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Nuverra Environmental Solutions Sets Its Sights on the Eagle Ford Shale

Nuverra Environmental Solutions (NYSE: NES  ) continues to work on turning around its operations. For the company, the key to this effort is its ability to offer customers a full-cycle environmental solution for the waste generated by fracking. To that end the company is looking to replicate its Bakken shale solution in America's other hot shale play, Texas' Eagle Ford.

Nuverra Environmental Solutions' Bakken landfill. Source: Nuverra Environmental Solutions website  

If you build it...
Nuverra Environmental Solutions is buying 180 acres in South Texas to develop its next waste treatment facility. The company will use that facility to collect, treat, and recycle liquid and solid waste from drilling sites in the Eagle Ford shale. The site will be similar to its plant in the Bakken and should open early next year.

It's a pretty bold move for a company that has struggled to turn around its operations in the Bakken Shale. However, that segment did see signs of stabilization during the first quarter, with gradual improvement as the quarter progressed. Nuverra hopes that adding an integrated environmental treatment center can take its business in the Eagle Ford to the next level. Its plans from there are to replicate the model across all major shale basins, as well as to expand its offerings, as the following slide notes.

Source: Nuverra Environmental Solutions Investor Presentation (link opens a PDF).

Still work to be done
Nuverra Environmental Solutions noted in its first-quarter earnings release that its Bakken landfill facility is doing well. The company said that volumes continue to grow and it remains on track to have its thermal desorption facility operational by the end of the year. These facilities are a key component in the company's environmentally responsible treatment of drilling solids in the basin.

Nuverra is also progressing on its first joint venture project with Halliburton (NYSE: HAL  ) . The H2O Forward initiative is a key component of the liquids recycling part of Nuverra's full-cycle environmental solution for drilling companies. To learn more about Halliburton's H20 Forward service, Halliburton has an excellent white board video, which can be seen below.

Source: Halliburton's YouTube Page.

If that venture is a success, Halliburton and Nuverra Environmental Solutions will likely seek to expand it to the Eagle Ford Shale, with the new waste treatment facility serving as a centralized location for the initiative.

Beyond that, the company will add heavy solids water treatment assets in the Marcellus and Utica shales this year. Nuverra is expanding its treatment and recycling facility in the Marcellus and is adding treatment assets in the Utica for fluids containing heavy concentrations of solid particulates. After that it's quite possible that Nuverra will add an environmental treatment center in Marcellus similar to those in the Bakken and Eagle Ford.

Investor takeaway
These integrated treatment facilities are key to Nuverra Environmental Solutions' turnaround efforts and future growth plans. While hauling water is a commodity business, these assets are much more difficult to replicate and can give Nuverra a competitive advantage and higher profit margins. The sites, along with Nuverra's liquids recycling partnership with Halliburton, certainly give investors hope that the company is on the right path. We just need to see these assets deliver as promised, which is lot to hope for from a company with a history of underdelivering. 

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Matt DiLallo

Matthew is a Senior Energy and Materials Specialist with The Motley Fool. He graduated from the Liberty University with a degree in Biblical Studies and a Masters of Business Administration. You can follow him on Twitter for the latest news and analysis of the energy and materials industries:

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8/28/2015 4:02 PM
NES $2.59 Down -0.02 -0.77%
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