Aris Water Solutions(ARIS) - 2023 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Adjusted EBITDA for Q2 2023 was $42.6 million, up 40% from Q2 2022 and up 12% sequentially from Q1 2023, exceeding expectations [15] - Total water volumes grew by 9% quarter-over-quarter, while adjusted EBITDA increased by 12% [8] - The company recorded a debt to adjusted EBITDA ratio below the midpoint of its long-term leverage target, with $171 million of available liquidity [19] Business Line Data and Key Metrics Changes - Produced water business experienced volumetric growth of 8% compared to Q1 2023, averaging over 1 million barrels per day [9] - Water recycling and sourcing business sold 452,000 barrels of water per day in Q2, growing sequentially by 12% [9] - The company is on track to reduce rental equipment costs by approximately $3.2 million on an annualized basis compared to the end of Q2 last year [10] Market Data and Key Metrics Changes - The Northern Delaware basin continues to show strong production growth, with operators indicating increased activity despite fluctuations in commodity prices [6] - Seven large customers have indicated they are increasing production in the core acreage, leading to a modest increase in growth capital outlook for the second half of the year [12] Company Strategy and Development Direction - The company is focused on executing its business plan ahead of schedule, with ongoing cost reduction and asset optimization efforts [7] - Plans to expand infrastructure to capture additional volumes and support existing customers while exploring new opportunities [12] - The company is actively testing treatment technologies for beneficial reuse of produced water, collaborating with major industry players [13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued volume growth and the ability to manage through inflationary pressures [10][21] - The company anticipates incremental margin improvement from ongoing projects and cost reduction initiatives in the second half of the year [11][20] - Management remains optimistic about the long-term future, citing strong customer demand and capital allocation to their acreage [25] Other Important Information - The company received Hart Energy's 2023 ESG Award for contributions towards sustainability in the Permian Basin [14] - The company announced its eighth consecutive dividend of $0.09 per share, to be paid on September 28 [19] Q&A Session Summary Question: Growth outlook beyond 2023 - Management indicated strong volume growth is expected to continue, supported by significant capital allocation to their acreage [25] Question: M&A landscape and growth strategy - Management noted opportunities for organic growth with better returns, while evaluating potential M&A opportunities as they arise [27] Question: Third quarter guidance and activity levels - Management clarified that the expected pullback in Q3 is timing-related and not indicative of a slowdown in overall activity [30][31] Question: Progress on rental equipment removal and cost reductions - Management reported being about halfway through the process of reducing rental equipment costs, with further reductions expected in the second half of the year [34][35]