Aris Water Solutions (ARIS) 7 Aug 242024 Q2 Earnings call transcript

Greetings. Welcome to Aris Water Solutions Second Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to David Tuerff, Senior Vice President of Finance and Investor Relations. Thank you.

You may begin.

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

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

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

customers cash improved shareholders. increase more completed capital continued and our from in half further efficient has leverage to and XXXX, asset structurally growth, margins our to returns footprint. investment capital effectively to our our allowed expenditure operational strong execution. you, generate and Thank revenue us long-term enhance by excess Consistent driven to momentum ability substantially its resilient continued first continue program weighted We've David. volumes and contracted Aris

in Our acreage our a the Delaware volumes volumes Northern function tier top steadily production oil water in of growing are contracted customers' Basin.

XXX over gains, efficient pipe oil has encouraged rigs, continue As and dedicated this more benefit These we efficiency our year as existing them a are large completions. infrastructure, are leveraging start We're miles under off I'll pads our XXX,XXX of to us by by into productivity which contract. their well are diameter our turn Amanda. great from acres customers over future. With alongside recoveries it gains outlook driving and that, and the fewer extensions to they well greater

a Thank the you, strong year. Bill. had Aris of first half

achieved grew million a up XX% Following water EBITDA X% in great year-over-year. quarter, $XX first year-over-year volumes the and second adjusted produced we quarter, our of

water pulled quarter. water from quarter of year. In produced As sold anticipated, we we sequentially saw flowback of Solutions volumetrically natural forward per business, softer due with to second quarter flat the the into the day, XXX,XXX volumes quarter significant that from were barrels declines a the approximately first the first Water

quarter. expect and Water completions customers volumes increase in the third Solutions few the deferred until we still While our later to scheduled fourth a throughout year,

For the $X.XX second we margins operating achieved straight of per barrel. quarter, adjusted

chemical demonstrate Our assets, handling. improvement, waste and driven electrification in to solid margin costs, stability for part operations our of processes by the team continues improved reduced large automation,

track guidance half, for the cash the to the generation start efficient we focus adjusted increasing remain strong year. the deployment on flow capital for beginning maintained our our full year outlook second year forecasted range at and the on we of and EBITDA of Given our for XXXX. We've are the

inorganic projects free invest cash in to providing while flexibility, organic high-return balance significant strategic and shareholders. flow have us excess We and acquisitions to growth sheet returning capacity opportunities

extract the water produced management in Permian iodine production value management of produced lead the established of to industry Basin water continue an stream. second with Aris's who first opportunities quarter, and waste delivering sustainable company, extraction letter signed to from Aris intent at the while facilities. a facility water our one additional marketing in We will solutions iodine In the evaluating construct

extraction Our viability other development partner extraction basins, confirm operates from to be iodine water. of facility numerous produced will similar this the facilities iodine in designed commercial and of Aris's

economic We around additional provide project information once scope this will potential the benefits finalized. is of

of for to it the This reuse outside and year-end. can ExxonMobil X oil The continue joint X of the working Aris-led water produced to verifying second water has the approval efforts, produced relates beneficial of we with to be cost for of and use ConocoPhillips, that Phase project our successfully As scheduled gas. regulators accelerate third its safely and Chevron and desalination project, of complete purposes. will multiple industry with conclude by testing treated effectively is pilots completed pilot the process

evaluation over the pleased it turn our also our process. With are considerable to quarter and the of We on the Energy joined I'll rest to the Coterra to for their that, announce expertise, recently partnership, for financial outlook discuss results year. piloting adding details the that and Steve

of for volumes XXXX Thank quarter X% recycled part barrel adjusted in Amanda. lower which to the from quarter first quarter. We delivered sold than and margin quarter, up the large in from XXXX you, more the water the $X.XX forecast. declines quarter second We $XX due sequentially earlier less water operating million, XX% groundwater flowback as we margin from straight mix the down natural benefit of business in for barrel recorded sourcing second $X.XX second per achieved of and of a reflects first adjusted EBITDA per large

to deliver profitable skim sales over produced additional levels durable, improvements be the will months rest as the sustainable, our barrel. Notwithstanding business throughout decline continue supply increased from water than water the margin these from benefits as anticipated, made We expect year mets, our also the beyond. skim volumes. core will And per in providing past the expect we the $X.XXX in margins we and of the XX recovery of recycled we operating we benefited over higher and at sustained time noted past, groundwater increased, are

would year the as as CapEx of prior the first quarter, the We indicated to $XX which our in be second half We to million with $XX our CapEx. to which consistent guidance. expected. unfolded program and million capital that XXXX million in first our full million, brings range invested months X $XXX compared $XX weighted, to earlier year front-end expected Turning is

business, to be the Looking financial available with oil leverage well barrels to we're between increased adjusted confidence debt the both adjusted per and year debt water million expect by and third forecasting expectation margin of for million and are day, volumes million regard outlook of the X.Xx consistent million to significant our rest to skim approximately ahead of liquidity, to a per half Solutions average of well provides which to In range $XXX first the dedicated per X.XX day, our target with X,XXX full our to sheet, barrels X.Xx strong in quarter uptick we day. EBITDA million X.XX in and the and volume completions flexibility. X.Xx half us recoveries in million. With $XXX the of volumes our year with for quarter of of the below to in quarter, XXX,XXX of third we XXX,XXX EBITDA performance produced range year. Driven to our acreage and $XXX ratio, barrels the the ended second we Water an expect we balance increasing net $XXX XXXX, our on

and infrastructure went turn Amanda delivering year to wrap that office corporate project it Finally, team upgrade successfully over ERP efficiency last budget. With we to growth. help software all implementation will back announced to support up. report I'm necessary accomplished accounting on has live I'll drive the of pleased provide this our X. and I'm time that This to that, July on future proud our in additional

thank to closing, Steve. I team. Thanks, In our dedicated again want

driving strong decrease are are have on significant become customers our extremely delivering and and footprint we've a well recovered. revenue sustainably leveraging structurally our better demonstrated underlying and goals. We've We long-term margins our our asset contracted in more growth paired that operating from We've with efficient, consistently spending opportunities our organic growth continuing to while while our we inorganic for returns take The future cash optionality supporting that, paired still significant which capital is sheet, increase us with shareholders. With growth. strategic questions. and high-return will balance result increased to our customers' generation, gives

Goldman [Operator from with John Instructions] Sachs. Our Mackay question first is

at producer year. Delaware maybe then and that curious earnings I half wanted back the view maybe were versus on improving Would your start as compares what and you XXXX. of to this your the pace, We've the and to into season be on to Permian just Midland beginning couple efficiencies, et just narratives growth into different get kind heard on pace a view how the looking we of cetera.

particularly earlier continues year. Permian the and we predicted The John. Thanks, Delaware, to produce, Northern in forecast as this

going our who do, we they year-end. customers would continue at articulate to to and what to look through we like just are that the David, they're performance how to you and seen performance, steady further? If take you steady see have Street

sure. Yes,

the with flat with that seeing in seeing production on operator volume digit the relatively rig on and the with consistent side business we're mid-single into efficiencies sort what is expectations the tracks our think, improved the count. And above count, our what to relatively And side we're consistent flat and produced we with with the what with water of rig sourcing volumetrically that. John, consistent growth expected I year doing growth driving are coming the production corresponding in range, over producers of basin.

see what would said our that out see next continuing, year. I and we the consistent mid-single of customers So growth we XXXX, on production theme digit into have with say about looking largely sort

they customers Delaware. are among the seeing, whether count narrative John, some the increase in not rig or We

the softening Midland like yet has that count versus of see watch been Delaware, rig do that everybody determined. You not We else. but in carefully the some Basin

little means I structure? what of focus bit. capacity, you just and gears also And strategy a disposal space. shifting for availability cost your what a your There's been a pore on is Can talk little bit overall recently about that here appreciate that. maybe broader

Certainly.

we the being proactive access we've granted dictate. can we on focused discussed, drill that have when As our making when we've previously been where particularly sufficient with we TPL, did pore to alliance on sure customer space always suppliers permits

we large a place diversified across have about at in point, permits So XX geographic, this region.

a have was drill couple that where TPL needed. with years announced alliance relationships landowners land ability of on ago Pacific, a and as ahead we permit important that have to and the we like go very and We then Texas

applying are So that permits we where of space, growth of moving carefully, and identify areas ahead of finding pore customers and concerns. for and any staying actually, to aggressively our ahead continue being by

is with question Spiro next Citi. from Our Dounis

provide and Spiro. powder. to have on Chad deal update refresh seem the levels, you given leverage activity? uses [ is of capital dry off, ] here Starting us for some and you recent This an on target some below is Can on landscape, M&A the

Certainly. the I'll start capital Steve our address have M&A landscape. with we'll and then program,

In in to terms approach we of that change the capital really allocation, there's that. framework no

shape, and to balance concern. in leverage that. we're Our going is put position to sheet's to want great a ourselves a in never focus We where continue on

are into increase quarter on we and growth long inorganic the they deploying saw that, And you focused consistently term. with expect present to our sustainably, where themselves. dividend capital last Beyond organic shareholder opportunities returns as over attractive projects we raise,

we framework and on quarter-over-quarter. to So focused deliver in that remain that look consistently

we the As M&A what recent relates seen it interest have in the some is landscape, sector. to

the process latter, Delek You buying come assets. business, a to market. the sales X a those and and years. number think I Waste Connections for transaction Basin. buying HXO over the at Layne recent in that of We case It in the Midstream a years. was had have yesterday, then X In the of for Midstream in of had transactions, announcement had Midland HXO been process looked seen

reasons, we sponsor perspective, comfortable did the had with feel from For a expecting. the that we many not valuations value determined was

in for reasons we Zartler backed with the remain phone. some where moving interested but doing the be price companies be be do equity there Bill we'd at M&A we had transaction, and see in the Delek do forward. and and market, that again, may right on interested fatigue is may opportunities private So very that

to you landscape now. that, to do want add the Bill, working on So we're right given

covered think I you it.

we to and the the focus sure and trading looking for partners our throughout our right what We've business. of for. is got Our our that going we've -- it's we're carefully And contracts structured the business, making we're opportunities, be the we over have same do buildup business, how projects know there so. to attractive I year at and the core think not, of If will out of be next they're they time. we'll our within the and see to continue organic no build course we shortage or fairly our

helpful. then Yes, that's And really second question. just

from you another Can here hope reached next strategy and talk what achieves? about steps You've the mineral ultimately you extraction. on milestone

and other reuse play water, water question. beneficial year our that looking than try long-term Certainly, we indicated uses what we everybody a in water is last back we and that could talking thank We identified at certain way. was the that our as we produced for commercial what come When just a disposal. for quarter, you obviously were told previously or we've other that spent were evaluate would a high-value attractive. minerals we extracted and in with who find could was partners be whether in our in we channel said we potential to And thought milestones, not over

lot right. experience relates our structure other it it this are royalty time, I'm this for other to that mineral. that one So to be at mineral, that a mining we is into royalty, see us a as conversations our think now it where It at the per facility. never CapEx. putting facilities minerals mineral, a tolling have to we now very and produced and they a be And going is large entered pay will be relates But able been will facilities. right of will one they same has of to iodine. where going or which be barrel. as up are we LOI And company continue announcing not brine get that are optimistic of it in done, this areas They water. to we're water And relates all have as to to that of iodine we've other on a kind we how as our we the can an it

a this we we is and indicated as milestone. we something will is make like happen, it when progress, progress. is this we So What communicate have

Got it. very That's helpful.

Our Research Partners. Seaport next question is with from Jeffrey Campbell

what's question, first the became to did first strong expect for on And you commercial quarter. first view to Congratulations as your iodine target as that the wondered, to emerge My emerge? I why recovery? just one the mineral

I'm and question. thanks, not Jeffrey, the scientist, a for

I technology did different others. expect out it the quickly It's function to that the than the more in available, we basin. a were there emerge a that's think references of

means the But to are people as certainly So from the from for we did moving others expect is what processes. talking we different it But rather. other route the And to was this removing and not of unexpected, emerge it ammonia to does not the on iodine expected relates minerals not magnesium, first. water. you from it water then prevent --

my you -- Texas applications I Great. contrast the Tech University Texas institutions? agricultural academic intending that the question. MOU with with work A&M at Texas you're with noted already Can And of with regarding other Okay. to that done other Tech you've and JIP water. interest

soil. ground verify us take We structure greenhouse that to being produced The in now done the which effectively a a can root water in is of sequestration oil working and early DOE cotton where with carbon more to use looking our executed. And on have environment. existed produced deal the Texas successful. were further very process consortium, with is ways that in in Tech the years outside with a actually pioneer will actually Texas we cost to Texas beneficially We picking a A&M, parties associated where gas agriculture, is belong this the and grant growing and at grant, the very partners that Consortium this water multiple treating before. program cotton also rather with be that we mentioned for was and and further have had ago than and were use step up of

is question next Our Tonet from Chase. Morgan Jeremy with J.P.

the This really It is sustained Maybe like through Jeremy. start strength of on efforts for the worked. the cost to of year. have first Eli some half margin these seems on optimization

stronger performance? in margins, think type we beyond? sustain to monitor and key should to of are how the likely around what items might they be this Or the these So business about XXXX and persist to

sustainable. where for may there's low-hanging be where skim and we where some we on structural some been then there recognizing Thanks, and they been take that through have with always thanks where and and think successful changes go Steve Eli, we've the you are and I'll ahead lumpiness quarter-to-quarter. guide others fruit

course, in equipment And were to creep to months we is number. the No, CPI term. and you're side. which That over revenue guidance efforts and seen think the improvement. rental per We've done But up around off confidence, a is we're barrel, with over of of quarters a last the and our that of that one-time chemicals sustainable, is X then equipment believe, onto some right. on in we guided based tremendous above A we skim, outperform margin permanent XX to long progress Provide benefit other items. The our able are around getting on will, in outperformance high the contracts we we've XX we've have that efforts and be Those believe long sustainable lot last have would where $X.XX the what it. long-term around the the to escalators we the do items. extent term. durable electrification,

decision the timing And then dividend one you you potential do for as cadence how of it the hikes? might dividend color And But strong good year? Did business opportunities. does thinking investment what see growth for sheet, as of think timing going EBITDA another team this balance That's the about consider just forward? Awesome. the guys CapEx the some the there. to just a flat alongside the be maybe I follow-up. about keep know raise,

the quarterly but earlier, well for on intend I shareholder our long And strategy. you Board it with to the anticipate nuanced as quarterly short for as topic, our not we to I term. increase given increases, think to don't do returns and a buybacks just shareholder in have It's long-term We discuss term we a a manner long-term the Yes, basis, sustainable But the returns dividend of over just increase time. intend and you as well. expect that should internally but over dividend consistent certainly long-term evaluate low have. should we share growth. anticipate float we said more

the balance is Bill, would how to given clean you like add just to optionality. that, sheet and everything

think that as I mean a find I opportunity, with great And we evaluating watch Yes. debt got go. don't nothing sheet. the wrong having there's super continue down it to for We're we Stephan's the it. we'll balance opportunity. and the next pay If

at So we're in to steady. it's haul, of not distributions we're time. period And and and this I -- our organic, over Right long think for will well inorganic, quarter-by-quarter We're over the opportunities continue for looking shareholders, as this haul. continued looking it basis. a at a long it's the as at that

And I to conference with this time, to the would remarks. over no Brock questions further for Amanda like turn closing at back

of better lot a it everybody hearing we Hopefully We feedback. a than is are. hearing had quarter. great I'm

excellence. on operational remain focused efficiencies all are the very We and

We go. pleased, we but is are to very yet. are more not done There

We are the very future. optimistic about

for Bill this in the we're As said, haul. long

some are there. out opportunities We seeing

hard. We are working extremely

are for Have all our today. our So and contributing a to great if shareholders. thank before. you next employees where forward quarter, you you talking to Thank to of our look customers not day. to we and And we to

conclude will today's This you. conference. Thank

You this time. your disconnect may lines at