Select Water Solutions (WTTR) is shifting from a cyclical oilfield services company to a higher-margin water infrastructure business, supported by rising water recycling demand, BofA Securities said in a note Friday.

The analysts said they forecast water infrastructure to contribute 58% of adjusted earnings before interest, taxes, depreciation, and amortization by 2030. They expect adjusted EBITDA of $315 million, $367 million, and $417 million in 2026, 2027, and 2028, respectively, which is modestly above consensus estimates.

The company has 2.8 million barrels per day of recycling capacity, including 1.7 mbd in the Northern Delaware, supported by more than 2.5 million acres, the analysts said, adding that they expect water infrastructure capacity to grow to 2.37 mbd by 2030, driving EBITDA from this segment to $340 million in 2030.

"We believe tightness in the water market, and [Select Water Solutions'] low-cost recycling solution position it to gain market share and see an inflection in volumes over the coming years," the analysts added.

BofA initiated coverage on Select Water Solutions with a buy rating and a $22 price target.

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