Specialist
Former Director at a water management company
Agenda
- WaterBridge's product offering and key end users in the water treatment and O&G (oil and gas) G&P (gathering and processing) industry
- Water disposal pricing and demand outlook
- Competitive landscape overview and customer retention
- Technology and growth outlook
Questions
1.
Regarding your four PE starts and given you've participated in four successful exits, has anything notably changed about the PE landscape across the last 10-15 years in terms of the water treatment and services industry?
2.
Do you expect the 75% of assets owned by E&P companies vs 20-25% owned by independent or third parties to shift at all? Should we expect E&P companies to buy more assets, or do you expect it to shift the other way?
3.
Are there any specific third-party companies that you're monitoring that you think will be active or end up owning more of the assets in the water services industry over the next couple of years?
4.
You have noted that the water services area might heat up in the next couple of years. Do you think anything has changed generally about the transactions taking place when it comes to the multiples or the valuations, or have we just seen a static increase over the last several years?
5.
Is there a path or roadmap to a successful PE exit in the water treatment and services industry that you've found works well, which we should take note of?
6.
You noted WaterBridge has around 4-5 competitors. Could you go over those competitors for us? What primarily differentiates WaterBridge from them?
7.
Could you give an overview of WaterBridge's operating model? What are the company's main sources of revenue, and how does it make money in 2023?
8.
Could you estimate WaterBridge's revenue distributions across the three streams of gathering, disposing of and recycling water, so we have some context for how big those sections are at the company?
9.
How long are WaterBridge's transportation contracts typically? If the rate is either USD 0.02 or USD 0.10, how long would that contract be for at that current rate?
10.
Could you summarise WaterBridge's assets? How many water disposal facilities and miles of pipeline does the company operate?
11.
Can you estimate how high levels of produced water are in 2023? Historically, are there any key factors that tend to drive or soften volumes of produced water that we should be monitoring?
12.
Looking into 2024, do you imagine the industry will be able to hit the necessary 8-9% growth to replace reserves and still have a little growth?
13.
Do you think WaterBridge's revenue growth would be higher or equal to the projected 8-9% you touched on? If so, could you estimate how much higher the company's growth might be?
14.
If the energy transition does happen quickly, how might that hurt WaterBridge? Is that something we should be thinking about that could really impact the company's long-term potential?
15.
In your mind, are analysts or industry experts undervaluing assets such as WaterBridge or
traditional E&P companies because of aggressive energy transition estimates?
16.
Are there any key metrics or benchmarks that we should monitor that hedge the growth of a company such as WaterBridge or the water services industry, to better help us accurately estimate the valuations of companies such as these?
17.
Do you think there are any notable differences in profitability between public and private water service companies?
18.
Could you estimate the profitability per water barrel in the industry and, if possible, between the smaller and larger companies?
19.
Is there anything that might limit the scaling of a company such as WaterBridge? Is there a sense that a company could get too big or that growth becomes unattainable at any point?
20.
You noted a potential IPO for WaterBridge. Do you think that's a likely outcome? If so, when might we see an IPO?
21.
What might the synergies be between a water services company and a traditional G&P [gathering and processing] company? If one of the larger companies did buy a water service company, is there anything that might limit growth or synergy opportunities?
22.
Do you think we could potentially see water services companies acquired by G&P companies even in 2024, or might we need to wait until the rate environment gets a little lower?
23.
In August 2023, WaterBridge announced a strategic partnership and expansion with Devon Energy in the Delaware Basin. Could you walk us through this partnership and explain why this might be beneficial to the company?
24.
Should we expect similar partnerships and expansions to the one with Devon in the future for WaterBridge?
25.
Noting WaterBridge's asset locations, are there any specific company partnerships or acquisition targets we should be monitoring for, or even just companies that would make sense to work with it?
26.
Is WaterBridge more competitive than other players we've touched on when it comes to making acquisitions or partnerships?
27.
How do WaterBridge's expansions and partnerships in the Delaware and Midland Basins impact the competitive landscape? Are competitors going to have to keep up or make acquisitions or JVs to keep up? I'm curious about the deployment cadence of this capital.
28.
Has WaterBridge's operating model changed materially since partnering with Five Point Energy? Has anything changed over the last few years, or are there any changes we should expect in the coming years?
29.
Is water infrastructure generally difficult to permit or construct? There have been a lot of regulatory challenges when it comes to O&G [oil and gas] transportation and gathering – is water the same?
30.
Related to the energy transition conversation, we've touched on how 75% of water service assets are owned by traditional operators. You expect that to meaningfully shift over the next years, as those traditional operators start to deploy capital in drilling rigs and wells. If the energy transition does start to meaningfully impact O&G production, even if it's in 1-2 decades, would that hamper that growth or maybe the transition to water service-specific independent companies?
31.
Is there anything a typical analyst might not know about WaterBridge or the water management industry that we should know? Are there any questions you don't see analysts asking that we should be?
32.
Are there any questions you would ask WaterBridge leadership to assess its long-term strategy and the company's general success and profitability?
33.
Does it make more sense to you for WaterBridge to go straight to an IPO eventually, when the company does transition out of its current PE sponsors? Or could we see a sale back to another PE sponsor, knowing that it is a growing industry and we expect some more growth from the company?
34.
We've touched a lot on WaterBridge's scale and how that's a huge differentiator when it comes to its competitors. Are there any other specific strengths that you would highlight to better understand the company?
35.
Are there any areas we haven't touched on that are relevant to monitor for future conversations on WaterBridge or the water management services industry?
36.
Is there any typical difference in margins when it comes to recycling vs disposing of water?
