Nuverra Environmental Solutions Stock (NES): Why The Price Surged Today

By Amit Chowdhry ● Dec 13, 2021
  • The stock price of Nuverra Environmental Solutions Inc (NYSEAMERICAN: NES) increased by over 85% during intraday trading today. This is why it happened.

The stock price of Nuverra Environmental Solutions Inc (NYSEAMERICAN: NES) increased by over 85% during intraday trading today. Investors are responding to Select Energy Services, Inc. (NYSE: WTTR), a leading provider of sustainable full life cycle water and chemical solutions to the U.S. unconventional oil and gas industry, today announced that it has entered into an agreement to acquire Nuverra Environmental Solutions, Inc. (NYSE American: NES) for total consideration of approximately $45 million, including the assumption of approximately $20 million of long-term debt, net of cash. Under the terms of the agreement, Nuverra stockholders will receive approximately 4.2 million shares of Select Class A common stock in exchange for all outstanding shares of Nuverra.

The deal was unanimously approved by each of Select’s and Nuverra’s board of directors and is expected to close in the first quarter of 2022, subject to customary closing conditions and the approval of Nuverra’s stockholders. And Select has entered into a support agreement with holders of Nuverra stock who collectively represent approximately 85% of the outstanding voting shares of Nuverra to approve the transaction.

Nuverra is an energy-focused environmental solutions company, providing comprehensive, full-cycle environmental solutions, including the removal, treatment, recycling, transportation, and disposal of restricted solids, fluids, and hydrocarbons for exploration and production companies operating across the United States, including in the Bakken, Haynesville, Marcellus and Utica Shales.

And Select announced that on December 3, 2021, it closed on the acquisition of the U.S. onshore rentals and accommodations operations of HB Rentals, L.C. (HB), a subsidiary of Superior Energy Services. In consideration for this acquisition, Select issued 1.2 million shares of Class A common stock and paid $1.5 million in cash, subject to standard post-closing adjustments, to Superior to close the transaction. With current operations in the Permian, Haynesville, MidContinent, Northeast, and Rockies regions, HB operates as a leading rentals and accommodations company with a footprint across the United States. Going forward, Select Energy expects to operate the HB assets within its Peak rentals and accommodations business within the Water Services segment.

KEY QUOTES:

“We are excited to further expand Select’s world-class sustainable water services and infrastructure footprint through yet another attractive set of consolidation opportunities. These acquisitions represent a continuation of our strategic effort to improve and bolster our base business, advance our technology and diversification efforts, and execute on strategic consolidation opportunities. The Nuverra acquisition will strengthen our geographic footprint with a unique set of water logistics and infrastructure assets, particularly in the Bakken, Haynesville and Northeast, while continuing to expand our production related revenues. Additionally, the acquisition of HB’s onshore operations will add significant asset and regional breadth to our market-leading rentals and accommodations business unit within our Water Services segment.

“With the Nuverra transaction, we will be adding more than 300,000 barrels per day of permitted daily disposal capacity in Texas, Louisiana, North Dakota, Montana and Ohio. When combined with our existing assets and other recent acquisitions, this brings our company-wide permitted daily disposal capacity to approximately 2.5 million barrels per day. Nuverra also owns and operates a 60-mile underground twin pipeline network in the Haynesville Shale in Texas and Louisiana 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 Nuverra’s 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. 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 capabilities into a new service offering. With current remaining available permitted capacity of approximately 1.3 million cubic yards, we believe the facility has the potential to be expanded up to a total of 5.8 million cubic yards of available capacity with additional permitting.”

“Importantly, the Nuverra acquisition continues to build upon our recent M&A strategy, as seen with the acquisitions of Complete and Agua Libre, of consolidating sizable existing infrastructure portfolios that provide us with a significant footprint of recurring produced water volumes and meaningful optionality for incremental gathering and recycling infrastructure development across larger networked systems. Supported by our strong technology platform and our market leading position in sustainable full life cycle water and chemicals solutions, our FluidMatch™ capabilities provide a holistic approach to produced water sourcing, treatment and recycling, chemistry and logistical delivery. We believe there remains significant opportunity to further commercialize and transition these legacy infrastructure assets towards new sustainable strategies revolving around our water recycling and FluidMatch™ expertise in order to both limit waste and decrease freshwater demand in the industry, while simultaneously improving economic and production results for our customers. As we all know, water is vital to the health, economic, and social well-being of the communities we all live in and work in and our goal is to develop sustainable water solutions with a shared commitment to conservation. Ultimately, we view this captive supply of produced water as an alternative, sustainable water source and will continue to invest in the technology and infrastructure needed to provide these solutions to our customers.”

“We continue to experience a strong recovery in activity and financial performance in the fourth quarter, buoyed by a robust commodity price environment and our recent acquisitions, and we remain excited about the opportunities that lie ahead in 2022. In total, upon completion of the Nuverra acquisition, we will have added an estimated nearly $300 million of incremental annualized run-rate revenue through M&A since the beginning of the third quarter of 2021. Consistent with our belief that consolidation in the oilfield service markets is a critical avenue to advance profitability in the industry, we also believe there are meaningful cost synergy opportunities to be gained from these acquisitions, including resolving the duplication of public company cost structures with Nuverra. We believe the acquisitions of Nuverra and HB, in conjunction with our other recent acquisitions of Complete, Agua Libre and UltRecovery, position us to see meaningful revenue and earnings growth in the year ahead. Even with this recent activity, we still maintain a strong balance sheet with a meaningful net cash position, backed by incremental revenue and gross profit. Ultimately, we look forward to realizing the benefits of these acquisitions across our scalable platform, and further developing and building upon this diversified portfolio of assets for our shareholders, customers, employees and other partners.” 

— John Schmitz, Select’s Chairman, President and CEO

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