Select Water Agrees to Buy Pilot Water for $700 Million

Key Facts

Select Water Solutions announced a definitive agreement on September 24, 2026, to buy Pilot Water Solutions in a transaction with $700 million of base consideration. The price comprises $600 million in cash and $100 million of Select Class A common shares. Sellers may receive a further $15 million in cash if specified operating milestones are met. Select expects Pilot Water to generate $120 million to $130 million of earnings before interest, taxes, depreciation and amortization in 2027, before targeted cost savings. The investment case therefore rests on projected earnings growth as well as the cost of financing the cash payment and the number of shares issued at closing. The agreement sets out a proposed acquisition; ownership will transfer only if the transaction closes.

WTTR closed at $19.29 on September 23, 2026, compared with $20.27 on September 22, according to EL7 data. Both closes preceded the September 24 deal announcement and provide a price reference from before investors had its terms. That distinction matters because the transaction combines a substantial cash commitment with a share issue, and investors may weigh their effects differently. Earnings from the acquired assets could support the company's value, while debt financing would add interest costs and issuing shares would spread ownership across more stock. Assessing the deal's effect on WTTR requires prices recorded after the announcement and evidence that Select can deliver its forecasts, rather than a preannouncement close.

The agreement sets the cash payment at $600 million, subject to customary purchase-price adjustments, and adds shares valued at $100 million. The share count will be based on their 30-day volume-weighted average price immediately before closing. Thus, the agreed value of the stock component is fixed, while the number of shares sellers receive will vary with that reference price. The agreement also provides a cash true-up if the 30-day volume-weighted average price at the six-month anniversary of closing is below the average used at closing. A separate $15 million payment depends on operating milestones expected in early 2027, so it is additional to the stated $700 million base price.

Pilot Water's platform includes about 2.7 million barrels a day of active permitted disposal capacity and another 0.9 million barrels a day of undeveloped permitted capacity. It also has more than 700 miles of pipelines, adding existing assets and connections to Select's Delaware Basin footprint. Select says the combined platform would have 4.8 million barrels a day of active and undeveloped permitted disposal capacity and more than 1,600 miles of pipelines. Combined recycling capacity would reach 3.8 million barrels a day, giving the network different ways to handle produced water. Undeveloped permitted capacity offers a potential route to expansion, while nearer-term revenue depends on the water actually handled under the assets and contracts.

Long-term contracts support more than 80% of Pilot Water's annual revenue, according to Select, and have an average term exceeding 7 years. The portfolio includes minimum-volume commitments of about 480,000 barrels a day and 306,000 dedicated acres. Minimum commitments establish a floor for contracted activity, reducing revenue's dependence on day-to-day changes in water flows. One new agreement carries a 175,000-barrel-a-day minimum-volume commitment, which Select identifies as a principal growth driver. The company expects Pilot Water's average produced-water volume handled to rise from about 850,000 barrels a day in the first half of 2026 to about 1,000,000 barrels a day during 2027.

Select forecasts Pilot Water adjusted EBITDA of $100 million to $110 million in 2026 and $120 million to $130 million in 2027. It attributes most of that projected increase to the new minimum-volume contract rather than assumed integration savings. Separately, Select targets another $10 million to $15 million of annual cost savings over 12 to 18 months. Investors can assess the two sources of growth separately: the Pilot Water forecast relies mainly on contract execution and higher volumes, while savings require successful operational integration. Delays in either volume growth or integration could shift when those benefits appear, even if the acquisition closes on the announced timetable.

The transaction follows growth already under way in Select's Water Infrastructure segment, which reported $101.6 million of revenue in the second quarter of 2026. That compares with $96.7 million in the first quarter of 2026 and $80.9 million in the second quarter of 2025. The segment's gross margin before depreciation and amortization was 58.3%, versus 56.2% and 55.2% in those respective periods. Companywide adjusted EBITDA reached $92.7 million in the second quarter, compared with $77.6 million in the previous quarter and $72.6 million a year earlier. These figures show Select's operating base before Pilot Water is added; they do not turn the target's projected earnings into results already achieved.

Select plans to fund the cash portion with cash on hand and committed borrowing, with other debt financing possible depending on market conditions. It had reported $33.4 million of cash and $277.8 million of total liquidity at the end of June 2026, illustrating the transaction's size relative to resources reported at that date. The company expects net leverage below 2 times at closing and projects Water Infrastructure will account for about 70% of combined profitability in 2027. For shareholders, the prospective return lies in contracted earnings growth, weighed against debt costs, new shares and the work of combining the businesses. Whether that balance proves attractive depends on delivered volumes and earnings after closing, not the purchase price alone.

Select scheduled a conference call for September 25, 2026, at 10:00 a.m. Eastern Time to discuss the acquisition. It expects to close in the fourth quarter of 2026, subject to customary conditions and required regulatory approvals. Those steps include expiration or termination of the waiting period under the Hart-Scott-Rodino Act. After closing, volume growth under the new contract and achievement of targeted savings will provide separate tests of the 2027 earnings outlook. Operating milestones expected in early 2027 will also determine whether sellers receive the additional $15 million contingent cash payment.