of approximately 25.9 million shares of Select Class A Common Stock, 6.7 million shares of Select Class A-2 Common Stock and 4.4 million shares of Select Class B Common Stock (excluding the issuance of equity awards, which are described in the following paragraph), were issued to the former holders of Rockwater common stock pursuant to the Merger Agreement. In the aggregate (including the issuance of equity awards), the Company issued approximately 37.3 million shares of common stock. Units in SES Holdings outstanding immediately prior to the LLC Merger Effective Time remain outstanding and have not been exchanged, converted or otherwise changed in the LLC Merger. Based on the number of RES Holdings Units issued and outstanding immediately prior to the LLC Merger Effective Time, a total of approximately 37.3 million units in SES Holdings were issued to the former holders of RES Holdings Units pursuant to the Merger Agreement.

At the Corporate Merger Effective Time, each outstanding option to purchase shares of Rockwater Class A Common Stock (each, a “Rockwater Stock Option”) was converted into an option to acquire, on the same terms and conditions as were applicable to such Rockwater Stock Option immediately prior to the Corporate Merger Effective Time, the number of shares of Select Class A Common Stock determined by multiplying the number of shares of Rockwater Class A Common Stock subject to such Rockwater Stock Option as of immediately prior to the Corporate Merger Effective Time by the Exchange Ratio, at an exercise price per share of Select Class A Common Stock equal to the exercise price per share of Rockwater Class A Common Stock under such Rockwater Stock Option divided by the Exchange Ratio (such conversions, collectively, the “Option Conversion”). Additionally, at the Corporate Merger Effective Time, each share of restricted Rockwater Class A Common Stock (each, a “Rockwater Restricted Stock Award”) that was outstanding immediately prior to the Corporate Merger Effective Time ceased to represent Rockwater Class A Common Stock and was converted into a new award of restricted shares, subject to the same terms and conditions as were applicable to such Rockwater Restricted Stock Award prior to the Corporate Merger Effective Time, equal to the number of shares of Select Class A Common Stock determined by multiplying the number of shares of Rockwater Class A Common Stock subject to such Rockwater Restricted Stock Award as of immediately prior to the Corporate Merger Effective Time by the Exchange Ratio (such conversions, collectively, the “Restricted Stock Conversion”). Subject to certain New York Stock Exchange (“NYSE”) restrictions, the shares available under the Rockwater Equity Plan as of the Corporate Merger Effective Time (as appropriately adjusted to reflect the Exchange Ratio) may be used for post-transaction grants under the 2016 Plan. The Option Conversion, Restricted Stock Conversion and assumption of shares available under the Rockwater Equity Plan described in the preceding sentences are collectively referred to as the “Equity Award Actions.” The Equity Plan Amendment, which was previously adopted to effectuate the Equity Award Actions, became effective on November 1, 2017 at the Corporate Merger Effective Time.

~~New Credit Agreement~~

~~On November 1, 2017, in connection with the closing of the transactions contemplated by the Merger Agreement (the “Closing”), SES Holdings and Select LLC (the “Borrower”)~~ entered into a ~~$300.0~~$270.0 million amended and restated senior secured sustainability-linked revolving credit facility (the ~~“New~~“Sustainability-Linked Credit ~~Agreement”~~Facility”), by and among SES Holdings, as parent, ~~the Borrower,~~Select LLC, as borrower, and certain of

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SES ~~Holdings’s~~Holdings’ subsidiaries, as guarantors, each of the lenders party thereto and Wells Fargo Bank, N.A., as administrative agent, issuing lender and swingline lender (the “Administrative Agent”)~~. The New~~ (which amended and restated the Credit Agreement dated November 1, 2017 by and among SES Holdings, as parent, Select LLC, as borrower and certain of SES Holdings’ subsidiaries, as guarantors, each of the lenders party thereto and the Administrative Agent (the “Prior Credit Agreement”)). Refer to “Note 10—Debt” in the Company’s Annual Report on Form 10-K for a discussion of the Prior Credit Agreement. The Sustainability-Linked Credit Facility also has a sublimit of $40.0 million for letters of credit and ~~a sublimit of $30.0~~$27.0 million for swingline ~~loans.~~loans, respectively. Subject to obtaining commitments from existing or new lenders, ~~the Company~~Select LLC has the option to increase the maximum amount under the senior secured credit facility by ~~$150.0~~$135.0 million during the first three years following the ~~Closing.~~Restatement Date.

The ~~New~~Sustainability-Linked Credit ~~Agreement~~Facility permits extensions of credit up to the lesser of ~~$300.0~~$270.0 million and a borrowing base that is determined by calculating the amount equal to the sum of (i) 85% of the Eligible Billed Receivables (as defined in the ~~New~~Sustainability-Linked Credit ~~Agreement)~~Facility), plus (ii) 75% of Eligible Unbilled Receivables (as defined in the ~~New~~Sustainability-Linked Credit ~~Agreement)~~Facility), provided that this amount will not equal more than 35% of the borrowing base, plus (iii) the lesser of (A) the product of 70% multiplied by the value of Eligible Inventory (as defined in the ~~New~~Sustainability-Linked Credit ~~Agreement)~~Facility) at such time and (B) the product of 85% multiplied by the Net Recovery Percentage (as defined in the ~~New~~Sustainability-Linked Credit ~~Agreement)~~Facility) identified in the most recent Acceptable Appraisal of Inventory (as defined in the ~~New~~Sustainability-Linked Credit ~~Agreement)~~Facility), multiplied by the value of Eligible Inventory at such time, provided that this amount will not equal more than 30% of the borrowing base, minus (iv) the aggregate amount of Reserves (as defined in the ~~New~~Sustainability-Linked Credit ~~Agreement)~~Facility), if any, established by the Administrative Agent from time to time, including, if any, the amount of the Dilution Reserve (as defined in the ~~New~~Sustainability-Linked Credit ~~Agreement)~~Facility). The borrowing base is calculated on a monthly basis pursuant to a borrowing base certificate delivered by ~~the Borrower~~Select LLC to the Administrative Agent.

Borrowings under the ~~New~~Sustainability-Linked Credit ~~Agreement~~Facility bear interest, at ~~the Borrower’s~~Select LLC’s election, at either the (a) one-~~, two-, three-~~ or ~~six-month LIBOR (“Eurocurrency Rate”)~~three-month Term SOFR (as defined in the Sustainability-Linked Credit Facility) or (b) the greatest of (i) the federal funds rate plus ½%0.5%, (ii) ~~the~~ one-month ~~Eurocurrency Rate~~Term SOFR plus 1% and (iii) the Administrative Agent’s prime rate (the “Base Rate”), in each case plus an applicable margin, and interest shall be payable monthly in arrears. The applicable margin for ~~Eurocurrency Rate~~Term SOFR loans ranges from ~~1.50%~~1.75% to ~~2.00%~~2.25% and the applicable margin for Base Rate loans ranges from ~~0.50%~~0.75% to ~~1.00%~~1.25%, in each case, depending on ~~the Borrower’s~~Select LLC’s average excess availability under the ~~New~~Sustainability-Linked Credit ~~Agreement. The applicable margin for Eurocurrency Rate loans will be 1.75% and~~Facility, as set forth in the ~~applicable margin for Base Rate loans will be 0.75% until June 30, 2018.~~table below. During the continuance of a bankruptcy event of default, automatically, and during the continuance of any other default, upon the Administrative Agent’s or the required lenders’ election, all outstanding amounts under the ~~New~~Sustainability-Linked Credit ~~Agreement~~Facility will bear interest at 2.00% plus the otherwise applicable interest rate. The ~~New~~Sustainability-Linked Credit ~~Agreement~~Facility is scheduled to mature on the fifth anniversary of the ~~Closing.~~Restatement Date.

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Level	Average Excess Availability	Base Rate Margin	SOFR Margin

I	< 33.33% of the commitments	1.25%	2.25%
II	< 66.67% of the commitments and ≥ 33.33% of the commitments	1.00%	2.00%
III	≥ 66.67% of the commitments	0.75%	1.75%


Level	Average Revolver Usage	Unused Line Fee Percentage

I	≥ 50% of the commitments	0.250%
II	< 50% of the commitments	0.375%

Under the Sustainability-Linked Credit Facility, the interest rate margin and the facility fee rates are also subject to adjustments based on Select LLC’s performance of specified sustainability target thresholds with respect to (i) total recordable incident rate, as the Employee Health and Safety Metric and (ii) barrels of produced water recycled at permanent or semi-permanent water treatment and recycling facilities owned or operated, as the Water Stewardship Metric, in each case, subject to limited assurance verification by a qualified independent external reviewer. The adjustment for the interest rate margin is a range of plus and minus 5.0 basis points and the adjustment for the fee margin is a range of plus and minus 1.0 basis point, subject to the mechanics under the Sustainability-Linked Credit Facility.

The obligations under the ~~New~~Sustainability-Linked Credit ~~Agreement~~Facility are guaranteed by SES Holdings and certain ~~of the~~ subsidiaries of SES Holdings and ~~the Borrower~~Select LLC and secured by a security interest in substantially all of the personal property assets of SES Holdings, ~~the Borrower~~Select LLC and their domestic subsidiaries.

The ~~New~~Sustainability-Linked Credit ~~Agreement~~Facility contains certain customary representations and warranties, affirmative and negative covenants and events of default. If an event of default occurs and is continuing, the lenders may declare all amounts outstanding under the ~~New~~Sustainability-Linked Credit ~~Agreement~~Facility to be immediately due and payable.

In addition, the ~~New~~Sustainability-Linked Credit ~~Agreement~~Facility restricts SES ~~Holdings’s~~Holdings’ and ~~the Borrower’s~~Select LLC’s ability to make distributions on, or redeem or repurchase, its equity interests, except for certain distributions, including distributions of cash so long as, both at the time of the distribution and after giving effect to the distribution, no default exists under the ~~New~~Sustainability-Linked Credit ~~Agreement~~Facility and either (a) excess availability at all times during the preceding 30 consecutive days, on a pro forma basis and after giving effect to such distribution, is not less than the greater of (1) 25% of the lesser of (A) the maximum revolver amount and (B) the then-effective borrowing base and (2) ~~$37.5~~$33.75 million or (b) if SES ~~Holdings’s~~Holdings’ fixed charge coverage ratio is at least 1.0 to 1.0 on a pro forma basis, and excess availability at all times during the preceding 30 consecutive days, on a pro forma basis and after giving effect to such distribution, is not less than the greater of (1) 20% of the lesser of (A) the maximum revolver amount and (B) the then-effective borrowing base and (2) ~~$30.0~~$27.0 million. Additionally, the ~~New~~Sustainability-Linked Credit ~~Agreement~~Facility generally permits ~~the Borrower~~Select LLC to make distributions required under its existing ~~tax receivable agreements.~~Tax Receivable Agreements. See “Note 12—Related Party Transactions—Tax Receivable Agreements” for further discussion of the Tax Receivable Agreements.

The ~~New~~Sustainability-Linked Credit ~~Agreement~~Facility also requires SES Holdings to maintain a fixed charge coverage ratio of at least 1.0 to ~~[1.0]~~1.0 at any time availability under the ~~New~~Sustainability-Linked Credit ~~Agreement~~Facility is less than the greater of (i) 10% of the lesser of (A) the maximum revolver amount and (B) the then-effective borrowing base and (ii) $15.0 million and continuing through

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and including the first day after such time that availability under the ~~New~~Sustainability-Linked Credit ~~Agreement~~Facility has equaled or exceeded the greater of (i) 10% of the lesser of (A) the maximum revolver amount and (B) the then-effective borrowing base and (ii) $15.0 million for 60 consecutive calendar days.

Certain lenders party to the ~~New~~Sustainability-Linked Credit ~~Agreement~~Facility and their respective affiliates have from time to time performed, and may in the future perform, various financial advisory, commercial banking and investment banking services for the Company and its affiliates in the ordinary course of business for which they have received and

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would receive customary compensation. In addition, in the ordinary course of their various business activities, such parties and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers, and such investments and securities activities may involve the Company’s securities and/or instruments.

~~Termination of~~The Company had 0 borrowings outstanding under the Sustainability-Linked Credit Facility as of March 31, 2022 and 0 borrowings outstanding under the Prior Credit Agreement as of December 31, 2021. As of March 31, 2022 and December 31, 2021, the borrowing base under the Sustainability-Linked Credit Facility and Prior Credit Agreement was $204.1 million and $132.7 million, respectively.The borrowing capacity under the Sustainability-Linked Credit Facility and Prior Credit Agreement was reduced by outstanding letters of credit of $15.6 million as of both March 31, 2022 and December 31, 2021. The Company’s letters of credit have a variable interest rate between 1.75% and 2.25% based on the Company’s average excess availability as outlined above. The unused portion of the available borrowings under the Sustainability-Linked Credit Facility was $188.5 million as of March 31, 2022.

In connection with the entry into the ~~New~~Sustainability-Linked Credit ~~Agreement,~~Facility, the ~~obligations~~Company incurred $2.0 million of debt issuance costs during the Current Quarter. Debt issuance costs are amortized to interest expense over the life of the debt to which they pertain. Total unamortized debt issuance costs as of March 31, 2022 and December 31, 2021, were $2.3 million and $0.6 million, respectively. As these debt issuance costs relate to a revolving line of credit, they are presented as a deferred charge within other assets on the consolidated balance sheets. Amortization expense related to debt issuance costs was $0.3 million and $0.2 million for the Current Quarter and Prior Quarter, respectively.

The Company also assumed $4.6 million in letters of credit as part of the Nuverra Acquisition. These letters of credit are not a part of the Sustainability-Linked Credit Facility and do not impact the Company’s borrowing base. We intend to replace these letters of credit in the first half of 2022.

The Company was in compliance with all debt covenants as of March 31, 2022.

NOTE 9—COMMITMENTS AND CONTINGENCIES

Litigation

The Company is subject to a number of lawsuits and claims arising out of the normal conduct of its business. The ability to predict the ultimate outcome of such matters involves judgments, estimates and inherent uncertainties. Based on a consideration of all relevant facts and circumstances, including applicable insurance coverage, it is not expected that the ultimate outcome of any currently pending lawsuits or claims against the Company will have a material adverse effect on its consolidated financial position, results of operations or cash flows; however, there can be no assurance as to the ultimate outcome of these matters.

Retentions

We are self-insured up to certain retention limits with respect to workers’ compensation, general liability and vehicle liability matters, and health insurance. We maintain accruals for self-insurance retentions that we estimate using third-party data and claims history.

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NOTE 10—EQUITY-BASED COMPENSATION

The SES Holdings 2011 Equity Incentive Plan (the “2011 Plan”) was approved by the board of managers of SES Holdings in April 2011. In conjunction with the private placement of 16,100,000 shares of the Company’s Class A Common Stock on December 20, 2016 (the “Select 144A Offering”), the Company adopted the Select Energy Services, Inc. 2016 Equity Incentive Plan (as amended, the “2016 Plan”) for employees, consultants and directors of the Company and its affiliates. Options that were outstanding under the 2011 Plan immediately prior to the Select 144A Offering were cancelled in exchange for new options granted under the 2016 Plan. On May 8, 2020, the Company’s stockholders approved an amendment to the 2016 Plan to increase the number of shares of the Company’s Class A Common Stock that may be issued under the 2016 Plan by 4,000,000 shares and to make certain other administrative changes. The 2016 Plan includes share recycling provisions that allow shares subject to an award that are withheld or surrendered to the Company in payment of any exercise price or taxes or an award that expires or is cancelled, forfeited or otherwise terminated without actual delivery of the underlying shares of Class A Common Stock to be considered not delivered and thus available to be granted as new awards under the 2016 Plan.

Currently, the maximum number of shares reserved for issuance under the 2016 Plan is approximately 13.3 million shares, with approximately 2.6 million shares available to be issued as of March 31, 2022. For all share-based compensation award types, the Company accounts for forfeitures as they occur.

Stock option awards

The Company has outstanding stock option awards as of March 31, 2022 but there have been 0 option grants since 2018. The stock options were granted with an exercise price equal to or greater than the fair market value of a share of Class A Common Stock as of the date of grant. The expected life of the options at the time of the grant was based on the vesting period and term of the options awarded, which was ten years.

A summary of the Company’s stock option activity and related information as of and for the Current Quarter is as follows:


	For the three months ended March 31, 2022
				Weighted-average
		Weighted-average		Grant Date Value	Aggregate Intrinsic
	Stock Options	Exercise Price		Term (Years)	Value (in thousands) ^(a)
Beginning balance, outstanding	2,074,216	$	16.89	4.4	$	—
Exercised	(70,000)		8.70
Forfeited	(9,411)		20.00
Expired	(91,319)		18.94
Ending balance, outstanding	1,903,486	$	17.08	4.3	$	—
Ending balance, exercisable	1,903,486	$	17.08	4.3	$	—
Nonvested as of March 31, 2022	—	$	—

^(a)Aggregate intrinsic value for stock options is based on the difference between the exercise price of the stock options and the ~~Borrower under~~quoted closing Class A Common Stock price of $8.57 and $6.23 as of March 31, 2022 and December 31, 2021, respectively.

The Company recognized 0 compensation expense related to stock options during the ~~Credit Facility were repaid in full~~Current Quarter and a nominal amount of compensation expense during the ~~Credit Facility~~Prior Quarter. As of March 31, 2022, all equity-based compensation expense related to stock options had been recognized.

Restricted Stock Awards

The value of the restricted stock awards granted was ~~terminated.~~established by the market price of the Class A Common Stock on the date of grant and is recorded as compensation expense ratably over the vesting term, which is generally one

~~Certain lenders party~~27

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to three years from the applicable date of grant. The Company recognized compensation expense of $2.8 million and $1.0 million related to the ~~Credit Facility~~restricted stock awards for the Current Quarter and ~~their respective affiliates have~~Prior Quarter, respectively. As of March 31, 2022, there was $26.9 million of unrecognized compensation expense with a weighted-average remaining life of 2.1 years related to unvested restricted stock awards.

A summary of the Company’s restricted stock awards activity and related information for the Current Quarter is as follows:


	For the three months ended March 31, 2022
		Weighted-average
	Restricted Stock Awards	Grant Date Fair Value
Nonvested as of December 31, 2021	3,144,513	$	6.35
Granted	2,337,795		8.12
Vested	(1,033,308)		7.06
Forfeited	(14,140)		6.30
Nonvested as of March 31, 2022	4,434,860	$	7.12

Performance Share Units (PSUs)

During 2020, 2021 and 2022, the Company approved grants of PSUs that are subject to both performance-based and service-based vesting provisions related to (i) return on asset performance (“ROA”) in comparison to thirteen peer companies and (ii) Adjusted Free Cash Flow (“FCF”) performance percentage. The number of shares of Class A Common Stock issued to a recipient upon vesting of the PSUs will be calculated based on ROA and FCF performance over the applicable period from ~~time~~either January 1, 2020 through December 31, 2022, January 1, 2021 through December 31, 2023 or January 1, 2022 through December 31, 2024.

During 2021, the Company also approved grants of PSUs subject to ~~time performed,~~both performance-based and ~~may~~service-based vesting conditions based on adjusted earnings before taxes and depreciation (“Adjusted EBITDA”) as defined in the ~~future perform, various financial advisory, commercial banking~~agreement. The target PSUs granted in 2021 connected with Adjusted EBITDA could vest at 100% only if the minimum Adjusted EBITDA threshold was met. All Adjusted EBITDA-linked PSUs granted in 2021 did not achieve the performance-based vesting conditions and ~~investment banking services~~were forfeited.

The target number of shares of Class A Common Stock subject to each remaining PSU granted in 2020, 2021 and 2022 is 1; however, based on the achievement of performance criteria, the number of shares of Class A Common Stock that may be received in settlement of each PSU can range from 0 to 1.75 times the target number. The PSUs become earned at the end of the performance period after the attainment of the performance level has been certified by the compensation committee, which will be no later than June 30, 2023 for the 2020 PSU grants, June 30, 2024 for the 2021 PSU grants, and June 30, 2025, for the 2022 PSU grants, assuming the applicable minimum performance metrics are achieved.

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The target PSUs granted in 2020 that become earned connected with the ROA in comparison to other companies will be determined based on the Company’s Average Return on Assets (as defined in the applicable PSU agreement) relative to the Average Return on Assets of the peer companies (as defined in the applicable PSU agreement) in accordance with the following table, but only if the Company’s Average Return on Assets is equal to or greater than 5% during the performance period. The target PSUs granted in 2021 and 2022 removed the 5% minimum ROA for the Company and ~~its affiliates~~added that the Company must have a positive Total Shareholder Return (as defined in the ~~ordinary~~applicable PSU agreement) over the performance period. As a result of this market condition being added, the 2021 and 2022 PSUs will be valued each reporting period utilizing a Black-Scholes model.


Ranking Among Peer Group		Percentage of Target Amount Earned
Outside of Top 10		0%
Top 10		50%
Top 7		100%
Top 3		175%

The target PSUs that become earned in connection with the adjusted FCF performance percentage will be determined (as defined in the applicable PSU agreement) in accordance with the following table:


Adjusted FCF Performance Percentage		Percentage of Target Amount Earned
Less than 70%		0%
70%		50%
100%		100%
130%		175%

The fair value on the date the PSUs were granted during 2022, 2021 and 2020 was $4.9 million, $4.4 million and $4.4 million, respectively. Compensation expense related to the PSUs is determined by multiplying the number of shares of Class A Common Stock underlying such awards that, based on the Company’s estimate, are probable to vest by the measurement date (i.e., the last day of each reporting period date) fair value and recognized using the accelerated attribution method. The Company recognized compensation expense of $0.5 million and $0.4 million related to the PSUs for the Current Quarter and Prior Quarter, respectively.

As of March 31, 2022, the unrecognized compensation cost related to our unvested PSUs is estimated to be $8.1 million and is expected to be recognized over a weighted-average period of 2.3 years. However, this compensation cost will be adjusted as appropriate throughout the applicable performance periods.

The following table summarizes the information about the PSUs outstanding as of March 31, 2022:


		PSUs
Nonvested as of December 31, 2021		2,205,604
Target shares granted		665,992
Target shares forfeited (1)		(838,384)
Target shares outstanding as of March 31, 2022		2,033,212

(1)

All PSUs granted in 2019 and all PSUs granted in 2021 tied to Adjusted EBITDA did not achieve the respective performance targets and were forfeited.

Employee Stock Purchase Plan (ESPP)

The Company has an Employee Stock Purchase Plan (“ESPP”) under which employees that have been continuously employed for at least one year may purchase shares of Class A Common Stock at a discount. The plan provides for four offering periods per year for purchases: December 1 through February 28, March 1 through May 31, June 1 through August 31 and September 1 through November 30. At the end of each offering period, enrolled

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employees purchase shares of Class A Common Stock at a price equal to 95% of the market value of the stock on the last day of such offering period. The purchases are made at the end of an offering period with funds accumulated through payroll deductions over the course of ~~business for which they have received and would receive customary compensation. In addition,~~the offering period. Subject to limitations set forth in the ~~ordinary course~~plan and under IRS regulations, eligible employees may elect to contribute a maximum of ~~their various~~$15,000 to the plan in a single calendar year. The plan is deemed to be noncompensatory.

The following table summarizes ESPP activity (in thousands, except shares):


	For the three months ended
	March 31, 2022
Cash received for shares issued	$	12
Shares issued		1,549

Share Repurchases

During the Current Quarter, the Company repurchased 2,297,985 shares of Class A Common Stock in the open market and repurchased 362,343 shares of Class A Common Stock in connection with employee minimum tax withholding requirements for units vested under the 2016 Plan and the cashless exercise of stock options. All repurchased shares were retired. During the Current Quarter, the repurchases were accounted for as a decrease to paid-in-capital of $19.5 million and a decrease to Class A Common Stock of approximately $27,000. In the Prior Quarter, the Company repurchased 144,078 shares in connection with employee minimum tax withholding requirements.

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NOTE 11—FAIR VALUE MEASUREMENT

The Company utilizes fair value measurements to measure assets and liabilities in a business ~~activities, such parties~~combination or assess impairment and ~~their respective affiliates may make~~abandonment of property and equipment, intangible assets and goodwill or ~~hold~~to measure the value of securities marked to market. Fair value is defined as the amount at which an asset (or liability) could be bought (or incurred) or sold (or settled) in an orderly transaction between market participants at the measurement date. Further, ASC 820, Fair Value Measurements, establishes a ~~broad array~~framework for measuring fair value, establishes a fair value hierarchy based on the quality of ~~investments~~inputs used to measure fair value, and ~~actively trade debt~~includes certain disclosure requirements. Fair value estimates are based on either (i) actual market data or (ii) assumptions that other market participants would use in pricing an asset or liability, including estimates of risk.

ASC 820 establishes a three-level valuation hierarchy for the disclosure of fair value measurements. The valuation hierarchy categorizes assets and ~~equity securities (or related derivative securities)~~liabilities measured at fair value into one of three different levels depending on the observability of the inputs employed in the measurement. The three levels are defined as follows:

Level 1—Unadjusted quoted prices for identical assets or liabilities in active markets.

Level 2—Quoted prices for similar assets or liabilities in non-active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3—Inputs that are unobservable and significant to the fair value measurement (including the Company’s own assumptions in determining fair value).

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. There were 0 transfers into, or out of, the three levels of the fair value hierarchy for the three months ended March 31, 2022 or the year ended December 31, 2021.

The following table presents information about the Company’s assets measured at fair value on a recurring basis as of March 31, 2022:


			Fair Value
			Measurements Using						Carrying
			Level 1		Level 2		Level 3		Value⁽¹⁾		Impairment

			(in thousands)
Three Months Ended March 31, 2022
Investments	Recurring	March 31	$	35	$	—	$	—	$	35	$	—

(1)

Amount represents carrying value at the date of assessment.

Other fair value considerations

The carrying values of the Company’s current financial instruments, ~~(including~~which include cash and cash equivalents, accounts receivable trade and accounts payable, approximate their fair value as of March 31, 2022 and December 31, 2021, due to the short-term nature of these instruments. The Company did not have any bank ~~loans) for their own~~debt as of March 31, 2022 or December 31, 2021. The estimated fair values of the Company’s financial instruments are not necessarily indicative of the amounts that would be realized in a current market exchange.

Nonmonetary transaction:During 2020, the Company had a nonmonetary exchange with a customer whereby the customer settled an accounts receivable balance using its restricted common stock, warrants and other privately traded securities. The Company chose the fair value option to account ~~and~~ for the ~~accounts~~securities because it represents the period-

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end value of the securities, which the Company has the ability to sell. The registration statement registering the resale of the restricted common stock, warrants and ~~such investments~~other privately traded securities received became effective in the fourth quarter of 2020. Accordingly, the Company uses a Level-1 calculation with the value of the securities derived from quoted market pricing of unrestricted, publicly-traded securities. The Company recorded less than a $0.1 million and $1.8 million unrealized loss on the securities ~~activities may involve~~during the Current Quarter and Prior Quarter, respectively, based on the value of the securities as of the end of each reporting period, recognized within other income (expense), net on the accompanying consolidated statements of operations. The Company sold most of these securities during 2021. The less than $0.1 million of remaining securities is included in prepaid expenses and other current assets on the accompanying consolidated balance sheets as of March 31, 2022.

NOTE 12—RELATED-PARTY TRANSACTIONS

The Company considers its related parties to be those stockholders who are beneficial owners of more than 5.0% of its common stock, executive officers, members of its board of directors or immediate family members of any of the foregoing persons, an investment in a company that is significantly influenced by another related party, and cost-method and equity-method investees. The Company has entered into a number of transactions with related parties. In accordance with the Company’s ~~securities and/~~related persons transactions policy, the audit committee of the Company’s board of directors regularly reviews these transactions. However, the Company’s results of operations may have been different if these transactions were conducted with non-related parties.

During the Current Quarter, sales to related parties were $0.3 million and purchases from related-party vendors were $2.6 million. These purchases consisted of $2.2 million relating to the rental of certain equipment or ~~instruments.~~other services used in operations, $0.3 million relating to management, consulting and other services and $0.1 million relating to property and equipment, inventory and consumables.

During the Prior Quarter, sales to related parties were $0.3 million and purchases from related-party vendors were $1.1 million. These purchases consisted of $0.9 million relating to the rental of certain equipment or other services used in operations and $0.2 million relating to management, consulting and other services.

Tax Receivable Agreements

In ~~addition,~~connection with the Select 144A Offering, the Company entered into two tax receivable agreements (the “Tax Receivable Agreements”) with Legacy Owner Holdco and certain ~~lenders party~~other affiliates of the then holders of SES Holdings LLC Units (each such person and any permitted transferee thereof, a “TRA Holder,” and together, the “TRA Holders”).

The first of the Tax Receivable Agreements, which the Company entered into with Legacy Owner Holdco and Crestview Partners II GP, L.P. (“Crestview GP”), generally provides for the payment by the Company to such TRA Holders of 85% of the net cash savings, if any, in U.S. federal, state and local income and franchise tax that the Company actually realizes (computed using simplifying assumptions to address the impact of state and local taxes) or is deemed to realize in certain circumstances in periods after the Select 144A Offering as a result of, as applicable to each such TRA Holder, (i) certain increases in tax basis that occur as a result of the Company’s acquisition (or deemed acquisition for U.S. federal income tax purposes) of all or a portion of such TRA Holder’s SES Holdings LLC Units in connection with the Select 144A Offering or pursuant to the ~~Credit Facility are lenders~~exercise of the Exchange Right or the Company’s Call Right and (ii) imputed interest deemed to be paid by the Company as a result of, and additional tax basis arising from, any payments the Company makes under ~~the New Credit~~such Tax Receivable Agreement.

The second of the Tax Receivable Agreements, which the Company entered into with an affiliate of Legacy Owner Holdco and Crestview GP, generally provides for the payment by the Company to such TRA Holders of 85% of the net cash savings, if any, in U.S. federal, state and local income and franchise tax that the Company actually realizes (computed using simplifying assumptions to address the impact of state and local taxes) or is deemed to realize in certain

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circumstances in periods after the Select 144A Offering as a result of, as applicable to each such TRA Holder, (i) any net operating losses available to the Company as a result of certain reorganization transactions entered into in connection with the Select 144A Offering and (ii) imputed interest deemed to be paid by the Company as a result of any payments the Company makes under such Tax Receivable Agreement.

The Company has not recognized a liability associated with the Tax Receivable Agreements as of March 31, 2022 or December 31, 2021.

NOTE 13—INCOME TAXES

The Company’s income tax information is presented in the table below. The effective tax rate is different than the 21% standard Federal rate due to net income allocated to noncontrolling interests, state income taxes and valuation allowances.


	Three months ended March 31,
	2022		2021

	(in thousands)
Current income tax expense (benefit)	$	241	$	(197)
Deferred income tax expense (benefit)		(27)		(66)
Total income tax expense (benefit)	$	214	$	(263)
Effective Tax Rate		2.6%		1.0%

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NOTE 14—NONCONTROLLING INTERESTS

The Company’s noncontrolling interests fall into two categories as follows:

●

Noncontrolling interests attributable to joint ventures formed for water-related services.

●

Noncontrolling interests attributable to holders of Class B Common Stock.


	As of		As of
	March 31, 2022		December 31, 2021

	(in thousands)
Noncontrolling interests attributable to joint ventures formed for water-related services	$	1,169	$	1,091
Noncontrolling interests attributable to holders of Class B Common Stock		102,468		101,987
Total noncontrolling interests	$	103,637	$	103,078

During the Prior Quarter, the Company initiated the dissolution of one of its water-related services joint ventures and increased its ownership interest in another joint venture, which, combined, eliminated $0.9 million of noncontrolling interest. Additionally, for all periods presented, there were changes in Select Inc.’s ownership interest in SES Holdings LLC. The effects of the changes in Select Inc.’s ownership interest in SES Holdings LLC are as follows:


	Three months ended March 31,
	2022		2021

	(in thousands)
Net income (loss) attributable to Select Energy Services, Inc.	$	6,802	$	(23,107)
Transfers from (to) noncontrolling interests:
Decrease in additional paid-in capital as a result of issuing shares for business combinations		(1,356)		—
Decrease in additional paid-in capital as a result of stock option exercises		(24)		—
Increase in additional paid-in capital as a result of restricted stock issuance, net of forfeitures		2,059		1,226
Increase (decrease) in additional paid-in capital as a result of the repurchase of SES Holdings LLC Units		409		(15)
Decrease in additional paid-in capital as a result of the Employee Stock Purchase Plan shares issued		(1)		—
Change to equity from net income (loss) attributable to Select Energy Services, Inc. and transfers from noncontrolling interests	$	7,889	$	(21,896)

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NOTE 15—INCOME (LOSS) PER SHARE

Income (loss) per share is based on the amount of loss allocated to the stockholders and the weighted-average number of shares outstanding during the period for each class of common stock. Outstanding options to purchase 1,903,486 and 2,272,441 shares of Class A Common Stock are not included in the calculation of diluted weighted-average shares outstanding for the Current Quarter and Prior Quarter, respectively, as their effect is antidilutive.

The following tables present the Company’s calculation of basic and diluted loss per share for the Current and Prior Quarter (dollars in thousands, except share and per share amounts):


	Three months ended March 31, 2022						Three months ended March 31, 2021
	Select Energy						Select Energy
	Services, Inc.		Class A		Class B		Services, Inc.		Class A		Class B
Numerator:
Net income (loss)	$	7,985					$	(27,421)
Net (income) loss attributable to noncontrolling interests		(1,183)						4,314
Net income (loss) attributable to Select Energy Services, Inc. — basic	$	6,802	$	6,802	$	—	$	(23,107)	$	(23,107)	$	—
Add: Reallocation of net income (loss) attributable to noncontrolling interests for the dilutive effect of restricted stock		14		14		—		—		—		—
Add: Reallocation of net income (loss) attributable to noncontrolling interests for the dilutive effect of performance units		2		2		—		—		—		—
Net income (loss) attributable to Select Energy Services, Inc. — diluted	$	6,818	$	6,818	$	—	$	(23,107)	$	(23,107)	$	—
Denominator:
Weighted-average shares of common stock outstanding — basic				91,821,906		16,221,101				84,989,945		16,221,101
Dilutive effect of restricted stock				1,324,947		—				—		—
Dilutive effect of performance share units				169,578		—				—		—
Dilutive effect of ESPP				77		—				—		—
Weighted-average shares of common stock outstanding — diluted				93,316,509		16,221,101				84,989,945		16,221,101
Income (loss) per share:
Basic			$	0.07	$	—			$	(0.27)	$	—
Diluted			$	0.07	$	—			$	(0.27)	$	—

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NOTE 16—SEGMENT INFORMATION

Select Inc. is a leading provider of comprehensive water-management and chemical solutions to the oil and gas industry in the U.S. The Company’s services are offered through 3 reportable segments. Reportable segments are defined as components of an enterprise for which separate financial information is evaluated regularly by the CODM in deciding how to allocate resources and assess performance. The Company’s CODM assesses performance and allocates resources on the basis of the 3 reportable segments. Corporate and other expenses that do not individually meet the criteria for segment reporting are reported separately as Corporate or Other.

The Company’s CODM assesses performance and allocates resources on the basis of the following 3 reportable segments:

Water Services — The Water Services segment consists of the Company’s services businesses, including water transfer, flowback and well testing, fluids hauling, water containment and water network automation, primarily serving E&P companies. Additionally, this segment includes the operations of our accommodations and rentals business.

Water Infrastructure — The Water Infrastructure segment consists of the Company’s infrastructure assets, including operations associated with our water sourcing and pipeline infrastructure, our water recycling solutions, and our produced water gathering systems and saltwater disposal wells, primarily serving E&P companies.

Oilfield Chemicals — The Oilfield Chemicals segment provides technical solutions and expertise related to chemical applications in the oil and gas industry. We develop, manufacture and provide a full suite of chemicals used in hydraulic fracturing, stimulation, cementing, production, pipelines and well completions. We also have significant capabilities in supplying logistics for chemical applications. Given the breadth of chemicals and application expertise we provide, our customers range from pressure pumpers to major integrated and independent oil and gas producers. This segment also utilizes its chemical experience and lab testing capabilities to customize tailored water treatment solutions designed to optimize the fracturing fluid system in conjunction with the quality of water used in well completions.

Financial information by segment for the Current and Prior Quarter is as follows:


	For the three months ended March 31, 2022
			Income		Depreciation and		Capital
	Revenue		before taxes		Amortization		Expenditures

	(in thousands)
Water Services	$	164,686	$	2,565	$	15,562	$	5,631
Water Infrastructure		59,198		3,427		8,431		11,072
Oilfield Chemicals		72,681		4,166		2,507		573
Other		—		(2)		—		—
Eliminations		(1,796)		—		—		—
Income from operations				10,156
Corporate		—		(14,447)		567		989
Interest expense, net		—		(720)		—		—
Bargain purchase gain		—		11,434		—		—
Other income, net		—		1,905		—		—
	$	294,769	$	8,328	$	27,067	$	18,265

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	For the three months ended March 31, 2021
			(Loss) Income		Depreciation and		Capital
	Revenue		before taxes		Amortization		Expenditures

	(in thousands)
Water Services	$	66,717	$	(13,310)	$	13,054	$	269
Water Infrastructure		37,805		1,657		6,255		4,460
Oilfield Chemicals		41,812		(1,477)		2,340		561
Other		—		(13)		—		—
Eliminations		(2,592)		—		—		—
Loss from operations				(13,143)
Corporate		—		(11,901)		650		1
Interest expense, net		—		(435)		—		—
Other expense, net		—		(2,205)		—		—
	$	143,742	$	(27,684)	$	22,299	$	5,291

Total assets by segment as of March 31, 2022 and December 31, 2021, is as follows:


	As of		As of
	March 31, 2022		December 31, 2021

	(in thousands)
Water Services	$	513,759	$	533,071
Water Infrastructure		294,919		229,803
Oilfield Chemicals		194,866		180,732
Other		8,376		6,586
	$	1,011,920	$	950,192

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with ~~the~~our consolidated financial statements and related notes included elsewhere in this report, as well as the historical consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the ~~Final Prospectus.~~year ended December 31, 2021, filed with the Securities and Exchange Commission on February 23, 2022 (our “2021 Form 10-K”). This discussion and analysis contains forward-looking statements based upon our current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors as described under “Cautionary Note Regarding Forward-Looking ~~Statements.”~~Statements” and other cautionary statements described under the heading “Risk Factors” included in our 2021 Form 10-K, and this Quarterly Report on Form 10-Q. We assume no obligation to update any of these forward-looking statements.

This discussion relates to the three months ended March 31, 2022 (the “Current Quarter”) and the three months ended March 31, 2021 (the “Prior Quarter”).

Overview

We are a leading provider of ~~total water~~comprehensive water-management and chemical solutions to the ~~U.S. unconventional~~ oil and gas ~~industry. Within the major shale plays~~industry in the United States ~~we source~~(“U.S.”). We also develop, manufacture and ~~transfer water (both by permanent pipeline and temporary pipe) prior to its~~deliver a full suite of chemical solutions for use in drilling and completion activities associated with hydraulic fracturing or “fracking,” which we collectively refer to as “pre-frac water services.” In most of our areas of operations, we provide complementary water-related services that support oil and gas well completion and production ~~activities including containment, monitoring, treatment, flowback, hauling and disposal. Our services are necessary to establish and maintain production~~operations. As a leader in the water solutions industry, we place the utmost importance on safe, environmentally responsible management of ~~oil and gas over~~oilfield water throughout the ~~productive life~~lifecycle of a ~~horizontal~~ well. ~~Water~~Additionally, we believe that responsibly managing water resources through our operations to help conserve and ~~related services are increasingly important as E&P companies have increased~~protect the ~~complexity and completion intensity of horizontal wells (including the use of longer horizontal wellbore laterals, tighter spacing of frac stages~~environment in the ~~laterals and increased water and proppant use per foot of lateral)~~communities in ~~order~~which we operate is paramount to ~~improve production and recovery of hydrocarbons. Historically, we have generated~~our continued success.

Sustainability

Select is committed to implementing a ~~substantial majority~~corporate strategy that supports the long-term viability of our ~~revenues through providing total water solutions to~~business model in a manner that focuses on our ~~customers.~~people, our customers, the environment, and the communities in which we operate. We ~~provide~~believe this focus will help both us and our ~~services to major integrated~~customers achieve their short-term and ~~large E&P companies, who typically represent the largest producers~~long-term environmental, social and governance (“ESG”) goals, help us attract and retain top talent, maintain community support in ~~each of~~ our areas of operations and further our efforts to generate stockholder returns. We believe our commitment to foster a culture of corporate responsibility is an important part of being a company with operations spanning the contiguous U.S. Further, we believe being a good corporate steward is strategic to our growth in the oil and gas industry and will better allow us to develop solutions that both address the needs of our customers and contribute to sustainable business practices. As a service company, we compete with other service providers based on various factors, including safety and operational performance, technological innovation, process efficiencies and reputational awareness. We believe there is a strong link between these corporate responsibility initiatives and our ability to provide value in our industry.

We are one of the few public companies whose primary focus is on the management of water and water logistics in the oil and gas development industry with a focus on driving efficient, environmentally responsible and economic solutions that lower costs throughout the lifecycle of the well. We believe water is a valuable resource and understand that the oil and gas industry as well as other industries and the general public are balancing the long-term sustainability of this resource. As a company, we continue to provide access to various sources of water as demanded by our customers and have significantly increased our focus on the recycling and reuse of produced water, as well as industrial water sources, to meet the industry’s water demand and align our operations with the goals of our customers. We have invested significantly in recent quarters in the development of fixed recycling facilities that support the advancement of commercialized produced water reuse solutions. By doing so, we strive to reduce both the amount of produced water being reinjected into SWDs and our usage of fresh water. We view our rather unique position as an opportunity to transform water management by leveraging our Oilfield Chemicals business to develop produced water management solutions that increase our customers’ ability to reuse this produced water and add value to their operations.

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By implementing our innovative approach to water solutions, Select has become a leader in recycling produced water to be used in well completions.

Our strong company culture includes commitments to all stakeholders, and we aim to create a work environment that fosters a diverse and inclusive company culture. Additionally, we prioritize safety in our operations through rigorous training, structured protocols, incentives and awards programs and ongoing automation of our operations. Our prioritization of safety includes a commitment to safeguarding the communities in which we operate

We believe that proper alignment of our management and our board of directors with our shareholders is critical to creating long-term value, including the alignment of management compensation and incentive structures and the active engagement of a diverse and independent board of directors.

Recent Developments

Between July 2021 and February 2022, Select completed five acquisitions. Collectively these acquisitions expanded our revenue base and service offerings with many of our key customers and increased our overall service offerings within multiple basins. Effectively integrating the acquired assets and operations is a major focus for the rest of 2022. Our integration and related efforts include, but are not limited to, increasing revenue through strategic market share gains, regional service line expansion, increased pricing, and operational synergies. These operational synergies are expected to be realized by effectively connecting assets with services, realizing cost synergies, and selling excess assets.

On February 23, 2022, the Company acquired Nuverra, an energy-focused environmental solutions company, providing environmental solutions, including the removal, treatment, recycling, transportation and disposal of restricted solids, fluids and hydrocarbons for exploration and production companies operating across the U.S., including in the Bakken, Haynesville, Marcellus and Utica Shales. With the Nuverra transaction, we added more than 300,000 barrels per day of permitted daily disposal capacity in Texas, Louisiana, North Dakota, Montana and Ohio. When combined with our existing assets and other recent acquisitions, this brings our company-wide permitted daily disposal capacity to approximately 2.5 million barrels per day.

The recent Complete Acquisition, Agua Libre and Basic Acquisition and HB Rentals Acquisition improved our financial results in the year ended December 31, 2021, as well as our competitive positioning in the water solutions market. These acquisitions expanded our geographic footprint and provided access to employee expertise as well as opportunities to expand our growing water recycling business into new areas. The acquisitions also increased our market share and added multiple opportunities for future revenue and cost synergies.

In February 2022, Russia launched a large-scale invasion of Ukraine that has led to significant armed hostilities. As a result, the U.S., the United Kingdom, the member states of the European Union and other public and private actors have levied severe sanctions on Russian financial institutions, businesses and individuals. This conflict, and the resulting sanctions, has contributed to significant increases and volatility in the price for oil and natural gas, with the posted price for WTI reaching a high of $123.64 per barrel. Such volatility may lead to a more difficult investing and planning environment for us and our customers. While the near-term impact of these ~~regions.~~events resulted in higher oil and gas prices in the first quarter, the geopolitical and macroeconomic consequences of this invasion and associated sanctions cannot be predicted, and such events, or any further hostilities in Ukraine or elsewhere, could severely impact the world economy and may adversely affect our financial condition.

While the ongoing effects of the COVID-19 pandemic on our operations have decreased in recent quarters, this pandemic has had a material negative impact on our financial results. While we have seen economic recovery and higher oil prices through the Current Quarter, such negative impact may continue well beyond the containment of the pandemic until global GDP levels, associated oil demand and resulting oilfield activity all fully rebound. While we have seen activity improve considerably since the low point experienced in 2020, there remains uncertainty, but global inventories have rapidly normalized with continued demand growth. Even with this recent recovery however, we cannot provide assurance that our assumptions used to estimate our future financial results will be correct given the unpredictable nature

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of the current market environment after the recent elevated volatility in the demand for oil and demand for our services. As a consequence, our ability to accurately forecast our activity and profitability is uncertain.

The future magnitude and ultimate duration of the COVID-19 pandemic is also uncertain. Therefore, we cannot estimate its impact on our business, financial condition or near- or longer-term financial or operational results with certainty. In this environment, the Company has planned for a range of scenarios and has taken a number of actions to decrease operating and capital expenses, and defer other expenses in accordance with the provisions of the CARES Act. To protect our workforce during the COVID-19 pandemic, we have taken steps to support our people who are affected by the virus, manage work-from-home scheduling as appropriate, limit on-site visitors, and monitor and consistently communicate with those who are required to be at a work location, while also providing these employees with additional personal protective equipment.

As a result of reduced oil inventories driven by the Russia/Ukraine war as well as economic recovery and oil demand growth in much of the world, oil and gas prices improved notably in the Current Quarter. During the Current Quarter, the average spot price of West Texas Intermediate crude oil was $95.18versus an average price of $58.09 for the Prior Quarter. The average Henry Hub natural gas spot price during the Current Quarter was $4.66 versus an average of $3.56 for the Prior Quarter. These price levels are supportive of our customers’ drilling and completion programs in the major shale basins.

Many of our customers have demonstrated their resolve to manage their capital spending to within budgets and cash flow from operations and increase redemptions of debt and/or returns of capital to investors. Additionally, consolidation among our customers can disrupt our market in the near-term and the resulting demand for our services. Overall however, the financial health of the oil and gas industry and many of our customers specifically, as reflected in debt metrics, recent capital raises, and equity valuations, greatly improved over the year ended December 31, 2021.

From an operational standpoint, many of the recent trends still apply to ongoing unconventional oil and gas development. The continued trend towards multi-well pad development, executed within a limited time frame, has increased the overall complexity of well completions, while increasing fracturing efficiency and the use of lower-cost in-basin sand has decreased total costs for our customers. However, we note the continued efficiency gains in the well completions process can limit the days we spend on the wellsite and, therefore, negatively impact the total revenue opportunity for certain of our services utilizing day-rate pricing models.

This multi-well pad development, combined with recent upstream acreage consolidation and the growing trends around the reuse applications of produced water, particularly in the Permian Basin but also emerging in other basins as well, however, provides significant opportunity for companies like us that can deliver increasingly complex solutions for our E&P customers across the full completion and production lifecycle of wells.

The trend of increased use of produced water will require additional chemical treatment solutions, and we have a dedicated team of specialists focused every day on developing and deploying innovative water treatment and reuse services for our customers. Our FluidMatch™ design solutions enable our customers to economically use these alternative sources to optimize their fluid systems by providing water profiling and fluid assessment services working towards real time. This trend also supports more complex “on the fly” solutions that treat, proportion, and blend various streams of water and chemicals at the wellsite. This complexity favors service companies able to provide advanced technology solutions. Ultimately, we intend to play an important role in the advancement of water and chemical solutions that are designed to meet the sustainability goals of all stakeholders.

Our water logistics, treatment, and chemical application expertise, in combination with advanced technology solutions, are applicable to other industries beyond oil and gas. We are working to further commercialize our services in other businesses through our industrial solutions group.

February 2021 Severe Weather

Severe winter weather in February 2021 negatively impacted our Prior Quarter results, equating to approximately one lost week of operations across most of our locations, with extended raw material shortages that

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impacted our Oilfield Chemicals segment into March. We estimate that this negatively impacted Prior Quarter revenue by an amount ranging from $9 million to $12 million.

Our Segments

Our services are offered through three ~~operating~~reportable segments: (i) Water ~~Solutions, Accommodations~~Services; (ii) Water Infrastructure; and ~~Rentals, and Wellsite Completion and Construction Services.~~(iii) Oilfield Chemicals.

●

Water Services. The Water Services segment consists of the Company’s services businesses, including water transfer, flowback and well testing, fluids hauling, water containment and water network automation, primarily serving E&P companies. Additionally, this segment includes the operations of our accommodations and rentals business.

●

Water ~~Solutions. Our~~Infrastructure. The Water ~~Solutions~~Infrastructure segment ~~is operated~~consists of the Company’s infrastructure assets, including operations associated with our water sourcing and pipeline infrastructure, our water recycling solutions, and our produced water gathering systems and saltwater disposal wells, primarily ~~under~~serving E&P companies.

●

Oilfield Chemicals. The Oilfield Chemicals segment provides technical solutions and expertise related to chemical applications in the oil and gas industry. We develop, manufacture and provide a full suite of chemicals used in hydraulic fracturing, stimulation, cementing, production, pipelines and well completions. We also have significant capabilities in supplying logistics for chemical applications. Given the breadth of chemicals and application expertise we provide, our ~~subsidiary Select LLC, and provides water-related services~~customers range from pressure pumpers to ~~customers that include~~ major integrated ~~oil companies~~ and independent oil and ~~natural~~ gas producers. ~~These services include:~~This segment also utilizes its chemical experience and lab testing capabilities to customize tailored water treatment solutions designed to optimize the ~~sourcing~~fracturing fluid system in conjunction with the quality of ~~water; the transfer of the~~ water ~~to the wellsite through permanent pipeline infrastructure and temporary pipe; the containment of fluids off-and on-location; measuring and monitoring of water; the filtering and treatment of fluids,~~used in well ~~testing and handling of flowback and produced formation water; and the transportation and recycling or disposal of drilling, completion and production fluids.~~

completions.

~~Accommodations and Rentals~~. Our Accommodations and Rentals segment is operated under our subsidiary Peak Oilfield Services, LLC, and provides workforce accommodations and surface rental equipment supporting drilling, completion and production operations to the U.S. onshore oil and gas industry.

~~Wellsite Completion and Construction Services~~. Our Wellsite Completion and Construction Services segment is operated under our subsidiary Affirm Oilfield Services, LLC, and provides oil and natural gas operators with a variety of services, including crane and logistics services, wellsite and pipeline construction and field services. These services are performed to establish, maintain and improve production throughout the productive life of an oil or gas well, or to otherwise facilitate other services performed on a well.

How We Generate Revenue

We currently generate ~~a significant~~the majority of our revenue through our ~~Water Solutions segment, specifically through the sourcing and transfer of water used in drilling and completion activities~~water-management services associated with hydraulic ~~fracturing. We generate~~fracturing, provided through our Water Services and Water Infrastructure segments. The majority of this revenue is realized through customer agreements with fixed pricing terms ~~but no guaranteed throughput amounts.~~

~~Table~~and is recognized when delivery of ~~Contents~~

services is provided, generally at our customers’ sites. While we have some long-term pricing arrangements, particularly in our Water Infrastructure segment, most of our water and water-related services are priced based on prevailing market conditions, giving due consideration to the specific requirements of the customer.

We also generate revenue by providing completion, specialty chemicals and production chemicals through our Accommodations and Rentals and Wellsite Completion and Construction Services segments which provide workforce accommodations, related rentals and a variety of wellsite completion and construction services, including wellsite construction, pipeline construction, field services and well services.Oilfield Chemicals segment. We invoice the majority of our ~~clients~~Oilfield Chemicals customers for ~~these~~ services provided based on ~~a per job basis~~the quantity of chemicals used or pursuant to short-term contracts as the ~~customer’s~~customers’ needs arise.

Costs of Conducting Our Business

The principal expenses involved in conducting our business are labor costs, vehicle and equipment costs (including depreciation, repair, rental and maintenance and leasing costs), ~~fuel~~raw materials and water sourcing costs and ~~water sourcing~~fuel costs. Our fixed costs are relatively ~~low and a large portion~~low. Most of the costs ~~we incur in~~of serving our ~~business~~customers are variable, i.e., they are incurred only ~~incurred~~ when we provide water and water-related services, or chemicals and chemical-related services to our customers.

Labor costs associated with our employees ~~represent~~and contract labor comprise the ~~most significant~~largest portion of our costs of ~~our~~doing business. We incurred labor and labor-related costs of ~~$54.8~~$104.0 million and ~~$34.4~~$57.9 million for the ~~three months ended September 30, 2017~~Current Quarter and ~~2016,~~Prior Quarter, respectively. We incurred labor costs of $155.5 million and $104.0 million for the nine months ended September 30, 2017 and 2016, respectively. Our labor costs for the nine months ended September 30, 2017 included $12.5 million of non-recurring costs related to a payout on our phantom equity units and IPO success bonuses. The majority of our recurring labor costs are variable and dependent on the then-current market environment and are incurred only while we are providing ~~water and water-related~~our operational services. We also incur costs to employ personnel to sell and supervise our services and perform maintenance on our assets, which ~~are~~is not directly tied to our level

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of business activity. ~~We also~~Additionally, we incur selling, general and administrative costs for compensation of our administrative personnel at our field sites and in our operational and corporate ~~headquarters.~~headquarters, as well as for third-party support, licensing and services.

We incur significant vehicle and equipment costs in connection with the ~~operation of our business,~~services we provide, including depreciation, ~~repair~~repairs and maintenance, rental and leasing costs. We incurred vehicle and equipment costs of ~~$36.0~~$57.3 million and ~~$26.2~~$34.7 million for the ~~three months ended September 30, 2017~~Current Quarter and ~~2016,~~Prior Quarter, respectively.

We incur raw material costs in manufacturing our chemical products, as well as for water that we source for our customers. We incurred ~~equipment~~raw material costs of ~~$98.4~~$71.1 million and ~~$84.5~~$45.0 million for the ~~nine months ended September 30, 2017~~Current Quarter and ~~2016,~~Prior Quarter, respectively. Our depreciation costs are expected to decline over the next few years as a result of recent impairments as well as the decline in our capital expenditures over the last three years, which will be partially offset by any future capital expenditures on depreciable assets.

~~Fuel~~We incur variable transportation costs associated with ~~water transportation are a significant operating cost.~~our service lines, predominately fuel and freight. We incurred fuel and freight costs of ~~$8.2~~$23.9 million and ~~$4.6~~$10.9 million for the ~~three months ended September 30, 2017~~Current Quarter and ~~2016,~~Prior Quarter, respectively. ~~We incurred~~Rising fuel ~~costs of $21.4 million and $12.1 million for the nine months ended September 30, 2017 and 2016, respectively. Fuel~~ prices impact our transportation costs, which affect the pricing and demand offor our services and, ~~have an impact on~~therefore, our results of operations.

We incur water sourcing costs in connection with obtaining strategic and reliable water sources to provide repeatable water volumes to our customers. We incurred water sourcing costs of $9.7 million and $5.8 million for the three months ended September 30, 2017 and 2016, respectively. We incurred water sourcing costs of $23.8 million and $14.1 million for ~~the nine months ended September 30, 2017 and 2016~~ ~~respectively.~~

~~Public Company Expenses~~

General and administrative expenses related to being a publicly traded company include: Exchange Act reporting expenses; expenses associated with compliance with the Sarbanes‑Oxley Act of 2002; expenses associated with maintaining our listing on the NYSE; incremental independent auditor fees; incremental legal fees; investor relations expenses; registrar and transfer agent fees; incremental director and officer liability insurance costs; and director compensation. We expect that general and administrative expenses related to being a publicly traded company will increase in future periods. Costs incurred by us for corporate and other overhead expenses will be reimbursed by SES Holdings pursuant to the SES Holdings LLC Agreement.

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How We Evaluate Our Operations

We use a variety of operational and financial metrics to assess our performance. Among other measures, management considers each of the following:

●

Revenue;

●

Gross Profit;

●

Gross Margins;

●

EBITDA; and

●

Adjusted EBITDA.

Revenue

We analyze our revenue and assess our performance by comparing actual monthly revenue to our internal ~~projections.~~projections and across periods. We also assess incremental changes in revenue compared to incremental changes in direct operating costs, and selling, general and administrative expenses across our ~~operating~~reportable segments to identify potential areas for improvement, as well as to determine whether ~~segments are~~segment performance is meeting management’s expectations.

Gross Profit

To measure our financial performance, we analyze our gross profit, which we define as revenues less direct operating expenses (including depreciation ~~expense)~~and amortization expenses). We believe gross profit ~~is a meaningful metric because it~~ provides insight oninto profitability and the true operating performance ~~based on the historical cost basis~~ of our assets. We also compare gross profit to prior periods and across ~~locations~~segments to identify trends as well as underperforming ~~locations.~~segments.

Gross Margins

Gross margins provide an important gauge of how effective we are at converting revenue into profits. This metric works in tandem with gross profit to ensure that we do not seek to increase gross profit at the expense of lower margins, nor pursue higher gross margins at the expense of declining gross profits. We track gross margins by segment

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and service line and compare them across prior periods and across segments and service lines to identify trends as well as underperforming segments.

EBITDA and Adjusted EBITDA

We view EBITDA and Adjusted EBITDA as important indicators of performance. We define EBITDA as net income/(loss), plus interest expense, income taxes, and depreciation and amortization. We define Adjusted EBITDA as EBITDA plus/(minus) loss/(income) from discontinued operations, plus any impairment charges or asset write-offs pursuant to accounting principles generally accepted in the U.S. (“GAAP”), plus non-cash losses on the sale of assets or subsidiaries, nonrecurring compensation expense, non-cash compensation expense, and nonrecurring or unusual expenses or charges, including severance expenses, transaction costs, or facilities-related exit and disposal-related expenditures, plus/(minus) foreign currency losses/(gains) and plus/(minus) losses/(gains) on unconsolidated entities less bargain purchase gains from business combinations. The adjustments to EBITDA are generally consistent with such adjustments described in our Sustainability-Linked Credit Facility. See “—Comparison of Non-GAAP Financial Measures—EBITDA and Adjusted EBITDA” for more information and a reconciliation of EBITDA and Adjusted EBITDA to net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP.

Factors Affecting the Comparability of Our Results of Operations to Our Historical Results of Operations

Our future results of operations may not be comparable to our historical results of operations for the periods presented, primarily for the reasons described below and those described in “—Recent Developments” above.

Acquisition Activity

As described above, we are continuously evaluating potential investments, particularly in water infrastructure and other water-related services and technology. To the extent we consummate acquisitions, any incremental revenues or expenses from such transactions are not included in our historical results of operations.

Between July 2021 and February 2022, we completed five acquisitions. Our historical financial statements for periods prior to the respective date each acquisition was completed do not include the results of operations of that acquisition. See “—Recent Developments” and “Note 3—Acquisitions” for a description of these acquisitions.”

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Results of Operations

The following tables set forth our results of operations for the periods presented, including revenue by segment.

Current Quarter Compared to the Prior Quarter


	Three months ended March 31,				Change
	2022		2021		Dollars		Percentage

		(in thousands)
Revenue
Water Services	$	163,606	$	64,223	$	99,383	154.7	%
Water Infrastructure		58,554		37,803		20,751	54.9	%
Oilfield Chemicals		72,609		41,716		30,893	74.1	%
Total revenue		294,769		143,742		151,027	105.1	%

Costs of revenue
Water Services		137,046		62,324		74,722	119.9	%
Water Infrastructure		44,378		26,399		17,979	68.1	%
Oilfield Chemicals		62,163		37,766		24,397	64.6	%
Depreciation and amortization		26,500		21,650		4,850	22.4	%
Total costs of revenue		270,087		148,139		121,948	82.3	%
Gross profit (loss)		24,682		(4,397)		29,079	661.3	%

Operating expenses
Selling, general and administrative		28,315		19,894		8,421	42.3	%
Depreciation and amortization		567		649		(82)	(12.6)	%
Lease abandonment costs		91		104		(13)	NM
Total operating expenses		28,973		20,647		8,326	40.3	%
Loss from operations		(4,291)		(25,044)		20,753	82.9	%

Other income (expense)
Gain (loss) on sales of property and equipment and divestitures, net		1,653		(579)		2,232	(385.5)	%
Interest expense, net		(720)		(435)		(285)	65.5	%
Foreign currency gain, net		3		3		—	NM
Bargain purchase gain		11,434		—		11,434	NM
Other		249		(1,629)		1,878	NM
Income (loss) before income tax (expense) benefit		8,328		(27,684)		36,012	130.1	%
Income tax (expense) benefit		(214)		263		(477)	NM
Equity in losses of unconsolidated entities		(129)		—		(129)	NM
Net income (loss)	$	7,985	$	(27,421)	$	35,406	129.1	%

Revenue

Our revenue increased $151.0 million, or 105.1%, to $294.8 million for the Current Quarter compared to $143.7 million for the Prior Quarter. This increase was composed of a $99.4 million increase in Water Services revenue, a $20.8 million increase in Water Infrastructure revenue and a $30.9 million increase in Oilfield Chemicals revenue. These increases were driven primarily by higher demand for our services in comparison to the Prior Quarter. Included in the increases in Water Services and Water Infrastructure were incremental revenue contributions from the Complete, Agua Libre and Basic, HB Rentals and Nuverra acquisitions. For the Current Quarter, our Water Services, Water Infrastructure and Oilfield Chemicals constituted 55.5%, 19.9% and 24.6% of our total revenue, respectively,

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compared to 44.7%, 26.3% and 29.0%, respectively, for the Prior Quarter. The revenue changes by reportable segment are as follows:

Water Services. Revenue increased $99.4 million, or 154.7%, to $163.6 million for the Current Quarter compared to $64.2 million for the Prior Quarter. The increase was primarily attributable to higher demand for our services in comparison to the Prior Quarter. The increase was also impacted by incremental revenue contributed by the Complete, Basic, HB Rentals and Nuverra acquisitions.

Water Infrastructure. Revenue increased by $20.8 million, or 54.9%, to $58.6 million for the Current Quarter compared to $37.8 million for the Prior Quarter. The increase was primarily attributable to higher demand for our services in comparison to the Prior Quarter. The increase was also modestly impacted by incremental revenue contributed by the Complete, Agua Libre and Nuverra acquisitions.

Oilfield Chemicals. Revenue increased $30.9 million, or 74.1%, to $72.6 million for the Current Quarter compared to $41.7 million for the Prior Quarter. The increase was primarily attributable to higher demand for our services in comparison to the Prior Quarter.

Costs of Revenue

Costs of revenue increased $121.9 million, or 82.3%, to $270.1 million for the Current Quarter compared to $148.1 million for the Prior Quarter. The increase was primarily composed of a $74.7 million increase in Water Services costs, an $18.0 million increase in Water Infrastructure costs, and a $24.4 million increase in Oilfield Chemicals costs due to supporting higher revenue producing activity discussed above.

Water Services. Costs of revenue increased $74.7 million, or 119.9%, to $137.0 million for the Current Quarter compared to $62.3 million for the Prior Quarter. Cost of revenue as a percent of revenue decreased from 97.0% to 83.8% primarily due to economies of scale from higher revenue activity. The Prior Quarter was negatively impacted by a significant reduction in demand for our services due to a gradual recovery following the onset of the COVID-19 pandemic.

Water Infrastructure. Costs of revenue increased $18.0 million, or 68.1%, to $44.4 million for the Current Quarter compared to $26.4 million for the Prior Quarter. Cost of revenue as a percent of revenue increased from 69.8% to 75.8% primarily due to a lower relative contribution of high-margin pipeline revenue.

Oilfield Chemicals. Costs of revenue increased $24.4 million, or 64.6%, to $62.2 million for the Current Quarter compared to $37.8 million for the Prior Quarter. Cost of revenue as a percent of revenue decreased from 90.5% to 85.6% primarily due to picking up additional market share for our portfolio of products. The Prior Quarter was negatively impacted by a significant reduction in demand for our services due to a gradual recovery following the onset of the COVID-19 pandemic.

Depreciation and Amortization. Depreciation and amortization expense increased $4.9 million, or 22.4%, to $26.5 million for the Current Quarter compared to $21.7 million for the Prior Quarter, primarily due to a higher fixed asset base related to acquisitions after March 31, 2021.

Gross Profit (Loss)

Gross profit was $24.7 million for the Current Quarter compared to a gross loss of $4.4 million for the Prior Quarter primarily due to higher revenue in all three segments resulting from increased activity levels. Gross profit increased by $24.7 million, $2.8 million and $6.5 million in our Water Services, Water Infrastructure and Oilfield Chemicals segments, respectively. Partially offsetting the increase in gross profit was a $4.9 million increase in depreciation and amortization expense. Gross margin as a percent of revenue was 8.4% and (3.1%) in the Current Quarter and Prior Quarter, respectively.

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Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $8.4 million, or 42.3%, to $28.3 million for the Current Quarter compared to $19.9 million for the Prior Quarter. The increase was primarily due to $2.4 million of costs from the additional personnel and related back-office expenses as a result of our 2021 and 2022 acquisitions, comprised of $0.7 million of personnel costs and $1.7 million of other back-office costs, $2.1 million higher legal and professional services in connection with work related to acquisitions, $2.1 million higher wages and associated payroll taxes, a $1.9 million increase in equity-based compensation costs, $0.8 million in higher vehicle lease costs, a $0.5 million increase in travel, meals and entertainment costs and $1.8 million from a combination of other expenses partially offset by $3.2 million in Prior Quarter severance expense.

Lease Abandonment Costs

Lease abandonment costs were $0.1 million in both the Current Quarter and Prior Quarter. Lease abandonment costs primarily related to expenses associated with facilities previously abandoned.

Net Interest Expense

Net interest expense increased by $0.3 million, or 65.5%, to $0.7 million for the Current Quarter compared to $0.4 million in the Prior Quarter primarily due to an increase in amortized deferred financing costs as a result of exiting the Prior Credit Agreement, lower interest income related to note receivable that was converted to an equity-method investment during the Current Quarter and higher interest expense due to borrowings in the Current Quarter.

Bargain Purchase Gain

Bargain purchase gain of $11.4 million in the Current Quarter was comprised of $11.8 million related to the Nuverra Acquisition and ($0.4) million in adjustments related to acquisitions in 2021. The Nuverra Acquisition has preliminarily resulted in a bargain purchase gain as the current estimated fair value of net assets received is greater than the consideration paid.

Other

Other income was $0.2 million in the Current Quarter compared to other expense of $1.6 million in the Prior Quarter. During the Current Quarter, other income primarily related to the sale of excess assets acquired in 2021. During the Prior Quarter, other expenses primarily related to the mark-to-market of equities using the fair value option.

Net Income (Loss)

Net Income (loss) increased by $35.4 million, to a net income of $8.0 million for the Current Quarter compared to a net loss of $27.4 million for the Prior Quarter, driven primarily by increased revenue due to a gradual increase in demand for our services and a bargain purchase gain of $11.4 million. The Prior Quarter was negatively impacted by a significant reduction in demand for our services following the onset of the COVID-19 pandemic.

Comparison of Non-GAAP Financial Measures

We view EBITDA and Adjusted EBITDA as important indicators of performance. We define EBITDA as net income (loss), plus ~~taxes,~~ interest expense, income taxes, and depreciation and amortization. We define Adjusted EBITDA as EBITDA plus/(minus) loss/(income) from discontinued operations, plus any impairment charges or asset write-offs pursuant to GAAP, ~~plus/(minus)~~plus non-cash ~~losses/(gains)~~losses on the sale of assets or subsidiaries, non-recurring compensation expense, non-cash compensation expense, ~~non-recurring compensation expense~~ and ~~nonrecurring~~non-recurring or unusual expenses or charges, including severance expenses, transaction costs, or ~~facilities related~~facilities-related exit and ~~disposal related expenditures.~~disposal-related expenditures, plus/(minus) foreign currency losses/(gains) and plus/(minus) losses/(gains) on unconsolidated entities less bargain purchase gains from business combinations. The

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adjustments to EBITDA are generally consistent with such adjustments described in our Sustainability-Linked Credit Facility. See “—Comparison of ~~Non-GAAP Financial Measures” and “Note Regarding~~ Non-GAAP Financial Measures” for more information and a reconciliation of EBITDA and Adjusted EBITDA to net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP.

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~~Results of Operations~~

~~The following tables set forth selected financial and operating data for the periods indicated (all values are net to our interest unless indicated otherwise):~~

~~Three Months Ended September 30, 2017 Compared to the Three Months Ended September 30, 2016~~

Three months ended September 30,

Change


2017


2016

Dollars

Percentage

(in thousands)

Revenue









Water solutions

$
125,086

$
60,975

$
64,111

105.1
%
Accommodations and rentals

15,615

5,838

9,777

167.5
%
Wellsite completion and construction services

13,179

7,094

6,085

85.8
%
Total revenue

153,880

73,907

79,973

108.2
%

Costs of revenue





Water solutions

88,087

49,996

38,091

76.2
%
Accommodations and rentals

11,976

4,969

7,007

141.0
%
Wellsite completion and construction services

10,888

6,299

4,589

72.9
%
Depreciation and amortization

23,420

21,613

1,807

8.4
%
Total costs of revenue

134,371

82,877

51,494

62.1
%
Gross profit (loss)

19,509

(8,970)

28,479

NM

Operating expenses





Selling, general and administrative

16,087

8,764

7,323

83.6
%
Depreciation and amortization

375

363

12

3.3
%
Lease abandonment costs

590

13,169

(12,579)

(95.5)
%
Total operating expenses

17,052

22,296

(5,244)

(23.5)
%
Income (loss) from operations

2,457

(31,266)

33,723

NM

Other income (expense)





Interest expense, net

(484)

(4,343)

3,859

(88.9)
%
Other income, net

326

431

(105)

(24.4)
%
Income (loss) before tax expense

2,299

(35,178)

37,477

NM

Tax benefit (expense)

294

(26)

320

NM

Net income (loss)

$
2,593

$
(35,204)

$
37,797

NM

~~Revenue~~

Our revenue increased $80.0 million, or 108.2%, to $153.9 million for the three months ended September 30, 2017 compared to $73.9 million for the three months ended September 30, 2016. The increase was primarily attributable to an increase in our Water Solutions segment revenues of $64.1 million. For the three months ended September 30, 2017, our Water Solutions, Accommodations and Rentals, and Wellsite Completion and Construction Services segments constituted 81.3%, 10.1% and 8.6% of our total revenue, respectively, compared to 82.5%, 7.9%, and 9.6%, respectively, for the three months ended September 30, 2016. The revenue increase by operating segment was as follows:

~~Water Solutions~~. Revenue increased $64.1 million, or 105.1%, to $125.1 million for the three months ended September 30, 2017 compared to $61.0 million for the three months ended September 30, 2016. The increase was primarily attributable to an increase in the demand for our services as a result of a rise in completion activities and an increase in average quarterly rig count of 97.4% during the third quarter of 2017 compared to the third quarter of 2016. Additionally, the GRR Acquisition, which closed March 10, 2017, contributed $10.4 million of revenue for the three months ended September 30, 2017.

~~Table of Contents~~

~~Accommodations and Rentals~~. Revenue increased $9.8 million, or 167.5%, to $15.6 million for the three months ended September 30, 2017 compared to $5.8 million for the three months ended September 30, 2016. The revenue increase was primarily attributable to a rise in completion activities and an increase in our customers’ quarterly rig count, which led to higher demand for equipment rentals as well as an increase in pricing for such rentals and other related services.

~~Wellsite Completion and Construction Services~~. Revenue increased $6.1 million, or 85.8%, to $13.2 million for the three months ended September 30, 2017 compared to $7.1 million for the three months ended September 30, 2016. The increase was primarily attributable to an increase in field services revenues of $5.1 million in our Rockies and Permian regions and increases in crane services revenues of $1.9 million, offset by $0.9 million due to the closure of our South Texas field services at the end of 2016. These increases were driven by the addition of the Permian region in 2017 and by increased demand for these services resulting from several new customers resuming completion activities during 2017.

~~Costs of Revenue~~

Cost of revenue increased $51.5 million, or 62.1%, to $134.4 million for the three months ended September 30, 2017 compared to $82.9 million for the three months ended September 30, 2016. The increase was largely attributable to higher salaries and wages due to an increase in employee headcount, and increased outside services, rentals and materials expense as a result of increased demand for our services resulting from the overall increase in drilling, completion and production activities, particularly in our Water Solutions segment. The cost of revenue increase by operating segment was as follows:

~~Water Solutions~~. Cost of revenue increased $38.1 million, or 76.2%, to $88.1 million for the three months ended September 30, 2017 compared to $50.0 million for the three months ended September 30, 2016. The increase was partly attributable to an increase in salaries and wages of $14.7 million resulting from a 48% increase in average headcount during the three months ended September 30, 2017 as compared to the prior year period. The increase in cost of revenue was also attributable to an increase in contract labor expense of $7.6 million, materials and supplies expense of $6.8 million, equipment rental and maintenance expense of $4.7 million, bulk and retail fuel expense of $2.9 million and allocated insurance costs of $0.4 million, offset by a decrease in allocated facility costs of $0.4 million. The increase in fuel and maintenance related expenses were largely attributable to a 28.1% increase in the average number of trucks and tractors in our fleet.

~~Accommodations and Rentals~~. Cost of revenue increased $7.0 million, or 141.0%, to $12.0 million for the three months ended September 30, 2017 compared to $5.0 million for the three months ended September 30, 2016. The increase was partially attributable to an increase in salaries and wages of $1.9 million resulting from an 85% increase in average headcount during the three months ended September 30, 2017 as compared to the prior year period. This increase in labor workforce also resulted in a $1.1 million increase of certain labor support costs including fuel and repair and maintenance expenses. The cost of revenue increase was also partly attributable to increases in outside services, equipment rentals and variable supplies expense totaling $3.7 million resulting from increased demand for services.

~~Wellsite Completion and Construction Services~~. Cost of revenue increased $4.6 million, or 72.9%, to $10.9 million for the three months ended September 30, 2017 compared to $6.3 million for the three months ended September 30, 2016. The increase was primarily attributable to increased direct labor costs of $1.7 million, contract labor expense of $2.2 million and rental expense of $0.7 million.

~~Depreciation and Amortization~~. Depreciation and amortization expense increased $1.8 million, or 8.4%, to $23.4 million for the three months ended September 30, 2017 compared to $21.6 million for the three months ended September 30, 2016. The increase was primarily attributable to the depreciation recognized in the three months ended September 30, 2017 related to recently acquired assets from the GRR Acquisition, the DAWS Acquisition and the TEX Acquisition.

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~~Gross Profit (Loss)~~

Gross profit (loss) improved by $28.5 million, to a gross profit of $19.5 million for the three months ended September 30, 2017 compared to a gross loss of $9.0 million for the three months ended September 30, 2016 as a result of factors described above.

~~Selling, General and Administrative Expenses~~

The increase in selling, general and administrative expenses of $7.3 million, or 83.6%, to $16.1 million for the three months ended September 30, 2017 compared to $8.8 million for the three months ended September 30, 2016 was primarily due to an increase in administrative labor costs of $1.5 million, primarily related to our new status as a public company and an increase in legal and professional fees of $4.9 million during the three months ended September 30, 2017 as compared to the prior year period, largely related to the Merger, offset by lower corporate office rent of less than $0.1 million.

~~Lease Abandonment Costs~~

Due to depressed industry conditions and a resulting reduction in the need for facilities primarily in 2016, during the three months ended September 30, 2017, we recorded $0.6 million of lease abandonment costs related to certain facilities that were no longer in use. During the three months ended September 30, 2016, we ~~recorded $13.2 million of lease abandonment costs related to certain facilities that were no longer in use~~.

~~Interest Expense~~

The decrease in interest expense of $3.9 million, or 88.9% during the three months ended September 30, 2017 compared to the three months ended September 30, 2016 was due to the completion of the 144A Offering on December 20, 2016 and the completion of the IPO on April 26, 2017. We used a portion of the net proceeds from the 144A Offering to repay all outstanding borrowings and a portion of the net proceeds from the IPO to repay all of our subsequent outstanding indebtedness related to the GRR Acquisition.

~~Net Loss~~

Net income (loss) improved by $37.8 million to a net income of $2.6 million for the three months ended September 30, 2017 compared to a net loss of $35.2 million for the three months ended September 30, 2016 as a result of the factors described above.

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~~Nine Months Ended September 30, 2017 Compared to the Nine Months Ended September 30, 2016~~

Nine months ended September 30,

Change


2017


2016

Dollars

Percentage

(in thousands)

Revenue









Water solutions

$
311,275

$
173,157

$
138,118

79.8
%
Accommodations and rentals

38,457

19,585

18,872

96.4
%
Wellsite completion and construction services

38,522

22,923

15,599

68.0
%
Total revenue

388,254

215,665

172,589

80.0
%

Costs of revenue





Water solutions

226,737

144,653

82,084

56.7
%
Accommodations and rentals

30,697

15,527

15,170

97.7
%
Wellsite completion and construction services

32,155

19,817

12,338

62.3
%
Depreciation and amortization

67,144

73,874

(6,730)

(9.1)
%
Total costs of revenue

356,733

253,871

102,862

40.5
%
Gross profit (loss)

31,521

(38,206)

69,727

NM

Operating expenses





Selling, general and administrative

49,298

25,928

23,370

90.1
%
Depreciation and amortization

1,312

1,644

(332)

(20.2)
%
Impairment of goodwill and other intangible assets

—

138,666

(138,666)

(100.0)
%
Impairment of property and equipment

—

60,026

(60,026)

(100.0)
%
Lease abandonment costs

2,871

13,169

(10,298)

(78.2)
%
Total operating expenses

53,481

239,433

(185,952)

(77.7)
%
Loss from operations

(21,960)

(277,639)

255,679

(92.1)
%

Other income (expense)





Interest expense, net

(1,885)

(11,792)

9,907

(84.0)
%
Other income, net

3,342

588

2,754

468.4
%
Loss before tax expense

(20,503)

(288,843)

268,340

(92.9)
%
Tax benefit (expense)

326

(392)

718

NM

Net loss

$
(20,177)

$
(289,235)

$
269,058

(93.0)
%

~~Revenue~~

Our revenue increased $172.6 million, or 80.0%, to $388.3 million for the nine months ended September 30, 2017 compared to $215.7 million for the nine months ended September 30, 2016. The increase was primarily attributable to an increase in our Water Solutions segment revenues of $138.1 million. For the nine months ended September 30, 2017, our Water Solutions, Accommodations and Rentals, and Wellsite Completion and Construction Services segments constituted 80.2%, 9.9% and 9.9% of our total revenue, respectively, compared to 80.3%, 9.1%, and 10.6%, respectively, for the nine months ended September 30, 2016. The revenue increase by operating segment was as follows:

~~Water Solutions~~. Revenue increased $138.1 million, or 79.8%, to $311.3 million for the nine months ended September 30, 2017 compared to $173.2 million for the nine months ended September 30, 2016. The increase was primarily attributable to an increase in the demand for our services as a result of a rise in completion activities and an increase in average quarterly rig count of 77.2% during the nine months ended September 30, 2017 compared to nine months ended September 30, 2016. Additionally, the GRR Acquisition, which closed on March 10, 2017, contributed $21.5 million of revenue for the nine months ended September 30, 2017.

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~~Accommodations and Rentals~~. Revenue increased $18.9 million, or 96.4%, to $38.5 million for the nine months ended September 30, 2017 compared to $19.6 million for the nine months ended September 30, 2016. The revenue increase was primarily attributable to a rise in completion activities and an increase in our customers’ quarterly rig count, which led to higher demand for equipment rentals.

~~Wellsite Completion and Construction Services~~. Revenue increased $15.6 million, or 68.0%, to $38.5 million for the nine months ended September 30, 2017 compared to $22.9 million for the nine months ended September 30, 2016. The increase was primarily attributable to an increase in field services revenues of $12.9 million in our Rockies and Permian regions, increases in construction services revenue of $2.3 million in our South Texas region and increases in crane services revenues of $3.8 million, offset by $3.1 million due to the closure of our South Texas field services at the end of 2016. These increases were driven by the addition of the Permian region in 2017 and by the increased demand for these services resulting from several new customers resuming completion activities during 2017.

~~Costs of Revenue~~

Cost of revenue increased $102.9 million, or 40.5%, to $356.7 million for the nine months ended September 30, 2017 compared to $253.9 million for the nine months ended September 30, 2016. The increase was largely attributable to higher salaries and wages due to an increase in employee headcount, and increased outside services, rentals and materials as a result of increased demand for ours services resulting from the overall increase in drilling, completion and production activities, particularly in our Water Solutions segment. The cost of revenue increase by operating segment was as follows:

~~Water Solutions~~. Cost of revenue increased $82.1 million, or 56.7%, to $226.7 million for the nine months ended September 30, 2017 compared to $144.7 million for the nine months ended September 30, 2016. The increase was partly attributable to an increase in salaries and wages of $28.0 million as a result of a 28% increase in average headcount during the nine months ended September 30, 2017 as compared to the prior year period. The increase was also attributable to an increase in materials and supplies expense of $17.0 million, contract labor expense of $16.1 million, equipment rental and maintenance expense of $11.3 million and bulk and retail fuel expense of $7.3 million, offset by a decrease in allocated facility costs of $3.3 million.

~~Accommodations and Rentals~~. Cost of revenue increased $15.2 million, or 97.7%, to $30.7 million for the nine months ended September 30, 2017 compared to $15.5 million for the nine months ended September 30, 2016. The increase was partially attributable to an increase in salaries and wages of $3.8 million resulting from a 45% increase in average headcount during the nine months ended September 30, 2017 as compared to the prior year period. This increase in labor workforce also resulted in a $2.8 million increase of certain labor support costs including fuel and repair and maintenance expenses. The cost of revenue increase was also partly attributable to increases in outside services, equipment rentals and variable supplies expense totaling $8.1 million resulting from increased demand for services.

~~Wellsite Completion and Construction Services~~. Cost of revenue increased $12.3 million, or 62.3%, to $32.2 million for the nine months ended September 30, 2017 compared to $19.8 million for the nine months ended September 30, 2016. The increase was primarily attributable to expansion into the Permian region in 2017 and new customer wins which led to higher direct and contract labor expenses of $8.0 million. To support this increased labor expense, increases in fuel and repair and maintenance costs of $1.2 million were incurred. This cost of revenue increase was also partially attributable to increases in equipment rental costs of $2.2 million and supplies and materials expense of $0.9 million needed to support customer demand.

~~Depreciation and Amortization~~. Depreciation and amortization expense decreased $6.7 million, or 9.1%, to $67.1 million for the nine months ended September 30, 2017 compared to $73.9 million for the nine months ended September 30, 2016. The decrease was primarily attributable to assets becoming fully depreciated or being impaired during the first half of 2016.

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~~Gross Profit (Loss)~~

Gross profit (loss) improved by $69.7 million, to a gross profit of $31.5 million for the nine months ended September 30, 2017 compared to gross loss of $38.2 million for the nine months ended September 30, 2016 as a result of factors described above.

~~Selling, General and Administrative Expenses~~

The increase in selling, general, and administrative expenses of $23.4 million, or 90.1%, to $49.3 million for the nine months ended September 30, 2017 compared to $25.9 million for the nine months ended September 30, 2016 was primarily due to a payout on our phantom equity units and IPO success bonuses of $12.5 million, including associated taxes, an increase in administrative labor costs of $2.7 million, primarily related to our new status as a public company, and an increase in legal and professional fees of $6.4 million, primarily related to the Merger, GRR Acquisition and other deal costs, during the nine months ended September 30, 2017 as compared to the prior year period offset by lower corporate office rent of $0.6 million.

~~Impairment~~

There were no impairment losses recorded during the nine months ended September 30, 2017. Due to significant reductions in oil and gas prices and rig counts during early 2016, we determined there were triggering events requiring an assessment of the recoverability of goodwill. This assessment resulted in our recognition in our consolidated statements of operations for the nine months ended September 30, 2016 of an impairment loss of $137.6 million related to goodwill and $60.0 million related to long-lived assets in our Water Solutions segment, $1.0 million related to goodwill and less than $0.1 million related to other intangible assets in our Accommodations and Rentals segment.

~~Lease Abandonment Costs~~

Due to depressed industry conditions and a resulting reduction in the need for facilities, we decided to close certain facilities beginning in the third quarter of 2016. As a result of continuing costs related to certain facilities that are no longer in use, we recorded $2.9 million of lease abandonment costs during the nine months ended September 30, 2017. We recorded $13.2 million of lease abandonment costs during the nine months ended September 30, 2016.

~~Interest Expense~~

The decrease in interest expense of $9.9 million, or 84.0%, during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 was due to the completion of the 144A Offering on December 20, 2016 and the completion of the IPO on April 26, 2017. We used a portion of the net proceeds from the 144A Offering to repay all outstanding borrowings and a portion of the net proceeds from the IPO to repay all of our subsequent outstanding indebtedness related to GRR Acquisition.

~~Net Loss~~

Net loss decreased by $269.1 million, or 93.0%, to $20.2 million for the nine months ended September 30, 2017 compared to $289.2 million for the nine months ended September 30, 2016 largely as a result of the impairment losses and other factors described above.

~~Comparison of Non-GAAP Financial Measures~~

We view EBITDA and Adjusted EBITDA as important indicators of performance. We define EBITDA as net income, plus taxes, interest expense, and depreciation and amortization. We define Adjusted EBITDA as EBITDA plus/(minus) loss/(income) from discontinued operations, plus any impairment charges or asset write-offs pursuant to GAAP, plus/(minus) non-cash losses/(gains) on the sale of assets or subsidiaries, non-recurring compensation expense,

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~~non-cash compensation expense, and non-recurring or unusual expenses or charges, including severance expenses, transaction costs, or facilities-related exit and disposal-related expenditures.~~

Our board of directors, management and investors use EBITDA and Adjusted EBITDA to assess our financial performance because it allows them to compare our operating performance on a consistent basis across periods by removing the effects of our capital structure (such as varying levels of interest expense), asset base (such as depreciation and amortization) and items outside the control of our management team. We present EBITDA and Adjusted EBITDA because we believe they provide useful information regarding the factors and trends affecting our business in addition to measures calculated under GAAP.

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Note Regarding Non-GAAP Financial Measures

EBITDA and Adjusted EBITDA

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 the exclusion of some but not all items that affect the most directly comparable GAAP financial measures. ~~You~~One 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. ~~For further discussion, please see “Summary—Summary Consolidated Financial Data” in our Final Prospectus.~~

The following table ~~presents a~~sets forth our reconciliation of EBITDA and Adjusted EBITDA to our net ~~loss,~~income (loss), which is the most directly comparable GAAP measure for the periods presented:


	Three months ended March 31,
	2022		2021

	(in thousands)
Net income (loss)	$	7,985	$	(27,421)
Interest expense, net		720		435
Income tax expense (benefit)		214		(263)
Depreciation and amortization		27,067		22,299
EBITDA		35,986		(4,950)
Non-cash compensation expenses		3,275		1,422
Nonrecurring severance expenses⁽¹⁾		—		3,225
Non-cash loss on sale of assets or subsidiaries⁽²⁾		520		697
Nonrecurring transaction costs⁽³⁾		3,617		412
Lease abandonment costs		91		104
Bargain purchase gain		(11,434)		—
Equity in losses of unconsolidated entities		129		—
Foreign currency gain, net		(3)		(3)
Adjusted EBITDA	$	32,181	$	907

Three Months Ended September 30,

Nine Months Ended September 30,


2017


2016

2017


2016

(In thousands)

(In thousands)
Net income (loss)

$
2,593

$
(35,204)

$
(20,177)

$
(289,235)
Interest expense

484

4,343

1,885

11,792
Depreciation and amortization

23,795

21,976

68,456

75,518
Tax (benefit) expense

(294)

26

(326)

392
EBITDA

26,578

(8,859)

49,838

(201,533)
Impairment

—

—

—

198,692
Lease abandonment costs

590

13,169

2,871

13,169
Non-recurring severance costs

—

147

122

689
Non-recurring deal costs

4,382

20

5,462

(236)
Non-cash incentive compensation

549

(1)

1,781

(488)
Non-cash loss on sale of subsidiaries and other assets

268

(491)

775

(29)
Non-recurring phantom equity and IPO-related compensation

—

—

12,537

—
Adjusted EBITDA

$
32,367

$
3,985

$
73,386

$
10,264

(1)	For the Prior Quarter, these costs related to severance costs associated with our former CEO.

(2)	For the Current Quarter and Prior Quarter, the losses were primarily due to sales of real estate and underutilized or obsolete property and equipment.

(3)	For the Current Quarter and Prior Quarter, these costs were primarily legal-related due diligence costs as well as costs related to certain acquired subsidiaries.

EBITDA was $36.0 million for the Current Quarter compared to ($5.0) million for the Prior Quarter. The 40.9 million increase in EBITDA was driven primarily by an increase of $33.9 million in gross profit and an $11.4 bargain purchase gain in the Current Quarter partially offset by an $8.4 million increase in selling, general and administrative costs. Adjusted EBITDA was $32.2 million for the Current Quarter compared to $0.9 million for the Prior Quarter. The $31.3 million increase is primarily attributable to the items discussed above.

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Liquidity and Capital Resources

Overview

Our primary sources of liquidity ~~to date have been capital contributions~~are cash on hand, borrowing capacity under the Sustainability-Linked Credit Facility, cash flows from ~~our members, the net~~operations and proceeds from the ~~144A Offering, the net proceeds from the IPO, borrowings under our Credit Facility~~sale of excess property and ~~cash flows from~~

~~Table of Contents~~

~~operations.~~equipment. Our primary uses of capital have been to fund current operations, maintain our asset base, implement technological advancements, make capital expenditures to support organic growth, fund acquisitions and ~~fund acquisitions.~~minority investments, and when appropriate, repurchase shares of Class A Common Stock in the open market. Depending ~~upon~~on available opportunities, market conditions and other factors, we may also issue debt and equity securities, in the future, if needed.

As of March 31, 2022, we had no outstanding bank debt and a positive net cash position. We prioritize sustained positive free cash flow and a strong balance sheet, and evaluate potential acquisitions and investments in the context of those priorities, in addition to the economics of the opportunity. We believe this approach provides us with additional flexibility to evaluate larger investments as well as improved resilience in a sustained downturn versus many of our peers.

Based on our current cash and cash equivalents balance, operating cash flow, available borrowings under our Sustainability-Linked Credit Facility and the ongoing actions discussed above, we believe that we will be able to maintain sufficient liquidity to satisfy our obligations and remain in compliance with our existing debt covenants through the next twelve months and beyond, prior to giving effect to any future financing that may occur.

We intend to finance most of our capital expenditures, contractual obligations and working capital needs with cash on hand, cash generated from operations and borrowings ~~from~~under our Sustainability-Linked Credit Facility. For a discussion of the Sustainability-Linked Credit Facility, see “—Sustainability-Linked Credit Facility” below. WeAlthough we cannot provide any assurance, we believe that our current cash balance, operating cash flow and available borrowings under our Sustainability-Linked Credit Facility will be sufficient to fund our operations for at least the next twelve months.

~~On April 26, 2017, we completed the IPO for net proceeds~~As of approximately $111.4 million, net of underwriting discounts and commissions and estimated offering expenses. We contributed all of these net proceeds to SES Holdings in exchange for SES Holdings LLC Units. SES Holdings used the net proceeds to repay borrowings incurred under our Credit Facility to fund the cash portion of the purchase price of the GRR Acquisition, for the cash settlement of outstanding phantom unit awards at SES Holdings and for 2017 budgeted capital expenditures.On May 10, 2017, we received approximately $17.1 million, net of underwriting discounts and commissions and estimated offering expenses, from the exercise in full by the underwriters of our IPO of their option to purchase additional shares of our Select Class A Common Stock. We used the net proceeds from the underwriters’ option exercise for general corporate purposes, including funding 2017 budgeted capital expenditures.

~~At September 30, 2017,~~March 31, 2022, cash and cash equivalents totaled ~~$42.4 million. In addition to cash~~$24.8 million, and ~~cash equivalents,~~ we had approximately ~~$85.9~~$188.5 million of available borrowing capacity under our Sustainability-Linked Credit Facility. As of March 31, 2022, the borrowing base under the Sustainability-Linked Credit Facility was $204.1 million, we had no outstanding borrowings and outstanding letters of credit totaled $15.6 million. As of May 2, 2022, we had no outstanding borrowings, the borrowing base under the Sustainability-Linked Credit Facility was $193.5 million, the outstanding letters of credit totaled $20.9 million, and the available borrowing capacity under the Sustainability-Linked Credit Facility was $172.6 million.

We also assumed $4.6 million in letters of credit as part of the Nuverra Acquisition. These letters of credit were not a part of the Sustainability-Linked Credit Facility as of ~~September 30, 2017.~~March 31, 2022 and did not impact the Company’s borrowing base. We replaced these letters of credit in April 2022 and they are now part of the Sustainability-Linked Credit Facility.

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Cash Flows

The following table summarizes our cash flows for the periods indicated:

Nine months ended September 30,

Change


2017

2016


(In thousands)

Net cash (used in) provided by operating activities

$
(4,249)

$
8,078

$
(12,327)
Net cash used in investing activities

(121,535)

(20,372)

(101,163)
Net cash provided by financing activities

128,136

2,730

125,406
Net increase (decrease) in cash

$
2,352

$
(9,564)


	Three months ended March 31,				Change
	2022		2021		Dollars		Percentage

	(in thousands)
Net cash used in operating activities	$	(18,550)	$	(3,873)	$	(14,677)	(379.0)	%
Net cash used in investing activities		(91)		(4,218)		4,127	97.8	%
Net cash used in financing activities		(39,768)		(935)		(38,833)	(4153.3)	%
Subtotal		(58,409)		(9,026)
Effect of exchange rate changes on cash and cash equivalents		7		8		(1)	NM
Net decrease in cash, cash equivalents, and restricted cash	$	(58,402)	$	(9,018)

Analysis of Cash Flow Changes ~~Between~~between the ~~Nine~~Three Months Ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021

Operating Activities. Net cash used in operating activities was ~~$4.2~~$18.6 million for the ~~nine months ended September 30, 2017,~~Current Quarter, compared to ~~net~~$3.9 million in the Prior Quarter. The $14.7 million increase is primarily due to cash ~~provided by operating activities~~used to settle acquired Nuverra liabilities, as well as the current timing of ~~$8.1 million for~~collecting receivables connected with increasing revenue and integrating an acquisition in the nine months ended September 30, 2016. The $12.3 million decrease in net cash provided by operating activities was primarily attributable to increases in accounts receivable and working capital during the nine months ended September 30, 2017 in response to growth in revenues driven by recovering demand for our services as compared to the prior year period.Current Quarter.

Investing Activities. Net cash used in investing activities was ~~$121.5~~$0.1 million for the ~~nine months ended September 30, 2017,~~Current Quarter, compared to ~~$20.4~~$4.2 million for the ~~nine months ended September 30, 2016.~~Prior Quarter. The ~~$101.2~~$4.1 million ~~increase~~decrease in net cash used in investing activities was primarily due to ~~net~~a $10.9 million increase in purchases of property and equipment and a $1.4 million increase in investments partially offset by a $9.8 million increase in proceeds received from sales of property and equipment and $6.9 million in cash ~~used for acquisitions of $62.2 million~~ and ~~by higher capital expenditures during~~restricted cash received in the ~~nine months ended September 30, 2017 of $37.4 million as compared to the nine months ended September 30, 2016.~~Nuverra Acquisition.

Financing Activities. Net cash ~~provided by~~used in financing activities was ~~$128.1~~$39.8 million for the ~~nine months ended September 30, 2017,~~Current Quarter compared to ~~cash provided by financing activities of $2.7~~$0.9 million for the ~~nine months ended September 30, 2016.~~Prior Quarter. The ~~$125.4~~$38.9 million increase in ~~net~~ cash ~~provided by~~used in financing activities was primarily due to ~~$128.5~~net debt repayments of $18.8 million, an $18.0 million increase in repurchases of shares of Class A Common Stock during the Current Quarter compared to the Prior Quarter and $2.0 million in ~~net proceeds received from the~~debt issuance ~~of shares~~costs in the ~~IPO, including exercise of the over-allotment option.~~Current Quarter.

~~Table of Contents~~

Sustainability-Linked Credit Facility

On ~~May 3, 2011, we~~March 17, 2022 (the “Restatement Date”), SES Holdings, a subsidiary of the Company, and Select Energy Services, LLC (“Select LLC”), a wholly-owned subsidiary of SES Holdings, entered into ~~our~~a $270.0 million amended and restated senior secured sustainability-linked revolving credit facility (the “Sustainability-Linked Credit ~~Facility, which was~~Facility”), by and among SES Holdings, as parent, Select LLC, as borrower and certain of SES Holdings’ subsidiaries, as guarantors, each of the lenders party thereto and Wells Fargo Bank, N.A., as administrative agent, issuing lender and swingline lender (the “Administrative Agent”) (which amended ~~most recently on June 13, 2017. As of September 30, 2017,~~and restated the ~~total commitment under our~~Prior Credit Facility was $100.0 million in the form of a revolver. As of September 30, 2017, we had no drawn borrowings under this bank facility. However, our available borrowings are reduced by letters of credit of $14.1 million.Agreement dated November 1, 2017). The ~~revolver~~Sustainability-Linked Credit Facility also has a sublimit of ~~$20.0~~$40.0 million for letters of credit and a sublimit of ~~$5.0~~$27.0 million for ~~swing-line~~swingline loans. ~~The most recent amendment of our Credit Facility was~~Subject to ~~remove~~obtaining commitments from existing or new lenders, Select LLC has the ~~requirement that businesses or assets acquired by us meet a positive EBITDA test (the “Positive EBITDA Test”) in order~~option to ~~be a Permitted Acquisition (as defined in and~~increase the maximum amount under the ~~Credit Facility), as well as~~senior secured credit facility by $135.0 million during the first three years following the Restatement Date.

Refer to ~~waive any defaults resulting from the DAWS Acquisition not being in compliance with the Positive EBITDA Test.~~

~~Our Credit Facility contains certain financial covenants, including (i) the maintenance of an Interest Coverage Ratio (as defined in the Credit Facility) of not less than (a) 1.25 to 1.0~~“Note 8—Debt” for the quarter ending on March 31, 2017, (b) 1.50 to 1.0 for the quarter ending on June 30, 2017, (c) 2.50 to 1.0 for the quarter ending on September 30, 2017 and (d) 3.00 to 1.0 for each fiscal quarter ending on or after December 31, 2017 and (ii) the maintenance of a Leverage Ratio of not greater than (a) 4.00 to 1.0 for the quarter ending on September 30, 2017, (b) 3.50 to 1.0 for the quarter ending on December 31, 2017, (c) 3.25 to 1.0 for the quarters ending on March 31, 2018, June 30, 2018 and September 30, 2018, (d) 3.00 to 1.0 for the quarter ending December 31, 2018 and (e) 2.75 to 1.0 for each fiscal quarter ending on or after March 31, 2019.

Our scheduled maturity date is February 28, 2020 and the per annum interest rate on our loans is LIBOR plus an applicable margin that ranges between 3.00% and 4.50%, based on our Leverage Ratio. Our capacity to make capital expenditures is $35 million for the fiscal year ending December 31, 2017 and for each year thereafter is the greater of (i) $35 million or (ii) 50% of our EBITDA for the prior twelve months; but this restriction is not applicable for any quarter if our Leverage Ratio asfurther discussion of the ~~end of the preceding fiscal quarter was less than 3.00 to 1.0. Our Leverage Ratio was less than 3.00 to 1.0 as of September 30, 2017. In addition, our~~Sustainability-Linked Credit Facility contains an anti-cash hoarding provision that restricts us from making any borrowing, if after giving effect to such borrowing, we would have in excess of $20 million in cash and cash equivalents at the end of the week such borrowing is made.

~~As of September 30, 2017, we were in compliance with all restrictive covenants under our Credit~~ Facility.

Contractual Obligations

Our contractual obligations include, among other things, our Sustainability-Linked Credit Facility and operating leases. Refer to ~~Note 7—Debt~~“Note 6—Leases” in our 2021 Form 10-K for operating lease obligations as of December 31, 2021 and “Note 8—Debt” in Part I, Item 1 of this Quarterly Report for an update to our ~~contractual obligations~~Sustainability-Linked Credit Facility as of ~~September 30, 2017.~~March 31, 2022.

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Critical Accounting Policies and Estimates

There were no changes to our critical accounting policies from those disclosed in our ~~Final Prospectus filed on April 24, 2017.~~2021 Form 10-K.

Recent Accounting Pronouncements

~~For information regarding new accounting policies or updates to existing accounting policies as a result~~None.

Off-Balance-Sheet Arrangements

As of ~~new accounting pronouncements, please refer to Note 2 - Significant Accounting Policies in Part I, Item 1 of this Quarterly Report, which is incorporated herein by reference.~~

~~Off Balance Sheet Arrangements~~

~~Currently,~~March 31, 2022, we ~~have~~had no material ~~off balance sheet arrangements, except for operating leases.~~off-balance-sheet arrangements. As such, we are not ~~materially~~ exposed to any material financing, liquidity, market or credit risk that could arise if we had engaged in such financing arrangements.

~~Table of Contents~~

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The demand, pricing and terms for oilfield services provided by us are largely dependent upon the level of drilling and completion activity ~~for~~in the U.S. oil and gas industry. ~~Industry conditions are~~The level of drilling and completion activity is influenced by numerous factors over which we have no control, including, but not limited to: global health events, including the COVID-19 pandemic; the supply of and demand for oil and gas; ~~the level of prices,~~war, economic sanctions and other constraints to global trade and economic growth; current price levels as well as expectations about future prices of oil and gas; the magnitude and timing of capital spending by our customers; the cost of exploring for, developing, producing and delivering oil and gas; the ~~expected rates of declining current~~extent to which our E&P customers choose to drill and complete new wells to offset decline from their existing wells; the extent to which our E&P customers choose to invest to grow production; ~~the discovery rates~~discoveries of new oil and gas reserves; available storage capacity and pipeline and other transportation capacity; weather conditions; domestic and worldwide economic conditions; political instability in oil-producing countries; environmental regulations; technical advances ~~affecting~~in alternative forms of energy ~~consumption;~~(e.g. wind and solar electricity, electric vehicles) that encourage substitution for or displacement of oil and gas consumption in end-use markets; the price and availability of alternative fuels; the ability of oil and gas producers to raise equity capital and debt financing; ~~and~~ merger and ~~divestiture~~acquisition activity ~~among oil~~ and ~~gas producers.~~consolidation in our industry, and other factors.

~~The level~~Any combination of ~~activity~~these factors that results in the U.S. oil and gas industry is volatile. Expected trends in oil and gas production activities may not continue and demand for our services may not reflect the level of activity in the industry. Any prolonged substantial reduction insustained low oil and gas prices ~~would likely affect oil and gas production levels~~ and, therefore, ~~affect demand for~~lower capital spending and / or reduced drilling and completion activity by our ~~services. A material decline in oil and gas prices or U.S. activity levels could~~customers, would likely have a material adverse effect on our business, financial condition, results of operations and cash flows.

Interest Rate Risk

~~At September 30, 2017,~~As of March 31, 2022, we had no outstanding ~~debt~~borrowings under our Sustainability-Linked Credit Facility. As of May 2, 2022, we had no outstanding borrowings and approximately $172.6 million of available borrowing capacity under our Sustainability-Linked Credit Facility. Interest is calculated under the terms of our Sustainability-Linked Credit Facility based on our selection, from time to time, of one of the index rates available to us plus an applicable margin that varies based on certain factors. Assuming our indebtedness remained constant throughout the period, there would not be an impact on interest expense as a result of a 1% increase or decrease in the interest rate on this amount of debt for the nine months ended September 30, 2017. We do not currently have or intend to enter into any derivative arrangements to protect against fluctuations in interest rates applicable to our outstanding indebtedness.

Foreign Currency Exchange Risk

We have been exposed to fluctuations between the U.S. dollar and the Canadian dollar with regard to the activities of our former Canadian subsidiary, which had designated the Canadian dollar as its functional currency. With the divestitures of our Canadian operations, we anticipate minimal future exposure to foreign currency exchange risk.

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Item 4. Controls and Procedures

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that the information required to be disclosed by us in our reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

As required by Rule ~~13a‑15(b)~~13a-15(b) under the Exchange Act, we have evaluated, under the supervision and with the participation of management, including our principal executive officer and principal financial officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and ~~15d‑15(e)~~15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10‑Q. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC.Report. Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of ~~September 30, 2017.~~March 31, 2022.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act) during the quarter ended ~~September 30, 2017~~March 31, 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

4552

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

We are not currently a party to any legal proceedings that, if determined adversely against us, individually or in the aggregate, would have a material adverse effect on our financial position, results of operations or cash flows. We are, however, named defendants in certain lawsuits, investigations and claims arising in the ordinary course of conducting our business, including certain environmental claims and employee-related matters, and we expect that we will be named defendants in similar lawsuits, investigations and claims in the future. While the outcome of these lawsuits, investigations and claims cannot be predicted with certainty, we do not expect these matters to have a material adverse impact on our business, results of operations, cash flows or financial condition. We have not assumed any liabilities arising out of these existing lawsuits, investigations and claims.

Item 1A. Risk Factors

~~The following risk factors update the risk factors described under “Risk Factors” in the Final Prospectus. Except as set forth below, there~~There have been no material changes to the Risk Factors disclosed in the ~~Final Prospectus.~~2021 Form 10-K.

~~The Merger may not be beneficial to us.~~

The consummation of the Merger involves potential risks, including, without limitation, the failure to realize expected profitability, growth or accretion; the incurrence of liabilities or other compliance costs related to environmental or regulatory matters, including potential liabilities that may be imposed without regard to fault or the legality of conduct; and the incurrence of unanticipated liabilities and costs for which indemnification is unavailable or inadequate. If these risks or other unanticipated liabilities were to materialize, any desired benefits of the Merger may not be fully realized, if at all, and our future financial performance and results of operations could be negatively impacted.

~~Failure to successfully combine our business with the business from Rockwater may adversely affect our future results.~~

~~The consummation of the Merger involves potential risks, including:~~

~~the failure to realize expected profitability, growth or accretion;~~

~~environmental or regulatory compliance matters or liabilities;~~

~~diversion of management's attention from our existing businesses; and~~

~~the incurrence of unanticipated liabilities and costs for which indemnification is unavailable or inadequate.~~

If these risks or other anticipated or unanticipated liabilities were to materialize, any desired benefits of the Merger may not be fully realized, if at all, and our future business operations and our cash available for distribution could be negatively impacted.

Item 2. Unregistered Sales of Equity Securities and Use of ~~Proceeds.~~

~~Unregistered Sales of Equity Securities~~

On September 15, 2017, we issued 156,909 shares of Select Class A Common Stock, valued at $15.17 per share, to Resource Water Transfer, L.P. as partial consideration for the Resource Water Acquisition. This issuance of Select Class A Common Stock did not involve any underwriters, underwriting discounts or commissions or a public offering, and such issuance was exempt from registration requirements pursuant to Section 4(a)(2) of the Securities Act.

~~Table of Contents~~

Proceeds

Issuer Purchases of Equity Securities

~~Neither~~During the Current Quarter, we ~~nor any affiliated purchaser~~ repurchased ~~any~~the shares of Class A Common Stock as shown in the table below, which included 2,297,985 shares purchased in the open market pursuant to a repurchase plan, and 362,343 shares purchased tosatisfy tax withholding obligations related to restricted stock and the cashless exercise of stock options previously awarded to certain of our ~~equity securities during the period covered by this Quarterly Report on Form 10‑Q.~~current and former employees.


	Total Number of	Weighted-Average Price
Period	Shares Purchased	Paid Per Share
January 1, 2022 to January 31, 2022	716,610	$	6.80
February 1, 2022 to February 28, 2022	1,721,013	$	7.25
March 1, 2022 to March 31, 2022	222,705	$	9.73
Total	2,660,328	$	7.34

Item 3. Defaults Upon Senior ~~Securities.~~Securities

None.

Item 4. Mine Safety ~~Disclosures.~~Disclosures

Not applicable.

Item 5. Other ~~Information.~~Information

None.

Item 6. Exhibits

The following exhibits ~~listed on the accompanying Exhibit Index~~ are filed, furnished or incorporated by reference, as applicable, as part of this ~~report, and such Exhibit Index is incorporated herein by reference.~~report.

4753

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~~EXHIBIT INDEX~~

HIDDEN_ROW
Exhibit Number		Description

~~2.1~~3.1		~~Agreement~~Fourth Amended and ~~Plan~~Restated Certificate of ~~Merger, dated as~~Incorporation of ~~July 18, 2017, by and among~~ Select Energy Services, Inc.~~, SES Holdings, LLC, Raptor Merger Sub, Inc., Raptor Merger Sub, LLC, Rockwater Energy Solutions, Inc. and Rockwater Energy Solutions, LLC~~ dated as of May 10, 2019 (incorporated by reference herein to Exhibit ~~2.1~~3.1 to Select Energy Services, Inc.’s Current Report on Form 8-K, filed ~~on July 19, 2017)~~May 15, 2019).

~~3.1~~		Third Amended and Restated Certificate of Incorporation of Select Energy Services, Inc. (incorporated by reference herein to Exhibit 4.1 to Select Energy Services, Inc.’s Registration Statement on Form S-8, filed on November 2, 2017 (Registration No. 333-221282)).

3.2		Second Amended and Restated Bylaws of Select Energy Services, Inc. dated as of May 10, 2019 (incorporated by reference herein to Exhibit 3.2 to Select Energy Services, Inc.’s ~~Registration Statement on Form S‑1, filed on March 2, 2017 (Registration No. 333‑ 216404)).~~

~~4.1~~		Form of Stock Certificate (incorporated by reference herein to Exhibit 4.1 to Select Energy Services, Inc.’s Registration Statement on Form S‑1, filed on March 2, 2017 (Registration No. 333‑216404)).

~~4.2~~		Amended and Restated Registration Rights Agreement, dated as of July 18, 2017, by and among Select Energy Services, Inc., SES Legacy Holdings, LLC, Crestview Partners II SES Investment B, LLC, SCF-VI, L.P., SCF-VII, L.P., SCF-VII(A), L.P. and WDC Aggregate LLC (incorporated by reference herein to Exhibit 4.1 to Select Energy Services, Inc.’s Current Report on Form 8-K, filed ~~on July 19, 2017)~~May 15, 2019).

10.1		~~Waiver and Amendment No. 16 to~~ Amended and Restated ~~Revolving~~ Credit Agreement, dated ~~June 13, 2017 (incorporated by reference herein to Exhibit 10.1 to Select Energy Services, Inc.’s Current Report on Form 8-K, filed on June 16, 2017).~~

~~10.2~~		~~Credit Agreement. dated November 1, 2017,~~as of March 17, 2022, by and among Select Energy Services, LLC, SES Holdings, LLC, Wells Fargo Bank, N.A., as administrative agent, and the lenders named therein (incorporated by reference herein to Exhibit 10.1 to Select Energy Services, Inc.’s Current Report on Form 8-K, filed ~~November 2, 2017)~~March 18, 2022).

~~10.3~~*31.1		First Amendment to Select Energy Services, Inc. 2016 Equity Incentive Plan (incorporated by reference herein to Exhibit 10.2 to Select Energy Services, Inc.’s Quarterly Report on Form 10-Q, filed August 11, 2017).

~~10.4~~		Amendment No. 1 to Tax Receivable Agreement, dated July 18, 2017, by and among Select Energy Services, Inc., SES Legacy Holdings, LLC and Crestview Partners II GP,��L.P. (incorporated by reference herein to Exhibit 10.3 to Select Energy Services, Inc.’s Quarterly Report on Form 10-Q, filed August 11, 2017).

~~10.5~~		Amendment No. 1 to Tax Receivable Agreement, dated July 18, 2017, by and among Select Energy Services, Inc., Crestview Partners II SES Investment B, LLC and Crestview Partners II GP, L.P. (incorporated by reference herein to Exhibit 10.4 to Select Energy Services, Inc.’s Quarterly Report on Form 10-Q, filed August 11, 2017).

~~10.6~~		Letter Agreement, dated as of September 19, 2017, by and among Select Energy Services, Inc., SES Holdings, LLC, Raptor Merger Sub, Inc., Raptor Merger Sub, LLC, Rockwater Energy Solutions, Inc. and Rockwater Energy Solutions, LLC (incorporated by reference herein to Exhibit 10.1 to Select Energy Services, Inc.’s Current Report on Form 8-K, filed on September 20, 2017).

~~Table of Contents~~

~~31.1~~		Certification of Chief Executive Officer required by Rules ~~13a‑14~~13a-14 and ~~15d‑14~~15d-14 under the Securities Exchange Act of 1934.

*31.2		Certification of Chief Financial Officer required by Rules ~~13a‑14~~13a-14 and ~~15d‑14~~15d-14 under the Securities Exchange Act of 1934.

**32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

**32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*101		The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Changes in Equity, (v) Consolidated Statements of Cash Flow, and (vi) Notes to Consolidated Financial Statements.

104		Cover Page Interactive Data ~~Files~~File (formatted as Inline XBRL and contained in Exhibit 101).

*Filed herewith

**Furnished herewith

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SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	SELECT ENERGY SERVICES, INC.

Date: ~~November 13, 2017~~May 4, 2022	By:	/s/ ~~Holli Ladhani~~John D. Schmitz
		~~Holli Ladhani~~John D. Schmitz
		Chairman, President and Chief Executive Officer
~~(Principal Executive Officer)~~


Date: ~~November 13, 2017~~May 4, 2022	By:	/s/ ~~Gary Gillette~~Nick Swyka
		~~Gary Gillette~~Nick Swyka
		Senior Vice President and Chief Financial Officer ~~and Senior Vice President~~ ~~(Principal Financial Officer and Principal Accounting Officer)~~

5055


Delaware	~~81‑4561945~~81-4561945
(State of incorporation)	(IRS Employer Identification Number)

~~1400 Post Oak Boulevard,~~1233 W. Loop South, Suite ~~400~~1400 Houston, TX	~~77056~~77027
(Address of principal executive offices)	(Zip Code)


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


Large accelerated filer ☐	Accelerated filer ☐☑	Non-accelerated filer ☑☐	Smaller reporting company ☐
		~~(Do not check if a smaller reporting company)~~	Emerging growth company ☑☐


		Page
PART I—FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	5 6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33 38

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	45 51

Item 4.	Controls and Procedures	45 52

PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	46 53

Item 1A.	Risk Factors	46 53

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46 53

Item 3.	Defaults ~~upon~~Upon Senior Securities	47 53

Item 4.	Mine Safety Disclosures	47 53

Item 5.	Other Information	47 53

Item 6.	Exhibits	47 53


	Three months ended March 31,
	2022		2021
Cash flows from operating activities
Net income (loss)	$	7,985	$	(27,421)
Adjustments to reconcile net income (loss) to net cash used in operating activities
Depreciation and amortization		27,067		22,299
(Gain) loss on disposal of property and equipment and divestitures		(1,653)		579
Equity in losses of unconsolidated entities		129		—
Bad debt expense		571		300
Amortization of debt issuance costs		294		172
Inventory write-downs		—		54
Equity-based compensation		3,275		1,422
Bargain purchase gain		(11,434)		—
Unrealized loss on short-term investment		40		1,831
Other operating items, net		99		(129)
Changes in operating assets and liabilities
Accounts receivable		(46,622)		(11,187)
Prepaid expenses and other assets		4,554		(2,696)
Accounts payable and accrued liabilities		(2,855)		10,903
Net cash used in operating activities		(18,550)		(3,873)
Cash flows from investing activities
Purchase of property and equipment		(15,463)		(4,534)
Purchase of equity method investments		(3,467)		(2,000)
Collection of note receivable		184		—
Distribution from cost method investment		20		—
Acquisitions, net of cash and restricted cash received		6,941		—
Proceeds received from sales of property and equipment		12,123		2,316
Other		(429)		—
Net cash used in investing activities		(91)		(4,218)
Cash flows from financing activities
Borrowings from revolving line of credit		20,000		—
Payments on revolving line of credit		(20,000)		—
Payments on long-term debt		(18,780)		—
Payments of finance lease obligations		(61)		(75)
Payment of debt issuance costs		(2,031)
Proceeds from share issuance		12		14
Repurchase of common stock		(18,908)		(874)
Net cash used in financing activities		(39,768)		(935)
Effect of exchange rate changes on cash		7		8
Net decrease in cash, cash equivalents, and restricted cash		(58,402)		(9,018)
Cash, cash equivalents, and restricted cash beginning of period		85,801		169,039
Cash, cash equivalents, and restricted cash end of period	$	27,399	$	160,021
Supplemental cash flow disclosure:
Cash paid for interest	$	402	$	367
Cash refunds received for income taxes, net	$	(721)	$	(650)
Supplemental disclosure of noncash investing activities:
Issuance of shares for acquisitions	$	35,854	$	—
Capital expenditures included in accounts payable and accrued liabilities	$	14,922	$	6,490


	September 30, 2017		December 31, 2016
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	42,393	$	40,041
Accounts receivable trade, net of allowance for doubtful accounts of $2,867 and $2,144, respectively		148,372		75,892
Accounts receivable, related parties		433		135
Inventories		852		1,001
Prepaid expenses and other current assets		13,495		7,586
Total current assets		205,545		124,655
Property and equipment		815,002		739,386
Accumulated depreciation		(535,456)		(490,519)
Property and equipment, net		279,546		248,867
Goodwill		25,091		12,242
Other intangible assets, net		35,351		11,586
Other assets		7,216		7,716
Total assets	$	552,749	$	405,066
Liabilities and Equity
Current liabilities
Accounts payable	$	11,751	$	10,796
Accounts payable and accrued expenses, related parties		1,246		648
Accrued salaries and benefits		8,595		2,511
Accrued insurance		11,008		10,338
Accrued expenses and other current liabilities		39,713		22,091
Total current liabilities		72,313		46,384
Accrued lease obligations		18,100		15,946
Other long term liabilities		8,008		8,028
Long-term debt, net of current maturities		—		—
Total liabilities		98,421		70,358
Commitments and contingencies (Note 8)
Class A-1 common stock, $0.01 par value; 40,000,000 shares authorized; no shares issued and outstanding as of September 30, 2017; 16,100,000 shares issued and outstanding as of December 31, 2016		—		161
Class A common stock, $0.01 par value; 250,000,000 shares authorized and 30,468,249 shares issued and outstanding as of September 30, 2017; 3,802,972 shares issued and outstanding as of December 31, 2016		305		38
Class B common stock, $0.01 par value; 150,000,000 shares authorized and 38,462,541 shares issued and outstanding as of September 30, 2017 and December 31, 2016		385		385
Preferred stock, $0.01 par value; 50,000,000 shares authorized; no shares issued and outstanding as of September 30, 2017 and December 31, 2016		—		—
Additional paid-in capital		206,158		113,175
Accumulated deficit		(8,207)		(1,043)
Total stockholders’ equity		198,641		112,716
Noncontrolling interests		255,687		221,992
Total equity		454,328		334,708
Total liabilities and equity	$	552,749	$	405,066


	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Revenue
Water solutions	$	125,086	$	60,975	$	311,275	$	173,157
Accommodations and rentals		15,615		5,838		38,457		19,585
Wellsite completion and construction services		13,179		7,094		38,522		22,923
Total revenue		153,880		73,907		388,254		215,665
Costs of revenue
Water solutions		88,087		49,996		226,737		144,653
Accommodations and rentals		11,976		4,969		30,697		15,527
Wellsite completion and construction services		10,888		6,299		32,155		19,817
Depreciation and amortization		23,420		21,613		67,144		73,874
Total costs of revenue		134,371		82,877		356,733		253,871
Gross profit (loss)		19,509		(8,970)		31,521		(38,206)
Operating expenses
Selling, general and administrative		16,087		8,764		49,298		25,928
Depreciation and amortization		375		363		1,312		1,644
Impairment of goodwill and other intangible assets		—		—		—		138,666
Impairment of property and equipment		—		—		—		60,026
Lease abandonment costs		590		13,169		2,871		13,169
Total operating expenses		17,052		22,296		53,481		239,433
Income (loss) from operations		2,457		(31,266)		(21,960)		(277,639)
Other income (expense)
Interest expense, net		(484)		(4,343)		(1,885)		(11,792)
Other income, net		326		431		3,342		588
Income (loss) before tax expense		2,299		(35,178)		(20,503)		(288,843)
Tax benefit (expense)		294		(26)		326		(392)
Net income (loss)		2,593		(35,204)		(20,177)		(289,235)
Less: Net loss attributable to Predecessor		—		34,931		—		285,359
Less: Net (income) loss attributable to noncontrolling interests		(1,369)		273		13,013		3,876
Net income (loss) attributable to Select Energy Services, Inc.	$	1,224	$	—	$	(7,164)	$	—
Allocation of net income (loss) attributable to:
Class A-1 stockholders	$	—			$	(2,679)
Class A stockholders		1,224				(4,485)
Class B stockholders		—
	$	1,224			$	(7,164)
Weighted average shares outstanding:
Class A-1—Basic		—				9,671,795
Class A—Basic		30,336,923				16,189,997
Class B—Basic		38,462,541				38,462,541
Net income (loss) per share attributable to common stockholders:
Class A-1—Basic	$	—			$	(0.28)
Class A—Basic	$	0.04			$	(0.28)
Class B—Basic	$	—			$	—
Weighted average shares outstanding:
Class A-1—Diluted		—				9,671,795
Class A—Diluted		30,357,572				16,189,997
Class B—Diluted		38,462,541				38,462,541
Net income (loss) per share attributable to common stockholders:
Class A-1—Diluted	$	—			$	(0.28)
Class A—Diluted	$	0.04			$	(0.28)
Class B—Diluted	$	—			$	—


	Class A-1			Class A			Class B			Preferred
	Stockholders			Stockholders			Stockholders			Stockholders
		Class A-1			Class A			Class B					Additional				Total
		Common			Common			Common			Preferred		Paid-In		Accumulated		Stockholders’		Noncontrolling
	Shares	Stock		Shares	Stock		Shares	Stock		Shares	Stock		Capital		Deficit		Equity		Interests		Total
Balance as of December 31, 2016	16,100,000	$	161	3,802,972	$	38	38,462,541	$	385	—	$	—	$	113,175	$	(1,043)	$	112,716	$	221,992	$	334,708
Conversion of Class A-1 to Class A	(16,100,000)		(161)	16,100,000		161	—		—	—		—		—		—		—		—		—
Issuance of shares for acquisitions	—		—	560,277		6	—		—	—		—		4,360		—		4,366		5,514		9,880
Issuance of shares for initial public offering	—		—	10,005,000		100	—		—	—		—		87,835		—		87,935		40,569		128,504
Equity-based compensation	—		—	—		—	—		—	—		—		788		—		788		993		1,781
Noncontrolling interest in subsidiary	—		—	—		—	—		—	—		—		—		—		—		(368)		(368)
Net loss	—		—	—		—	—		—	—		—		—		(7,164)		(7,164)		(13,013)		(20,177)
Balance as of September 30, 2017	—	$	—	30,468,249	$	305	38,462,541	$	385	—	$	—	$	206,158	$	(8,207)	$	198,641	$	255,687	$	454,328


	Year				As of March 31,	As of December 31,
Type of Investment	attained	Accounting method	Balance Sheet Location	2022		2021

				(in thousands)
20% minority interest	2011	Cost-method	Other long-term assets, net	$	100	$	120
Notes receivable (1)	2020	Amortized cost basis	Other long-term assets, net		—		4,446
21% minority interest (1)	2021	Equity-method	Other long-term assets, net		4,442		—
33% minority interest	2021	Equity-method	Other long-term assets, net		3,316		1,779
45% minority interest	2021	Equity-method	Other long-term assets, net		1,942		142
Publicly traded securities	2020	Fair value option	Prepaid expenses and other current assets		35		75


	Three months ended March 31, 2022
	(in thousands)
Balance at December 31, 2021	$	4,401
Increase to allowance based on a percentage of revenue		571
Balance at March 31, 2022	$	4,972


Assets and Operations Acquired	Acquisition Date	Shares Issued		Cash Consideration		Contingent Consideration		Value of Shares Issued		Total Consideration	Segments
Nuverra	February 23, 2022	4,203,323	$	—	$	—	$	35,854	$	35,854	Water Services & Water Infrastructure
HB Rentals	December 3, 2021	1,211,375		2,610		—		7,135		9,745	Water Services
Agua Libre and Basic	October 1, 2021	902,593		16,394		—		4,684		21,078	Water Services & Water Infrastructure
UltRecovery	August 2, 2021	—		2,500		1,058		—		3,558	Oilfield Chemicals
Complete	July 9, 2021	3,600,000		14,356		—		20,304		34,660	Water Services & Water Infrastructure
Total		9,917,291	$	35,860	$	1,058	$	67,977	$	104,895


Preliminary purchase price allocation	Amount
Consideration transferred	(in thousand)
Cash paid	$	6,692
Class A common stock issued		2,380
Total consideration transferred		9,072
Less: identified assets
Working capital		1,396
Fixed assets		3,485
Customer relationship intangible assets		1,912
Other intangible assets		466
Total identified assets		7,259
Goodwill	$	1,813


Preliminary purchase price allocation	Amount
Consideration transferred	(in thousands)
Class A Common Stock (4,203,323 shares)	$	35,854
Total consideration transferred		35,854
Less: identifiable assets acquired and liabilities assumed
Working capital		8,093
Property and equipment		65,138
Right-of-use assets		2,931
Other long-term assets		229
Long-term debt		(18,780)
Long-term ARO		(8,104)
Long-term lease liabilities		(1,189)
Deferred tax liabilities		(120)
Other long-term liabilities		(500)
Total identifiable net assets acquired		47,698
Bargain Purchase Gain		(11,844)
Fair value allocated to net assets acquired, net of bargain purchase gain	$	35,854


Preliminary purchase price allocation	As Reported as of December 31, 2021		Current Quarter Adjustment		Amount

Consideration transferred	(in thousands)
Class A Common Stock (1,211,375 shares)	$	7,135	$	—	$	7,135
Cash paid		1,526		—		1,526
Final working capital settlement paid April 1, 2022 and included in accrued expenses and other current liabilities as of March 31, 2022		—		1,084		1,084
Total consideration transferred		8,661		1,084		9,745
Less: identifiable assets acquired and liabilities assumed
Working capital		29		880		909
Property and equipment		14,091		—		14,091
Right-of-use assets		1,316		—		1,316
Long-term lease liabilities		(835)		—		(835)
Total identifiable net assets acquired		14,601		880		15,481
Bargain Purchase Gain		(5,940)		204		(5,736)
Fair value allocated to net assets acquired, net of bargain purchase gain	$	8,661	$	1,084	$	9,745


	Pro Forma				Pro Forma
	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
	(unaudited)				(unaudited)
	(in thousands)				(in thousands)
Revenue	$	156,045	$	82,824	$	400,948	$	237,644

Net income (loss)	$	3,195	$	(34,344)	$	(17,951)	$	(289,130)
Less: net (income) loss attributable to noncontrolling interests 1		(1,706)		19,284		11,682		163,044
Net income (loss) attributable to Select Energy Services, Inc. 1	$	1,489	$	(15,060)	$	(6,269)	$	(126,086)


Purchase price allocation	Amount
Consideration transferred and estimated earn-out liability	(in thousands)
Cash paid	$	2,500
Estimated earn-out liability assumed		1,058
Total purchase price		3,558
Less: identifiable assets acquired
Inventory		13
Property and equipment		514
Patents and other intellectual property		3,031
Total identifiable net assets acquired		3,558
Fair value allocated to net assets acquired	$	3,558


			Provision during the		Usage during the
	Balance as of		nine months ended		nine months ended		Balance as of
	December 31, 2016		September 30, 2017		September 30, 2017		September 30, 2017
	(in thousands)
Lease obligations and terminations	$	18,000	$	2,871	$	2,153	$	18,718
Reclassification of deferred rent		1,069						1,254
Total	$	19,069					$	19,972


			Wellsite Completion
	Water		and Construction		Accommodations
	Solutions		Services		and Rentals		Total
	(in thousands)
Balance as of December 31, 2015	$	137,534	$	12,242	$	995	$	150,771
Impairment		(137,534)		—		(995)		(138,529)
Balance as of December 31, 2016		—		12,242		—		12,242
Additions		12,849		—		—		12,849
Balance as of September 30, 2017	$	12,849	$	12,242	$	—	$	25,091


Leverage Ratio Before Receipt of Fourth Quarter 2017	Eurodollar		Base Rate
Compliance Certificate	Advances		Advances
< 4.00	4.00	%	3.00	%
≥ 4.00	4.50	%	3.50	%


	For the nine months ended September 30, 2017
		Weighted-average
	Equity Options	Exercise Price
Beginning balance	620,721	$	16.50
Granted	455,130		20.00
Forfeited	(98,499)		20.00
Ending balance	977,352	$	17.78


	$20.00 Strike
Underlying Equity	$	20.00
Strike Price	$	20.00
Dividend Yield (%)		0.0	%
Risk free rate (%)		1.68 - 2.00	%
Volatility (%)		46.6 - 46.8	%
Expected Term (Years)		4-6


	For the nine months ended September 30, 2017
		Weighted-average
	Restricted Stock	Grant Date Fair Value
Beginning balance	—	$	—
Granted	41,117		19.91
Forfeited	(10,757)		20.00
Ending balance	30,360	$	19.88


	For the nine months ended September 30,
	2017		2016
	(in thousands)
Net loss attributable to Select Energy Services, Inc. and its Predecessor	$	(7,164)	$	(285,359)
Transfers from noncontrolling interests:
Increase in additional paid-in capital as a result of the contribution of proceeds from the IPO to SEC Holdings, LLC in exchange for common units		87,835		—
Increase in additional paid-in capital as a result of the contribution of assets acquired to SES Holdings, LLC in exchange for common units		4,360		—
Increase in contributed capital due to purchase of noncontrolling interest		—		135
Change to equity from net loss attributable to Select Energy Services, Inc. and its Predecessor and transfers from noncontrolling interests	$	85,031	$	(285,224)


	For the three months ended September 30, 2017
			Income (loss) before		Depreciation and		Capital
	Revenue		taxes		Amortization		Expenditures
	(in thousands)
Water Solutions	$	125,142	$	9,844	$	19,433	$	22,260
Accommodations and Rentals		15,974		(304)		2,908		3,541
Wellsite Completion and Construction Services		13,301		(2)		1,079		1,303
Elimination		(537)		—		—		—
Income from operations				9,538
Corporate		—		(7,081)		375		—
Interest expense, net		—		(484)		—		—
Other income, net		—		326		—		—
	$	153,880	$	2,299	$	23,795	$	27,104


	Total Assets
	As of		As of
	September 30, 2017		December 31, 2016
	(in thousands)
Water Solutions	$	448,585	$	324,171
Accommodations and Rentals		50,057		38,874
Wellsite Completion and Construction Services		38,827		29,994
Corporate		15,280		12,027
	$	552,749	$	405,066


	Three months ended September 30,				Change
	2017			2016	Dollars		Percentage
		(in thousands)
Revenue
Water solutions	$	125,086	$	60,975	$	64,111	105.1	%
Accommodations and rentals		15,615		5,838		9,777	167.5	%
Wellsite completion and construction services		13,179		7,094		6,085	85.8	%
Total revenue		153,880		73,907		79,973	108.2	%

Costs of revenue
Water solutions		88,087		49,996		38,091	76.2	%
Accommodations and rentals		11,976		4,969		7,007	141.0	%
Wellsite completion and construction services		10,888		6,299		4,589	72.9	%
Depreciation and amortization		23,420		21,613		1,807	8.4	%
Total costs of revenue		134,371		82,877		51,494	62.1	%
Gross profit (loss)		19,509		(8,970)		28,479	NM

Operating expenses
Selling, general and administrative		16,087		8,764		7,323	83.6	%
Depreciation and amortization		375		363		12	3.3	%
Lease abandonment costs		590		13,169		(12,579)	(95.5)	%
Total operating expenses		17,052		22,296		(5,244)	(23.5)	%
Income (loss) from operations		2,457		(31,266)		33,723	NM

Other income (expense)
Interest expense, net		(484)		(4,343)		3,859	(88.9)	%
Other income, net		326		431		(105)	(24.4)	%
Income (loss) before tax expense		2,299		(35,178)		37,477	NM
Tax benefit (expense)		294		(26)		320	NM
Net income (loss)	$	2,593	$	(35,204)	$	37,797	NM