Aris Water Solutions (ARIS) 29 Feb 242023 Q4 Earnings call transcript

Greetings, and welcome to the Aris Water Solutions Q4 2023 Earnings Conference Call. [Operator Instructions]

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, David Tuerff, Senior Vice President of Finance and Investor Relations. Thank you, David.

begin. may You

Executive welcome XXXX and by Aris Solutions Founder Water President CFO, and Good Tompsett. Stephan Conference to Call. Quarter and our Brock; Earnings CEO, today Bill I Fourth Zartler; and our morning, Amanda the Chairman, am our joined

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

undue to Please place Exchange cautionary Securities forward-looking You Commission. from and filings other the not reliance the included factors to are refer in our time and statements made to statements. risk with on time cautioned

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

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

we XXXX. inflation grow eroded which a cost Volumes fantastic operational capital execution, margins, up our was the been for and rapid by XXXX fundamental growth working to and which our had by year, for We late the were while David. you, in challenges reduced on continuing business. flexibility driven and XX% Aris profitability, recaptured Thank year the business. include focused improved

to demand is remained improving contractual approach new environment. Basin while there Delaware There in growing are participate a we the on we've attractive metrics existing term. in maintained long-term and accretion of an agreements rates Strategically, continued opportunity water disciplined return. short with discipline assets, pricing under at infrastructure the and and for fit agreements both growth further to Northern evaluating all the across strategic in in and greater in our than long allocation, organically we Inorganically, focus capital have selectively closing have similar

invest sheet balance timing conservative and liquidity Our ample are us when most economics to give flexibility the and compelling. the

opportunity Looking to we're set. the XXXX, business our excited about and

with and able our going We improve better will efficiency benefit investments positive from and year, the improve commercial increasing free improvements, anticipate leverage shareholder we capital our capital forward. include prior continued Combined to anticipate allocation, capital will being which returns. flow can system which operational to our the for for cash options sustained

XXXX, employees is we Basin. and our operating for customers in team continuing sustainability reliably execution while strong demonstrated and focused the the enhancing Permian water Our on safely in

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

tremendous growth team who profitability improve collective we proud continuing expectations. consistently and At rapid worked efforts start with we Thank Aris outstanding to by momentum. recognize great significant of like achievements. while immensely above our onset said an I'd would had XXXX, extremely performed the pace and positive I I'm comments. the We Bill's results quarter-over-quarter, hard you, Bill. we delivering infrastructure enter echoing of of to the year, of expansion. our XXXX want off and

is goals, expanding XX% there to than by our efficiency. exceeded more and improving operational do, annual we work margins While still and financial

sequential growth of In of for the solutions up ahead the our XX% We XX% adjusted million year-over-year, and combined X.X We continued maintained and ninth with EBITDA averaged produced expanded volumes the quarter. water per increased barrels exceeding water million, our end of strong produced volumes rate year fourth a our water for guidance in our of margins, upper consecutive for we X% quarter, the our day which range. growth. expectations culminated business, and $XXX

previously we've volumes discussed, the from expectations additional barrels resources quarter, due skim ahead primarily fourth have and X,XXX allocated to day As of and to flowbacks operational we per in oil improvements. averaged approximately recovery higher

Our deliver water fourth allowed win and volumes infrastructure again, higher-than-anticipated spot us large in large-scale quantities, proven to in to the ability additional solutions driving business, quarter. treated water

forward business quarter and seen, lumpy, in were previously fourth can also we've a As originally the a for the of of XXXX. the scheduled water first water pull volumes be of higher activity function quarter solutions

the their operators use has unprecedented. Permian the limit As groundwater, been of in water Basin recycling produced of growth

and over XXX,XXX recycling barrels alone, day water and growing year-over-year. XX% per water barrels of in sold sequentially the fourth quarter sourcing Our or business million XX X%

proud managing extremely the logistics of and success in while enhancing our use growth in are and the optimizing our and sustainability costs Permian this of infrastructure We Basin. water

these we rental target of converting infrastructure. Over basis, reduced XXXX, expenses equipment and facilities annualized set costs the the reduced an on $X.X approximately exceeding beginning the by electrified year. course million We diesel at to permanent the we fuel by of

believe facilities can electrification conversion, savings capture further that We in and additional for have identified we XXXX.

beneficial scale. a the lessons as consistently of we of results made technologies and projects in have for progress the revenue, promising, lot of drove expansion on for at margin of XXXX. water of been since barrel of took focus rental our largest CPI annual treatment the also escalations in beginning the can the $X.XX combined treatment expense cost quarter; the of field, peaked reductions, of learned cost operate our third middle effect a success per of We've reuse. terms with at and technologies produced and The and lot significant that piloting our electrification the In

partners, piloting look of quarter. be our updating Chevron and and produced ExxonMobil, will water. mineral evaluating technologies additional viability and from industry to be our We X desalination with extraction evaluating ConocoPhillips, we you Working commercial forward also the we'll next

with anticipate will partner be XXXX, the volumes prior year-over-year of volume to choice, of closely Volumetrically, divestitures. growth matures to more delivering own up pace work ahead we to moderates, X% basin customers' Delaware asset to for our be water growth and X% Northern expected closely oil our adjusting as sustainable water production their to and customers Basin, in Looking safe, growth with we after reliable mirror infrastructure solutions. continue approximately the our

In year, addition and leverage we and further investment greater revenue growth bring rate, reductions With chemicals, operational allow infrastructure approximately versus being XX% assets waste sustainable to we year, room also to through control margins the efficiencies, the well and our from which escalation. down should as existing expect operating XXXX. to filtration benefit out our capital from automation in as on spending contractual last this considerable able disposal to in anticipate cost momentum positive and profitability of date improved coming visibility our us more fully our flexibility by additional to

anticipated operating will anticipate as Steve up margins capital reduced and expansion as pivotal our sustained cash details, a XXXX of flow. positive expand growth, significantly spending, year on volume continued but we free sustainable the sets Aris for

for 'XX, the our consistent compelling keen first on our the outlook quarter XXXX. this in results hard excited continued work to we're team a year testament delivered by momentum and our is and into Our focus of of and margins

over quarter XXXX. details results it turn for Steve outlook for our and our on to the I'll that, to With discuss financial

costs. million, quarter Thank up and quarter EBITDA third of from again, you, exceeding adjusted $XX.X XX% recoveries for largely reported sequential expectations to commercial and skim XXXX, wins Amanda. XXXX water The from G&A of some up the short-cycle and quarter in XX% was increase lower fourth activity oil additional due forward quarter. for the higher-than-anticipated pull of the We sequentially the fourth of solutions,

$XXX EBITDA original above high adjusted guidance. year, of end For the the million full of was our

of For end for of were year, capital bringing us able this our quarter, year. the optimize better our capital into and a spend low defer our approximately incurred the expenditures, in existing guidance $XX as we $XXX below to and to million assets leverage the million we portion

year, benefit. an $XX the improvements almost XX%, a period grow ongoing more For a and capital in than working XX% working driving net million decrease process saw revenue capital which delivered

$XX in lower working free Taken together, flow investment improvements XXXX. and positive cash in delivered million capital operational our capital performance,

Looking to when up we per County Martin of water and completed million the the year year-over-year between water impact sale X.XX adjusted ahead million for our the X% day, asset be XXXX, third last quarter produced expect volume in of for year. approximately X% X.XX to barrels of

would of oil X,XXX barrel. correspond And price to of change skim oil day per average forecasting WTI each approximately relative recoveries in per an $XX expectations barrels year. of a of in EBITDA to We're $X reminder, change at as oil per price $XXX,XXX a

with currently business, barrels frac approximately between volumes first the Permian expect XXX,XXX expect crew rig XXX,XXX day, Basin For full to we per XXX,XXX and solutions which barrels XXX,XXX flat year-over-year, corresponds average to counts. per water year of volumes day and and forecasted quarter

year the in operator capital solutions year, couple of flowback in past the volumes in the years, throughout generally As the drilled concentrated are year. of back ramp with the of water as seen are refreshed wells half half we've the activity and first budgets up

year, increase a from margins inflation-based which $X.XX XX% we cost the a at improvement tailwinds the forecast per referenced, rate reductions XXXX. represents for Amanda contractual With continuous to midpoint on focus escalations, relative the barrel between and and $X.XX

from optimization midpoint. increasing our million XXXX. $XX and range $XX evaluation, continued outlook at and million the X% Alongside $XXX we we drive versus of to deliver million XXXX, to operational system further are $XXX business and for development under Given could customers for and between projects XX% moderating potential the EBITDA XXXX which our capital from million earnings growth higher to capital of expenditures adjusted end XXXX $XX million a including capital customers anticipate in improvements, incremental maintenance approximately the outlook efficiencies, of and forecasting our million ability and the to reduction beyond. total includes The $XXX year, versus

cash million will as to spending earnings $XX quarter, dividend $XX Aris. be the us repurchases. optionality expenditures give or capital anticipate returns point growth evaluate and year, first continued first flow the clear of flow through and we to $XX million free share With cash anticipate to for weighted year. of inflection million anticipate to the free expected capital to shareholder We growth the deliver expenditures, half greater a which is reduced sustained the towards either of for generating we For million significantly XXXX $XX our

to $XXX We the quarter which ended sheet. liquidity, healthy with million our the long-term below of significant leverage our target Turning of low end debt with EBITDA of balance provides a flexibility. us adjusted to available financial X.Xx, and

X. first Finally, to as quarter share, of shareholders record declared tenth be paid the of for of per March consecutive $X.XX to our dividend of we March XXXX, XX

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

into XXXX. consistent highlight I is and again success results. more evident and us XXXX, Steve. of business efficient, year which made to provides predictable, in the profitable forward progress, We've Thanks, the the our close, want it more is To across our XXXX today great looking momentum our and execution more

We growth, business. we are further increased to not will XXXX, our leverage additional value on In to and execute cost margin new opportunities assets continue from expansion for reductions identify existing and deliver our done.

spending to capital will flow opportunity free provide returns. to and reduced us increase Our allow the us greater achieve cash shareholder

With questions. to take are we happy that,

with [Operator Dounis Spiro Our comes question Instructions] first from line of the Citi.

] Ed Spiro. for [ on

on how off, your M&A where priority would excess given fall cash the starting your flow that? leverage you under target? -- Just for And here stack would

Thanks for the questions.

about In thinking priorities, we're everything. of terms

of what early. going sort to of terms in think do, it's as to I we're So responding

there's the the Obviously, buybacks, those dividend, the conversations have all We debt. there's time. paying down the there's

evaluate to continue to the quarter -- everybody just later to in to talk in going the year. sorry, are that and later -- be that about expect We

Okay. you of those about execution for Makes of goals. met year a focus you, sense. XXXX? thinking 'XX are will kind thinking And I for guess and about the just what you've How largely was be

with to continue core execution. for still adjacent our to to growth our customers margin opportunity focused, opportunities We're Spiro, working on expansion very additional system. our We going see core in on be business,

heads to But and down beneficial at and extraction. about I optimistic going continue we there execute we're to have opportunities to reuse, very and that see looking to 'XX. feel think So continue as other our execution relates also our just mineral it may be

may your Jackie muted. line be ], [

Congrats here. on quarter the great

First, I'd to on just like start volumes.

upside quarter? that the better. be carryforward us there seems from from come the throughout seems first upside, that is is how than a the trend it better So with flat your year quarter seasonality to be fourth but though higher a could sequentially, And year? the give at Is to on midpoint as Could seems factor volumes it guide. that here, understanding first you full the quarter a should that thoughts

to explain I'm question. and let Steve take question. back-end Great we see Thanks, [ Jackie is how ], for weighted. going the thanks that to this

the some [ they've the public they you year. indicated from ], at of throughout larger Yes. when of profile the some some commentary Jackie of And I our think customers, look volume expect

into When customers. so notice X forecasts. a own outlook, flows about internal get our our And of do lot that we from we months' provide our

the We we're further have half put line outlook, very sight we of good we're we But out in. confident we're beyond the around year, very what that. out what working a what around guidance and and we the know first do of start deliberate volumetric based when on in providing

So year, as volumes. to from we There the of we'll upside move be the greater out back our refined as half activity customers through we year. the where see could with come get

What be side. when further for what's mentioned specifically for that higher Great. that driving those further initiatives at fees That And initiatives margin And context, improvement mentioned the may that you year, some are on margins, Or makes on guidance look sense. cost is there efficiency in XXXX. And then outlook you that the also better of work? you the margin XXXX? doing here? for just

when drive down. costs operations, our constantly are look So we looking to we at that places can we

think we're I do on in labor working when across reduce chemicals and focused we on reuse the can about be to and going very with filtration those to focused area, the what system, very So areas. waste 'XX the team, costs also productivity, and

continue continued which We electrification, will drive have costs down. some will to

our being cost entire combination deliberate opportunities sort Jackie looking for we manage a [ things, portfolio identify ], So of and across really and it's as of our efficiency. very

In terms a rates. is driving, on margins it story of margin

at rates, really adjustments we end that set revenue -- And year big January. know, the we the across actually in you then We those rates, with as have and QX, at of have comes but our March, end we contracts, with from set X have the of from CPI. CPI QX the reset

a function So margin. and it's rates of

of Jossen JPMorgan. with next Eli Our question comes the from line

circle back free cash I deployment. flow wanted So to just to the

So to color what increasing you raise potential increase otherwise, a returns. can add shareholder in you shareholder potentially returns? dividend Or alluded we Should those XXXX? for to expect

Yes.

our statements, and the saw relative As release you our in very to targets. leverage low in our is press financial

reduction So no need debt at allocate to this time. capital to further

leads low of think a far But of either that from where back, So float that's you some share our out stock there. issues or repurchases. Repurchases we you would value the see when to from the is. the dividends we're step exacerbate intrinsic we cry

And potential look so some compelling there's value when we at repurchases.

table. said, to So dividends, Amanda repurchases working or accommodation of as year. both are And later through be back you here on We're the we'll the guys that. in

Okay. release, projects. In then just of your recent for into assets look more types that those on organic also maybe forward capital higher-return a like. color bit I redeployment that. as a projects to noncore the of kind of touched And you Maybe little what might follow-up. just on look allows divestiture

our core our additional now, rates. lot County These are mean attractive working particularly just additional we be system customers in area. capture a our [ going expand right to projects and Northern of Lea at I to volumes with very Simon we're projects Certainly. where seeing ]

comes Our with the from next line Rice. Don Johnson of question Crist

from kind You the made facilities And of what are where you to you strides to year. you on grid big the year connecting last do in that remind those halfway connecting grid this process? everything over in now? us expect Are your Can you savings efforts?

have We for exact And told we you. Steve's halfway. numbers are going than more you, as to the

to connect, done. the locations additional those have we've We When Don. point, list. had we're XX announced we've X that at XX got do added originally Yes, to facilities we we this going of

of regulated X at waiting Xcel, -- we're out point, mostly remaining And there's to So done the get that there. this utility XX. on X

we're but a So bit in little the the but queue, we're progress. we've mercy at significant made

do we there. facilities, recycling X the another locations On have

over margin well but this the So see halfway we'll those. incremental some from mark, improvement year

by achieve and And with million those more actually to finished actually you million $X.X year As hope to we we the know, savings. indicated savings all of $X.X achieving connecting that we in Don, go systems.

But the through just amount given sit, 'XX the bit. of progress. consolidation large of industry especially from where see of we you do that in you'll kind Permian, you the light kind is great side little saying and in move where lot M&A my for E&P if do answer about consolidation you ripe on in a sit, of sit, as that And to private to you're a I M&A. into me equity investors of the are that and I'm From asked business. 'XX? OFS ripe it's And for From as M&A not general, going industry where water indulge a of lot Amanda, consolidation. the Yes,

Great having question, that for on Don. this we're conversation I'm going to because time. let the all Bill

players fairly do Don, to mean the be the I a There's couple and fragmented. out of need but players market is Yes. there, larger fragmented consolidated. will

I think on to has that is been making business. focus sure our that what do accretive truly our we really

that We and using anything light we're those it's in be in long-term have great of customers to where evaluate hard form may such dilutive any that contracts today our equity or and fashion. valued in

we are be, opportunities should we the systems systems or versus in around think consolidation. we and to and for constantly ready it all So challenging, these value landowners makes some at complex industry in of do their time, think is extract least ability what integrated consolidate the Delaware more and The Midland over but the evaluating to challenges of the the Basin Basin level consolidated. middle

Stifel. Akyol Our next question comes from the Selman line of with

opening want you in about volumes higher helpful. spot with, your start So were to talked I how just comments,

then months that And cadence we well new that. what quarter, talk how as as maybe X so And the into progress the first year. we're drove saw moved into you just could you about really as

Yes.

were as customers looking really volumes. water on bring constantly for That's in. is when we referring volumes business about much basis. disposal. the our you're it in water opportunities What to And interruptible shorter-cycle is out in a may that's were bringing mentioned going there And relates additional an solutions where talked additional for what to We able completions. is on we our to those system bringing somebody need higher business. So we've and spot to availability

are very bringing It's And additional and 'XX have being additional QX also QX, we business. actually sort in reach of and mentioned fluid, we we number and locations some so just with win positioned volumes able recycling to geographic to in the of from spot business. well win

referenced Understood. you And skim I your guidance X,XXX is of then think and also, sort oil, of barrels X,XXX. then

So is naturally we that as just to conservatism? higher across move expect volumes expect ramp system, if that Because your well. to you

also So it's indicated time. we of it level mentioned the skim as tend seemed When had some that a what be we looking consequence benefit flowback, a X,XXX get we over price. oil barrels, of also to of we at to higher

And those so lumpiness in skim we see do volumes. some

are we that barrels that estimating sort state X,XXX over will we day. So just a at of the have year, steady

comes question next from Daniel of with John Daniel the Our Energy. line

that could influence ] have but like pricing think pricing that's if question, be right strategy Amanda, sure is would your goals, it down switching ESG rookie important long-term not higher customers, and to costs, or a one. high a how perhaps you bit mature [ the of over and time. think I this revised is recycling ultimately I years feel How a road? might water as contracts about so. not, I'm when But their will

John, think question, rookie you've question. but I ever had good don't a

have water deliver relationships multiple fracs, the the infrastructure need and very large yes, they order our of and relationships in aggregate So are to as with more of as these customers the consequence to more the and with we physical quantities a volumes we these sticky. have customers our we

contracts demand as be power. groundwater, example, and I versus basin I more think off as think in there roll reuse the is will do for there that for pricing

volumes in rate our over over power see We some disposal will increase. the business also just as pricing and basin to time continue increase

Got it.

would customer? the at like switch buys thoughts are those and providers look customer of and happens are many some different B, of what of endearment, They've to water when which quickly iron then of types to consolidators. to have, I quickly change? be will the that a I'm very because but those Do their a me. the partner. in do one, got A companies likely I when And and reliability. they curious people dumb change? Just service any of infrastructure big a incumbent you company know big that the good How term is oil Okay. helpful that pretty as want company your viewed businesses, they service guys on that's

me legal perspective Let answer of sort from a first.

sort contracts Our with are the with land. long-term contracts, are of covenants our which running customers,

in is means will that still sell that what consolidate, So even or effect. they if they contract have

contractual But have Bill, to we respond you why So support. that? don't

seen we've more with into from way. business to get [indiscernible] continue probably a John, happen And rolling Concho already Conoco. relationship that the as and along Conoco

the in control contracts. the to you volumes, you demand, facilitate the infrastructure this a have in have part the which to to under required this able so of and we those contracts. These servicing piece And and high will, is order in to if long-term are oilfield do midstream the those deliver recycling infrastructure this, is takeaway that's business. be But place of water

to stickiness its per relationship ability the is more and so around the infrastructure the it perform se. And is than

sticky for there. there, that, water plus of XXX% And that we so the to people's I of massive redeliver infrastructure the trucks pumps virtually there, because amounts ultimately, are treat pumps just of business that The we replicate. the is water and these and perform that big their buffer think time can will impossible is the are is part blend other the

like time. this Amanda at Brock floor to the There back I'd to remarks. no closing are for over pass questions further

very you Thank much.

because are done. is our called hard not customers a very want appreciate. closely had all, We who I of who to in work and First to continue work we we continuing 'XX 'XX year to everybody and into great our with thank push and in

so deliver that, great our the provided want in to 'XX thank especially and momentum positive us into work employees I had year this we with 'XX. who with So hard to

you forward in later So to to all we again look talking the year.

today's This teleconference. concludes

time. You your may lines for this you Thank participation. your at disconnect