Workflow
Aris Water Solutions(ARIS) - 2025 Q1 - Earnings Call Transcript
ARISAris Water Solutions(ARIS)2025-05-07 14:00
Filings
Slide

Financial Data and Key Metrics Changes - The company recorded adjusted EBITDA of 56.5millionforQ12025,up456.5 million for Q1 2025, up 4% sequentially and 6% year-over-year, driven by record volumes in produced water handling and water solutions [12] - Adjusted operating margin was 0.44 per barrel, reflecting the durability of operating improvements over the last 24 months [12] - Capital expenditures (CapEx) were 21million,down4421 million, down 44% compared to Q1 2024 [12] Business Line Data and Key Metrics Changes - Produced water volumes and water solution volumes grew 7% sequentially compared to Q4 2024 [7] - The first quarter represented the first full quarter integrating the McNeil Ranch into operations, with ongoing evaluations for additional revenue streams [7][9] Market Data and Key Metrics Changes - The company expects produced water volumes for Q2 2025 to be between 1.2 million and 1.25 million barrels per day, and water solutions volumes to be around 1 million barrels per day [13] - The current WTI price strip represents a 6 million to 8millionheadwindtothebusiness[13]CompanyStrategyandDevelopmentDirection−Thecompanyisfocusedonmanagingcapitalinvestmentstoalignwithcustomeractivitylevelsandhasastrongpositionduetolong−termcontractsintheNorthernDelawareBasin[5][6]−Thereisanemphasisonbeneficialreuseeffortsanddesalinationofproducedwaterforvariousapplications,includingreservoirreplenishmentandindustrialuse[9][10]−Thecompanyisexploringopportunitiesinindustrialwatertreatmentandmineralextraction,withplansforaniodinefacilityexpectedtobeoperationalbyearly2026[10][12]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementnotedthatwhilethereissignificantuncertaintyaroundcommoditypricesandtariffs,thecompanyisofftoastrongstartin2025andexpectsthisstrengthtocontinueintoQ2[10][11]−Themanagementteamexpressedconfidenceintheirabilitytomanagethroughvolatilityandmaintainfreecashflow,evenifcustomeractivitylevelsdecrease[17]OtherImportantInformation−Thecompanysuccessfullyrefinancedseniornotes,upsizingtheofferingto8 million headwind to the business [13] Company Strategy and Development Direction - The company is focused on managing capital investments to align with customer activity levels and has a strong position due to long-term contracts in the Northern Delaware Basin [5][6] - There is an emphasis on beneficial reuse efforts and desalination of produced water for various applications, including reservoir replenishment and industrial use [9][10] - The company is exploring opportunities in industrial water treatment and mineral extraction, with plans for an iodine facility expected to be operational by early 2026 [10][12] Management's Comments on Operating Environment and Future Outlook - Management noted that while there is significant uncertainty around commodity prices and tariffs, the company is off to a strong start in 2025 and expects this strength to continue into Q2 [10][11] - The management team expressed confidence in their ability to manage through volatility and maintain free cash flow, even if customer activity levels decrease [17] Other Important Information - The company successfully refinanced senior notes, upsizing the offering to 500 million, and ended the quarter with net debt of 480millionandaliquidityof480 million and a liquidity of 372 million [14] - A dividend of 0.14 per share was declared for Q2 2025, to be paid on June 18 [14] Q&A Session Summary Question: Expectations for water cuts and volumes if producers move to maintenance mode - Management indicated that they can flex capital expenditures down by 25% to 30% if volumes decrease, and water cuts will remain the same, impacting volume rather than the cut itself [20][21][22] Question: Update on M&A activity and seller motivations - Management noted that while there is some discomfort in the market due to volatility, the bid-ask spread remains close, and they are well-positioned to take advantage of opportunities [23][24][26] Question: Volume growth cadence and one-time impacts in Q1 - Management confirmed that Q1 volumes were strong due to better-than-expected well performance and increased interruptible volumes, but future growth will depend on customer activity [30][31][32] Question: Capital allocation in a downside environment - The company remains committed to maintaining balance sheet strength and plans to continue dividend growth while having the ability to flex down capital expenditures if necessary [33][34][35] Question: Update on McNeil Ranch commercialization - Management reported that McNeil Ranch is exceeding expectations with multiple inbound opportunities for surface royalty activities and has already secured permits for disposal capacity [38][39][40] Question: Competitive landscape and impact of new pipelines - Management stated that new pipeline projects do not impact their competitive position due to long-term contracts and a large dedicated customer base [49][50][58] Question: Q2 guidance assumptions regarding interruptible volumes - Management indicated that Q2 guidance is primarily based on contracted volumes, with interruptible volumes viewed as a bonus [60][61] Question: Cost recovery for desalination and potential for iodine production - Management confirmed that operational costs for desalination could be below 1 per barrel, and they are evaluating the economics of iodine production based on the size of the facility [84][86]