Select Water Solutions has entered into a definitive agreement to acquire Pilot Water Solutions for $700 million in cash and stock, with the sellers eligible to receive an additional $15 million in contingent cash consideration. The acquisition will substantially expand Select’s water infrastructure operations in the Delaware Basin and strengthen its contracted produced-water management business.
The deal consists of $600 million in cash and $100 million in Select Class A common stock, subject to customary purchase price adjustments and other provisions. The additional contingent payment depends on achieving specified operational milestones expected in early 2027.
The acquisition is expected to close in the fourth quarter of 2026, subject to regulatory approvals and customary closing conditions.
Pilot Water is a privately held water midstream company with a substantial operating presence in the Delaware Basin, one of the Permian Basin’s principal oil and natural gas-producing regions.
Its infrastructure portfolio includes approximately 2.7 million barrels per day of active permitted disposal capacity, an additional 900,000 barrels per day of undeveloped permitted disposal capacity, and more than 700 miles of pipelines.
The company also maintains a substantial portfolio of long-term customer contracts.
More than 80% of Pilot Water’s annual revenue comes from long-term agreements with an average remaining term exceeding seven years.
Its contract portfolio includes approximately 480,000 barrels per day of minimum volume commitments and 306,000 acres dedicated under long-term agreements.
These arrangements provide recurring business tied to customers’ oil and gas production activities.
A recently secured 175,000-barrel-per-day minimum volume commitment contract is expected to increase Pilot Water’s daily produced-water volumes from approximately 850,000 barrels during the first half of 2026 to approximately 1 million barrels in 2027.
More than 80% of the company’s daily produced-water volumes are handled in the Delaware Basin across New Mexico and Texas.
Pilot Water also maintains operations in the Midland Basin, Eagle Ford, Haynesville, Rockies, and Northeast regions.
The acquisition is expected to add $100 million to $110 million in adjusted EBITDA in 2026, increasing to approximately $120 million to $130 million in 2027.
Select is also targeting $10 million to $15 million in additional annual cost synergies, which it expects to achieve within 12 to 18 months. Those anticipated savings are incremental to Pilot Water’s projected 2027 adjusted EBITDA.
These figures represent company forecasts, not financial results already achieved.
For Select, the acquisition will integrate Pilot Water’s disposal infrastructure with its existing water recycling and treatment operations.
The combined platform is intended to provide additional flexibility for managing water produced during oil and natural gas extraction, allowing customers to access a broader network of gathering, recycling, treatment, storage, and disposal assets.
Following the transaction, the combined company is expected to operate approximately 3.8 million barrels per day of recycling capacity and 4.8 million barrels per day of combined active and undeveloped permitted disposal capacity.
Its infrastructure network will include more than 1,600 miles of pipelines and approximately 57 million barrels of treated and produced-water storage capacity.
The larger network is expected to support greater water recycling and improve the ability to balance water volumes across different parts of the Delaware Basin.
Select also sees opportunities to improve infrastructure utilization and preserve disposal capacity by directing additional produced-water volumes toward recycling and other applications.
The combined company’s contract portfolio is expected to support more than 2.5 million barrels per day of produced-water volumes in 2027.
That portfolio will include more than 600,000 barrels per day of minimum volume commitments and approximately 3.6 million acres under dedication or right-of-first-refusal arrangements, with a weighted average remaining term of approximately nine years.
Nearly 90% of the combined company’s minimum volume commitments are expected to be supported by investment-grade customers.
The acquisition will also change Select’s business mix.
Management expects its Water Infrastructure segment to account for approximately 70% of the combined company’s gross profit before depreciation and amortization in 2027, strengthening its emphasis on infrastructure-related earnings.
Select expects to maintain pro forma net leverage below 2.0 times at closing, despite the substantial acquisition consideration.
To support the transaction, the company has obtained debt financing commitments from JPMorgan Chase Bank and Bank of America.
The cash portion of the acquisition is expected to be funded through available cash, committed debt financing, or other debt financing, depending on market conditions.
The transaction also contains provisions addressing the value of the stock consideration.
The number of shares issued will be based on Select’s 30-day volume-weighted average share price immediately before closing. A separate provision may require an additional cash payment if the company’s corresponding average share price declines during the six months following closing.
Support: J.P. Morgan Securities and BofA Securities served as financial advisers to Select, while Vinson & Elkins is acting as legal counsel.
KEY QUOTES:
“We are excited to announce our agreement to acquire Pilot Water Solutions, a leading private water midstream company with a core position in the Delaware Basin. We expect this acquisition to further solidify Select’s position as a diversified, market leading water midstream platform operating across the United States. With Pilot Water, Select will add highly contracted, production-related earnings streams at an accretive valuation in the heart of the Delaware Basin.”
“Pilot Water’s sizable Delaware Basin water midstream footprint across Texas and New Mexico is very complementary to Select’s existing footprint, providing significant opportunity to interconnect in both an operational and capital-efficient manner.”
John Schmitz, Chairman, President and CEO of Select Water Solutions
