Hey, everybody. My name's Earl Gergen. I'm here with Three Part Advisors. Thank you all for coming to the conference. Up next, we have Select Water Solutions, traded on the NYSE under WTTR. On behalf of the company, we have John Schmitz, Chairman and CEO. John?
Yeah, thank you very much for having us, and thanks for the interest today. As I said, I'm the Chairman and CEO. I founded the company in January of 2007. We took the company public in 2017. We will walk through the slides here, but primarily, it is very much a water infrastructure company. It is in and around the oil and gas business and the transition of what is going on with water in the oil and gas business. We have now branched out into the municipal side of the business. It is a public company. Here is the disclaimer. Some of the positions that are important within the company today, as I said, it is a water infrastructure platform company. We introduced recycling application. We were the first there in 2021. We put the first recycling plant in Permian. We are the leader in that avenue.
This is a position that's really launched the infrastructure side of the business. It's a clear market leading. They're really free cash flow conversion, low CapEx. They are a services business. They are cyclical in the application of completing oil and gas wells. They're really low CapEx, low CapEx maintenance. They convert 70%-80% of the cash or the earnings to cash. The infrastructure, the growth arm, once it's built out and you're through the cycle of build-out, they're recycled. I mean, they're like plants. They are fixed. The maintenance of those are very low. They're high free cash flow conversion as well, just higher gross margin. It's a strong balance sheet.
It does have some debt that we put on it because of this infrastructure build-out primarily, but it's still very conservative in less than a year of turn of EBITDA or within our working capital contraction opportunity, whether it's accounts receivable or inventory. It is really a growth story in the build-out of water infrastructure. There is a lot of M&A around it, but that water M&A is primarily building out networks that you can balance water, manage water through the whole life cycle of the well. You are sitting in the middle of it with big networks. You have taken asset purchases through M&A, added it to the network. You are simply solving the solution for the customer or water balancing. Whoever is long water, bring them a solution that is cheaper in dealing with the long water.
Whoever's short water, you're using that solution to bring a solution that's actually better for actually contracting the water to do the completion on it. We are a dividend-paying company. We did raise it last year. We've done a lot of stock buybacks, really, until we got in this growth phase of building out this infrastructure. We bought back roughly $200 million worth of stock in a shorter history here. We are a water sustainability business. I mean, we're taking a waste stream, treating that waste stream, and making a usable piece of water. Right now, that is very focused on oil and gas so that water's getting recycled back into use, the water to frac the well or the completion side.
We also have some pilot programs where we're going to take that waste stream of produced water and actually reclaim some of it to take back into the environment instead of disposing as a waste stream to grow crops or do something in the industrial side of water needs. The company is reported under three segments. The first one is our growth, the water infrastructure. It really has two sides to it. The recycling, there's your fixed plants, long-term contracts. That's dealing with taking the produced water that comes out with the oil and gas and making it usable back into completing wells instead of using fresh water. Then the actual gathering and disposal of the waste stream. We do have a solids management in there too.
It's smaller than those two, but that's managing separations of solids, water, oil at the surface and disposing of the water or capturing the oil or taking the solids to the landfills. This is sizable, this position. Our water recycling is probably 3x as big as number two, primarily in the Permian Basin. Our gathering systems, the lines to gather the water or take the water back out to where it's going to be used, is substantial now. Our storage, which we would believe would be the strongest position really to the network because when you're long water, short water, your balancing ability is really important. That 21 million barrels of storage is a big asset to the company. We have, and we'll talk about it, we have entered into the municipal industrial space.
We just made an investment in south of Denver, Colorado, of taking water and accumulating in. Diameter hose you laid out for the job and extension of that network to the job site. That's primarily what's in that water service business. In the chemical technologies business, what our chemicals is, first of all, it's an in-base and manufacturing plant in Midland, Texas shelf. It makes chemistry to either make the water usable, frac with, or the chemistry that goes in the water to frac the well. This is a diagram. Everything on the left really is where we started. It's sourcing, movement, that last mile logistics, containment, large quantities, treating the water, making it usable to frac with, and then adding the chemistry going into the frac job. That's kind of where we started. Hit the right side of the screen.
It's when after you either have completed the well, the well starts its production life. Everything in the lower right-hand corner is all to do with disposal. It is what the industry did do: gather the water, take it to a disposal well, pump it in the ground, and dispose it in reservoirs. What we added is a recycle piece right above the fluid separation and control. You can see that we took it back and made it a water source into the frac operation. You can see to the right there the beneficial non-oil and gas application. That is the pilots that I'm describing. In these boxes, y'all, we're either going to be one, the largest player in the boxes, or if you think of it at network, it is going to be sizable and contracted positions as we added this infrastructure.
This slide takes you to across the United States. The company is also different in the sense that it goes across all basins. So it has the flexibility of oil activity or gas activity. We have the biggest disposal opportunity or position in the Haynesville Shale or up in the northeast, in the Utica and the Marcellus. We also have the biggest recycling position in the Permian Basin where all that water production is and where the water management is in need of a solution. These are the different areas of the United States, and this is our systems across those areas. A very unique, flexible between oil and gas. This is the customer base. Primarily, it is going to be upstream players. People who drill and complete and produce wells. You will see a couple of frac companies in there: Liberty, Halliburton, Patterson-UTI.
Our chemistry that we make to frac wells with, some of that chemistry is sold through the frac horsepower companies. That is why they are on the page. Basically, we sell to E&P companies. They are our customers. They are the people signing the long-term contracts. They are the people that we are building these recycling facilities and pipelines and gathering systems on their land or in partnership with them. This is the performance of the company. Coming out of COVID, it was an oilfield service business, that last mile logistics. We developed this infrastructure. Logically, the industry actually rebounded after COVID as well. This is the growth of the revenue and the growth of the earnings and the transition between OFS or the services side of our business to the industrial side of our business and the chemistry side of our business.
You can see that the infrastructure is the growth. That's where the capital growth dollars are going. As I said at first, the water services chemistry, it is a call-out service business. It is very driven by completion activity. We are attuned to technicality in those businesses. They are free cash flow conversion. We convert about 70%-80% of the cash out of the gross profit of those businesses. We're using that cash today to do the right side, which is the water infrastructure business. Heavily weighted to oil and gas now. As I said, we just invested in that first municipality deal in Colorado. This is a, it's a high gross margins. These are underwritten by contracts. They are tied to the land. If there's consolidation between these oil and gas companies, our contract follows the actual asset base across it.
We're using the profits out of the left to fuel the right and build out that infrastructure business. It's about a little more than two times the gross margin of the left side of the page. This is a picture of one of the recycling facilities. The interesting thing is this one, what we've been able to do, first of all, it's a value prop. We're bringing value to the customer. This is a better answer than what they were doing, which is just disposing of a waste stream. When you can water balance and you got long water and short water, you can bring value to both. 21 years. We do them up to 18 years. Some of them are eight years. If you look at all the contracts across the company now, it's about 10.1 years.
The most important piece and our very important piece is the left-hand side that showed the water recycling facility. When you put these facilities in place and put these long contracts in place, you actually get dedicated position. That is to the asset base. As I said, it follows the land. We have about 2.5 million acres now in some of the best rock in the United States under dedication or with rovers tied to these contracts. It is truly the full cycle life of the well as it develops itself and produces itself out throughout its life. This is a page that shows, as I said, we were the first to bring in recycle. The top left-hand side of the page, 2020, 31 million barrels were $282 million. This is to our company and the recycling application.
You can see the right side of the page, we also grew disposal. We're more recycling first because we think it's the best economic solution. If you do not need water to frac with or what you can do with it, you're going to have to have a disposal solution. We do both. This is the growth that we've had both in revenue and volumes. This is the conversion of the company. If you take 2018, y'all, this was basically an oilfield service business. 80% of the business was that last call-out service business. It's roughly a 22%-25% gross margins business. That ran about $1.6 billion and about a little less than $260 million of EBITDA in 2018, but it took about 5,500-6,000 employees to do that.
We started our conversion of the infrastructure and the opportunity and the development of recycling. This year, we'll have about 50. This with about 3,800 employees today. This is really how we came up with it. We went through COVID, and coming out of COVID, there was a lot of disruption. The left-hand side of the page is a lot of bankruptcies that we bought. These were systems, if you think about water infrastructure. We bought systems. We bought the water side of Basic Energy's . That was Aqua Libra. Of their bankruptcy, Cypress was a disposal system out of a bankruptcy. Nuverra was a full company bankruptcy that gave us our Haynesville position we got in gathering and disposal.
We bought back the water side of Complete that gave us really good systems and opportunities in the DJ and the MidCon and some other places, but that's the two big ones with it. That's just kind of the systems and bankruptcies distress on the left. The right is really assets. If you think of the systems, you can go out and do M&A to buy a disposal well. If it's a single disposal well, not part of a system, it's got a certain value to it. When you put it in the system and make it part of the network on it, it has a better value. We go out and buy assets that fit within our networks, and then we build out that network to add those assets to it.
We usually buy them at about a third of their cost to replacement is kind of where we can buy them. The biggest thing, we buy them off the economics as a standalone asset. Once they bring into the network, they become more valuable. That is primarily what the right side is. We did enter into the municipal industrial water space. It's not something we're not used to. We were the biggest freshwater source frac water need in the United States before we converted the company coming out of 2021. We had water rights all over the United States. It was all big water rights going into frac horsepower. We know how to contract water in Colorado and manage that. We've now taken that knowledge and that rolodex, if you will, and we moved into the municipal space.
Our first one is off the Arkansas River Basin, south of Denver. This is about 16,600 acre ft of freshwater that we now own. We have consolidated. That was nine or 10 different transactions. We consolidated that. It is a size now that you can go to municipality and contract it long term, lease it to them. It is non-depleting. You have also, being a river, you got to have storage opportunity because flow rates come and go throughout the year. The rights to the water, you got to capture it when you can. You got to have a reserve base that you can deliver to your customer underneath your contracted obligation. We put $62 million in it to do the consolidation of the nine or 10 pieces. We put another $10 million to buy some more water.
We got the rights to put the next $72 million in. When we put that $72 million in, we'll own about 56% of it. We'll own control and we'll run it. There is a mechanism on the backside of that that actually could give us 100% of it if we choose to do that. If you think about it, we put in the $146 million or have the rights to put in the $146 million. On a total enterprise, this one would be about $260 million of committed capital. An opportunity depends on if you're municipal or industrial, one's better than the other. Opportunity of creating $40 million-$60 million worth of earnings power out of that $260 million. These contracts are long life. Some of these contracts with municipalities can be 30-50 years. They have escalators in them. You're leasing them the water.
It's a non-depleting asset. They're very senior water rights. If you do it with a municipality, you're getting into a utility type arrangement in your lease with them. That's a picture of it. This is, as I said, the Arkansas. You end up with a hole in the ground. That hole in the ground's the right spot to fill it up with water and have that water as storage swing for your municipalities as the river flow changes over the course of the 12 months. I talked about the balance sheet. We did borrow money to continue our build-out of our infrastructure. It's got plenty of liquidity. It's very conservative debt. It's within one year of EBITDA.
If you look at working capital in a business that can go up and down with activity in the services side and the chemistry side, it's within AR and inventory. It is very manageable. We look at it that way. It will change as we continue down the municipal and industrial side with long-term contracts. We do pay a dividend. We did raise it last year by 17%. We fully believe that we're building a business that is going to be high free cash flow. It is going to be high gross margins. It is going to be contracted. It actually, I think, has a bridge into even a better stability in the municipal and industrial side than just the water infrastructure for oil and gas. We expect the ability of this company to have the choices of capital allocation in a very positive way for the investor base.
We did buy back stock over the time period from 2021 up. We bought back about $200 million worth of stock over that time period. The company does think of itself as an opportunity of distribution to the shareholders that probably is going to get better because of the contracted nature and high gross margins and low CapEx requirements. It is kind of going back over everything I just talked about. I will not do that. I will sure take any questions that anybody has. Yes, sir.
Two questions relative to the Colorado project. You mentioned a $40 million-$60 million of gross profit eventually. What is the timeline to get there? You mentioned municipal water use. What does that actually mean? Does that mean communities will be drinking the water? Does it mean selling to industrial facilities? What is the reality of where those molecules go?
Our business model is a leasing model, regardless of whether it is municipal or industrial. That is our first direction of what we are going to do with our water rights, is lease them long-term on long-term contracts with escalators. We are not going to be in the utility business. We are not going to deliver the water, run it through a meter, and send somebody a bill. That is not what we are going to do. We are going to lease water. You are completely correct. If it is a municipality, this is going into their freshwater utility for drinking water for expansion of housing that you are seeing at different parts of the country right now. On the industrial side, it is a little different. It could be agricultural grow houses, so where they are growing vegetables and stuff like that. It could be data centers in the use of water.
It's a little different because some data centers are cooling. Some are used in operation application itself. Regardless, it is a water source for that. It could be a water source in other industries that use water for cooling or processing. They're actually higher in value than a municipality, but they're not necessarily a utility that has exposure to utility capital on it. That's the arrangement. That's the business model. That's what we're going to do with it. We're going to target Texas and Colorado because we kind of know water law pretty good in those states. We think the growth and the opportunity within them states are going to hand us more Arkansas river farms, Arkansas valley farm. Yes, sir.
This slide deck, you have a page about commissioner rates. Curious how that fits into your total business. Is that something that you're looking to expand on or?
No, sir. Yeah, I will talk to it. It's methane capture. It is inside of water services. We have two pieces of that business that's still there today that don't fit within the water thesis that we just went over and described. We have an accommodations with a portable power generation business inside there. And then we have what you call a flowback business in it. In that flowback business, you it's in water services, but it does not fit the water thesis.
That's not something that you might expand on? Or if you have that capability, would it be applicable to other areas geographically or?
It is an area in the industry that has got a lot of pressure to expand because the regulations that are coming down, combustors are getting not only used during the completion and flowback process of the well where we participate, but they're actually setting combustors on every battery site now. Any fumes coming out of the battery while they produce oil and gas, they capture and eliminate with it. Is it an expansion area that is opportunistic? Yes, it is. Does it fit the water thesis? No, it does not. Yes, sir.
Timing of Colorado project.
Yeah, I didn't. Sorry about that. We expect that we will 36 months. And what will drive that is either buying more water rights, developing the storage.
What really will drive it is landing a contract with a municipal or industrial user that we can underwrite and spend that capital properly. We would expect we probably will ink something in the next 24-36 months. Yes, sir. Sorry about that. Thank you all very much. I appreciate it. Yes, sir.
Sorry, one more quick question. The competitive dynamic, are there other companies trying to do the same model? You guys are building on infrastructure or are you generally?
There are some large infrastructure companies that are either going to be a certain area. They are not going to be brought across the United States like we are. They will have either strengths in volumes because of the gathering they laid for customers or the disposals they put in.
There's not going to be a lot of competitiveness in fixed recycling facilities because we were kind of first there. We built out the first one. We actually announced we built it out south of Midland, and it just had its, actually, two of them now just had their milestone of 50 million barrels of recycled produced water. So we're heavily number one in the recycling space because we were first to market. We're very special in the sense of crossing the United States for all the development of oil and gas, except the West Coast. We would be very different then. We would be the only company that have water and chemistry. Chemistry is an important piece. Does it fit the water thesis? It does in the sense you use chemistry to treat the water to make it usable to frac with.
You use chemistry to actually do beneficial reuse if you get to that point. You use chemistry to go in the water to actually frac the well. That is what this chemistry is. We are the only one like that. Yes, sir.
Reading about all of the issues with porosity and pressure for injection, particularly the Delaware side of the Permian, should that help recycle rates? I guess the second part of that question is, how should that work for incumbents in the disposal business?
You have seismicity as it relates to injection, which is starting to have regulatory limitations to injection. That means water is getting moved around, if you will, to find a way to manage it differently than what they were. You have the development of recycling. You have, to your point, about poor space.
Water is a big issue in the oil and gas industry. It's a big issue in a lot of places now, but especially the upper Delaware and Eddy and Lea County. New Mexico does not want you using fresh water to frack with now. New Mexico does not have a lot of water to begin with. The development of that acreage, which is probably some of the best acreage in the United States for oil and gas development, it needs a solution to a problem both on source to be able to drill and complete as well as management because that area comes kind of the highest water-oil ratio in the United States. That 2,000-barrel well that you read about in the upper Delaware, that 2,000-barrel oil well comes with 12,000 barrels of water. It's a growing problem. It's limited to certain solutions.
We believe recycle first is a great solution. Disposal, and it's the cheapest. Disposal is up the line. That's going to be a challenge because of seismicity or limitations by government or poor space. You got out of basin. I should say you got the opportunity of beneficial reuse. Can you take 30%, 40%, 50% of that volume and make it a piece of water that can be entered back into the environment instead of disposal? That's more expensive than disposal. You got out of basin. Move the water long distances to get it away from that poor space that's filling up or the seismicity or the growth. That's the most expensive. Select has exposure to all of it. We like recycle First because we think it's the best economic solution that fits the regulatory body that fits the need.
If you look at all of our growth, all them capital dollars that we keep announcing, all of that really, majority of it, y'all, is Eddy and Lea County, New Mexico, because that's where the good rock is. That's where the need is the most. Thank you all very much.