Could Water and Oil Mix in IPO Markets? Select Energy Services Finds Out

Select Energy Services is a company mainly based on the needs around mining and exploration areas. Rather than participate as an extraction firm, it centers itself towards providing services to the miners and their businesses and seeks returns from its clientele composed of small mining companies to large corporations involved in the sector.

Primarily targeting oil fields, Select Energy delivers its services on three fronts. Its main branch is Water Solutions where it sources for water around the mining area, transports it on-site via temporary or permanent pipes and measures the levels of water in the fields. Further, the firm filters, treats and regulates the levels of fluids within the extraction zone and oversees the flow of water back from the site to factories where it is recycled. Additionally, the company gives accommodation and rental services whereby mining groups can rent equipment and are provided with areas to sleep. Its final service to prospective companies is the complete construction or completion of well sites. It uses its equipment to drill wells and lay functional pipelines according to the details provided by clientele.

Citing the stabilizing prices in the oil sector, the company filed to go public on April 12th and set its terms for an offering targeted at raising a revenue of $175 million. With the proposed increase in the support for local industries in the United States as well as the governmental policy towards the improvement of infrastructure, Select Energy states that demand for oil will increase in coming times. As such, the company expects that there will be a greater need for its services and these will boost both business revenue and returns. As such, the firm set its share price range at $15 – $18. It plans to sell 10.6 million units of its stock at this price. Selling its shares at mid-range would have the company command a market value of $1.1 billion. Its enterprise value would also increase significantly, being pegged at $1.0 billion.

Select Energy was incorporated in 2016. However, its operations began in 2007 under the name Oil Peak Services. At the time, the firm was led by John Schmitz as founder and CEO. Based in Gainesville, Texas, the corporation has its principal shareholders consisting of Adage Capital, Hadley Harbor, Luminus Energy, Putnam Funds, Senator Global, Teacher Retirement System of Texas, Whipstock, SES Legacy Holdings and Crestview Partners.

Over the 12 months that preceded January 2017, Select Energy gathered a total of $302 million from its sales. Despite being substantial, the figure is yet another drop from previous years. The company’s revenue has continually been decreasing over past years as a result of falling oil prices. Further, a higher number of oil companies are looking to scale their operations, thereby leading to increased competition in the market. As such, growth prospects are weak. However, this is a wait-and-see situation.

The underwriters for this particular deal include Credit Suisse, FBR Capital Markets, Wells Fargo Securities, BofA Merrill Lynch, Citi and J.P. Morgan. The offering is scheduled to be within next week, from April 17th. The firm plans to appear on the New York Securities Exchange under the ticker ‘WTTR.’