Select Water Solutions, Inc. · NYSE:WTTR
Select Water Solutions — Select Energy Services — Merger or Acquisition (July 2017)
21 slides from Select Water Solutions's merger presentation, July 2017
Slide 1: Merger with Rockwater Energy Solutions
Merger with Rockwater Energy Solutions July 2017
Slide 2: Disclaimer Statement
Disclaimer Statement Cautionary Statement Regarding Forward Looking Statements All statements in this communication other than statements of historical facts are forward-looking statements which contain our current expectations about our future results. We have attempted to identify any forward-look
Slide 3: Strategic Rationale for Combination
Strategic Rationale for Combination A combination of Select and Rockwater has compelling industrial and financial logic Further strengthens the leading water solutions company in all service lines across all geographies Both companies operate across all major U.S. basins and each has a strong franch
Slide 4: Combination of Highly Complementary Businesses
Combination of Highly Complementary Businesses Accretive for • Merger expected to be meaningfully accretive to Select’s EPS, CFPS and EBITDA per share in Shareholders 4Q’17P, 2018P and 2019P before any contribution from synergies Stock-for-Stock • 37,953,214 common shares of Select issued to Rockwat
Slide 5: Rockwater: A Leading Water Services & Oilfield Chemicals Company
Rockwater: A Leading Water Services & Oilfield Chemicals Company • Leading provider of comprehensive water management solutions and complementary chemical products • Presence in many of the most active unconventional plays in North America • Exposure to the life-cycle of a well from completion to pr
Slide 6: Strong Strategic Fit
Strong Strategic Fit Pre-Frac and Well Testing Activities Directly Tied to Well Completions Flowback, Water Hauling and Disposal Activities Temporary Post-Frac Water Water Transfer Treatment Water Water Pre-Frac Hydraulic Flowback / Fluids Production Sourcing Containment Treatment Fracturing Well Te
Slide 7: Complementary Product and Service Offerings
Complementary Product and Service Offerings • Combination will enhance Select’s position across multiple business lines % of Pro Forma % of Pro Forma Business Line Select Rockwater Q2 '17 Revenue Q2 '17 EBITDA¹ Water Sourcing Water Transfer Water Containment & Storage Water Solutions Water Monitorin
Slide 8: Differentiated Oilfield Chemicals Franchise
Differentiated Oilfield Chemicals Franchise • Rockwater develops, manufactures and provides a full suite of chemicals utilized during the well completion and production process, providing exposure to completions intensity as well as long-lived production • Rockwater operates three manufacturing faci
Slide 9: Attractive Relative Valuation
Attractive Relative Valuation Ratio of Enterprise Value to Tangible Adjusted Book Value¹˒² 5.0x 4.9x 4.0x 3.0x 2.6x 2.6x 2.3x 2.2x 2.0x 2.0x 1.0x 0.0x Rockwater³ Pro Forma³ Select³ Frac Sand OFS Chemicals⁴⁴ SMID-Cap Companies⁵⁵ Completions Exposure⁶⁶ ¹ Source: Capital IQ. As of July 17, 2017. ² Tang
Slide 10: Q2 2017 Preliminary Financial Results
Q2 2017 Preliminary Financial Results ($ in millions) • Strong Q2 results for both companies driven by continued ramp in completions activity, with significant momentum heading into the third quarter • Strong incremental margin growth despite limited contribution from improved pricing in the quarter
Slide 11: Expansion of Earnings Base and Capacity
Expansion of Earnings Base and Capacity ($ in millions) Q2 ‘17P Annualized EBITDA¹ (Wall Street Consensus Estimates, Except WTTR; Pro Forma excluding synergies) $400 $346 $303 $300 $200 $172-$180 $163 $148 $112 $104-$108 $99 $91 $89 $100 $78 $73 $57 $55 $43 $26 $2 $0 $0 RES SLCA Pro FMSA TTI SPN WTT
Slide 12: Revenue Mix and Geographic Diversification
Revenue Mix and Geographic Diversification Select Revenue By Business Segment¹ Select Revenue By Region¹ Select Standalone Q2’ 2017 Pro Forma Combined Q2’ 2017 Pro Forma Combined Q2’ 2017 Total Revenue: $133 Million Total Revenue: $312 Million Revenue by Region 2 Region % of Total 14% Permian 32% 20
Slide 13: Complementary Customer Relationships
Complementary Customer Relationships • Blue-chip customer base with very complementary overlay across all service lines and geography • No customer to represent more than 6.8% of the combined company’s estimated pro forma revenue for 1H17 Selected Customers Top 20 Customers1 % of Total Rank Customer
Slide 14: Strong Combined Management Team
Strong Combined Management Team • Corporate headquarters in Corporate Leadership Houston, Texas • Water Solutions headquarters in Gainesville, Texas Executive Leadership Adam Law Gary Gillette Eric Mattson Justin Briscoe Senior Vice Senior Vice President Executive Vice President Vice President Presi
Slide 15: Financially Compelling Transaction
Financially Compelling Transaction • Stock-for-stock transaction enables all stockholders to participate in future upside – Pro forma ownership1: ~64.4% Select and ~35.6% Rockwater • Select maintains a strong, unlevered pro forma balance sheet – Upsized credit facility with Wells Fargo of $150 milli
Slide 16: Significant Earnings Capacity & Growth Potential
Significant Earnings Capacity & Growth Potential • The pro forma combined companies generated $2.1 billion of revenue and $322 million of Adjusted EBITDA in 2014 • Select and Rockwater have invested over $350 million in combined capital expenditures and acquisitions since 2014, including the buildou
Slide 17: Balance Sheet and Liquidity Provides Flexibility
Balance Sheet and Liquidity Provides Flexibility • Best-in-class balance sheet with significant liquidity and attractive public currency • Upsized credit facility allows financial flexibility for large scale infrastructure development opportunities and future M&A transactions Pro Forma Balance Sheet
Slide 18: Strategic Rationale for Combination
Strategic Rationale for Combination A combination of Select and Rockwater has compelling industrial and financial logic Further strengthens the leading water solutions company in all service lines across all geographies Both companies operate across all major U.S. basins and each has a strong franch
Slide 19: Appendix: Non-GAAP Reconciliation
Appendix: Non-GAAP Reconciliation 19
Slide 20: Non-GAAP Reconciliation
Non-GAAP Reconciliation We view EBITDA and Adjusted EBITDA as important indicators of performance. We define EBITDA as net income, plus taxes, interest expense, and depreciation and amortization. We define Adjusted EBITDA as EBITDA plus/(minus) loss/(income) from discontinued operations, plus any im
Slide 21: Non-GAAP Reconciliation
Non-GAAP Reconciliation Select Energy Services Year Ended December 31, 2017 ($ in millions) 2014 2015 2016 Q2 (Low) Q2 (High) Net Income/(Loss) $2 ($82) ($311) ($12) ($11) Taxes 1 0 0 1 1 Interest Expense 17 14 16 0 0 Depreciation and Amortization 128 108 97 23 23 EBITDA $148 $40 ($197) $12 $13 Net
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