Aris Water Solutions' Q1 2025: Navigating Contradictions in McNeill Ranch Development, Capital Flexibility, and Mineral Opportunities

McNeill Ranch development timeline and revenue impact, capital flexibility and adjustments, capital expenditure flexibility, mineral extraction and revenue opportunities, and water production and volume expectations are the key contradictions discussed in Aris Water Solutions' latest 2025Q1 earnings call.



Record Volumes and Production Growth:
- Aris Water Solutions reported record Produced Water volumes and Water Solution volumes, growing 7% sequentially in Q1 2025.
- This growth was driven by higher-than-anticipated customer activity levels, strong sustained Produced Water volumes, and increased spot volume demand on their infrastructure network.

Financial Performance and Earnings:
- The company reported adjusted operating margin of $0.44 a barrel in Q1 2025, with adjusted EBITDA reaching $56.5 million, an all-time high.
- The record financial performance was supported by strong volumes and sustained margins, along with benefits from cost efficiencies and disciplined capital investment.

Capital Investment and Flexibility:
- Aris invested $21 million in Q1 2025, down 44% compared to Q1 2024.
- The company maintains the ability to flex down capital spending by 25% to 30% if customer volumes decrease, ensuring alignment with customer activity levels.

Long-term Contracts and Customer Resilience:
- Aris is well-positioned with long-term contracts in the Northern Delaware Basin, featuring multiple decades of production with economically viable inventory.
- The company's large, well-capitalized customers are expected to be resilient in a sustained low oil price environment, allowing Aris to moderate capital investments accordingly.