Aris Water Solutions (ARIS) 5 Aug 232023 Q2 Earnings call transcript

Greetings, and welcome to Aris Water Solutions Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions].

As a reminder, this conference is being recorded.

pleasure Investor your Relations. my SVP, David now and Finance is to host, introduce Tuerff, It Please ahead. go

Good morning, joined and Founder CFO, second President quarter Stephen welcome CEO, and to the earnings and Zartler; call. Aris Executive conference Thompsett. Chairman, I and Brock; am Amanda today Bill our XXXX by our Water our Solutions

beliefs, which Before and I'd like forward-looking number such this not related the and will future we performance to by make in other of and unknown from actual are expectations, could results begin, presentation, materially contemplated that regarding statements events plans forward-looking and uncertainties guarantees of statements. known current results subject to our call and differ to are remind a you and risks factors cause and we that

You place not reliance statements. forward-looking to on are cautioned undue

also other financial Please statements Commission. to with refer we contain the cautionary prepared as Securities are substitute not be appendix today's measures from non-GAAP are or measures earnings conference and useful for our discussion that call and performance. included release believe will today's which should to in would to factors evaluating the in Exchange time risk filings made accompanying U.S. the isolation our of investor financial directly in time supplemental like of considered to and presentation GAAP. measures, with point comparable out GAAP our These in presentation. and measures Reconciliations our most accordance a the included I in

and over the Chairman, turn Founder Bill call now I'll Executive our Zartler. to

and earnings our has delivered for joining steadily growth everyone, as this another increasing results. and Aris with by David, morning. you, thanks, Thank reflected strong quarter solid volumes us

active they levels. the drilling continue commodity our of quarter, and our prices in Delaware that do basin overall Over contracted area remained U.S. and reduction and to will completion so the fluctuation indicated have despite core customers the Northern in in

production. a relative for production produced supply operators onshore additional is inventory handling and to of in outsized Delaware our expanding U.S. rest depth to of infrastructure are area the Northern capture the The compelling Our well growth management combination is economics to continues increasing offer for and captured need scale driving and water customers, and completions to additional the which of well importance comprehensive network large for solutions Aris’ proven water positioned completions volumes. well

This environment. have under developed of Aris production decades be and throughout high more development. volumes margins acreage will remaining range grow to demonstrated supported growth water has tripled Aris’ its a alongside water A since cash continue making than consistently to quality our contract under in inventory price commodity XXXX flow wide volumes. steady of recapturing with progress we're

more business of still cost asset reduction be and impacts seen there's ahead progress the tangible to we pleased have to plan on and are optimization to be While our line executing made, bottom schedule from our efforts.

excited performed team has the first I'm through and XXXX Our beyond. of year, the for and rest the half of well

Amanda. that, With it turn I'll to over

you, Bill. Thank

the by results the half encouraged very are over of We year. our first

we cost by operating total results. have XX%. adjusted X% improvements business initiatives execution, on meaningful and line EBITDA bottom grew and focus Our Quarter-over-quarter, process volumes by delivered water our

our our demand further core have in volumes, solidify leadership reliable, Delaware, customers, customers additional operating support capture the position which network infrastructure. of in for the management our area To continue infrastructure our water will we increases production basin. Northern additional critical expand to As our our to

consistent earlier barrel Skim compared first results. per We our line operational as our changes X.X% volumetric were growth as of oil exceeding water water business, inlet XXXX. this X million the of with implemented of per expectations, to averaged In day, quarter year over had produced forecast. are delivering in produced just X% barrels we of recoveries our

our related to activity increased we the solution public significantly leading Tracking saw sales. Mexico the to commentary second water activity, quarter completion increased in New higher customers’

business sourcing of our and recycled day by aggregate and barrels water deliver capability large recycling throughout to system's water basin. sequentially quantities sold driven water second XXX,XXX Our XX%, per by quarter, in growing of the the

rental year, We annualized reduce progress ahead infrastructure date, growth. in on equipment now rapid the expenses end basis schedule to also approximately our made of up catching cost tangible our second as pace million installed reducing last the of an of quarter success reduction during second our initiatives. of early versus our which by permanent to rental the X.X highlights equipment To is support cost we're quarter

continue broad physical allocation capital the reach recycled While fluctuate network. we quarter-to-quarter, completion schedules our from the increased Delaware, the for Northern customers and of water to to benefit may trends of preference

managing of with continued through working vendors our our controllable impact on reduction are inflation We cost the and initiatives.

in is pumps project convert nine Our to completed to with to well, tracking booster diesel the of permanent half scheduled second to from date XXXX. be and power XX more completed locations

facilities we provider closely are our mentioned in regulated previously, to newer provided As New timelines power power. line connect working the maintain to to our Mexico we us with they

expense our incremental improvement meaningful expect year. the clauses, margin will escalation electrification We in CPI second the half reductions projects, and rental of deliver

driven As working long-term we trusted our closely providers, consistent infrastructure with customers are volumetric have our who growth.

others in producers have development. with plan their have indicated core production our who acreage, smaller they're swapped accelerate to contracted acreage Seven customers and large our increasing

with and expand inventory. plans economics and forecasts will infrastructure of in areas in running decades our our contract acreage volume compelling we network upstream As increase,

and new in our active working capital the second reuse, of testing Chevron, we and this Accordingly, and ConocoPhillips technologies beneficial execute outlook continue existing in proprietary these growth and now treatment are positioning capture In we promising year, of modestly alongside increasing half volumes, ExxonMobil us to opportunities. are processes for our on customers the field. incremental support

testing of and methods water to of of robust outside use goal to treatment opportunities treated gas The commercial this the effective, to support cost develop is produced oil industry.

progress for several next oversight quarters. the develop use forward We of also treated with appropriate to to the frameworks regulators collaborate this water. produced We continue over seeing to look

Hoek, Furthering an specifically focus we initiatives, minerals pleased reuse on be this our of Dr. the that engineering are Lawrence commercialization scientist years. Eric and Dr. leader to in of a water to and at stream. successfully recognized will announce Hoek advisor commercialized in a our and National month faculty developing globally high-value brine has Berkeley technologies is the technologies materials at joining us professor beneficial as a Laboratory, over numerous UCLA

ESG announce contributions public Basin. that were also recognizing recipient for towards of Energy's the Award We companies we Hart this Permian midstream XXXX past are our quarter, pleased in to sustainability the

quarter. over discuss to turn it Steve for our that, I'll With to the financial results

The EBITDA expectations the second of quarter up million, and quarter. from water for in second of were XXXX, maintenance up produced XXXX quarter Thank sequentially third costs, XX% the increase the $XX.X quarter first into million largely the from well which solutions you, to was adjusted the and for our Amanda. We water exceeding growth volume to due of $X.X quarter issues. recorded approximately supply sequential delayed as chain due as our XX% well

The expense, margins property $X.X contract one-time and million quarter an estimated from G&A higher benefited also taxes. lower of on lower volume items, efficiencies, minimum including

$XX of by the project capital below core of operational approximately our our items, end incurred due million for one-time performance spending. to quarter range our expenditures, high the we these the for X%. guidance and guidance delayed exceeded On timing quarter capital growth volumetric Excluding slightly

inlet per X barrels water the expect remain water day, volumes price below quarter fourth to X.X% produced Looking of to volumes million volumes quarter. an average just quarter, again third barrel. approximately average we per the $XX produced before oil slightly in second We're to approximately forecasting ahead growing WTI skim the over for recoveries of at

As a change estimated reminder, EBITDA oil in every a expectations price quarter. in per to of an would relative to $X our correspond change $XXX,XXX

XXX,XXX XXX,XXX but again for we the again fluctuations customer barrels of water volumes down expect it expect to solutions meaningfully For quarter, from in day fourth water the to to in due timing, second of the the quarter. business, sequentially increase quarter per

side, quarter. the $X.X costs second relative million inclusive the maintenance of second forecasted X.X from On be to expense the of cost higher million delayed quarter, maintenance well is to

$X.X than million second higher G&A We also accounting quarter the third due to system and expect office to quarter expense relocation, headcount. projects increased be

as adjusted linked $XX CPI EBITDA volumes. slightly For expected offset to quarter, of million lower and improvements $XX are cost we're the escalation forecasting operating third revenue million to

top $XXX million to year, adjusted increasing guidance full are the million previous EBITDA $XXX our the of range $XXX million. we half to to For million to $XXX of

to Amanda XXXX brings $XXX maintenance million. As million, year increasing and to million growth guidance $XX we mentioned, are capital by million $XXX $X expenditures capital the our for capital approximately approximately which by

$XXX Turning to target EBITDA ratio adjusted with quarter the leverage our our the ended a million of debt sheet. of available liquidity. long-term below to and midpoint We balance

outstanding, sales quarter, and our last improve end XX year. to reduced continue days the or by capital working We accounts have XX% the second of receivables now since during

of of record paid announced will $X.XX shareholders dividend share, per as September XX. on our Finally, we of recently eighth which to September consecutive XX be

At time, term, value agreements, are operators, framework our our we XXXX return the balance of XXXX. executing and look primarily focused our shareholder capital investments on Longer rest targets long-term we of on early production of under the the and growth for maximization. this to return profiles long-term

forecasts schedules and organic our and receive shareholder business become from to to frameworks defined. growth, as look providing contracted better customers XXXX, for those our to an continue return update We development forward

wrap up. turn I'll Amanda that, With to to it over

team. the I Thanks, want first Steve. year, congratulate of We've made the significant to progress our in half and

said have focused work identified ensuring we cost still remain realize we on of beginning efficiencies before, to XXXX. we the we margin and As the fully execution, and expansion, do at

in of further in the and which from outlook excited efforts growing our rest in for long-term are reinvesting is consistently our underway We and increased operators basin. the customers, this core the confident for footprint, of forecast key I'm Northern the underpinned margin and by improvement Delaware future. our best-in-class year are volume With

take will questions. we that, With

Thank you.

question be [Operator ahead. question-and-answer go Citi. Bryant We Charles comes conducting Please will Instructions]. our from first now a And with session.

implications know little what specific it's right [Indiscernible] for your now looking 'XX? beyond early potential, about some growth you're talk producers. the behind a of seeing footprint and your maybe for I

but you were asking are about the how a little Unfortunately, we your question. for question you think 'XX Charles, you're volumes garbled beyond? a seeing grow in thank bit beginning, from I

Yes.

continue question. in and great focus. to very strong thanks that those see additional in we positively. for capital volumes our allocating capital We're expect state and also a 'XX Mexico, We've and to that acreage, we Obviously, our really great which grow in volumes area. to customers so our seeing area our you expectations We that disproportionate see of of And all [ph]. allocation end are in of beyond. trends Thank had some inventory. of on have of continued additional and got to We've rock are to New track we grow basically continuing they means growth will publicly exceed

And just how your you maybe growth helpful. That's M&A in you're how it the that. seeing about a follow-up landscape for and future? into that your And question. you Thanks see Okay. the Could talk around strategy fitting footprint?

Certainly.

question. In fact, take have I'll Bill that

Charles, they on pop consolidation may point, outgoing for growth we begin over think, to at the focus right is things we And that better now. opportunities point. think continue really market made at work stuff. indications the time, have things returns. executing have tracking up few come folks There's not But to that this the but I I is continue as organic about capital to to evaluate we a with this organic in put and are there our to see opportunities market really to on

for Thanks the That's Okay, helpful. time understood. today.

you. Thank

Don from Our Johnson ahead. comes next with Please question Crist go Rice.

morning, Good everybody.

Good morning, Don.

quarter the make wanted want seen just that was a pulling maybe slow, that's [ph] kind was Amanda, of just second I touch to a sure quarter’s just super second and little sure bit. case is little the third indicate Obviously, quarter And timing to slipped on back your patch quarter. versus Aris? related, that bit. other third that make the a third guide some of the that not just into the wanted activity quarter peers we've at here the I to strong and

particularly did guide Thank morning. Great good expectations QX, water our solutions, and in in obviously down Don, QX. we We you, question. outperformed and

obviously really I'll But go see cycle. As how QX. production supply said, and we give we've is and Steve more some lumpy, detail in and ahead how strength you about short QX additional we always water have view

end we're year. water We the forecast, XX%, is business up Amanda Don, We at on produced look Yes. site water said, XX% the EBITDA solution growth. the our our lower lumpy. the guidance brought year-over-year still forecasting as of for

full we're on Volume going on We're seeing So any not financial impact performance. confident to year the outlook. be is there.

business the quarter-to-quarter, vary where about may feel good it is Although, we going.

us QX. saw exceeded into some we do of also if that into our own We indicated QX, coming we Yet, point we out you And expectations. completely had supply. that QX outperformed moved

we contracts. difficult nature not optimistic of to is And even it how it's work. going a this for have But though forecast feel to very how QX. everything the is is So We roll just about long-term completions out. problem

could we I appreciate in know not. touch Should or of rental rental of half process equipment we the But of pretty Where equipment? I in cost percentage back in if are a the just second you And I XX% color. the on costs put could one don't that reductions of through the process? are on that year came and now? the XX% that removal on you there. down expect quarter. The further it reduction removal or if significantly

Don, we should.

cost efforts of by our still QX. additional see Again, bore all the you reduction which focus explain in We our reduction Steve, don't expected. more we than on pleased with granularity extremely QX see how We are why breakdown? and this of earlier fruit results

about halfway through -- through We're Yes. on halfway rental almost the side.

halfway project other have The as major is just we're under line there. power. to we And permanent connected stated, about we

is XX of locations that but schedule, there so the regulated on again, nine about we're have And utility over, nicely. tracking. We tracking converted project

July. as CPI start some expect margin projects of largest we in escalators the having the of second those of improvement over So with well course expansion incremental year, our from margin our half from additional contracts kicked some as two one of the the

of half year. course So over we the second additional expansion the the should of see some

the color. all it I'll appreciate back. Good quarter. Thanks. turn I

you. Thank

Thank you.

would no further time. Amanda I to are turn this back comments. There over closing for to at Please go the like questions floor Brock ahead.

today. for a all Thank you strong you connected We who very in much thank quarter. and second had

beyond. and We also for optimistic plan progress on very are executing want our in XXXX. to out We to thank of call particularly we want rest well and that feel employees. the the and customers vein, And laid making the about out significant year our

Our worked look We continues team very all next efforts. we work forward talking quarter. grateful to very you to and Thank are much. their has hard, extremely you for to again and

today's conference concludes call. This

lines a participation, may great for have you at You Thank this your time. and day. disconnect your