• Adjusted EBITDA (Q4 2024): $54.5 million
• Adjusted Operating Margin (Q4 2024): $0.44 per barrel
• Adjusted EBITDA (Full Year 2024): $211.9 million, up 21% from 2023
• Adjusted Operating Margin (Full Year 2024): $0.45 per barrel, up 15% from 2023
• Capital Expenditures (Full Year 2024): $101 million, down 35% year-over-year
• Free Cash Flow (Full Year 2024): $73 million
• Dividend Increase: 33% increase to $0.14 per share
• Produced Water Volumes Growth (2024): 7% year-over-year
• Water Solutions Volumes Growth (Q4 2024): 14% sequentially
• Net Debt (End of Q4 2024): $422 million
• Debt to Adjusted EBITDA Ratio: 2.0 times
• Liquidity (End of Q4 2024): $332 million

• Warning! GuruFocus has detected 9 Warning Signs with ARIS.

Release Date: February 27, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Aris Water Solutions Inc (NYSE:ARIS) achieved record quarterly volumes in their Water Solutions business, with a 14% sequential growth.
• The company maintained strong margins, achieving an adjusted operating margin of $0.44 per barrel and adjusted EBITDA of $54.5 million in Q4 2024.
• Aris Water Solutions Inc (NYSE:ARIS) increased their dividend by 33% to $0.14 per share, reflecting strong financial performance and commitment to shareholder returns.
• The acquisition of McNeil Ranch provides significant strategic advantages, including potential for long-term water infrastructure development and reduced operating expenses.
• The company is expanding into industrial water treatment beyond the oil and gas industry, leveraging their expertise in complex water treatment.

Negative Points

• The company anticipates a potential delay in some Water Solutions volumes due to unexpected well completion downtime from a major customer.
• Cold weather in early 2025 impacted customer production, leading to an estimated $1.5 million impact on Q1 adjusted EBITDA.
• Skim oil pricing is expected to decrease by approximately 7% in 2025, impacting annual revenue by an estimated $3 million.
• The McNeil Ranch acquisition, while strategic, will not contribute significantly to EBITDA until the 2026-2027 timeframe.
• There is no expected revenue from desalination and mineral extraction projects until 2026, delaying potential new revenue streams.

Q & A Highlights

Q: Can you provide insights into the return profile and development steps for the McNeil Ranch acquisition? A: Amanda Brock, President and CEO, explained that the McNeil Ranch was acquired at an attractive price and offers significant optionality due to its location and subsurface characteristics. The ranch is strategically positioned for future disposal needs and has already received permits for disposal capacity. Development is expected in the 2026-2027 timeframe, with CapEx underwritten by long-term contracts. The acquisition also reduces operating expenses by eliminating landowner royalties for disposed volumes.

Q: What is the strategy for future dividend growth, and do you have a specific target or yield in mind? A: Stephan Tompsett, CFO, stated that while there is no explicit target for dividend payouts, the company aims to grow shareholder returns sustainably. The recent 33% dividend increase reflects strong performance and confidence in the business outlook. Future increases are expected to be more consistent but at a lower growth rate than the recent hike.

Q: How do you plan to integrate the McNeil Ranch into existing operations, and what synergies do you expect? A: Amanda Brock highlighted that disposing of water on the ranch eliminates royalty payments, reducing operating expenses. The ranch's location is synergistic with existing infrastructure investments and contracts, providing operational advantages and positioning the company for future growth opportunities.

Q: Can you provide an update on the desalination and mineral extraction projects and any potential revenue streams in 2025? A: Amanda Brock noted that significant revenue from these projects is not expected until 2026. The company is progressing with iodine and magnesium projects and has filed for a permit for surface discharge of reclaimed water. Draft permits are anticipated by year-end, with operations expected to begin in 2026.

Q: What are the capital requirements and customer commitments for the Red Bluff Treatment Facility? A: Amanda Brock stated that there is considerable interest from customers in accessing the facility's capacity. The project will be a collaborative effort with partners, focusing on technology, design, and operation. The company plans to conduct a Front-End Engineering Design (FEED) study by the end of the year as the project progresses through regulatory processes.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.