Q4 2022 Select Energy Services Inc Earnings Call
Greetings and welcome to the select energy services fourth quarter earnings Conference call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad as a reminder, this call for.
Is being recorded it is now my pleasure to introduce your host Chris George.
Chris you may begin.
Thank you operator, and good morning, everyone. We appreciate you joining us for select conference call and webcast to review, our financial and operational results for the fourth quarter and full year 2022 with me today are John Schmitz, Our founder Chairman, President and CEO , Nick <unk>, Senior Vice President and Chief Financial Officer, and Michael <unk> Executive Vice President.
Operating officer.
Before I turn the call over to John I have a few housekeeping items to cover a replay of today's call will be available by webcast and accessible from our website at select energy Dot com.
There will also be a recorded telephonic replay available until March eight 2023.
The access information for this replay was also included in yesterday's earnings release.
Please note that the information reported on this call speaks only as of today February 22023, and therefore time sensitive information may no longer be accurate as of the time of the replay listening or transcript reading.
In addition, the comments made by management. During this conference call may contain forward looking statements within the meaning of the United States Federal Securities laws. These forward looking statements reflect the current views of select management. However, these various risks uncertainties and contingencies could cause our actual results performance or achievements to differ materially from those.
Expressed in the statements made by management.
The listener is encouraged to read our annual report on Form 10-K, our current reports on form 8-K, as well as our quarterly reports on Form 10-Q to understand those risks uncertainties and contingencies.
Also please refer to our earnings announcement released yesterday for reconciliations of non-GAAP financial measures.
Now I'd like to turn the call over to our founder Chairman President and CEO John Schmidt.
Thanks, Chris Good morning, and thank you for joining us I'm excited to be discussing select again with you today.
Overall 2022 was a very exciting time for select and I'd like to start by highlighting some of our achievements over the past year.
During 2022, we grew revenues by 81% and adjusted EBITDA by 290%, finishing the year with total revenues of approximately $1 4 billion and adjusted EBITDA of $195 million has importantly, we finished the year with record.
Net income and earnings per share.
Across our segments, we achieved record revenues in both water infrastructure and chemicals, while water services continue to reap the benefits of our consolidation and technology initiatives, achieving all time high levels of revenue on a per employee basis.
Select has always been dedicated to maintaining a strong balance sheet and discipline allowed us to capitalize during a dislocated market over the last two years.
We've closed on a dozen different strategic acquisitions and executed a meaningful number of organic growth projects.
Adding a sizable portfolio of contracted and production weighted revenues, bringing incremental financial stability to our business.
For example, we recently signed multiple new long term contract to support new recycling projects in the Delaware Basin.
We continue to see tremendous amount of interest from our customer base around contracting new infrastructure development, particularly around full lifecycle solutions.
And I see a number of opportunities for additional growth this year.
The addition, additional stability provided by these initiatives acquisitions projects and contracts give us incremental optionality in our capital allocation strategy.
Accordingly, I am proud to have initiated our first ever quarterly dividend during quarter four 2022.
Having just paid our second ever dividend last week I look forward to building and enhancing a solid track record of returning capital to shareholders has a component of our overall capital allocation framework.
Over the last couple of years select has remained steadfast and focused on executing our strategy of building and bolstering the core water and chemicals business advancing our technology sustainability and diversification efforts as well as executing on our strategic.
<unk> M&A.
It is clear to me that these efforts have been paying off 2022 represented a culmination of sorts for this strategy as well as an opportunity for a new beginning.
One, which reinforces our connection to water at our core select is dedicated to our vision to be the recognized leader and trusted partner in sustainable water management solutions select wasn't initially built over the last 15 years to service the oil and gas.
So industry.
And in that time, we have refined our focus to become a technology leader uniquely positioned as the only integrated full lifecycle water and chemistry company in the industry.
We continue to develop new and creative chemistry technologies that have helped us grow our market share in the industry. These efforts have helped lead the industry towards sustainable recycling and reuse solutions.
During 2022 alone select recycled 174 million barrels of produced water for reuse or more than 7 billion gallons of water. This is equal to more than two months of water usage and the city of Austin, Texas.
Approximately two thirds of this came from our fix facilities under long term contract with the other third coming from our active mobile operations.
These recycling solutions will provide critical sustainable solutions for traditional energy industry, allowing it to continue to prosper as part of the energy transition in years ahead.
The last 10 years have seen the dramatic impact in the United States and to a lesser extent globally of the shale Revolution. This is revitalized the U S oil and gas production and created an abundance of economical energy that is essential ingredient to fueling the PA.
<unk> of human ingenuity and progress we believe the important contribution of responsible energy production is too often taken for granted as the world seeks to reduce energy poverty and improve energy access for all people. We can also.
<unk> mitigate the risk of climate change through thoughtful innovation and investments to develop sustainable ways to produce affordable reliable clean energy as part of a comprehensive energy transition ultimately select will remain firmly committed to advancing new and sustainable solutions for our.
Customers and other stakeholders that are responsible for producing the energy needed to power homes.
Deals that provide mobility to the global economy.
And the refined products needed to engineer advanced materials and technologies.
However, our expertise and sustainable water and chemical solutions.
Has a diverse range of application beyond our traditional niche within unconventional shale resource development and production whether that is through full lifecycle water and waste management solutions developing creative technologies to support the energy transition.
More broadly advancing into other industrial sectors. We believe select is uniquely positioned to capitalize on new growth opportunities using and building upon our existing expertise in recent years, we have closed on a dozen.
Strategic acquisitions, while also divesting non core assets and operations that were not strategic to our vision.
With our diverse capabilities and.
That pace of change it is clear to me that select is ready for a realignment.
Accordingly, I am excited to announce our corporate re branding initiatives.
During the first half of 2023 select intends to change its name to select water solutions, Inc.
He will remain traded on the New York stock exchange under the stock ticker W. P. P are embracing our heritage as a water first company.
For now our corporate and financial segment reporting structures are not changing however, this rebranding will align our employees and field operations consolidating more than 10 unique brands and DBA is currently operating nationwide.
This change will also significantly simplify our external communications with our customers and ensure that we are receiving maximum brand recognition for our capabilities and technologies across the entire platform of our operations.
Who embody our new corporate identity.
We also have launched a new brand logo I believe it's a bold and vivid emblem.
For the future of select a future connected by water I look forward to deploying our new brand into the marketplace and months ahead.
Whether it's about uniting our teams around integrated water and chemistry.
Creating sustainable.
Partnerships with our customers integrating large infrastructure networks are being good stewards for our surrounding communities.
Our business is all about making connections and.
And whether it's molecules our pipelines our people we are all connected by water Importantly, this initiative also prepares select for the years ahead of us.
Supported by our recent acquisitions advanced chemical technologies organic infrastructure growth opportunities and our other strategic investments I see meaningful revenue EBITDA and net income growth in 2023.
We will continue to seek new and exciting opportunities both organically and through M&A, while also making sure to hold ourselves accountable through improving the base business and constantly evaluating what fits our strategy long term.
I am very excited about what the future holds for select and look forward to further executing on this vision.
Additional earnings growth shareholders returns and strategic execution during 2023.
Now I'd like to turn it over to Nick to provide more details on our fourth quarter financial performance are currently 23 outlook and the other ongoing initiatives Nick Thank you John and good morning, everyone.
2022 was a transformational year for select we increased our annual net income by $105 million.
Initiated our first ever regular dividends and completed numerous corporate and asset acquisitions that offer best infrastructure development potential.
We also exceeded our annual employee safety and water recycling targets embedded in our sustainability linked credit facility, which translates to a lower borrowing rate building.
Building on these accomplishments, we expect even greater things ahead as select water solutions, we plan to consolidate our various brands and operations for greater efficiency, while expanding our water infrastructure for greater impact.
During 2023 after two years of rapid organic growth coupled with a dozen acquisitions, we will seek first and foremost the meaningfully boost our operating margins.
Cost inflation has eased for the various inputs in our business and this combined with internal efficiency efforts provides us with an opportunity to carry a larger part of the revenue dollars through to the bottom line.
With revenue run rate performance already approaching all time high levels.
Expected to increase further during the year.
We will endeavor forward with a relentless approach to achieving incremental efficiencies across the business.
This represents a tremendous opportunity for us to pull through additional profitability and cash flow into the business.
Next we will seek to build upon our infrastructure asset footprint through organic investments around recycling pipelines in system capacity.
Our capital light business model consumed just $41 million of net Capex last year coming in below our previous guidance of $45 million to $50 million from last quarter, and well below our original guidance of $50 million to $70 million coming into last year.
During 2022, we were able to apply cash generated from the sale of unneeded or duplicative assets into targeted strategic investments like developing new recycling facilities or enhancing our advanced chemistry from our research lab through in based on manufacturing.
With our with our most recent acquisitions in the fourth quarter, we've added core Midland basin water recycling and infrastructure systems to complement our northern Delaware pipeline and distribution footprint and additional Bakken assets around our pipeline and disposal networks there.
All of the assets like these have a higher value potential within our portfolio than they do on a standalone basis, given our ability to fund further development with minimal leverage and importantly, our ability to tie them into a growing infrastructure network strategically suited to balance water needs across many different customers.
2023 will bring an acceleration of our infrastructure network investments as we advanced customer discussions and leverage our leading position across multiple basins. These.
These investments will be supported by long term contracts that will grow select cash flow for years to come.
Spending on market conditions, and the ultimate realization of various projects under discussion with customers. We expect 2023 net capex to come in between $90 million to $130 million after giving effect to roughly $20 million of expected asset sales.
Finally, and most importantly, we expect 2023 to bring a large uplift in free cash flow.
Through the rebranding and streamlining of operations systems integration into a single ERP and other working capital initiatives, we expect to deliver free cash flow of roughly two thirds of our adjusted EBITDA.
This would not only comfortably fund our capital program, but also offer additional flexibility and optionality around our commitment to shareholder returns while rebuilding a strong net cash position.
We expect to see the benefits of these efforts accelerate in the second quarter as we further worked through acquisition integration in the first quarter.
On the subject of free cash flow, we realized a meaningful improvement to $24 million of cash flow from operations less net capex in the fourth quarter cash.
Cash flow from operations increased from $5 4 million in the third quarter to $35 4 million in the fourth.
This cash flow was applied towards 35 million in total acquisition related cash consideration and costs plus the elimination of $13 million of breakwater bank debt in conjunction with the closing of that acquisition.
Which along with $11 million of net capex and $6 million of dividend payments still resulted in a very modest net debt position of $9 million.
We finished the quarter with $16 million drawn on our sustainability linked credit facility and $213 million of total liquidity.
Fourth quarter revenue of $382 million grew by 2% or $6 $6 million sequentially acquisitions.
Acquisitions from November onwards contributed about $15 million of total revenue for the quarter the.
The quarter was impacted by winter weather delaying customer activities in most all regions.
Which when combined with certain non ordinary expenses and insurance reserve adjustments totaling $8 4 million decreased net income to $7 6 million from $24 7 million and adjusted EBITDA to $52 2 million from $62 eight.
Looking forward, we expect revenue and margin expansion across the business in the first quarter.
The water services segment experienced some weather related challenges in January but we anticipate modestly increased revenue with gross margins before DNA, improving by 2% to three percentage points as we work through breakwater integration and an uneven outlook and guests a year basis.
We expect water infrastructure will take the biggest step forward in Q1, as we benefit from a full quarter of our infrastructure related acquisition combined with the recent investments, we've been making to deliver 20% to 25% revenue growth.
With gross margins before DNA in the high <unk> to 30% range.
I'm excited about the new organic recycling project, John announced and the additional returns that will bring in the latter parts of this year and beyond.
The chemicals segment, which was not directly affected by the latest acquisition activity.
Continues to see strong organic revenue expansion, our advanced chemistry solutions continued to gain share across multiple water related applications and have led to expanded relationships with certain key customers.
We anticipate first quarter revenue continuing near this record high fourth quarter number with relatively stable gross margins.
While the first quarter should demonstrate a solid step forward in our financial performance I fully expect to see further improvement in our revenue earnings and free cash flow generation over the remainder of 2023 as well.
SG&A of $34 1 million was impacted by $3 9 million of transaction costs in the fourth quarter, while the first quarter. We will also have some transaction costs as well as rebranding initiative costs.
Aimed to decrease SG&A as a percent of revenue back down to 8% as we worked through those costs over the course of the first half of the year.
We expect depreciation and amortization expense to be in the low $30 million range per quarter and tax expense to remain minimal through 2023.
Generating positive free cash flow through improved working capital management is a core priority and as I mentioned earlier, we see a very robust cash flow profile ahead of us for the full year.
With that I'll hand, it back to John for some final remarks John .
Thanks, Nick before we jump into question and answers I would like to take a moment to thank our now over 4000 employees, including our newest team members joining us from breakwater Cypress and elsewhere I think we have brought together the best water and cameras chemical experts in the industry.
And we will continue to benefit from the consolidation of this team into one select.
We have the asset base balance sheet customer relationships and technical expertise to really build something special.
I am very excited to jump into 2023, alongside them and I look forward to reaching new heights under the banner of select water solutions.
Thank you and with that we'll open it up to questions operator.
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Our first question comes from the line of Luke.
With capital one Securities. Please proceed with your question.
Hey, good morning, local morning Piper Sandler.
John or maybe Nick you've done several acquisitions this year and you're continually to invest organically.
And you have various initiatives along with the recycling facility that you announced yesterday.
So this is an ingredient and you complete the re org, how should we think about revenue or profitability potential just a little tough on our side and so we don't get comps segment level, Kpis, which you talked about significant rather than profitability grows and just wanted to see if you could frame this up a little bit outside of a <unk> for us.
Sure. So we gave some <unk> direction, there I think as you look out into the rest of the year.
That pace of growth that you saw in the water infrastructure group from second to third quarter, and then moving into first quarter from what we described today.
I think you have some solid tail winds behind that given that the majority of that Capex total for this year will be focused on connecting that infrastructure on adding recycling projects around it and doing so.
In many cases on a contracted long term basis.
So given that I think thats the segment that Youll see the most torque in through the remainder of the year as we look at water services.
We have some good opportunities there, but we're very focused there on on taking out costs in the system on integrating operations.
Putting together what we've acquired.
On a unified basis throughout the lower 48 shale basins on chemicals, we've had great momentum there without any transaction benefit.
Do you have.
The ability to expand that further beyond existing roofline.
Also have the ability to continue to innovate.
Around some new R&D that we have under development.
I think you'll you'll see.
The continuation of very strong performance.
The chemicals group as well.
But overall I think based on our acquisitions the asset footprint, our ability to invest in that existing asset footprint.
Youre going to see the strongest growth in high margin infrastructure opportunities.
Yes.
Okay.
This is John I'll add to it a little bit with Nick here.
I think if you look at the history of the company to go back to 2018, you will see really the high point of the company.
Somewhere around $1, six and $260 million of EBITDA.
If you think about what we just did in 'twenty, one 'twenty two and look at the transactions that we did and what we've added.
That the revenue.
Opportunity is very much shifted into that infrastructure asset base.
The.
The assets that we put together, whether its disposal wells or <unk>.
Contracts are.
Surface use agreements with ranch's the ability to exchange water.
The ability to put infra.
Infrastructure in place around recycling and distribution collection.
And management of waste streams to productive streams, it's just way different.
And as Nick said, that's where the majority of the Capex will be targeted but the opportunity of this company because of these transactions and because of this asset base is way more directed now too.
Fixed contract relationship long term full recycle application of water lifecycle of water being a lot of the revenue now is coming out of the production side of the world instead of just the drilling and completion side of the well. So it is very much a different asset base.
That we've created and it heavily weighted to the opportunity within the infrastructure piece of the business.
Okay.
And then on the rebranding and reorganizing you talked about streamlining good bad taking cost out of reorganizing and getting a good uplift to free cash flow with this anything you'd costs here on the quantification of that either on the margin side or kind of costs are being taken out.
Yes, I'll go first I think.
Some of the early wins with the transactions that we did.
Probably was at a very.
Either at the very top of the company.
And the executive branch or.
<unk> down into the operations and consolidating of yards and things of that nature.
But where we have a lot of work to do and to be clear about it. Its a lot of work as we inherited multiple ERP systems multiple field ticketing systems multiple processes that are different one company to another from one region to another.
And that consolidation.
<unk> is in front of us it's not behind us.
And that integration is in front of us and not behind US net made mentioned that we're going to execute on our new ERP system in the first half of this year that really has a big effect on.
On streamlining and processing and being able to manage the working capital different than it's being managed today. It also has.
The comments around the rebranding of going from as Chris said, a dozen different or 10 different.
Companies that go to market across the United States.
At <unk>.
Really three different.
Physicians that will take the market and and bill our customers and communicate with our customers and what we can do with that single ERP system. So the.
The streamlining that needs that.
And that is still in front of US is really the integration of the.
The rebranding and the integration of the of the ERP system and field field ticketing system in.
That is really.
They're a big piece of the working capital is hung up today.
If we talk about working capital more specifically so I think the rebranding is really about the company we are becoming.
How we position ourselves in the market.
It does have that working capital benefits as.
As well.
If we look at fourth quarters overall cash flow performance, our operating cash flow improved from 5% to $35 million as I mentioned, our free cash flow increased by $35 million.
And so we've made considerable progress there now.
We acquired working capital through the breakwater corporate acquisition, we built working capital through a partial quarter of operations from the entirety of our acquisitions that you don't typically collect.
Given the partial quarter in the 60 days they operated.
And so the overall working capital number did increase so we've.
We made good progress there, we certainly have a lot more work to do we expect this.
Working capital will turn into a pretty big tailwind as I mentioned for 2023.
Free cash flow in 2023.
That's extremely strong that will provide us a lot of optionality, whether it's new organic investments increasing.
Increasing our considering new mechanisms of shareholder returns or considering new acquisitions. So I'm really excited about the potential there for 2023.
Okay got it appreciate the time.
Thanks Luke.
Our next question.
Comes from the line of Tom Curran with Seaport Research Partners. Please proceed with your question.
Good morning.
Nick just just picking up where the conversation just left off around working capital.
Could you update us on where you are at then with with the integration of the collection processing systems.
Various field ticketing approaches.
Given.
The latest batch of acquisitions and then also.
When you would expect to complete the migration to Microsoft 365, I believe as of the last call you expected to finish the migration by the end of Q2, but again I don't know maybe that slid out because of the additional.
Assets that youll now be attempting to to include in that.
Yes, Thank you Tom.
Target remains the same obviously with acquisitions that brings a little more work and a little more process and new.
Avenues to ensure we fully integrate.
But first half is still the target there now that doesn't mean, we will.
See all the benefits from it in the first half probably doesn't mean, we will see all the benefits in the third quarter.
There is always a little.
<unk> curve and <unk>.
Transition time, but in the long run as John mentioned going from the eight brands to the three with through which we're billing customers going from three ERP is the one that.
That's going to provide.
A lot of streamlining and a lot more.
I'd say ease of access and ability to work with customers on across all of our sales platforms to drive better working capital management.
So we are in the early innings of that we still have some more integration work to do.
In addition to the technology initiatives here.
But I think given our improvement in the fourth quarter.
The pace of improvement, we'd like to see into 2023, even if fourth quarter didn't meet our objectives on the free cash flow front.
Tom if I could.
If I could this is John I would like to add a little bit to Nick's comments.
One of the things that's very unique with what we've been able to do with this asset base and the footprint and.
The opportunity that we've developed as we want to make sure that whatever we put that on top of whether it's the ERP system or the field.
Processing ticket that it fits and can and cannot allow us to harvest this opportunity properly.
And.
In the case of fill ticketing, we ended up with four through the transactions, we're going to one <unk>.
That one took.
Several.
Months' or times in efforts to make sure we pick the right one that fits the opportunity and what we're going to do with this asset base. So it.
It is.
In front of us it is.
Going to be executed.
We think we've thought through it very well.
To the asset base in the footprint.
As long along with what we think is the opportunity primarily around that infrastructure position, we put together now.
Understood. Thanks for that additional explanation John .
For water services do you do you still expect water services to be able to achieve a gross margin in the low twenties for Q2 through <unk> and.
And what will be the key determinants in terms of the streamlining and efficiency initiatives you're pursuing.
The division's ability to sustainably reach that level.
Tom This is Michael <unk>.
In short, yes, we still expect that for water services.
That's what we're looking at in forecasting going forward in terms of streamlining efficiencies. It's just continuing to execute the base business immune as John mentioned, we put a lot of companies together and we're working through processes and making sure that we can make it as efficient as possible. So that it simplifies our operations and allows us to be more efficient when we're delivering.
<unk> solution to the customer.
Yes, Tom.
One piece with it when you think about.
Service components like this it's very very important that you have real time information that you can act off I've always said you've got to get the information on Tuesday and act on Wednesday.
And in the oilfield service business.
We put a lot of companies together the processes are different the information flow is.
Going to be.
Consolidated and put in a disciplined mode, but we have to have that information to run really good margins in our service business, we will get that information and we do believe we can hit that kind of margins.
In that sector of our business.
That's helpful.
And then last one for me would you. Please update us on your split between oil directed and natural gas oriented activity and give us an idea of what your <unk> guidance assumes on the natural gas oriented side of your customer base.
Yes. So we've of course seen the same weakness that the market has there.
Our overall breakdown Tom were 50% Permian for starters, we largely mirror the lower 48 unconventional rig counts.
As far as gas weighted.
Overall, that's about 80 20 oil to gas.
You can you can point to some associated gas from the Permian and what does that have.
Impacts on activity there.
But we do have some very strong production focused assets, especially in the haynesville.
We don't benefit.
<unk> from lower gas prices certainly.
But for ongoing production.
Infrastructure systems, that's going to be a lot less impacted.
The new completions.
So overall, we have a lot of our customers do have active hedging profiles.
Near term weakness hopefully with Freeport coming back online.
The need for Europe to rebuild inventories, we do see some improvement in that market, but we're very well positioned.
Both to weather it.
Offer customers solutions to lower cost there.
And the one thing I would add to that Tom is on the natural gas side with prices coming down we have seen a material increase in conversations around pipeline solutions and recycling because there theyre going to be more efficient and so it's a way for the operator to reduce their fees and low expense now.
On the recycling side, whether it's natural gas or oil. We do think this is a secular trend and something that we're going to continue to see kind of.
Obviously, it will pick up and slow down somewhat but regardless of activity.
Yes, Tom.
This is Jon and you know if you go across the space as Nick said, you can really follow our revenue base. According to where rigs are running in the lower 48, but the most a really important piece as far as that infrastructure and the stability of that infrastructure revenue and growth.
Revenue growth or profitability.
Our recycling facilities.
Especially now that we bought break water.
Our very strong within the Permian basin.
If you think produced water that carrier system or that gathering and disposal system in the Haynesville that we got with Nomura is very strong and the production lifecycle of the well on it so.
Although we.
We do get affected by natural gas prices, it's not near as directed just too.
Areas that probably could potentially have slowdown in activity, but most importantly is where were really.
Focusing our capital dollars, where the asset base gives us the biggest opportunity for long term contracts and high gross margin that really post either to production related life cycles or high levels of activity.
That all makes sense.
Nice to hear some silver linings on the natural gas side, given the unique nature of your exposure.
Thanks for taking my questions I'll turn it back.
Thank you Tom.
And as a reminder, if anyone has any questions you may prefer star one on your telephone keypad to join the question and answer queue.
Again pressing star one.
He will join the question and answer queue.
Our next question comes from the line of Jeff Robertson with Morningstar Research. Please proceed with your question.
Thank you for taking my question.
A question on the rebranding effort you mentioned are you referenced the notion of additional diversification opportunities.
Can you talk about what maybe at a high level, just what kind of opportunities might entail.
What they would be or how they would be margin accretive to your existing businesses.
Sure. This is John .
<unk> the question.
We look at it as what our skill sets within this company.
That we have.
Developed the technology put the position together.
All around <unk>.
We're seeing a water movement containment delivery and as that process happens we've now.
Really focused and develop the position of adding the right chemistry.
In two areas of that one as we add the chemistry to make the water usable for the application. After we source it and two we put the chemistry with that water to do the job it needs to do which is fracking in this case.
We believe that if we can.
Match.
Water and chemistry.
In the manner that we do in the fracking side of this business are in the.
Waste management side of this business and full lifecycle, we believe that fits into a lot of different industries.
So.
<unk>.
We actually have done that some and it could be just chemistry.
And we've done that somewhere it's just water, but the uniqueness of matching water and the chemistry needed to use to make usable.
Is what we're focused on and how we could take that into other areas. Besides just the oil and gas space.
This is Michael again, just to elaborate on one thing as John mentioned around waste management. So two of the acquisitions, we closed in the last year and a half expanded our operation in waste management, and managing drilling muds pit bottoms and other oilfield waste products is really a logical fit for us and a natural organic expansion is.
We look to continue to grow the business.
We did develop and industrial team and this is something that we've tasked them with doing because the opportunities right here in front of us and they are well positioned to apply in the chemistry and managing kind of the full waste management lifecycle.
Okay. Thank you.
Our next question comes from the line of Shawn Boyd with next Mark Capital. Please proceed with your question.
Thank you can you hear me okay.
Yes, Sean go ahead.
Great.
Opex guidance.
Net capex was expected to be $40 million to $50 million next year. It looks like we're talking about 90 to 130 million now.
Is that correct or was I off on that estimation.
Yes, Sean that was our guidance for 2022, there are most recently, we finished at $41 million for 2022.
Looking at that 90 to $1 30, we think of it as 50 50 on the maintenance and growth side. So I think that number is pretty accurate for where we expect our maintenance to come in.
Got it okay.
No Brian .
Previous year understood.
And at this point.
Yes.
I guess I want to get back to kind of something I think Luke.
Sort of like I did a little bit different way, which is.
The assets that <unk> got at this point what are you.
How would you steer us in terms of organic growth in each segment.
The emphasis on water infrastructure.
If you can give us just a.
A little bit.
Guidelines here in terms of how we think about organic growth going forward.
Really helpful by segment.
Yes, Sir.
We've laid out Q1.
As I mentioned.
The bulk of growth investment going towards water infrastructure and most of that is going to be around existing assets building.
Building those out enhancing them.
Oftentimes with contracted revenue with production Levered revenue.
That's really going to be the.
Large focus of our growth Capex piece here.
So we have a number of active customer discussions we announced a big recycling project in our press release yesterday that we are really exciting excited about that comes with a long term contract with a respected.
Large independent E&P.
And so we're expecting to have a lot more of those coming down the pike here this year and we will definitely share those.
Quarterly as we consummate those deals.
Okay.
Hey, Sean.
I'm, sorry that does conclude our question and answer session and therefore, we will.
I will turn the call back over to John Smith for closing remarks.
Yes, thank you operator.
I appreciate the.
The interest today in select energy, we are very excited about the asset base. We've been put together we have put together in the last two years now.
We think we've got great opportunities in the infrastructure side of the business because of these assets and transactions and relationships to the customer base as well as to the.
To the to the landowners and the movement of this water.
Across the space. So look forward to talking to you next quarter and thank you very much.
And ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a wonderful day.
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