WTTR 10-K & 10-Q changes, risk factors and insider trading

Demand for our services is directly affected by capital spending by our customers to explore for, develop and produce oil and gas in the U.S. Capital spending is generally dependent on our customers’ views of future demand for oil and gas and future oil and gas prices, as well as our customers’ ability to access capital. Such demand may be impacted by a variety of factors, including global geopolitical instability, accelerated substitution of renewable forms of energy for oil and gas and actions of OPEC+. During the year ended December 31, 2024,2025, the average West Texas Intermediate (“WTI”) spot price was $76.63,$65.39, versus an average price of $77.58$76.63 for the year ended December 31, 2023.2024. Furthermore, this trend has continued into the first quarter of 2026 and we anticipate the resumption of Venezuelan hydrocarbon exports may further depress oil prices.

Volatility in oil prices or natural gas prices (or the perception that oil prices or natural gas prices will decrease) affects the spending patterns of our customers and may result in the drilling or completion of fewer new wells or lower spending on existing wells. This, in turn, could lead to lower demand for our services and may cause lower rates and lower utilization of our assets. While customer budgets for U.S. onshore development during 20242025 were relatively flat on a year over yearyear-over-year basis, and are expected to remain relatively so during 2025,2026, factors outside of our control can alter these budgets, or lead customers to underspend their budgets. Even in an environment of strong oil and gas prices, fewer oil and gas well completions in our market areas as a result of decreased capital spending may have a negative long-term impact on our business. Any of these conditions or events could adversely affect our operating results and may continue to do so into the future. Sustained market uncertainty could also result in lower demand for our services, which could adversely affect our liquidity, results of operations and financial condition. While we believe that the newcurrent presidential administration will provide regulatory tailwinds for our industry, industry conditions are influenced by numerous factors over which we have no control, including, but not limited to those discussed in “Cautionary StatementNote Regarding Forward-Looking Statements.”

Our business, financial condition and future results are subject to political and economic risks and uncertainties, including instability resulting from civil unrest, political demonstrations, mass strikes or armed conflict or other crises in crude oil or natural gas producing areas. For example, while there are currently broad-ranging economic sanctions on Russia and certain Russian individuals, banking entities and corporations as a response to the Russia-Ukraine war, an end to the Russia-Ukraine conflict and an easing or elimination of the related sanctions against Russia could result in a decrease in commodity prices as Russian hydrocarbons become more readily accessible on global markets, which could have an adverse effect on our customers and therefore adversely affect our customers’ demand for our services. In addition, the instability in the Middle East has contributed to volatility in oil and gas prices, as well as disruptions to supply chains. Further escalation of conflict in the Middle East, in particular with Iran, a major oil producer, could have an adverse effect on our customers and therefore adversely affect our customers’ demand for our services. Further, beginning in late 2025, the U.S. seized several oil tankers suspected of transporting oil from Venezuela, and, in early 2026, the U.S. launched a limited military intervention in Venezuela which culminated in the capture of Venezuela’s incumbent president. As the situation stabilizes and U.S.-Venezuela relations improve, it is expected that approximately 50 million barrels of sanctioned oil may become available for export as U.S. sanctions are lifted. The resumption of such exports may cause a depression in global oil prices as the market adjusts to such an increase in supply. If the resumption of oil exports from Venezuela depresses global oil prices, certain of our customers’ operations may no longer be economically viable, thereby reducing demand for our services. The ultimate geopolitical and macroeconomic consequences of these conflicts cannot be predicted, and such events could severely impact the world economy and may adversely affect our financial condition. Although the Company does not have operations overseas, these conflicts elevate the likelihood of supply chain disruptions, heightened volatility in crude oil and natural gas prices and negative effects on our ability to raise additional capital when required and could have a material adverse impact on our business, financial condition or future results.

The actions of OPEC+ with respect to oil production cuts can have a significant impact on crude oil prices. OnFollowing Decemberseveral 5,reductions 2024,in production cuts throughout 2025, on November 30, 2025, OPEC+ announced anit extensionwould of itsmaintain current oil production cuts throughof 2026approximately 3.2 million barrels per day and willreaffirmed its decision to not startincrease implementing output increases until April 2025.production. Due to the above and other factors, crude oil and natural gas prices experienced increased levels of volatility during 2024,2025, ranging from a low of $66.73$55.44 per barrel in September to a high of $87.69$80.73 per barrel in April. Further, the volatility in crude oil and natural gas prices could accelerate a transition away from fossil fuels, resulting in reduced demand over the longer term. To what extent these and other external factors (such as government action with respect to climate change regulation) ultimately impact our future business, liquidity, financial condition, and results of operations is highly uncertain and dependent on numerous factors, including future developments, which are not within our control and cannot be accurately predicted.

AlmostApproximately half of our revenues are derived from our operations in the Permian Basin of Texas and New Mexico, making us vulnerable to risks associated with geographic concentration generally and the Permian Basin specifically, including Basin-specific supply and demand factors, regulatory changes and severe weather impacts that could materially and adversely affect our business.

The Permian Basin of Texas and New Mexico is presently our largest operating region, accounting for approximately 51% and 48% of our revenue in both 20242025 and in2024, 2023.respectively. As a result of this concentration, we are vulnerable to risks associated with geographic concentration generally and the Permian Basin specifically. For example, we are disproportionately exposed to the impact in the Permian Basin of regional supply and demand factors, production delays or interruptions, as a result of governmental regulation or otherwise, processing or transportation capacity constraints, severe weather, market limitations, curtailment of production or interruption of the processing or transportation of produced oil and natural gas. Increased consolidation activity has occurred recently in the Permian Basin, which may lead to reductions in capital spending that could have an adverse effect on our business. In addition, the effect of fluctuations on supply and demand may become more pronounced within specific geographic oil and natural gas producing areas such as the Permian Basin, which may cause these conditions to occur with greater frequency or magnify the effects of these conditions. Due to the concentrated nature of our revenue-generating operations, we could experience any of the same conditions at the same time, resulting in a relatively greater impact on our revenue than they might have on other companies that have more geographically diverse revenue-generating operations.

In August 2022, IRA 2022 was signed into law and it contains hundreds of billions of dollars in incentives that a could accelerate the transition from the use of fossil fuels to alternative energy sources, which could decrease demand for oil and gas and consequently adversely affect the business of our customers, thereby reducing demand for our services. InHowever, addition,certain of these initiatives have been paused, repealed or otherwise modified by the IRATrump 2022Administration imposesand the firstpassage ever federal fee onof the emissionOBBBA ofin GHGsJuly through2025. aFor methaneexample, emission charge. Thethe IRA 2022 amended the Clean Air ActCAA to impose a feeWaste onEmission theCharge emissionfor methane emissions in excess of methanestatutory thresholds from sources required to report their GHG emissions to the EPA, including those sources in the onshore petroleum and natural gas production and gathering and boosting source categories. AHowever, in February 2025, Congress repealed the Waste Emissions Charge rule to implementusing the methaneCongressional feeReview wasAct, finalizedand bythe OBBBA delayed implementation of the charge until 2034. While the EPA cannot reissue its rule implementing the Waste Emissions Charge (either in Februarysubstantially 2024.the However,same itform isor uncertainin whata actions,new rule), the underlying requirement in the IRA 2022 remains unchanged. We cannot predict if any, the Trump Administration and/or Congress may take with respectaction to the methane feerepeal or otherrevise provisionsthis ofrequirement in the IRA 2022. TheTo methanethe emissionsextent chargesimilar initiatives or other air pollution control and permitting requirements are implemented in the future, such initiatives could increase our customers’ operating costs and adversely affect their businesses, thereby reducing demand for our services.

Our operations and the operations of our E&P customers in most states require permits from one or more governmental agencies in order to perform drilling and completion activities, secure water rights, construct impoundment tanks and operate pipelines or trucking services. Such permits are typically issued by state agencies, but federal and local governmental permits may also be required. In addition, some of our customers’ drilling and completion activities in the U.S. may take place on federal land or Native American lands, requiring leases and other approvals from the federal government or Native American tribes to conduct such drilling and completion activities. Under certain circumstances, federal agencies may cancel proposed leases for federal lands and refuse to grant or delay required approvals. Moreover, additional rules and regulations on federal lands may impact our customers. For example, the BLM has finalized new rules that limit flaring from well sites on federal lands and add additional methane-related provisions to the permit application process, thoughalthough litigation challenging these rules haveis beenheld subjectin toabeyance legalwhile challenge.the Trump Administration reconsiders the rules. Any delay or denial of permits faced by our customers may impact demand for our services.

Fuel is one of our significant operating expenses, and a significant increase in fuel prices could result in increased transportation costs. The price and supply of fuel is unpredictable and fluctuates based on events such as geopolitical developments, supply and demand for oil and gas, actions by oil and gas producers, war and unrest in oil producing countries and regions, regional production patterns and weather concerns. At times we have been able to pass along increases in fuel costs to customers, though we cannot guarantee our ability to do so in the future. Although the average price of fuel declined in 20232024 and 2024,2025 as a result of market oversupply, fuel prices constantly fluctuate and a significant increase in fuel prices could increase the price of, and therefore reduce demand for, our services, or force us to accept lower margins, both of which could affect our results of operations and financial condition.

The issue of climate change continues to attract considerable attention in the U.S. and foreign countries. As a result, numerous proposals have been made and are likely tomay continue to be made at the international, national, regional and state levels of government to monitor and limit emissions of GHGs as well as to eliminate such future emissions. As a result, our operations as well as the operations of our E&P customers are subject to a series of regulatory, political, litigation and financial risks associated with the production and processing of fossil fuels and emission of GHGs. See Part I, Item 1. “Business – Environmental and Occupational Safety and Health Matters” for more discussion on the threat of climate and restriction of GHG emissions. The adoption and implementation of any international, federal, regional or state legislation, executive actions, regulations or other regulatory initiatives that impose more stringent standards for GHG emissions from the oil and natural gas sector or otherwise restrict the areas in which this sector may produce oil and natural gas or generate GHG emissions could result in increased compliance costs or costs of consuming fossil fuels. Such legislation, executive actions or regulations could result in increased costs of compliance or costs of consuming, and thereby reduce demand for oil and natural gas, which could reduce demand for our products and services. Additionally, political, financial and litigation risks may result in our customers restricting, delaying or canceling production activities, incurring liability for infrastructure damages as a result of climatic changes, or impairing the ability to continue to operate in an economic manner, which also could reduce demand for our products and services. The occurrence of one or more of these developments could have a material adverse effect on our business, financial condition, results of operations and cash flows. Moreover, the increased competitiveness of alternative energy sources (such as wind, solar geothermal, tidal and biofuels) could reduce demand for hydrocarbons, and therefore for our products and services, which would lead to a reduction in our revenues.

Our disposal business and the number of SWDs we operate has significantly increased since 2021. This disposal process has been linked to increased induced seismicity events in certain areas of the country, particularly in certain counties in Oklahoma, Texas, Colorado, and New Mexico. For example, Texas and Oklahoma have issued rules for wastewater disposal wells that imposedimpose certain permitting and operating restrictions and reporting requirements on disposal wells in proximity to faults. States have also issued orders, from time to time, for certain wells where seismic incidents have occurred to restrict or suspend disposal well operations. Another consequence of seismic events may be lawsuits alleging that disposal well operations have caused damage to neighboring properties or otherwise violated state and federal rules regulating waste disposal. These and other states have begun to consider or adopt laws and regulations that may restrict or otherwise prohibit oilfield fluid disposal in certain areas or underground disposal wells, and state agencies implementing these requirements may issue orders directing certain wells where seismic incidents have occurred to restrict or suspend disposal well operations or impose standards related to disposal well construction and monitoring. For example, in December 2023 the Texas Railroad Commission suspended the permits of 23 deep disposal wells in a seismic response area in Culberson and Reeves Counties. Any one or more of these developments may result in our having to limit disposal well volumes, disposal rates or locations, or to cease disposal well activities, which could have a material adverse effect on our business, financial condition, and results of operations. See Part I, Item 1. “Business – Environmental and Occupational Safety and Health Matters” for more discussion on seismic matters.

Our operations and the operations of our E&P customers are subject to federal, state and local laws and regulations in the U.S. relating to protection of natural resources and the environment, health and safety aspects of our operations and waste management, including the transportation and disposal of waste and other materials. These laws and regulations may take the form of laws, regulations, executive actions and various other legal initiatives and result in the imposition of numerous obligations on our operations and the operations of our customers.customers and liability for administrative, civil and criminal fines and penalties. See Part I, Item 1. “Business – Environmental and Occupational Safety and Health Matters” for more discussion on these matters. Compliance with these regulations and other regulatory initiatives, or any other new environmental laws, regulations and executive actions could, among other things, require us or our customers to install new or modified emission controls on equipment or processes, incur longer permitting timelines, and incur significantly increased capital or operating expenditures, which costs may be significant. One or more of these developments that impact our customers could reduce demand for our services, which could have a material adverse effect on our business, results of operations and financial condition.

The ESA and comparable state laws restrict activities that may affect endangered or threatened species or their habitats. Similar protections are offeredafforded to migratory birds under the MBTA. To the degree that species listed under the ESA or similar state laws, or are protected under the MBTA, live in the areas where we or our E&P customers’ operate, both our and our customers’ abilities to conduct or expand operations and construct facilities could be limited or be forced to incur additional material costs. Additionally, the FWS may make determinations on the listing of unlisted species as endangered or threatened under the ESA. See Part I, Item 1. “Business – Environmental and Occupational Safety and Health Matters” for more discussion on ESA and MBTA matters. The designation of previously unidentified endangered or threatened species could indirectly cause us to incur additional costs, cause our or our E&P customers’ operations to become subject to operating restrictions or bans and limit future development activity in affected areas, which developments could have a material adverse effect on our business, results of operations and financial condition.

InvestorIncreasing attention to ESGsustainability and environmental matters may impact our business.

While it remains an ongoing and evolving political, regulatory, social, and financial investment consideration, companiesCompanies across all industries haveare facedfacing increasedincreasing scrutiny from regulatorsinvestors, customers, employees, regulatory bodies and other stakeholders related to their ESGsustainability practicesand inenvironmental recent years.practices. Companies thatwhich do not adapt to or comply with investor orsuch stakeholder expectations and standards, which are evolving, or which are perceived to have not responded appropriately to the growing concern for ESGsustainability- and environmental-related issues, regardless of whether there is a legal requirement to do so, may suffer from reputational damage and the business, financial condition, and/or stock price of such a company could be materially and adversely affected. Increasing attention to climate change, increasing societal expectations on companies to address climate change, and potential consumer use of substitutes to energy commodities may result in increased costs, reduced demand for our customers’ hydrocarbon products and our products and services, reduced profits, increased investigations and litigation, and negative impacts on our stock price and access to capital markets, or ability to attract and retain a talented workforce. Increasing attention to climate change, for example, may result in demand shifts for our customers’ hydrocarbon products and additional governmental investigations and private litigation against us.those customers.

In addition, certain change of control events have the effect of accelerating the payment due under our Tax Receivable AgreementsTRAs (as defined herein), which could be substantial and accordingly serve as a disincentive to a potential acquirer of our company. See “—Risks Related to Our Organizational Structure—In certain cases, payments under the Tax Receivable AgreementsTRAs may be accelerated and/or significantly exceed the actual benefits, if any, we realize in respect of the tax attributes subject to the Tax Receivable Agreements.TRAs.”

Our amended and restated certificate of incorporation provides that, to the fullest extent permitted by applicable law, we renounce any interest or expectancy in any business opportunity that involves any aspect of the energy business or industry and that may be from time to time presented to any member of (i) Legacy Owner Holdco; Crestview Partners II SES Investment, LLC; any funds, limited partnerships or other investment entities or vehicles managed by Crestview Partners or controlled by Crestview GP; B-29 Investments, LP; Sunray Capital, LP; Proactive Investments, LP and their respective affiliates, other than us (collectively, the “SES Group”); (ii) the other entities (existing and future) that participate in the energy industry and in which the SES Group owns substantial equity interests (the “Portfolio Companies”) or (iii) any director or officer of the corporation who is also an employee, partner, member, manager, officer or director of any member of the SES Group or the Portfolio Companies, including our Chairman, President and CEO,Chief Executive Officer (“CEO”), John D. Schmitz, and our Executive Vice President, Business and Regulatory Affairs, Cody Ortowski, even if the opportunity is one that we might reasonably have pursued or had the ability or desire to pursue if granted the opportunity to do so. Mr. Schmitz controls both B-29 Investments, LP and Sunray Capital, LP and is a direct and indirect beneficiary of these provisions in our amended and restated certificate of incorporation. Our amended and restated certificate of incorporation further provides that no such person or party shall be liable to us by reason of the fact that such person pursues any such business opportunity or fails to offer any such business opportunity to us.

We are a holding company and have no material assets other than our equity interest in SES Holdings. We have no independent means of generating revenue. To the extent SES Holdings has available cash, we intend to cause SES Holdings to make (i) generally pro rata distributions to its unitholders, including us, in an amount at least sufficient to allow us to pay our taxes, pay dividends and to make payments under the Tax Receivable AgreementsTRAs that we entered into in connection with our restructuring at the Select 144A Offering and any subsequent tax receivable agreementsTRAs that we may enter into in connection with future acquisitions and (ii) non-pro rata payments to us to reimburse us for our corporate and other overhead expenses. We will be limited, however, in our ability to cause SES Holdings and its subsidiaries to make these and other distributions or payments to us due to certain limitations, including the restrictions under our Sustainability-Linked Credit Facility and the cash requirements and financial condition of SES Holdings. To the extent that we need funds and SES Holdings or its subsidiaries are restricted from making such distributions or payments under applicable law or regulations or under the terms of their financing arrangements or are otherwise unable to provide such funds, our liquidity and financial condition could be adversely affected.

In connection with our restructuring at the Select 144A Offering, we entered into the Tax Receivable AgreementsTRAs with certain affiliates of the then-holders of SES Holdings LLC Units (each such person and any permitted transferee thereof, a “TRA Holder,” and together, the “TRA Holders”) which generally provide for the payment by us to the TRA Holders of 85% of the net cash savings, if any, in U.S. federal, state and local income and franchise tax that we actually realize (computed using simplifying assumptions to address the impact of state and local taxes) or are deemed to realize in certain circumstances as a result of certain tax basis increases, net operating losses available to us as a result of certain reorganization transactions entered into in connection with the Select 144A Offering, and certain tax benefits attributable to imputed interest. We will retain the benefit of the remaining 15% of these cash savings.

The term of each Tax Receivable AgreementTRA commenced upon the completion of the Select 144A Offering and will continue until all tax benefits that are subject to such Tax Receivable AgreementTRAs have been utilized or expired, unless we exercise our right to terminate the Tax Receivable AgreementsTRAs (or the Tax Receivable AgreementsTRAs are terminated due to other circumstances, including our breach of a material obligation thereunder or certain mergers or other changes of control) and we make the termination payment specified in the Tax Receivable Agreements.TRAs. In addition, payments we make under the Tax Receivable AgreementsTRAs will be increased by any interest accrued from the due date (without extensions) of the corresponding tax return. We commenced payments under the Tax Receivable AgreementsTRAs in 2024. In the event that the Tax Receivable AgreementsTRAs are not terminated and we have sufficient taxable income to utilize all of the tax benefits subject to the Tax Receivable Agreements,TRAs, the payments due under the Tax Receivable AgreementTRA entered into with Legacy Owner Holdco and Crestview GP continue until the benefits of the last exchange of SES Holdings LLC Units are realized or expire, and the payments due under the Tax Receivable AgreementTRA entered into with certainan affiliate of Legacy OwnersOwner Holdco and Crestview GP continue until the benefits of the exchanges are realized or expire.

The payment obligations under the Tax Receivable AgreementsTRAs are our obligations and not obligations of SES Holdings, and we expect that the payments we will be required to make under the Tax Receivable AgreementsTRAs will be substantial. Estimating the amount and timing of payments that may become due under the Tax Receivable AgreementsTRAs is by its nature imprecise. For purposes of the Tax Receivable Agreements,TRAs, cash savings in tax generally will be calculated by comparing our actual tax liability (using the actual applicable U.S. federal income tax rate and an assumed combined state and local income and franchise tax rate) to the amount we would have been required to pay had we not been able to utilize any of the tax benefits subject to the Tax Receivable Agreements.TRAs. The amounts payable, as well as the timing of any payments, under the Tax Receivable AgreementsTRAs are dependent upon future events and significant assumptions, including the timing of the exchanges of SES Holdings LLC Units, the market price of our Class A common stock at the time of each exchange (since such market price will determine the amount of tax basis increases resulting from the exchange), the extent to which such exchanges are taxable transactions, the amount of the exchanging unitholder’s tax basis in its SES Holdings LLC Units at the time of the relevant exchange, the depreciation and amortization periods that apply to the increase in tax basis, the amount of net operating losses available to us as a result of reorganization transactions entered into in connection with the Select 144A Offering, the amount and timing of taxable income we generate in the future, the U.S. federal income tax rate then applicable, and the portion of our payments under the Tax Receivable AgreementsTRAs that constitute imputed interest or give rise to depreciable or amortizable tax basis.

Certain of the TRA Holders’ rights under the Tax Receivable AgreementsTRAs are transferable in connection with a permitted transfer of SES Holdings LLC Units or if the TRA Holder no longer holds SES Holdings LLC Units. The payments under the Tax Receivable AgreementsTRAs are not conditioned upon the continued ownership interest in either SES Holdings or us of any holder of rights under the Tax Receivable Agreements.TRAs. See Part III, Item 13. “Certain Relationships and Related Transactions, and Director Independence.”

If we elect to terminate the Tax Receivable AgreementsTRAs early or they are terminated early due to our failure to honor a material obligation thereunder or due to certain mergers, asset sales, other forms of business combinations or other changes of control, our obligations under the Tax Receivable AgreementsTRAs would accelerate and we would be required to make an immediate payment equal to the present value of the anticipated future payments to be made by us under the Tax Receivable AgreementsTRAs (determined by applying a discount rate of the lesser of 6.50% per annum, compounded annually, or the 12-month term secured overnight financing rate (“SOFR”) published by CME Group Benchmark Administration plus 171.513 basis points); and such payment is expected to be substantial. The discount rate used as of December 31, 20242025 was 5.95%.5.49%. The calculation of anticipated future payments will be based upon certain assumptions and deemed events set forth in the Tax Receivable Agreements,TRAs, including (i) the assumption that we have sufficient taxable income to fully utilize the tax benefits covered by the Tax Receivable Agreements,TRAs, (ii) the assumption that any SES Holdings LLC Units (other than those held by us) outstanding on the termination date are exchanged on the termination date and (iii) certain loss or credit carryovers will be utilized in the taxable year that includes the termination date. Any early termination payment may be made significantly in advance of the actual realization, if any, of the future tax benefits to which the termination payment relates.

As a result of either an early termination or a “change of control” (as defined in the Tax Receivable Agreements,TRAs as amended), we could be required to make payments under the Tax Receivable AgreementsTRAs that exceed our actual cash tax savings under the Tax Receivable Agreements.TRAs. In these situations, our obligations under the Tax Receivable AgreementsTRAs could have a substantial negative impact on our liquidity and could have the effect of delaying, deferring or preventing certain mergers, asset sales or other forms of business combinations or changes of control. For example, if the Tax Receivable AgreementsTRAs were terminated on December 31, 2024,2025, the estimated termination payments would have been approximately $78.1$79.1 million (calculated using a 5.95%5.49% discount rate, applied against an undiscounted liability of approximately $111.2$107.3 million, based upon the last reported closing sale price of our Class A common stock on December 31, 20242025) in the aggregate. The foregoing number is merely an estimate and the actual payment could differ materially. There can be no assurance that we will be able to finance our obligations under the Tax Receivable Agreements.TRAs.

Payments under the Tax Receivable AgreementsTRAs will be based on the tax reporting positions that we will determine. The TRA Holders will not reimburse us for any payments previously made under the Tax Receivable AgreementsTRAs if any tax benefits that have given rise to payments under the Tax Receivable AgreementsTRAs are subsequently disallowed, except that excess payments made to the TRA Holders will be netted against payments that would otherwise be made to the TRA Holders, if any, after our determination of such excess. As a result, in such circumstances, we could make payments that are greater than our actual cash tax savings, if any, and may not be able to recoup those payments, which could adversely affect our liquidity. See Part III, Item 13. “Certain Relationships and Related Transactions, and Director Independence.”

We intend to operate such that SES Holdings does not become a publicly-traded partnership taxable as a corporation for U.S. federal income tax purposes. A “publicly-traded partnership” is a partnership, the interests of which are traded on an established securities market or are readily tradeable on a secondary market or the substantial equivalent thereof. Under certain circumstances, exchanges of SES Holdings LLC Units for shares of our Class A common stock or cash pursuant to the Eighth Amended and Restated Limited Liability Company Agreement of SES Holdings (the “SES Holdings LLC Agreement”) or other transfers of SES Holdings LLC Units could cause SES Holdings to be treated as a publicly-traded partnership. Applicable U.S. Treasury regulations provide for certain safe harbors from treatment as a publicly-traded partnership, and we intend to operate such that exchanges or other transfers of SES Holdings LLC Units qualify for one or more such safe harbors. For example, we intend to limit the number of unitholders of SES Holdings and Legacy Owner Holdco, and the SES Holdings LLC Agreement provides for limitations on the ability of unitholders of SES Holdings to transfer their SES Holdings LLC Units and will provide us, as managing member of SES Holdings, with the right to impose restrictions (in addition to those already in place) on the ability of unitholders of SES Holdings to exchange their SES Holdings LLC Units pursuant to the SES Holdings LLC Agreement to the extent we believe it is necessary to ensure that SES Holdings will continue to be treated as a partnership for U.S. federal income tax purposes. If SES Holdings were to become a publicly-traded partnership, significant tax inefficiencies might result for us and for SES Holdings. In addition, we may not be able to realize tax benefits covered under the Tax Receivable Agreements,TRAs, and we would not be able to recover any payments previously made by us under the Tax Receivable Agreements,TRAs, even if the corresponding tax benefits (including any claimed increase in the tax basis of SES Holdings’ assets) were subsequently determined to have been unavailable.

Our ability to use certain of our current and future net operating lossNOL carryforwards may be limited and could adversely affect our operating results and cash flows.

As of December 31, 2024,2025, wethe Company and certain of its corporate subsidiaries had approximately $167.3$210.6 million of tax-affected U.S. federal netNOLs, operating loss carryforwards (“NOLs”), $87.8$87.7 million of which we expect to expire unused beginning in 2031 due to limitations under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”). As of December 31, 2024,2025, wethe Company and certain of its corporate subsidiaries also had approximately $15.9$19.2 million of tax-affected state NOLs, $6.9$6.6 million of which we expect to expire unused and the remaining $9.0$12.6 million of which we expect to expire beginning in 2025,2026, and tax-affected non-U.S. NOLs of approximately $1.4 million, which we expect to expire beginning in 2035. Utilization of these NOLs (which include historic NOLs of Rockwater Energy Solutions Inc. (“Rockwater”), Nuverra Environmental Solutions Inc. (“Nuverra”), and Buckhorn Disposal ND, Inc. (“Buckhorn”)) depends on many factors, including our future income, which cannot be assured. In addition, Section 382 of the Code generally imposes an annual limitation on the amount of NOLs that may be used to offset taxable income when a corporation has undergone an “ownership change” (as determined under Section 382 of the Code). An ownership change generally occurs if one or more stockholders (or groups of stockholders) who are each deemed to own at least 5% of the relevant corporation’s stock change their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. In the event that an ownership change has occurred, or were to occur, utilization of the relevant corporation’s NOLs would be subject to an annual limitation under Section 382 of the Code, determined by multiplying the value of the relevant corporation’s stock at the time of the ownership change by the applicable long-term tax-exempt rate as defined in Section 382 of the Code, and potentially increased for certain gains recognized within five years after the ownership change to the extent of certain net built-in gains at the time of the ownership change. Any unused annual limitation may be carried over to later years until they expire. Limitations similar to those applicable under Section 382 of the Code apply for U.S. state and non-U.S. income tax purposes.

While we do not believe that the acquisitions of Rockwater, Nuverra or Buckhorn resulted in an ownership change under Section 382 of the Code with respect to us, future issuances, sales and/or exchanges of our stock (including in connection with an exercise of the Exchange Right (as described in Note 1 to the consolidated financial statements) or other transactions beyond our control), taken together with prior transactions with respect to our stock, could cause us to undergo an ownership change. As a result, we cannot assure you that we will not undergo an ownership change in the future. We believe that the acquisitions of Rockwater, Nuverra and Buckhorn resulted in ownership changes with respect to each of Rockwater, Nuverra and Buckhorn, respectively. Accordingly, as described above, some or all of our U.S. federal or state or non-U.S. NOLs could expire before they can be used. In addition, future ownership changes or changes to the U.S. tax laws could limit our ability to utilize our NOLs. To the extent we are not able to offset our future income with our NOLs, this would adversely affect our operating results and cash flows.

We evaluate our long-lived assets, such as property and equipment, and finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that their carrying value may not be recoverable. Recoverability is measured by a comparison of their carrying amount to the estimated undiscounted cash flows to be generated by those assets. Based on specific market factors and circumstances at the time of prospective impairment reviews and the continuing evaluation of development plans, economics and other factors, we may be required to write down the carrying value of our long-lived and finite-lived intangible assets. For the yearyears ended December 31, 2025, 2024, and 2023, we recorded $11.1 millionimpairment and $1.5 million of abandonment charges related to writelong-lived downassets theand carrying value of our definite-livedfinite-lived intangible assets of $6.2 million, $1.2 million, and long-lived$12.6 assets,million, respectively.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes thereto in Part II, Item 8. “Financial Statements and Supplementary Data”. This discussion and analysis contains forward-looking statements based on our current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors as described under “Cautionary Note Regarding Forward-Looking Statements” and Part I, Item 1A. “Risk Factors.” The following information updates the discussion of our financial condition provided in our previous filings, and analyzes the changes in the results of operations between the years ended December 31, 2025 and 2024. Refer to our 2024 Annual Report filed February 19, 2025 for discussion and analysis of the changes in results of operations between the years ended December 31, 2024 and 2023. We assume no obligation to update any of these forward-looking statements.

We are a leading provider of sustainable water-managementwater and chemical solutions to the energy industry in the U.S. As a leader in the water solutions industry, we place the utmost importance on safe, environmentally responsible management of oilfield water throughout the lifecycle of a well. Additionally, we believe that responsibly managing water resources through our operations to help conserve and protect the environment in the communities in which we operate is paramount to our continued success.

InAcross many regions of the country,regions in which we operate, there has beenis growing concern aboutsurrounding the volumes of water required for new oil and gas well completions, as well as the volumes of produced water injected into subterranean zonesformations where induced seismicity canmay beoccur. triggered.In Workingresponse, we are working collaboratively with our customers and local communities,communities to advance more sustainable, cost-effective water management solutions that reduce both freshwater consumption and disposal volumes. Through our integrated infrastructure networks, we striveprovide topermanent beand an industry leader in the development of sustainable cost-effective alternatives to fresh water. Specifically, we offermobile solutions through our infrastructure networks that enable ourthe E&Pgathering, customers to gather, treattreatment, and reuse of produced water, therebywhich reducingin theturn reduces demand for freshwater whileresources alsoand reducinglimits thereliance volumes ofon saltwater thatdisposal must be disposed by injection.wells. In manyselect areas,regions, we have also acquiredsecured sourcesaccess ofto non-potable water,alternative suchwater assources, including brackish watergroundwater orand municipal or industrial effluent.effluent, Throughto further support water reuse and reduce competition for freshwater. Leveraging our expertise inin-house chemical technologiesexpertise and ourproprietary FluidMatch™ design solutions,platform, we provide tailored water profilingprofiling, treatment assessment, and fluid assessmentsystem services for our customersoptimization to support the optimization of their fluid systems, enablingenable the economic use of these alternative sources.sources Wewithout alsocompromising workwell withperformance. Additionally, we help our E&P customers to lower theiremissions emissionsand minimize environmental impact through methanethe deployment of combustion technology,solutions for field-based methane control and reduce the environmental footprint of their operations through the use of temporary layflat hose systems and permanent pipeline systems,infrastructure. whichThese water delivery systems are supported by extensiveour real-time automation and remote monitoring technologies, including leak detection, pressure monitoring, and automationvolume technologytracking, which enhance the safety, reliability, and efficiency of our operations. By reducing the reliance on trucked water logistics, these solutions thatmaterially providereduce safergreenhouse gas emissions, improve public safety, and morehelp efficient water resource management. These solutions significantly reduce the demand for trucking operations, thereby reducing gasoline and diesel exhaust emissions, increasing safety and decreasinglimit traffic congestion and road damage in nearbythe communities.local communities where we operate.

Select is prioritizing investments in waterWater infrastructureInfrastructure projects, which often bring a more predictable and steady revenue stream through long-term contracts and production-related operations. These investments typically produce higher gross margins and also foster stronger partnerships with customers, as Select becomes an integral partner in ensuring well productivity for ongoing customer production over the life of a well. Our focus is on integrated solutions that enhance contracted infrastructure projects with logistics services and chemical solutions, and expanding the value we provide to our customers. Our approach, historically and during the year ended December 31, 2024,approach has been to streamline operations and offer a more comprehensive and valuable overall package to customers that is built around optimizing the entire water lifecyclelifecycle, as such integrated solutions drive revenue growth and enhance overall value to clients.

The armed conflict between Ukraine and Russia has continued into 2024,2026, as well as ongoing conflicts in the Middle East, including heightened tensions with Iran. As a result of the Russian invasion of the Ukraine, the U.S., the United Kingdom, the member states of the European Union and other public and private actors have imposed severe sanctions on Russian financial institutions, businesses and individuals. In the Middle East, various conflicts have resulted in increased hostilities and instability in oil and gas producing regions in the Middle East as well as in key adjacent shipping lanes and supply chains, including elevated tensions with Iran, a major oil producer. In addition, in July of 2025, the U.S. government threatened additional sanctions on Russia and additional tariffs on countries that import energy from Russia.

The Russia-Ukraine conflict, and the resulting sanctions and concerns regarding global energy security, hashave contributed to, and conflicts in the Middle East may contribute to, increases and volatility in the prices for oil and natural gas. Further, beginning in late 2025, the U.S. seized several oil tankers suspected of transporting oil from Venezuela, and, in early 2026, the U.S. launched a limited military intervention in Venezuela which culminated in the capture of Venezuela’s incumbent president. As the situation stabilizes and U.S.-Venezuela relations improve, it is expected that approximately 50 million barrels of sanctioned oil may become available for export as U.S. sanctions are lifted. The resumption of such exports may cause a depression in global oil prices as the market adjusts to such an increase in supply. Such volatility, coupled with an increased cost of capital, due, in part to elevated rates of inflation and interest rates, may lead to a more difficult investing and planning environment for us and our customers. The ultimate geopolitical and macroeconomic consequences of these conflicts and associated sanctions and/or international responses cannot be predicted, and such events, or any further hostilities elsewhere, could severely impact the world economy and may adversely affect our financial condition. An end to these conflicts and an easing or elimination of the related sanctions and/or international response could result in a significant fall in commodity prices as hydrocarbons become more readily accessible in global markets, which could have an adverse effect on our customers, and therefore adversely affect our customers’ demand for our services. An intensification of that conflict could also have an adverse effect on our customers and their demand for our services.

In addition, sinceSince 2021, OPEC+ countries have instituted production cuts (as well as voluntary production cuts), which currently cut output by 5.86approximately 3.2 million barrels/day in the aggregate. InMost Decemberrecently, 2024,in November 2025, OPEC+ announced anit extensionwould ofmaintain suchcurrent oil production cuts through the end of 2026.approximately 3.2 million barrels per day and reaffirmed its decision to not increase production. OPEC+ may, at its discretion, continue to decrease, or increase, production, which will continue to impact crude oil and natural gas price volatility. The actions of OPEC+ countries with respect to oil production levels and announcements of potential changes in such levels, including agreement on and compliance with production targets, may result in volatility in the industry in which we and our customers operate. The average price of West Texas Intermediate (“WTI”) crude oil remained relatively flatdecreased in 20242025 versus 2023, primarily2024 due to sluggisha demandcombination of factors, including heightened trade tensions, weakening global demand, rising domestic and relativelyglobal highproduction, the threat of a global recession and increased production outside offrom OPEC+ countries,countries offsetand bythe gradual unwinding of OPEC+ production cuts. During the year ended December 31, 2024,2025, the average spot price of WTI crude oil was $76.63$65.39 versus an average price of $77.58$76.63 for the year ended December 31, 2023. While WTI price levels marginally declined during 2024 relative to 2023, these WTI price levels remain supportive of our customers’ drilling and completion programs in the major shale basins.2024. The average Henry Hub natural gas spot price during the year ended December 31, 2024,2025 was $2.19$3.52 versus an average of $2.53$2.19 for the year ended December 31, 2023.2024. Henry Hub natural gas price levels in 20242025 have declinedincreased relative to 20232024 due to a variety of factors, including increased demand driven by power consumption, sanctions on Russian hydrocarbons, severe weather events, infrastructure disruptions, lower than expected inventories, and the ongoing liquified natural gas (“LNG”) export growth in the U.S., and have negativelypositively impacted activity levels in the natural gas basins though prices did see a recovery in the second half of 2024 relative to the first half of the year.basins.

Additionally, heightened inflation in recent years has resulted in higher interest rates and increased cost of capital for Select and for our customers. As costs of capital have increased, many of our customers have demonstrated their resolve to manage their capital spending within budgets and cash flow from operations and increase redemptions of debt and/or returns of capital to investors. Furthermore, consolidation among our customers, such as the consolidation of E&P companies in the Permian Basin, can disrupt our market in the near term and the resulting demand for our services. When one customer acquires another, drilling and completions activity levels may decrease overall, but acquisitions can lead to larger blocks of consolidated development and production acreage, which can increase the demand for our longer-term integrated full water lifecycle solutions. This consolidation may streamline operations, as Select can offer integrated solutions to clients with larger water volumes to manage in certain areas. The Company’s position in the market may strengthen, as it becomes an essential partner for long-term production integrity in larger, more comprehensive water projects. However, it also means Select must meet the changing needs and structures of these consolidated entities to maintain and grow these relationships. While customers involved in acquisitions may initially slow activity to focus on integration and portfolio management, we believe we are well-positioned to meet the increased responsibilities of overall water management, including water reuse, recycling, transmitting and balancing across customers and regions, and ultimately disposal, for these larger customers and blocks of contiguous acreage.

Overall, however, even though commodity prices have moderated recently, the financial health of the oil and gas industry is in a generally healthy position, including many of our customers specifically, as reflected in revenues and earnings, debt metrics, recent capital raises, and recurring shareholder returns. The industry may face additional changes due to recent and future legislative and regulatory changes under the current presidential administration. Most recently, the OBBBA, signed into law in July 2025, includes many provisions intended to expand onshore oil and gas leasing and drilling on federal land, such as increased federal oil and gas lease sales and lower royalty rates on federal oil and gas leases. While the financial health of the broader oil and gas industry has shown improvement as compared to prior periods, central bank policy actions and associated liquidity risks and other factors may negatively impact the value of our equity and that of our customers, and may reduce our and their ability to access liquidity in the bank and capital markets or result in capital being available on less favorable terms, which could negatively affect our financial condition and that of our customers.

From an operational standpoint, many of the recent efficiency trends still apply to ongoing unconventional oil and gas development. The continued trend towards multi-well pad development and simultaneous well completions, executed within a limited time frame, combined with service price inflation and elevated interest rates, has increased the overall intensity, complexity and cost of well completions, while increasing fracturing efficiency and the use of lower-cost in-basin sand has decreased total costs for our customers. However, we note the continued efficiency gains in the well completions process can limit the days we spend on the wellsite and, therefore, negatively impact the total revenue opportunity for certain of our services utilizing day-rate pricing models.

Our water logistics, treatment, and chemical application expertise, in combination with advanced technology solutions, are applicable to other industries beyond oil and gas. We are working to further commercialize our services in other businesses and industries through our industrial solutions group.group and equity method investments.

The principal expenses involved in conducting our business are labor costs, vehicle and equipment costs (including depreciation, rental, repair and maintenance and leasing costs), raw materials andincluding water sourcing costs and fuel costs. OurOverall, our fixed costs are relatively low.low Mostand most of the costs of serving our customers are variable, i.e., they are incurred only when we provide water and water-related services, or chemicals and chemical-related services to our customers.

Escalating conflict in or near major oil-producing or shipping corridors could lead to higher fuel and energy prices, increasing our transportation, manufacturing, and distribution costs, as well as resulting in downstream effects to global chemicals commodities markets. In particular, ongoing geopolitical tensions and military conflicts in thekey Middleoil-producing East,regions, including the conflict involving Iran and the related restriction or cessation of maritime traffic through the Strait of Hormuz and the potential for continued disruptions to Redmajor Seashipping shipping,routes, may adversely affect our operations. TheDisruptions ongoingto restrictionglobal orshipping cessationcorridors of maritime traffic through the Strait of Hormuz, and the potential for continued disruptions in Red Sea shipping, hashave caused disruptions to the global chemicals and oil-derived goods markets, reducing supplies and availability worldwide,worldwide and resulting in increased prices. While we are not reliant on any chemicals or other commodities that are exclusively transported through theany Straitsingle ofshipping Hormuzcorridor due to our continued focus on domestic sourcing, such global disruptions to commodities markets can have downstream effects in the domestic markets, including elevated domestic prices, reduced supply and business interruptions to our suppliers. These events may also cause shipping delays, rerouted freight, port congestion, or higher logistics and insurance costs, which could disrupt the movement of raw materials upon which our suppliers rely. While the ultimate duration, impact and magnitude of these disruptions is currently unknown, a prolonged interruption to the global chemicals commodities and oil-derived goods markets has the potentiallypotential to materially adversely affect our business and operations and those of our suppliers.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this report, as well as the historical consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the Securities and Exchange Commission on February 18, 2026 (our “2025 Form 10-K”) and in our Quarterly Report on Form 10-Q for the period ended March 31, 2026, filed with the Securities and Exchange Commission on May 6, 2026 (our “Q1 2026 Form 10-Q”). This discussion and analysis contains forward-looking statements based upon our current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors as described under “Cautionary Note Regarding Forward-Looking Statements” and other cautionary statements described under the heading “Risk Factors” included in our 2025 Form 10-K10-K, our Q1 2026 Form 10-Q and this Quarterly Report on Form 10-Q. We assume no obligation to update any of these forward-looking statements.

This discussion relates to the three and six months ended MarchJune 31,30, 2026 (the “Current Quarter” and the “Current Period”, respectively) and the three and six months ended MarchJune 31,30, 2025 (the “Prior Quarter” and the “Prior Period”, respectively).

During the Current Quarter, we continued executing our strategy of expanding our Water Infrastructure segment as a key component of our long-term growth platform. Our integrated water management systems support operators by providing produced water gathering, transportation, recycling, and disposal services designed to reduce costs to our customers, reduce trucking activity, improve operational reliability, and increase water management efficiency across development programs.

Our infrastructure footprint in the Northern Delaware Basin remainsrepresents a core area of development for our business. Our in-service and under construction systems in New Mexico in Eddy and Lea counties include approximately 1.7 million barrels per day of active fixed recycling capacity, more than 400 miles of pipeline, substantialand 22.2 million barrels of storage capacity,capacity andacross more than 1.5 million dedicated acres. This interconnected infrastructure network positions us to manage large volumes of produced water and support customer development programs across the region.

Peak RentalRentals Update

In August 2025, we announced that we had started an evaluation of strategic alternatives for Peak Rentals business within our Water Services segment. Peak Rentals currently includes our accommodations and rentals platformplatform, including distributed power solutions, as well as our well testing and flowback operations. This evaluation includes a range of potential paths forward, including capital structure initiatives and other portfolio optimization opportunities. As of MarchJune 31,30, 2026, no transaction is pending or imminent, and we continue to own 100% of the business. We are continuing to evaluate strategic alternatives for Peak Rentals in the ordinary course; however, there can be no assurance that any particular outcome will ultimately be pursued or completed.

During the Current Quarter, we continued to expand our portfolio of contracted and recurring revenue opportunities through new and amended commercial agreements across our water infrastructure footprint, including produced water takeaway and disposal arrangements, water supply agreements, minimum volume commitments, acreage-wide right-of-first-refusal arrangements and additional delivery point commitments. These included multiple agreements included, among others, a 12-year water supply and takeaway agreement in Leathe County,Northern NewDelaware Mexico, supported by approximately 7.1 milesportion of plannedthe pipelinePermian infrastructure, and a five-year produced water takeaway and disposal agreement in Canadian County, Oklahoma. We also executed several shorter-term interruptible disposal, water purchase and reserve capacity arrangements across New Mexico, Texas and Oklahoma,Basin, including a water purchasetreatment and supply agreement with a minimum volume commitmentcommitment, ofmultiple approximatelywater 1.8sales agreements and several interruptible takeaway arrangements. We also executed a water treatment agreement in the Midland Basin and a produced water disposal agreement in the Bakken with a minimum volume commitment, a disposal agreement in the Northeast with a right-of-first-refusal structure, a disposal agreement in the MidCon region, supported by a four million barrels.barrel minimum volume commitment, and an interruptible takeaway arrangement in the Haynesville region. Collectively, these agreements are intended to increasedrive higher utilization of our existing infrastructure, support selectivecapital-efficient capital investments in new pipeline connectivity and delivery points,growth and provide improvedgreater visibilitycertainty intoaround future revenue generation across our operating regions. In addition, we expanded our Water Services footprint through an acreage-wide water transfer services agreement with a strategic customer in the Northeast, which also includes a right-of-first-refusal arrangement under which the customer has committed a portion of its produced water volumes to us for disposal.streams.

Progress continued on our equity-method investment in AV Farms, LP related to the Colorado municipal water rights project. In addition, lithium extraction partnerships across the Haynesville, Midland, and Northern Delaware basins continue to progress, with initial royalty-based revenues currently expected to begin in late 2026.2027.

Industry conditions during the first quarterhalf of 2026 reflected a relatively stable but disciplined North American upstream activity environment. Commodity prices, while significantly fluctuating in the first quarter,half of 2026, remained supportive of development activity, althoughalthough, even with the recent increases in oil prices following geopolitical tensions in the Middle East, North American operators continued to emphasize capital efficiency, free cash flow generation, and moderated production growth. As a result, drilling and completion activity across key U.S. basins remained generally stable compared to recent periods, with the Permian Basin continuing to represent the primary area of development and the largest concentration of completions activity and associated water handling demand.

Demand for produced water gathering, transportation, disposal, and recycling services remained closely linked to completionindustry activity levels and the steady growth in produced water volumes associated with existing production. Produced water generation continues to increase as horizontal wells mature and as operators develop longer laterals and higher-intensity completion designs. Additionally, water-to-oil ratios in the Southern Delaware and Northern Delaware Basins are among the highest in the United States, and within the Permian Basin, and even furthermore, across the United States, contributing to growing produced water volumes in the Permian Basin. These structural trends continue to support demand for integrated water management infrastructure, including pipeline gathering systems, disposal capacity, and recycling capabilities.

Labor costs associated with our employees and contract labor comprise the largest portion of our costs of doing business. We incurred labor and labor-related costs of $115.4$117.5 million, $124.4 million, $232.9 million and $129.4$253.8 million for the Current QuarterQuarter, Prior Quarter, Current Period and Prior Quarter,Period, respectively. The majority of our recurring labor costs are variable and dependent on the market environment and are incurred only while we are providing our operational services. We also incur costs to employ personnel to ensure safe operations, sell and supervise our services and perform maintenance on our assets, which is not as directly tied to our level of business activity. Additionally, we incur selling, general and administrative costs for compensation of our administrative personnel at our field sites and in our operational and corporate headquarters, as well as for third-party support, permitting, licensing and services.

We incur significant vehicle and equipment costs in connection with the services we provide, including depreciation, repairs and maintenance, rental and leasing costs. We incurred vehicle and equipment costs of $81.0$83.7 million, $79.7 million, $164.7 million and $79.5$159.2 million for the Current QuarterQuarter, Prior Quarter, Current Period and Prior Quarter,Period, respectively.

We incur raw material costs in manufacturing our chemical products, as well as for water that we source for our customers. We incurred raw material costs of $66.5$73.0 million, $58.8 million, $139.5 million and $65.2$123.9 million for the Current QuarterQuarter, Prior Quarter, Current Period and Prior Quarter,Period, respectively.

We incur variable transportation costs associated with our service lines, predominantly fuel and freight. We incurred fuel and freight costs of $20.1$24.5 million, $18.4 million, $44.7 million and $22.3$40.7 million for the Current QuarterQuarter, Prior Quarter, Current Period and Prior Quarter,Period, respectively. Changes to fuel prices impact our transportation costs, which affects the results of our operations.