# EDGAR Filing Document

**Accession Number:** 0001693256
**File Stem:** 0001104659-23-034518
**Filing Date:** 2023-3
**Character Count:** 343842
**Document Hash:** 177c6a480d9a9cfa4ea8bdf94397b1c2
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001104659-23-034518.hdr.sgml**: 20230320

**ACCESSION NUMBER**: 0001104659-23-034518

**CONFORMED SUBMISSION TYPE**: ARS

**PUBLIC DOCUMENT COUNT**: 1

**CONFORMED PERIOD OF REPORT**: 20221231

**FILED AS OF DATE**: 20230320

**DATE AS OF CHANGE**: 20230320

**EFFECTIVENESS DATE**: 20230320

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Select Energy Services, Inc.
- **CENTRAL INDEX KEY:** 0001693256
- **STANDARD INDUSTRIAL CLASSIFICATION:** OIL, GAS FIELD SERVICES, NBC [1389]
- **IRS NUMBER:** 814561945
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** ARS
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-38066
- **FILM NUMBER:** 23747028

**BUSINESS ADDRESS:**
- **STREET 1:** 1233 W LOOP SOUTH, SUITE 1400
- **CITY:** HOUSTON
- **STATE:** TX
- **ZIP:** 77027
- **BUSINESS PHONE:** (713) 235-9500

**MAIL ADDRESS:**
- **STREET 1:** 1233 W LOOP SOUTH, SUITE 1400
- **CITY:** HOUSTON
- **STATE:** TX
- **ZIP:** 77027

### Attached PDF Documents

**Attachment 1:** `tm234153d2_ars.pdf`

![img-0.jpeg](img-0.jpeg)

# Annual Report 20 22

SELECT

Financial Highlights

Revenue

![img-1.jpeg](img-1.jpeg)

Adjusted EBITDA(1)

![img-2.jpeg](img-2.jpeg)

Recycled Water Volumes

![img-3.jpeg](img-3.jpeg)

Employee Headcount

![img-4.jpeg](img-4.jpeg)

(1) Adjusted EBITDA is a non-GAAP financial measure. For a reconciliation of non-GAAP financial measures, see "Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations - Comparison of Non-GAAP Financial Measures" in our Annual Report on Form 10-K included in this annual report to shareholders or visit our website at www.selectenergy.com.

![img-5.jpeg](img-5.jpeg)

# A Letter to Stockholders

March 20, 2023

Overall, 2022 was a very exciting year for Select. We successfully executed on our key strategic objectives that were focused on maximizing the value potential across our business, resulting in the following achievements:

- 2022 Revenues grew by 81% as compared to 2021, finishing the year with total revenues of approximately $1.4 billion. We achieved record revenues during 2022 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
- Record 2022 net income, an increase of $105 million, and record 2022 earnings per share of $0.51.
- 2022 adjusted EBITDA increased 290% as compared to 2021 to $195 million
- Continued to maintain a strong disciplined balance sheet, which allowed us to capitalize on opportunities during a dislocated market over the last two years
- Applied 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-basin manufacturing
- Completed a dozen different corporate and asset strategic acquisitions and executed a meaningful number of organic growth projects that offer vast infrastructure development potential

- Exceeded our annual water recycling and employee safety targets embedded in our sustainability-linked credit facility, which translates to a lower borrowing rate
- Initiated our first-ever quarterly dividend during the fourth quarter of 2022

Operationally, we continue to develop new integrated infrastructure projects and creative chemistry technologies that have helped us grow our market share across all segments. These efforts have also helped lead the industry towards a rapidly growing environment for sustainable recycling and reuse solutions. During 2022 alone, Select recycled 88 million barrels of produced water for reuse or approximately 4 billion gallons. When taking into account the full year of Breakwater operations, this number grows to 174 million barrels or 7 billion gallons. This pro forma figure is equal to more than two months of water usage within the city of Austin, Texas. Approximately two-thirds of this amount came from our fixed facilities under long-term contracts with the other third coming from our active mobile operations. During 2022, we expanded our daily recycling capabilities by more than 400% to more 3 million barrels per day of capacity. These recycling solutions will provide critical, sustainable solutions for traditional energy operations, allowing the industry to continue to prosper throughout the energy transition in years ahead.

## Select's Foundation for Growth

The last 10 years have seen the dramatic impact in the United States and, to a lesser extent, globally of the shale revolution. This has revitalized US oil and gas production and created an abundance of economical energy that is an essential ingredient to fueling the power 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 pollution, poverty, and improve energy access for all people, we can also mitigate the risk of climate change through thoughtful innovation and advancements to develop sustainable waste solutions, and 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, the fuels that provide mobility to the global economy, and the refined products needed to engineer advanced materials and technologies.

During 2022, we expanded our daily recycling capabilities by more than 400% to more 3 million barrels per day of capacity. These recycling solutions will provide critical, sustainable solutions for traditional energy operations, allowing the industry to continue to prosper throughout the energy transition in years ahead.

We continue to find ways to expand our expertise in sustainable water and chemical solutions across a diverse range of applications both within and beyond our traditional niche within unconventional shale resource development and production. Whether that is through full life cycle water and waste management solutions, developing creative technologies to support the energy transition or 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.

Over the last couple of years, Select has remained steadfast and focused on executing our strategy of building and bolstering our core water and chemicals business, advancing our technology, sustainability, and diversification efforts, as well as executing on our strategic M&A. I think we have brought together the best water and chemical experts in the industry, and we'll continue to benefit from the consolidation of these team members into Select. Additionally, this strategy added a sizable portfolio of contracted and production-weighted revenues to bring incremental financial stability to our business, providing us the conviction to declare our first ever quarterly regular dividend during the fourth quarter of 2022.

2022 represented a culmination of our "build and bolster" 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 was initially built over the last 15 years to service the energy industry and in that time, we have refined our focus to become a technology leader, uniquely positioned as the only integrated full life cycle water and chemistry company in the industry.

In recent years, we have closed on a dozen strategic acquisitions while also divesting noncore assets and operations that were not critical to our vision. With our diverse capabilities and that pace of change, it is clear to me that Select is ready for a realignment.

#### **New Brand, Same Vision**

Accordingly, we recently announced our corporate rebranding initiative. During the first half of 2023, Select intends to change its name to Select Water Solutions, Inc. 2022 marked our 5th anniversary as a publicly traded company and we will remain traded

*To embody our new corporate identity as Select Water Solutions, we also have launched a new brand logo-a bold and vivid emblem for the future of Select.*

on the New York Stock Exchange under the stock ticker, WTTR, embracing our heritage as a water-first company. We believe this rebranding will align our employees and field operations and consolidate more than 10 unique brands and DBAs 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.

To embody our new corporate identity as Select Water Solutions, we also have launched a new brand logo-a bold and vivid emblem for the future of Select, a future connected by water. We've already begun to deploy our new brand into the marketplace. Whether it's about uniting our teams around integrated water and chemistry, creating sustainable partnerships with our customers, integrating large infrastructure networks, or being good stewards for our surrounding communities, our business is all about fostering connections. And whether it's molecules or pipelines or people, we are all connected by water.

#### **Looking Ahead**

Importantly, our corporate rebranding initiative prepares Select for the future. In 2023, we intend to accelerate our infrastructure network investments as we advance customer discussions and leverage our leading position across multiple basins. We continue to see a tremendous amount of interest from our customer base around contracting new infrastructure development, particularly around full life cycle solutions. These investments will be supported by long-term contracts that will grow Select's cash flow for years to come. The additional stability provided by these initiatives, acquisitions, projects, and contracts give us incremental optionality in our capital allocation strategy.

Supported by recent acquisitions, advanced chemical technologies, organic infrastructure growth opportunities, and our other strategic investments, we see meaningful revenue, EBITDA, and net income growth in 2023. Select

has identified the following growth opportunities:

1. During 2023, after two years of rapid organic growth coupled with a dozen acquisitions, we will seek, first and foremost, to meaningfully boost our operating margins. Cost inflation has eased for the various inputs in our business, and our revenue run-rate

*Quality assets have a higher value potential within our portfolio than they do on a stand-alone 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.*

performance is approaching all time high levels and expected to increase further throughout 2023. Our primary focus will be on internal efficiency efforts, which provides us with an opportunity to carry a larger part of the revenue dollar through to the bottom line.

2. Next, we will seek to build upon our infrastructure asset footprint through organic investments around recycling, pipelines, and system capacity. With our most recent acquisitions, we added four 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. Quality assets have a higher value potential within our portfolio than they do on a stand-alone 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.

3. Finally, we will continue to seek new and exciting opportunities 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.

In closing, we look forward to building and enhancing a solid track record of returning capital to shareholders as a component of our overall capital allocation framework. We are very excited about what the future holds for Select and look forward to further executing on this vision through additional earnings growth, shareholder returns, and strategic execution during 2023.

On behalf of our now over 4,000 highly skilled and dedicated employees, including our newest team members joining us from Breakwater, Cypress, and elsewhere, thank you for your continued support. We have the asset base, balance sheet, customer relationships, and technical expertise to really build something special. I'm very excited to jump into 2023 alongside them, and I look forward to reaching new heights under the banner of Select Water Solutions.

Sincerely,

**John D. Schmitz**
Chairman, President & Chief Executive Officer

# **UNITED STATES**
**SECURITIES AND EXCHANGE COMMISSION**
Washington, D.C. 20549
**FORM 10-K**

(Mark One)

☑ **ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

For the fiscal year ended December 31, 2022.

OR

☐ **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

For the transition period from __________ to __________

Commission file number 001-38066

# **Select Energy Services, Inc.**

(Exact name of registrant as specified in its charter)

**Delaware**
(State or Other Jurisdiction of Incorporation or Organization)

**81-4561945**
(I.R.S. Employer Identification No.)

1233 W. Loop South, Suite 1400
Houston, Texas
(Address of Principal Executive Offices)

77027

(Zip Code)

Registrant's telephone number, including area code **(713) 235-9500**

Securities registered pursuant to Section 12(b) of the Act:

| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| --- | --- | --- |
| Class A common stock, par value $0.01 per share | WTTR | New York Stock Exchange |

Securities registered pursuant to Section 12(g) of the Act:

**NONE**

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ☑ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes ☐ No ☑

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☐ Accelerated Filer

☑

Non-accelerated Filer

☐ Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act).

Yes ☐ No ☑

The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant computed as of June 30, 2022 (the last business day of the registrant's most recent completed second fiscal quarter) based on the closing price of the Class A common stock on the New York Stock Exchange was $489.1 million. There were 109,389,526 and 16,221,101 shares of the registrant's Class A and Class B common stock, respectively, outstanding as of February 20, 2023.

# **Documents Incorporated by Reference:**

Portions of the registrant's definitive proxy statement for the 2023 annual meeting of stockholders, to be filed no later than 120 days after the end of the fiscal year, are incorporated by reference into Part III of this Annual Report on Form 10-K.

# **Table of Contents**

|  | Page |
| --- | --- |
| PART I |  |
| Item 1. Business | 6 |
| Item 1A. Risk Factors | 33 |
| Item 1B. Unresolved Staff Comments | 60 |
| Item 2. Properties | 60 |
| Item 3. Legal Proceedings | 61 |
| Item 4. Mine Safety Disclosures | 61 |
| PART II |  |
| Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 61 |
| Item 6. Reserved | 64 |
| Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 65 |
| Item 7A. Quantitative and Qualitative Disclosures About Market Risk | 80 |
| Item 8. Financial Statements and Supplementary Data | 81 |
| Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 81 |
| Item 9A. Controls and Procedures | 81 |
| Item 9B. Other Information | 86 |
| Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 86 |
| PART III |  |
| Item 10. Directors, Executive Officers and Corporate Governance | 86 |
| Item 11. Executive Compensation | 86 |
| Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 86 |
| Item 13. Certain Relationships and Related Transactions, and Director Independence | 86 |
| Item 14. Principal Accounting Fees and Services | 86 |
| PART IV |  |
| Item 15. Exhibit and Financial Statement Schedules | 86 |

1

# PART I

## CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

The information in this Annual Report on Form 10-K includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements, other than statements of historical fact, included in this Annual Report regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this Annual Report, the words “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project,” “preliminary,” “forecast,” and similar expressions or variations are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on our current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements described under the heading “Risk Factors” included elsewhere in this Annual Report on Form 10-K, as well as those set forth from time to time in our other filings with the Securities and Exchange Commission (the “SEC”). These forward-looking statements are based on management’s current belief, based on currently available information, as to the outcome and timing of future events.

Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, those summarized below:

- • global economic distress resulting from sustained Russia-Ukraine war and related economic sanctions, rising interest rates, and potential energy insecurity in Europe which may decrease demand for oil and demand for our services or contribute to volatility in the prices for oil and natural gas;
- • actions taken by the members of the Organization of the Petroleum Exporting Countries (“OPEC”) and Russia (together with OPEC and other allied producing countries, “OPEC+”) with respect to oil production levels and announcements of potential changes in such levels, including the ability of the OPEC+ countries to agree on and comply with announced supply limitations;
- • actions taken by the Biden Administration or state governments, such as executive orders or new or expanded regulations, that may negatively impact the future production of oil and natural gas in the U.S. or our customers’ access to federal and state lands for oil and gas development operations, thereby reducing demand for our services in the affected areas;
- • the level of capital spending and access to capital markets by oil and gas companies in response to changes in commodity prices or reduced demand;
- • the ability to source certain raw materials and other critical components or manufactured products globally on a timely basis from economically advantaged sources;
- • the severity and duration of world health events, including the novel coronavirus (“COVID-19”) pandemic and its variants, and associated repercussions and operational challenges to supply and demand for oil and natural gas and the economy generally;
- • any new or additional measures required by national, state or local governments to combat COVID-19, such as a COVID-19 vaccine mandate, which if enacted, could reduce labor availability or add additional operational costs as we may experience constraints on our workforce and the workforce of our supply chain, which could have a negative impact on our operations;
- • the potential deterioration of our customers’ financial condition, including defaults resulting from actual or potential insolvencies;

2

- • the degree to which consolidation among our customers may affect spending on U.S. drilling and completions;
- • trends and volatility in oil and gas prices, and our ability to manage through such volatility;
- • the impact of current and future laws, rulings and governmental regulations, including those related to hydraulic fracturing, accessing water, disposing of wastewater, transferring produced water, interstate freshwater transfer, chemicals, carbon pricing, pipeline construction, taxation or emissions, leasing, permitting or drilling on federal lands and various other environmental matters;
- • regional impacts to our business, including our key infrastructure assets within the Bakken, the Northern Delaware portion of the Permian Basin, and the Haynesville;
- • capacity constraints on regional oil, natural gas and water gathering, processing and pipeline systems that result in a slowdown or delay in drilling and completion activity, and thus a decrease in the demand for our services in our core markets;
- • regulatory and related policy actions intended by federal, state and/or local governments to reduce fossil fuel use and associated carbon emissions, or to drive the substitution of renewable forms of energy for oil and gas, may over time reduce demand for oil and gas and therefore the demand for our services, including as a result of the Inflation Reduction Act of 2022 (“IRA 2022”) or otherwise;
- • changes in global political or economic conditions, generally, and in the markets we serve, including the rate of inflation and potential economic recession;
- • growing demand for electric vehicles that may result in reduced demand for gasoline and therefore the demand for our services;
- • our ability to hire and retain key management and employees, including skilled labor;
- • our access to capital to fund expansions, acquisitions and our working capital needs and our ability to obtain debt or equity financing on satisfactory terms, including as a result of recent increases in cost of capital resulting from Federal Reserve policies and otherwise;
- • our health, safety and environmental performance;
- • the impact of competition on our operations;
- • the degree to which our E&P customers may elect to operate their water-management services in-house rather than source these services from companies like us;
- • our level of indebtedness and our ability to comply with covenants contained in our Sustainability-Linked Credit Facility (as defined herein) or future debt instruments;
- • delays or restrictions in obtaining permits by us or our customers;
- • constraints in supply or availability of equipment used in our business;
- • the impact of advances or changes in well-completion technologies or practices that result in reduced demand for our services, either on a volumetric or time basis;

3

- acts of terrorism, war or political or civil unrest in the U.S. or elsewhere, such as the Russia-Ukraine war and/or political instability in the Middle East;
- accidents, weather, natural disasters or other events affecting our business; and
- the other risks identified in this Annual Report on Form 10-K, including, without limitation, those under the headings “Item 1A. Risk Factors,” “Item 1. Business,” “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 13. Certain Relationships and Related Transactions, and Director Independence.”

These factors are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors also could have material adverse effects on our future results. Our future results will depend upon various other risks and uncertainties, including those described elsewhere in this Annual Report. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. We undertake no obligation to update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise. All forward-looking statements attributable to us are qualified in their entirety by this cautionary note.

4

# **Risk Factor Summary**

# **Risks Related to Our Business Operations**

- Our business depends on capital spending by the oil and gas industry in the U.S. and reductions in capital spending could have a material adverse effect on our liquidity, results of operations and financial condition.
- Continuing or worsening inflationary issues and associated changes in monetary policy have resulted in and may result in additional increases to the costs of our goods, services and personnel, which in turn could cause our capital expenditures and operating costs to rise.
- The failure to successfully and timely integrate acquired properties, including to successfully combine our business and Breakwater Energy Services, LLC’s. (“Breakwater”) business, may adversely affect our future results.
- Continued volatility in oil and/or natural gas prices may adversely affect the demand for our services.
- The IRA 2022 could accelerate the transition to a low carbon economy and could impose new costs on our customers’ operations.
- Our key infrastructure assets in Louisiana, North Dakota, New Mexico and Texas make us vulnerable to risks associated with conducting business in these regions.
- Restrictions on the ability to procure water or changes in sourcing or disposal requirements could decrease demand for some of our services.
- Regulatory and societal efforts to reduce fossil fuel use and associated carbon emissions could reduce demand for oil and natural gas, and thereby the demand for our services, including as a result of the IRA 2022 or otherwise.
- We may be subject to claims for personal injury and property damage.
- We are subject to cybersecurity risks.
- We may be adversely affected by uncertainty in the global financial markets and a worldwide economic downturn.
- Disruptions in the transportation services of logistics companies transporting wastewater and other oilfield products could have an adverse effect on our results.
- A significant increase in fuel prices may adversely affect our transportation costs.
- Continuing or worsened impacts of the COVID-19 pandemic or of the widespread outbreak of any other communicable disease could reduce the demand for oil, and therefore for our services, and negatively impact our business.

# **Risks Related to Customers and Suppliers**

- Significant price volatility or interruptions in supply of our raw materials for our chemicals business may result in increased costs and negatively impact our financial results.

# **Risks Related to Compliance with Regulations**

- Legislative and regulatory initiatives in the U.S. relating to hydraulic fracturing could result in operating restrictions, delays or cancellations in our customers’ operations, reducing demand for our services.
- Our and our customers’ operations are subject to a number of regulatory risks as a result of climate change initiatives.
- Our chemical products are subject to regulations that tend to become more onerous over time, that could result in increased costs.
- State and federal legislation and regulatory initiatives relating to our disposal operations and seismicity could harm our business.

# **Risks Related to Personnel and Related Parties**

- Our industry typically experiences a high rate of employee turnover.
- Transactions with related parties present possible conflicts of interest.

5

• Potential vaccine mandates and other governmental regulations relating to the ongoing COVID-19 pandemic could have a material adverse impact on our business, operations, and results of operations.

# Risks Related to Our Capital Structure

- If we fail to maintain and enhance an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud.
- We may incur indebtedness or issue additional equity securities to execute our long-term growth strategy.
- Our Sustainability-Linked Credit Facility subjects us to various financial and other restrictive covenants.
- Future sales or issuances of our equity securities may depress our share price or dilute your ownership.
- Provisions in our governing documents and Delaware law may discourage takeover attempts.
- SES Legacy Holdings, LLC (“Legacy Owner Holdco”) controls a significant percentage of our voting power.
- Our amended and restated certificate of incorporation may limit certain corporate opportunities.
- Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings.

# Risks Related to Our Organizational Structure

- We are a holding company and our sole material asset consists of common units (“SES Holdings LLC Units”) in SES Holdings, LLC (“SES Holdings”), which we are dependent upon for distributions and payments.
- We are party to two tax receivable agreements (the “Tax Receivable Agreements”) that require payments for certain tax benefits, and such payment amounts could be significant.
- In certain cases, payments under the Tax Receivable Agreements may be accelerated and/or significantly exceed the actual benefits.
- If SES Holdings were to become a publicly-traded partnership taxable as a corporation for U.S. federal income tax purposes, we could experience tax inefficiencies.
- Legacy Owner Holdco and existing and former owners of outstanding membership interests in SES Holdings prior to the December 2016 private placement of 16,100,000 shares of our Class A-1 common stock at $20.00 per share (the “Select 144A Offering”) and the related reorganization (“Legacy Owners”) may have interests that conflict with the interests of holders of the Class A common stock.
- Our ability to use certain of our current and future net operating loss carryforwards (“NOLs”) may be limited and could adversely affect our operating results and cash flows.

# General Risks

- We may not be able to finance future growth of our operations or future acquisitions.
- The growth of our business through acquisitions may expose us to various risks.
- Our success depends on key members of our management.
- We may be required to take write-downs of the carrying values of our long-lived assets and finite-lived intangible assets.

# ITEM 1. BUSINESS

Select Energy Services, Inc. and its consolidated subsidiaries (collectively referred to as “Select,” the “Company,” “we,” “us,” or “our”) is a leading provider of comprehensive water-management and chemical solutions to the oil and gas industry in the U.S. As a leader in the water solutions industry, we place the utmost importance on safe, environmentally responsible management of oilfield water throughout the lifecycle of a well. Additionally, we believe that responsibly managing water resources through our operations to help conserve and protect the environment in the communities in which we operate is paramount to our continued success.

With a footprint across every major unconventional basin in the U.S., we operate through three primary segments: Water Services, Water Infrastructure and Oilfield Chemicals.

6

Our Water Services segment, which contributed approximately 58% of our 2022 revenue and 52% of our 2021 revenue, provides the complex services needed to support new well completions as well as ongoing production over the life of the well, including water transfer, flowback and well testing, water containment, fluids hauling, water monitoring and water network automation, as well as various on-site rental equipment and accommodation offerings. Through our patented WaterONETM automation services and our proprietary AquaView® software platform, our Water Services segment provides extensive technology solutions that enable 24/7 monitoring and visibility for our customers into all of their water-related operations, including hydrographic mapping, water volume and quality monitoring, remote pit and tank monitoring, leak detection, asset and fuel tracking and automated-equipment services. We believe these technologies help our customers lower their operating costs, improve well productivity, increase safety, reduce the risk of spills and reduce the environmental footprint of their operations.

Our Water Infrastructure segment, which contributed approximately 19% of both our 2022 and 2021 revenue, develops, builds and operates semi-permanent and permanent infrastructure solutions to support both new oil and gas well development as well as ongoing production activity, including water sourcing, recycling and disposal of flowback and produced water as well as the associated logistics. As our customers transition from appraisal to full-field development, our fixed infrastructure offerings can provide environmental benefits by reducing the demand for water hauling by truck as well as economies of scale that help reduce their capital expenditures and lease operating expenses over the life of the field. Water Infrastructure operations provide for both the delivery of and the takeaway and reuse of water enabled by a network of water sources, permanent pipeline infrastructure, semi-permanent pipeline infrastructure, fixed and mobile treatment and recycling facilities, earthen pits and saltwater disposal wells (“SWDs”). We are actively building recycling facilities across multiple regions, and will continue to focus on recycling opportunities in all of the areas that we operate. We view produced water as an alternative, sustainable non-potable water source that is naturally generated from sources below the water table in the course of oil and/or gas production. Additionally, through recycling, we strive to reduce the portion of produced water being reinjected into SWDs over time, while also reducing the industry’s need for fresh water.

Our Oilfield Chemicals segment, which contributed approximately 23% of our 2022 revenue and 28% of our 2021 revenue, develops, manufactures, manages logistics and provides a full suite of chemicals used in hydraulic fracturing, stimulation, cementing, pipelines and well completions. Our completion chemicals are sold primarily to leading integrated and independent E&P companies and pressure-pumping service companies in the U.S. to support well stimulation and completion. We also provide customized water treatment and flow assurance solutions across the completion and production lifecycle. Additionally, through our FluidMatchTM solutions, we provide comprehensive testing and analysis of our customers’ application conditions, product chemistry and key performance requirements for oil and gas well completion fluid-system design. This process may include water profiling, application and fluid assessment, treatment assessment, product selection, optimization and customization.

## Industry and Company Overview

Over the past two decades, advancements in horizontal drilling and completions technologies have led to significant and sustained growth in oil and natural gas production in the U.S. Advances in drilling and completion technology have propelled U.S. shale-oil production from about 500,000 barrels per day in 2010 to more than eight million barrels per day currently. While U.S. shale oil production temporarily declined from the previous peak levels seen before the COVID-19 pandemic, it increased over the course of 2022 to approximately pre-pandemic peak levels, accounting for approximately 10% of the total global oil supply. Additionally, U.S. shale gas production has increased from about 15 billion cubic feet per day in 2010 to about 80 billion cubic feet per day currently, or nearly 20% of global supply. This growth has dramatically impacted fundamental global supply and demand dynamics and has resulted in a generally balanced to over-supplied market in recent years. While demand for oil and natural gas has generally increased over the last twelve years, demand is cyclical and subject to many factors. Over the course of 2020, the market was significantly impacted by demand declines driven by the economic disruption resulting from the COVID-19 pandemic, which greatly abated in 2021 and into 2022. Demand for our services is largely influenced by the level of drilling and completion activity by E&P companies, which in turn depends largely on the current and anticipated profitability of developing oil and natural gas reserves.

Water is essential to the development and completion of unconventional oil and gas wells, where producers rely on hydraulic fracturing to stimulate the production of oil and gas from subsurface rock formations with low

7

permeability. The modern hydraulic fracturing process involves the injection of large volumes of water and proppant (typically sand) together with chemicals, under high pressure, through a cased and cemented wellbore into targeted subsurface formations thousands of feet below ground to fracture the surrounding rock. Modern hydraulic fracturing involves complex, engineered solutions to produce oil and gas from tight geological formations in a cost effective manner.

The volume of water required to economically produce tight oil and gas reserves in the U.S. has grown in recent years and water and water-related services comprise a meaningful portion of our customers' drilling and completion budgets. For example, in 2010, the completion of a typical horizontal well could require roughly 75,000 barrels of water, but today, current horizontal well completion designs can call for in excess of 750,000 barrels for a single well. Our customers' current multi-well pad development plans can require in excess of five million barrels to complete all of the wells on the pad. Significant mechanical, logistical, environmental and safety issues related to the sourcing, transfer, storage and treatment of such large volumes of water have increased both the total cost of water and related services and the complexity and importance of the services required. This trend has shifted many of our customers' operational focus away from traditional small, local water service providers, to larger regional and national players like us, who have the expertise, technology and scale to provide high-quality, reliable, comprehensive and environmentally responsible water-management solutions for the full extent of the water lifecycle.

These logistical challenges are typically met through a combination of temporary and permanent solutions utilizing pipe and hose infrastructure to deliver water across the broad geographic areas in which we operate. These logistical solutions significantly reduce the cost and environmental footprint compared to legacy solutions such as tank truck and frac tank operations. For a single representative multi-well pad that requires five million barrels of water, we can utilize our pipe and hose infrastructure solutions and eliminate the approximate equivalent of 38,500 tank truck loads from the roads. This significantly reduces the capital and operating expenditure costs for our customers while dramatically improving the safety of our operations. Importantly, these solutions also reduce the environmental impact of our customers' operations by limiting spills and diesel exhaust emissions, as well as reducing the social impact of heavy vehicle traffic in the communities in which we operate.

We also develop and source completion chemicals that are a key part of the U.S. energy industry. Completion chemicals are blended with water to improve the transport and placement of proppant in targeted zones within the producing geological formations. The induced fractures near the wellbore allow hydrocarbons to flow into the wellbore for extraction. Our team of chemists and research and development personnel work directly with our customers to support the optimization of their fracturing fluid systems through our FluidMatchTM solutions. Through laboratory and application experience, we apply our expertise in chemistry to develop, manufacture and supply a wide range of specialized and customizable products to our customers for their well completion fluid systems.

Up to fifty percent of the water pumped into the well during the hydraulic fracturing process returns as 'flowback' during the first several weeks following the well completion process, and a large percentage of the remainder, plus naturally occurring water in the producing formation, is recovered as produced water over the life of the well. The total volumes of flowback and produced water are even greater than the volumes used for new well completions-by some estimates, the U.S. oil and gas industry today produces over 22 billion barrels of water per year and this volume is likely to grow. This flowback and produced water must be captured, contained and then either treated and recycled for reuse in subsequent fracturing jobs or disposed of in an environmentally-responsible manner. We provide services that support the operator's management of flowback and produced water for either reuse or disposal. Additionally, our customized chemical treatment programs help improve well productivity and reduce production costs, thereby extending the economic life of our customers' oil and gas wells.

As produced water volumes have significantly grown in recent years, logistical advancements similar to those seen in the delivery of source water volumes for new well completions have been developed for managing these produced water volumes. Increasingly, the transportation of these produced water volumes has shifted away from traditional tank truck operations and onto gathering pipeline infrastructure for disposal or recycling and reuse. This significantly reduces the lease operating costs for our customers over the life of a well, while also reducing the environmental impact of our customers' operations by limiting diesel exhaust emissions and reducing truck traffic in our local communities.

8

We believe that sustainable water and chemical solutions are critical to the ongoing energy transition and will lead to a new era of growth for Select. As water is vital to the health, economic, and social well-being of our communities, our goal is to develop sustainable water solutions with a shared commitment to conservation. We have a dedicated team of specialists developing and deploying innovative water treatment and reuse solutions for our customers. We believe the opportunity to repurpose produced water for reuse in new well completions instead of using fresh water creates new sustainable water sources from previously inaccessible underground water resources. This also includes, over the long-term, the potential for repurposing produced water for new beneficial uses outside of the oil and gas industry instead of disposing of it, ultimately contributing positively back to the total water cycle.

Ultimately, our customers are required to manage more than 22 billion barrels of produced water annually, and we are focused on how we can create the most beneficial resource out of what has historically been viewed solely as a waste stream. We believe the industry will increasingly turn to specialized water solutions companies like us to help cost-effectively manage produced water in an environmentally responsible manner. Select intends to play an important role in the advancement of water and chemical solutions that are designed to meet the sustainability goals of all stakeholders.

## Recent Developments

The recent completion of seven business combinations, an asset acquisition and the buyout of noncontrolling interests in a recycling system joint venture has strengthened our financial results for the year ended December 31, 2022, as well as our competitive positioning in the water solutions market. These acquisitions enhanced our geographic footprint and significantly expanded the capacity and reach of sustainable recycling solutions.

While the ongoing effects of the COVID-19 pandemic on our operations have decreased recently, this pandemic has had a material negative impact on our financial results. Some impacts related to the COVID-19 pandemic, such as increased inflation and supply chain constraints, have resulted in rising interest rates and cost of capital, which in turn increase the risk of economic stagnation or an economic recession. While we have seen economic recovery and higher oil prices through the year ended December 31, 2022, such negative impact may continue well beyond the containment of the pandemic until global gross domestic product (“GDP”) levels, associated oil demand and resulting oilfield activity fully rebound. While we have seen oilfield activity improve considerably and global inventories rapidly normalize with continued demand growth since the low point experienced in 2020, significant uncertainty remains. Even with this recent recovery however, we cannot provide assurance that our assumptions used to estimate our future financial results will be correct, given the unpredictable nature of the current market environment after the recent elevated volatility in demand for oil and demand for our services. As a consequence, our ability to accurately forecast our activity and profitability is uncertain.

In February 2022, Russia launched a large-scale invasion of Ukraine that has led to significant armed hostilities. As a result, the U.S., the United Kingdom, the member states of the European Union and other public and private actors have levied severe sanctions on Russian financial institutions, businesses and individuals. This conflict, and the resulting sanctions and concerns regarding global energy security, has contributed to increases and volatility in the prices for oil and natural gas. Such volatility may lead to a more difficult investing and planning environment for us and our customers. While the near-term impact of these events has resulted in higher oil and gas prices, the ultimate geopolitical and macroeconomic consequences of this invasion and associated sanctions cannot be predicted, and such events, or any further hostilities in Ukraine or elsewhere, could severely impact the world economy and may adversely affect our financial condition. An end to the Russia-Ukraine conflict and an easing or elimination of the related sanctions against Russia could result in a significant fall in commodity prices as Russian hydrocarbons become more readily accessible on global markets, which could have an adverse effect on our customers and therefore adversely affect our customers’ demand for our services.

9

# Sustainability

Select is committed to developing a corporate strategy that supports the long-term viability of our business model in a manner that focuses on our people, our customers, the environment, and the communities in which we operate. We believe this focus will help us and our customers achieve their short-term and long-term environmental, social and governance (“ESG”) goals, help us attract and retain top talent, and further our efforts to generate investor returns. We believe our commitment to foster a culture of corporate responsibility is an important part of being a company with operations spanning the contiguous U.S. Further, we believe being a good corporate steward is strategic to our growth in the energy industry and will better allow us to develop solutions that both address the needs of our customers and contribute to sustainable business practices. We have identified the following four priorities as part of our comprehensive corporate responsibility initiative: Environmental Consciousness, Health and Safety, Human Capital Management and Community Outreach. As a service company, we compete with other service providers based on various factors, including safety and operational performance, technological innovation, process efficiencies and reputational awareness. We believe there is a strong link between these corporate responsibility initiatives and our ability to provide value to our stakeholders.

We are one of the few public companies whose primary focus is on the management of water and water logistics in the energy industry with a focus on driving efficient, environmentally responsible and economic solutions that lower costs throughout the lifecycle of the well. We believe water is a valuable resource and understand that the energy industry as well as other industries and the general public are competing for this resource. As a company, we continue to provide access to water as demanded by our customers and have significantly increased our focus on the recycling and reuse of produced water, as well as industrial water sources, to meet the industry’s water demand and align our operations with the goals of our customers. We have invested significantly in recent quarters in the development and acquisition of fixed and mobile recycling facilities that support the advancement of commercialized produced water reuse solutions. By doing so, we strive to reduce the amount of produced water being reinjected into SWDs and to reduce our usage of fresh water. We view our rather unique position as an opportunity to strategically transform water management by leveraging our Oilfield Chemicals business to develop produced water management solutions that increase our customers’ ability to reuse this produced water and add value to their operations. By implementing our innovative approach to water solutions, Select has become a leader in recycling produced water to be used in well completions. See Part I, Item 1. “Business - Competitive Strengths” and “-Description of Business Segments” for more discussion on our operating capabilities and expertise around advancing sustainable water and chemical solutions.

Our strong company culture includes commitments to all stakeholders, and we aim to create a work environment that fosters a diverse and inclusive company culture. Additionally, we prioritize safety in our operations through rigorous training, structured protocols and ongoing automation of our operations. Our prioritization of safety includes a commitment to safeguarding the communities in which we operate. See Part I, Item 1. “Business-Human Capital” and Part I, Item 1. “Business-Environmental and Occupational Safety and Health Matters” for more discussion on our efforts on safety, training, diversity and other stakeholder engagement.

We believe that proper alignment of our management and our board of directors with our shareholders is critical to creating long-term value, including the alignment of management compensation and incentive structures and the establishment of an experienced, diverse and independent board of directors. See Part III, Item 10. “Directors, Executive Officers and Corporate Governance” and Part III, Item 11 “Executive Compensation” for additional discussion on our governance and compensation structures.

# Human Capital

We consider our employees vital to our success and are focused on attracting, developing and retaining the most qualified employees at all levels of our business. In particular, the quality of our customer service depends significantly on employee satisfaction and retention. We strive to create a productive and collaborative work environment for our employees.

10

As of December 31, 2022, we had more than 4,000 employees and we believe we have good relations with our employees.

To attract talent and meet the needs of our employees, we offer a competitive benefits package for regular, full-time employees including health benefits such as medical, dental and vision, welfare benefits such as life and accident insurance, an employee assistance program, and a qualified defined contribution plan to all eligible employees. We also provide our employees with resources for professional development including training, feedback and performance reviews from supervisors. Our human capital measures and objectives focus on several areas including, but not limited to, safety of our employees, human rights and social responsibility, diversity initiatives, culture, COVID-19, employee development and training, and operational execution.

- Safety: Select maintains a culture of safety, committed to the protection of the health and safety of our employees as well as preserving the environment and our relationships with the communities in which we operate. We place a strong emphasis on the safe execution of our operations, including safety training for our employees and the development of a variety of safety programs designed to make us a market leader in safety standards and performance. We have a comprehensive approach to formulating and managing training requirements for all of Select’s operational employees. This includes mandatory participation in monthly, quarterly, and annual environmental, health and safety meetings, a combination of live in-person training and computer-based training tailored to specific job-duties and operational activities, and comprehensive safety reference material. In addition, our safety recognition program incentivizes employees throughout our organization to focus on conducting operations in accordance with our strict safety standards. Further, we work closely with federal, state, local and tribal governments and community organizations to help ensure that our operations comply with legal requirements and community standards. Lastly, when our employees identify a heightened safety risk, we respond quickly to mitigate the risk through communication, coordination and, if appropriate, a change in policy, procedures and training. We believe that our customers select their operational partners based in part on the quality of their safety and compliance records, and therefore, we will continue to make investments to be a market leader in this area. Select also empowers operational personnel with stop-work authority (“SWA”) as a tool for helping ensure safety. Our SWA policy empowers our employees to stop work whenever they identify unsafe work conditions. When SWA is employed, operations cease until the risk is addressed and both the employee and management agree that it is safe to resume work.
- Human Rights: Select is committed to conducting business in a manner that respects all human rights. Select is committed to promoting and encouraging respect for people and fundamental freedoms for all without distinctions of any kind such as race, color, sex, language, religion, or political or other opinions. We are committed to partnering with personnel, business parties and other stakeholders directly linked to our operations that share our commitment to these same principles. We demonstrate this commitment in our employment practices, including through our Code of Conduct, our Equal Employment Opportunity Employer Policy, and our Anti-Harassment Policy, as well as through our policies on safety and security for our employees. Additionally, our human resource department tracks and reviews metrics on the sex, age, and ethnicity of our employees to help ensure that current employees and prospective employees are treated fairly. Select provides several ways for individuals to raise concerns anonymously, including the 24-hour Employee Hotline, Whistleblower Hotline and Environmental Health & Safety Hotline, which promotes quick and confidential remediation without fear of retaliation.
- Diversity Initiatives: Select recognizes the many benefits of having a diverse workforce. Diversity impacts all stages of employment, from making it easier to attract and retain top talent, to better performance among diverse teams, to the greater innovation and creativity that comes from a workforce comprised of different backgrounds and experiences. In fact, over 45% of our workforce is comprised of ethnic minorities. Additionally, 12% of our overall workforce is female and 50% of our workforce is comprised of individuals over the age of forty. Select provides employee resources such as handbooks, procedures, and training in more than one language and continually looks for ways to be more inclusive and tap into the talent of our diverse workforce.
- Culture: We believe company culture is an integral part of business that affects recruitment, job satisfaction, work performance and morale and begins with our mission, vision and core values. Our Company introduced new core values (Accountability, Continuous Improvement and Teamwork or “ACT”) with a renewed focus on how we ACT to be successful employees and build a great company that provides innovative solutions to our customers. Every day our employees put our core values into action to improve operational excellence, safety,

11

and the customer experience. These core values are helping to align our efforts to accomplish our vision to be the recognized leader and trusted partner in sustainable water management solutions. Through a series of employee-centric videos called “This is How We ACT,” we demonstrate an inclusive and dynamic team all working towards the same goal.

- COVID-19: To protect Select’s workforce during the COVID-19 pandemic, we have taken steps to support our people who are affected by the disease, manage work-from-home scheduling as appropriate, and continue to provide additional personal protective equipment where needed. We empaneled a COVID-19 task force and created a COVID-19 rules of engagement instructional job aid consistent with CDC recommendations that provides a reporting mechanism along with guidance on facemasks, social distancing, personal hygiene, engineering controls, administrative controls, and specific rules for facilities and vehicles.
- Employee Development: Select encourages managers and supervisors at all levels to have frequent, open and constructive dialogue with their direct reports about job performance continuous performance improvement and development. In addition, managers and employees are directed to connect and conduct one-on-one conversations twice a year on employee well-being, performance, development and growth opportunities utilizing a formal feedback program. Employees answer four simple questions relating to their recent performance (successes and challenges) and development. As part of this conversation, our core values play an important part in communicating expected behaviors and how we expect each of us to ACT. With these and related practices, we strive for a culture of open dialogue and commitment to development. During 2021, we had a mid-year completion percentage of 78% and an end of year completion percentage of 73%. In order to better equip our managers to conduct meaningful conversations, we had training for both mid-year and year-end conversations. Select focused on the continuous improvement of our managers and supervisors by offering a series of trainings to better their understanding of company policies and how to better support our employees. Training sessions were led by multiple departments such as the Department of Transportation (“DOT”), Safety and Human Resources. We noticed a marked increase in manager participation in 2021 over 2020 training sessions. We began the development of a National Awareness Calendar and subsequent employee communication in mid-2021 with the purpose of increasing employee awareness on important employee-related topics such as Mental Health Awareness, Military Appreciation and National Diabetes Awareness, an effort that we have continued throughout 2022 and expect to continue going forward.
- Operational Execution: It is critical that all Select employees that serve our customers are qualified and trained for their roles, understand our policies and work procedures, and receive the work direction necessary to operate safely. Site managers create daily, weekly and monthly plans for coordination of tasks and personnel. Our employees use standard operating procedures and best practices to standardize effective and consistent execution. Further, we employ a comprehensive mentor program, where more experienced employees provide guidance and instruction to less experienced employees and use videos to train and develop our operational personnel.

## Competitive Strengths

We believe our ability to integrate the complexities of our water and chemical-related services through both temporary, customized services and longer-term solutions that include investments in sustainable infrastructure gives us a competitive advantage and is the foundation of our business. We believe our comprehensive suite of sustainable water and chemical solutions, inventory of water sources, advanced technology and recycling capabilities, and permanent and semi-permanent pipeline infrastructure position us to be a leading provider of water and chemical solutions in all of the geographic basins that we serve. We have well-established field operations in what we believe to be core areas of many of the most active shale plays, basins and regions in the U.S., including the Permian, Bakken, Eagle Ford, Haynesville, Marcellus, Utica, Rockies and Mid-Continent (“MidCon”) regions. Our broad geographic footprint enables us to service the majority of current domestic unconventional drilling and completion activity. We estimate that approximately 85% of all currently active U.S. onshore horizontal rigs are operating in our primary service areas. We believe that the vast majority of rigs that will be deployed in the near- to medium-term will be situated in these areas. In particular, we have established a strong position in the Permian Basin, which is presently our largest operating region, accounting for approximately 47% of our revenue in 2022 and 49% of our revenue in 2021.

Our Water Services segment focuses on supplying the services and customized, job-specific solutions needed as our customers’ activities move from location to location across the geographic footprint of their acreage over time.

12

These services include the transportation, logistics and storage solutions needed to support the delivery of water to the wellsite for new well completions, the flowback and well testing services needed to manage the initial production phases of the well and the logistics services needed to manage the long-term produced water volumes associated with oil and gas production over the life of the well. We believe we are a market leader in providing comprehensive water-related services to the industry and we have dedicated significant resources to developing technology solutions to manage the increasingly complex needs of our customers throughout the water lifecycle.

We have invested significantly in our patented WaterONETM and AquaView® suite of proprietary hardware and software applications for measuring, monitoring and automating our water services throughout the well lifecycle. Our suite of automated solutions include automated water transfer pumps, automated manifolds, automated proportioning systems and telemetry meter trailers. WaterONETM provides true automation to gather, analyze and act on data in real-time - all without human intervention - giving operators the ability to remotely set and maintain or improve the operational control of their frac and produced water-related requirements. When our monitoring systems detect that certain defined thresholds set by our customers are out of desired range, our equipment sends out an alert and then, through dynamic machine learning, takes action to keep operations running safely and smoothly. This can include actions such as raising a pump’s RPM to maintain desired flow rates, adjusting valves in a proportioning system to maintain the desired water quality in real time while blending fresh, brackish, produced or otherwise impaired water sources or shutting down the system and valves completely in the event of a detected failure. In addition to reducing the risk of spills and injuries, our automated operations increase efficiency across the water transfer supply chain, reducing the risk of pressure spikes and increasing associated fuel efficiency, thereby significantly reducing overall fuel emissions. Our automation capabilities provide a safer, more efficient and cost-effective transfer, treatment and containment of produced or otherwise impaired water sources.

Within our AquaView® monitoring software systems, our solar-powered cellular and satellite-based remote-monitoring telemetry systems give our customers the ability to gain precise and accurate volumetric analyses of water sources and provide real-time data to our customers that is accessible 24/7 via computer, smart phone or tablet. Our Hydrographic Mapping Vessels (“HMVs”) use sonar, satellite, and compass technology to provide precise volumetric analyses of water sources. The HMVs are rapidly deployed, durable enough to handle flowback pits, and can navigate through tight spaces in natural ponds. Additionally, our AquaView® sensors give timely information about pH levels, water quality, temperature and flow rate to assure there is sufficient water at the right quality levels required by our customers and provide alarm notifications to prevent problems during the well completion. We believe that our investments in technology provide a significant competitive advantage for us relative to our smaller, regionally-focused competitors by delivering more reliable, efficient, and environmentally responsible solutions, often at a lower overall cost.

Our Water Infrastructure segment develops water sources, recycling infrastructure and the associated semi-permanent and permanent pipeline infrastructure to both meet our customers’ needs for source water for new well completions as well as their requirements for the gathering of flowback and produced water for either recycling for reuse or disposal. We believe that investments in infrastructure such as commercialized recycling facilities or disposal wells that serve multiple customers, when underwritten by longer-term contracts, lowers the cost of production for our customers, while reducing the overall environmental footprint and impact on the local communities. Additionally, the development of water pipeline infrastructure networks to serve multiple customers can improve the economics of non-potable water sourcing, including produced water recycling and therefore reduce the demand for fresh water required in oil and gas operations while also reducing required disposal volumes.

To meet the water demands of our customers, we have secured access to significant volumes of water in key unconventional development areas. Water sources are often difficult to locate, acquire and permit, particularly in the quantities and at the locations needed for multi-well pad development programs. We have secured permits or long-term access rights to more than two billion barrels of water annually from hundreds of sources, including surface, subsurface, municipal and industrial sources, including brackish water, produced water and effluent. We have also invested in significant pipeline infrastructure to support the delivery of water from our water sources, consisting of approximately 3,000 miles of both above-ground and buried infrastructure, including key systems in the Delaware Basin in New Mexico and Texas, the Bakken shale in the Williston Basin in North Dakota and the Haynesville Shale in Texas and Louisiana. We continue to focus our efforts on the development of non-potable sources as well as the infrastructure and

13

solutions required for the treatment, recycling and reuse of produced water. We have developed and maintained extensive relationships with landowners as well as local, state, tribal and federal authorities to ensure that we can sustainably meet both the economic and operational needs of our customers while responding to the concerns of the local communities in which we operate. We believe that our extensive relationships and regulatory expertise will continue to constitute a competitive advantage in identifying and developing additional sources of water, including recycled volumes of produced water, in a responsible and sustainable manner.

Water is vital to the health, economic, and social well-being of the communities where we live and work. In support of industry-wide efforts to reduce the demand for fresh water for hydraulic fracturing, we have a dedicated team of specialists focused on developing and deploying innovative water treatment and reuse services for our customers. We strive to fully understand local water issues, and to develop sustainable solutions with a commitment to conservation. Working collaboratively with our customers, we are actively operating and developing fixed recycling facilities in the Delaware and Midland basins, as well as in the Rockies region, and will continue to focus on evaluating new fixed recycling facilities and deploying mobile recycling technologies in all of the areas that we operate. Longer term, we believe our focus on commercialized solutions that connect multiple operators to strategic infrastructure that provides for greater use of treated produced water for new well completions will reduce the use of fresh water for hydraulic fracturing. By doing so, we also strive to both reduce the industry’s need for fresh water and reduce the portion of produced water being reinjected into SWDs, particularly in areas with active seismicity concerns.

We believe that greater use of produced water to reduce fresh water consumption will require collaboration with all stakeholders as we together develop water infrastructure networks to meet the needs of multiple operators. In addition to investing in pipelines and related infrastructure, Select offers mechanical and chemical solutions for treatment of produced water, and other non-potable water sources customized for our E&P customers’ complex fracturing fluid systems. We believe our expertise in utilizing chemical technologies in the water reclamation and conditioning process, combined with our chemical expertise in fracturing fluid system design, gives us a competitive advantage. For example, we offer a wide spectrum of bacterial control, aeration, proportioning and recycling technologies to condition source water or reuse flowback and produced water for hydraulic fracturing.

Additionally, we invest in gathering infrastructure to collect produced water, and we actively operate produced water disposal facilities in major U.S. shale plays with a permitted capacity of approximately 1.0 million barrels/day (“bbl/d”) with an additional 0.9 million bbl/d of permitted capacity available for development to support the disposal of produced water that cannot be recycled and reused for new well completions. This disposal capacity is critical to support recycling and reuse capabilities, as it provides an alternative outlet during times when limited completions activity in an area may not support additional water reuse demand.

In short, Select intends to play an important role in the advancement of sustainable water solutions that are designed to align the needs of the oil and gas industry with the sustainability goals of all stakeholders.

Our Oilfield Chemicals segment, develops, manufactures, manages logistics and delivers a full suite of completion chemical products utilized in hydraulic fracturing, stimulation, cementing and related well completion and production processes. Our Chemical Technologies product lines support the fluid systems utilized primarily in the completion and development of unconventional resources. These products include polymers that create viscosity, crosslinkers, friction reducers, surfactants, buffers, breakers and other specialty chemical technologies, and are provided to leading E&P operators and pressure pumping service companies in the U.S. The use of automated monitoring systems combined with direct-to-wellsite delivery ensures seamless product availability for our customers, while our chemical expertise enables us to deliver a customized suite of products to meet customers’ technical, economic and environmental product needs.

With our wide range of manufactured proprietary products and our expertise in completion chemistry, we believe we are well positioned to support our customers as completion chemistry evolves in the coming years in response to changes in technology and the evolution of completion water fluid systems. In addition to our chemical product offerings, we provide inventory management services, including procurement, warehousing and delivery services as well as a full suite of laboratory technologies and FluidMatchTM consultation services, including water analysis, quality control and assurance, additive compatibility analysis, solids analysis and stimulation

14

recommendations. We have two primary manufacturing facilities, one each in west Texas and east Texas, regional distribution centers and a logistics fleet supporting geographic regions in the Permian, MidCon, Bakken, Eagle Ford, Haynesville and Rockies. We introduced the first in-basin manufacturing facility of emulsion polymers (friction reducers) in our industry, strategically located in the Permian Basin, which provides the advantage of reducing our overall transportation costs of delivering finished goods to our customers locally within the basin.

We also provide advanced water treatment solutions throughout the water lifecycle, as well as specialized stimulation flow assurance and integrity management, and post-treatment monitoring services. We deliver customized programs using proven chemical technologies and mobile equipment to treat virtually any oilfield water for reuse. Following our treatment applications, fluid samples are analyzed again to ensure the treatment is optimized to reduce overall chemical investment. We provide disinfection treatment with a smaller environmental footprint, lower power costs and manpower needs than alternative solutions resulting in a reduced emissions profile. Our expertise allows us to advise our customers on the best economic and operational solutions to optimally manage their water quality and chemical solutions needs across water qualities and well completion fluid systems.

As mentioned under “-Human Capital” above, we maintain a culture focused on safety. With more than 4,000 employees and operations spanning the U.S., we believe our commitment to foster a culture of safety and corporate responsibility is essential. Our employee base is made up of dedicated operational and technical professionals, including many with advanced degrees, professional licenses and project development experience, and diverse backgrounds in geology, geography, land management, petroleum, chemical and electrical engineering, computer science, environmental science, geographic information systems and legal and regulatory affairs. In addition, we emphasize preserving the environment and building relationships with the communities in which we operate. We work closely with federal, state, local and tribal governments and community organizations to help ensure that our operations comply with legal requirements, community standards and industry best practices. Further, we believe being a good corporate steward is strategic to our leadership in the water solutions industry, and will better allow us to develop solutions that both address the needs of our customers and contribute to sustainable business practices. Our solutions significantly decrease the quantity of trucks on the road, thereby reducing fuel use and emissions and limiting the traffic footprint in the communities in which we operate. We believe that our customers will select their service providers based in part on the quality of their safety and compliance records and their ability to support their long-term ESG goals and therefore, we will continue to make investments to be a market leader in these areas.

## Description of Business Segments

We offer our services through the following three reportable segments: (i) Water Services, (ii) Water Infrastructure and (iii) Oilfield Chemicals.

### Water Services Segment

Our Water Services segment consists of our services businesses, including water transfer, flowback and well testing, fluids hauling, water monitoring, water containment and water network automation, primarily serving E&P companies. Additionally, this segment includes the operations of our accommodations and rentals business.

- Water Transfer. We believe we are the largest provider of water transfer services to the industry. Our Water Transfer service line installs temporary above-ground pipeline systems that can be equipped with full automation to deliver water autonomously at high volumes and rates from a water source to water containment facilities (tanks and pits), or directly to the wellsite.

We install layflat hose as part of a flexible water transfer solution that can be customized to fit a specific project. Our layflat hose allows for quick, cost-effective deployment and removal of transfer assets with limited environmental disturbance and can be quickly redeployed for new projects, including projects in different geographic regions. Layflat hose has a significantly lower risk of spills than most other types of temporary jointed pipe as a result of the strength and durability of the hose as well as the secure nature of any coupling joints used to connect multiple sections of hose. Our layflat hose consists primarily of 12-inch

15

and 10-inch diameter segments, powered by mobile pumps. Historically, this equipment has been powered by diesel; however, we are actively developing and deploying electric pumping units which should decrease emissions and further reduce the environmental impact of our operations. Depending on the requirements of a project, layflat hose may run from a water source directly to a containment area, such as an above-ground pit or storage tank, or to a wellsite. Water can also be transferred from one containment area to another as part of managing a larger supply network. Our customers generally prefer layflat hose to alternative temporary piping options due to the cost-effectiveness, limited environmental impact, customizability and reduced risk of spills.

○ Water Network Automation. Our proprietary and industry leading automation technologies provide integrated water transfer solutions with automated pump operation, automated valve control, automated blending and proportioning capabilities, automated manifolds, level monitoring and data collection with analytics. We are able to provide our customers with increased visibility into their water inventories and usage, improving their efficiency and decreasing their costs. Our technology also provides us with the unique ability to detect potential issues and prevent them from occurring, as well as to reduce manpower and equipment on certain jobs, in turn mitigating safety and environmental risks while reducing overall fuel emissions.

• Flowback and Well Testing. Our flowback and well testing services add value for our customers by providing well productivity data associated with our services, including fracturing support, fracturing plug drill out, flaring operations, ventless flowback operations, sand management and production testing. We believe we are one of the largest flowback and well testing providers to the U.S. land industry. We are a seasoned operator within Environmental Protection Agency (“EPA”) emissions regulations, offering green completions through our mobile production facilities. Our fleet of specialized portable combustors offers cleaner waste gas destruction and elimination, significantly reducing emissions, with an operational range from intermittent to 5mmcf/day without the need for an external power supply, further reducing the environmental impact.

Additionally, certain of our services utilize specialized, closed-loop vapor tanks that prevent the release of methane and vapors to the atmosphere during drill out and flowback operations. This collaborative process safely contains and combusts flare gas, reducing emissions at the wellsite. These solutions perform better than current EPA emissions regulations and therefore provide our customers with enhanced emissions reduction solutions to help meet their sustainability targets and initiatives. These services require highly-trained personnel that specialize in our cutting-edge technologies and equipment.

To support these specialized services, our in-house, state-of-the-art well testing training facility provides hands-on, field-simulated stimulation training with our equipment in a controlled environment, reducing the potential for training errors and related safety incidents. Our specialized well testing equipment is outfitted with pressure transducers, Coriolis meters, and guided wave radars for efficient and accurate testing. Our traditional well testing and hydraulic equipment is also deployable in an extensive range of operational conditions: high and low temperature, high and low pressure, high hydrogen sulfide concentration, and high volume.

• Fluids Hauling. We currently operate over one thousand tractor trailers and body load trucks and believe we are one of the largest providers of fluids hauling to the oil and gas industry. Our Fluids Hauling group, provides transportation for water and various drilling, completion, and production fluids, utilizing our fleet of vacuum, winch and kill trucks, hot oilers, and hydrovacs along with other related assets, such as mobile storage tanks. Our operations span the Permian, MidCon, Bakken, Eagle Ford, Marcellus/Utica, Haynesville, and Rockies regions.

• Water Monitoring. Our Water Monitoring services support the full scope of our Water Services offerings and include hydrographic mapping services, remote pit and tank monitoring, generator monitoring, leak detection and automation-equipment monitoring services, including automated transfer pumps, automated manifolds, automated blending and proportioning systems and telemetry meter trailers. These services

16

securely track water assets and measure information such as flow rates, temperature, pressure and water qualities such as pH and salinity, providing real-time data through our customized portals and alert systems which are accessible 24/7 via computer, smart phone or tablet.

- Water Containment. We provide a diverse set of primary and secondary containment solutions for the temporary storage and containment of water and fluids. We believe we are the largest provider of high-capacity aboveground water storage tanks (“ASTs”) in the U.S. We offer ASTs ranging in size from 4,500 to 80,000 barrels (or 189,000 to 3.4 million gallons) per tank, with remote monitoring capability in every major U.S. basin. Our ASTs provide a high-volume, low-cost containment alternative to traditional mobile storage tanks, which typically hold 500 barrels or 21,000 gallons. ASTs can also be set up as part of our Water Treatment & Recycling service offerings, which can be bundled with our Water Sourcing and Water Transfer services. A 40,000 barrel AST can be delivered by three trucks and installed in a single day, replacing the equivalent of 80 trucks delivering individual 500-barrel mobile storage tanks. This reduction in truck traffic provides a significant reduction in traffic congestion in local communities as well as the associated emissions from the transportation of those mobile storage tanks. Our modular tank design allows for twenty different tank configurations to meet each customer’s individual needs. We also offer assorted secondary containment solutions, from drive-over to raised barriers and multi-ringed nested AST solutions, that are designed to reduce the risk and environmental impact of potential spills.

- Accommodations and Rentals. Our accommodations and rentals service line provides workforce accommodations and surface rental equipment supporting drilling, completion and production operations in the U.S. onshore energy industry. The services provided include fully furnished office and living quarters, freshwater supply and wastewater removal, portable power generation and light plants, internet, phone, intercom, surveillance and monitoring services and other long-term rentals supporting field personnel. Further, our recent acquisition of the HB Rentals assets has bolstered our presence in multiple regions and added thousands of fixed asset units, including skid mounted housing units and trailer housing units giving us a market leading position in this service line.

# Water Services Geographic Areas of Operation

We provide our Water Services offerings in most of the major unconventional shale plays in the continental U.S., as illustrated by a “√” in the chart below.

| Services Provided | Geographic Region |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  | Permian | MidCon | Bakken | Eagle Ford | Marcellus / Utica | Haynesville | Rockies |
| Water Transfer | √ | √ | √ | √ | √ | √ | √ |
| Flowback and Well Testing | √ | √ | - | √ | √ | √ | √ |
| Fluids Hauling | √ | √ | √ | √ | √ | √ | √ |
| Water Monitoring | √ | √ | √ | √ | √ | √ | √ |
| Water Containment | √ | √ | √ | √ | √ | √ | √ |
| Accommodations and Rentals | √ | √ | - | √ | √ | √ | √ |

# Water Services Customers

Our Water Services customers primarily include major integrated and independent U.S. and international oil and gas producers.

17

# *Water Services Competition*

Our industry is highly competitive. Our customers typically award contracts after a competitive bidding process. Operational track record, the skill and competency of our people, pricing, safety, technology and environmental performance are key factors in the bid evaluation. Equipment availability, location, service breadth and technical specifications can also be significant considerations.

Certain large domestic and international oilfield services companies offer some water-oriented and environmental services, though these are generally ancillary to their core businesses. As a result, the water solutions industry is highly fragmented and our main competitors are typically smaller and often private service providers that focus on water solutions and logistical services across a narrow geographic area or service offering. We seek to differentiate ourselves from our competitors by delivering comprehensive, high-quality services and equipment, coupled with well-trained people and a commitment to sustainability, superior execution and a safe working environment.

# *Water Infrastructure Segment*

Our Water Infrastructure segment provides water sourcing, storage, recycling, gathering, transferring and disposal of water. Water Infrastructure operations are provided through or enabled by a network of permanent pipeline infrastructure, semi-permanent pipeline infrastructure, water recycling facilities, earthen pits, water sources and SWDs.

# Water Infrastructure Service Lines

Our Water Infrastructure segment is divided into the following service lines:

- *Water Sourcing.* Our Water Sourcing service line provides water, permitting and, in some instances, necessary logistics required by our E&P customers to support their drilling and completion operations. Our sourcing efforts include identifying, developing and obtaining the right to use water from a variety of sources, including surface, subsurface, industrial, municipal and produced water. Through a portfolio of contracts with and permits from regulatory bodies, corporations and individual landowners, we have secured rights in excess of two billion barrels of water annually from hundreds of strategically-located sources across the U.S.
- *Water Recycling & Reuse.* We believe we are one of the largest providers of water treatment and recycling to the energy industry. Our Water Recycling & Reuse business provides tailored solutions to fit specific customer water quality and delivery needs. We utilize both standard and proprietary processes and technology, including mechanical and chemical technologies, that provide high-quality, large volume throughput and cost-optimized recycling and reuse solutions for our E&P customers. These solutions are largely designed for the recycling and reuse of flowback and produced water from existing operations to meet a customer's well completion water needs. We provide our customers with high-quality completion water volumes while reducing the need to source fresh water as well as reducing the need for disposal into SWDs. Our recycling operations consist of temporary, semi-permanent and permanent infrastructure, including above-ground and in-ground containment along with treatment processing assets and facilities, capable of recycling large volumes of produced water for reuse in the hydraulic fracturing process.

Over the course of 2022, we continued to invest in developing produced water recycling infrastructure with multiple new facilities commencing operations in the Midland, Delaware and DJ Basins backed by long-term contracts, resulting in approximately 605,000 barrels per day of produced water recycling capacity, supported by approximately 150,000 barrels per day of mobile recycling capacity. These facilities are also supported by approximately 7.2 million barrels of storage capacity and miles of pipeline infrastructure for the gathering and delivery of produced water into and out of the facilities. Additionally, in 2022 as part of the Breakwater acquisition, we added four commercial recycling facilities, supported by a portfolio of long-term contracts, with 600,000 barrels per day of operational capacity. Breakwater has an incremental 1.4 million barrels

18

per day of permitted recycling capacity available for development across its four currently operating fixed facilities as well as a fifth facility location yet to be developed. Additionally, Breakwater currently operates nine active modular recycling facilities with 1.5 million barrels per day of throughput capacity. These facilities are supported by 46 miles of gathering and distribution pipelines, 70,000 barrels per day of wastewater disposal capacity and 4.7 million barrels of storage capacity, with an additional 3.7 million barrels of permitted storage capacity available for development. The combined operations result in a consolidated capacity of 2.8 million barrels of active produced water recycling capacity and 11.5 million barrels of produced water storage.

- *Pipelines & Logistics.* We have developed some of our larger, strategic water sources into comprehensive, permanent pipeline systems designed to provide water used for drilling, completion and production activity across a wide geography or to collect and redistribute produced water into our recycling and disposal facilities. In many instances, we also provide the associated storage and logistics needed to deliver the water directly to our customers' wellsites. We have developed or acquired pipeline systems in the Northern Delaware Basin of the Permian Basin in Texas and New Mexico, the MidCon, the Bakken in North Dakota, the Haynesville in Louisiana and the Rockies in Colorado.
  - *Permian:* We have significant Permian Basin infrastructure, primarily in the Northern Delaware Basin in New Mexico, but also in the Southern Delaware Basin and the Midland Basin in Texas. We have a vast array of brackish, effluent and industrial water sources and significant water transport infrastructure, including over 1,000 miles of temporary and permanent pipeline infrastructure and related storage facilities and pumps, throughout the Permian Basin. In 2019, we expanded our Northern Delaware Basin water infrastructure with the construction of a large diameter, 40-mile pipeline system that delivers drilling and completion water required by our customers in New Mexico's Lea and Eddy Counties, as well as provides the ability to transport produced water resulting from oil and gas production to recycling facilities or to disposal wells. This system expansion is supported by a multi-year take-or-pay contract with a major integrated oil company for the purchase and delivery of 75 million barrels of water in total, which commenced in 2019. In support of this growing Permian water infrastructure network, we also acquired storage infrastructure during 2021 from an existing customer to add storage capacity to our existing infrastructure footprint.
  - *MidCon:* During the first quarter of 2022, we signed a multi-year pipeline gathering and disposal agreement with a large independent operator in the MidCon region with a minimum volume commitment in exchange for a throughput pipeline capacity dedication to certain of our disposal facilities. Additionally, we signed an agreement with an additional operator to tie in its existing pipeline infrastructure to our MidCon facilities.
  - *Bakken:* We have three permits that enable us to withdraw up to 192 million barrels of water annually from the Missouri River and Lake Sakakawea in North Dakota. Water access cannot be easily replicated on Lake Sakakawea today as there are multiple environmental and regulatory conditions that must be met before an industrial water intake location can be built. New permits will also not be granted within 25 miles of an intake location associated with an existing permit. We have three of the five existing permits off Lake Sakakawea. To develop these water rights, we constructed, own and operate two large diameter pipeline systems that provide drilling and completion water to support oil and gas activity in McKenzie County, North Dakota. These two systems consist of pump stations and approximately 88 miles of underground pipe, of which we own 38 miles and have contractual rights to access the remaining 50 miles. In addition to our water distribution pipelines, we also have a number of produced water gathering pipelines in the Bakken region supporting our Fluid Disposal operations, including the assets we recently acquired from Cypress Environmental Services, LLC ("Cypress").

19

These pipelines are supported by multiple long-term customer contracts, including acreage dedications.

○ Haynesville: We own a 60-mile underground twin pipeline network in the Haynesville Shale for the collection of produced water for transport to interconnected disposal wells and the delivery or re-delivery of water from water sources to operator locations for use in well completion activities. More than 60% of our disposal volumes in the Haynesville are currently delivered via the pipeline network, with the ability to handle disposal volumes of more than 100,000 barrels per day.

○ Rockies: We signed a multi-year agreement with a large major integrated oil company in the Rockies with a dedicated pipeline from its property to our water treatment facility and adjacent saltwater disposal well. We will receive, treat and recycle water and have the ability to dispose of excess wastewater for this customer.

• Fluid Disposal. The acquisitions of Nuverra Environmental Solutions, Inc. (“Nuverra”), Cypress, Agua Libre Midstream, LLC (“Agua Libre”) and Complete significantly increased the number of active SWDs we own and operate. We currently operate a sizable portfolio of active SWDs across the Permian, MidCon, Bakken, South Texas, Rockies, Marcellus/Utica and Haynesville regions. We also have a significant amount of additional permitted, undeveloped disposal capacity as well as additional permits in process. In total, we have approximately 2.0 million barrels per day of daily permitted disposal capacity across the basins we operate. We dispose of both flowback water produced from well completion operations as well as naturally-occurring produced water that is extracted during the oil and natural gas production process. Volumes are transported to our SWDs for disposal by means of both owned and third-party gathering pipelines, as well as through owned and third-party fluid hauling trucks.

# Water Infrastructure Geographic Areas of Operation

We provide our Water Infrastructure offerings in most of the major unconventional shale plays in the continental U.S., as illustrated by a “√” in the chart below.

| Services Provided | Geographic Region |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  | Permian | MidCon | Bakken | Eagle Ford | Marcellus / Utica | Haynesville | Rockies |
| Water Sourcing . . . . . . . . . . . . . . . | √ | √ | √ | √ | √ | √ | √ |
| Water Recycling & Reuse . . . . . . | √ | - | - | √ | - | √ | √ |
| Pipelines & Logistics . . . . . . . . . . | √ | √ | √ | - | - | √ | √ |
| Fluid Disposal . . . . . . . . . . . . . . . . | √ | √ | √ | √ | √ | √ | √ |

# Water Infrastructure Customers

Our Water Infrastructure customers primarily include major integrated and independent U.S. and international oil and gas producers.

# Water Infrastructure Competition

Our industry is highly competitive. Our customers typically award contracts after a competitive bidding process. Track record, the skill and competency of our people, pricing, safety, the ability to move sufficient volumes at scale and environmental performance and location and are key factors in the bid evaluation. Equipment availability, location, and technical specifications can also be significant considerations. While a significant portion of our work is awarded on a short-term basis, we have a successful track record of utilizing our infrastructure to obtain various long-

20

term contracts such as areas-of-mutual-interest, acreage dedications, well bore dedications, minimum volume commitments and take-or-pay agreements.

Certain large midstream companies offer some water-oriented and infrastructure services, though these are generally ancillary to their core businesses of gathering and transporting oil and gas volumes. There are also public water-midstream focused competitors. Additionally, certain of our E&P customers have invested in water infrastructure for their own operations. As a result, the water infrastructure competitive landscape is highly fragmented and our main competitors, aside from E&P companies, can often be private water midstream companies and smaller water service providers that focus on a more limited geographic area or service offering. We seek to differentiate ourselves from our competitors through our expansive scale and by delivering high-quality solutions throughout the sourcing, recycling and disposal elements of the water lifecycle, coupled with extensive regulatory expertise, well-trained people and a commitment to superior execution and a safe working environment. Additionally, we believe our ability to couple our water infrastructure with our water services and oilfield chemicals expertise provides an advantage relative to our competition.

### Oilfield Chemicals Segment

Within our Oilfield Chemicals segment, we develop, manufacture, manage logistics and provide a full suite of completion chemical products utilized in hydraulic fracturing, stimulation, cementing and related well completion processes. We sell chemicals and provide services primarily to leading E&P operators and pressure-pumping service companies in the U.S. We also provide customized water treatment and flow assurance solutions to our customers throughout the lifecycle of a well.

### Oilfield Chemicals Service Lines

Our Oilfield Chemicals segment is made up of the following service lines:

- Chemical Manufacturing. We are a specialty manufacturer of polyacrylamides, surfactants, crosslinkers and other custom chemistries. Polyacrylamides, or friction reducers, are water soluble polymers that reduce friction and boost viscosity of the hydraulic fluid during application in energy production. We manufacture this reactive chemistry in Midland, Texas and Tyler, Texas with regional distribution facilities across the United States. Our in-basin manufacturing provides reduced lead times to decrease non-productive time on location for our customers with fully automated processes from raw materials to finished goods. We are among the largest manufacturers of friction reducers to the energy industry, producing both anionic and viscosifying friction reducers. Our manufacturing is supported by in-house logistics and comprehensive lab services.
- Chemical Technologies. Our Chemical Technologies service line provides technical solutions, products and expertise related to chemical applications in the energy industry. We develop solutions, manage logistics and provide a full suite of chemicals used in hydraulic fracturing, stimulation, cementing, pipelines and well completions for customers ranging from major integrated and independent oil and gas producers to pressure pumpers. This service line also utilizes its chemical experience and lab testing capabilities to customize tailored water treatment solutions designed to optimize the fracturing fluid system in conjunction with the quality of water used in well completions. Through our Chemical Technologies service line, we develop and provide a full suite of chemicals utilized in hydraulic fracturing, stimulation and cementing, including polymers that create viscosity, crosslinkers, friction reducers, surfactants, buffers, breakers and other chemical technologies. We source our products through our own manufacturing operations as well as through third party producers and distributors. We provide 24/7/365 time-critical logistical support to our customers and our warehousing and service includes inventory management with computerized tracking and monthly reporting. We use automated communications systems combined with direct-to-wellsite delivery to ensure seamless product availability for our customers. With our expertise in fracturing chemistry, we can develop customized products to meet customers' frac-fluid system requirements.

21

- **Water Treatment.** Through our Water Treatment service line, we provide advanced water treatment solutions throughout the well lifecycle, as well as specialized stimulation flow assurance and integrity management, and post-treatment monitoring services in the U.S. land market. Our specialty chemicals are used in applications such as water conditioning, water recycling, on-the-fly treatment and water reuse and mining. Our chemical experts provide pre-treatment water sampling, analysis and testing to determine a water’s chemistry, then design the most effective fracturing fluid system. The team delivers customized programs using proven chemical technologies and mobile equipment to treat almost any oilfield water for reuse. Following our treatment applications, fluid samples are analyzed again to ensure the treatment is optimized to reduce overall chemical investment. Water Treatment provides disinfection solutions to neutralize microorganisms, hydrogen sulfide (H2S), iron sulfide, phenols, mercaptans, and polymers in the surface water. Our Water Treatment team works closely with our Chemical Technologies service line as well as our water monitoring, reuse and recycling teams within our Water Services and Water Infrastructure segments to advise our customers on the best economic and operational solutions to manage their water quality and chemical solutions needs.

### *Oilfield Chemicals Geographic Areas of Operation*

We provide Oilfield Chemicals services in most of the major unconventional shale plays in the continental U.S. In the chart below, a “√” indicates that we offer the service line in the indicated geographic region.

| Services Provided | Geographic Region |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  | Permian | MidCon | Bakken | Eagle Ford | Marcellus / Utica | Haynesville | Rockies |
| Chemical Manufacturing . . . . . . . | √ | - | - | - | - | √ | - |
| Completion Chemicals . . . . . . . . | √ | √ | √ | √ | - | √ | √ |
| Water Treatment . . . . . . . . . . . . . | √ | √ | √ | √ | - | √ | √ |

### *Oilfield Chemicals Customers*

Our Oilfield Chemicals customers primarily include pressure pumpers, and major integrated and independent U.S. and international oil and gas producers.

### *Oilfield Chemicals Competition*

The Oilfield Chemicals business is highly competitive. Our competitors include both large manufacturers and companies that are pure distributors of commodities and specialty chemicals. We believe that the principal competitive factors in the markets we serve are technical expertise, manufacturing capacity, workforce competency, efficiency, safety record, reputation, experience and price. Additionally, projects are often awarded on a bid basis, which tends to create a highly competitive environment. We seek to differentiate ourselves from our competitors by delivering high-quality services and solutions, coupled with superior execution and operating efficiency in a safe working environment. Additionally, many of our competitors focus on serving multiple industries outside of oil and gas, and therefore we believe our dedicated focus on the oil and gas industry and in-basin manufacturing capabilities provides a competitive advantage. We also believe our expertise in water management provides a competitive advantage that allows us to assess and optimize our chemical solutions in a unique manner.

### **Significant Customers**

There were no customers that accounted for 10% or more of our consolidated revenues for the year ended December 31, 2022.

### **Sales and Marketing**

We direct our sales activities through a network of sales representatives and business development personnel, which allows us to support our customers at both the corporate and field level. Our sales representatives work closely

22

with local operations managers to target potential opportunities through strategic focus and regular customer interaction. We track the drilling and completion activities of our current and potential new customers. Our operations managers meet with our sales team several times a week, and monitor sales activity via daily reporting. To support our sales strategy, we have developed a proprietary database that integrates market information such as current rig, completion crew and permit activity and the location of our strategic water sources.

Our marketing activities are performed by an internal marketing group with input from key executives. We intend to build and maintain a well-recognized brand in the oil and gas industry through multiple media outlets, including our website and social media accounts, radio, print and billboard advertisements, and various industry-specific conferences, case studies, publications and lectures.

## Environmental and Occupational Safety and Health Matters

Our water-related operations in support of energy exploration, development and production activities pursued by our customers are subject to stringent and comprehensive federal, tribal, state and local laws and regulations in the U.S. governing occupational safety and health, the discharge of materials into the environment and environmental protection. Numerous governmental entities, including the EPA, the U.S. Occupational Safety and Health Administration (“OSHA”) and analogous state agencies, have the power to enforce compliance with these laws and regulations and the permits issued under them, often requiring difficult and costly actions. These laws and regulations may, among other things (i) require the acquisition of permits or other approvals to take fresh water from surface water and groundwater, construct pipelines or containment facilities, drill wells and other regulated activities; (ii) restrict the types, quantities and concentration of various substances that can be released into the environment or injected into non-producing belowground formations; (iii) limit or prohibit our operations on certain lands lying within wilderness, wetlands and other protected areas; (iv) require remedial measures to mitigate pollution from former and ongoing operations; (v) impose specific safety and health criteria addressing worker protection; and (vi) impose substantial liabilities for pollution resulting from our operations. Any failure to comply with these laws and regulations may result in the assessment of sanctions, including administrative, civil and criminal penalties, the imposition of investigatory, remedial or corrective action obligations or the incurrence of capital expenditures; the occurrence of restrictions, delays or cancellations in the permitting, performance or expansion of projects; and the issuance of orders enjoining performance of some or all of our operations in a particular area.

Our business activities present risks of incurring significant environmental costs and liabilities, including costs and liabilities resulting from our handling of oilfield and other wastes, because of air emissions and wastewater discharges related to our operations, and due to historical oilfield industry operations and waste disposal practices. Our businesses include the operation of oilfield waste disposal injection wells that pose risks of environmental liability, including leakage from the wells to surface or subsurface soils, surface water or groundwater. In addition, private parties, including the owners of properties upon which we perform services and facilities where our wastes are taken for reclamation or disposal, also may have the right to pursue legal actions to enforce compliance as well as to seek damages for non-compliance with environmental laws and regulations or for personal injury or property or natural resource damages. Some environmental laws and regulations may impose strict liability, which means that in some situations we could be exposed to liability as a result of our conduct that was lawful at the time it occurred or the conduct of, or conditions caused by, prior operators or other third parties. Remedial costs and other damages arising as a result of environmental laws and costs associated with changes in environmental laws and regulations could be substantial and could have a material adverse effect on our liquidity, results of operations and financial condition.

The trend in U.S. environmental regulation is typically to place more restrictions and limitations on activities that may affect the environment. In particular, President Biden has issued several executive orders since taking office, and has made combating of climate change a priority under his administration. Moreover, accidental releases or spills may occur in the course of our operations, and we cannot assure you that we will not incur significant costs and liabilities as a result of such releases or spills, including any third-party claims for damage to property, natural resources or persons. Historically, our environmental compliance costs in the U.S. have not had a material adverse effect on our results of operations; however, there can be no assurance that such costs will not be material in the future or that such future compliance will not have a material adverse effect on our business and operational results. Our customers may also incur increased costs or restrictions, delays or cancellations in permitting or operating activities as a result of more

23

stringent environmental laws and regulations, which may result in curtailment of exploration, development or production activities that would reduce the demand for our services. Any new laws and regulations, amendment of existing laws and regulations, reinterpretation of legal requirements or increased governmental enforcement that result in more stringent and costly construction, completion or water-management activities, waste handling, storage transport, disposal, or remediation requirements or increased climate-related restrictions on our customers’ operations could have a material adverse effect on our financial position and results of operations. We may be unable to pass on such increased compliance costs to our customers.

The following is a summary of the more significant existing environmental and occupational safety and health laws in the U.S., as amended from time to time, to which our operations are subject and for which compliance may have a material adverse impact on our capital expenditures, results of operations or financial position.

*Hazardous substances and wastes.* The federal Resource Conservation and Recovery Act (“RCRA”), and comparable state statutes regulate the generation, transportation, treatment, storage, disposal and cleanup of hazardous and non-hazardous wastes. Pursuant to rules issued by the EPA, the individual states administer some or all of the provisions of RCRA, sometimes in conjunction with their own, more stringent requirements. Drilling fluids, produced waters, and most of the other wastes associated with the exploration, development, and production of oil or gas, if properly handled, are currently exempt from regulation as hazardous waste under RCRA, and instead are regulated under RCRA’s less stringent non-hazardous waste provisions, state laws or other federal laws. However, it is possible that certain oil and gas drilling and production wastes now classified as non-hazardous could be classified as hazardous wastes in the future. Any loss of the RCRA exclusion for drilling fluids, produced waters and related wastes could result in an increase in our and our oil and gas producing customers’ costs to manage and dispose of generated wastes, which could have a material adverse effect on our and our customers’ results of operations and financial position. In the course of our operations, we generate some amounts of ordinary industrial wastes, such as paint wastes, waste solvents and waste oils that may be regulated as hazardous wastes.

Wastes containing naturally occurring radioactive materials (“NORM”) may also be generated in connection with our operations. Certain processes used to produce oil and gas may enhance the radioactivity of NORM, which may be present in oilfield wastes. NORM is subject primarily to individual state radiation control regulations. In addition, NORM handling and management activities are governed by regulations promulgated by the OSHA. These state and OSHA regulations impose certain requirements concerning worker protection, the treatment, storage and disposal of NORM waste, the management of waste piles, containers and tanks containing NORM, as well as restrictions on the uses of land with NORM contamination.

The federal Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), also known as the Superfund law, and comparable state laws impose liability, without regard to fault or legality of conduct, on classes of persons considered to be responsible for the release of a “hazardous substance” into the environment. These persons include the current and past owner or operator of the site where the hazardous substance release occurred and anyone who disposed or arranged for the disposal of a hazardous substance released at the site. Under CERCLA, such persons may be subject to joint and several, strict liability for the costs of cleaning up the hazardous substances that have been released into the environment, for damages to natural resources and for the costs of certain health studies. CERCLA also authorizes the EPA and, in some instances, third parties to act in response to threats to the public health or the environment and to seek to recover from the responsible classes of persons the costs they incur. In addition, neighboring landowners and other third parties may file claims for personal injury and property damage allegedly caused by the hazardous substances released into the environment. We generate materials in the course of our operations that may be regulated as hazardous substances.

We currently own, lease, or operate numerous properties that have been used for activities supporting oil and gas exploration, development and production for a number of years. Although we believe that we have utilized operating and waste disposal practices that were standard in the industry at the time, hazardous substances, wastes, or petroleum hydrocarbons may have been released on, under or from the properties owned or leased by us, or on, under or from other locations, including off-site locations, where we conduct services for our customers or where such substances have been taken for treatment or disposal. In addition, some of our properties have been operated by third parties or by previous owners or operators whose treatment and disposal of hazardous substances, wastes, or petroleum hydrocarbons was not

24

# ***Disruptions in production at our chemical manufacturing facilities may have a material adverse impact on our business, results of operations and/or financial condition.***

Chemical manufacturing facilities in our industry are subject to outages and other disruptions. Serious disruptions at any of our facilities could impair our ability to use our facilities and have a material adverse impact on our revenue and increase our costs and expenses. Unplanned production disruptions may occur for external reasons including natural disasters, weather, disease, strikes, transportation interruption, government regulation, political or civil unrest or terrorism, or internal reasons, such as fire, unplanned maintenance or other manufacturing problems. Moreover, alternative facilities with sufficient capacity may not be available, may cost substantially more or may take a significant time to increase production or qualify with our customers, any of which could negatively impact our business, results of operations and/or financial condition. Long-term production disruptions may cause our customers to seek alternative supply, which could further adversely affect our profitability.

Unplanned production disruptions may occur for external reasons including natural disasters, world health events, such as the COVID-19 pandemic, weather, disease, strikes, transportation interruption, government regulation, political or civil unrest or terrorism, or internal reasons, such as fire, unplanned maintenance or other manufacturing problems. Any such production disruption could have a material impact on our operations, operating results and financial condition.

Additionally, we rely on a number of vendors, suppliers, and in some cases sole-source suppliers, service providers, toll manufacturers and collaborations with other industry participants to provide us with chemicals, feedstocks and other raw materials, along with energy sources and, in certain cases, facilities that we need to operate our business. If the business of these third parties is disrupted, some of these companies could be forced to reduce their output, shut down their operations or file for bankruptcy protection. If this were to occur, it could adversely affect their ability to provide us with the raw materials, energy sources or facilities that we need, which could materially disrupt our operations, including the production of certain of our chemical products. Moreover, it could be difficult to find replacements for certain of our business partners without incurring significant delays or cost increases. All of these risks could have a material adverse effect on our business, results of operations, financial condition and liquidity.

While we maintain business recovery plans that are intended to allow us to recover from natural disasters or other events that could disrupt our business, we cannot provide assurances that our plans would fully protect us from the effects of all such disasters or from events that might increase in frequency or intensity due to climate change. In addition, insurance may not adequately compensate us for any losses incurred as a result of natural or other disasters. In areas prone to frequent natural or other disasters, insurance may become increasingly expensive or not available at all.

# ***Constraints in the supply of equipment used in providing services to our customers and replacement parts for such could affect our ability to execute our growth strategies.***

Equipment used in providing services to our customers is normally readily available. Market conditions could trigger constraints in the supply chain of certain equipment or replacement parts for such equipment, which could have a material adverse effect on our business. The majority of our risk associated with supply chain constraints occurs in those situations where we have a relationship with a single supplier for a particular resource.

# ***Unsatisfactory safety performance may negatively affect our E&P customer relationships and, to the extent we fail to retain existing customers or attract new customers, adversely impact our revenues.***

Our ability to retain existing E&P customers and attract new business is dependent on many factors, including our ability to demonstrate that we can reliably and safely operate our business and stay current on constantly changing rules, regulations, training and laws. Existing and potential customers consider the safety record of their service providers to be of high importance in their decision to engage third-party services. If one or more accidents were to occur at one of our operating sites, the affected customer may seek to terminate or cancel its use of our facilities or services and may be less likely to continue to use our services, which could cause us to lose substantial revenues. Further, our ability to attract new customers may be impaired if they elect not to purchase our third-party services because they view our safety record as unacceptable. In addition, it is possible that we will experience numerous or

45

particularly severe accidents in the future, causing our safety record to deteriorate. This may be more likely as we continue to grow, if we experience high employee turnover or labor shortage, or add inexperienced personnel. See Part I, Item 1. “Business - Environmental and Occupational Safety and Health Matters” for more discussion on worker safety matters.

*Significant price volatility or interruptions in supply of our raw materials for our chemicals business may result in increased costs that we may be unable to pass on to our customers, which could reduce profitability.*

We purchase a substantial portion of our raw materials for our chemicals business from third-party suppliers and the cost of these raw materials represents a substantial portion of our operating expenses. The prices of the raw materials that we purchase from third parties are cyclical and volatile. Our supply agreements provide us only limited protection against price volatility because they are entered into either on a short-term basis or are longer-term volume contracts, which provide for market-based pricing renegotiated several times per year. While we attempt to match cost increases with corresponding product price increases, we are not always able to raise product prices immediately or at all. Timing differences between raw material prices, which may change daily, and contractual product prices, which in many cases are negotiated only monthly or less often, have had and may continue to have a negative effect on our cash flow. Any cost increase that we are not able to pass on to our customers could have a material adverse effect on our business, results of operations, financial condition and liquidity.

There are several raw materials for which there are only a limited number of suppliers or a single supplier. To mitigate potential supply constraints, we enter into supply agreements with particular suppliers, evaluate alternative sources of supply and evaluate alternative technologies to avoid reliance on limited or sole-source suppliers. Where supply relationships are concentrated, particular attention is paid by the parties to ensure strategic intentions are aligned to facilitate long-term planning. If certain of our suppliers are unable to meet their obligations under present supply agreements, we may be forced to pay higher prices to obtain the necessary raw materials from other sources and we may not be able to increase prices for our finished products to recoup the higher raw materials costs. Any interruption in the supply of raw materials could increase our costs or decrease our revenue, which could reduce our cash flow. The inability of a supplier to meet our raw material needs could have a material adverse effect on our financial condition and results of operations.

The number of sources for and availability of certain raw materials is also specific to the particular geographical region in which a facility is located. Political and economic instability in the countries from which we purchase our raw material supplies could adversely affect their availability. In addition, if raw materials become unavailable within a geographic area from which they are now sourced, we may not be able to obtain suitable or cost-effective substitutes. During 2021, the importation of internationally sourced chemicals presented new challenges such as increased freight costs, limited container space, and reduced production of certain chemicals. We may also experience higher operating costs such as energy costs, which could affect our profitability. We may not always be able to increase our selling prices to offset the impact of any higher production costs or reduced production levels, which could reduce our earnings and decrease our liquidity.

### Risks Related to Compliance with Regulations

*Laws, regulations, executive actions and other regulatory initiatives in the U.S. relating to hydraulic fracturing could increase our costs of doing business and result in additional operating restrictions, delays or cancellations in the drilling and completion of oil and gas wells, or possible restrictions on the performance of hydraulic fracturing that may reduce demand for our services and could have a material adverse effect on our liquidity, results of operations and financial condition.*

Although we do not directly engage in hydraulic fracturing, our operations support many of our E&P customers in such activities. The practice continues to be controversial in certain parts of the country, resulting in increased scrutiny and regulation of the hydraulic fracturing process, including by federal and state agencies and local municipalities. See Part I, Item 1. “Business - Environmental and Occupational Safety and Health Matters” for more discussion on these hydraulic fracturing and seismicity matters.

46

The adoption of any federal, state or local laws or the implementation of regulations or issuance of executive orders regarding hydraulic fracturing activities or leasing activities on federal properties could potentially cause a decrease in the completion of new oil and gas wells and an associated decrease in demand for our services and increased compliance costs and time, which could have a material adverse effect on our liquidity, results of operations, and financial condition.

*Our and our E&P customers' operations are subject to a number of risks arising out of the threat of climate change, energy conservation measures or initiatives that stimulate demand for alternative forms of energy, which could result in increased operating and capital costs for our customers, restrictions on drilling for our customers and reduced demand for the products and services we provide.*

The threat of climate change continues to attract considerable attention in the U.S. and foreign countries. As a result, numerous proposals have been made and are likely to continue to be made at the international, national, regional and state levels of government to monitor and limit emissions of GHGs as well as to eliminate such future emissions. As a result, our operations as well as the operations of our E&P customers are subject to a series of regulatory, political, litigation and financial risks associated with the production and processing of fossil fuels and emission of GHGs. See Part I, Item 1. 'Business - Environmental and Occupational Safety and Health Matters' for more discussion on the threat of climate and restriction of GHG emissions. The adoption and implementation of any international, federal, regional or state legislation, executive actions, regulations or other regulatory initiatives that impose more stringent standards for GHG emissions from the oil and natural gas sector or otherwise restrict the areas in which this sector may produce oil and natural gas or generate GHG emissions could result in increased compliance costs or costs of consuming fossil fuels. Such legislation, executive actions or regulations could result in increased costs of compliance or costs of consuming, and thereby reduce demand for oil and natural gas, which could reduce demand for our products and services. Additionally, political, financial and litigation risks may result in our customers restricting, delaying or canceling production activities, incurring liability for infrastructure damages as a result of climatic changes, or impairing the ability to continue to operate in an economic manner, which also could reduce demand for our products and services. The occurrence of one or more of these developments could have a material adverse effect on our business, financial condition, results of operations and cash flows. Moreover, the increased competitiveness of alternative energy sources (such as wind, solar geothermal, tidal and biofuels) could reduce demand for hydrocarbons, and therefore for our products and services, which would lead to a reduction in our revenues.

*Our chemical products are subject to stringent chemical control laws that could result in increased costs on our business.*

We are subject to a wide array of laws and regulations governing chemicals, including the regulation of chemical substances and inventories, such as the TSCA. These laws and regulations change frequently and have the potential to limit or ban altogether the types of chemicals we may use in our products, as well as result in increased costs related to testing, storing, and transporting our products prior to providing them to our customers. Any new restrictions on the development of new products or use of existing products, increases in regulation of those products, or disclosure of confidential, competitive information relating to the products could have an adverse effect on our operations and our cost of doing business. Furthermore, governmental, regulatory and societal demands for increasing levels of product safety and environmental protection could result in increased pressure for more stringent regulatory control with respect to the chemical industry. See Part I, Item 1. 'Business - Environmental and Occupational Safety and Health Matters' for more discussion on chemical product use and safety.

*In the future, we may face increased obligations relating to the closing of our wastewater disposal facilities and may be required to provide an increased level of financial assurance to guarantee that the appropriate closure activities will occur for a wastewater disposal facility.*

Our ability to obtain permits to own or operate wastewater disposal facilities generally requires us to establish performance bonds, letters of credit or other forms of financial assurance to address remediation and closure obligations. As we acquire additional wastewater disposal facilities or expand our existing wastewater disposal facilities, these obligations will increase. Additionally, in the future, regulatory agencies may require us to increase the amount of our closure bonds at existing wastewater disposal facilities. Moreover, actual costs could exceed our current expectations, as a result of, among other things, federal, state or local government regulatory action, increased costs charged by service

47

providers that assist in closing wastewater disposal facilities and additional environmental remediation requirements. Increased regulatory requirements regarding our existing or future wastewater disposal facilities, including the requirement to pay increased closure and post-closure costs or to establish increased financial assurance for such activities could substantially increase our operating costs and adversely affect our business, financial condition and results of operations.

# ***State and federal legislation and regulatory initiatives relating to our disposal operations and seismicity could harm our business.***

Our disposal business and the number of SWDs we operate has significantly increased in connection with our 2021 acquisitions of Complete and Agua Libre. This disposal process has been linked to increased induced seismicity events in certain areas of the country, particularly in Oklahoma, Texas, Colorado, and New Mexico. For example, Texas and Oklahoma have issued rules for wastewater disposal wells that imposed certain permitting and operating restrictions and reporting requirements on disposal wells in proximity to faults. Other states, such as Texas and Oklahoma, have also issued orders, from time to time, for certain wells where seismic incidents have occurred to restrict or suspend disposal well operations. Another consequence of seismic events may be lawsuits alleging that disposal well operations have caused damage to neighboring properties or otherwise violated state and federal rules regulating waste disposal. These and other states have begun to consider or adopt laws and regulations that may restrict or otherwise prohibit oilfield fluid disposal in certain areas or underground disposal wells, and state agencies implementing these requirements may issue orders directing certain wells where seismic incidents have occurred to restrict or suspend disposal well operations or impose standards related to disposal well construction and monitoring. Any one or more of these developments may result in our having to limit disposal well volumes, disposal rates or locations, or to cease disposal well activities, which could have a material adverse effect on our business, financial condition, and results of operations. See Part I, Item 1. 'Business - Environmental and Occupational Safety and Health Matters' for more discussion on seismic matters.

# ***Changes in U.S. and international trade policies, particularly involving China, may adversely impact our business and operating results.***

Though a comprehensive trade agreement was signed in 2020, the U.S. government has previously imposed tariffs affecting certain goods produced in China. A portion of the chemicals we use originate in China and are sold to us by our supplier partners. As a result, tariffs incurred by our supplier partners could increase our costs and reduce profitability. Additionally, delays or interruptions in the supply of some chemicals for any reason could impact our ability to generate chemicals revenue. If we are forced to source chemicals currently originating in China from other countries, such compounds might be more expensive, inferior in quality, or take longer to source. If we incur higher costs that we cannot pass on to our customers or if we are unable to adequately replace the chemicals we currently source with chemicals produced elsewhere, our business could be adversely affected.

# ***Changes to applicable tax laws and regulations or exposure to additional income tax liabilities could affect our business and future profitability.***

We are subject to various complex and evolving U.S. federal, state and local taxes. U.S. federal, state and local tax laws, policies, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us, in each case, possibly with retroactive effect, and may have an adverse effect on our business and future profitability.

# ***We are subject to environmental and occupational health and safety laws and regulations that may expose us to significant liabilities for penalties, damages or costs of remediation or compliance.***

Our operations and the operations of our E&P customers are subject to federal, state and local laws and regulations in the U.S. relating to protection of natural resources and the environment, health and safety aspects of our operations and waste management, including the transportation and disposal of waste and other materials. These laws and regulations may take the form of laws, regulations, executive actions and various other legal initiatives and result in

48

the imposition of numerous obligations on our operations and the operations of our customers. See Part I, Item 1. “Business - Environmental and Occupational Safety and Health Matters” for more discussion on these matters. Compliance with these regulations and other regulatory initiatives, or any other new environmental laws, regulations and executive actions could, among other things, require us or our customers to install new or modified emission controls on equipment or processes, incur longer permitting timelines, and incur significantly increased capital or operating expenditures, which costs may be significant. One or more of these developments that impact our customers could reduce demand for our services, which could have a material adverse effect on our business, results of operations and financial condition.

*The Endangered Species Act and Migratory Bird Treaty Act govern both our and our E&P customers’ operations and additional restrictions may be imposed in the future, which constraints could have an adverse impact on our ability to expand some of our existing operations or limit our customers’ ability to develop new oil and gas wells.*

The ESA and comparable state laws restrict activities that may affect endangered or threatened species or their habitats. Similar protections are offered to migratory birds under the MBTA. To the degree that species listed under the ESA or similar state laws, or are protected under the MBTA, live in the areas where we or our E&P customers’ operate, both our and our customers’ abilities to conduct or expand operations and construct facilities could be limited or be forced to incur additional material costs. Additionally, the FWS may make determinations on the listing of unlisted species as endangered or threatened under the ESA. See Part I, Item 1. “Business - Environmental and Occupational Safety and Health Matters” for more discussion on ESA and MBTA matters. The designation of previously unidentified endangered or threatened species could indirectly cause us to incur additional costs, cause our or our E&P customers’ operations to become subject to operating restrictions or bans and limit future development activity in affected areas, which developments could have a material adverse effect on our business, results of operations and financial condition.

*Increasing investor attention to ESG matters may impact our business.*

Companies across all industries are facing increasing scrutiny from stakeholders related to their ESG practices. Companies that do not adapt to or comply with investor or stakeholder expectations and standards, which are evolving, or which are perceived to have not responded appropriately to the growing concern for ESG issues, regardless of whether there is a legal requirement to do so, may suffer from reputational damage and the business, financial condition, and/or stock price of such a company could be materially and adversely affected. Increasing attention to climate change, increasing societal expectations on companies to address climate change, and potential consumer use of substitutes to energy commodities may result in increased costs, reduced demand for our products and services, reduced profits, increased governmental investigations and private litigation against us.

Moreover, to an increasing extent, many institutional investors have announced plans to transition their portfolios to net-zero greenhouse gas emissions over the next 2-3 decades as part of a commitment to combat climate change. This has, and will likely continue to result in some (and perhaps a growing number of) institutions removing from their portfolios the shares of companies that do not meet their minimum investment standards. Further, banks and other capital providers are reassessing their capital allocation to our industry or making their participation conditional. This trend towards the divestment or limitation of future investment in companies involved in the development, production, transportation and utilization of fossil fuels, may adversely affect the price of our stock and limit our access to the debt and equity markets for capital to fund our growth.

In addition, organizations that provide proxy advisory services to investors on corporate governance and related matters have developed ratings processes for evaluating companies on their approach to ESG matters. Currently, there are no universal standards for such scores or ratings, but the importance of sustainability evaluations is becoming more broadly accepted by investors and shareholders. Such ratings are used by some investors to inform their investment and voting decisions. Additionally, certain investors use these scores to benchmark companies against their peers and if a company is perceived as lagging, these investors may engage with companies to require improved ESG disclosure or performance. Unfavorable ESG ratings may lead to increased negative investor sentiment toward us or our customers and to the diversion of investment to other industries, which could have a negative impact on our stock price and/or our access to and costs of capital.

49

# Risks Related to Personnel and Related Parties

*Our industry typically experiences a high rate of employee turnover. Any difficulty we experience replacing or adding personnel could have a material adverse effect on our operational performance, customer satisfaction, ability to retain existing business or secure new business, and therefore liquidity, results of operations and financial condition.*

We are dependent upon the available labor pool of skilled employees and may not be able to find enough skilled labor to meet our needs, which could have a negative effect on our growth. We are also subject to the Fair Labor Standards Act, which governs such matters as minimum wage, overtime and other working conditions. Our services require skilled workers who can perform physically demanding work. As a result of our industry volatility, pronounced declines in drilling and completions activity, as well as the demanding nature of the work, many workers have left the oilfield services section to pursue employment in different fields. If we are unable to retain or meet the growing demand for skilled technical personnel, our operating results and our ability to execute our growth strategies may be adversely affected.

*We engage in transactions with related parties and such transactions present possible conflicts of interest that could have an adverse effect on us.*

We have historically entered into a number of transactions with related parties. Related party transactions create the possibility of conflicts of interest with regard to our management. Such a conflict could cause an individual in our management to seek to advance his or her economic interests above ours. Further, the appearance of conflicts of interest created by related party transactions could impair the confidence of our investors. While our board of directors regularly reviews these transactions, in accordance with our Related Party Transactions policy, a related party transaction presenting a conflict of interest could have a material adverse effect on our liquidity, results of operations and financial condition.

# Risks Related to Our Capital Structure

*We may not be able to continue to pay or maintain our cash dividends and the failure to do so may negatively affect our share price.*

On September 7, 2022, we announced that our board of directors approved the initiation of a dividend program under which we intend to pay regular quarterly dividends. On January 27, 2023, our board of directors declared our most recent quarterly cash dividend, of $0.05 per share of Class A common stock, that was paid on February 17, 2023 to shareholders of record as of the close of business on February 7, 2023. A distribution of $0.05 per unit was also approved for those holders of units of SES Holdings, LLC, who also hold an equal number of shares of Class B common stock, which was subject to the same payment and record dates. Our ability to pay cash dividends depends on, among other things, our cash flows from operations, our cash requirements, our financial condition, the degree to which we are/or become leveraged, contractual restrictions binding on us, provisions of applicable law and other factors that our board of directors may deem relevant. There can be no assurance that we will generate sufficient cash from continuing operations in the future or have sufficient cash surplus or net profits to pay dividends on our Class A common stock. Our dividend policy is based upon our directors' current assessment of our business and the environment in which we operate, and that assessment could change based on business developments (which could, for example, increase our need for capital expenditures) or new growth opportunities. All future dividend payments are subject to quarterly review and approval by our board of directors. Our board of directors may, in its discretion, decrease the level of cash dividends or entirely discontinue the payment of cash dividends. The reduction or elimination of cash dividends may negatively affect the market price of our Class A common stock.

50

*If we fail to maintain and enhance an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud. As a result, current and potential stockholders could lose confidence in our financial reporting, which would harm our business and the trading price of our Class A common stock.*

Effective internal controls are necessary for us to provide reliable financial reports, prevent fraud and operate successfully as a public company. We are subject to Section 404 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) and therefore are required to make a formal assessment of the effectiveness of our internal controls over financial reporting for that purpose. We cannot be certain that our efforts to maintain and enhance our internal controls will be successful, that we will be able to maintain adequate controls over our financial processes and reporting in the future or that we will be able to comply with our obligations under Sections 302 and 404 of Sarbanes-Oxley. Any failure to maintain effective internal controls, or difficulties encountered in implementing or improving our internal controls, could harm our operating results or cause us to fail to meet our reporting obligations. Ineffective internal controls could also cause investors to lose confidence in our reported financial information, which would likely have a negative effect on the trading price of our Class A common stock.

*We may incur indebtedness or issue additional equity securities to execute our long-term growth strategy, which may reduce our profitability or result in significant dilution to our stockholders.*

Constructing and maintaining water infrastructure used in the oil and gas industry requires significant capital. We may require additional capital in the future to develop and construct water sourcing, transfer and other related infrastructure to execute our growth strategy. For the years ended December 31, 2022, 2021 and 2020, we spent $71.9 million, $40.0 million and $21.2 million, respectively, in capital expenditures (excluding expenditures connected with business combinations). Historically, we have financed these investments through cash flows from operations, external borrowings, capital contributions and proceeds from the issuance of equity securities. These sources of capital may not be available to us in the future. If we are unable to fund capital expenditures for any reason, we may not be able to capture available growth opportunities or effectively maintain our existing assets and any such failure could have a material adverse effect on our results of operations and financial condition. If we incur additional indebtedness or issue additional equity securities, our profitability may be reduced and our stockholders may experience significant dilution.

*Our Sustainability-Linked Credit Facility subjects us to various financial and other restrictive covenants. These restrictions may limit our operational or financial flexibility and could subject us to potential defaults under our Sustainability-Linked Credit Facility.*

Our Sustainability-Linked Credit Facility subjects us to significant financial and other restrictive covenants, including restrictions on our ability to consolidate or merge with other companies, conduct asset sales, incur additional indebtedness, grant liens, issue guarantees, make investments, loans or advances, pay dividends and enter into certain transactions with affiliates.

Our Sustainability-Linked Credit Facility contains certain financial covenants, including the maintenance of a fixed charge coverage ratio of at least 1.0 to 1.0 at any time availability under the Sustainability-Linked Credit Facility is less than the greater of (i) 10% of the lesser of (A) the maximum revolver amount and (B) the then-effective borrowing base and (ii) $15.0 million and continuing through and including the first day after such time that availability under the Sustainability-Linked Credit Facility has equaled or exceeded the greater of (i) 10% of the lesser of (A) the maximum revolver amount and (B) the then-effective borrowing base and (ii) $15.0 million for 60 consecutive calendar days. Our ability to comply with such financial condition tests can be affected by events beyond our control and we may not be able to do so. The scheduled maturity date for our Sustainability-Linked Credit Facility is March 17, 2027. In addition, the Sustainability-Linked Credit Facility restricts SES Holdings’ and Select LLC’s ability to make distributions on, or redeem or repurchase, its respective equity interests, except for certain distributions, including distributions of cash so long as, both at the time of the distribution and after giving effect to the distribution, no default exists under the Sustainability-Linked Credit Facility and either (a) excess availability at all times during the preceding 30 consecutive days, on a pro forma basis and after giving effect to such distribution, is not less than the greater of (1) 25% of the lesser of (A) the maximum revolver amount and (B) the then-effective borrowing base and (2) $33.75 million or (b) if SES Holdings’ and Select LLC’s fixed charge coverage ratio is at least 1.0 to 1.0 on a pro forma basis, and excess availability at all times during the preceding 30 consecutive days, on a pro forma basis and after giving effect to such distribution, is

51

not less than the greater of (1) 20% of the lesser of (A) the maximum revolver amount and (B) the then-effective borrowing base and (2) $27.0 million. For additional information regarding our Sustainability-Linked Credit Facility, please read Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Sustainability-Linked Credit Facility.”

Our Sustainability-Linked Credit Facility also contains a sustainability adjustments feature that could result in up to a 0.05% increase or reduction to the effective interest rate pursuant to an Applicable Sustainability Margin Adjustment depending on Select LLC’s ability to meet certain sustainability targets and thresholds starting in 2022. For each calendar year, the “Applicable Sustainability Margin Adjustment” will equal the number of basis points (whether positive, negative or zero) equal to the sum of (i) the Applicable Water Stewardship Fee Adjustment plus (ii) Applicable Health and Safety Fee Adjustment (each as defined in the Sustainability-Linked Credit Facility).

The “Applicable Water Stewardship Fee Adjustment” is based on Select LLC’s ability to (i) remain above the Water Stewardship Threshold and (ii) reach the Water Stewardship Target, both metrics which are measured by the total number of barrels of recycled produced water recycled by SES Holdings and its Subsidiaries. The “Applicable Employee Health and Safety Fee Adjustment” is based on Select LLC’s ability to (i) remain above the Employee Health and Safety Threshold and (ii) reach the Employee Health and Safety Target, both metrics which are measured by the total recordable incident rates of employees with respect to SES Holdings and its Subsidiaries.

If we are unable to remain in compliance with the covenants of our Sustainability-Linked Credit Facility, then the lenders may declare all amounts outstanding under the Sustainability-Linked Credit Facility to be immediately due and payable. Any such acceleration could have a material adverse effect on our financial condition and results of operations.

*Future sales of our equity securities, or the perception that such sales may occur, may depress our share price, and any additional capital raised through the sale of equity or convertible securities may dilute your ownership in us.*

Subject to certain limitations and exceptions, Legacy Owner Holdco and its permitted transferees may exchange their SES Holdings LLC Units (together with a corresponding number of shares of Class B common stock) for shares of Class A common stock (on a one-for-one basis, subject to conversion rate adjustments for stock splits, stock dividends and reclassification and other similar transactions) and then sell those shares of Class A common stock. Additionally, we may in the future issue our previously authorized and unissued securities. We are authorized to issue 350 million shares of Class A common stock, 40 million shares of Class A-2 common stock, 150 million shares of Class B common stock and 50 million shares of preferred stock with such designations, preferences and rights as determined by our board of directors. The potential issuance of such additional shares of equity securities will result in the dilution of the ownership interests of the holders of our Class A common stock and may create downward pressure on the trading price, if any, of our Class A common stock.

In addition, Legacy Owner Holdco, Crestview Partners II SES Investment B, LLC and the SCF Group (as defined below) (collectively, the “Registration Rights Holders”), who collectively own in excess of 30 million shares of our common stock, are party to a registration rights agreement which provides, among other things, for parties to that agreement to initiate or participate in an underwritten public offering of all or a portion of their shares. The Registration Rights Holders may exercise their rights under such agreement in their sole discretion, and sales pursuant to such rights may be material in amount and occur at any time.

The sales of substantial amounts of our Class A common stock following the effectiveness of registration statements for the benefit of such holders, or the perception that these sales may occur, could cause the market price of our Class A common stock to decline and impair our ability to raise capital. For example, we recently registered the resale of 8,717,619 shares of our Class A common stock. Any sales of such shares may depress our share price. We also may grant additional registration rights in connection with any future issuance of our capital stock.

We cannot predict the size of future issuances of our Class A common stock or securities convertible into Class A common stock or the effect, if any, that future issuances and sales of shares of our Class A common stock will have on the market price of our Class A common stock. Sales of substantial amounts of our Class A common stock (including

52

shares issued in connection with an acquisition), or the perception that such sales could occur, may adversely affect prevailing market prices of our Class A common stock.

# ***Provisions in our amended and restated certificate of incorporation and amended and restated bylaws and Delaware law may discourage a takeover attempt even if a takeover might be beneficial to our stockholders.***

Provisions contained in our Fourth Amended and Restated Certificate of Incorporation and our Second Amended and Restated Bylaws, which we refer to herein as our “amended and restated certificate of incorporation” and “amended and restated bylaws,” respectively, could make it more difficult for a third party to acquire us. Provisions of our amended and restated certificate of incorporation and amended and restated bylaws impose various procedural and other requirements, which could make it more difficult for stockholders to effect certain corporate actions. For example, our amended and restated certificate of incorporation authorizes our board of directors to determine the rights, preferences, privileges and restrictions of unissued series of preferred stock without any vote or action by our stockholders. Thus, our board of directors can authorize and issue shares of preferred stock with voting or conversion rights that could adversely affect the voting or other rights of holders of our capital stock. These rights may have the effect of delaying or deterring a change of control of our company. Additionally, our amended and restated bylaws establish limitations on the removal of directors and on the ability of our stockholders to call special meetings and include advance notice requirements for nominations for election to our board of directors and for proposing matters that can be acted upon at stockholder meetings. These provisions could limit the price that certain investors might be willing to pay in the future for shares of our Class A common stock.

In addition, certain change of control events have the effect of accelerating the payment due under our Tax Receivable Agreements (as defined herein), which could be substantial and accordingly serve as a disincentive to a potential acquirer of our company. See “-Risks Related to Our Organizational Structure-In certain cases, payments under the Tax Receivable Agreements may be accelerated and/or significantly exceed the actual benefits, if any, we realize in respect of the tax attributes subject to the Tax Receivable Agreements.”

# ***Legacy Owner Holdco controls a significant percentage of our voting power.***

As of December 31, 2022, Legacy Owner Holdco beneficially owned 100% of our Class B common stock which represented approximately 12.9% of our outstanding voting capital stock. In addition, one of our directors is currently employed by Crestview Advisors, L.L.C. (“Crestview Partners”), our private equity sponsor and, through Crestview Partners II GP, L.P. (“Crestview GP”), the manager of funds that hold the largest equity interest in Legacy Owner Holdco. Other funds controlled by Crestview GP also have an interest in our currently outstanding shares of our Class A common stock, which represented an additional 3.1% of our outstanding voting capital. Collectively, these holders controlled approximately 16.0% of our voting shares. Holders of Class A common stock and Class B common stock generally will vote together as a single class on all matters presented to our stockholders for their vote or approval. Consequently, Legacy Owner Holdco will be able to significantly influence all matters that require approval by our stockholders, including the election and removal of directors, changes to our organizational documents and approval of acquisition offers and other significant corporate transactions, regardless of whether other stockholders believe that a transaction is in their own best interests. This concentration of ownership will limit your ability to influence corporate matters, and as a result, actions may be taken that you may not view as beneficial.

# ***Our amended and restated certificate of incorporation contains a provision renouncing our interest and expectancy in certain corporate opportunities, which could adversely affect our business or prospects.***

Our amended and restated certificate of incorporation provides that, to the fullest extent permitted by applicable law, we renounce any interest or expectancy in any business opportunity that involves any aspect of the energy business or industry and that may be from time to time presented to any member of (i) Legacy Owner Holdco; Crestview Partners II SES Investment, LLC; any funds, limited partnerships or other investment entities or vehicles managed by Crestview Partners or controlled by Crestview GP; B-29 Investments, LP; Sunray Capital, LP; Proactive Investments, LP and their respective affiliates, other than us (collectively, the “SES Group”); (ii) SCF-VI, L.P., SCF-VII, L.P. and SCF-VII(A), L.P. and their respective affiliates, other than us (collectively, the “SCF Group”); (iii) the other entities (existing and future) that participate in the energy industry and in which the SES Group and SCF Group own substantial equity

53

interests (the “Portfolio Companies”) or (iv) any director or officer of the corporation who is also an employee, partner, member, manager, officer or director of any member of the SES Group, the SCF Group or the Portfolio Companies, including our Chairman, President and CEO, John D. Schmitz, and our Executive Vice President, Business Strategy, Cody Ortowski, even if the opportunity is one that we might reasonably have pursued or had the ability or desire to pursue if granted the opportunity to do so. Mr. Schmitz controls both B-29 Investments, LP and Sunray Capital, LP and is a direct and indirect beneficiary of these provisions in our amended and restated certificate of incorporation. Our amended and restated certificate of incorporation further provides that no such person or party shall be liable to us by reason of the fact that such person pursues any such business opportunity, or fails to offer any such business opportunity to us.

As a result, any member of the SES Group, SCF Group or the Portfolio Companies or any director or officer of the corporation who is also an employee, partner, member, manager, officer or director of any member of the SES Group, SCF Group or the Portfolio Companies may become aware, from time to time, of certain business opportunities, such as acquisition opportunities, and may direct such opportunities to other businesses in which they have invested, in which case we may not become aware of or otherwise have the ability to pursue such opportunity. Further, such businesses may choose to compete with us for these opportunities. As a result, by renouncing our interest and expectancy in any business opportunity that may be from time to time presented to any member of the SES Group, SCF Group or the Portfolio Companies or any director or officer of the corporation who is also an employee, partner, member, manager, officer or director of any member of the SES Group, SCF Group or the Portfolio Companies, our business or prospects could be adversely affected if attractive business opportunities are procured by such parties for their own benefit rather than for ours. See Part III, Item 13. “Certain Relationships and Related Transactions, and Director Independence.”

*A significant reduction by Crestview GP or the SCF Group of either of their respective ownership interests in us could adversely affect us.*

We believe that Crestview GP’s and the SCF Group’s beneficial ownership interests in us provides each with an economic incentive to assist us to be successful. Neither Crestview GP nor the SCF Group is subject to any obligation to maintain its ownership interest in us and either may elect at any time to sell all or a substantial portion of or otherwise reduce its ownership interest in us. If either Crestview GP or the SCF Group sells all or a substantial portion of its ownership interest in us, it may have less incentive to assist in our success and its affiliate(s) that are expected to serve as members of our board of directors may resign. For example, the SCF Group no longer has a representative serving on our board of directors, and the SCF Group may sell their beneficial ownership interests in us in the future and are subject to fewer restrictions on such sales than during prior periods. Such actions could adversely affect our ability to successfully implement our business strategies, which could adversely affect our cash flows or results of operations.

*We may issue preferred stock whose terms could adversely affect the voting power or value of our Class A common stock.*

Our amended and restated certificate of incorporation authorizes us to issue, without the approval of our stockholders, one or more classes or series of preferred stock having such designations, preferences, limitations and relative rights, including preferences over our Class A common stock respecting dividends and distributions, as our board of directors may determine. The terms of one or more classes or series of preferred stock could adversely impact the voting power or value of our Class A common stock. For example, we might grant holders of preferred stock the right to elect some number of our directors in all events or on the happening of specified events or the right to veto specified transactions. Similarly, the repurchase or redemption rights or liquidation preferences we might assign to holders of preferred stock could affect the residual value of the Class A common stock.

54

*Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or agents.*

Our amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will, to the fullest extent permitted by applicable law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, employees or agents to us or our stockholders, (iii) any action asserting a claim against us or any director or officer or other employee or agent of ours arising pursuant to any provision of the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws, or (iv) any action asserting a claim against us or any director or officer or other employee or agent of ours that is governed by the internal affairs doctrine, in each such case subject to such Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein.

The exclusive forum provision would not apply to suits brought to enforce any liability or duty created by the Securities Act or the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. To the extent that any such claims may be based upon federal law claims, Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.

The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation or similar governing documents has been challenged in legal proceedings, and it is possible that a court could find the choice of forum provisions contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable, including with respect to claims arising under the U.S. federal securities laws.

To the fullest extent permitted by law, any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock will be deemed to have notice of, and consented to, the provisions of our amended and restated certificate of incorporation described in the preceding sentence. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, employees or agents, which may discourage such lawsuits against us and such persons. Alternatively, if a court were to find these provisions of our amended and restated certificate of incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition or results of operations.

### Risks Related to Our Organizational Structure

*We are a holding company. Our sole material asset consists of SES Holdings LLC Units, and accordingly, we are dependent upon distributions and payments from SES Holdings to pay taxes, pay dividends, make payments under the Tax Receivable Agreements and cover our corporate and other overhead expenses.*

We are a holding company and have no material assets other than our equity interest in SES Holdings. We have no independent means of generating revenue. To the extent SES Holdings has available cash, we intend to cause SES Holdings to make (i) generally pro rata distributions to its unitholders, including us, in an amount at least sufficient to allow us to pay our taxes, pay dividends and to make payments under the Tax Receivable Agreements that we entered into in connection with our restructuring at the Select 144A Offering and any subsequent tax receivable agreements that we may enter into in connection with future acquisitions and (ii) non-pro rata payments to us to reimburse us for our corporate and other overhead expenses. We will be limited, however, in our ability to cause SES Holdings and its subsidiaries to make these and other distributions or payments to us due to certain limitations, including the restrictions

55

under our Sustainability-Linked Credit Facility and the cash requirements and financial condition of SES Holdings. To the extent that we need funds and SES Holdings or its subsidiaries are restricted from making such distributions or payments under applicable law or regulations or under the terms of their financing arrangements or are otherwise unable to provide such funds, our liquidity and financial condition could be adversely affected.

*We will be required to make payments under the Tax Receivable Agreements for certain tax benefits we may claim, and the amounts of such payments could be significant.*

In connection with our restructuring at the Select 144A Offering, we entered into the Tax Receivable Agreements with certain affiliates of the then-holders of SES Holdings LLC Units (each such person and any permitted transferee thereof, a “TRA Holder,” and together, the “TRA Holders”) which generally provide for the payment by us to the TRA Holders of 85% of the net cash savings, if any, in U.S. federal, state and local income and franchise tax that we actually realize (computed using simplifying assumptions to address the impact of state and local taxes) or are deemed to realize in certain circumstances as a result of certain tax basis increases, net operating losses available to us as a result of certain reorganization transactions entered into in connection with the Select 144A Offering, and certain tax benefits attributable to imputed interest. We will retain the benefit of the remaining 15% of these cash savings.

The term of each Tax Receivable Agreement commenced upon the completion of the Select 144A Offering and will continue until all tax benefits that are subject to such Tax Receivable Agreement have been utilized or expired, unless we exercise our right to terminate the Tax Receivable Agreements (or the Tax Receivable Agreements are terminated due to other circumstances, including our breach of a material obligation thereunder or certain mergers or other changes of control) and we make the termination payment specified in the Tax Receivable Agreements. In addition, payments we make under the Tax Receivable Agreements will be increased by any interest accrued from the due date (without extensions) of the corresponding tax return. In the event that the Tax Receivable Agreements are not terminated and we have sufficient taxable income to utilize all of the tax benefits subject to the Tax Receivable Agreements, the payments due under the Tax Receivable Agreement entered into with Legacy Owner Holdco and Crestview GP are expected to commence at a yet to be determined future date, and continue until the benefits of the last exchange of SES Holdings LLC Units are realized or expire, and the payments due under the Tax Receivable Agreement entered into with certain Legacy Owners are expected to commence at a yet to be determined future date, and to continue until the benefits of the exchanges are realized or expire.

The payment obligations under the Tax Receivable Agreements are our obligations and not obligations of SES Holdings, and we expect that the payments we will be required to make under the Tax Receivable Agreements will be substantial. Estimating the amount and timing of payments that may become due under the Tax Receivable Agreements is by its nature imprecise. For purposes of the Tax Receivable Agreements, cash savings in tax generally will be calculated by comparing our actual tax liability (using the actual applicable U.S. federal income tax rate and an assumed combined state and local income and franchise tax rate) to the amount we would have been required to pay had we not been able to utilize any of the tax benefits subject to the Tax Receivable Agreements. The amounts payable, as well as the timing of any payments, under the Tax Receivable Agreements are dependent upon future events and significant assumptions, including the timing of the exchanges of SES Holdings LLC Units, the market price of our Class A common stock at the time of each exchange (since such market price will determine the amount of tax basis increases resulting from the exchange), the extent to which such exchanges are taxable transactions, the amount of the exchanging unitholder’s tax basis in its SES Holdings LLC Units at the time of the relevant exchange, the depreciation and amortization periods that apply to the increase in tax basis, the amount of net operating losses available to us as a result of reorganization transactions entered into in connection with the Select 144A Offering, the amount and timing of taxable income we generate in the future, the U.S. federal income tax rate then applicable, and the portion of our payments under the Tax Receivable Agreements that constitute imputed interest or give rise to depreciable or amortizable tax basis.

Certain of the TRA Holders’ rights under the Tax Receivable Agreements are transferable in connection with a permitted transfer of SES Holdings LLC Units or if the TRA Holder no longer holds SES Holdings LLC Units. The payments under the Tax Receivable Agreements are not conditioned upon the continued ownership interest in either SES Holdings or us of any holder of rights under the Tax Receivable Agreements. See Part III, Item 13. “Certain Relationships and Related Transactions, and Director Independence.”

56

*In certain cases, payments under the Tax Receivable Agreements may be accelerated and/or significantly exceed the actual benefits, if any, we realize in respect of the tax attributes subject to the Tax Receivable Agreements.*

If we elect to terminate the Tax Receivable Agreements early or they are terminated early due to our failure to honor a material obligation thereunder or due to certain mergers, asset sales, other forms of business combinations or other changes of control, our obligations under the Tax Receivable Agreements would accelerate and we would be required to make an immediate payment equal to the present value of the anticipated future payments to be made by us under the Tax Receivable Agreements (determined by applying a discount rate of the lesser of 6.50% per annum, compounded annually, or one-year London Interbank Offered Rate (“LIBOR”) plus 100 basis points); and such payment is expected to be substantial. The calculation of anticipated future payments will be based upon certain assumptions and deemed events set forth in the Tax Receivable Agreements, including (i) the assumption that we have sufficient taxable income to fully utilize the tax benefits covered by the Tax Receivable Agreements, (ii) the assumption that any SES Holdings LLC Units (other than those held by us) outstanding on the termination date are exchanged on the termination date and (iii) certain loss or credit carryovers will be utilized in the taxable year that includes the termination date. Any early termination payment may be made significantly in advance of the actual realization, if any, of the future tax benefits to which the termination payment relates.

As a result of either an early termination or a “change of control” (as defined in the Tax Receivable Agreements, as amended), we could be required to make payments under the Tax Receivable Agreements that exceed our actual cash tax savings under the Tax Receivable Agreements. In these situations, our obligations under the Tax Receivable Agreements could have a substantial negative impact on our liquidity and could have the effect of delaying, deferring or preventing certain mergers, asset sales or other forms of business combinations or changes of control. For example, if the Tax Receivable Agreements were terminated on December 31, 2022, the estimated termination payments would have been approximately $65.3 million (calculated using a discount rate equal to the lesser of 6.50% per annum, compounded annually, or one-year LIBOR plus 100 basis points, applied against an undiscounted liability of $98.0 million, based upon the last reported closing sale price of our Class A common stock on December 31, 2022) in the aggregate. The foregoing number is merely an estimate and the actual payment could differ materially. There can be no assurance that we will be able to finance our obligations under the Tax Receivable Agreements.

Payments under the Tax Receivable Agreements will be based on the tax reporting positions that we will determine. The TRA Holders will not reimburse us for any payments previously made under the Tax Receivable Agreements if any tax benefits that have given rise to payments under the Tax Receivable Agreements are subsequently disallowed, except that excess payments made to the TRA Holders will be netted against payments that would otherwise be made to the TRA Holders, if any, after our determination of such excess. As a result, in such circumstances, we could make payments that are greater than our actual cash tax savings, if any, and may not be able to recoup those payments, which could adversely affect our liquidity. See Part III, Item 13. “Certain Relationships and Related Transactions, and Director Independence.”

*If SES Holdings were to become a publicly-traded partnership taxable as a corporation for U.S. federal income tax purposes, we and SES Holdings might be subject to potentially significant tax inefficiencies, and we would not be able to recover payments previously made by us under the Tax Receivable Agreements even if the corresponding tax benefits were subsequently determined to have been unavailable due to such status.*

We intend to operate such that SES Holdings does not become a publicly-traded partnership taxable as a corporation for U.S. federal income tax purposes. A “publicly-traded partnership” is a partnership, the interests of which are traded on an established securities market or are readily tradable on a secondary market or the substantial equivalent thereof. Under certain circumstances, exchanges of SES Holdings LLC Units for shares of our Class A common stock or cash pursuant to the Eighth Amended and Restated Limited Liability Company Agreement of SES Holdings (the “SES Holdings LLC Agreement”) or other transfers of SES Holdings LLC Units could cause SES Holdings to be treated as a publicly-traded partnership. Applicable U.S. Treasury regulations provide for certain safe harbors from treatment as a publicly-traded partnership, and we intend to operate such that exchanges or other transfers of SES Holdings LLC Units qualify for one or more such safe harbors. For example, we intend to limit the number of unitholders of SES Holdings and Legacy Owner Holdco, and the SES Holdings LLC Agreement provides for limitations on the ability of unitholders of SES Holdings to transfer their SES Holdings LLC Units and will provide us, as managing member of SES Holdings,

57

with the right to impose restrictions (in addition to those already in place) on the ability of unitholders of SES Holdings to exchange their SES Holdings LLC Units pursuant to the SES Holdings LLC Agreement to the extent we believe it is necessary to ensure that SES Holdings will continue to be treated as a partnership for U.S. federal income tax purposes. If SES Holdings were to become a publicly-traded partnership, significant tax inefficiencies might result for us and for SES Holdings. In addition, we may not be able to realize tax benefits covered under the Tax Receivable Agreements, and we would not be able to recover any payments previously made by us under the Tax Receivable Agreements, even if the corresponding tax benefits (including any claimed increase in the tax basis of SES Holdings' assets) were subsequently determined to have been unavailable.

# ***Legacy Owner Holdco and the Legacy Owners may have interests that conflict with the interests of holders of the Class A common stock.***

As of December 31, 2022, Legacy Owner Holdco owned approximately 12.9% of the outstanding SES Holdings LLC Units. Because it holds a portion of its ownership interest in our business in the form of direct ownership interests in SES Holdings rather than through us, Legacy Owner Holdco may have conflicting interests with holders of shares of Class A common stock. For example, Legacy Owner Holdco may have different tax positions from us, and decisions we make in the course of running our business, such as with respect to mergers, asset sales, other forms of business combinations or other changes in control, may affect the timing and amount of payments that are received by the TRA Holders under the Tax Receivable Agreements. See Part III, Item 13. 'Certain Relationships and Related Transactions, and Director Independence.'

# ***Our ability to use certain of our current and future net operating loss carryforwards may be limited and could adversely affect our operating results and cash flows.***

As of December 31, 2022, we had approximately $886.3 million of U.S. federal net operating loss carryforwards ('NOLs'), $410.4 million of which we expect to expire unused, $142.9 million of which we expect to expire beginning in 2031 and the remaining $333.0 million of which have no expiration. As of December 31, 2022, we also had approximately $26.2 million of state NOLs, $10.5 million of which we expect to expire unused and the remaining $15.7 million of which we expect to expire beginning in 2023, and non-U.S. NOLs of approximately $6.6 million, which we expect to expire beginning in 2035. Utilization of these NOLs (which include historic NOLs of Rockwater and Nuverra) depends on many factors, including our future income, which cannot be assured. In addition, Section 382 of the Internal Revenue Code of 1986, as amended (the 'Code'), generally imposes an annual limitation on the amount of NOLs that may be used to offset taxable income when a corporation has undergone an 'ownership change' (as determined under Section 382 of the Code). An ownership change generally occurs if one or more stockholders (or groups of stockholders) who are each deemed to own at least 5% of the relevant corporation's stock change their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. In the event that an ownership change has occurred, or were to occur, utilization of the relevant corporation's NOLs would be subject to an annual limitation under Section 382 of the Code, determined by multiplying the value of the relevant corporation's stock at the time of the ownership change by the applicable long-term tax-exempt rate as defined in Section 382 of the Code, and potentially increased for certain gains recognized within five years after the ownership change to the extent of certain net built-in gains at the time of the ownership change. Any unused annual limitation may be carried over to later years until they expire. Limitations similar to those applicable under Section 382 of the Code apply for U.S. state and non-U.S. income tax purposes.

While we do not believe that the acquisitions of either Rockwater or Nuverra resulted in an ownership change under Section 382 of the Code with respect to us, future issuances, sales and/or exchanges of our stock (including in connection with an exercise of the Exchange Right or other transactions beyond our control), taken together with prior transactions with respect to our stock, could cause us to undergo an ownership change. As a result, we cannot assure you that we will not undergo an ownership change in the future. We believe that the acquisitions of Rockwater and Nuverra resulted in ownership changes with respect to each of Rockwater and Nuverra, respectively. Accordingly, as described above, some or all of our U.S. federal or state or non-U.S. NOLs could expire before they can be used. In addition, future ownership changes or changes to the U.S. tax laws could limit our ability to utilize our NOLs. To the extent we are not able to offset our future income with our NOLs, this would adversely affect our operating results and cash flows.

58

## General Risks

*We may not be able to finance future growth of our operations or future acquisitions, which could adversely affect our operations and financial position.*

The successful execution of our growth strategy depends on our ability to generate sufficient cash flows and our access to capital, both of which are impacted by numerous factors beyond our control, including financial, business, economic and other factors, such as volatility in commodity prices and pressure from competitors. There have been recent increases in the cost of capital and rising interest rates, which may affect future borrowings and impact the financial benefit we may receive. If we are unable to generate sufficient cash flows or obtain additional capital on favorable terms or at all, we may be unable to continue growing our business, conduct necessary corporate activities, take advantage of business opportunities that arise or engage in activities that may be in our long-term best interest, which may adversely impact our ability to sustain or improve our current level of profitability.

*The growth of our business through acquisitions may expose us to various risks, including those relating to difficulties in identifying suitable, accretive acquisition opportunities and integrating businesses, assets and personnel, as well as difficulties in obtaining financing for targeted acquisitions and the potential for increased leverage or debt service requirements.*

As a component of our business strategy, we intend to pursue selected, accretive acquisitions of complementary assets, businesses and technologies. Acquisitions involve numerous risks, including:

- unanticipated costs and assumption of liabilities and exposure to unforeseen liabilities of the acquired business, including but not limited to environmental liabilities and plug and abandonment obligations;
- difficulties in integrating the operations and assets of the acquired business and the acquired personnel;
- limitations on our ability to properly assess and maintain an effective internal control environment over an acquired business;
- potential losses of key employees and customers of the acquired business;
- risks of entering markets in which we have limited prior experience; and
- increases in our expenses and working capital requirements.

In evaluating acquisitions, we generally prepare one or more financial cases based on a number of business, industry, economic, legal, regulatory and other assumptions applicable to the proposed transaction. Although we expect a reasonable basis will exist for those assumptions, the assumptions will generally involve current estimates of future conditions. Realization of many of the assumptions will be beyond our control. Moreover, the uncertainty and risk of inaccuracy associated with any financial projection will increase with the length of the forecasted period. Some acquisitions may not be accretive in the near term and will be accretive in the long-term only if we are able to timely and effectively integrate the underlying assets and such assets perform at or near the levels anticipated in our acquisition projections.

The process of integrating an acquired business may involve unforeseen costs and delays or other operational, technical and financial difficulties and may require a significant amount of time and resources. Our failure to successfully incorporate the acquired business and assets into our existing operations or to minimize any unforeseen operational difficulties could have a material adverse effect on our financial condition and results of operations. Furthermore, there is intense competition for acquisition opportunities in our industry. Competition for acquisitions may increase the cost of, or cause us to refrain from, completing acquisitions.

In addition, we may not have sufficient capital resources to complete any additional acquisitions. We may incur substantial indebtedness to finance future acquisitions and also may issue equity, debt or convertible securities in

59

connection with such acquisitions. Debt service requirements could represent a significant burden on our results of operations and financial condition and the issuance of additional equity or convertible securities could be dilutive to our existing stockholders. Furthermore, we may not be able to obtain additional financing on satisfactory terms. Even if we have access to the necessary capital, we may be unable to continue to identify suitable acquisition opportunities, negotiate acceptable terms or successfully acquire identified targets.

*Our success depends on key members of our management, the loss of any of whom could disrupt our business operations.*

We depend to a large extent on the services of some of our executive officers. The loss of the services of one or more of our key executives could increase our exposure to the other risks described in this “Risk Factors” section. We do not maintain key person insurance on any of our personnel.

*We may be required to take write-downs of the carrying values of our long-lived assets and finite-lived intangible assets.*

We evaluate our long-lived assets, such as property and equipment, and finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that their carrying value may not be recoverable. Recoverability is measured by a comparison of their carrying amount to the estimated undiscounted cash flows to be generated by those assets. Based on specific market factors and circumstances at the time of prospective impairment reviews and the continuing evaluation of development plans, economics and other factors, we may be required to write down the carrying value of our long-lived and finite-lived intangible assets. There were not costs related to trademark impairment or abandonment of property and equipment in 2022 or 2021.

*We may be required to take a write-down of the carrying value of goodwill.*

We had no goodwill as of December 31, 2022, but we could add goodwill in the future in connection with business combinations. When applicable, we conduct our annual goodwill impairment assessment during the fourth quarter of each year, or more frequently if an event or circumstance indicates that the carrying value of a reporting unit may exceed the fair value. When possible impairment is indicated, we value the implied goodwill to compare it with the carrying amount of goodwill. If the carrying amount of goodwill exceeds its implied fair value, an impairment charge is recorded. The fair value of goodwill is based on estimates and assumptions applied by us such as revenue growth rates, operating margins, weighted-average costs of capital, market multiples, and future market conditions and as affected by numerous factors, including the general economic environment and levels of exploration and production activity of oil and gas companies, our financial performance and trends, and our strategies and business plans, among others. As a result of this annual impairment assessment, we may be required to write down the carrying value of goodwill.

#### **ITEM 1B. UNRESOLVED STAFF COMMENTS**

None.

#### **ITEM 2. PROPERTIES**

We lease space for our principal executive offices in Houston and Gainesville, Texas and we also lease local office space in the regions in which we operate. Additionally, we own and lease numerous storage facilities, trucking facilities and sales and administrative offices throughout the geographic areas in which we operate. In connection with our Oilfield Chemicals segment, we own two primary manufacturing facilities in Texas, and we lease three primary regional distribution centers through which we provide products to our customers in all major U.S. shale basins. Our leased properties are subject to various lease terms and expirations.

60

We believe all the properties that we currently occupy are suitable for their intended uses. We believe that our current facilities are sufficient to conduct our operations. However, we continue to evaluate the purchase or lease of additional properties or the sale or consolidation of our properties, as our business requires.

The following table shows our active leased and owned properties categorized by segment as of December 31, 2022:

| Region | Water Services | Water Infrastructure | Oilfield Chemicals | Corporate & Other | Total |
| --- | --- | --- | --- | --- | --- |
| Leased | 58 | 20 | 3 | 4 | 85 |
| Owned | 41 | 22 | 6 | - | 69 |
|  | 99 | 42 | 9 | 4 | 154 |

### ITEM 3. LEGAL PROCEEDINGS

We are not currently a party to any legal proceedings that, if determined adversely against us, individually or in the aggregate, would have a material adverse effect on our financial position, results of operations or cash flows. We are, however, named defendants in certain lawsuits, investigations and claims arising in the ordinary course of conducting our business, including certain environmental claims and employee-related matters, and we expect that we will be named defendants in similar lawsuits, investigations and claims in the future. While the outcome of these lawsuits, investigations and claims cannot be predicted with certainty, we do not expect these matters to have a material adverse impact on our business, results of operations, cash flows or financial condition. We have not assumed any liabilities arising out of these existing lawsuits, investigations and claims.

### ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

## PART II

### ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our Class A common stock is listed on the New York Stock Exchange (the 'NYSE') under the ticker symbol 'WTTR.' As of February 20, 2023, there were 189 stockholders of record of our Class A common stock.

#### Dividend Policy

On September 7, 2022, the Company announced that our board of directors approved the initiation of a dividend program under which the Company intends to pay regular quarterly dividends. Prior to this announcement, we had not paid dividends to holders of our Class A common stock. On October 27, 2022, our board of directors declared a quarterly cash dividend of $0.05 per share of Class A common stock that was paid on November 17, 2022 to shareholders of record as of the close of business on November 7, 2022. A distribution of $0.05 per unit was also approved for those holders of units of SES Holdings, LLC, who also hold an equal number of shares of Class B common stock of the Company, which was subject to the same payment and record dates. Our future dividend policy is within the discretion of our board of directors, and all future dividend payments are subject to quarterly review and approval by our board of directors, and will depend upon then-existing conditions, including our results of operations and financial condition, capital requirements, business prospects, statutory and contractual restrictions on our ability to pay dividends, including restrictions contained in our Sustainability-Linked Credit Facility and other factors our board of directors may deem relevant.

61

## Securities Authorized for Issuance under Equity Compensation Plans

The Company maintains the Select Energy Services, Inc. 2016 Equity Incentive Plan (as amended, the “2016 Plan”), the Select Energy Services, Inc. Employee Stock Purchase Plan (the “ESPP”), the Nuverra Environmental Solutions, Inc. 2017 Long Term Incentive Plan (the “2017 Plan”), and the Nuverra Environmental Solutions, Inc. 2018 Restricted Stock Plan for Directors (the “2018 Plan” and, together with the 2017 Plan, the “Assumed Plans”). The 2016 Plan was approved by our stockholders prior to our initial public offering but has not been approved by our public stockholders; however, the first amendment to the 2016 Plan was approved by our public stockholders in October 2017 and the second amendment to the 2016 Plan was approved by our public stockholders in May 2020. The ESPP was approved by our stockholders on May 4, 2018. On November 3, 2022, our board of directors approved an amendment to the ESPP, which suspended all offerings on or after December 1, 2022. Our board of directors reserves the right to recommence offerings pursuant to its discretion and the terms of the ESPP. The Assumed Plans were assumed in our acquisition of Nuverra, were not approved by our stockholders, and may only be used to grant awards to legacy Nuverra employees and service providers. See “Note 12-Equity-Based Compensation” for a description of our equity compensation plans.

The following table provides information about our Class A common stock that may be issued under our equity compensation plans as of December 31, 2022.

| Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted-average exercise price of outstanding options, warrants and rights(1) (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))(2) (c) |  |
| --- | --- | --- | --- | --- |
|  | Equity compensation plans approved by security holders | 1,666,872 | $17.10 | 2,894,308 |
| Equity compensation plans not approved by security holders | - (3) | - | 70,505 (4) |  |
| Total | 1,666,872 | $17.10 | 2,964,813 |  |

(1) Only stock options have an exercise price.
(2) Reflects the total number of shares of Class A common stock (i) subject to outstanding rights under the ESPP and (ii) remaining available for issuance under the 2016 Plan and the ESPP. For the avoidance of doubt, while shares of Class A common stock technically remain available for issuance under the ESPP, the Company does not currently have an offering period open with respect to the ESPP. Shares remaining available under the 2016 Plan may be issued other than with respect to options, warrants or rights.
(3) All awards assumed under the Assumed Plans have either fully vested or been forfeited such that as of December 31, 2022, there were no outstanding awards under the Assumed Plans.
(4) Reflects the total number of shares of Class A common stock remaining available for issuance under the Assumed Plans to legacy Nuverra employees and service providers. Shares remaining available under the Assumed Plans may be issued other than with respect to options, warrants or rights.

## Features of the Assumed Plans

On February 23, 2022, the Company assumed the Assumed Plans and certain equity awards outstanding under the Assumed Plans in connection with the Nuverra Acquisition. Under the 2017 Plan, the Company may grant to certain eligible participants who were employees, directors or other service providers of Nuverra prior to the Nuverra Acquisition options, stock appreciation rights, restricted stock, restricted stock units, stock awards, dividend equivalents, other stock-based awards, cash awards, substitute awards, performance awards, or any combination of the foregoing, with respect to up to 1,772,058 shares of Nuverra common stock. Under the 2018 Plan, the Company may grant to certain eligible participants who were directors of Nuverra prior to the Nuverra Acquisition restricted stock awards with respect to up to 100,000 shares of Nuverra common stock. The shares remaining available for issuance under the

62

Assumed Plans were converted into shares of the Company’s Class A common stock at a conversion rate of one Nuverra share to 0.2551 shares of the Company’s Class A common stock such that at the time of the Nuverra Acquisition an aggregate of 131,110 shares of the Company’s Class A common stock was available for issuance with respect to assumed awards and future awards under the 2017 Plan and an aggregate of 24,984 shares of the Company’s Class A common stock was available for issuance with respect to assumed awards and future awards under the 2018 Plan.

The aggregate number of shares of the Company’s Class A common stock available for issuance under the Assumed Plans will be reduced by one share of the Company’s Class A common stock for every one share of the Company’s Class A common stock subject to an award granted under the Assumed Plans. If any award granted under the 2017 Plan (in whole or in part) is cancelled, forfeited, exchanged, settled in cash, or otherwise terminated, the shares of the Company’s Class A common stock subject to such award will again be available at a rate of one share of the Company’s Class A common stock for every one share of the Company’s Class A common stock subject to such award, and if any award granted under the 2018 Plan (in whole or part) is forfeited, the shares of the Company’s Class A common stock subject to such award will again be available at a rate of one share of the Company’s Class A common stock for every one share of the Company’s Class A common stock subject to such award. The Company registered the securities issuable under the Assumed Plans by filing a registration statement on Form S-8 with the Securities and Exchange Commission on February 23, 2022. As of December 31, 2022, the maximum number of shares of the Company’s Class A common stock available for future issuance under the 2017 Plan is 55,769 and under the 2018 Plan is 14,736.

### Issuer Purchases of Equity Securities

| Period | Total Number of Shares Purchased | Average Price Paid per Share (1) | Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (2) |
| --- | --- | --- | --- |
| October 1 through October 31, 2022 | - | $ - | $8,596,156 |
| November 1 through November 31, 2022 | 27,564 | $8.88 | $8,596,156 |
| December 1 through December 31, 2022 | - | $ - | $8,596,156 |

(1) The average price paid per share includes commissions.

(2) Our board of directors has approved programs permitting the Company to repurchase a portion of its outstanding shares of Class A common stock in the open market not to exceed $25.0 million in the aggregate.

63

**ITEM 6. RESERVED**

64

## ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

*The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes thereto in Part II, Item 8. 'Financial Statements and Supplementary Data'. This discussion and analysis contains forward-looking statements based on our current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors as described under 'Cautionary Note Regarding Forward-Looking Statements' and Part I, Item 1A. 'Risk Factors.' We assume no obligation to update any of these forward-looking statements.*

### Overview

We are a leading provider of comprehensive water-management and chemical solutions to the oil and gas industry in the U.S. As a leader in the water solutions industry, we place the utmost importance on safe, environmentally responsible management of oilfield water throughout the lifecycle of a well. Additionally, we believe that responsibly managing water resources through our operations to help conserve and protect the environment in the communities in which we operate is paramount to our continued success.

In many regions of the country, there has been growing concern about the volumes of water required for new oil and gas well completions, as well as volumes of water injected into subterranean zones where seismicity can be triggered. Working with our customers and local communities, we strive to be an industry leader in the development of cost-effective alternatives to fresh water. Specifically, we offer services that enable our E&P customers to treat and reuse produced water, thereby reducing the demand for fresh water while also reducing the volumes of saltwater that must be disposed by injection. In many areas, we have also acquired sources of non-potable water, such as brackish water or municipal or industrial effluent. Through our expertise in chemical technologies and our FluidMatchTM design solutions, we provide water profiling and fluid assessment services for our customers to support the optimization of their fluid systems, enabling the economic use of these alternative sources. We also work with our E&P customers to lower their emissions through methane combustion technology, and reduce the environmental footprint of their operations through the use of temporary hose and permanent pipeline systems, which are supported by extensive monitoring and automation technology solutions that provide safer and more efficient water resource management. These solutions significantly reduce the demand for trucking operations, thereby reducing gasoline and diesel exhaust emissions, increasing safety and decreasing traffic congestion in nearby communities.

### Recent Trends and Outlook

On September 7, 2022, the Company announced that our board of directors approved the initiation of a dividend program under which the Company intends to pay regular quarterly dividends. On January 27, 2023, our board of directors declared our most recent quarterly cash dividend, of $0.05 per share of Class A common stock, that was paid on February 17, 2023 to shareholders of record as of the close of business on February 7, 2023. A distribution of $0.05 per unit was also approved for those holders of units of SES Holdings, LLC, who also hold an equal number of shares of Class B common stock of the Company, which was subject to the same payment and record dates. All future dividend payments are subject to quarterly review and approval by the board of directors.

Between July 2021 and December 2022, Select completed seven business combinations, one asset acquisition and the buyout of all noncontrolling interests in a recycling system joint venture. Collectively these acquisitions expanded our revenue base and service offerings with many of our key customers and increased our overall service offerings within multiple basins. Continuing the integration of the acquired assets and operations will be a major focus of ours during 2023. Our integration and related efforts include, but are not limited to, increasing revenue through strategic market share gains, investing around acquired infrastructure, regional service line expansion and achieving operational synergies. These operational synergies are expected to be realized by efficiently connecting complementary infrastructure assets with one another, pairing infrastructure assets with related services, realizing cost synergies, and selling excess assets.

65

While the ongoing effects of the COVID-19 pandemic on our operations have decreased in recent quarters, this pandemic has had a material negative impact on our financial results. While we have seen economic recovery and higher oil prices through the year ended December 31, 2022, such negative impact may continue well beyond the containment of the pandemic until global GDP levels, associated oil demand and resulting oilfield activity fully rebound. While we have seen oilfield activity improve considerably and global inventories rapidly normalize with continued demand growth since the low point experienced in 2020, considerable uncertainty remains. Even with this recent recovery however, we cannot provide assurance that our assumptions used to estimate our future financial results will be correct, given the unpredictable nature of the current market environment after the recent elevated volatility in demand for oil and demand for our services. As a consequence, our ability to accurately forecast our activity and profitability is uncertain.

In February 2022, Russia launched a large-scale invasion of Ukraine that has led to significant armed hostilities. As a result, the U.S., the United Kingdom, the member states of the European Union and other public and private actors have levied severe sanctions on Russian financial institutions, businesses and individuals. This conflict, and the resulting sanctions and concerns regarding global energy security, has contributed to increases and volatility in the prices for oil and natural gas throughout 2022, with the posted price for WTI reaching a high of $123.64 per barrel during the year ended December 31, 2022. Such volatility may lead to a more difficult investing and planning environment for us and our customers. While the near-term impact of these events resulted in higher oil and gas prices during the year ended December 31, 2022, the ultimate geopolitical and macroeconomic consequences of this invasion and associated sanctions cannot be predicted, and such events, or any further hostilities in Ukraine or elsewhere, could severely impact the world economy and may adversely affect our financial condition.

As a result of reduced oil inventories driven by the economic recovery and oil demand growth in much of the world, as well as supply uncertainties heightened by the Russia/Ukraine war, oil and gas prices increased notably in the year ended December 31, 2022 as compared to the year ended December 31, 2021. During the year ended December 31, 2022, the average spot price of WTI crude oil was $94.90 versus an average price of $68.16 for the year ended December 31, 2021. The average Henry Hub natural gas spot price during the year ended December 31, 2022, was $6.42 versus an average of $3.91 for the year ended December 31, 2021. While current price levels have materially reduced from these 2022 full year averages, current price levels remain supportive of our customers’ drilling and completion programs in the major shale basins.

Many of our customers have demonstrated their resolve to manage their capital spending within budgets and cash flow from operations and increase redemptions of debt and/or returns of capital to investors. Additionally, consolidation among our customers can disrupt our market in the near-term and the resulting demand for our services. Overall however, the financial health of the oil and gas industry and many of our customers specifically, as reflected in debt metrics, recent capital raises, and equity valuations, greatly improved over the year ended December 31, 2021 and through the year ended December 31, 2022.

From an operational standpoint, many of the recent trends still apply to ongoing unconventional oil and gas development. The continued trend towards multi-well pad development, executed within a limited time frame, has increased the overall complexity of well completions, while increasing fracturing efficiency and the use of lower-cost in-basin sand has decreased total costs for our customers. However, we note the continued efficiency gains in the well completions process can limit the days we spend on the wellsite and, therefore, negatively impact the total revenue opportunity for certain of our services utilizing day-rate pricing models.

This multi-well pad development, combined with recent upstream acreage consolidation and the growing trends around the recycling and reuse applications of produced water provides a significant opportunity for companies like us that can deliver increasingly complex solutions for our E&P customers across the full completion and production lifecycle of wells. While these trends have advanced the most in the Permian Basin to date, they are beginning to emerge in other basins as well.

The trend of increased reuse of produced water will require additional chemical treatment solutions, and we have a dedicated team of specialists focused every day on developing and deploying innovative water treatment and reuse services for our customers. Our FluidMatchTM design solutions enable our customers to economically use these alternative sources to optimize their fluid systems by providing water profiling and fluid assessment services working

66

towards real-time. This trend also supports more complex “on-the-fly” solutions that treat, proportion, and blend various streams of water and chemicals at the wellsite. This complexity favors service companies able to provide advanced technology solutions. Ultimately, we intend to play an important role in the advancement of water and chemical solutions that are designed to meet the sustainability goals of key stakeholders.

Our water logistics, treatment, and chemical application expertise, in combination with advanced technology solutions, are applicable to other industries beyond oil and gas. We are working to further commercialize our services in other businesses and industries through our industrial solutions group.

On November 1, 2022, the Company completed the acquisition of Breakwater in a stock-for-stock transaction for total consideration of $105.3 million based on the closing price of the Company’s shares of Class A common stock on October 31, 2022. The consideration transferred consisted of 9,181,144 shares of Class A common stock, $10.5 million of debt that was paid off at closing as part of consideration exchanged, $3.7 million in change-of-control payments and $2.4 million in seller transaction costs. The acquisition strengthened Select’s geographic footprint with a unique set of water logistics and infrastructure assets, particularly in the Permian and Eagle Ford regions. The acquisition included a controlling interest in the Big Spring Recycling System (“BSRS”), which includes significant pipeline, storage, recycling and disposal infrastructure assets in the Midland Basin.

On December 2, 2022, the Company acquired all noncontrolling interests in BSRS valued at approximately $7.3 million based on the closing price of the Company’s shares of Class A common stock on December 1, 2022, and $22.0 million in cash, for total consideration of $29.3 million. The consideration transferred included 910,612 shares of Class A common stock. This equity transaction enabled Select to simplify the BSRS operations and decision-making processes and provided potential revenue and cost synergies. On December 2, 2022, Select also acquired certain assets and revenue-producing contracts in the Midland Basin from a third party for $6.1 million, inclusive of $0.1 million of acquisition-related costs. Many of the assets acquired are adjacent to the BSRS, with connectivity into the BSRS providing future revenue and cost synergies.

On November 1, 2022, the Company completed the acquisition of certain saltwater disposal assets from Cypress for total consideration of $9.2 million based on the closing price of the Company’s shares of Class A common stock on October 31, 2022. The consideration transferred consisted of 952,753 shares of Class A common stock. The acquired Cypress operations consist of eight saltwater disposal facilities with daily permitted capacity of 85,000 barrels per day across North Dakota. The acquisition strengthened Select’s geographic footprint with a portfolio of strategic wastewater disposal facilities in the Bakken region, with the majority of Cypress’s volumes being delivered through high volume contracted gathering pipeline infrastructure.

On February 23, 2022, the Company completed the acquisition of Nuverra for total consideration of $35.9 million based on the closing price of the Company’s shares of Class A common stock on February 23, 2022. The consideration transferred consisted of 4,203,323 shares of Class A common stock. The acquisition strengthened Select’s geographic footprint with a unique set of water logistics and infrastructure assets, particularly in the Bakken, Haynesville and Northeast, while continuing to expand Select’s production-related revenues. Select also acquired a 60-mile underground twin pipeline network in the Haynesville Shale in Texas and Louisiana. This pipeline network is used for the collection of produced water for transport to interconnected disposal wells and the delivery or re-delivery of water from water sources to operator locations for use in well completion activities. Additionally, Nuverra operates a landfill facility in North Dakota located on a 50-acre site. The facility provides a unique opportunity for Select to expand its logistics capabilities into a new service offering. The acquisition resulted in a bargain purchase gain, as Nuverra was experiencing financial distress and actively evaluating strategic alternatives leading up to the transaction.

## Our Segments

Our services are offered through three reportable segments: (i) Water Services; (ii) Water Infrastructure; and (iii) Oilfield Chemicals.

- *Water Services.* The Water Services segment consists of the Company’s services businesses, including water transfer, flowback and well testing, fluids hauling, water monitoring, water containment and water

67

network automation, primarily serving E&P companies. Additionally, this segment includes the operations of our accommodations and rentals business.

- *Water Infrastructure.* The Water Infrastructure segment consists of the Company's infrastructure assets, including operations associated with our water sourcing and pipeline infrastructure, our water recycling solutions, and our produced water gathering systems and SWDs, as well as solids disposal facilities, primarily serving E&P companies.
- *Oilfield Chemicals.* The Oilfield Chemicals segment provides technical solutions, products and expertise related to chemical applications in the oil and gas industry. We develop, manufacture, manage logistics and provide a full suite of chemicals used in hydraulic fracturing, stimulation, cementing, pipelines and well completions for customers ranging from pressure pumpers to major integrated and independent oil and gas producers. This segment also utilizes its chemical experience and lab testing capabilities to customize tailored water treatment solutions designed to optimize the fracturing fluid system in conjunction with the quality of water used in well completions.

## How We Generate Revenue

We currently generate the majority of our revenue through our water-management services associated with well completions, provided through our Water Services and Water Infrastructure segments. The majority of this revenue is realized through customer agreements with fixed pricing terms and is recognized when delivery of services is provided, generally at our customers' sites. While we have some long-term pricing arrangements, particularly in our Water Infrastructure segment, most of our water and water-related services are priced based on prevailing market conditions, giving due consideration to the specific requirements of the customer.

We also generate revenue by providing completion and specialty chemicals through our Oilfield Chemicals segment. We invoice the majority of our Oilfield Chemicals customers for services provided based on the quantity of chemicals used or pursuant to short-term contracts as the customers' needs arise.

## Costs of Conducting Our Business

The principal expenses involved in conducting our business are labor costs, vehicle and equipment costs (including depreciation, repair, rental and maintenance and leasing costs), raw materials and water sourcing costs and fuel costs. Our fixed costs are relatively low. Most of the costs of serving our customers are variable, i.e., they are incurred only when we provide water and water-related services or chemicals and chemical-related services to our customers.

Labor costs associated with our employees and contract labor comprise the largest portion of our costs of doing business. We incurred labor and labor-related costs of $476.2 million, $285.7 million and $243.6 million for the years ended December 31, 2022, 2021 and 2020, respectively. The majority of our recurring labor costs are variable and dependent on the then-current market environment and are incurred only while we are providing our operational services. We also incur costs to employ personnel to sell and supervise our services and perform maintenance on our assets, which is not directly tied to our level of business activity. Additionally, we incur selling, general and administrative costs for compensation of our administrative personnel at our field sites and in our operational and corporate headquarters, as well as for third-party support, licensing and services.

We incur significant vehicle and equipment costs in connection with the services we provide, including depreciation, repairs and maintenance, rental and leasing costs. We incurred vehicle and equipment costs of $266.6 million, $165.1 million and $157.6 million for the years ended December 31, 2022, 2021 and 2020, respectively.

We incur raw material costs in manufacturing our chemical products, as well as for water that we source for our customers. We incurred raw material costs of $300.8 million, $209.7 million and $154.2 million for the years ended December 31, 2022, 2021 and 2020, respectively.

68

We incur variable transportation costs associated with our service lines, predominately fuel and freight. We incurred fuel and freight costs of $118.1 million, $58.5 million and $35.6 million for the years ended December 31, 2022, 2021 and 2020, respectively. Rising fuel prices impact our transportation costs, which affect the pricing and demand for our services and, therefore, our results of operations.

## How We Evaluate Our Operations

We use a variety of operational and financial metrics to assess our performance. Among other measures, management considers each of the following:

- Adjusted EBITDA.

### Revenue

We analyze our revenue and assess our performance by comparing actual monthly revenue to our internal projections and across periods. We also assess incremental changes in revenue compared to incremental changes in direct operating costs and selling, general and administrative expenses across our reportable segments to identify potential areas for improvement, as well as to determine whether segment performance is meeting management’s expectations.

### Gross Profit

To measure our financial performance, we analyze our gross profit, which we define as revenues less direct operating expenses (including depreciation and amortization expenses). We believe gross profit provides insight into profitability and the true operating performance of our assets. We also compare gross profit to prior periods and across segments to identify trends as well as underperforming segments.

### Gross Margins

Gross margins provide an important gauge of how effective we are at converting revenue into profits. This metric works in tandem with gross profit to ensure that we do not seek to increase gross profit at the expense of lower margins, nor pursue higher gross margins at the expense of declining gross profits. We track gross margins by segment and service line and compare them across prior periods and across segments and service lines to identify trends as well as underperforming segments.

### EBITDA and Adjusted EBITDA

We view EBITDA and Adjusted EBITDA as important indicators of performance. We define EBITDA as net income/(loss), plus interest expense, income taxes, and depreciation and amortization. We define Adjusted EBITDA as EBITDA plus/(minus) loss/(income) from discontinued operations, plus any impairment charges or asset write-offs pursuant to generally accepted accounting principles in the U.S. (“GAAP”), plus non-cash losses on the sale of assets or subsidiaries, non-recurring compensation expense, non-cash compensation expense, and non-recurring or unusual expenses or charges, including severance expenses, transaction costs, or facilities-related exit and disposal-related expenditures, plus/(minus) foreign currency losses/(gains) and plus/(minus) losses/(gains) on unconsolidated entities less bargain purchase gains from business combinations. The adjustments to EBITDA are generally consistent with such adjustments described in our Sustainability-Linked Credit Facility. See “-Comparison of Non-GAAP Financial

69

Measures-EBITDA and Adjusted EBITDA” for more information and a reconciliation of EBITDA and Adjusted EBITDA to net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP.

### **Factors Affecting the Comparability of Our Results of Operations to Our Historical Results of Operations**

Our future results of operations may not be comparable to our historical results of operations for the periods presented, primarily for the reasons described below and those described in “-Recent Trends and Outlook” above.

#### **Acquisition Activity**

As described above, we continuously evaluate potential investments, particularly in water infrastructure and other water-related services and technology. To the extent we consummate acquisitions, any incremental revenues or expenses from such transactions are not included in our historical results of operations.

Between July 2021 and December 2022, we completed seven business combinations, one asset acquisition and the buyout of all noncontrolling interests in a recycling system joint venture. Our historical financial statements for periods prior to the respective date each acquisition was completed do not include the results of operations of such acquisition. See “-Recent Trends and Outlook” and “Note 3-Acquisitions” for a description of these transactions.

70

## Results of Operations

The following table sets forth our results of operations, including revenue by segment, for the year ended December 31, 2022 compared to the year ended December 31, 2021. The results of operations for the year ended December 31, 2021 compared to the year ended December 31, 2020 is set forth in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

### Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021

|  | Year ended December 31, |  | Change |  |
| --- | --- | --- | --- | --- |
|  | 2022 | 2021 | Dollars | Percentage |
| (in thousands) |  |  |  |  |
| Revenue |  |  |  |  |
| Water Services | $799,369 | $394,075 | $405,294 | 102.8% |
| Water Infrastructure | 270,412 | 154,789 | 115,623 | 74.7% |
| Oilfield Chemicals | 317,639 | 215,756 | 101,883 | 47.2% |
| Total revenue | 1,387,420 | 764,620 | 622,800 | 81.5% |
| Costs of revenue |  |  |  |  |
| Water Services | 644,097 | 346,730 | 297,367 | 85.8% |
| Water Infrastructure | 203,413 | 115,887 | 87,526 | 75.5% |
| Oilfield Chemicals | 265,648 | 191,115 | 74,533 | 39.0% |
| Depreciation and amortization | 113,507 | 90,028 | 23,479 | 26.1% |
| Total costs of revenue | 1,226,665 | 743,760 | 482,905 | 64.9% |
| Gross profit | 160,755 | 20,860 | 139,895 | 670.6% |
| Operating expenses |  |  |  |  |
| Selling, general and administrative | 118,935 | 83,076 | 35,859 | 43.2% |
| Depreciation and amortization | 2,209 | 2,430 | (221) | (9.1)% |
| Lease abandonment costs | 449 | 894 | (445) | (49.8)% |
| Total operating expenses | 121,593 | 86,400 | 35,193 | 40.7% |
| Income (loss) from operations | 39,162 | (65,540) | 104,702 | (159.8)% |
| Other income (expense) |  |  |  |  |
| Gain (loss) on sales of property and equipment and divestitures, net | 2,192 | (2,068) | 4,260 | 206.0% |
| Interest expense, net | (2,700) | (1,711) | (989) | 57.8% |
| Foreign currency (loss) gain, net | (8) | 2 | (10) | NM |
| Bargain purchase gain | 13,352 | 18,985 | (5,633) | NM |
| Other | 4,726 | 673 | 4,053 | NM |
| Income (loss) before income tax (expense) benefit | 56,724 | (49,659) | 106,383 | 214.2% |
| Income tax (expense) benefit | (957) | (147) | (810) | NM |
| Equity in losses of unconsolidated entities | (913) | (279) | (634) | NM |
| Net income (loss) | $54,854 | $(50,085) | $104,939 | 209.5% |

### Revenue

Our revenue increased $622.8 million, or 81.5%, to $1.4 billion for the year ended December 31, 2022, compared to $764.6 million for the year ended December 31, 2021. The increase was composed of a $405.3 million increase in Water Services revenue, a $115.6 million increase in Water Infrastructure revenue and a $101.9 million increase in Oilfield Chemicals revenue. These increases were driven primarily by higher demand for our services coupled with increased pricing in comparison to the year ended December 31, 2021. Included in the increases in Water

71

Services and Water Infrastructure were incremental revenue contributions from the Complete, Agua Libre and Basic, HB Rentals, Nuverra, Breakwater and Cypress acquisitions. For the year ended December 31, 2022, our Water Services, Water Infrastructure and Oilfield Chemicals revenues constituted 57.6%, 19.5% and 22.9% of our total revenue, respectively, compared to 51.6%, 20.2% and 28.2%, respectively, for the year ended December 31, 2021. The revenue changes by reportable segment are as follows:

*Water Services.* Revenue increased $405.3 million, or 102.8%, to $799.4 million for the year ended December 31, 2022, compared to $394.1 million for the year ended December 31, 2021. The increase was primarily attributable to higher demand for our services coupled with increased pricing in comparison to the year ended December 31, 2021. The increase was also impacted by incremental revenue contributed by the Complete, Basic, HB Rentals, Nuverra and Breakwater acquisitions.

*Water Infrastructure.* Revenue increased by $115.6 million, or 74.7%, to $270.4 million for the year ended December 31, 2022, compared to $154.8 million for the year ended December 31, 2021. The increase was primarily attributable to higher demand for our services in comparison to the year ended December 31, 2021. The increase was also modestly impacted by incremental revenue contributed by the Complete, Agua Libre, Nuverra, Breakwater and Cypress acquisitions.

*Oilfield Chemicals.* Revenue increased $101.9 million, or 47.2%, to $317.6 million for the year ended December 31, 2022, compared to $215.8 million for the year ended December 31, 2021. The increase was primarily attributable to higher demand for our services, particularly our proprietary friction reducer product offerings, in comparison to the year ended December 31, 2021.

## Costs of Revenue

Costs of revenue increased $482.9 million, or 64.9%, to $1.2 billion for the year ended December 31, 2022, compared to $743.8 million for the year ended December 31, 2021. The increase was comprised of a $297.4 million increase in Water Services costs, a $87.5 million increase in Water Infrastructure costs and a $74.5 million increase in Oilfield Chemicals costs. Depreciation and amortization expense also increased by $23.5 million. For the year ended December 31, 2022, inflation also impacted variable costs for labor, fuel and services. We were able to pass some of these increased costs to customers with surcharges and pricing increases.

*Water Services.* Costs of revenue increased $297.4 million, or 85.8%, to $644.1 million for the year ended December 31, 2022, compared to $346.7 million for the year ended December 31, 2021. Cost of revenue as a percent of revenue decreased to 80.6% from 88.0%, due primarily to economies of scale from higher revenue activity

*Water Infrastructure.* Costs of revenue increased $87.5 million, or 75.5%, to $203.4 million for the year ended December 31, 2022, compared to $115.9 million for the year ended December 31, 2021. Cost of revenue as a percent of revenue slightly increased to 75.2% from 74.9%, due to increased pricing for many water sources partially offset by a higher relative contribution of high margin disposal revenue.

*Oilfield Chemicals.* Costs of revenue increased $74.5 million, or 39.0%, to $265.6 million for the year ended December 31, 2022, compared to $191.1 million for the year ended December 31, 2021. Cost of revenue as a percent of revenue decreased to 83.6% from 88.6%, due primarily to higher utilization and cost absorption at our manufacturing facilities.

*Depreciation and Amortization.* Depreciation and amortization expense increased $23.5 million, or 26.1%, to $113.5 million for the year ended December 31, 2022, compared to $90.0 million for the year ended December 31, 2021, due primarily to a higher fixed asset base related to acquisitions occurring after June 30, 2021.

72

# Gross Profit

Gross profit was $160.8 million for the year ended December 31, 2022 compared to $20.9 million for the year ended December 31, 2021. Gross profit increased by $107.9 million in our Water Services segment, $28.1 million in our Water Infrastructure segment and $27.4 million in our Oilfield Chemicals segment. Partially offsetting the increase in gross profit was a $23.5 million increase in depreciation and amortization expense. Gross margin as a percent of revenue was 11.6% and 2.7% during the years ended December 31, 2022 and December 31, 2021, respectively.

# Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $35.9 million, or 43.2%, to $118.9 million for the year ended December 31, 2022, compared to $83.1 million for the year ended December 31, 2021. The increase was due primarily to a $6.1 million increase in equity-based compensation costs, $5.9 million from higher wages, associated payroll taxes and employer 401k match contributions, $5.2 million of costs from the additional personnel and related back-office expenses as a result of our recent acquisitions, comprised of $1.9 million of personnel costs and $3.3 million of other back-office costs, a $4.4 million increase in short-term incentive compensation cost, a $3.0 million increase in business development costs, $2.6 million in higher vehicle lease costs, $2.5 million in higher legal and professional fees, a $1.8 million increase in bad debt expense, a $1.3 million increase in travel, meals and entertainment costs, $1.0 million in higher subscription costs, a $1.0 million increase in information technology costs, a $1.0 million increase in insurance costs and $3.2 million from a combination of other expenses partially offset by $3.2 million in severance expense during the year ended December 31, 2021.

# Net Interest Expense

Net interest expense increased by $1.0 million, or 57.8%, to $2.7 million for the year ended December 31, 2022, compared to $1.7 million for the year ended December 31, 2021 due primarily to writing off unamortized deferred debt issuance costs in connection with amending and restating the Prior Credit, lower interest income related to notes receivable that were converted to an equity-method investment and higher interest expense due to borrowings during the year ended December 31, 2022.

# Bargain Purchase Gain

Bargain purchase gain of $13.4 million in 2022 was comprised of $6.7 million related to the Nuverra acquisition and $6.7 million in adjustments related to acquisitions that occurred in 2021. The Nuverra acquisition resulted in a bargain purchase gain as Nuverra was experiencing financial distress and actively evaluating strategic alternatives leading up to the transaction.

Bargain purchase gain of $19.0 million in 2021 was comprised of $9.4 million, $5.9 million and $3.6 million for the Complete, HB Rentals, and Agua Libre and Basic acquisitions, respectively. The Complete and HB Rentals acquisitions resulted in a bargain purchase in part due to the seller recently emerging from bankruptcy and deciding to divest domestic assets and operations and focus on international operations. The Agua Libre and Basic acquisition resulted in a bargain purchase as the seller was distressed and decided to divest its assets and operations to multiple buyers as operations were wound down and the business was shuttered.

# Other

Other income was $4.7 million for the year ended December 31, 2022, compared to $0.7 million for the year ended December 31, 2021. During the year ended December 31, 2022, other income primarily related to the sale of excess assets and assignment to third parties of leased properties with asset retirement obligations acquired in our recent acquisitions as well as the removal of the $1.1 million UltRecovery contingent consideration liability. During the year ended December 31, 2021, other income primarily related to the disposal of asset retirement obligations and the realized gain, partially offset by an unrealized loss, on equity securities sold in 2021.

73

## **Net Income (Loss)**

Net Income (loss) increased by $104.9 million, to a net income of $54.9 million for the year ended December 31, 2022 compared to a net loss of $50.1 million for the year ended December 31, 2021, driven primarily by increased revenue and gross profit due to an increase in demand for our services. This was partially offset by an increase in selling, general and administrative costs of $35.9 million and a smaller bargain purchase gain recorded for the year ended December 31, 2022 compared to the year ended December 31, 2021. The year ended December 31, 2021 was negatively impacted by a significant reduction in demand for our services due to a gradual recovery following the onset of the COVID-19 pandemic.

## **Comparison of Non-GAAP Financial Measures**

We view EBITDA and Adjusted EBITDA as important indicators of performance. We define EBITDA as net income (loss), plus interest expense, income taxes, and depreciation and amortization. We define Adjusted EBITDA, as EBITDA plus/(minus) loss/(income) from discontinued operations, plus any impairment charges or asset write-offs pursuant to GAAP, plus non-cash losses on the sale of assets or subsidiaries, non-recurring compensation expense, non-cash compensation expense, and non-recurring or unusual expenses or charges, including severance expenses, transaction costs, or facilities-related exit and disposal-related expenditures, plus/(minus) foreign currency losses/(gains) and plus/(minus) losses/(gains) on unconsolidated entities less bargain purchase gains from business combinations. The adjustments to EBITDA are generally consistent with such adjustments described in our Sustainability-Linked Credit Facility. See “-Note Regarding Non-GAAP Financial Measures” for more information and a reconciliation of EBITDA and Adjusted EBITDA to net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP.

Our board of directors, management and investors use EBITDA and Adjusted EBITDA to assess our financial performance because it allows them to compare our operating performance on a consistent basis across periods by removing the effects of our capital structure (such as varying levels of interest expense), asset base (such as depreciation and amortization) and items outside the control of our management team. We present EBITDA and Adjusted EBITDA because we believe they provide useful information regarding the factors and trends affecting our business in addition to measures calculated under GAAP.

### ***Note Regarding Non-GAAP Financial Measures***

EBITDA and Adjusted EBITDA are not financial measures presented in accordance with GAAP. We believe that the presentation of these non-GAAP financial measures will provide useful information to investors in assessing our financial performance and results of operations. Net income is the GAAP measure most directly comparable to EBITDA and Adjusted EBITDA. Our non-GAAP financial measures should not be considered as alternatives to the most directly comparable GAAP financial measure. Each of these non-GAAP financial measures has important limitations as an analytical tool due to the exclusion of some but not all items that affect the most directly comparable GAAP financial measures. One should not consider EBITDA or Adjusted EBITDA in isolation or as substitutes for an analysis of our results as reported under GAAP. Because EBITDA and Adjusted EBITDA may be defined differently by other companies in our industry, our definitions of these non-GAAP financial measures may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.

74

The following table sets forth our reconciliation of EBITDA and Adjusted EBITDA to our net (loss) income, which is the most directly comparable GAAP measure, for the years ended December 31, 2022 and 2021. The reconciliation of EBITDA and Adjusted EBITDA for the years ended December 31, 2021 and 2020 is set forth in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

|  | Year Ended December 31, |  |
| --- | --- | --- |
|  | 2022 | 2021 |
|  | (in thousands) |  |
| Net income (loss) | $54,854 | $(50,085) |
| Interest expense, net | 2,700 | 1,711 |
| Income tax expense | 957 | 147 |
| Depreciation and amortization | 115,716 | 92,458 |
| EBITDA | 174,227 | 44,231 |
| Non-cash compensation expenses | 15,570 | 9,469 |
| Non-recurring severance expenses (1) | - | 3,225 |
| Non-cash loss on sale of assets or subsidiaries (2) | 4,400 | 4,596 |
| Non-recurring transaction costs (3) | 11,672 | 5,656 |
| Lease abandonment costs | 449 | 894 |
| Bargain purchase gain | (13,352) | (18,985) |
| Other non-recurring charges (3) | - | 608 |
| Equity in losses of unconsolidated entities | 913 | 279 |
| Foreign currency loss (gain), net | 8 | (2) |
| Non-recurring change in vacation policy (4) | 918 | - |
| Adjusted EBITDA | $194,805 | $49,971 |

(1) For 2021, these costs related to severance costs associated with our former CEO.

(2) For all periods presented, the losses were primarily due to sales of real estate and underutilized, excess or obsolete property and equipment.

(3) For all periods presented, these costs were primarily legal-related due diligence costs as well as costs related to certain acquired subsidiaries.

(4) Due to the various acquisitions entered into the last 18 months, and the workload on our employees, these costs represent a one-time accrual to payout vacation in excess of the allowed unused vacation carryover amount. Previously, any unused vacation in excess of the allowed carryover amount was forfeited at year-end.

EBITDA was $174.2 million for the year ended December 31, 2022 compared to $44.2 million for the year ended December 31, 2021. The $130.0 million increase in EBITDA was driven primarily by higher gross profit of $163.4 million and a $4.3 million increase in net gains from asset sales partially offset by a $35.9 million increase in selling, general and administrative costs. Adjusted EBITDA was $194.8 million for the year ended December 31, 2022 compared to $50.0 million for the year ended December 31, 2021. The $144.8 million increase is primarily attributable to many of the items discussed above.

## Liquidity and Capital Resources

### Overview

Our primary sources of liquidity are cash on hand, borrowing capacity under the Sustainability-Linked Credit Facility, cash flows from operations and proceeds from the sale of excess property and equipment. Our primary uses of capital have been to fund current operations, maintain our asset base, implement technological advancements, make capital expenditures to support organic growth, fund acquisitions and minority investments, and when appropriate, repurchase shares of Class A common stock in the open market. Depending on available opportunities, market conditions and other factors, we may also issue debt and equity securities, in the future, if needed.

75

As of December 31, 2022, we had $16.0 million outstanding bank debt. We prioritize sustained positive free cash flow and a strong balance sheet, and evaluate potential acquisitions and investments in the context of those priorities, in addition to the economics of the opportunity. We believe this approach provides us with additional flexibility to evaluate larger investments as well as improved resilience in a sustained downturn versus many of our peers.

Based on our current cash and cash equivalents balance, operating cash flow, available borrowings under our Sustainability-Linked Credit Facility and the ongoing actions discussed above, we believe that we will be able to maintain sufficient liquidity to satisfy our obligations and remain in compliance with our existing debt covenants through the next twelve months and beyond, prior to giving effect to any future financing that may occur.

We intend to finance most of our capital expenditures, contractual obligations and working capital needs with cash on hand, cash generated from operations and borrowings under our Sustainability-Linked Credit Facility. For a discussion of the Sustainability-Linked Credit Facility, see “-Sustainability-Linked Credit Facility” below. Although we cannot provide any assurance, we believe that our current cash balance, operating cash flow and available borrowings under our Sustainability-Linked Credit Facility will be sufficient to fund our operations for at least the next twelve months.

During the fourth quarter of 2022, we initiated a quarterly dividend and distribution program of $0.05 per share and $0.05 per unit for holders of Class A and Class B shares, respectively. This resulted in a financing outflow of $6.0 million in the fourth quarter of 2022, and this quarterly dividend program is expected to continue into 2023 and beyond. All future dividend payments are subject to quarterly review and approval by our board of directors.

As of December 31, 2022, cash and cash equivalents totaled $7.3 million and we had approximately $206.1 million of available borrowing capacity under our Sustainability-Linked Credit Facility. As of December 31, 2022, the borrowing base under the Sustainability-Linked Credit Facility was $245.0 million, we had $16.0 million in outstanding borrowings, and outstanding letters of credit totaled $22.9 million. As of February 20, 2023, we had $50.0 million in outstanding indebtedness, the borrowing base under the Sustainability-Linked Credit Facility was $228.0 million, the outstanding letters of credit totaled $22.6 million, and the available borrowing capacity under the Sustainability-Linked Credit Facility was $155.4 million.

During 2022, our trade accounts receivable increased from $232.8 million to $430.0 million. The increase was due to increasing revenue, receivables from acquired companies and integration challenges related to our acquisitions. We are focused on improving our overall billings and collections processes in order to reduce our working capital and generate cash that we can employ in our business or return to shareholders.

As of December 31, 2022, we had no material off-balance sheet arrangements. As such, we are not exposed to any material financing, liquidity, market or credit risk that could arise if we had engaged in such financing arrangements.

Our contractual obligations include, among other things, our Sustainability-Linked Credit Facility and operating leases. Refer to “Note 6-Leases” for operating lease obligations as of December 31, 2022 and “Note 10-Debt” for an update to our Sustainability-Linked Credit Facility as of December 31, 2022.

76

## Cash Flows

The following table summarizes our cash flows for the years ended December 31, 2022 and 2021. The summary of our cash flows for the years ended December 31, 2021 and 2020 is set forth in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

### *Cash Flow Changes Between the Years Ended December 31, 2022 and 2021*

|  | Year ended December 31, |  | Change |  |
| --- | --- | --- | --- | --- |
|  | 2022 | 2021 | Dollars | Percentage |
| (in thousands) |  |  |  |  |
| Net cash provided by (used in) operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $33,231 | $(16,248) | $49,479 | 304.5% |
| Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (53,246) | (64,456) | 11,210 | 17.4% |
| Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (58,451) | (2,542) | (55,909) | (2199.4)% |
| Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (78,466) | (83,246) |  |  |
| Effect of exchange rate changes on cash and cash equivalents . . . | (13) | 8 | (21) | NM |
| Net decrease in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $(78,479) | $(83,238) |  |  |

*Operating Activities.* Net cash provided by operating activities was $33.2 million for the year ended December 31, 2022, compared to cash used in operating activities of $16.2 million for the year ended December 31, 2021. The $49.5 million increase is comprised of an increase of $135.2 million of net income combined with non-cash adjustments, partially offset by $85.7 million of increased working capital primarily due to the timing of collecting trade receivables connected with increased revenue.

*Investing Activities.* Net cash used in investing activities was $53.2 million for the year ended December 31, 2022, compared to $64.5 million for the year ended December 31, 2021. The $11.2 million decrease in net cash used in investing activities was due primarily to a $27.8 million decrease spent on acquisitions, net of cash received during the year ended December 31, 2022 compared to the year ended December 31, 2021, an $18.8 million increase in proceeds received from sales of property and equipment partially offset by a $31.9 million increase in purchases of property and equipment and a $4.4 million increase in investments.

*Financing Activities.* Net cash used in financing activities was $58.5 million for the year ended December 31, 2022, compared to $2.5 million for the year ended December 31, 2021. The $55.9 million increase in cash used in financing activities was primarily due to a $22.0 million purchase of noncontrolling interests, a $19.0 million increase in repurchases of shares of Class A common stock during the year ended December 31, 2022 compared to the year ended December 31, 2021, the pay down of debt, net of borrowings of $6.0 million, dividend and distribution payments of $6.0 million and $2.1 million in debt issuance costs paid during the year ended December 31, 2022.

### **Sustainability-Linked Credit Facility**

On March 17, 2022 (the “Restatement Date”), SES Holdings, a subsidiary of the Company, and Select Energy Services, LLC (“Select LLC”), a wholly-owned subsidiary of SES Holdings, entered into a $270.0 million amended and restated senior secured sustainability-linked revolving credit facility (the “Sustainability-Linked Credit Facility”), by and among SES Holdings, as parent, Select LLC, as borrower and certain of SES Holdings’ subsidiaries, as guarantors, each of the lenders party thereto and Wells Fargo Bank, N.A., as administrative agent, issuing lender and swingline lender (the “Administrative Agent”) (which amended and restated the Prior Credit Agreement dated November 1, 2017). The Sustainability-Linked Credit Facility also has a sublimit of $40.0 million for letters of credit and a sublimit of $27.0 million for swingline loans. Subject to obtaining commitments from existing or new lenders, Select LLC has the option to increase the maximum amount under the senior secured credit facility by $135.0 million during the first three years following the Restatement Date.

77

Our Sustainability-Linked Credit Facility also contains a sustainability adjustments feature that could result in up to a 0.05% increase or reduction to the effective interest rate pursuant to an Applicable Sustainability Margin Adjustment depending on Select LLC’s ability to meet certain sustainability targets and thresholds starting in 2022. For each calendar year, the “Applicable Sustainability Margin Adjustment” will equal the number of basis points (whether positive, negative or zero) equal to the sum of (i) the Applicable Water Stewardship Fee Adjustment plus (ii) Applicable Health and Safety Fee Adjustment (each as defined in the Sustainability-Linked Credit Facility).

The “Applicable Water Stewardship Fee Adjustment” is based on Select LLC’s ability to (i) remain above the Water Stewardship Threshold and (ii) reach the Water Stewardship Target, both metrics which are measured by the total number of barrels of recycled produced water recycled by SES Holdings and its Subsidiaries. The “Applicable Employee Health and Safety Fee Adjustment” is based on Select LLC’s ability to (i) remain above the Employee Health and Safety Threshold and (ii) reach the Employee Health and Safety Target, both metrics which are measured by the total recordable incident rates of employees with respect to SES Holdings and its Subsidiaries.

Refer to “Note 10-Debt” for further discussion of the Sustainability-Linked Credit Facility.

## Tax Receivable Agreements

We intend to fund any obligation under the Tax Receivable Agreements with cash from operations or borrowings under our Sustainability-Linked Credit Facility. With respect to obligations under each of our Tax Receivable Agreements (except in cases where we elect to terminate the Tax Receivable Agreements early, the Tax Receivable Agreements are terminated early due to certain mergers or other changes of control or we have available cash but fail to make payments when due), generally we may elect to defer payments due under the Tax Receivable Agreements if we do not have available cash to satisfy our payment obligations under the Tax Receivable Agreements or if our contractual obligations limit our ability to make these payments. Any such deferred payments under the Tax Receivable Agreements generally will accrue interest.

We intend to account for any amounts payable under the Tax Receivable Agreements in accordance with Accounting Standards Codification (“ASC”) Topic 450, Contingent Consideration. For further discussion regarding such an acceleration and its potential impact, please read Part I, Item 1A. “Risk Factors - Risks Related to Our Organizational Structure - In certain cases, payments under the Tax Receivable Agreements may be accelerated and/or significantly exceed the actual benefits, if any, we realize in respect of the tax attributes subject to the Tax Receivable Agreements.”

We have assessed the amount of any liability under the Tax Receivable Agreements required under the provisions of ASC 450 in connection with preparing the consolidated financial statements. We determined that there was no liability related to the Tax Receivable Agreements arising from the corporate reorganization and subsequent exchanges as of December 31, 2022 due to there not being any payments under the Tax Receivable Agreements that are probable under the provisions of ASC 450 within the foreseeable future. The Company would generally expect to recognize the liability under the Tax Receivable Agreements as probable in conjunction with the conclusion that deferred tax assets are more likely than not to be realized and, therefore, part or all of the valuation allowance on the deferred tax assets is released. We believe this correlation is appropriate given the relationship between the likelihood of realization of deferred tax assets and the probability of utilization of certain tax benefits that are subject to the Tax Receivable Agreements.

## Critical Accounting Policies and Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures about any contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Our critical accounting policies are described below to provide a better understanding of how we develop our assumptions and judgments about future events and related estimations and how they can impact our financial statements. The following accounting policies involve critical accounting estimates because they are dependent on our judgment and assumptions about matters that are inherently uncertain.

78

We base our estimates on historical experience and on various other assumptions we believe to be reasonable according to the current facts and circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Estimates and assumptions about future events and their effects are subject to uncertainty and, accordingly, these estimates may change as new events occur, as more experience is acquired, as additional information is obtained, and as the business environment in which we operate changes. We believe the current assumptions, judgments and estimates used to determine amounts reflected in our consolidated financial statements are appropriate, however, actual results may differ under different conditions. This discussion and analysis should be read in conjunction with our consolidated financial statements and related notes included in this Annual Report.

*Goodwill and other intangible assets:* The purchase price of acquired businesses is allocated to its identifiable assets and liabilities based upon estimated fair values as of the acquisition date. Goodwill and other intangible assets are initially recorded at their fair values. Goodwill represents the excess of the purchase price of acquisitions over the fair value of the net assets acquired in a business combination. Our goodwill balance at both December 31, 2022 and 2021 was zero. Goodwill and other intangible assets not subject to amortization are tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. Intangible assets with finite useful lives are amortized either on a straight-line basis over the asset’s estimated useful life or on a basis that reflects the pattern in which the economic benefits of the intangible assets are realized.

*Impairment of goodwill, long-lived assets and intangible assets:* Long-lived assets, such as property and equipment and finite-lived intangible assets, are evaluated for impairment whenever events or changes in circumstances indicate that their carrying value may not be recoverable. Recoverability is measured by a comparison of their carrying amount to the estimated undiscounted cash flows to be generated by those assets. If the undiscounted cash flows are less than the carrying amount, we record impairment losses for the excess of their carrying value over the estimated fair value. Fair value is determined, in part, by the estimated cash flows to be generated by those assets. Our cash flow estimates are based upon, among other things, historical results adjusted to reflect our best estimate of future market rates, utilization levels, and operating performance. Development of future cash flows also requires management to make assumptions and to apply judgment, including the timing of future expected cash flows, using the appropriate discount rates and determining salvage values. The estimate of fair value represents our best estimates of these factors based on current industry trends and reference to market transactions and is subject to variability. Assets are generally grouped at the lowest level of identifiable cash flows. We operate within the oilfield service industry, and the cyclical nature of the oil and gas industry that we serve and our estimates of the period over which future cash flows will be generated, as well as the predictability of these cash flows, can have a significant impact on the estimated fair value of these assets and, in periods of prolonged down cycles, may result in impairment charges. Changes to our key assumptions related to future performance, market conditions and other economic factors could adversely affect our impairment valuation. During the year ended December 31, 2020, we impaired $7.9 million of property and equipment because the carrying values were deemed not recoverable and were comprised of leasehold improvements related to abandoned facilities, abandonment of certain saltwater and fresh water wells and obsolete machinery and equipment.

When applicable, we conduct our annual goodwill impairment tests in the fourth quarter of each year, and whenever impairment indicators arise, by examining relevant events and circumstances which could have a negative impact on our goodwill, such as macroeconomic conditions, industry and market conditions, cost factors that have a negative effect on earnings and cash flows, overall financial performance, acquisitions and divestitures and other relevant entity-specific events. If a qualitative assessment indicates that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then we would be required to perform a quantitative impairment test for goodwill comparing the reporting unit’s carrying value to its fair value. The Company’s reporting units are based on its organizational and reporting structure. In determining fair values for the reporting units, the Company relies primarily on the income, market and cost approaches for valuation. In the income approach, the Company discounts predicted future cash flows using a weighted-average cost of capital calculation based on publicly-traded peer companies. In the market approach, valuation multiples are developed from both publicly-traded peer companies as well as other company transactions. The cost approach considers replacement cost as the primary indicator of value.

If the fair value of a reporting unit is less than its carrying value, impairment is calculated based on the difference between the fair value and carrying value in accordance with our early adoption of Accounting Standards

79

Update (“ASU”) 2017-04- Simplifying the Test for Goodwill Impairment. Application of the goodwill impairment test requires judgment, including the identification of reporting units, allocation of assets (including goodwill) and liabilities to reporting units and determining the fair value. The determination of reporting unit fair value relies upon certain estimates and assumptions that are complex and are affected by numerous factors, including the general economic environment and levels of E&P activity of oil and gas companies, our financial performance and trends and our strategies and business plans, among others. Unanticipated changes, including immaterial revisions, to these assumptions could result in a provision for impairment in a future period. Given the nature of these evaluations and their application to specific assets and time frames, it is not possible to reasonably quantify the impact of changes in these assumptions. During the first quarter of 2020, we recorded $266.9 million of goodwill impairment due to the significant decline in oil prices coupled with the uncertainty associated with future recovery. This impairment brought our goodwill balance to zero.

*Retentions:* We assume risk of loss through deductibles and self-insured retentions, up to certain levels for losses related to general liability, workers’ compensation and employer’s liability, vehicle liability, and health insurance. Our exposure (i.e., the self-insured retention or deductible) per occurrence is $0.5 million for general liability, $0.25 million for workers’ compensation and employer’s liability, $0.25 million for auto liability and $0.3 million for health insurance. We also have an excess loss policy over these coverages with a limit of $100.0 million in the aggregate. Management reviews its estimates of reported and unreported claims and provides for losses through reserves. We use actuarial estimates to record our liability for future periods. If the number of claims or the costs associated with those claims were to increase significantly over our estimates, additional charges to earnings could be necessary to cover required payments. As of December 31, 2022, we estimate the range of exposure to be from $15.3 million to $18.4 million and have recorded liabilities of $16.6 million, which represents management’s best estimate of probable loss related to workers’ compensation and employer’s liability, and auto liability. Additionally, as of December 31, 2022, accrued health insurance and accrued general liabilities were $7.2 million and $0.5 million, respectively.

### **Recent Accounting Pronouncement**

Refer to “Note 2-Significant Accounting Policies” for recent accounting pronouncement.

### **ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

The demand, pricing and terms for oilfield services provided by us are largely dependent upon the level of drilling and completion activity in the U.S. oil and gas industry. The level of drilling and completion activity is influenced by numerous factors over which we have no control, including, but not limited to: global health events, including the COVID-19 pandemic; the supply of and demand for oil and gas; war, economic sanctions and other constraints to global trade and economic growth; current price levels as well as expectations about future prices of oil and gas; the magnitude and timing of capital spending by our customers; the cost of exploring for, developing, producing and delivering oil and gas; the extent to which our E&P customers choose to drill and complete new wells to offset decline from their existing wells; the extent to which our E&P customers choose to invest to grow production; discoveries of new oil and gas reserves; available storage capacity and pipeline and other transportation capacity; weather conditions; domestic and worldwide economic conditions; political instability in oil-producing countries; environmental regulations; technical advances in alternative forms of energy (e.g. wind and solar electricity, electric vehicles) that encourage substitution for or displacement of oil and gas consumption in end-use markets; the price and availability of alternative fuels; the ability of oil and gas producers to raise equity capital and debt financing; merger and acquisition activity and consolidation in our industry, and other factors.

Any combination of these factors that results in sustained low oil and gas prices and, therefore, lower capital spending and / or reduced drilling and completion activity by our customers, would likely have a material adverse effect on our business, financial condition, results of operations and cash flows.

### ***Interest Rate Risk***

As of December 31, 2022, we had $16.0 million outstanding under our Sustainability-Linked Credit Facility. As of February 20, 2023, we had $50.0 million in outstanding indebtedness and $155.4 million of available borrowing

80

capacity under our Sustainability-Linked Credit Facility. Interest is calculated under the terms of our Sustainability-Linked Credit Facility based on our selection, from time to time, of one of the index rates available to us plus an applicable margin that varies based on certain factors. We do not currently have or intend to enter into any derivative arrangements to protect against fluctuations in interest rates applicable to our outstanding indebtedness.

#### **ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA**

The report of our independent registered public accounting firm and our consolidated financial statements and supplementary data are included in this Annual Report beginning on page F-1.

#### **ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE**

None.

#### **ITEM 9A. CONTROLS AND PROCEDURES**

##### **Disclosure Controls and Procedures**

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer ('CEO') (principal executive officer) and chief financial officer ('CFO') (principal financial officer), as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well-designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by SEC Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation of our management, including our CEO and CFO, of the effectiveness of our disclosure controls and procedures as of December 31, 2022. Based on their evaluation, the Company's CEO and CFO have concluded that the Company's disclosure controls and procedures were effective at a reasonable level of assurance as of December 31, 2022.

##### **Management's Annual Report on Internal Control over Financial Reporting**

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive and principal financial officers, or persons performing similar functions, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

81

As permitted by the SEC, we have excluded the business of Breakwater Energy Services, LLC. from our evaluation of the effectiveness of internal control over financial reporting for the year ended December 31, 2022 due to the limited time available to complete their integration and evaluation. See “Note 3-Acquisitions” for additional information on this acquisition. The operations excluded from our evaluation represent approximately 11.9% of our total assets as of December 31, 2022, and 1.1% of our total revenues for the year ended December 31, 2022.

Under the supervision and with the participation of management, including the CEO and CFO, the Company conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting based on the framework in “Internal Control - Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this assessment, our management concluded that our internal control over financial reporting was effective as of December 31, 2022. Grant Thornton LLP, an independent registered public accounting firm, audited the effectiveness of our internal control over financial reporting as of December 31, 2022.

82

# Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during the quarter ended December 31, 2022 which materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We closed several business combinations during the year ended December 31, 2022, as described in “Note 3-Acquisitions” to our consolidated financial statements included in this Annual Report. At this time, we continue to evaluate the business and internal controls and processes of these acquired businesses and are making various changes to their operating and organizational structure based on our business plan. We are in the process of implementing our internal control structure over these acquired businesses. We expect that our evaluation and integration efforts related to those operations will be completed during 2023 and we believe that we will be able to maintain sufficient controls over our financial reporting throughout this integration process.

83

# REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

## Opinion on internal control over financial reporting

We have audited the internal control over financial reporting of Select Energy Services, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2022, based on criteria established in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in the 2013 Internal Control-Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2022, and our report dated February 22, 2023 expressed an unqualified opinion on those financial statements.

## Basis for opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting (“Management’s Report”). Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Our audit of, and opinion on, the Company’s internal control over financial reporting does not include the internal control over financial reporting of Breakwater Energy Services, LLC, a wholly-owned subsidiary, whose financial statements reflect total assets and revenues constituting 11.9 and 1.1 percent, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2022. As indicated in Management’s Report, Breakwater Energy Services, LLC was acquired during 2022. Management’s assertion on the effectiveness of the Company’s internal control over financial reporting excluded internal control over financial reporting of Breakwater Energy Services, LLC.

## Definition and limitations of internal control over financial reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

84

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ GRANT THORNTON LLP

Dallas, Texas
February 22, 2023

85

# **ITEM 9B. OTHER INFORMATION**

None.

# **ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS**

None.

# **PART III**

# **ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE**

The information required in response to this Item 10 will be set forth in our definitive proxy statement for the 2023 annual meeting of stockholders and is incorporated herein by reference.

# **ITEM 11. EXECUTIVE COMPENSATION**

The information required in response to this Item 11 will be set forth in our definitive proxy statement for the 2023 annual meeting of stockholders and is incorporated herein by reference.

# **ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS**

The information required in response to this Item 12 will be set forth in our definitive proxy statement for the 2023 annual meeting of stockholders and is incorporated herein by reference.

# **ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE**

The information required in response to this Item 13 will be set forth in our definitive proxy statement for the 2023 annual meeting of stockholders and is incorporated herein by reference.

# **ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES**

The information required in response to this Item 14 will be set forth in our definitive proxy statement for the 2023 annual meeting of stockholders and is incorporated herein by reference.

# **PART IV**

# **ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES**

# **(a)(1) and (a)(2) Financial Statements and Financial Statement Schedules**

Our consolidated financial statements are incorporated under Part II, Item 8. “Financial Statements and Supplementary Data” of this Annual Report. For a listing of these statements and accompanying notes, see “Index to Financial Statements” on Page F-1 of this Annual Report.

# **(a)(3) Exhibits**

The exhibits required to be filed or furnished under Item 15 of this Annual Report are set forth below in the Exhibit Index included within this Annual Report.

86

# EXHIBIT INDEX

| Exhibit Number | Description |
| --- | --- |
| 2.1 | Agreement and Plan of Merger, dated as of July 18, 2017, by and among Select Energy Services, Inc., SES Holdings, LLC, Raptor Merger Sub, Inc., Raptor Merger Sub, LLC, Rockwater Energy Solutions, Inc. and Rockwater Energy Solutions, LLC (incorporated by reference herein to Exhibit 2.1 to Select Energy Services, Inc.'s Current Report on Form 8-K, filed July 19, 2017 (File No. 001-38066)). |
| 3.1 | Fourth Amended and Restated Certificate of Incorporation of Select Energy Services, Inc. (incorporated by reference herein to Exhibit 3.1 to Select Energy Services, Inc.'s Current Report on Form 8-K, filed May 15, 2019 (File No. 001-38066)). |
| 3.2 | Second Amended and Restated Bylaws of Select Energy Services, Inc. (incorporated by reference herein to Exhibit 3.2 to Select Energy Services, Inc.'s Current Report on Form 8-K, filed May 15, 2019 (File No. 001-38066)). |
| 4.1 | Form of Stock Certificate (incorporated by reference herein to Exhibit 4.1 to Select Energy Services, Inc.'s Registration Statement on Form S-1, filed March 2, 2017 (Registration No. 333-216404)). |
| 4.2 | Amended and Restated Registration Rights Agreements, dated as of July 18, 2017, by and among Select Energy Services, Inc., SES Legacy Holdings, LLC, Crestview Partners II SES Investment B, LLC, SCF-VI, L.P., SCF-VII, L.P., SCF-VII(A), L.P. and WDC Aggregate LLC (incorporated by reference herein to Exhibit 4.1 to Select Energy Services, Inc.'s Current Report on Form 8-K, filed July 19, 2017 (File No. 001-38066)). |
| 4.3 | Registration Rights Agreement, dated December 20, 2016, by and between Select Energy Services, Inc. and FBR Capital Markets & Co. (incorporated by reference herein to Exhibit 4.3 to Select Energy Services, Inc.'s Registration Statement on Form S-1, filed March 2, 2017 (Registration No. 333-216404)). |
| 4.4 | Assignment and Assumption Agreement, dated November 1, 2017, by and between Select Energy Services, Inc. and Rockwater Energy Solutions, Inc. (incorporated by reference herein to Exhibit 4.1 to Select Energy Services, Inc.'s Current Report on Form 8-K, filed November 2, 2017 (File No. 001-38066)). |
| 4.5 | Registration Rights Agreement, dated February 16, 2017, by and between Rockwater Energy Solutions, Inc. and FBR Capital Markets & Co. (incorporated by reference herein to Exhibit 4.2 to Select Energy Services, Inc.'s Current Report on Form 8-K, filed November 2, 2017 (File No. 001-38066)). |
| 4.6 | Description of Securities Registered Under Section 12 of the Securities Exchange Act of 1934, amended (incorporated by reference herein to Exhibit 4.6 to Select Energy Services, Inc.'s Annual Report on Form 10-K, filed February 25, 2020 (File No. 001-38066)). |
| 10.1 | Amended and Restated Credit Agreement, dated as of March 17, 2022, by and among Select Energy Services, LLC, SES Holdings, LLC, Wells Fargo Bank, N.A., as administrative agent, and the lenders named therein (incorporated by reference herein to Exhibit 10.1 to Select Energy Services, Inc.'s Current Report on Form 8-K, filed March 18, 2022). |

87

†10.2 Select Energy Services, Inc. 2016 Equity Incentive Plan (incorporated by reference herein to Exhibit 10.3 to Select Energy Services, Inc.'s Registration Statement on Form S-1, dated March 2, 2017 (Registration No. 333-216404)).†10.3 First Amendment to Select Energy Services, Inc. 2016 Equity Incentive Plan (incorporated by reference herein to Exhibit 10.2 to Select Energy Services, Inc.'s Quarterly Report on Form 10-Q, filed August 11, 2017 (File No. 001-38066)).†10.4 Second Amendment to Select Energy Services, Inc. 2016 Equity Incentive Plan (incorporated by reference herein to Exhibit 10.1 to Select Energy Services, Inc.'s Current Report on Form 8-K, filed May 14, 2020 (File No. 001-38066)).†10.5 Nuvera Environmental Solutions, Inc. 2017 Long Term Incentive Plan (incorporated by reference herein to Exhibit 99.1 to Select Energy Services, Inc.'s Registration Statement on Form S-8, dated February 23, 2022 (Registration No. 333-262939)).†10.6 Nuvera Environmental Solutions, Inc. 2018 Restricted Stock Plan for Directors (incorporated by reference herein to Exhibit 99.2 to Select Energy Services, Inc.'s Registration Statement on Form S-8 dated February 23, 2022 (Registration No. 333-262939)).†10.7 Form of Indemnification Agreement (incorporated by reference herein to Exhibit 10.4 to Select Energy Services, Inc.'s Registration Statement on Form S-1, dated March 2, 2017 (Registration No. 333-216404)).10.8 Tax Receivable Agreement, dated December 19, 2016, by and among Select Energy Services, Inc., SES Legacy Holdings, LLC and Crestview Partners II GP, L.P. (incorporated by reference herein to Exhibit 10.5 to Select Energy Services, Inc.'s Registration Statement on Form S-1, dated March 2, 2017 (Registration No. 333-216404)).10.9 Amendment No. 1 to Tax Receivable Agreement, dated July 18, 2017, by and among Select Energy Services, Inc., SES Legacy Holdings, LLC and Crestview Partners II GP, L.P. (incorporated by reference herein to Exhibit 10.3 to Select Energy Services, Inc.'s Quarterly Report on Form 10-Q, filed August 11, 2017 (File No. 001-38066)).10.10 Tax Receivable Agreement, dated December 19, 2016, by and among Select Energy Services, Inc., Crestview Partners II SES Investment B, LLC and Crestview Partners II GP, L.P. (incorporated by reference herein to Exhibit 10.6 to Select Energy Services, Inc.'s Registration Statement on Form S-1, dated March 2, 2017 (Registration No. 333-216404)).10.11 Amendment No. 1 to Tax Receivable Agreement, dated July 18, 2017, by and among Select Energy Services, Inc., Crestview Partners II SES Investment B, LLC and Crestview Partners II GP, L.P. (incorporated by reference herein to Exhibit 10.4 to Select Energy Services, Inc.'s Quarterly Report on Form 10-Q, filed August 11, 2017 (File No. 001-38066)).10.12 Eighth Amended and Restated Limited Liability Company Agreement of SES Holdings, LLC (incorporated by reference herein to Exhibit 10.9 to Select Energy Services, Inc.'s Registration Statement on Form S-1, dated March 2, 2017 (Registration No. 333-216404)).10.13 Amendment No. 1 to Eighth Amended and Restated Limited Liability Company Agreement of SES Holdings, LLC. (incorporated by reference herein to Exhibit 10.10 to Select Energy Services, Inc.'s Annual Report on Form 10-K, filed March 1, 2019 (File No. 001-38066)).†10.14 Form of Restricted Stock Unit Grant Notice and Restricted Stock Unit Agreement under the Select Energy Services, Inc. 2016 Equity Incentive Plan (incorporated by reference herein to Exhibit 4.4 to Select Energy Services, Inc.'s Registration Statement on Form S-8, filed April 28, 2017 (Registration No. 333-217561)).

88

†10.15 Form of Stock Option Agreement under the Select Energy Services, Inc. 2016 Equity Incentive Plan (incorporated by reference herein to Exhibit 10.10 to Select Energy Services, Inc.'s Registration Statement on Form S-1, dated March 2, 2017 (Registration No. 333-216404)).

†10.16 Form of Restricted Stock Grant Notice and Restricted Stock Agreement under the Select Energy Services, Inc. 2016 Equity Incentive Plan (incorporated by reference herein to Exhibit 10.13 to Select Energy Services, Inc.'s Annual Report on Form 10-K, filed March 1, 2019 (File No. 001-38066)).

†10.17 Form of Performance Share Unit Grant Notice and Performance Share Unit Agreement under the Select Energy Services, Inc. 2016 Equity Incentive Plan (incorporated by reference herein to Exhibit 10.14 to Select Energy Services, Inc.'s Annual Report on Form 10-K, filed March 1, 2019 (File No. 001-38066)).

†10.18 Global Amendment to Performance Share Unit Grant Notices and Agreements (incorporated by reference herein to Exhibit 10.1 to Select Energy Services, Inc.'s Current Report on Form 8-K, filed January 24, 2020 (File No. 001-38066)).

†10.19 Form of Stock Option Agreement for John Schmitz under the Select Energy Services, Inc. 2016 Equity Incentive Plan (incorporated by reference herein to Exhibit 10.15 to Select Energy Services, Inc.'s Annual Report on Form 10-K, filed March 1, 2019 (File No. 001-38066)).

†10.20 Form of Success Bonus Agreement under the Select Energy Services, Inc. 2016 Equity Incentive Plan (incorporated by reference herein to Exhibit 10.12 to Select Energy Services, Inc.'s Quarterly Report on Form 10-Q, filed May 19, 2017 (File No. 001-38066)).

†10.21 Select Energy Services, Inc. Employee Stock Purchase Plan (incorporated by reference herein to Exhibit 4.3 to Select Energy Services, Inc.'s Registration Statement on Form S-8, filed February 1, 2018 (Registration No. 333-222816)).

†10.22* First Amendment to the Select Energy Services, Inc. Employee Stock Purchase Plan.

†10.23 Employment Agreement between Paul Pistono and Rockwater Energy Solutions, Inc., dated September 4, 2012 (incorporated by reference herein to Exhibit 10.20 to Select Energy Services Inc.'s Annual Report on Form 10-K, filed March 1, 2019 (File No. 001-38066)).

†10.24 First Amendment to Employment Agreement between Paul Pistono, Rockwater Energy Solutions, LLC and Rockwater Energy Solutions Administrative Services, LLC, dated February 21, 2020 (incorporated by reference herein to Exhibit 10.22 to Select Energy Services, Inc.'s Annual Report on Form 10-K, filed February 25, 2020 (File No. 001-38066)).

†10.25 Employment Agreement between Michael Skarke and Select Energy Services, LLC, dated January 14, 2019 (incorporated by reference herein to Exhibit 10.22 to Select Energy Services, Inc.'s Annual Report on Form 10-K, filed March 1, 2019 (File No. 001-38066)).

†10.26 Employment Agreement between Nick Swyka and Select Energy Services, LLC, dated March 1, 2019 (incorporated by reference herein to Exhibit 10.23 to Select Energy Services, Inc.'s Annual Report on Form 10-K, filed March 1, 2019 (File No. 001-38066)).

†10.27 Employment Agreement between Adam Law and Select Energy Services, LLC, dated March 1, 2019 (incorporated by reference herein to Exhibit 10.24 to Select Energy Services, Inc.'s Annual Report on Form 10-K, filed March 1, 2019 (File No. 001-38066)).

†10.28* Transition and Separation Agreement and General Release of Claims by and between Select Energy Services, LLC and Adam Law, dated October 21, 2022.

†10.29 Global Amendment to Performance Share Unit Grant Notices and Agreements (incorporated by reference herein to Exhibit 10.1 to Select Energy Services, Inc.'s Current Report on Form 8-K, filed January 24, 2020 (File No. 001-38066)).

89

†10.30 Form of Letter Agreement (incorporated by reference herein to Exhibit 10.2 to Select Energy Services, Inc.'s Current Report on Form 8-K, filed May 14, 2020 (File No. 001-38066)).†10.31 Form of Performance Share Unit Grant Notice and Performance Share Unit Agreement - Adjusted Free Cash Flow - under the Select Energy Services, Inc. 2016 Equity Incentive Plan (incorporated by reference herein to Exhibit 10.2 to Select Energy Services, Inc.'s Quarterly Report on Form 10-Q, filed May 6, 2020 (File No. 001-38066)).†10.32 Form of Performance Share Unit Grant Notice and Performance Share Unit Agreement - Return on Assets - under the Select Energy Services, Inc. 2016 Equity Incentive Plan (incorporated by reference herein to Exhibit 10.3 to Select Energy Services, Inc.'s Quarterly Report on Form 10-Q, filed May 6, 2020 (File No. 001-38066)).†10.33 Letter Agreement between John D. Schmitz and Select Energy Services, LLC, dated March 1, 2021 (incorporated by reference herein to Exhibit 10.1 to Select Energy Services, Inc.'s Current Report on Form 8-K, filed March 5, 2021).†10.34 Amended and Restated Employment Agreement between Michael Skarke and Select Energy Services, LLC, dated March 1, 2021 (incorporated by reference herein to Exhibit 10.2 to Select Energy Services, Inc.'s Current Report on Form 8-K, filed March 5, 2021).†10.35 Letter Agreement between Michael Skarke and Select Energy Services, Inc., dated March 1, 2021 (incorporated by reference herein to Exhibit 10.3 to Select Energy Services, Inc.'s Current Report on Form 8-K, filed March 5, 2021).†10.36 Employment Agreement between Brian Szymanski and Select Energy Services, LLC, dated March 1, 2021 (incorporated by reference herein to Exhibit 10.4 to Select Energy Services, Inc.'s Quarterly Report on Form 10-Q, filed May 5, 2021).†10.37 Form of Performance Share Unit Grant Notice and Performance Share Unit Agreement - Return on Assets - under the Select Energy Services, Inc. 2016 Equity Incentive Plan (incorporated by reference herein to Exhibit 10.5 to Select Energy Services, Inc.'s Quarterly Report on Form 10-Q, filed May 5, 2021).†10.38 Form of Restricted Stock Grant Notice and Restricted Stock Agreement between John D. Schmitz and Select Energy Services, Inc. under the Select Energy Services, Inc. 2016 Equity Incentive Plan (incorporated by reference herein to Exhibit 10.6 to Select Energy Services, Inc.'s Quarterly Report on Form 10-Q, filed May 5, 2021).†10.39 Form of Special Restricted Stock Grant Notice and Restricted Stock Agreement between John D. Schmitz and Select Energy Services, Inc. under the Select Energy Services, Inc. 2016 Equity Incentive Plan (incorporated by reference herein to Exhibit 10.7 to Select Energy Services, Inc.'s Quarterly Report on Form 10-Q, filed May 5, 2021).†10.40 Form of Performance Share Unit Grant Notice and Performance Share Unit Agreement - Adjusted Free Cash Flow - between John D. Schmitz and Select Energy Services, Inc. under the Select Energy Services, Inc. 2016 Equity Incentive Plan (incorporated by reference herein to Exhibit 10.8 to Select Energy Services, Inc.'s Quarterly Report on Form 10-Q, filed May 5, 2021).†10.41 Form of Performance Share Unit Grant Notice and Performance Share Unit Agreement - Return on Assets - between John D. Schmitz and Select Energy Services, Inc. under the Select Energy Services, Inc. 2016 Equity Incentive Plan (incorporated by reference herein to Exhibit 10.9 to Select Energy Services, Inc.'s Quarterly Report on Form 10-Q, filed May 5, 2021).

90

| †10.42 | Form of Performance Share Unit Grant Notice and Performance Share Unit Agreement - Adjusted EBITDA - under the Select Energy Services, Inc. 2016 Equity Incentive Plan (incorporated by reference herein to Exhibit 10.1 to Select Energy Services, Inc.’s Quarterly Report on Form 10-Q, filed August 4, 2021). |
| --- | --- |
| *21.1 | List of subsidiaries of Select Energy Services, Inc. |
| *23.1 | Consent of Grant Thornton LLP. |
| *31.1 | Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a). |
| *31.2 | Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a). |
| *32.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished herewith. |
| *32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished herewith. |
| *101 | Interactive Data Files |
| *101.INS | iXBRL Instance Document. |
| *101.SCH | iXBRL Taxonomy Extension Schema Document. |
| *101.CAL | iXBRL Taxonomy Extension Calculation Linkbase Document. |
| *101.DEF | iXBRL Taxonomy Extension Definition Linkbase Document. |
| *101.LAB | iXBRL Taxonomy Extension Label Linkbase Document. |
| *101.PRE | iXBRL Taxonomy Extension Presentation Linkbase Document. |
| *101 | The following materials from Select Energy Services, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2022 formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations; (iii) Consolidated Statements of Comprehensive Income (Loss); (iv) Consolidated Statements of Changes in Equity; (v) Consolidated Statements of Cash Flows; and (vi) Notes to Consolidated Financial Statements. |
| 104 | 104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |

* Filed or furnished with this Annual Report on Form 10-K.

** The schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(b)(2). The Company agrees to furnish supplementally a copy of any omitted schedule to the Securities and Exchange Commission upon its request.

† Management contract or compensatory plan or arrangement.

91

# **SIGNATURES**

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

**Select Energy Services, Inc.**

Dated: February 22, 2023

/s/ JOHN D. SCHMITZ

John D. Schmitz

*Chairman, President and Chief Executive Officer*

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities indicated on February 22, 2023.

/s/ JOHN D. SCHMITZ

John D. Schmitz

Chairman, President and Chief Executive Officer
(Principal Executive Officer)

/s/ NICK L. SWYKA

Nick L. Swyka

Chief Financial Officer and Senior Vice President
(Principal Financial Officer)

/s/ BRIAN P. SZYMANSKI

Brian P. Szymanski

Chief Accounting Officer
(Principal Accounting Officer)

/s/ ROBERT V. DELANEY

Robert V. Delaney

Director

/s/ TROY W. THACKER

Troy W. Thacker

Director

/s/ ROBIN FIELDER

Robin Fielder

Director

/s/ DOUGLAS J. WALL

Douglas J. Wall

Director

/s/ RICHARD A. BURNETT

Richard A. Burnett

Director

/s/ GAYLE BURLESON

Gayle Burleson

Director

/s/ LUIS FERNANDEZ-MORENO

Luis Fernandez-Moreno

Director

92

# INDEX TO FINANCIAL STATEMENTS
SELECT ENERGY SERVICES, INC.

|  | Page(s) |
| --- | --- |
| Select Energy Services, Inc. |  |
| Annual Financial Statements |  |
| Report of Independent Registered Public Accounting Firm (PCAOB ID Number 248) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | F-2 |
| Consolidated Balance Sheets as of December 31, 2022 and 2021. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | F-4 |
| Consolidated Statements of Operations for the Years Ended December 31, 2022, 2021 and 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | F-5 |
| Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2022, 2021 and 2020. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | F-6 |
| Consolidated Statements of Changes in Equity for the Years Ended December 31, 2022, 2021 and 2020. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | F-7 |
| Consolidated Statements of Cash Flows for the Years Ended December 31, 2022, 2021 and 2020. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | F-8 |
| Notes to Consolidated Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | F-9 |

F-1

# REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

## Opinion on the financial statements

We have audited the accompanying consolidated balance sheets of Select Energy Services, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), changes in equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 20X2, based on criteria established in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 22, 2023 expressed an unqualified opinion.

## Basis for opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

## Critical audit matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

### *Customer relationships acquired with the Breakwater Energy Services, LLC acquisition*

As described further in Note 3 and Note 9 to the consolidated financial statements, on November 1, 2022, the Company completed the acquisition of Breakwater Energy Services, LLC. The total purchase price consideration was $105.3 million, which allocated $35.6 million to customer relationships, which are separately identifiable, definite-lived, intangible assets. The determination of the fair value of the customer relationships requires management to make significant estimates and assumptions related to forecasts of future revenues, expenses and the discount rate applied. Changes in these assumptions could materially affect the determination of the fair value of the customer relationships. We identified the acquisition date fair value assigned to the customer relationships as a critical audit matter.

F-2

The principal considerations for our determination that the acquired customer relationships are a critical audit matter is that management utilized significant judgment when estimating the fair value assigned to the customer relationships. In turn, auditing management’s judgments regarding the assigned fair value involved a high degree of subjectivity due to the estimation uncertainty of management’s significant judgments.

Our audit procedures related to the estimated fair value assigned to acquired customer relationships included the following, among others.

- We tested the design and operating effectiveness of controls relating to the customer relationship valuation process including testing controls over management’s review of the valuation specialists’ calculations and the completeness and accuracy of the underlying data.
- We tested management’s process for valuing acquired customer relationships, including evaluating the reasonableness of the method and significant assumptions used in the calculations with the assistance of valuation specialists.
- We tested forecasted revenues and operating expenses and whether these forecasts were reasonable and consistent with historical performance and third-party market data.
- We tested the reasonableness of the discount rate applied to the present value of the estimated future cash flows model with the assistance of valuation specialists.

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor since 2016.

Dallas, Texas
February 22, 2023

F-3

# **SELECT ENERGY SERVICES, INC.**  
 **CONSOLIDATED BALANCE SHEETS**  
 (in thousands, except share data)

|  | As of December 31, |  |
| --- | --- | --- |
|  | 2022 | 2021 |
| Assets |  |  |
| Current assets |  |  |
| Cash and cash equivalents | $7,322 | $85,801 |
| Accounts receivable trade, net of allowance for credit losses of $4,918 and $4,401, respectively | 429,983 | 232,824 |
| Accounts receivable, related parties | 5,087 | 219 |
| Inventories | 41,164 | 44,456 |
| Prepaid expenses and other current assets | 34,380 | 31,486 |
| Total current assets | 517,936 | 394,786 |
| Property and equipment | 1,084,005 | 943,515 |
| Accumulated depreciation | (584,451) | (551,727) |
| Total property and equipment, net | 499,554 | 391,788 |
| Right-of-use assets, net | 47,662 | 47,732 |
| Other intangible assets, net | 138,800 | 108,472 |
| Other long-term assets, net | 18,901 | 7,414 |
| Total assets | $1,222,853 | $950,192 |
| Liabilities and Equity |  |  |
| Current liabilities |  |  |
| Accounts payable | $61,539 | $36,049 |
| Accrued accounts payable | 67,462 | 52,051 |
| Accounts payable and accrued expenses, related parties | 3,305 | 1,939 |
| Accrued salaries and benefits | 28,686 | 22,233 |
| Accrued insurance | 26,180 | 13,408 |
| Sales tax payable | 3,056 | 2,706 |
| Accrued expenses and other current liabilities | 23,292 | 19,544 |
| Current operating lease liabilities | 17,751 | 13,997 |
| Current portion of finance lease obligations | 19 | 113 |
| Total current liabilities | 231,290 | 162,040 |
| Long-term operating lease liabilities | 46,388 | 53,198 |
| Long-term debt | 16,000 | - |
| Other long-term liabilities | 45,447 | 39,780 |
| Total liabilities | 339,125 | 255,018 |
| Commitments and contingencies (Note 11) |  |  |
| Class A common stock, $0.01 par value; 350,000,000 shares authorized and 109,389,528 shares issued and outstanding as of December 31, 2022; 350,000,000 shares authorized and 94,172,920 shares issued and outstanding as of December 31, 2021 | 1,094 | 942 |
| Class A-2 common stock, $0.01 par value; 40,000,000 shares authorized; no shares issued or outstanding as of December 31, 2022 and December 31, 2021 | - | - |
| Class B common stock, $0.01 par value; 150,000,000 shares authorized and 16,221,101 shares issued and outstanding as of December 31, 2022 and December 31, 2021 | 162 | 162 |
| Preferred stock, $0.01 par value; 50,000,000 shares authorized; no shares issued and outstanding as of December 31, 2022 and December 31, 2021 | - | - |
| Additional paid-in capital | 1,075,915 | 950,464 |
| Accumulated deficit | (311,194) | (359,472) |
| Total stockholders’ equity | 765,977 | 592,096 |
| Noncontrolling interests | 117,751 | 103,078 |
| Total equity | 883,728 | 695,174 |
| Total liabilities and equity | $1,222,853 | $950,192 |

*The accompanying notes to consolidated financial statements are an integral part of these financial statements.*

F-4

# **SELECT ENERGY SERVICES, INC.**  
 **CONSOLIDATED STATEMENTS OF OPERATIONS**  
 (in thousands, except share and per share data)

|  | Year Ended December 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Revenue |  |  |  |
| Water Services | $799,369 | $394,075 | $319,766 |
| Water Infrastructure | 270,412 | 154,789 | 125,356 |
| Oilfield Chemicals | 317,639 | 215,756 | 159,983 |
| Total revenue | 1,387,420 | 764,620 | 605,105 |
| Costs of revenue |  |  |  |
| Water Services | 644,097 | 346,730 | 291,734 |
| Water Infrastructure | 203,413 | 115,887 | 99,546 |
| Oilfield Chemicals | 265,648 | 191,115 | 143,550 |
| Other | - | - | 740 |
| Depreciation and amortization | 113,507 | 90,028 | 98,800 |
| Total costs of revenue | 1,226,665 | 743,760 | 634,370 |
| Gross profit (loss) | 160,755 | 20,860 | (29,265) |
| Operating expenses |  |  |  |
| Selling, general and administrative | 118,935 | 83,076 | 74,364 |
| Depreciation and amortization | 2,209 | 2,430 | 2,872 |
| Impairment of goodwill and trademark | - | - | 276,016 |
| Impairment and abandonment of property and equipment | - | - | 7,910 |
| Lease abandonment costs | 449 | 894 | 4,350 |
| Total operating expenses | 121,593 | 86,400 | 365,512 |
| Income (loss) from operations | 39,162 | (65,540) | (394,777) |
| Other income (expense) |  |  |  |
| Gain (loss) on sales of property and equipment and divestitures, net | 2,192 | (2,068) | (2,815) |
| Interest expense, net | (2,700) | (1,711) | (2,136) |
| Foreign currency (loss) gain, net | (8) | 2 | 39 |
| Bargain purchase gain | 13,352 | 18,985 | - |
| Other | 4,726 | 673 | (3,519) |
| Income (loss) before income tax (expense) benefit | 56,724 | (49,659) | (403,208) |
| Income tax (expense) benefit | (957) | (147) | 1,476 |
| Equity in losses of unconsolidated entities | (913) | (279) | - |
| Net income (loss) | 54,854 | (50,085) | (401,732) |
| Less: net (income) loss attributable to noncontrolling interests | (6,576) | 7,860 | 63,048 |
| Net income (loss) attributable to Select Energy Services, Inc. | $48,278 | $(42,225) | $(338,684) |
| Net income (loss) per share attributable to common stockholders (Note 17): |  |  |  |
| Class A-Basic | $0.51 | $(0.48) | $(3.98) |
| Class B-Basic | $ - | $ - | $ - |
| Net income (loss) per share attributable to common stockholders (Note 17): |  |  |  |
| Class A-Diluted | $0.50 | $(0.48) | $(3.98) |
| Class B-Diluted | $ - | $ - | $ - |

*The accompanying notes to consolidated financial statements are an integral part of these financial statements.*

F-5

# **SELECT ENERGY SERVICES, INC.**  
 **CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)**  
 **(in thousands)**

|  | Year Ended December 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Net income (loss) | $54,854 | $(50,085) | $(401,732) |
| Comprehensive income (loss) | 54,854 | (50,085) | (401,732) |
| Less: comprehensive (income) loss attributable to noncontrolling interests | (6,576) | 7,860 | 63,048 |
| Comprehensive income (loss) attributable to Select Energy Services, Inc. | $48,278 | $(42,225) | $(338,684) |

*The accompanying notes to consolidated financial statements are an integral part of these financial statements.*

F-6

# **SELECT ENERGY SERVICES, INC.**
**CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY**
(in thousands, except share data)

|  | Class A |  | Class B |  | Additional Paid-In Capital | Retained Earnings (Accumulated Deficit) | Total Stockholders' Equity | Noncontrolling Interests | Total |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | Shares | Common Stock | Shares | Common Stock |  |  |  |  |  |
| Balance as of December 31, 2019 | 87,893,525 | $879 | 16,221,101 | $162 | $914,699 | $21,437 | $937,177 | $175,635 | $1,112,812 |
| ESPP shares issued | 15,132 | - | - | - | 83 | - | 83 | (7) | 76 |
| Equity-based compensation | - | - | - | - | 4,856 | - | 4,856 | 908 | 5,764 |
| Issuance of restricted shares | 1,477,488 | 15 | - | - | 2,487 | - | 2,422 | (2,422) | - |
| Exercise of restricted stock units | 625 | - | - | - | 1 | - | 1 | (1) | - |
| Repurchase of common stock | (2,199,824) | (22) | - | - | (12,270) | - | (12,292) | 1,416 | (10,876) |
| Restricted shares forfeited | (374,299) | (4) | - | - | (544) | - | (548) | 548 | - |
| Distributions to noncontrolling interests, net | - | - | - | - | - | - | - | (162) | (162) |
| NCI income tax adjustment | - | - | - | - | 46 | - | 46 | (46) | - |
| Net loss | - | - | - | - | - | (338,684) | (338,684) | (63,048) | (401,732) |
| Balance as of December 31, 2020 | 86,812,647 | $868 | 16,221,101 | $162 | $909,278 | $(317,247) | $593,061 | $112,821 | $705,882 |
| ESPP shares issued | 10,518 | - | - | - | 59 | - | 59 | (1) | 58 |
| Equity-based compensation | - | - | - | - | 8,056 | - | 8,056 | 1,433 | 9,469 |
| Issuance of restricted shares | 2,154,897 | 22 | - | - | 2,162 | - | 2,184 | (2,182) | 2 |
| Other | 738 | - | - | - | 5 | - | 5 | - | 5 |
| Issuance of shares for acquisitions | 5,713,968 | 57 | - | - | 32,598 | - | 32,655 | (532) | 32,123 |
| Repurchase of common stock | (199,974) | (2) | - | - | (1,223) | - | (1,225) | 19 | (1,206) |
| Restricted shares forfeited | (319,874) | (3) | - | - | (332) | - | (335) | 335 | - |
| Distributions to noncontrolling interests, net | - | - | - | - | (140) | - | (140) | (934) | (1,074) |
| NCI income tax adjustment | - | - | - | - | 21 | - | 21 | (21) | - |
| Net loss | - | - | - | - | - | (42,225) | (42,225) | (7,860) | (50,085) |
| Balance as of December 31, 2021 | 94,172,920 | $942 | 16,221,101 | $162 | $950,464 | $(359,472) | $592,096 | $103,078 | $695,174 |
| ESPP shares issued | 6,973 | - | - | - | 52 | - | 52 | 1 | 53 |
| Equity-based compensation | - | - | - | - | 13,395 | - | 13,395 | 2,175 | 15,570 |
| Issuance of restricted shares | 2,923,073 | 29 | - | - | 2,563 | - | 2,592 | (2,592) | - |
| Stock options exercised | 70,000 | 1 | - | - | 583 | - | 584 | 24 | 608 |
| Issuance of shares for acquisitions | 15,247,832 | 152 | - | - | 135,538 | - | 135,690 | 5,269 | 140,959 |
| Repurchase of common stock | (2,822,547) | (28) | - | - | (20,346) | - | (20,374) | (445) | (20,819) |
| Restricted shares forfeited | (208,723) | (2) | - | - | (184) | - | (186) | 186 | - |
| Distributions to noncontrolling interests | - | - | - | - | (1,943) | - | (1,943) | - | (1,943) |
| Contributions from noncontrolling interests | - | - | - | - | - | - | - | 4,797 | 4,797 |
| Purchase of noncontrolling interests | - | - | - | - | 1,077 | - | 1,077 | (389) | 688 |
| NCI income tax adjustment | - | - | - | - | 53 | - | 53 | (53) | - |
| Dividend and distribution declared: | - | - | - | - | - | - | - | - | - |
| Class A common stock ($0.05 per share) | - | - | - | - | (5,143) | - | (5,143) | (66) | (5,209) |
| Unvested restricted stock ($0.05 per share) | - | - | - | - | (194) | - | (194) | 1 | (193) |
| Class B common stock ($0.05 per share) | - | - | - | - | - | - | - | (811) | (811) |
| Net income | - | - | - | - | - | 48,278 | 48,278 | 6,576 | 54,854 |
| Balance as of December 31, 2022 | 100,389,528 | $1,094 | 16,221,101 | $162 | $1,075,915 | $(311,194) | $765,971 | $117,751 | $883,728 |

*The accompanying notes to consolidated financial statements are an integral part of these financial statements.*

F-7

# **SELECT ENERGY SERVICES, INC.**  
 **CONSOLIDATED STATEMENTS OF CASH FLOWS**  
 (in thousands)

|  | Year Ended December 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Cash flows from operating activities |  |  |  |
| Net income (loss) | $54,854 | $(50,085) | $(401,732) |
| Adjustments to reconcile net income (loss) to net cash used in operating activities |  |  |  |
| Depreciation and amortization | 115,716 | 92,458 | 101,672 |
| (Gain) loss on disposal of property and equipment and divestitures | (2,192) | 2,068 | 2,815 |
| Equity in losses of unconsolidated entities | 913 | 279 | - |
| Bad debt expense (recovery) | 2,023 | (139) | 6,373 |
| Amortization of debt issuance costs | 661 | 688 | 688 |
| Inventory adjustments | (737) | 239 | 852 |
| Equity-based compensation | 15,570 | 9,469 | 5,764 |
| Impairment of goodwill and trademark | - | - | 276,016 |
| Impairment and abandonment of property and equipment | - | - | 7,910 |
| Bargain purchase gain | (13,352) | (18,985) | - |
| Unrealized loss (gain) on short-term investment | - | 2,044 | (1,799) |
| Other operating items, net | (1,989) | (1,795) | (407) |
| Changes in operating assets and liabilities |  |  |  |
| Accounts receivable | (162,257) | (80,127) | 142,873 |
| Prepaid expenses and other assets | 1,264 | (15,108) | 14,886 |
| Accounts payable and accrued liabilities | 22,757 | 42,746 | (50,101) |
| Net cash provided by (used in) operating activities | 33,231 | (16,248) | 105,810 |
| Cash flows from investing activities |  |  |  |
| Proceeds from sale of securities | - | 730 | - |
| Proceeds received from divestitures | 1,700 | - | 197 |
| Purchase of property and equipment | (71,884) | (39,994) | (21,239) |
| Investment in note receivable | - | (1,101) | (3,000) |
| Purchase of equity-method investments | (7,667) | (2,200) | - |
| Collection of note receivable | 184 | 167 | - |
| Distribution from cost method investment | 60 | 180 | 200 |
| Acquisitions, net of cash and restricted cash received | (6,959) | (34,740) | - |
| Proceeds received from sales of property and equipment | 31,320 | 12,502 | 18,449 |
| Net cash used in investing activities | (53,246) | (64,456) | (5,393) |
| Cash flows from financing activities |  |  |  |
| Borrowings from revolving line of credit | 143,000 | - | - |
| Payments on revolving line of credit | (127,000) | - | - |
| Payments on current and long-term debt | (22,075) | - | - |
| Payments of finance lease obligations | (112) | (320) | (264) |
| Payment of debt issuance costs | (2,144) | - | - |
| Dividends paid | (6,020) | - | - |
| Proceeds from share issuance | 53 | 58 | 76 |
| Purchase of noncontrolling interests | (22,000) | - | - |
| (Distributions to) contributions from noncontrolling interests | (1,943) | (1,074) | 354 |
| Repurchase of common stock | (20,210) | (1,206) | (10,876) |
| Net cash used in financing activities | (58,451) | (2,542) | (10,710) |
| Effect of exchange rate changes on cash | (13) | 8 | 64 |
| Net (decrease) increase in cash and cash equivalents | (78,479) | (83,238) | 89,771 |
| Cash and cash equivalents, beginning of period | 85,801 | 169,039 | 79,268 |
| Cash and cash equivalents, end of period | $7,322 | $85,801 | $169,039 |
| Supplemental cash flow disclosure: |  |  |  |
| Cash paid for interest | $1,970 | $1,488 | $1,838 |
| Cash refunds received for income taxes, net | $(452) | $(887) | $(174) |
| Supplemental disclosure of noncash operating activities: |  |  |  |
| Noncash settlement of accounts receivable | $ - | $ - | $1,578 |
| Lease liabilities arising from obtaining right-of-use assets | $14,778 | $8,665 | $9,322 |
| Supplemental disclosure of noncash investing activities: |  |  |  |
| Issuance of shares for acquisitions | $133,646 | $32,123 | $ - |
| Conversion of notes receivable to equity-method investment | $4,442 | $ - | $ - |
| Capital expenditures included in accounts payable and accrued liabilities | $17,789 | $12,120 | $5,733 |
| Noncash proceeds received from sale of interest in a formerly consolidated joint venture | $ - | $ - | $367 |
| Supplemental disclosure of noncash financing activities: |  |  |  |
| Accrued contributions from noncontrolling interests | $4,797 | $ - | $ - |
| Issuance of shares for NCI acquisitions | $7,313 | $ - | $ - |

*The accompanying notes to consolidated financial statements are an integral part of these financial statements.*

F-8

# SELECT ENERGY SERVICES, INC.

## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

### NOTE 1-BUSINESS AND BASIS OF PRESENTATION

*Description of the business:* Select Energy Services, Inc. (“we,” “Select Inc.,” “Select” or “the Company”) was incorporated as a Delaware corporation on November 21, 2016. The Company is a holding company whose sole material asset consists of common units (“SES Holdings LLC Units”) in SES Holdings, LLC (“SES Holdings”).

We are a leading provider of comprehensive water-management and chemical solutions to the oil and gas industry in the United States (“U.S.”). As a leader in the water solutions industry, we place the utmost importance on safe, environmentally responsible management of oilfield water throughout the lifecycle of a well. Additionally, we believe that responsibly managing water resources through our operations to help conserve and protect the environment in the communities in which we operate is paramount to our continued success.

*Class A and Class B common stock:* As of December 31, 2022, the Company had both Class A and Class B common shares issued and outstanding. Holders of shares of our Class A common stock, par value $0.01 per share (“Class A common stock”) and Class B common stock, par value $0.01 per share (“Class B common stock”) are entitled to one vote per share and vote together as a single class on all matters presented to our stockholders for their vote or approval.

*Exchange rights:* Under the Eighth Amended and Restated Limited Liability Company Agreement of SES Holdings (the “SES Holdings LLC Agreement”), SES Legacy Holdings LLC (“Legacy Owner Holdco”) and its permitted transferees have the right (an “Exchange Right”) to cause SES Holdings to acquire all or a portion of its SES Holdings LLC Units for, at SES Holdings’ election, (i) shares of Class A common stock at an exchange ratio of one share of Class A common stock for each SES Holdings LLC Unit exchanged, subject to conversion rate adjustments for stock splits, stock dividends, reclassification and other similar transactions or (ii) cash in an amount equal to the Cash Election Value (as defined within the SES Holdings LLC Agreement) of such Class A common stock. Alternatively, upon the exercise of any Exchange Right, Select Inc. has the right (the “Call Right”) to acquire the tendered SES Holdings LLC Units from the exchanging unitholder for, at its election, (i) the number of shares of Class A common stock the exchanging unitholder would have received under the Exchange Right or (ii) cash in an amount equal to the Cash Election Value of such Class A common stock. In connection with any exchange of SES Holdings LLC Units pursuant to an Exchange Right or Call Right, the corresponding number of shares of Class B common stock will be cancelled.

*Basis of presentation:* The accompanying consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the U.S. (“GAAP”) and pursuant to the rules and regulations of the SEC. The consolidated financial statements include the accounts of the Company and all of its majority-owned or controlled subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

For investments in subsidiaries that are not wholly owned, but where the Company exercises control, the equity held by the minority owners and their portion of net income or loss are reflected as noncontrolling interests. Investments in entities in which the Company exercises significant influence over operating and financial policies are accounted for using the equity method, and investments in entities for which the Company does not have significant control or influence are accounted for using the cost-method or other appropriate basis as applicable. As of December 31, 2022, the Company had three equity method investments and one cost-method investment. The Company’s investments are reviewed for impairment whenever events or circumstances indicate that the carrying value may not be recoverable. When circumstances indicate that the fair value of its investment is less than its carrying value and the reduction in value is other than temporary, the reduction in value is recognized in earnings. Our investments in unconsolidated entities are summarized below and are included in the assets of our Water Services segment:

F-9

| Type of Investment | Year attained | Accounting method | Balance Sheet Location | As of December 31, 2022 | As of December 31, 2021 |
| --- | --- | --- | --- | --- | --- |
|  |  |  |  | (in thousands) |  |
| 20% minority interest . . . . . | 2011 | Cost-method | Other long-term assets, net | $60 | $120 |
| Notes receivable (1) . . . . . | 2020 | Amortized cost basis | Other long-term assets, net | - | 4,446 |
| 21% minority interest (1) . . . | 2021 | Equity-method | Other long-term assets, net | 4,686 | - |
| 40% minority interest (2) . . . | 2021 | Equity-method | Other long-term assets, net | 4,985 | 1,779 |
| 48% minority interest (3) . . . | 2021 | Equity-method | Other long-term assets, net | 3,446 | 142 |

(1) Investment in notes receivable converted to equity-method investment during the year ended December 31, 2022.

(2) Ownership percentage increased during the year ended December 31, 2022 due to additional contributions. Minority interest was 33% as of December 31, 2021.

(3) Ownership percentage increased during the year ended December 31, 2022 due to additional contributions. Minority interest was 45% as of December 31, 2021.

*Dividends:* On October 27, 2022, our board of directors declared a quarterly cash dividend of $0.05 per share of Class A common stock which was paid during the fourth quarter. A distribution of $0.05 per unit was also approved for those holders of units of SES Holdings, LLC, who also hold an equal number of shares of Class B common stock of the Company, which was subject to the same payment and record dates. During the fourth quarter, the Company paid $5.2 million in dividends accounted for as a reduction to additional paid in capital and noncontrolling interests and $0.8 million of distributions accounted for as a reduction to noncontrolling interests. As of December 31, 2022, the Company had $0.2 million dividends payable included in accrued expenses and other current liabilities in connection with unvested restricted stock awards. All future dividend payments are subject to quarterly review and approval by the board of directors.

*Segment reporting:* The Company has three reportable segments. Reportable segments are defined as components of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and assess performance. The Company’s reportable segments are Water Services, Water Infrastructure, and Oilfield Chemicals.

The Water Services segment consists of the Company’s services businesses, including water transfer, flowback and well testing, fluids hauling, water monitoring water containment and water network automation, primarily serving exploration and production (“E&P”) companies. Additionally, this segment includes the operations of our accommodations and rentals business.

The Water Infrastructure segment consists of the Company’s infrastructure assets, including operations associated with our water sourcing and pipeline infrastructure, our water recycling solutions, and our produced water gathering systems and saltwater disposal wells, as well as solids disposal facilities, primarily serving E&P companies.

The Oilfield Chemicals segment provides technical solutions, products and expertise related to chemical applications in the oil and gas industry. We develop, manufacture, manage logistics and provide a full suite of chemicals used in hydraulic fracturing, stimulation, cementing, pipelines and well completions for customers ranging from pressure pumpers to major integrated and independent oil and gas producers. This segment also utilizes its chemical experience and lab testing capabilities to customize tailored water treatment solutions designed to optimize the fracturing fluid system in conjunction with the quality of water used in well completions.

*Reclassifications:* Certain reclassifications have been made to the Company’s prior period consolidated financial information to conform to the current year presentation. These presentation changes did not impact the Company’s consolidated net income, consolidated cash flows, total assets, total liabilities or total stockholders’ equity.

F-10

## NOTE 2-SIGNIFICANT ACCOUNTING POLICIES

*Use of estimates:* The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

On an ongoing basis, the Company evaluates its estimates, including those related to the recoverability of long-lived assets and intangibles, useful lives used in depreciation and amortization, uncollectible accounts receivable, inventory reserve, income taxes, self-insurance liabilities, share-based compensation, contingent liabilities, lease-related reasonably certain option exercise assessments, and the incremental borrowing rate for leases. The Company bases its estimates on historical and other pertinent information that are believed to be reasonable under the circumstances. The accounting estimates used in the preparation of the consolidated financial statements may change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment changes.

*Cash and cash equivalents:* The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

*Accounts receivable:* Accounts receivable are stated at the invoiced amount, or the earned but not yet invoiced amount, net of an allowance for credit losses.

*Allowance for credit losses:* The Company’s allowance for credit losses relates to trade accounts receivable. The Company treats trade accounts receivable as one portfolio and records an initial allowance calculated as a percentage of revenue recognized based on a combination of historical information and future expectations. Additionally, the Company adjusts this allowance based on specific information in connection with aged receivables. Historically, most bad debt has been incurred when a customer’s financial condition significantly deteriorates, which in some cases leads to bankruptcy. Market volatility is highly uncertain and, as such, the impact on expected losses is subject to significant judgment and may cause variability in the Company’s allowance for credit losses in future periods.

The change in the allowance for credit losses is as follows:

|  | For the year ended December 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
|  | (in thousands) |  |  |
| Balance at beginning of year | $4,401 | $9,157 | $5,773 |
| Increase to allowance based on a percentage of revenue | 2,750 | 1,477 | 1,212 |
| Adjustment based on aged receivable analysis | (801) | (1,444) | 5,161 |
| Charge-offs | (1,562) | (4,793) | (3,003) |
| Recoveries | 130 | 4 | 14 |
| Balance at end of year | $4,918 | $4,401 | $9,157 |

*Concentrations of credit and customer risk:* Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and trade accounts receivable. The amounts held in financial institutions periodically exceed the federally insured limit. Management believes that the financial institutions are financially sound and the risk of loss is minimal. The Company minimizes its exposure to counterparty credit risk by performing credit evaluations and ongoing monitoring of the financial stability of its customers. There were no customers that accounted for more than 10% of the Company’s consolidated revenues or receivables for the years ended December 31, 2022, 2021 and 2020, respectively.

F-11

*Inventories:* The Company values its inventories at lower of cost or net realizable value. Inventory costs are determined under the weighted-average method. Inventory costs primarily consist of chemicals and materials available for resale and parts and consumables used in operations.

*Property and equipment:* Property and equipment are stated at cost less accumulated depreciation.

Depreciation (and amortization of finance lease assets) is calculated on a straight-line basis over the estimated useful life of each asset as noted below:

| Asset Classification | Useful Life (years) |
| --- | --- |
| Land | Indefinite |
| Buildings and leasehold improvements | 30 or lease term |
| Vehicles and equipment | 4 - 7 or lease term |
| Machinery and equipment | 2 - 12 |
| Pipelines | 15 |
| Computer equipment and software | 3 - 4 or lease term |
| Office furniture and equipment | 7 |
| Gathering and disposal infrastructure | 7 - 10 |

Depreciation expense related to the Company's property and equipment, including amortization of property under finance leases, was $103.3 million, $81.6 million and $90.2 million for the years ended December 31, 2022, 2021 and 2020, respectively.

*Change in depreciable lives of property and equipment:* In accordance with its policy, the Company reviews the estimated useful lives and estimated salvage values of its fixed assets on an ongoing basis.

*Business Combinations:* The Company records business combinations using the acquisition method of accounting. Under the acquisition method of accounting, identifiable assets acquired and liabilities assumed are recorded at their acquisition-date fair values. The excess of the purchase price over the estimated fair value is recorded as goodwill and the excess of the fair value over the purchase price is recorded as a bargain purchase gain. Changes in the estimated fair values of net assets recorded for acquisitions prior to the finalization of more detailed analysis, but not to exceed one year from the date of acquisition, will adjust the amount of the purchase price allocable to goodwill. Measurement period adjustments are reflected in the period in which they occur.

*Goodwill and other intangible assets:* Goodwill represents the excess of the purchase price of acquisitions over the fair value of the net assets acquired. Goodwill and other intangible assets not subject to amortization are tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. Intangible assets with finite useful lives are amortized either on a straight-line basis over the asset's estimated useful life or on a basis that reflects the pattern in which the economic benefits of the intangible assets are realized.

*Impairment of goodwill, long-lived assets and intangible assets:* Long-lived assets, such as property and equipment and finite-lived intangible assets, are evaluated for impairment whenever events or changes in circumstances indicate that its carrying value may not be recoverable. Recoverability is measured by a comparison of its carrying amount to the estimated undiscounted cash flows to be generated by those assets. If the undiscounted cash flows are less than the carrying amount, the Company records impairment losses for the excess of its carrying value over the estimated fair value. The development of future cash flows and the estimate of fair value represent its best estimates based on industry trends and reference to market transactions and are subject to variability. The Company considers the factors within the fair value analysis to be Level 3 inputs within the fair value hierarchy. See 'Note 4-Impairments and Other Costs' for further discussion.

The Company conducts its annual goodwill impairment tests in the fourth quarter of each year, and whenever impairment indicators arise, by examining relevant events and circumstances which could have a negative impact on its

F-12

**Time limit hit – remaining pages or documents were skipped.**