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Aris Water Solutions, Inc. Reports Second Quarter 2022 Results & Acquisition of Delaware Energy Services Assets

August 3, 2022

August 03, 2022 5:12pm EDT Download as PDF

HOUSTON–(BUSINESS WIRE)– Aris Water Solutions, Inc. (NYSE: ARIS) (“Aris”, “Aris Water” or the “Company”) today announced financial and operating results for the second quarter ended June 30, 2022 as well as the acquisition of Delaware Energy Services, LLC’s assets (“Delaware Energy”).

SECOND QUARTER 2022 HIGHLIGHTS

  • Total water volumes of approximately 1.2 million barrels per day for the second quarter of 2022, up 34% versus the second quarter of 2021.
  • Recycled produced water volumes of approximately 297 thousand barrels per day for the second quarter of 2022, up 186% versus the second quarter of 2021.
  • Consolidated net income of $4.0 million for the second quarter of 2022, down 11% versus the second quarter of 2021, primarily related to non-cash charges associated with a write down of abandoned assets. Adjusted Net Income 1 of $11.9 million for the second quarter of 2022, up 151% versus the second quarter of 2021. Adjusted EBITDA 1 of $37.2 million for the second quarter of 2022, up 21% versus the second quarter of 2021.

RECENT EVENTS

  • On August 1, 2022, Aris acquired the assets of Delaware Energy which are located in Aris’s core areas of Eddy and Lea County, New Mexico. Once fully integrated with our system, this infrastructure will accelerate growth alongside new and currently contracted operators.
  • Declared a dividend on the Company’s Class A common stock for the third quarter of 2022 of $0.09 per share.

“Aris was pleased to report continued volume growth as expected in the second quarter,” stated Amanda Brock, Chief Executive Officer of Aris. “Despite cost headwinds and customer scheduling delays pushing contracted volumes into subsequent quarters, we continue to grow rapidly and our premier contracted customers in the Northern Delaware Basin remain committed to expanding in the Basin and accelerating their use of recycled water. Our recently announced acquisition of Delaware Energy’s assets further enhances our scale and geographic footprint, brings additional water onto our network, and allows us to recycle in new areas for a greater number of customers. We also look forward to sharing our 2021 Sustainability Report which will be released shortly. The report highlights our leadership and demonstrated commitment towards Environmental, Social, and Governance initiatives that benefit all of our stakeholders.”

OPERATIONS UPDATE

For the second quarter of 2022, the Company averaged approximately 1.2 million barrels of water per day of total volumes handled, up approximately 34% from 924 thousand barrels of water per day for the second quarter of 2021. The Company’s volume growth was primarily driven by increased activity levels from our long-term contracted customers and continued adoption of our recycled produced water solutions.

FINANCIAL UPDATE

Consolidated net income of $4.0 million for the second quarter of 2022, down 11% versus the second quarter of 2021, primarily related to non-cash charges associated with a write down of abandoned assets. Adjusted Net Income1 of $11.9 million for the second quarter of 2022, up 151% versus the second quarter of 2021.

The Company had Adjusted EBITDA 1 of $37.2 million for the second quarter of 2022 compared to $30.6 million in the second quarter of 2021, an increase of 21%. Aris continues to grow its Adjusted EBITDA alongside its long-term contracted customers and increased demand for its sustainable water recycling solutions.

The Company had gross margin per barrel of $0.26 per barrel for the second quarter of 2022 compared to $0.22 per barrel in the second quarter of 2021. The Company had Adjusted Operating Margin per barrel 2 of $0.41 per barrel for the second quarter of 2022, compared to $0.42 per barrel in the second quarter of 2021.

Second quarter 2022 property, plant, and equipment expenditures totaled $38.5 million compared to $22.0 million in the second quarter of 2021. Aris continues to invest in high-return capital projects that support its long-term contracted customers and leverage its existing infrastructure.

STRONG BALANCE SHEET AND LIQUIDITY

As of June 30, 2022, the Company had approximately $35 million in cash and an undrawn and available $200 million revolving credit facility for a total available liquidity of approximately $235 million.

THIRD QUARTER 2022 DIVIDEND

On August 3, 2022, Aris’s Board of Directors declared a dividend on its Class A common stock for the third quarter of 2022 of $0.09 per share. In conjunction with the dividend payment, a distribution of $0.09 per unit will be paid to unit holders of Solaris Midstream Holdings, LLC. The dividend will be paid on August 30, 2022, to holders of record of the Company’s Class A common stock as of the close of business on August 17, 2022. The distribution to unit holders of Solaris Midstream Holdings, LLC will be subject to the same payment and record dates.

THIRD QUARTER 2022 FINANCIAL OUTLOOK

For the third quarter of 2022, Aris projects Adjusted EBITDA1 between $38.0 and $41.0 million.

DELAWARE ENERGY ASSET ACQUISITION

On August 1, 2022, we acquired all of Delaware Energy’s assets in exchange for 3.37 million Class A shares and a small, volumetric-based contingent consideration paid over 5 years. Delaware Energy’s assets include seven produced water handling facilities and associated gathering lines in Aris’s core areas of Eddy and Lea County, New Mexico. Once integrated, these assets will allow Aris to bring additional water volumes into its network, enhance its recycling capabilities, and further accelerate its organic growth.

“The acquisition of Delaware Energy’s assets represents a unique opportunity to add strategic operating assets and customers adjacent to our core infrastructure in New Mexico,” said Amanda Brock, Chief Executive Officer of Aris. “By integrating Delaware Energy’s assets into our broader network, we will be able to drive additional system utilization and facilitate increased recycling. We are pleased to work with legacy Delaware Energy investors as new shareholders of Aris and look forward to quickly realizing the benefits of this combination.”

“A combination with Aris was a natural geographic fit and we’re excited to participate in the next phase of growth as shareholders,” said Shaesby Scott, President of Delaware Energy. “By integrating our assets into Aris’ larger gathering, handling, and recycling network, we can realize enhanced flexibility and efficiency while offering additional capabilities to operators in the Northern Delaware Basin.”

CONFERENCE CALL

Aris will host a conference call and webcast for investors and analysts to discuss its results for the second quarter of 2022 on Thursday, August 4, 2022, at 9:30 a.m. Central Time (10:30 a.m. Eastern Time). Participants should call (877) 407-5792 and should refer to Aris Water Solutions, Inc. when dialing in. An audio replay of the conference call will be available shortly after the conclusion of the call and will remain available for approximately 14 days. To access the replay, call (877) 660-6853 (United States/Canada) or (201) 612-7415 (International) and enter access code 13730563. A live broadcast of the earnings conference call and the related earnings presentation will also be available via the internet at www.ariswater.com under the “Investors” section of the website. A replay will also be available on the website following the call.

About Aris Water Solutions, Inc.

Aris Water Solutions, Inc. is a leading, growth-oriented environmental infrastructure and solutions company that directly helps its customers reduce their water and carbon footprints. Aris Water delivers full-cycle water handling and recycling solutions that increase the sustainability of energy company operations. Its integrated pipelines and related infrastructure create long-term value by delivering high-capacity, comprehensive produced water management, recycling and supply solutions to operators in the core areas of the Permian Basin.

Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Examples of forward-looking statements include, but are not limited to, those regarding the Company’s business strategy, its industry, its future profitability, the various risks and uncertainties associated with the extraordinary market environment and impacts resulting from the volatility in global oil markets and the COVID-19 pandemic, expected capital expenditures and the impact of such expenditures on performance, management changes, current and potential future long-term contracts and the Company’s future business and financial performance and the Company’s estimated incremental Adjusted EBITDA expected as a result of the Delaware Energy asset acquisition. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “guidance,” “preliminary,” “project,” “estimate,” “expect,” “continue,” “intend,” “plan,” “believe,” “forecast,” “future,” “potential,” “may,” “possible,” “could” and variations of such words or similar expressions. Forward-looking statements are based on the Company’s current expectations and assumptions regarding its business, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, the Company’s actual results may differ materially from those contemplated by the forward-looking statements, including the Company’s estimated incremental Adjusted EBITDA expected as a result of the Delaware Energy asset acquisition. Factors that could cause the Company’s actual results to differ materially from the results contemplated by such forward-looking statements include, but are not limited to the risk factors discussed or referenced in its filings made from time to time with the U.S. Securities and Exchange Commission. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. Factors or events that could cause the Company’s actual results to differ may emerge from time to time, and it is not possible for the Company to predict all of them. The Company undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

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1 Adjusted EBITDA and Adjusted Net Income are non-GAAP financial measures. See the supplementary schedules in this press release for a discussion of how we define and calculate Adjusted EBITDA and Adjusted Net Income and a reconciliation thereof to net income, the most directly comparable GAAP measure.
2 Adjusted Operating Margin per Barrel is a non-GAAP financial measure. See the supplementary schedules in this press release for a discussion of how we define and calculate Adjusted Operating Margin per Barrel and a reconciliation thereof to gross margin, the most directly comparable GAAP measure.

Use of Non-GAAP Financial Information

The Company uses financial measures that are not calculated in accordance with U.S. generally accepted accounting principles (“GAAP”), including Adjusted EBITDA, Adjusted Operating Margin Adjusted Operating Margin per Barrel, and Adjusted Net Income. Although these Non-GAAP financial measures are important factors in assessing the Company’s operating results and cash flows, they should not be considered in isolation or as a substitute for net income or gross margin or any other measures prepared under GAAP.

The Company calculates Adjusted EBITDA as net income (loss) plus: interest expense; income taxes; depreciation, amortization and accretion expense; abandoned well costs; asset impairments and abandoned project charges; losses on the sale and/or exchange of assets; loss on debt modification; and non-recurring or unusual expenses or charges (including temporary power costs), less any gains on sale and/or exchange of assets.

The Company calculates Adjusted Operating Margin as Gross Margin plus depreciation, amortization and accretion and temporary power costs. The Company defines Adjusted Operating Margin per Barrel as Adjusted Operating Margin divided by total volumes.

The Company calculates Adjusted Net Income as Net Income (Loss) Attributable to Stockholders’/Members’ Equity plus the after-tax impacts of stock-based compensation and plus or minus the after-tax impacts of certain items affecting comparability, which are typically noncash and/or nonrecurring items.

For the quarter ended June 30, 2022, the Company calculates its current leverage ratio as net debt as of June 30, 2022, divided by annualized 2Q 2022 Adjusted EBITDA. Net debt is calculated as the principal amount of total debt as of June 30, 2022, less cash as of June 30, 2022.

The Company believes these presentations are used by investors and professional research analysts for the valuation, comparison, rating, and investment recommendations of companies within its industry. Similarly, the Company’s management uses this information for comparative purposes as well. Adjusted EBITDA, Adjusted Operating Margin, Adjusted Operating Margin per Barrel, and Adjusted Net Income are not measures of financial performance under GAAP and should not be considered as measures of liquidity or as alternatives to net income (loss) or gross margin. Additionally, these presentations as defined by the Company may not be comparable to similarly titled measures used by other companies and should be considered in conjunction with net income (loss) and other measures prepared in accordance with GAAP, such as gross margin, operating income, net income or cash flows from operating activities.

Although we provide forecasts for the non-GAAP measure Adjusted EBITDA, we are not able to forecast the most directly comparable measure net income calculated and presented in accordance with GAAP without unreasonable effort. Certain elements of the composition of the GAAP net income are not predictable, making it impractical for us to forecast. Such elements include but are not limited to non-recurring gains or losses, unusual or non-recurring items, income tax benefit or expense, or one-time transaction costs, which could have a significant impact on the GAAP measure. As a result, no reconciliation of forecasted Adjusted EBITDA to forecasted GAAP net income is provided.

David Tuerff
Senior Vice President, Finance & Investor Relations
832-803-0367
IR@ariswater.com

Source: Aris Water Solutions, Inc.

Released August 3, 2022