Select Energy Services Slashes Capital Spend in Half

Select Energy Services Inc., a provider of water management and chemical solutions to the U.S. unconventional oil and gas industry, has taken several strategic actions in response to plummeting commodity prices.

The actions include:

• Savings of $25-30 million due to headcount and wage reductions across the employee base, including executive management
• Significant curtailment or renegotiation of other internal and third-party expenses
• Reduced total select headcount by 31% since March 1, including field operations and corporate positions
• Significantly reducing capital expenditures guidance from the prior range of $55- to $70 million by at least 50%.

Holli Ladhani, President and CEO, commented, "First and foremost, Select is closely monitoring the impact of COVID-19 and taking active precautions to help protect the health and well-being of our employees and the communities in which we work, in accordance with local, state and federal health authority recommendations. We are also working closely with our customers and vendors on business continuity plans. The significant and sudden pullback in commodity prices has forced our customers to meaningfully reduce their operational plans for 2020, requiring us to take immediate actions to reduce our operating expenses and capital expenditures.”

“Agility and financial strength will be key to successfully navigating this rapidly evolving market landscape. While our cash flow will be impacted by current market conditions, we believe the actions we are taking, and will continue to take, will enable us to continue to generate solid positive free cash flow during 2020. With a current cash balance in excess of $100 million and no debt on our balance sheet, we are well prepared to manage through this difficult market.”

As of February 29, 2020, Select had a total net working capital balance of $275.0 million, including a cash balance of $101.3 million. Additionally, it had no outstanding borrowings under its revolving credit facility and $174.9 million of available borrowing capacity thereunder, resulting in total liquidity of $276.1 million.

The company expects relatively flat revenue for the first quarter of 2020 as compared to the fourth quarter of 2019, with activity starting to decline in early March.

To contact the author, email bertie.taylor@rigzone.com.