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Aris Water Solutions, Inc. Reports First Quarter 2022 Results

Aris Water Solutions, Inc. (NYSE: ARIS) (“Aris”, “Aris Water” or the “Company”), today announced financial and operating results for the first quarter ended March 31, 2022.

FIRST QUARTER 2022 HIGHLIGHTS

  • Total water volumes of approximately 1.2 million barrels per day for the first quarter of 2022, up 45% versus the first quarter of 2021.
  • Recycled produced water volumes of approximately 273 thousand barrels per day for the first quarter of 2022, up 290% versus the first quarter of 2021.
  • First quarter 2022 consolidated net loss of $6.6 million, down from consolidated net income of $2.8 million for the first quarter of 2021 primarily related to a non-cash charge associated with assets held for sale. Adjusted Net Income 1 was $10.0 million. Adjusted EBITDA 1 of $35.9 million for the first quarter of 2022, up 54% versus the first quarter of 2021.

RECENT EVENTS

  • Announced a new long-term full cycle water management agreement with Chevron. Under the agreement, Aris will provide Chevron with exclusive produced water handling and recycling services in a significant portion of their core Northern Delaware Basin acreage.
  • Declared a dividend on the Company’s Class A common stock for the second quarter of 2022 of $0.09 per share.

“Aris finished the first quarter with significant commercial momentum and strong execution,” stated Amanda Brock, Chief Executive Officer of Aris. “We continued to move record water volumes on our expansive infrastructure network and grew alongside our premier, long-term contracted customers. Aris’s recycled produced water solutions continue to be rapidly adopted by operators and we are improving water sustainability in the Permian Basin. In addition, our recently announced agreement with Chevron is a significant milestone for the team, provides greater visibility to our long-term growth trajectory, and represents a strong endorsement of Aris from a leading operator. We are optimistic and confident about Aris’s continued growth in 2022 and beyond.”

OPERATIONS UPDATE

For the first quarter of 2022, the Company averaged approximately 1.2 million barrels of water per day of total volumes handled, up approximately 45% from 806 thousand barrels of water per day for the first 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.

In March of 2022, Aris announced an expansion of its alliance with Texas Pacific Land Corporation (“TPL”). As part of the expanded relationship, Aris has access across TPL’s Northern Delaware surface acreage to provide a full suite of produced water services, including incremental water recycling for two leading large-cap customers operating on TPL royalty and surface acreage. In addition, Aris received key additional shallow interval water handling locations with the ability to permit more as needed.

FINANCIAL UPDATE

During the first quarter of 2022 the Company recorded a consolidated net loss of $6.6 million, down from consolidated net income of $2.8 million for the first quarter of 2021. The net loss was primarily related to a non-cash charge associated with assets held for sale. Adjusted Net Income 1 was $10.0 million.

The Company had Adjusted EBITDA 1 of $35.9 million for the first quarter of 2022 compared to $23.4 million in the first quarter of 2021, an increase of 54%. Aris continues to grow its Adjusted EBITDA alongside activity level increases from 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 first quarter of 2022 compared to $0.14 per barrel in the first quarter of 2021. The Company had Adjusted Operating Margin per barrel 2 of $0.42 per barrel for the first quarter of 2022, compared to $0.39 per barrel in the first quarter of 2021.

First quarter 2022 property, plant, and equipment expenditures totaled $9.8 million compared to $20.3 million in the first 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 March 31, 2022, the Company had approximately $67.8 million in cash and an undrawn and available $200.0 million revolving credit facility for a total available liquidity of $267.8 million.

SECOND QUARTER 2022 DIVIDEND

On May 6, 2022, Aris announced that its Board of Directors declared a dividend on its Class A common stock for the second 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 May 31, 2022, to holders of record of the Company’s Class A common stock as of the close of business on May 19, 2022. The distribution to unit holders of Solaris Midstream Holdings, LLC will be subject to the same payment and record dates.

INCREASED 2022 OUTLOOK

Aris is updating its 2022 outlook to reflect the impact of the recently signed long-term agreement with Chevron as well as increased activity levels in the Northern Delaware Basin. For the year of 2022, Aris is now projecting increased Adjusted EBITDA1 between $165.0 and $175.0 million and property, plant, and equipment expenditures between $140.0 and $150.0 million. For the second quarter of 2022, Aris projects Adjusted EBITDA 1 of $38.0-$40.0 million. Aris is investing additional capital in 2022 to support the Chevron agreement as well as incremental projected growth from our other long-term contracted customers.

CONFERENCE CALL

Aris will host a conference call and webcast for investors and analysts to discuss its results for the first quarter of 2022 on Tuesday, May 10, 2022, at 8:00 a.m. Central Time (9:00 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 13727969. 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. 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. 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.

_________________

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 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 comparable GAAP measure.

Table 1
Aris Water Solutions, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
 
 
Three Months Ended
(in thousands, except for share and per share amounts) March 31,

2022

2021

Revenue
Produced Water Handling

$

35,100

 

$

21,651

Produced Water Handling—Affiliates

21,081

 

18,086

Water Solutions

11,644

 

1,943

Water Solutions—Affiliates

3,144

 

4,509

Total Revenue

70,969

 

46,189

Cost of Revenue
Direct Operating Costs

26,671

 

20,754

Depreciation, Amortization and Accretion

16,579

 

14,957

Total Cost of Revenue

43,250

 

35,711

Operating Costs and Expenses
General and Administrative

10,730

 

4,695

Impairment of Long-Lived Assets

15,597

 

Loss on Asset Disposal and Other

1,064

 

317

Total Operating Expenses

27,391

 

5,012

Operating (Loss) Income

328

 

5,466

Interest Expense, Net

7,785

 

2,651

(Loss) Income Before Income Taxes

(7,457

)

2,815

Income Tax Benefit

(840

)

Net (Loss) Income

(6,617

)

2,815

Equity Accretion and Dividend—Redeemable Preferred Units

 

7

Net (Loss) Income Attributable to Stockholders'/Members' Equity

$

(6,617

)

$

2,822

Net Loss Attributable to Noncontrolling Interest

(4,395

)

Net Loss Attributable to Aris Water Solutions, Inc.

$

(2,222

)

 
Net Loss Per Share of Class A Common Stock, Basic and Diluted

$

(0.11

)

Weighted Average Shares of Class A Common Stock Outstanding, Basic and Diluted

21,852,966

 

Table 2
Aris Water Solutions, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
 
(in thousands, except for share and per share amounts) March 31, December 31,

2022

2021

Assets
Cash $

67,779

 

$

60,055

 

Accounts Receivable, Net

50,792

 

41,973

 

Accounts Receivable from Affiliate

19,584

 

20,191

 

Other Receivables

2,730

 

4,126

 

Prepaids and Deposits

5,191

 

6,043

 

Assets Held for Sale

7,450

 

 

Total Current Assets

153,526

 

132,388

 

Fixed Assets
Property, Plant and Equipment

696,275

 

700,756

 

Accumulated Depreciation

(68,160

)

(67,749

)

Total Property, Plant and Equipment, Net

628,115

 

633,007

 

Intangible Assets, Net

295,746

 

304,930

 

Goodwill

34,585

 

34,585

 

Deferred Income Tax Assets, Net

22,439

 

19,933

 

Right-of-Use Assets

7,002

 

 

Other Assets

1,708

 

1,850

 

Total Assets $

1,143,121

 

$

1,126,693

 

Liabilities and Stockholders' Equity
Accounts Payable $

19,281

 

$

7,082

 

Payables to Affiliate

1,740

 

1,499

 

Accrued and Other Current Liabilities

46,174

 

40,464

 

Total Current Liabilities

67,195

 

49,045

 

Long-Term Debt, Net of Debt Issuance Costs

392,518

 

392,051

 

Asset Retirement Obligation

7,530

 

6,158

 

Tax Receivable Agreement Liability

77,095

 

75,564

 

Other Long-Term Liabilities

5,398

 

1,336

 

Total Liabilities

549,736

 

524,154

 

Commitments and Contingencies
Stockholders' Equity:
Preferred Stock $0.01 par value, 50,000,000 authorized. None issued or outstanding as of March 31, 2022 and December 31, 2021

 

 

Class A Common Stock $0.01 par value, 600,000,000 authorized, 22,006,624 issued and 21,996,433 outstanding as of March 31, 2022, 21,858,022 issued and 21,847,831 outstanding as of December 31, 2021

219

 

218

 

Class B Common Stock $0.01 par value, 180,000,000 authorized, 31,568,017 issued and outstanding as of March 31, 2022, 31,716,104 issued and outstanding as of December 31, 2021

316

 

317

 

Treasury Stock (at Cost), 10,191 shares

(135

)

(135

)

Additional Paid-in-Capital

215,805

 

212,926

 

Accumulated Deficit

(4,741

)

(457

)

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

211,464

 

212,869

 

Noncontrolling Interests

381,921

 

389,670

 

Total Stockholders' Equity

593,385

 

602,539

 

Total Liabilities and Stockholders' Equity $

1,143,121

 

$

1,126,693

 

 
Table 3
Aris Water Solutions, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
 
(in thousands) Three Months Ended March 31,

2022

2021

Cash Flow from Operating Activities
Net (Loss) Income $

(6,617

)

$

2,815

 

Adjustments to reconcile Net (Loss) Income to Net Cash provided by Operating Activities:
Deferred Income Tax Benefit

(840

)

 

Depreciation, Amortization and Accretion

16,579

 

14,957

 

Stock-Based Compensation

2,337

 

 

Impairment of Long-Lived Assets

15,597

 

 

Loss on Disposal of Asset, Net

554

 

44

 

Abandoned Projects

2

 

211

 

Amortization of Deferred Financing Costs

565

 

214

 

Other

203

 

 

Changes in Operating Assets and Liabilities:
Accounts Receivable

(7,996

)

850

 

Accounts Receivable from Affiliate

608

 

(768

)

Other Receivables

795

 

896

 

Prepaids, Deposits and Other Current Assets

852

 

923

 

Accounts Payable

1,026

 

(2,928

)

Payables to Affiliate

241

 

246

 

Adjustment in Deferred Revenue

14

 

(149

)

Accrued Liabilities and Other

2,470

 

(737

)

Net Cash Provided by Operating Activities

26,390

 

16,574

 

 
Cash Flow from Investing Activities
Property, Plant and Equipment Expenditures

(9,810

)

(20,326

)

Net Cash Used in Investing Activities

(9,810

)

(20,326

)

 
Cash Flow from Financing Activities
Dividends and Distributions Paid

(8,856

)

 

Members' Contributions

 

5

 

Net Cash (Used In) Provided by Financing Activities

(8,856

)

5

 

 
Net Increase (Decrease) in Cash

7,724

 

(3,747

)

Cash, Beginning of Period

60,055

 

24,932

 

Cash, End of Period $

67,779

 

$

21,185

 

Table 4
Aris Water Solutions, Inc.
Operating Metrics
(Unaudited)
 
Three Months Ended
March 31,

2022

2021

Thousand barrels water per day
Produced Water Handling Volumes

803

648

Water Solutions Volumes:
Recycled Produced Water Volumes Sold

273

70

Groundwater Volumes Sold

66

33

Groundwater Volumes Transferred

25

55

Total Water Solutions Volumes

364

158

Total Volumes

1,167

806

 
Per Barrel Operating Metrics
Produced Water Handling Revenue/Barrel $

0.78

$

0.68

Water Solutions Revenue/Barrel $

0.45

$

0.45

Revenue/Barrel of Total Volumes $

0.68

$

0.64

Direct Operating Costs/Barrel $

0.25

$

0.29

Adjusted Operating Margin/Barrel $

0.42

$

0.39

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; 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 Stockholder’/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 March 31, 2022, the Company calculates its current leverage ratio as net debt as of March 31, 2022, divided by annualized 1Q 2022 Adjusted EBITDA. Net debt is calculated as the principal amount of total debt as of March 31, 2022, less cash as of March 31, 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.

 
Table 5
Aris Water Solutions, Inc.
Reconciliation of Net Income (Loss) to Non-GAAP Adjusted EBITDA
(Unaudited)
 
Three Months Ended
(in thousands) March 31,

2022

2021

Net Income (Loss) $

(6,617

)

$

2,815

Interest Expense, Net

7,785

 

2,651

Income Tax Benefit

(840

)

Depreciation, Amortization and Accretion

16,579

 

14,957

Impairment of Long-Lived Assets

15,597

 

Stock-Based Compensation

2,337

 

Abandoned Projects

2

 

211

Temporary Power Costs

 

2,650

Loss on Disposal of Asset, Net

554

 

44

Transaction Costs

508

 

62

Adjusted EBITDA $

35,905

 

$

23,390

Table 6
Aris Water Solutions, Inc.
Reconciliation of Gross Margin to Adjusted Operating Margin and Adjusted Operating Margin per Barrel
(Unaudited)
 
Three Months Ended
(in thousands) March 31,

2022

2021

Total Revenue $

70,969

 

$

46,189

 

Cost of Revenue

(43,250

)

(35,711

)

Gross Margin

27,719

 

10,478

 

Depreciation, Amortization and Accretion

16,579

 

14,957

 

Temporary Power Costs

 

2,650

 

Adjusted Operating Margin $

44,298

 

$

28,085

 

Total Volumes (Thousands of BBLs)

105,006

 

72,555

 

Adjusted Operating Margin/BBL $

0.42

 

$

0.39

 

 
Table 7
Aris Water Solutions, Inc.
Reconciliation of Net Income (Loss) to Non-GAAP Adjusted Net Income
(Unaudited)
 
Three Months Ended
(in thousands) March 31,

2022

2021

Net Income (Loss) $

(6,617

)

$

2,815

Adjusted items:
Impairment of Long-Lived Assets

15,597

 

Loss on Disposal of Asset, Net

554

 

44

Stock-Based Compensation

2,337

 

Tax Effect of Adjusting Items (1)

(1,843

)

Adjusted Net Income $

10,028

 

$

2,859

 
(1) Estimated tax effect of adjusted items allocated to Aris' based on statutory rates
Table 8
Aris Water Solutions, Inc.
Computation of Leverage Ratio
(Unaudited)
 
As of
March 31,
(in thousands)

2022

 
Principal Amount of Debt at March 31, 2022 $

400,000

 

Less: Cash at March 31, 2022

(67,779

)

Net Debt $

332,221

 

 
Adjusted EBITDA for the Three Months Ended March 31, 2022 $

35,905

 

x 4 Quarters

x 4

Annualized Adjusted EBITDA $

143,620

 

 
Net Debt $

332,221

 

÷ Annualized Adjusted EBITDA $

143,620

 

Current Leverage Ratio as of March 31, 2022

2.31

 

 

Contacts

David Tuerff

Senior Vice President, Finance & Investor Relations

832-803-0367

IR@ariswater.com

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