WTTR · Select Water Solutions
Conviction · Low · more likely to lag the S&P 500 over the next three months
Wrong if: a daily close above $19.15
Note written ·
Price against the kill line
14.2% clear of its kill line on the 13 November 2026 close.
How to read this
This note expects the shares to lag the market, so its kill line sits above the price: a close above the red mark would prove the view wrong. Prices run from low on the left to high on the right. The dot is where the stock closed on 13 November 2026, left of the mark while it is below the line; a dot right of the mark has closed through it.
The scale is stretched near the line, so close calls are easy to see. More than 8% from the line, the stock reads well clear, with a hollow dot to show the figure is off the drawn scale.
The kill line is the research note's own test. The portfolio sells on business facts, not on a price. How the portfolio decides
Three months against the kill line
Daily closes, to . Red: the kill line, a daily close above $19.15, on record since 11 November 2026. The shares are down 22.6% since the close; the S&P 500 is down 2.1% over the same sessions. Figures in the note can cover a different window.
Kill line
A daily close above $19.15, the 50-day average of closes as of 11 November 2026, which would show the shares leading the S&P 500. Fourth-quarter 2026 adjusted EBITDA above the $100 million top of guidance would also show the call wrong.
Research onlyNot in the portfolio.
Last catalyst
Key figures from the filings · Energy
Quarter to 30 September 2026, filed 9 November 2026
- Revenue, latest quarter ($M)
- 412
- Revenue, change on a year (%)
- +27.9
- Gross margin (%)
- 19.7
- Operating margin (%)
- 6.5
- Free cash flow, four quarters ($M)
- −63.6
- Net cash, cash less debt ($M)
- −213
All filed numbers
What Select Water Solutions reports to the SEC in its quarterly and annual filings. Each group states its period and filing date once; a figure dated otherwise says so. Built from the filings known on .
| Quarter to | Revenue ($M) | On a year (%) | Gross margin (%) | Operating margin (%) |
|---|---|---|---|---|
| first filed | 412 | +27.9 | 19.7 | 6.5 |
| first filed | 396 | +8.7 | 19.4 | 8.7 |
| first filed | 366 | −2.3 | 17.8 | 4.9 |
| first filed | 347 | −0.7 | 13.1 | −0.1 |
| first filed | 322 | −13.2 | 13.5 | −0.5 |
| first filed | 364 | −0.3 | 15.9 | 4.2 |
| Pre-tax income ($M) | 32.4 |
| Net income ($M) four quarters: 49.9 | 20.6 |
| Diluted shares, change on a year (%) | Not reported |
| Operating cash flow ($M) | 247 |
| Capital spending ($M) | 310 |
| Free cash flow ($M) | −63.6 |
| Cash and short-term investments ($M) | 34.1 |
| Debt ($M) long-term debt | 247 |
| Net cash, cash less debt ($M) | −213 |
| Deferred revenue ($M) +266.8% on a year | 12.8 |
| Backlog, orders not yet delivered ($M) | Not reported |
| Receivables ($M) | Not reported |
| Inventory ($M) | 48.2 |
| Shareholders' equity ($M) | 1,096 |
| Market value ($M) | Not available |
| Enterprise value, market value plus net debt ($M) | Not available |
| Enterprise value to sales (×) | Not available |
| Enterprise value to operating income (×) | Not available |
| Price to earnings (×) | Not available |
| Price to book value (×) | Not available |
| Free-cash-flow yield (%) | Not available |
Short interest (FINRA, settled 15 October 2026, published 26 October 2026): the share of shares outstanding is not available, 4.8 days of average trading to cover, −2.6% since the previous report.
| Window | Bought | Sold |
|---|---|---|
| 90 daysfrom | $0 | $0 |
| 12 monthsfrom | $0 | $116.0M |
The thesis
Select Water Solutions' shares are more likely to lag the S&P 500 over the next three months. The third-quarter report on 9 November 2026 met guidance, but it also showed higher spending and negative free cash flow, with $900 million of new 7.625% debt funding the Pilot Water acquisition. The fourth-quarter report, the first to include Pilot, settles whether the deal lifts earnings enough to carry that cost.
The company reported third-quarter adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $93.5 million on 9 November 2026. That is inside the $90–94 million range it guided on 5 August 2026. Revenue was $412 million and net income was $22.9 million. Earnings per share of $0.16 missed the $0.21 analyst estimate, according to company news on 9 November 2026.
Fourth-quarter guidance calls for adjusted EBITDA of $95–100 million. That includes part of a quarter of Pilot, which closed on 2 November 2026, and the removal of Peak Rentals from reported results. Select also raised 2026 net capital spending to about $300–310 million. The rating is Low because the Pilot contribution has not yet shown up in reported earnings, while the debt and spending costs are already known.
At $16.21 on 11 November 2026, the shares closed 28.1% below the $22.55 52-week high of 5 August 2026. They are down 20.4% over three months even though infrastructure revenue reached a record, so the market is pricing doubt about what Pilot returns on its cost.
Bullish and bearish views on Select Water Solutions, Inc.
The bull case on Select Water Solutions, Inc. (WTTR), in brief: Water Infrastructure set a revenue record. The bear case: free cash flow turned negative.
Bull case
- Water Infrastructure set a revenue record. Third-quarter segment revenue was $110 million, up 40% from a year earlier, with a 57.2% gross margin before depreciation and amortization (8-K, 9 November 2026).
- Pilot doubles the infrastructure segment's scale. Fourth-quarter guidance puts Water Infrastructure revenue at $150–160 million with only part of a quarter of Pilot (8-K, 9 November 2026). On 24 September 2026 Select said Pilot carries about 480,000 barrels per day of minimum-volume commitments on 306,000 dedicated acres.
- Management's Pilot forecasts give a checkable target. The company forecasts Pilot adjusted EBITDA of $100–110 million for 2026 and $120–130 million for 2027. The 9 November 2026 release did not change those figures.
- Liquidity is available. The new $500 million revolving credit facility was undrawn, with about $483.4 million available on 9 November 2026 (8-K).
- Citigroup still rates the shares Buy. Citigroup kept its Buy rating on 11 November 2026 and lowered its target to $23.
Bear case
- Free cash flow turned negative. Third-quarter free cash flow was negative $3.6 million, against positive $17.0 million in the second quarter. Third-quarter net capital spending was $88.1 million (8-K, 9 November 2026).
- Spending and debt costs rose. Full-year 2026 net capital spending is now guided to about $300–310 million. After the quarter ended, Select issued $900 million of 7.625% senior notes due 2034 to help fund Pilot (8-K, 9 November 2026).
- The fourth-quarter guide is a small step up. The $95–100 million adjusted EBITDA guide sits above the $93.5 million third-quarter result even though it includes Pilot. The Peak Rentals deconsolidation offsets part of the gain.
- Chemical margins fell short of guidance. Chemical Technologies revenue was $90 million, at the top of the $85–90 million guide, but its 17.8% gross margin before depreciation and amortization missed the 20–21% guided on 5 August 2026. The fourth-quarter guide is $75–80 million at 17–18%.
- A price-linked payment and new shares come with the deal. Select issued 5,149,331 Class A shares at the 2 November 2026 closing. One seller receives a cash true-up if the 30-day volume-weighted share price six months after closing is below the 30-day average before closing.
Price setup
The shares closed at $16.21 on 11 November 2026. That is below the 200-day average of $17.50 and the 50-day average of $19.15, both as of 11 November 2026. The 50-day average is above the 200-day average, but the price is under both. Together they define the zone the shares would need to reclaim to show the decline has turned.
The market's response to the report was mixed. The shares closed at $16.18 on 6 November 2026, the last session before the report, and at $15.07 on 9 November 2026, results day. They recovered to $16.21 by 11 November 2026, back to roughly the level before the report.
The 3-month reference close was $20.37 on 13 August 2026. The 52-week closing low is $9.40, set on 20 November 2025. The decline since the August high has erased about a quarter of the gain from that low. The most recent insider filing is a Form 4 dated 18 August 2026. It reports 1,844 shares withheld for tax from the EVP and chief strategy and technology officer at $20.86. It is not a discretionary sale.
Catalysts ahead
- ~17 February 2027 (est.): Fourth-quarter and full-year 2026 results. The first report with Pilot. It tests the $95–100 million adjusted EBITDA guide and the 52–56% infrastructure margin, and should give 2027 spending and Pilot guidance.
- ~3 May 2027 (est.): Pilot true-up measurement, six months after the 2 November 2026 closing. Sets whether Select owes one seller a cash payment, based on its 30-day volume-weighted share price versus the pre-closing average.
Elapsed catalysts
- 13 November 2026: Baker Hughes weekly US rig-count release. Tracks drilling activity that drives Water Services and Chemical Technologies volumes; a single week does not set the revenue trend. (passed)
What would change the view
A daily close above $19.15, the 50-day average of closes as of 11 November 2026, which would show the shares leading the S&P 500. Fourth-quarter 2026 adjusted EBITDA above the $100 million top of guidance would also show the call wrong.
What it trades with
Select's water volumes depend on US onshore drilling and completions. The Baker Hughes rig count and oil-price moves therefore feed its Water Services and Chemical Technologies results. Pilot adds Delaware Basin produced-water volumes under minimum-volume commitments. That deepens Select's dependence on one basin but shifts more revenue to contracted infrastructure, which has held margins in the 57–58% range in the second and third quarters of 2026. Oilfield-services peers react to the same activity signals. Select's added debt also makes the shares more sensitive to credit conditions than they were before the November 2026 note issue.
The evidence, claim by claim (8)
- Third-quarter 2026 revenue was $412 million, net income $22.9 million and adjusted EBITDA $93.5 million, up 57% year over year. Select Water Solutions Q3 2026 results, Form 8-K exhibit 99.1 · as of
- Water Infrastructure revenue was a record $110 million, up 40% year over year, at a 57.2% gross margin before depreciation and amortization. Select Water Solutions Q3 2026 results, Form 8-K exhibit 99.1 · as of
- Fourth-quarter 2026 guidance: adjusted EBITDA $95–100 million, including a partial Pilot quarter and Peak Rentals deconsolidation; Water Infrastructure revenue $150–160 million at 52–56% margin. Select Water Solutions Q3 2026 results, Form 8-K exhibit 99.1 · as of
- 2026 net capital expenditures are now expected at about $300–310 million; third-quarter free cash flow was negative $3.6 million. Select Water Solutions Q3 2026 results, Form 8-K exhibit 99.1 · as of
- After quarter end Select issued $900 million of 7.625% senior notes due 2034; its $500 million revolver was undrawn with about $483.4 million available. Select Water Solutions Q3 2026 results, Form 8-K exhibit 99.1 · as of
- Select completed the Pilot Water acquisition for about $700 million: roughly $600 million cash and 5,149,331 Class A shares. Select Water Solutions closing release, Form 8-K exhibit · as of
- Third-quarter diluted EPS of $0.16 missed the $0.21 analyst estimate; revenue of $412.2 million beat the $397.5 million estimate. Company news, 9 November 2026 · as of
- Citigroup maintained a Buy rating on Select Water Solutions and lowered its price target to $23. Company news, 11 November 2026 · as of
Sources
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