Select Energy Services IncWTTR8,03 $
Select Energy Services (NYSE: WTTR) - American energy company from Texas, which appeared in 2016 and focuses on serving the needs of the oil and gas industry. The business is engaged in water supply and pipeline construction, as well as the production of chemicals and reagents for oil and gas producers.
What he earns
The company has three main business segments.
Water supply. Segment brought 52% revenue in 2021. The total business resources are 1,8 billion barrels of intake water - this is the name of the water, which is withdrawn from a water body for specific business purposes. Select Energy services include identifying the closest source of water to the customer, assessment and planning of methods of its delivery, drawing up a wiring diagram for communications at the facility, as well as water quality control and compliance with all legal and environmental requirements during the supply process.
Infrastructure for water supply. Segment brought 20% revenue in 2021. Includes infrastructure projects for laying pipelines for transporting water resources, development and installation of water collection systems, as well as wells for the discharge of salt water, used in the oil and gas industry.
Oilfield chemistry. Segment brought 28% revenue in 2021. Separate division of the company, Rockwater Energy Solutions, is engaged in the manufacture of a wide range of specialized chemicals for the needs of production and maintenance of infrastructure in the oil and gas industry: fracturing fluid constituents, chemicals for reservoirs and reservoirs for storage and transportation of oil and gas, as well as chemistry to speed up and improve their production processes.
What's wrong
Unprofitableness. Over the five years of the company's history on the market, the multiplier P / E, which shows the ratio of capitalization to the net profit of shareholders, was positive only in 2018 and 2019, in other cases, its negative value indicates losses.
But even positive values did not look encouraging.: the values at 13.67 and 292.98 suggest, that subject to payment 100% returns to shareholders, their investment in the company will pay off in full in about 14 years and 293 years respectively.
Doesn't pay dividends. Select Energy Services has never paid dividends to shareholders and prefers to invest all the money in business development, which is not quite common for companies in the US energy sector, where the average dividend payout is 1,5%.
Not the best results in the past. Over the past five years, the company's loss has increased annually by an average of 53,6%, which demonstrates noticeably worse dynamics relative to the US energy sector and loses even more to the US market as a whole. At the same time, over the past year, the company has demonstrated results that are significantly better than the sector and the market..
What good
Pays the bills. Since 2019, the net business debt ratio has remained negative, which means, that the amount of cash in the company's accounts fully covers the amount of all its loans.
Cost indicators. Despite the negative P / E and unprofitability, other valuation multiples look attractive: P-values / S and P / BV is just over one.
The first indicator evaluates the company in terms of revenue and shows, how much an investor pays for each ruble or cent of her income, the second - evaluates the ratio of capitalization to equity capital of the issuer.
Additional opportunities to increase sales. The situation in world politics is more likely to play into the hands of the company: additional US LNG supplies to Europe, as well as a ban on imports of Russian coal and plans to reduce the share of Russian energy in EU markets automatically provide competitive opportunities for US producers of natural gas and petroleum products. In a situation of increasing and scaling production, the demand for specialized chemicals and reagents will grow at a corresponding pace.
What's the bottom line?
Looks like, that the Select Energy Services business could greatly benefit from a reprioritization of energy in the EU market, along with the promotion of a green agenda for US producers regarding the environmental friendliness of LNG.
The company has shown not too outstanding results in the past, but over the past year, it has begun to noticeably improve its performance and, while maintaining the pace of development, is able to achieve significant success in the rapidly developing market of the American energy.
