Bank of America has initiated coverage of Select Water Solutions with a Buy rating and a $22 price target, saying the company is moving away from the traditional cyclical oilfield services model toward what the bank describes as a higher-margin water infrastructure business with more predictable cash flows.
In its research note, BofA laid out a trajectory for Select in which produced-water recycling and infrastructure play a central role in reducing earnings volatility and improving long-term profitability. The bank expects the water infrastructure business to represent 58% of adjusted EBITDA by 2030, up from 45% in 2025 and just 8% in 2019.
Analysts cited in the coverage forecast adjusted EBITDA of $315 million in 2026, increasing to $417 million by 2028. The projected growth is attributed to several factors the bank highlighted: expanding recycling capacity, higher volumes of water handled, and a rebound in U.S. oil completions activity.
BofA pointed to tightening disposal capacity in the Delaware Basin as a significant growth catalyst for Select. The firm notes that U.S. oil production produces more than four barrels of water for every barrel of oil, a ratio that underpins steady demand for recycling and disposal infrastructure.
The company currently has 2.8 million barrels per day of recycling capacity either under contract or under construction, including 1.7 million barrels per day located in the Northern Delaware Basin. Additionally, Select has nearly doubled its acreage dedications since early 2025 to more than 2.5 million acres, with average contract durations exceeding 11 years, according to the report.
BofA's analysis also flagged emerging demand drivers outside of traditional oilfield activity. The bank noted opportunities tied to AI-driven data center growth, suggesting recycled water could increasingly be used for cooling infrastructure. BofA estimated that Texas alone could eventually require between 1 million and 6.5 million barrels per day of water demand from data centers that are either under construction or have been announced.
Despite an approximate 64% year-to-date gain in the stock, BofA said Select still trades below pure-play water infrastructure peers on an EV/EBITDA basis, a valuation gap the firm views as an attractive risk-reward as the company’s earnings visibility improves.
The bank also outlined risks that could temper the company's outlook, including weaker oil prices, execution challenges associated with expanding infrastructure, and rising competition within the Permian water market. These factors could affect the pace and profitability of the firm’s transition to a larger water infrastructure mix.
Overall, BofA's initiation frames Select as a business pivoting into infrastructure-oriented water services, with recycling capacity growth, long-term acreage dedications and potential non-oilfield demand from data centers as principal elements of the investment thesis. The bank’s forecasts and valuation commentary form the basis for its Buy rating and $22 target.