ARIS - Earnings call 3 2023 | Aris Water Solutions, Inc.

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Operator

Good day, ladies and gentlemen, and welcome to the Aris Water Solutions Third Quarter 2023 Earnings Conference Call.

Our host for today's call is David Tuerff, Senior Vice President of Finance and Investor Relations. [Operator Instructions]

I would now like to turn the call over to your host, Mr. Tuerff, the floor is yours.

David Tuerff

to Call. Water welcome XXXX Third 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

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

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

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

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

William Zartler

this its and morning. Thank momentum continued for an us Aris quarter. you, David, excellent thanks, joining everyone, with positive third

growth past years. Basin, dedicated in continue Our the capital our the Northern allocating Delaware several volume in water contracted resulting acreage to on activity sustained customers over

a operations management comprehensive water services. multi-decade economics in Our customers substantial need depth inventory our critical area of attractive support and

on progress sustainable acreage. meet this X third supporting customers, over Aris' profitability increasing our significant expanding last solutions. in the XX% we while the growth their development water years. with pace industry alongside year, to the the quarter And We are while of are recapturing volumes nearly also margins, our consistent continuing up providing needs made infrastructure of our our in

drive business, balance disciplined proud continue a term focus With our accretion in and long our inorganic efficiency on remain we on approach conservative return are far sheet. a execution we XXXX. with in in thus the our We continued growth, of in to respect strategic short and greater capital both fit maintaining to and and

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

Amanda Brock

Thank you, Bill.

continuing to of initiative infrastructure primary while customers' was to our believe recapture guidance. end Delaware the Our footprint significant support pleased report high improve will growing XXXX the quarter year the finishing the of in to extremely progress Northern third profitability momentum our core the for at in and to our and continue EBITDA We're next expand Basin. this margins volumes into positive quarter

field to which deliver XXXX. in per $X.XX our barrel in and infrastructure, recognized of began we line the on per prior barrel margins adjusted sequential us early was Our in improvement efficiency $X.XX and process per impact adjusted in margin with of helped inflationary improvement focus barrel electrification business to operating pressures margin operating

expectations barrels up averaged sequentially enabling for water quarter solution and the we grow XX% consecutive volume produced our ahead In eighth per our our quarter, water business, year-over-year. of our and third of continuing quarter, growth X% was profitability produced X,XXX,XXX the enhanced growth. our and up day sequential for us to supporting EBITDA better-than-anticipated volumes million $XX Further water nearly adjusted to

improve this year of produced changes to implemented recoveries oil X.XX% skim were and of ahead are water barrel Skim delivering expectations consistent yields earlier oil per results. of also operational inlet

Our in skim oil commodity rising sales from prices benefited quarter. also the

forward from quarter quarter spot won completion was than and pulled we volumes into the as activity business. we solutions water higher saw also fourth additional third the We anticipated

spot shorter-cycle is under business often as win much course the operators our water of Solutions While shift. the Water need agreements, also volumes of over long-term quarter we

million and sold on day network business barrels Our water XX by that significant or to of over to the water per areas system expansive by XXX,XXX aggregate volumes allows and third of in X% the Aris its for quarter, basin. water barrels across infrastructure supported recycling sourcing our other recycling growing sequentially redelivery

while move for As are completion the for we've seen, in up our schedules Solutions quarter, out or push given year. volumes expectations outpacing we may a Water

facilities also to equipment significant and infrastructure. expenses continuing to made rental in reducing diesel reuse permanent progress We fuel by electrified convert

third fuel annualized commitment pressures to an basis, to and our in year rental diesel a to inflationary ago, equipment the on improve we've margins experienced reduced XXXX. delivering $X.X by quarter on mitigate Compared cost million our approximately we

of terms the reductions. largest effect with took the projects revenue, third of combined and at expense our the of beginning the and quarter, success escalations rental our of In electrification CPI

to are the improvement We proud quarter. have incremental meaningful margin delivered in third

work are reflected do, is growth our still we have improvements the and results to profitability. our While in margin there consistent volumetric while driven material continuing

further closely our are XXXX, on to water alongside infrastructure plans Looking finalize reporting. outlook as and quarter ahead working will quarter our we XXXX we with to have updates needs next customers their they their for fourth

capital infrastructure volumes, depend volumetric next outlook. our spending year proportionate will Our and of growth expansion on and will customers rate of we for moderate to profile the earnings expected our that

XXXX. expenditures forecast currently sequentially XXXX capital we've of contracted to On lower far received our the thus customers, we from versus be expect the basis

We our selectively pursue growth opportunities return meet organic they thresholds. will also additional provided

operational our we believe margins better assets. Importantly, operating our and made we system and improvements rate sustain can however, spending optimizing with XXXX, flexibility our business of increased return capital through our capital on improved the the improving we and have and investments,

to ConocoPhillips, we the our alongside the in and promising testing oil next and and project quarter, of gas year. industry, water reuse first of several were Chevron produced technologies management customers reuse ExxonMobil beneficial with working We third and use pilot are challenges pursue underway through half turning in on beneficial our to remain toward applications opportunities our solve focused outside water efforts. long-term Now the

piloting as have we identifying numerous by brine data addition, we of in the the In so last we also far. are seen water stages encouraged while long-term our in valuable early we are constituents we technologies, mentioned potentially stream, are quarter, produced and

in engaging are be constituents parties with can commercialized. preliminary determine third We mineral in our water to whether conversations

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

Stephan Tompsett

We to solutions Thank improved for adjusted The increase recorded million, quarter XXXX, driven adjusted oil by our quarter and the sequentially of you, due margins the the a exceeding into well recoveries XXXX X% was for from the up again, Water third the Solutions additional Amanda. and quarter. quarter contracted sequential expectations pricing EBITDA from of third as reductions sold operating expense earlier. as pull of XX% the second higher-than-anticipated of third volumes $XX.X skim and water largely volumes spot mentioned forward quarter up realized

For million the million. in capital $XXX in our $XX incurred expenditures, with year full quarter, to million line expectations $XXX we of

third system assets higher on redeploy day certain the Basin Delaware us our cash of which water noncore average. the handled $XX.X projects it sold returning accretive core Martin of produced at we transaction consideration quarter, margins than the Northern closed capital allows Texas sale County, our also in quarter. for barrels into in to in though lower XX,XXX During though million. This system, approximately were did produced third water of per our volumes assets The reduce beginning

our Looking up skim quarter, third be of relative asset of X% fourth approximately of to adjusting $XX X% per an at approximately barrel. water the the the WTI to sale. inlet we of average produced recoveries ahead to to impact We're quarter, for X.X% water oil produced recent volumes expect price forecasting volumes

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

For the slowdowns. sequentially our we for the forward to business scheduled quarter, the XXX,XXX declining first per moderately potential Solutions current due quarter the the on of basis pull for the to Water volumes and of XXX,XXX expect day water of of seasonal barrels originally forecast for volumes

that Water team And as to quarter. to Solutions, shorter arise commercial opportunities given always, pursue volumes our add opportunities the in cycle to spot continues the

be operations, $X.XX adjusted made and With realized of the operating to $X.XX to in our operating the margin projecting maintain we are we've to barrel. believe quarter margins we'll able changes per third the improvements

For to year increasing for million, of adjusted million. fourth of expectations $XXX our forecasting $XX million range further to XXXX end guidance to the $XX we're upper the million EBITDA quarter, the $XXX of of our

to Our our full remain guidance meet capital year on track of $XXX million. expenditures to $XXX million

the our We refinanced credit to put facility our XXXX with opportunistically since $XXX October, liquidity. debt through available of the extending in facility our facility, company's we adjusted ratio is ended EBITDA balance we In proportionate of million, $XXX was maturity leverage prior long-term the X.XXx which quarter of growth sheet. had to a to and the and end Turning to the low million target at place. announced increasing

had early banking recent to due until prudent not we given a supportive was While the market XXXX, sector. refinance the prior we it the to in facility current April go felt while volatility

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

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

Amanda Brock

team's we I'm opportunities a and progress, focus our meaningful far with began not efficiencies further We while execution thus enhance know on reduction maintaining in done. Steve. year we've we're very of these quarter-over-quarter, committed proud initiatives made cost Thanks, to We XXXX. and profitability. profitability the remain to and identifying

in multi-decade investments the through inventory compelling making Delaware with prolific Northern economics. sizable Basin is and by business in supported upstream Our large cycles operators, commodity areas

future, the meet optimistic outside are needs industry. ability utilize we opportunities to water oil and our produced about to our gas to while continue long-term So customers' the pursuing looking infrastructure water to of

With that, we questions. will take

Operator

from comes first Instructions] [Operator Your Mackay question Sachs. of Goldman John

John Mackay

if you we down more expense. the rental some Congrats electrification down could the and bringing the a little on break on recovery just margin Maybe quarter. moving the of pieces mentioned bit

on can kind -- going you how of these where little on Just share greedy over kind be to we margins are moving a could curious can there, forward? in if time? think confident the And pieces maybe bit get if trajectory the you you of again,

Amanda Brock

margin let but the and it where specifics this assured, we're all Thanks, Steve can take continue look John. rentals, is efficiencies. for business that continue aspects over increase to . actual I'll increase you think actually our time. at to We to to opportunities we rest looking through and sustainable, recovery other see do we on electrification of the

Stephan Tompsett

Yes, John.

realize the in We've savings of you that. so that implement when at talked to schedule, about, the the done, and the already from electrification break of Two are waiting X X been done. for we're facilities started Aris can and we we facilities, rentals a look those. On have our

savings incremental next see we'll So we year. go as into

be X still have to this in completed we that QFX Now quarter. expect we facilities the that are

continue improvement year. next savings cost we're going we So see from to on then quarter forecasted continued those. the and this And have to margin rentals, into

converted year, side, next water that the pumps going additional year. XX now, we are and produced we did schedule put got booster this have an the we've talked that be in XX Excel We several On to right in early have about into X place the year. of slip in

So that we're and into again, of to or that's going X waiting are for to have QX. our them. going And X control. ready We're out push

see margin we're those incremental to improvement So some to on going continue projects.

John Mackay

of bucket? have Maybe you cored footprint or want to Midland sale, All appreciate as else I the maybe right. that think think the broadly more be more up. as Should kind anything noncore little the you don't a I a on if that. say little we just being there's And in the left could EBITDA asset about sold well. thinking could if -- comment multiple in that I you about across all know

Amanda Brock

to been this where opportunistic was Delaware. coming was with this our When a I in buyer has in we pretty it Northern It about that basin, asset, been was deal. enter the sold to more us think focus and wanted an there accretive was primary lower the margin. who noncore we've specific

David, very anything the So want this with you of add that, deal. Steve. to we're Do happy outcome to

David Tuerff

Yes.

asset. We the was indicated, the as But of haven't transaction. It multiple accretive was disclosed a to us. it Amanda stand-alone

So we're the happy very with transaction.

Operator

Your next question comes Citi. Dounis with from Spiro

Unknown Analyst

becomes actually what's water Spiro. you is produced constraints scenario that? the bottleneck? more water the a we're Starting hearing on off, Permian. about This for Do a where in present see solution to And takeaway Chad

Amanda Brock

conversation lot and constraints There produced us. more about be actually is tailwind enough takeaway. that This a concerns there water is will a for

be can out our look the a is and in beneficial Northern with to that at as options looking us. continuing basin dealt we more how be assure ways come we a water can of there But are different to lot that potentially this pipeline of we to of attention can wave at the reuse continues So and is of Delaware which on disposal lot with efficient it, positive in volumes. for that

Unknown Analyst

That's a year. been helpful. I know then Great. And just following this execution up. has focus

is going beyond and current your up in that Just the this outlook curious play environment shaping growth landscape into could how how M&A the year? forward

Amanda Brock

very Thanks, Chad. very, sent been quarter. We've We've this every disciplined.

to And done, while transact. we'd for not M&A, And like to sense, got if us, strategically. accretive. both we're be looked as well to make it's term have like long term. short they valuations make our and now For thresholds, there've have It's have at going got meet to to to been things don't as we'd sense

Stephan Tompsett

You got it?

Unknown Analyst

Okay. Understood. Hope so.

Amanda Brock

Sorry, I had asking Bill was if to add. anything you

William Zartler

exactly right. That's .

Amanda Brock

We it. work closely on

Operator

Suki Your question Wade with next comes One. from Capital

Wade Suki

prior into of to front. this M&A asset. questions like But couple it Not the sounds read have to harp on we on the don't

in the this more opportunities. we've We anything don't backdrop? How don't talked do maybe I walking mind minded. think out about you basin before. might given here So consolidation for big do we've of But through read that little got into who's strategic about maybe a opportunities a bit And us player longer the with some the term what that.

Amanda Brock

Wade, the are about you're between E&P the consolidation how? talking guys opportunities going or on that

Wade Suki

Exactly, One I'm big is referring in sort customer particular, of to. exactly. what

Amanda Brock

watch we our It's very to interesting customers us, tend closely. it that consolidated. be trust in Well,

lot are to sort Permian continued allocating of dedicated, dedicated into who larger a and and growth and there. tend Delaware the of Northern customers Conoco be Chevron to and capital Our particularly to companies Basin the

Exxon recent the seen, the being deals does us we've in So Midland impact really Basin. not that the Pioneer deal

and not so with a for tailwind there great do great means customers this any believe impact. that run with concerned that is are contractual But is our rock we we contracts consolidation, being on this And with land, the these that that us. a

this acquisitions rock. grow, You lot will Bill, see increased is making with are efficiencies to and look else. people anything you a at great this

William Zartler

us. actually think for So the I good consolidation is

and transactions. focused have We customers the larger longer on

consolidation great them, of several private so more some Obviously, formerly that of the as have swings rolling And activity a companies We equity-backed and levels than type big the there's of among as mega up mid look been been put I lot anchorage consolidation. together and smaller there's the deals, roll-up, And there's we formed end then public gone the and think strategic. of the they majors. and their up companies. those sort -- more do, with themselves activity

a majors steadily middle really been is that growing we've proportionate the are share those transactions. we've why with that's because the had of so And versus in

Wade Suki

Great.

or the switching for any of looking related? kind reuse on be a guidepost the gears But we should what Just next bit going to over now. are little or few right maybe kind of the months we milestones data

Amanda Brock

Yes.

if that We what are see to you produced begin in we can talk trained the and understanding there. to guys valuable in there's that begin in are brines the doing to sort revenue in we we to of QX stream that the in seeing about constituents maybe expect water work also additional our

right now. are actual And with underway so we pilot the that as far

keep technology Chevron Conoco. with are We through and the coming work everybody Exxon will how and results informed as we as to

hear So doing year. a about I we what and are 'XX more upside will think in as lot see you next what potential we

Operator

comes Your Partners. Jeffrey from next Campbell Seaport with question Research

Jeffrey Campbell

effort. Alliance in not acreage water reuse Pioneer to in accounting just core participation state participant the recent does affects appear this much ExxonMobil how line for Aris' their wondered the beneficial area acquisition. have I even

Amanda Brock

But issue, reuse Eddy. in acreage have the Lake with it's acreage with acreage Poker very focus we terms is, they consortium acreage, committed of our in other do a really to just their Jeffrey, that and Permian what Lea is is and the because with actually agnostic to and beneficial are finding sort beneficial as reuse can positions just of where everywhere. significant they not

to they in and we customer fact, So us as great and will a position grow for our a are continue be them. customer great with

William Zartler

Yes.

and up fundamental Ranch. at nature reuse beneficial pipeline but a extends that's along state actually business. around moving think into I may Exxon line far Poker the and water Eddy The and . does the Lake our surround of County network Jens Lea be

Jeffrey Campbell

do and Great. more about as talking regard beneficial regulatory reuse. approval, the technology reuse -- Which you Between commercialization challenging? I'm

Amanda Brock

this in technology trying Texas. water. are sure regulators effective. we What it issue made needed, We've that and at New there is think focused the to particularly to in seen other regulatory that lot approvals of in very The robust is technology this the Rail with is, Mexico. we I be point, Commission make to Road is it progress will cost treat are a do on that and is

So is high a terms with focus to to the down in we have of lot treating lowest the cost we of with on TDS our achieve constituents. the accommodate bringing of can what water dealing cost this

Jeffrey Campbell

Great. X last one. just could And I if Okay.

and be Regarding have effort. both high-value to this or in to water Are discrete the And significantly exposed materials X other? effort than be technical given use require stream, will minerals to to approach they effort beneficial a the commercialize your the different to brine volumes efforts? going

Amanda Brock

make it pilot No, on highest more it you're whatever from how on it for. for be clean, the we're is treat it treating focused so use used or can treating standard, water to mineral we trying we the to or to like valuable discharge process. to extract. make that on certain to limited terms you're a but use beneficial to to brines, concentrate are focused focused reuse material ag, it of that it not simple can water going When certain very whatever the a clean water a purpose is extract

just It when of different, a approach to side. extractive slightly but it's So the different it process. a it more comes is is

William Zartler

possible in more brine, brine as the heavier effectively the water minerals. you concentrated extract and if those other you removing much you're to cost constituents the that you're potentially beneficial heavier And think that brine allows and about good as Yes. reuse, concentrating

Amanda Brock

explain it. Like we'd

Operator

comes Your Selman next Stifel. with question from Akyol

Selman Akyol

on $X.X terms Just question about the can up left in can removed, of you about dollar to characterized guys on on -- in you can be as of basis? dollars of et sort curious, a earlier put the of and capture pumps With additional following sort in you what's million of an you're you terms of you on John's that figures trying savings what talk talked just go-forward electrification go sort maybe up, to coming basis. terms the I'm -- it cetera. see annual some

Stephan Tompsett

X projects, million Yes, those about done. total happy On we in it's all and $X to. million specifically, to $X.X talked

some So towards made that we progress potential goal.

So going those we're confident figures. we're to achieve

Beyond for business that, across operations, we contracts, et are the looking cetera. vendors, ways other optimize to

So our a towards X mindset this we're minus in is improvement. of those $X.X or terms projects, continuous But million plus well tracking of target.

Selman Akyol

it. Got

the is $X.X million So million, $X.X that out or minus. plus of

Stephan Tompsett

right. That's

Selman Akyol

'XX. Understood. generation? terms of of get Great. thinking maybe of that exploration Okay. doing, And But in or we're potentially it then brine the know several years still sort going for should as Or sooner? something stream opportunity seeing just we you and to are you're out in I of this be more revenue

Amanda Brock

we out. I the on but believe side, that this is we years may still sooner, several think -- be brine

we to explain want are So it. to everybody focused on we very that

encouraged expectation very are what talk we but revenue sort about We are is. seeing, point not are a to come out where are going the and we what we by at of

Operator

comes question Fargo. Praneeth next with Your Satish from Wells

Praneeth Satish

homogeneous economically guess, apply pilot? regions and this is But conceptually, of wondering, Maybe of more you'll of it you your looking give questions certain just I perfect here. guess, following this year. the yes, across you water are Are volumes? more concentrated Or next know I'm . up how to all And clarity if just, that I opportunity? more just I the viable? on is brine kind kind

Amanda Brock

hear to you. from Praneeth, good

focused to waste always So very we've on we waste focused, or are we're value. said to asset that and

at just can So constantly water our value. we it what produced we dispose to with got of than looking and it there do that see are what other is

be So focused and much we recycle on reuse. very as continue we and have to as we can, reuse

reuse across water used pilot beneficial this for to can basin. for that is then, provide addition In the technology be

is with And that the to basin. different of specific have influence is flexibility water going can not the it's that certain just be basin. across used so It it for areas

Praneeth Satish

That's cash consider then as positive being overtime? a it. Got know do after free early, if at you you gears. I helpful. increasing to but that XXXX, the raising you flow switching so, would envision then capital point it's look dividend And dividends? And little or out

Amanda Brock

Yes.

we we and on I ahead focused flow, it's how why important. looking you are very think don't go and we're this. at cash free Steve, very explain know

Stephan Tompsett

full Yes, customers year half Praneeth. At the our for the outlooks this point, we of back year. have from don't

into indications year. EBITDA And expect CapEx our prepared have for as second up. But to in down to We and mentioned relative the comments, expect quarter. be quarter some the Amanda we we to this first do come

call a we're main until So going at to more long. to it. importance in very we'll here, a defer of of know we're and our again, on as it months. have point, to full demand fortune step, this more to But focused communicate have We couple full our year the investors,

Operator

over time, turn no questions. call this like management closing any the to appears At it back I'd there are remarks. further for to

Amanda Brock

for today. on great the want you what's all work come. more know we to participating about team are We thank a but we to very have do, to quarter. everybody excited for Thank We

to and the Have we a continued our thanksgiving. talking to and a be again then, on great we if to look you for day We also customers talking fourth thank forward great want weren't their have earnings you before all call. support, to quarter

Operator

attending, This rest concludes and for a day. have Call. today's Aris Thank Water Conference Earnings Quarter you your Solutions XXXX of Third wonderful

Aris Water Solutions (ARIS) 2 Nov 232023 Q3 Earnings call transcript