Select Water Solutions 2026 Third Quarter Earnings Conference Call - SELECT WATER SOLUTIONS INC

Greetings. Welcome to Select Water Solutions, Third Quarter 2026 Earnings Conference Call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Garrett Williams, Vice President of Corporate Finance and Investor Relations. Thank you. You may begin. Thank you, Operator, and good morning, everyone. We appreciate you joining us for Select Water Solutions conference call and webcast to review our financial and operational results for the third quarter of 2026. With me today are John Schmitz, our Founder, Chairman, President, and Chief Executive Officer, Chris George, Executive Vice President and Chief Financial Officer, Michael Skarke, Executive Vice President, Chief Commercial Officer, and Mike Lyons, Executive President, Vice President, Executive Chief Strategy and Technology Officer. Before I turn the call over to John, I have a few housekeeping items to cover. A replay of today's call will be available by webcast accessible from our website at selectwater.com. There will also be a recorded telephonic replay available until November 23, 2026. The access information for this replay was also included in today's earnings release. Please note that the information reported on this call speaks only as of today, November 9, 2026, and therefore, time submitted information may no longer be accurate as of the time of the replay listening or transcript reading. In addition, the comments made by management during this conference call may contain forward-looking statements within the meaning of the United States Federal Securities Laws. These forward-thinking statements reflect the current views of selects management. However, various risks, uncertainties, and contingencies could cause our actual results, performance, or achievements to differ materially from those expressed in the statements made by management. The listener is encouraged to read our annual report on Form 10-K, our current reports on Form 8-K as well as our quarterly reports on Form 10Q to understand the risks, uncertainties, and contingencies. Please refer to our earnings announcement released today for reconciliations of non-GAAP financial measures. Now, I would like to turn the call over to John. Thanks, Garrett. Good morning and thank you for joining us. I am pleased to be discussing Select Water Solutions again with you today. The third quarter of 2026 was another strong quarter for Select. I'd like to start with some of the key third quarter highlights and other strategic and market updates. Now I'll hand it over to Chris to discuss the third quarter results, transaction updates, and financial outlook in more detail. During the third quarter, Select delivered strong overall performance across all three operating segments and made significant progress on our strategic objectives. During the 3rd quarter of 2026, we delivered consolidated revenue and gross profit growth resulting in $23 million of net income and $93 million of adjusted EBITDA. Of note, with $264 million of year-to-date adjusted EBITDA through the third quarter of 2026, we have already surpassed 2025's full-year adjusted EBIDDA record in just three quarters so far this year before considering any performance contributions from the pilot water acquisition. Underpinning this performance, we grew produced water volumes to 1.7 million barrels per day during the third quarter of 2026. This is a 14% increase relative to the second quarter of 2020 and a significant year-over-year increase of more than 30% relative to third quarter 2025. These volume gains drove water infrastructure segment revenues up by more than 40% year over year to a record level of $110 million for the third quarter of 2026. With ongoing strength in our base water infrastructure business, we anticipate a strong finish to the year for this segment. Furthermore, as recently announced earlier this month, we closed on our strategic acquisition of Pilot Water Solutions. We expect Pilot Water to finish the year in line with its prior 2026 guidance, and the business remains on track to achieve the 2027 outlook we underwrote for this acquisition. Accordingly, on a combined basis with a partial fourth quarter contribution from Pilot Water, we expect to drive significant incremental revenue growth of more than 40 percent in the fourth quarter for this segment on a reported basis. We are already underway with post-closing customer outreach and integration planning, and I'm increasingly excited about what this transaction will do for the company long term. With new contracted projects coming online from both Select's base business and the acquired pilot water business in 2027 and significant remaining capacity available for commercial expansion, we are well positioned for a strong growth profile in the years ahead. With the continued execution of our organic growth backlog and the high volume of inbound calls from our customers post-acquisition, we have increased conviction around the commercialization opportunities of the combined network. We continue to win additional projects that underwrite our network and volume expansion, and I believe 2027 will be an active year for new commercialization activities. We expect the combination of our complementary recycling and disposal assets will deliver superior end-to-end water management that reduces costs for our customers and allow Select to maximize the value out of every barrel that comes through our network. Elsewhere, our water services and chemical technology segments also generated strong performance relative to guided expectation for the third quarter. On the water services side, we completed our efforts to streamline this segment with a successful recapitalization and divestment of the majority interest in our peak rentals business late in the third quarter. This transaction further concentrates our business around our core water solutions and chemical technology thesis, and we are pleased to retain long-term exposure to peak rentables growth potential through our minority ownership position in the business. Looking ahead, we anticipate current customer activity levels to support solid results in our water services and chemical technology segments while acknowledging standard near-term seasonality in the fourth quarter ahead. In our water infrastructure segment, we expect to see benefits from our strong secular tailwinds, ongoing organic project development, and a growing opportunity set for the combined SELECT and pilot water networks. I am proud of our year-to-date performance, which has set the stage for another record year for the company. While the broader macro and geopolitical environment continues to evolve, we remain confident in the company's future, and I look forward to another record year ahead for SELEECT in 2027 with the full-year benefit of the pilot water acquisition. In summary, our growth initiatives and optimization efforts combined with our strong balance sheet and contracted earning profile position select to deliver continued value creation for our shareholders. At this point, I'll hand it over to Chris to speak to our financial results and our outlook in a bit more detail. Chris? Thank you, John, and good morning, everyone. Select made great strides in the third quarter of 2026, which included consolidated revenue, gross margin, net income, and adjusted EBITDA growth relative to the second quarter, record water infrastructure revenue, and another quarter of record adjusted EBIDDA. Additionally, subsequent to quarter end, Select completed a debut senior unsecured notes offering, raising $900 million of long-term eight-year financing, 7.58%. The offering, which was very well received and successfully upsized by $100 million from initial launch, was primarily used to fund the acquisition of Pilot Water, as well as to refinance Select's prior sustainability-linked credit facility and term loan. Additionally, in connection with the closing of the Pilot Water acquisition, Select also closed on a new five-year 500 million dollar cash flow revolving credit facility this new revolving credit facility remains on undrawn as of today and nearly double selects available liquidity as compared to our prior credit facility these efforts positions select with a strong balance sheet and one of the leading credit ratings and leverage profiles amongst our water midstream peer group including a leverage ratio of approximately two times net debt to adjusted EBITDA on a pro forma basis following the close of the pilot water acquisition. Of note, this is before taking into account the expected growth we forecast for 2027 or the benefit of synergies from the pilot-water integration. Looking at our third quarter, consolidating financial performance in more detail, we grew revenue to $412 million, generating net income of $23 million and adjusted EBITD of more than $93 million. The water infrastructure segment delivered another solid quarter marked by top-line growth and the execution of key strategic objectives. We grew produced water volumes handled in the third quarter to 1.7 million barrels per day, driving record revenues of $110 million and relatively steady 57% gross margins before DNA. This represents an 8% increase in revenue and a 6% increase in gross profit before DNA as compared to the second quarter of 2026. Importantly, though, this equates to year-over-year growth in revenue and gross profit before DNA of about 40 and 50 percent, respectively, relative to Q3 2025. Looking ahead to the fourth quarter, the water infrastructure segment will benefit from a partial quarter contribution from the pilot water business, resulting in anticipated revenue growth of 35 to 45 percent, or about $150 to $160 million for the segment. On a combined basis, we expect gross margins in the 52% to 56% range during Q4, as certain integration-related costs and seasonal expenses impact the margins of the segment during the quarter. With our strong year-to-date performance and forecasted sequential growth in the base business, we are well positioned to deliver above the high end of our previously increased 2026 guidance of 25% to 30% year-over-year growth, before taking into consideration any benefit of the pilot water acquisition. As John mentioned, we expect the pilot water business to finish full-year 2026 within the previously outlined guidance range of $250 to $270 million of revenue and $100 to $110 million of adjusted EBITDA. Similarly, the business remains on track to achieve the 2027 outlook of $120 to $130 million of Adjusted EBITD, driven primarily by new MVCs and other capital projects coming online in early 2027. Additionally, we continue to set the stage for further organic water infrastructure growth in the base business in 2027 with additional contract wins. Most notable was our previously announced Northern Delaware Basin contract expansion we signed during August with a key investment grade customer which added more than 250,000 new acres under dedication and converted more than 100,000 acres from roefer to base dedication while also extending the term another 12 years with increased rate on an existing contract. Switching over to water services, this segment saw revenues grow by approximately 7% quarter over quarter, outpacing our guidance of flat revenue sequentially, driven by continued strength in the Permian Basin. Gross margins before DNA and water services increased to 24% during Q3, an improvement compared to 23% in the second quarter. Notably, as John referenced, from a strategic standpoint, we completed the recapitalization and divestment of the majority interest in peak rentals during late September. The transaction resulted in the sale of a 55% majority interest into business with Select receiving $77 million of consideration subject to customary fees and post-closing adjustments, including $42 million of cash proceeds and a $35 million seller note while retaining a 45% minority ownership interest in the business. While we benefited from PEAK's contribution to the income statement for effectively the full third quarter, with the transaction closing in late September, we ultimately deconsolidated PEAK Rental's financials from our balance sheet at quarter end, resulting in an equity method investment retained on the balance sheet. Going forward, this divestment and decons consolidation will reduce Water Services' financial results, with PEAK having represented about 21% of the segment's revenue year-to-date, while generating relatively comparable gross margins to the overall segment. Additionally, concurrent with the transaction closing, Peak Rentals entered into new long-term financing agreements on a non-recourse basis to Select, providing the Peak business with its own capital structure and liquidity moving forward, allowing the business to independently fund its own future growth capital while allowing Select to benefit from Peak's future growth through its retained equity interests. Looking ahead to the fourth quarter specifically, we anticipate revenue of $150 to $160 million for water services, driven primarily by the impact of the peak divestiture along with standard fourth quarter seasonality. We also forecast margins before DNA in the 21 to 24 percent range for the quarter. Pairing the year-to-date performance with our fourth quarter guidance, even with the absence of peak in Q4, we are well on track to surpass our original full-year 2026 guidance for the segment. Overall, we believe water services remains well-positioned to protect its leading market share position and improve its margin profile over time. Elsewhere, the chemical technology segment generated revenue of $90 million during the third quarter, coming in on the high end of our $85 to $90 billion guidance, as we pulled forward certain customer activity into the third quarter, which along with standard Q4 seasonality is expected to result in $75 to $80 million of revenue in Q4. Gross margins before DNA are expected to remain relatively steady in the 17% to 18% range during Q4 relative to the 18% result in the third quarter. While the fourth quarter will likely see a modest pullback in the chemical technology segment, this segment has performed very well year-to-date, and with full-year 2026 revenue expected to increase approximately 10% to 12% on a year-over-year basis, we should finish the year well above our original 2026 guidance for this segment we remain optimistic about the outlook for this business as our new product development efforts continue to see great results and strong interest with the customer base on a consolidated basis in the third quarter sgna increased to 54 million dollars or approximately 13 percent of revenue attributable primarily to increased transaction related costs associated with the peak rentals and pilot water transactions Looking ahead, we anticipate SG&A of 11% to 12% of revenue in the fourth quarter of 2026, before returning to more normalized levels of approximately 10% to 11% of revenue in 2027. Looking back on a consolidated basis, supported by revenue gains and strong gross margins, altogether, we generated consolidated adjusted EBITDA of $93.5 million during the third quarter of 2026 on the high end of our guidance range of $90 to $94 million, resulting from healthy performance across all three segments. Looking forward, we anticipate adjusted EBITDA of $95 to $100 million for the fourth quarter of 2026, as continued strong performance in the water infrastructure business and a partial quarter contribution from the pilot water business more than offset the full quarter impact from the sale of peak rentals and fourth quarter seasonality. Additionally, we remain poised for meaningful year-over-year growth in 2027, as incremental pilot NDC volumes and previously announced projects already under development for SELECT drive continued contracted expansion of our water infrastructure business in the year ahead. With pilot now closed and consolidated budget efforts well underway, I look forward to providing more specific details on the full year 2027 outlook on our year-end call. Looking at our other costs for the near term, DNA expense should climb slightly in the fourth quarter to $50 to $55 million after giving effect to both the peak and pilot transactions during the quarter, though this remains subject to preliminary purchase price accounting estimates and allocations. Net interest expense increased sequentially to $8 million and is expected to increase further to $15 to $17 million in the fourth quarter, driven by Select's recently closed Senior Notes offering, which was completed subsequent to quarter end. From a cash flow perspective, we saw relatively steady operating cash flow of $84 million in the third quarter, relative to $87 million in the second quarter. On the investing side, we deployed $96 million in third quarter towards a combination of CapEx, acquisitions, and deconsolidation adjustments associated with the peak transaction. Net CapEx during Q3 was $88 million, with bolt-on acquisitions totaling another $2 million, primarily supporting projects in our water infrastructure business. With the addition of pilot water, our full-year maintenance capital program on a go-forward basis is expected to increase to approximately $80 to $90 million, though still very representative of a maintenance-like business model given the overall earnings power of the business. We do anticipate some incremental spend in the fourth quarter of 2026 associated with pilot water's ongoing capital projects, as well as a modest amount of initial capex associated with upgrading and integrating the networks. Accordingly, for 2026, we now anticipate net capital expenditures to modestly increase to $300 million to $310 million, attributable primarily to the pilot water acquisition. Overall, I am very pleased with the strong year-over-year trajectory across all parts of the business so far in 2026. We have made significant progress in strengthening Select as a company this year, including scaling our water infrastructure platform through both investment and acquisition, increasing our liquidity position with our latest financings and enhancing the contractual weighting of our earnings with a sizable and growing NBC and Acres dedication contract portfolio. With that, I'll hand it over to the operator for any questions. Operator? Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. may press star 2 if you would like to remove your question from the queue and for participants using speaker equipment it may be necessary to pick up your handset before pressing the star keys our first question is from jim rollison with raymond james please proceed hey good morning everyone uh nice job and you guys certainly got a lot of things done this quarter um chris maybe to start just a little quick bridge on sequential EBITDA from 3Q to 4Q. Obviously, you know, you have this kind of 93.5 million in 3Q. And when just trying to get some of the math on adding pilot for partial quarter, subtracting peak for an entire quarter, and then obviously the balance is kind of more seasonal factors. But I don't know if you could walk through like a quick synopsis of those numbers just so we kind of know how to think about it, because obviously 100 to 110 million divided by four is, you know, about 17 million. But just I want to make sure we have the math right. Yeah, maybe to put a couple of data points on it, Jim. So as we mentioned, Peak contributed about 21% of the services segment year-to-date revenue on a consolidated company basis, you know, a little north of 10% from a gross profit contribution, going to be pretty ratable to the overall segment contribution to the revenue dollar. But on a combined company, given the margin uplift you get from infrastructure, going be a shade under 10% of the overall gross profit contribution for the business that was effectively seen for a full Q3 basis. So when you translate that through to, you Know, to the impact of peak overall, It's obviously going to take a full quarter impact into Q4 of something in the $7 to $10 million range on an EBITDA basis with pilot coming in on a couple of months contribution. We're not going to see kind of the full run rate benefit of pilot for those two months, just given the timeline of the seasonality of when it's coming in, as well as some of the upfront costs we're going to incur. So it'll be a little underweight there. But overall, the business is contributing, as I said, in line with our expectations overall on the full year for 2026. So that 100 to 110 full year is going to be achieved. But November, December will be slightly under that, just given some of the upfront costs that we're going to incur as we immediately bring the assets online and start to work on integration. Got it. That makes sense. And when you kind of think out, I know it's not 27 guidance time just yet, but when I kind of look at the $300 to $310 million of CapEx now that includes Pilot, you look at the backlog of what you guys already are working on, including the recent announcements, you work at the integration of Pilot. Directionally, how do we think about net CapEx in 27 versus 26 and, you know, and maybe whatever that kind of trends, how do you think about that relating to free cash flow? So we'll obviously have more, you know, more to provide in terms of a four-year outlook on CapEx next year as we get through our budget exercise and start to work on the integration, you know, planning for putting the two systems together in the couple of months ahead. That said, you know, I would say as a base case, we certainly, you think there's likely going to be a capital program next year that looks fairly similar to this year as a starting point. But given the earnings power trajectory and the growth we expect, we should see pre-cash flow build next year as we see the earnings growth certainly accelerate past the capital program we're looking to undertake. So we'll certainly see maintenance CapEx pick up modestly next year, as we outlined, growth CapEx, we'll continue to look at additional projects we might be able to layer on to the overall program. But as we sit here today, thinking about next year as a starting point, looking pretty similar to this year overall is how we think about it, and we'll obviously fine-tune that in the months ahead as we budget and start the integration thought process more detailed. Yep, appreciate that, and look forward to seeing those inbounds turn into projects. Our next question is from Robert Brooks with Northlink Capital Markets. Please proceed. Hey, good afternoon, team. Thank you for taking my question. I wanted to first ask about the evolution and competition you face in water infrastructure. Is it fair to be thinking that wind rates, the wind rates that you're seeing on projects that you go after have risen as the overall footprint has continued to grow? And then on the flip side, what are some of the most common reasons you might lose out on a bid for a project or reverse or a most common reason that you might not go after a certain project? Yeah, Bobby, thank you for the question. This is Michael Skarkey. As we've built out the system, we've seen our win rates increase. And it's because we're touching more acreage. We're servicing more customers. we're able to more effectively balance the longs and shorts and we're just able to provide a more reliable recycling first solution to our customer base. Now obviously with the addition of pilot we're adding more fixed infrastructure, more customers, more contracts and we think we can further commercialize those but the key there is that we're combining our recycling first solution with their disposal first solution and when you provide the economics of the recycling with the firm capacity of the disposal and then layer in kind of our large-time or dual-pipeline network, we think it's a truly unique system and we would expect the win rates and the percentage of our hit rates to continue to increase. I'd say that in the past, when we've lost an opportunity, it's usually been around our reluctance or inability to provide firm capacity on the disposal side. And obviously, pilot, once we interconnect the system between the available capacity they have and the extensive permits, approved permits and un-drilled capacity they have, that will largely resolve that issue. So we're really focused on commercializing the collective system, and we're focused on growing recycling and disposal kind of in tandem to find the largest or highest marginal profitable barrel. That's super helpful. Thank you, Michael. And it's great to hear kind of the biggest hole, the biggest reason why you were previously losing or would lose out on a bid, you just filled in with this pilot acquisition. So I think that's great for other people to hear on the call, too. And just maybe shifting gears a bit, something not mentioned on today is just, you know, your partnership with LibertyStream Infrastructure. You know, last week they announced another off-take deal that will likely require them to stand up another facility. that's even with the first commercial facility they're working on with you down and right outside the Midland so is it just want to get your sense on like kind of your thoughts on that threat on how things have been going there and is it also fair to be thinking that you want to continue to partner with them on other recycling facilities to help you then capture some incremental royalty EBITDA just any color there yeah thanks Bobby this is Mike Lyons here. So yeah, we took a pretty broad strategy with our partners so that we could create this royalty revenue stream as quickly as possible across our entire network. Right now, we do have two active in construction projects and two more coming in the wings of that. And we would expect to have several facilities up and running next year, both on the lithium and iodine side. This does include LibertyStream to your exact question. So yeah, we continue to, we love it when our partners are out in the market and are successful commercializing and securing offtake. I mean that is one of the most important parts of these projects apart from just good solid execution on our side and on their side. So yeah we remain very excited and I think with the addition of pilot and some of these areas of nice collections of volume, I think that will even further expand our total potential around minerals. That makes perfect sense. I'll return to the queue. Congrats on the great core, guys. Thank you, Bobby. Our next question is from Scott Gruber with Citigroup. Please proceed. Good morning. We had a pretty big election result here in Texas last week that elicited some questions from investors. So I wanted to get your guys' opinion on given the shifting political backdrop in Texas, what it could mean for your business if we do see more stringent regulation of wastewater. If there's additional fees that are applied to disposal, do you think those are easily passed along to your customers? And would the changing regulatory backdrop put any of your disposal capacity at risk? Or conversely, does it make permitted capacity more valuable? Just trying to think through how that could shake out. Yeah, sure, Scott. This is Michael. Thanks for the question. I'd start off by saying that most importantly, we've got a very strong record of growing our business in highly regulated environments. So, when you look at kind of what we've been able to do, you know, specifically in New Mexico, I think we're very well positioned to operate in stringent environments from a recycling and disposal side and just really partnering with the governing bodies. In terms of disposal capacity, we do think that it puts a premium on disposal capacity which is why we're so excited that we were able to close the pilot acquisition when we did, because it comes with a considerable amount. There's almost 900,000 barrels a day of approved permanent capacity that we could tap into and drill and expand our network to the extent that you have kind of constraints on existing capacity or the demand to provide more firm capacity than what the existing network can do. In terms of the ability to pass a loan, that's an important component. Our contracts have change-in-law provisions that allow us to pass any sort of change in pricing along to the customer. And so we feel like we're well-positioned in the event that we see meaningful changes in the regulatory environment. I would say, though, that in general, as you start to see change in regulations, it generally creates opportunities for solutions-oriented service companies like Select. So just in overall, in summary, I'd say that we're really not expecting any material changes to the business, and to the extent that some come, we think we're very well positioned to deal with them. I appreciate all that, Connor. And then maybe turning to peak rentals, you know, good to see the transaction that you guys have been contemplating for a while take place. Can you just give us any flavor for the strategic plan for peak rentals in the hands of the new majority owner? Where do you think they take that business here over the medium to longer term? Yeah, I'll hit on some of the high points there, Scott. So obviously, the relationship between select and peak has been one that we've benefited from in terms of building out our own infrastructure footprint in the Permian and in particular in New Mexico, where power is, you know, is at a premium and, you know, solutions are continuing to be needed just given the, you know, the limitations on infrastructure build out. So, you know, we certainly look to, you know, look and anticipate maintaining a strategic operational relationship with the business to ensure that we can execute on the build out of our own infrastructure. And that's been a great solution for us. Obviously, with the transaction we undertook here, the expectation is that their future growth capital needs will be met with their incremental financing opportunities and other solutions. So we think they've got great opportunities ahead on both the base business as well as some of the incremental power solutions opportunities. So we look forward to the opportunity to maintain upside to that relationship with the ownership position. They've now got more flexibility of choice to pursue those opportunities in whatever form they may take, whether that's within the traditional oil field on the production side facilities or more on the industrial solution side elsewhere. So they've now Got much more flexibility. They've got more ability of choice, and we look forward to maintaining some upside position there. It will be deconsolidated, so to the extent there is opportunity there, it won't be represented holistically within our financials, but it gives us an opportunity to focus on the core, gives them an opportunity to focus on making, you know, different choices long-term and we'll maintain some exposure to that. Be sure to call her, Chris. I'll turn it back. Thank you. Our next question is from Derek Whitfield with Texas Capital. Please proceed. Good morning, guys, and thanks for taking my questions. Morning, Derek. Wanting to start with the pilot acquisition, Since the announcement, how would you characterize the change in your customer discussions and are you getting more in balance for disposal now? Yeah, Derek, this is Michael. That's a great question. We've had a number of customers reach out. We've reached out to a number customers. We had a lot of customers who reached out directly to us wanting to engage now that we've closed on pilot. It's been, frankly, surprising and very encouraging. looking for kind of what we can do with the combined system as I mentioned but also specifically as you alluded to around our ability to provide firm capacity and we had one customer tell us that they're looking forward doing even more with us now through our platform that we're going to have these assets and kind of greater abilities than we had before pilot so it's as I mentioned it's really encouraging and looking forward to how those conversations materialized during the course of 2027 perfect and as my follow-up i wanted to touch on the chemicals business we continue to hear a very constructive dialogue from emp industry and a when we're seeing clearly a positive trajectory for the adoption of advanced chemicals and surfactants i guess since the last quarter how would you guys characterize what you're seeing and a progression of your clock discussions. I'd say, Derek, the conversations continue to be very constructive. We've said it before, but we think last year, this year, was really more of a continuation of the trialing and development of the technology suite to really accelerate what we think is going to be an opportunity set looking into 2027. We're certainly seeing that from some of the customers in both the direct conversations we're having as well as some of the external information they're putting out for the market to digest. So we feel very good about what that opportunity set can translate to as we look to the year ahead. For our businesses, it sits today. We've seen that surfactant suite grow on a year-over-year basis to now more than 10% of the overall product portfolio on a Q3 versus Q3 basis. So we continue to see that advancement for the business. Yeah, we'll see a little bit of a slowdown in Q4 as we just get into the end of the year, but we feel very confident around that technology suite and the new products we developed, the test results we're getting, the well results we'RE getting back from the customer, and think that that's going to translate through to continued growth for the surfactant product suite over the year. That's great. Congrats on the quarter. Thanks. Thank you, Derek. Our next question is from Eli Joseph. with JP Morgan. Please proceed. Hey, good morning. Thanks for taking the questions. Obviously, a lot of discussion on the complementary nature of pilot and the kind of growth that platform brings, but just wanted to dive a bit more into the ability to build a large pipeline out of base and, you know, obviously seen some peers do it and it kind of fits with the produced water product. Can you just discuss whether that's kind of in the growth plans or how you think about that? Sure, Eli. No, I appreciate the question. With the pilot acquisition, it brings about a couple of different solutions for taking produced water out of New Mexico, several of which are truly out of the Delaware Basin. So as we kind of continue to look at the overall produced water solution, recycling, local disposal, distant disposal, and potentially beneficial reuse, that's certainly one of the things that we're looking at, and it's one of The Alternative that we now have available to us post-acquisition or post-closing. Yeah, one of the things I would add is we look at the overall portfolio now and the choices we can make around what to do with a barrel. At the end of the day, with the scale of putting pilot's disposal capacity with our recycling capacity, it gives us much more flexibility of harvesting the maximum value out of every barrel we put onto the network. So first and foremost, we'll continue to prioritize recycling those barrels for the industry's demand, our customers' needs. But to the extent those barrels can be deployed elsewhere or need to find a home, whether that's local disposal or long-distance disposal, the combined network gives us much more flexibility of choice, whetherthat's moving barrels southeast or north throughout the footprint that we have. So it gives us much more flexibility choice from a competitive standpoint. It gives us the opportunity to really add competitive scale on traditional disposal. But at the end of the day, we think there's more value in the integrated network pairing it with recycling to provide even more competitive outlets for deploying those barrels on a commercial basis. Got it. That's helpful. And, you know, obviously it's early and I know that, you know, the 27 guys are going to come alongside 4Q, but just from a sneak peek perspective on the revenue synergies, you know, how should we be thinking about those in terms of order of magnitude and, you Know, how low you could compress this multiple any, any kind of high level color there would be great. Yeah, I think we'll, we'll obviously have more to provide on, you KNOW, on the year end call, but at this stage, I I would say given the volume of customer imbalance we've had, given the ability that we think we have to maximize the disposal potential with the recycling footprint we have, we continue to, I think, get more optimistic around the opportunity set to add revenue synergies and add them in a timeframe that might be more accelerated than what we initially were looking to accomplish. So whether it's the cost synergies that we expected to harvest by the time we got to the end of 27 or 28 or pulling those revenue synergies forward in the next year, I think we continue to feel like there's upside opportunity to accelerate the potential out of the combined platform. So as we sit here today, I would say that we're probably already pretty comfortable with what we put out from a guidance standpoint looking into next year on the base business. And the ability to add to that has probably been strengthened in what we've been able to see and learn from the opportunity set, both on the combined basis and with the customer base so far. Great. Appreciate the call. Our next question is from Jeff Robertson with Water Tower Research. Please proceed. Thank you. Michael, can you talk about what you can do in 2027 to bring the northern Delaware and the southern Delaware basin systems together so you can leverage the entire footprint of the company? Sure, Jeff. I mean, that's really our goal, and I know we've said it, but that's what makes this consolidated platform so exciting, because the two systems are highly complementary from a geographic standpoint. They're not very far apart, but there's also not a lot of overlap. And so we're currently evaluating a number of different ways to tie in kind of our primarily New Mexico large-angle recycling first solution with the pilot system that exists in southern Lee County, but really goes throughout kind of the Texas-Delaware. So it's not as simple as just running a pipeline from the southernmost portion of our system to the northernmost portionof theirs, which is why we're going through and looking at a couple of different ways to make sure that we're managing the hydraulics and tying in our large diameter line with their southern, with the northern part of their large diameterline. I note that the large NBC that we signed earlier this year in the second quarter it's taking our system down into Loving County, that's going to serve as one of the major arteries and that asset becomes even more important as we look forward to tying in our system with the pilot system. But really when you back up, the key here is we think we're going to have the largest system and collectively we think will be able to grow recycling because of the firm disposal capacity that we can now offer and we think can grow the firm disposal capacity because of the network and the recycling solutions we offer. And I would add, fortunately, from a timing standpoint, given the recency of some of the recent contracts and the build-out of that that's going to take place over the next 12 to 18 months, we've been able to reassess the opportunity set and the approach of how we build that out to make sure that we can optimize the buildout and interconnectivity with the pilot system as part of that you know that construction timeline over the next 18 months so it gives us the opportunity to to reassess maximize the the value potential how we put it together and build that out in a manner that fits the the combined you know basis of both both systems over that time frame do you anticipate the type of solutions that you can offer customers on the legacy pilot asset base for organic growth projects would have a similar margin profile to what you all have been so successful doing up in the northern Delaware Basin? Yeah, from a margin standpoint, Jeff, we certainly expect the margin profile of the future development opportunities to look consistent with the overall segment. You know, obviously, there's a little bit of a swing factor with regards to skim oil, but as you put the two systems together, the ability to harvest that skim oil potential, improve the capture rates across the combined platform, we think will continue to improve. And the way we underwrite these new contracts is generally going to be consistent, whether it's a recycle or a disposal or a pure pipeline project. We're generally underwriting all of those on a consistent basis in that 50% the 60% margin profile consistent with the current platform. And when we put the – I was going to say, when we do put the two together, Jeff, we do think, you know, there's opportunities to create efficiency and improve the margin profile of the acquired assets as well. So we think that's another area where you've got both revenue and cost synergy potential from what we acquired. Lastly, on the permitted proposal, do those permits have a shelf life where they might need to be renewed at some point in the future? They do have a shelf life where they need to be renewed or extended, something that we're monitoring, and it's not something that is going to become a restriction at this point. So we're thrilled to have them. It's going to be a big part of our solution as we go forward because, again, you need recycling. It is the most economic solution. It's the most friendly from a force-based perspective, but you're also going to need local disposal and distant disposal, and we're very focused on providing the full suite of services. Thank you, Jeff. Our next question is from Sean Mitchell with Daniel Energy Partners. Please proceed. Hey, guys. Thanks for taking the question. Maybe to follow on to Derek's question around surfactants, we've heard several EMPs talk about it on their earnings calls last week. It's been a pretty hot topic, I think, over the last two or three quarters. When you think about these guys are mostly in the testing phase today, what needs to happen for adoption to accelerate on this front? And is that measured in months, quarters, years? Is that something you expect in kind of later 27 or any color around kind of adoption? I'd say generally the adoption, you know, timelines are moving as we would expect based upon the, you know the history of the test results, you we've been able to undertake today. So I think you're starting to get well results that are getting into that 12, 18-month time frame where you can have true conviction around the outcome and the comparative results on a side-by-side basis. So that we really do think does set 27 up to allow for more adoption over the overall industry. Some of the customers that we've been, I think, undertaking longer live testing programs with so far are already changing the behavior of their new well. completions. And so, you know, we think that's going to continue to translate through to a lot of fast adopters and fast followers from a customer standpoint. So we feel like 27 is really the year where it's going start to accelerate. You know, the pace of that over the course of the year, we'll continue to see. But we'd be very surprised if you did not see a lot of fast movement in the industry. The only thing I'd add is we think you're going to see some of the large operators continue to talk about it, about the success they're having as the well results come in, like Chris mentioned. And when you see some of the larger operators talk about that success, you're going to have everyone else follow pretty quickly, as Chris alluded to. A lot of the phone calls we're getting now are based on customers that are not using the technology today or seeing the results and want to learn more. So that's going to continue to accelerate. Got it. Thanks for the color. This concludes the question and answer session. I would like to turn the call back over to John Schmitz for any final comments. Thanks to everyone for joining the call. We appreciate your continued support and interest in learning more about select water solutions. We look forward to speaking to you again next quarter. Thanks, everyone. Thank you. This will conclude today's conference. You may disconnect at this time and thank you for your participation.