Aris Water Solutions Inc - Ordinary Shares (ARIS) 7 Aug 24 2024 Q2 Earnings call transcript

Aris Water Solutions, a leading player in the water management sector, recently held its second-quarter earnings call, showcasing a robust performance and a promising outlook for the future. The call, led by Senior Vice President of Finance and Investor Relations, David Tuerff, along with Amanda Brock, Founder and Executive Chairman, Bill Zartler, and CFO Stephan Tompsett, provided insights into the company's operational efficiencies, growth prospects, and strategic initiatives.

Resilient Performance and Operational Efficiencies

Aris Water Solutions reported a strong second quarter, with a 5% year-over-year increase in produced water volumes and a 17% year-over-year growth in adjusted EBITDA, reaching $50 million. The company's operational efficiencies were highlighted, with a focus on electrification assets, reduced chemical costs, automation, and improved solid waste handling, leading to a structurally improved margin of $0.46 per barrel for the second consecutive quarter. This operational excellence is a testament to Aris's strategic focus on delivering sustainable water management solutions.

Growth and Innovation

Amanda Brock, the Founder and Executive Chairman, highlighted the company's proactive approach to securing pore space and permits to support customer needs, emphasizing the importance of staying ahead of the curve in a rapidly evolving industry. The announcement of a letter of intent with an established iodine production and marketing company to construct the first iodine extraction facility in the Permian Basin is a significant step forward, showcasing Aris's commitment to exploring new opportunities in beneficial reuse of produced water. This innovative approach to mineral extraction is a potential game-changer, with Aris aiming to explore the extraction of other high-value minerals from its produced water.

Financial Stability and Future Outlook

Stephan Tompsett, the CFO, provided a detailed financial overview, highlighting the company's strong financial position, with a net debt of $438 million and a 2.2x debt to adjusted EBITDA ratio, well below the leverage target range of 2.5x to 3.5x. The successful implementation of the accounting ERP software upgrade further underscores Aris's operational efficiency and financial stability. With a focus on deploying capital into attractive organic growth projects and strategic inorganic acquisitions, Aris is poised for sustained growth and shareholder returns.

Looking Ahead

The earnings call also touched on key trends in the industry, with a focus on the Northern Delaware Basin and the potential for mid-single digit production growth in the Permian region. The company's strategic approach to managing disposal capacity and exploring the beneficial reuse of produced water outside of the oil and gas sector underscores its forward-thinking approach. Aris Water Solutions remains committed to operational excellence, financial stability, and strategic growth, positioning itself for a promising future in the water management sector.