ARIS Aris Water Solutions Inc

Aris Water Solutions, Inc. (NYSE: ARIS) (“Aris,” “Aris Water” or the “Company”) today announced financial and operating results for the fourth quarter and year ended December 31, 2023.

FOURTH QUARTER AND FULL YEAR 2023 HIGHLIGHTS

• Increased total water volumes 4% quarter-over-quarter and 16% annually
• Grew recycled produced water volumes 8% for the year of 2023, including record volumes in the fourth quarter
• Achieved fourth quarter and full year 2023 net income of $13.0 million and $43.4 million, respectively
• Diluted Net Income per Share of $0.59 for the full year of 2023; Diluted Adjusted Net Income per Share1 of $0.88 for the year, up 14% versus 2022
• Generated Adjusted EBITDA1 of $49.3 million for the fourth quarter and $175.0 million for the full year, up 17% from 2022
• Improved Adjusted Operating Margin per Barrel2 by 11% versus the fourth quarter of 2022, reflecting the successful impact of cost saving initiatives
• $114 million year-over-year increase in Cash Provided by Operating Activities driven by volume growth, operational efficiencies and significant improvements in working capital
• Full year Capital Expenditures3 of $156.4 million
• Maintained a strong balance sheet with 2023 year-end leverage of 2.4x4 and $329.0 million of available liquidity

2024 OUTLOOK: FOCUSED ON CASH GENERATION

• Significant positive free cash flow expected due to greater asset efficiency, improved cost structure and lower capital reinvestment
• Full year produced water volumes are forecasted to grow approximately 2 - 5%, excluding the impact of a 2023 asset divestiture
• Full year water solutions volumes are expected to be between 430 to 470 thousand barrels per day, approximately flat with 2023
• Full-year Adjusted EBITDA1 forecasted between $180 - $200 million, up approximately 9% at the midpoint versus 2023
• Adjusted Operating Margin per Barrel2 is anticipated to increase 8% - 13% year-over-year to $0.42 - $0.44/bbl
• We project Capital Expenditures3 of $85 - $105 million, down approximately 40% versus 2023, a range which reflects $12 - $16 million of capital investment needed to maintain our system and potential capital for new business development

“2023 was an exceptional year for Aris. Our team delivered significantly increased profitability, with strong momentum carrying us into 2024. A year ago, we stated that our primary objectives for 2023 were to improve asset efficiency, address our cost structure, and improve margins. Our electrification and other cost reduction efforts allowed us to recognize over $7.5 million in sustainable, annualized savings while volumes also increased throughout the year. We structurally reduced our operating costs while growing substantially, supporting our long-term contracted customers. I am very pleased with our results and the efforts of the Aris team,” said Amanda Brock, Chief Executive Officer of Aris.

“In addition, Aris’s water recycling infrastructure facilitated over 118 million barrels of recycled produced water in 2023, growing 8% year over year. In December, we achieved a major milestone by recycling over 550,000 barrels in a single day. We take pride in having helped our customers dramatically reduce their groundwater withdrawals by more than 270 million barrels in the past 3 years. We have significantly enhanced water sustainability in the areas in which we operate and are delivering long term benefits to all our stakeholders.

"We remain committed to continuous improvement, optimizing our existing assets, and increasing our rates of return on invested capital and are extremely optimistic about what we can achieve in 2024 and beyond.”

OPERATIONS UPDATE

 

 

Three Months Ended

 

 

 

Three Months Ended

 

 

 

 

 

December 31,

 

September 30,

 

% Change

December 31,

 

% Change

 

 

2023

 

2023

 

 

 

2022

 

 

 

(thousands of barrels of water per day)

 

 

 

 

 

 

 

 

 

 

 

Total Volumes

 

1,577

 

1,516

 

4

%

1,305

 

21

%

Produced Water Handling Volumes

 

1,095

 

1,056

 

4

%

940

 

16

%

Water Solutions Volumes

 

 

 

 

 

 

 

 

 

 

 

Recycled Produced Water Volumes Sold

 

401

 

339

 

18

%

283

 

42

%

Groundwater Volumes Sold

 

81

 

121

 

(33)

%

82

 

(1)

%

Total Water Solutions Volumes

 

482

 

460

 

5

%

365

 

32

%

 

 

 

 

 

 

 

 

 

 

 

 

Skim oil recoveries (barrels of water per day)

 

1,362

 

1,125

 

21

%

775

 

76

%

Skim oil recoveries (as a % of produced water volumes)

 

0.12%

 

0.11%

 

9

%

0.08%

 

50

%

 

 

 

 

 

 

 

 

 

 

Year Ended December 31,

 

% Change

 

 

2023

 

2022

 

 

 

(thousands of barrels of water per day)

 

 

 

 

 

 

 

Total Volumes

 

1,492

 

1,284

 

16

%

Produced Water Handling Volumes

 

1,042

 

873

 

19

%

Water Solutions Volumes

 

 

 

 

 

 

 

Recycled Produced Water Volumes Sold

 

324

 

300

 

8

%

Groundwater Volumes Sold

 

126

 

105

 

20

%

Groundwater Volumes Transferred

 

—

 

6

 

N/M

%

Total Water Solutions Volumes

 

450

 

411

 

9

%

 

 

 

 

 

 

 

 

Skim oil recoveries (barrels of water per day)

 

1,219

 

792

 

54

%

Skim oil recoveries (as a % of produced water volumes)

 

0.12%

 

0.09%

 

33

%

N/M Not Meaningful

 

 

 

 

 

 

 

FINANCIAL UPDATE

Full year Cash Flow from Operating Activities increased approximately 162% to $183.9 million as compared to 2022 and was positively impacted by a $43.8 million improvement in Accounts Receivable and Accounts Receivable from Affiliate balances.

Net income was $13.0 million for the fourth quarter of 2023 versus net income of $5.4 million in the fourth quarter of 2022 and net income of $12.2 million in the third quarter of 2023. Adjusted Net Income1 was $15.4 million for the fourth quarter of 2023 versus $9.0 million for the fourth quarter of 2022 and $13.9 million in the third quarter of 2023.

Net income was $43.4 million for the full year of 2023, versus net income of $4.8 million for the full year of 2022. Adjusted Net Income1 was $52.4 million for the full year of 2023 versus $44.1 million for the full year of 2022.

Adjusted EBITDA1 was $49.3 million for the fourth quarter of 2023, up approximately 37% from $36.1 million in the fourth quarter of 2022, and up approximately 10% from $44.9 million in the third quarter of 2023. Adjusted EBITDA1 was $175.0 million for the full year of 2023 versus $149.0 million for the full year of 2022, an increase of approximately 17%.

Adjusted Operating Margin per Barrel2 for the fourth quarter of 2023 was $0.41 per barrel versus $0.37 per barrel in the fourth quarter of 2022. Adjusted Operating Margin per Barrel2 for the full year of 2023 was $0.39 per barrel, flat versus the full year of 2022.

Fourth quarter 2023 Capital Expenditures3 totaled approximately $20 million versus $20 million in the fourth quarter of 2022. Full year 2023 Capital Expenditures3 totaled approximately $156 million versus approximately $167 million for the full year of 2022.

STRONG BALANCE SHEET AND LIQUIDITY

As of December 31, 2023, the Company had approximately $5 million in cash and $324 million available under its revolving credit facility for total available liquidity of $329 million. The Company’s leverage ratio at year-end 2023 was 2.4X4, below the low end of its target leverage range of 2.5X-3.5X.

FIRST QUARTER 2024 DIVIDEND

On February 23, 2024, Aris’s Board of Directors declared a dividend on its Class A common stock for the first quarter of 2024 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 March 21, 2024, to holders of record of the Company’s Class A common stock as of the close of business on March 7, 2024. The distribution to unit holders of Solaris Midstream Holdings, LLC will be subject to the same payment and record dates.

FIRST QUARTER AND FULL YEAR 2024 FINANCIAL OUTLOOK

“Building on our success in 2023, our focus in 2024 is unlocking additional value from our infrastructure by driving increased returns from our existing assets, demonstrating sustainable cash generation capability, and identifying opportunities to leverage our expertise in the treatment of high-volume, complex water streams. We will prioritize safety, operational excellence, cost efficiency, and innovation,” said Amanda Brock.

“We will continue to grow alongside new and existing customers in the Northern Delaware Basin with potential upside in our shorter cycle Water Solutions business. We expect the positive momentum in our operating margins to continue as we benefit from the impact of contractual inflation clauses and additional efficiency initiatives in the field.

"2024 is an inflection year for Aris. The capital investment needed to support our infrastructure is substantially lower this year as the basin matures and operators temper their pace of development. With the Aris system more fully built out, we can better utilize its reach and capabilities, which in turn should increase free cash generation. With moderating volume growth, continued improvements in operating margins, and significantly reduced capital spending, we anticipate 2024 will deliver sustainable free cash flow. Aris is exceptionally well positioned for 2024 following our demonstrated operating improvements in 2023. As the year progresses, we expect cash generation to accelerate which will drive additional returns of capital to our shareholders.”

For the full year of 2024, the Company expects:

• Produced Water Handling volumes between 1,020 and 1,070 thousand barrels of water per day, up approximately 2 – 5% versus 2023 when adjusted for the approximately 35 thousand barrels per day impact of asset divestitures completed in the third quarter of 2023
• Water Solutions volumes between 430 and 470 thousand barrels of water per day, approximately flat versus 2023
• Adjusted Operating Margin per Barrel2 between $0.42 and $0.44
• Skim oil recoveries of approximately 1,300 barrels per day at an average WTI price of $76 per barrel
• Adjusted EBITDA1 between $180 and $200 million
• Capital Expenditures3 between $85 and $105 million

For the first quarter of 2024, the Company expects:

• Produced Water Handling volumes between 1,075 and 1,105 thousand barrels of water per day
• Water Solutions volumes between 325 and 345 thousand barrels of water per day
• Adjusted Operating Margin per Barrel2 between $0.42 and $0.44
• Skim oil recoveries of approximately 1,600 barrels per day at an average WTI price of $76 per barrel
• Adjusted EBITDA1 between $43 and $47 million
• Capital Expenditures3 between $30 and $35 million

CONFERENCE CALL

Aris will host a conference call to discuss its fourth quarter and full year 2023 results on Thursday, February 29, 2024, at 8:00 a.m. Central Time (9:00 a.m. Eastern Time).

Participants should call (877) 407-5792 and refer to Aris Water Solutions, Inc. when dialing in. Participants are encouraged to log in to the webcast or dial in to the conference call approximately ten minutes prior to the start time. To listen via live webcast, please visit the Investor Relations section of the Company’s website, www.ariswater.com.

An audio replay of the conference call will be available shortly after the conclusion of the call and will remain available for approximately fourteen days. The replay can be accessed by dialing (877) 660-6853 within the United States or (201) 612-7415 outside of the United States. The access code is 13743897.

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.

  1 Adjusted Net Income, Adjusted EBITDA, and Diluted Adjusted Net Income per Share are non-GAAP financial measures. See the supplementary schedules in this press release for a discussion of how we define and calculate Adjusted Net Income, Adjusted EBITDA, and Diluted Adjusted Net Income per Share 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.

3 Capital Expenditures is a non-GAAP financial measure. See the supplementary schedules in this press release for a discussion of how we define and calculate Capital Expenditures and a reconciliation thereof to cash paid for property, plant, and equipment, the most directly comparable GAAP measure.

4 Represents a non-GAAP financial measure. Defined as net debt as of December 31, 2023, divided by trailing twelve months Adjusted EBITDA. Net debt is calculated as total debt less cash and cash equivalents. See the supplementary schedules in this press release for a reconciliation to the most directly comparable GAAP measure.

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, statements, information, opinions or beliefs regarding our business strategy, our industry, our future profitability, business and financial performance, including our guidance for 2024, current and potential future long-term contracts, legal and regulatory developments, our ability to identify strategic acquisitions and realize expected benefits therefrom, the development of technologies for the beneficial reuse of produced water and related strategies, plans, objectives and strategic pursuits and other statements that are not historical facts. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “guidance,” “preliminary,” “project,” “estimate,” “expect,” “anticipate,” “continue,” “sustain,” “will,” “intend,” “strive,” “plan,” “goal,” “target,” “believe,” “forecast,” “outlook,” “future,” “potential,” “opportunity,” “predict,” “may,” “visibility,” “possible,” “should,” “could” and variations of such words or similar expressions. Forward-looking statements are based on our current expectations and assumptions regarding our 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, our actual results may differ materially from those contemplated or implied by the forward-looking statements including our guidance for 2024. Factors that could cause our actual results to differ materially from the results contemplated by such forward-looking statements include, but are not limited to, energy prices, the Russia-Ukraine and Israel-Hamas conflicts, macroeconomic conditions (such as inflation) and market uncertainty related thereto, legislative and regulatory developments, customer plans and preferences, technological innovations and developments, and other events discussed or referenced in our filings made from time to time with the Securities and Exchange Commission (“SEC”), including such factors discussed under “Risk Factors” in our most recent Annual Report on Form 10-K, and if applicable, our subsequent SEC filings, which are available on our Investor Relations website at https://ir.ariswater.com/sec-filings or on the SEC’s website at www.sec.gov/edgar. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. All forward-looking statements, expressed or implied, included in this presentation and any oral statements made in connection with this presentation are expressly qualified in their entirety by the foregoing cautionary statements. We undertake 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.

Table 1

Aris Water Solutions, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands, except for share and

 

Three Months Ended

 

Year Ended

per share amounts)

 

December 31,

 

December 31,

 

 

2023

 

2022

 

2023

 

2022

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

Produced Water Handling

 

$

51,817

 

$

41,061

 

$

195,207

 

$

151,360

Produced Water Handling—Affiliate

 

 

27,965

 

 

24,023

 

 

102,322

 

 

93,107

Water Solutions

 

 

17,445

 

 

13,928

 

 

66,625

 

 

60,672

Water Solutions—Affiliate

 

 

6,416

 

 

3,516

 

 

25,611

 

 

15,156

Other Revenue

 

 

482

 

 

342

 

 

2,353

 

 

706

Total Revenue

 

 

104,125

 

 

82,870

 

 

392,118

 

 

321,001

Cost of Revenue

 

 

 

 

 

 

 

 

 

 

 

 

Direct Operating Costs

 

 

44,995

 

 

38,143

 

 

177,973

 

 

139,480

Depreciation, Amortization and Accretion

 

 

19,495

 

 

17,800

 

 

76,632

 

 

67,524

Total Cost of Revenue

 

 

64,490

 

 

55,943

 

 

254,605

 

 

207,004

Operating Costs and Expenses

 

 

 

 

 

 

 

 

 

 

 

 

Abandoned Well Costs

 

 

89

 

 

1,134

 

 

1,303

 

 

15,771

General and Administrative

 

 

12,447

 

 

11,890

 

 

50,454

 

 

45,220

Impairment of Long-Lived Assets

 

 

—

 

 

—

 

 

—

 

 

15,597

Research and Development Expense

 

 

1,253

 

 

161

 

 

3,120

 

 

691

Other Operating (Income) Expense, Net

 

 

866

 

 

396

 

 

(1,230)

 

 

2,212

Total Operating Expenses

 

 

14,655

 

 

13,581

 

 

53,647

 

 

79,491

Operating Income

 

 

24,980

 

 

13,346

 

 

83,866

 

 

34,506

Other Expense

 

 

 

 

 

 

 

 

 

 

 

 

Interest Expense, Net

 

 

9,266

 

 

7,322

 

 

32,853

 

 

29,185

Other

 

 

107

 

 

—

 

 

107

 

 

—

Total Other Expense

 

 

9,373

 

 

7,322

 

 

32,960

 

 

29,185

Income Before Income Taxes

 

 

15,607

 

 

6,024

 

 

50,906

 

 

5,321

Income Tax Expense

 

 

2,576

 

 

605

 

 

7,494

 

 

524

Net Income

 

 

13,031

 

 

5,419

 

 

43,412

 

 

4,797

Net Income Attributable to Noncontrolling Interest

 

 

7,632

 

 

3,590

 

 

24,524

 

 

3,097

Net Income Attributable to Aris Water Solutions, Inc.

 

$

5,399

 

$

1,829

 

$

18,888

 

$

1,700

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income Per Share of Class A Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.17

 

$

0.06

 

$

0.59

 

$

0.04

Diluted

 

$

0.17

 

$

0.06

 

$

0.59

 

$

0.04

Weighted Average Shares of Class A Common Stock Outstanding

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

30,128,424

 

 

27,946,505

 

 

30,037,681

 

 

24,070,934

Diluted

 

 

30,128,424

 

 

28,051,871

 

 

30,037,681

 

 

24,146,215

Table 2

Aris Water Solutions, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

 

 

 

 

 

 

 

(in thousands, except for share and per share amounts)

 

December 31,

 

December 31,

 

 

2023

 

2022

Assets

 

 

 

 

 

 

Cash

 

$

5,063

 

 

$

1,122

 

Accounts Receivable, Net

 

 

59,393

 

 

 

81,683

 

Accounts Receivable from Affiliate

 

 

22,963

 

 

 

46,029

 

Other Receivables

 

 

12,767

 

 

 

4,354

 

Prepaids and Deposits

 

 

8,364

 

 

 

5,805

 

Total Current Assets

 

 

108,550

 

 

 

138,993

 

Fixed Assets

 

 

 

 

 

 

Property, Plant and Equipment

 

 

1,041,703

 

 

 

907,784

 

Accumulated Depreciation

 

 

(121,989

)

 

 

(88,681

)

Total Property, Plant and Equipment, Net

 

 

919,714

 

 

 

819,103

 

Intangible Assets, Net

 

 

232,277

 

 

 

269,845

 

Goodwill

 

 

34,585

 

 

 

34,585

 

Deferred Income Tax Assets, Net

 

 

22,634

 

 

 

30,424

 

Right-of-Use Assets

 

 

16,726

 

 

 

9,135

 

Other Assets

 

 

5,995

 

 

 

1,281

 

Total Assets

 

$

1,340,481

 

 

$

1,303,366

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Accounts Payable

 

$

25,925

 

 

$

22,982

 

Payables to Affiliate

 

 

894

 

 

 

3,021

 

Insurance Premium Financing Liability

 

 

5,463

 

 

 

—

 

Accrued and Other Current Liabilities

 

 

64,416

 

 

 

65,411

 

Total Current Liabilities

 

 

96,698

 

 

 

91,414

 

Long-Term Debt, Net of Debt Issuance Costs

 

 

421,792

 

 

 

428,921

 

Asset Retirement Obligations

 

 

19,030

 

 

 

17,543

 

Tax Receivable Agreement Liability

 

 

98,274

 

 

 

97,980

 

Other Long-Term Liabilities

 

 

16,794

 

 

 

10,421

 

Total Liabilities

 

 

652,588

 

 

 

646,279

 

Stockholders' Equity

 

 

 

 

 

 

Preferred Stock $0.01 par value, 50,000,000 authorized. None issued or outstanding as of December 31, 2023 and December 31, 2022

 

 

—

 

 

 

—

 

Class A Common Stock $0.01 par value, 600,000,000 authorized, 30,669,932 issued and 30,251,613 outstanding as of December 31, 2023; 30,115,979 issued and 29,919,217 outstanding as of December 31, 2022

 

 

306

 

 

 

300

 

Class B Common Stock $0.01 par value, 180,000,000 authorized, 27,543,565 issued and outstanding as of December 31, 2023; 27,575,519 issued and outstanding as of December 31, 2022

 

 

275

 

 

 

276

 

Treasury Stock (at Cost), 418,319 shares as of December 31, 2023; 196,762 shares as of December 31, 2022

 

 

(5,133

)

 

 

(2,891

)

Additional Paid-in-Capital

 

 

328,543

 

 

 

319,545

 

Accumulated Deficit

 

 

(87

)

 

 

(7,722

)

Total Stockholders' Equity Attributable to Aris Water Solutions, Inc.

 

 

323,904

 

 

 

309,508

 

Noncontrolling Interest

 

 

363,989

 

 

 

347,579

 

Total Stockholders' Equity

 

 

687,893

 

 

 

657,087

 

Total Liabilities and Stockholders' Equity

 

$

1,340,481

 

 

$

1,303,366

 

Table 3

Aris Water Solutions, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

Year Ended

(in thousands)

 

 

December 31,

December 31,

 

 

 

2023

 

2022

2023

 

2022

Cash Flow from Operating Activities

 

 

 

 

 

 

 

 

 

 

 

 

Net Income

 

$

13,031

 

 

$

5,419

 

 

$

43,412

 

 

$

4,797

 

Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities

 

 

 

 

 

 

 

 

 

 

 

 

Deferred Income Tax Expense

 

 

2,526

 

 

 

562

 

 

 

7,299

 

 

 

466

 

Depreciation, Amortization and Accretion

 

 

19,495

 

 

 

17,800

 

 

 

76,632

 

 

 

67,524

 

Stock-Based Compensation

 

 

2,624

 

 

 

2,900

 

 

 

11,569

 

 

 

12,034

 

Impairment of Long-Lived Assets

 

 

—

 

 

 

—

 

 

 

—

 

 

 

15,597

 

Abandoned Well Costs

 

 

89

 

 

 

1,134

 

 

 

1,303

 

 

 

15,771

 

(Gain) Loss on Disposal of Assets, Net

 

 

(32

)

 

 

(3

)

 

 

(2,606

)

 

 

478

 

Abandoned Projects

 

 

88

 

 

 

6

 

 

 

216

 

 

 

72

 

Amortization of Debt Issuance Costs, Net

 

 

700

 

 

 

580

 

 

 

2,280

 

 

 

2,143

 

Change in Payables Related to Tax Receivable Agreement Liability

 

 

413

 

 

 

—

 

 

 

413

 

 

 

—

 

Other

 

 

566

 

 

 

312

 

 

 

93

 

 

 

623

 

Changes in Operating Assets and Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Accounts Receivable

 

 

(1,878

)

 

 

(5,128

)

 

 

20,716

 

 

 

(38,811

)

Accounts Receivable from Affiliate

 

 

333

 

 

 

(20,257

)

 

 

23,104

 

 

 

(25,838

)

Other Receivables

 

 

3,711

 

 

 

1,301

 

 

 

(9,648

)

 

 

(838

)

Prepaids and Deposits

 

 

(6,123

)

 

 

(3,977

)

 

 

(2,559

)

 

 

238

 

Accounts Payable

 

 

4,092

 

 

 

(1,330

)

 

 

3,937

 

 

 

1,903

 

Payables to Affiliate

 

 

(283

)

 

 

609

 

 

 

(2,127

)

 

 

1,522

 

Accrued Liabilities and Other

 

 

(8,004

)

 

 

(6,900

)

 

 

9,839

 

 

 

12,532

 

Net Cash Provided by Operating Activities

 

 

31,348

 

 

 

(6,972

)

 

 

183,873

 

 

 

70,213

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Flow from Investing Activities

 

 

 

 

 

 

 

 

 

 

 

 

Property, Plant and Equipment Expenditures

 

 

(37,862

)

 

 

(49,534

)

 

 

(169,736

)

 

 

(146,525

)

Cash Paid for Asset Acquisitions

 

 

—

 

 

 

(1,747

)

 

 

—

 

 

 

(5,100

)

Proceeds from the Sale of Property, Plant and Equipment

 

 

35

 

 

 

7,259

 

 

 

20,154

 

 

 

14,700

 

Net Cash Used in Investing Activities

 

 

(37,827

)

 

 

(44,022

)

 

 

(149,582

)

 

 

(136,925

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Flow from Financing Activities

 

 

 

 

 

 

 

 

 

 

 

 

Dividends and Distributions Paid

 

 

(5,346

)

 

 

(5,308

)

 

 

(21,429

)

 

 

(24,465

)

Repurchase of Shares

 

 

(738

)

 

 

(2,756

)

 

 

(1,363

)

 

 

(2,756

)

Repayment of Credit Facility

 

 

(67,000

)

 

 

—

 

 

 

(118,000

)

 

 

—

 

Proceeds from Credit Facility

 

 

59,000

 

 

 

35,000

 

 

 

109,000

 

 

 

35,000

 

Payment of Debt Issuance Costs Related to Credit Facility

 

 

(3,942

)

 

 

—

 

 

 

(3,942

)

 

 

—

 

Proceeds from Insurance Premium Financing

 

 

6,636

 

 

 

—

 

 

 

6,636

 

 

 

—

 

Payment of Insurance Premium Financing

 

 

(1,252

)

 

 

—

 

 

 

(1,252

)

 

 

—

 

Net Cash (Used in) Provided by Financing Activities

 

 

(12,642

)

 

 

26,936

 

 

 

(30,350

)

 

 

7,779

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (Decrease) Increase in Cash

 

 

(19,121

)

 

 

(24,058

)

 

 

3,941

 

 

 

(58,933

)

Cash, Beginning of Period

 

 

24,184

 

 

 

25,180

 

 

 

1,122

 

 

 

60,055

 

Cash, End of Period

 

$

5,063

 

 

$

1,122

 

 

$

5,063

 

 

$

1,122

 

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, Adjusted Net Income, net debt and leverage ratio, and Capital Expenditures. 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 impairment and abandoned project charges; losses on the sale of assets; transaction costs; research and development expense; change in payables related to the Tax Receivable Agreement liability as a result of state tax rate changes; loss on debt modification; stock-based compensation expense; and other non-recurring or unusual expenses or charges (such as temporary power costs, litigation expenses and severance costs), less any gains on the sale of assets. For the fourth quarter of 2022, we began including research and development expense in our calculation of Adjusted EBITDA due to our new beneficial reuse pilot projects, which are discreet, non-revenue initiatives.

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 handled, sold or transferred.

The Company calculates Adjusted Net Income as Net Income (Loss) 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. The Company calculated Diluted Adjusted Net Income Per Share as (i) Net Income (Loss) 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, divided by (ii) the diluted weighted-average shares of Class A common stock outstanding, assuming the full exchange of all outstanding LLC interests, adjusted for the dilutive effect of outstanding equity-based awards.

For the quarter ended December 31, 2023, the Company calculates its leverage ratio as net debt as of December 31, 2023, divided by Adjusted EBITDA for the trailing twelve months. Net debt is calculated as the principal amount of total debt outstanding as of December 31, 2023, less cash and cash equivalents as of December 31, 2023.

The Company calculates Capital Expenditures as cash capital expenditures for property, plant, and equipment additions less changes in accrued capital costs.

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, Adjusted Net Income, and Capital Expenditures are not measures of financial performance under GAAP and should not be considered as measures of liquidity or as alternatives to net income (loss), gross margin, or cash paid for property, plant and equipment. 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, cash paid for property, plant, and equipment or cash flows from operating activities.

Although we provide forecasts for the non-GAAP measures Adjusted EBITDA, Adjusted Operating Margin per Barrel, and Capital Expenditures, we are not able to forecast their most directly comparable measures (net income, gross margin, and cash paid for property, plant, and equipment) calculated and presented in accordance with GAAP without unreasonable effort. Certain elements of the composition of forward-looking non-GAAP metrics 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 and cost of revenue, which could have a significant impact on the GAAP measures. The variability of the excluded items may have a significant, and potentially unpredictable, impact on our future GAAP results. As a result, no reconciliation of forecasted non-GAAP measures is provided.

Table 4

Aris Water Solutions, Inc.

Operating Metrics

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

Year Ended

 

 

December 31,

September 30,

December 31,

 

 

2023

 

2022

 

2023

 

2023

 

2022

(thousands of barrels of water per day)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Produced Water Handling Volumes

 

 

1,095

 

 

940

 

 

1,056

 

 

1,042

 

 

873

Water Solutions Volumes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recycled Produced Water Volumes Sold

 

 

401

 

 

283

 

 

339

 

 

324

 

 

300

Groundwater Volumes Sold

 

 

81

 

 

82

 

 

121

 

 

126

 

 

105

Groundwater Volumes Transferred (1)

 

 

—

 

 

—

 

 

—

 

 

—

 

 

6

Total Water Solutions Volumes

 

 

482

 

 

365

 

 

460

 

 

450

 

 

411

Total Volumes

 

 

1,577

 

 

1,305

 

 

1,516

 

 

1,492

 

 

1,284

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Per Barrel Operating Metrics (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Produced Water Handling Revenue/Barrel

 

$

0.79

 

$

0.75

 

$

0.78

 

$

0.78

 

$

0.77

Water Solutions Revenue/Barrel

 

$

0.54

 

$

0.52

 

$

0.55

 

$

0.56

 

$

0.51

Revenue/Barrel of Total Volumes

 

$

0.71

 

$

0.69

 

$

0.71

 

$

0.72

 

$

0.68

Direct Operating Costs/Barrel

 

$

0.31

 

$

0.32

 

$

0.32

 

$

0.33

 

$

0.30

Gross Margin/Barrel

 

$

0.27

 

$

0.22

 

$

0.26

 

$

0.25

 

$

0.24

Adjusted Operating Margin/Barrel

 

$

0.41

 

$

0.37

 

$

0.40

 

$

0.39

 

$

0.39

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) The groundwater transfer assets were sold in Q1 2022.

(2) Per Barrel operating metrics are calculated independently. Therefore, the sum of individual amounts may not equal the total presented.

Table 5

Aris Water Solutions, Inc.

Reconciliation of Net Income (Loss) to Non-GAAP Adjusted EBITDA

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Year Ended

(in thousands)

 

December 31,

 

December 31,

 

 

2023

 

2022

 

2023

 

2022

Net Income

 

$

13,031

 

 

$

5,419

 

 

$

43,412

 

 

$

4,797

Interest Expense, Net

 

 

9,266

 

 

 

7,322

 

 

 

32,853

 

 

 

29,185

Income Tax Expense

 

 

2,576

 

 

 

605

 

 

 

7,494

 

 

 

524

Depreciation, Amortization and Accretion

 

 

19,495

 

 

 

17,800

 

 

 

76,632

 

 

 

67,524

Abandoned Well Costs

 

 

89

 

 

 

1,134

 

 

 

1,303

 

 

 

15,771

Impairment of Long-Lived Assets

 

 

—

 

 

 

—

 

 

 

—

 

 

 

15,597

Stock-Based Compensation

 

 

2,624

 

 

 

2,900

 

 

 

11,569

 

 

 

12,034

(Gain) Loss on Disposal of Assets, Net

 

 

(32

)

 

 

(3

)

 

 

(2,606

)

 

 

478

Transaction Costs

 

 

129

 

 

 

251

 

 

 

802

 

 

 

1,520

Research and Development Expense

 

 

1,253

 

 

 

161

 

 

 

3,120

 

 

 

691

Change in Payables Related to Tax Receivable Agreement Liability

 

 

413

 

 

 

—

 

 

 

413

 

 

 

—

Other

 

 

464

 

 

 

489

 

 

 

(20

)

 

 

880

Adjusted EBITDA

 

$

49,308

 

 

$

36,078

 

 

$

174,972

 

 

$

149,001

Table 6

Aris Water Solutions, Inc.

Reconciliation of Gross Margin to Adjusted Operating Margin and

Adjusted Operating Margin per Barrel

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Year Ended

(in thousands)

 

December 31,

 

December 31,

 

 

2023

 

2022

 

2023

 

2022

Total Revenue

 

$

104,125

 

 

$

82,870

 

 

$

392,118

 

 

$

321,001

 

Cost of Revenue

 

 

(64,490

)

 

 

(55,943

)

 

 

(254,605

)

 

 

(207,004

)

Gross Margin

 

 

39,635

 

 

 

26,927

 

 

 

137,513

 

 

 

113,997

 

Depreciation, Amortization and Accretion

 

 

19,495

 

 

 

17,800

 

 

 

76,632

 

 

 

67,524

 

Adjusted Operating Margin

 

$

59,130

 

 

$

44,727

 

 

$

214,145

 

 

$

181,521

 

Total Volumes (thousands of barrels)

 

 

145,122

 

 

 

120,086

 

 

 

544,647

 

 

 

468,401

 

Adjusted Operating Margin/BBL

 

$

0.41

 

 

$

0.37

 

 

$

0.39

 

 

$

0.39

 

Table 7

Aris Water Solutions, Inc.

Reconciliation of Net Income to Non-GAAP Adjusted Net Income

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Year Ended

(in thousands)

 

December 31,

 

December 31,

 

 

2023

 

2022

 

2023

 

2022

Net Income

 

$

13,031

 

 

$

5,419

 

 

$

43,412

 

 

$

4,797

 

Adjusted items:

 

 

 

 

 

 

 

 

 

 

 

 

Impairment of Long-Lived Assets

 

 

—

 

 

 

—

 

 

 

—

 

 

 

15,597

 

Abandoned Well Costs

 

 

89

 

 

 

1,134

 

 

 

1,303

 

 

 

15,771

 

(Gain) Loss on Disposal of Assets, Net

 

 

(32

)

 

 

(3

)

 

 

(2,606

)

 

 

478

 

Stock-Based Compensation

 

 

2,624

 

 

 

2,900

 

 

 

11,569

 

 

 

12,034

 

Tax Effect of Adjusting Items (1)

 

 

(335

)

 

 

(420

)

 

 

(1,282

)

 

 

(4,577

)

Adjusted Net Income

 

$

15,377

 

 

$

9,030

 

 

$

52,396

 

 

$

44,100

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Estimated tax effect of adjusted items allocated to Aris based on statutory rates.

Table 8

Aris Water Solutions, Inc.

Reconciliation of Diluted Net Income Per Share to Non-GAAP Diluted Adjusted Net Income Per Share

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Year Ended

 

 

December 31,

 

December 31,

 

 

2023

 

2022

 

2023

 

2022

Diluted Net Income Per Share of Class A Common Stock

 

$

0.17

 

 

$

0.06

 

 

$

0.59

 

 

$

0.04

 

Adjusted items:

 

 

 

 

 

 

 

 

 

 

 

 

Reallocation of Net Income Attributable to Noncontrolling Interests From the Assumed Exchange of LLC Interests

 

 

0.05

 

 

 

0.03

 

 

 

0.14

 

 

 

0.01

 

Impairment of Long-Lived Assets

 

 

—

 

 

 

—

 

 

 

—

 

 

 

0.28

 

Abandoned Well Costs

 

 

—

 

 

 

0.02

 

 

 

0.02

 

 

 

0.29

 

(Gain) Loss on Disposal of Assets, Net

 

 

—

 

 

 

—

 

 

 

(0.05

)

 

 

0.01

 

Stock-Based Compensation

 

 

0.05

 

 

 

0.05

 

 

 

0.20

 

 

 

0.22

 

Tax Effect of Adjusting Items (1)

 

 

(0.01

)

 

 

(0.01

)

 

 

(0.02

)

 

 

(0.08

)

Diluted Adjusted Net Income Per Share

 

$

0.26

 

 

$

0.15

 

 

$

0.88

 

 

$

0.77

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Estimated tax effect of adjusted items allocated to Aris based on statutory rates.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted Weighted Average Shares of Class A Common Stock Outstanding

 

 

30,128,424

 

 

 

28,051,871

 

 

 

30,037,681

 

 

 

24,146,215

 

Adjusted Items:

 

 

 

 

 

 

 

 

 

 

 

 

Assumed Redemption of LLC Interests

 

 

27,543,565

 

 

 

29,271,745

 

 

 

27,554,221

 

 

 

30,929,045

 

Dilutive Performance-Based Stock Units (2)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Diluted Adjusted Fully Weighted Average Shares of Class A Common Stock Outstanding

 

 

57,671,989

 

 

 

57,323,616

 

 

 

57,591,902

 

 

 

55,075,260

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2) Dilutive impact of Performance-Based Stock Units already included for the three and twelve months ended December 31, 2023 and 2022.

Table 9

Aris Water Solutions, Inc.

Computation of Leverage Ratio

(Unaudited)

 

 

 

 

 

 

 

 

 

As of

(in thousands)

 

December 31, 2023

Principal Amount of Debt at December 31, 2023

 

$

431,463

 

Less: Cash at December 31, 2023

 

 

(5,063

)

Net Debt

 

$

426,400

 

 

 

 

 

Net Debt

 

$

426,400

 

÷ Trailing Twelve Months Adjusted EBITDA

 

 

174,972

 

Leverage Ratio

 

 

2.4

 

Table 10

Aris Water Solutions, Inc.

Reconciliation of Capital Expenditures

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Year Ended

 

 

December 31,

 

December 31,

(in thousands)

 

2023

 

2022

 

2023

 

2022

Cash Paid for Property, Plant and Equipment

 

$

37,862

 

 

$

49,534

 

 

$

169,736

 

 

$

146,525

Change in Capital Related Accruals

 

 

(18,095

)

 

 

(29,876

)

 

 

(13,342

)

 

 

20,876

Capital Expenditures

 

$

19,767

 

 

$

19,658

 

 

$

156,394

 

 

$

167,401

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240228061104/en/

David Tuerff Senior Vice President, Finance and Investor Relations (281) 501-3070 IR@ariswater.com