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Aris Water Solutions, Inc. (ARIS)·Q1 2025 Earnings Summary

Executive Summary

  • Record Q1 2025 performance: revenue $120.5M, adjusted EBITDA $56.5M, and adjusted operating margin $0.44/BBL; volumes rose 7% sequentially across produced water and water solutions, aided by spot volumes and strong customer activity .
  • Results beat Street: revenue $120.5M vs consensus $115.2M*, adjusted EPS $0.35 vs $0.30*, while GAAP diluted EPS was $0.25 (non‑GAAP adjusted diluted EPS $0.35) .
  • Guidance: Q2 2025 outlook introduced (produced water 1,200–1,250 kbbl/d; water solutions 475–525 kbbl/d; adjusted operating margin $0.41–$0.43/BBL; adjusted EBITDA $50–$55M; capex $20–$25M), and full‑year 2025 guidance maintained (adjusted EBITDA $215–$235M; capex $85–$105M) .
  • Balance sheet: refinanced into $500M 2030 notes at 7.25% coupon; quarter‑end net debt ~$480M, leverage 2.2x; Q2 dividend declared at $0.14/share .
    Values marked with an asterisk (*) are retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

  • Record volumes and margins drove an all‑time high adjusted EBITDA ($56.5M); adjusted operating margin sustained at $0.44/BBL despite deferred maintenance benefit (~$2M) moving to Q2 .
  • McNeil Ranch integration progressing with attractive surface and subsurface optionality; 11 permits granted on the Texas side and ~330 kbbl/d permitted disposal capacity already in hand .
  • Beneficial reuse advancing: permitting for large‑scale desalination and progress on mineral extraction; first iodine site selected with plant targeted online in early 2026; desalination OpEx can be below $1/BBL per management .

What Went Wrong

  • Lower oil price strip is a $6–$8M headwind to the 2025 outlook; Q2 adjusted operating margin expected to dip to $0.41–$0.43/BBL on timing of maintenance and lower skim oil realizations .
  • Q2 skim oil barrels guided down to ~1,800–2,000 bopd, impacting revenue sensitivity to commodity prices .
  • Macro/tariff uncertainty remains a watch item; while direct tariff exposure appears limited, broad cost inflation risks persist via suppliers .

Financial Results

Income, EPS, EBITDA vs Prior Periods

MetricQ1 2024Q4 2024Q1 2025
Revenue ($USD Millions)$103.4 $118.6 $120.5
Diluted EPS (GAAP, $)$0.23 $0.17 $0.25
Diluted Adjusted EPS (Non-GAAP, $)$0.34 $0.29 $0.35
Adjusted EBITDA ($USD Millions)$53.1 $54.5 $56.5

Margins vs Prior Periods

MetricQ1 2024Q4 2024Q1 2025
Gross Margin per Barrel ($)$0.32 $0.31 $0.32
Adjusted Operating Margin per Barrel ($)$0.46 $0.44 $0.44

Q1 2025 Actual vs Consensus Estimates (S&P Global)

MetricConsensusActual
Revenue ($USD Millions)$115.2*$120.5
Primary EPS (Normalized, $)$0.30*$0.35
Values marked with an asterisk (*) are retrieved from S&P Global.

Segment Breakdown (Q1 2025)

SegmentRevenue ($USD Millions)Direct Op Costs ($USD Millions)D&A ($USD Millions)Operating Income ($USD Millions)
Water Gathering & Processing$120.3 $50.2 $19.1 $50.2
Corporate & Other$0.24 —$0.63 $(22.4)
Consolidated$120.5 $50.2 $19.8 $27.8

KPIs and Operating Metrics

KPI (Daily)Q1 2024Q4 2024Q1 2025
Total Volumes (kbbl/d)1,523 1,636 1,750
Produced Water Handling (kbbl/d)1,159 1,112 1,191
Recycled Produced Water Sold (kbbl/d)337 463 475
Groundwater Volumes Sold (kbbl/d)27 61 84
Total Water Solutions Volumes (kbbl/d)364 524 559
Skim Oil Recoveries (bopd)1,729 1,762 1,962
Skim Oil % of Produced Water0.15% 0.16% 0.16%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Produced Water Handling (kbbl/d)Q2 2025N/A1,200–1,250 New
Water Solutions (kbbl/d)Q2 2025N/A475–525 New
Adjusted Operating Margin per Barrel ($)Q2 2025N/A$0.41–$0.43 New
Skim Oil Recoveries (bopd)Q2 2025N/A1,800–2,000 New
Adjusted EBITDA ($M)Q2 2025N/A$50–$55 New
Capital Expenditures ($M)Q2 2025N/A$20–$25 New
Produced Water Handling (kbbl/d)FY 20251,150–1,210 Maintained Maintained
Water Solutions (kbbl/d)FY 2025460–520 Maintained Maintained
Adjusted Operating Margin per Barrel ($)FY 2025$0.43–$0.45 Maintained Maintained
Adjusted EBITDA ($M)FY 2025$215–$235 Maintained Maintained
Capital Expenditures ($M)FY 2025$85–$105 Maintained Maintained
Dividend per Share ($)Q2 2025$0.14 (Q1 2025) $0.14 declared Maintained

Earnings Call Themes & Trends

TopicQ3 2024 (Prev-2)Q4 2024 (Prev-1)Q1 2025 (Current)Trend
Beneficial reuse (desalination)Pilot progress; lowering energy/cost; partner consortium Applied to TCEQ for 475 kbbl/d discharge; targeting permit by end-2025 Permitting continues; OpEx below $1/BBL possible; focus on reservoir replenishment/industrial uses Advancing toward commercialization
Mineral extractionSite selection underway for iodine; evaluating Mg/NH3/Li Expect iodine under construction by YE 2025; revenue more 2026 First iodine site finalized; plant online early 2026; magnesium likely next focus Execution milestones achieved
Tariffs/macroNoted 2025 outlook sensitivity; margins sustainable Balanced 2025 plan; strong contracted volumes $6–$8M WTI headwind; limited direct tariff exposure; supplier monitoring Heightened macro watch
Competitive landscape (pipelines)Volume/margin/sourcing visibility improving McNeil Ranch strategic position for long‑term injection Western pipeline south of footprint; WaterBridge open season; ARIS sees limited direct impact Position defended
Capital disciplineCapex down significantly; strong FCF FY24 capex $101M; FCF $73M Flex down 20–30% possible if volumes slow; sustaining capex < $50M for flat volumes High flexibility maintained
Customer activitySteady on dedicated acreage Q1 2025 guide reflects weather impacts; margins intact Strong Q1/Q2; large blue‑chip customers; resilience expected Still supportive

Management Commentary

  • “We achieved adjusted operating margin of $0.44 a barrel… driving adjusted EBITDA of $56.5 million, another all‑time high for Aris.” — Amanda Brock .
  • “Current WTI price strip represents a $6–$8 million headwind… offset by strong first half volumes, stronger skim oil recoveries, CPI‑linked revenue escalation clauses.” — CFO Stephan Tompsett .
  • “We have finalized site selection on the first iodine facility, and this plant should be online in early 2026.” — Amanda Brock .
  • “We are positioned to moderate our capital investments… and produce resilient free cash flow.” — Amanda Brock .
  • “We ended the quarter with net debt of $480 million and a 2.2x debt to adjusted EBITDA ratio with $372 million of liquidity.” — CFO Stephan Tompsett .

Q&A Highlights

  • Volumes and spot/interruptible: Volumes exceeded expectations; interruptible volumes opportunistic and hard to forecast; Q2 modeling primarily contractual volumes .
  • Capital allocation and flexibility: No change to framework; can reduce 2025 capital by 20–30%; sustaining capex under ~$50M to hold flat volumes; aim to deliver annual dividend growth .
  • Competitive pipeline landscape: Western’s Pathfinder south of ARIS footprint; WaterBridge open season near McNeil Ranch seen as limited impact due to long‑term contracts and system dynamics .
  • Desalination economics: OpEx can be below $1/BBL; surface discharge costs becoming more competitive though still above disposal; modular scaling planned .
  • Customer resilience and macro: Majority volumes tied to produced water (≈70%); best corollary is oil production; large customers (Chevron, Conoco, Oxy, Mewbourne) viewed as resilient .

Estimates Context

  • Q1 2025 beat: revenue $120.5M vs consensus $115.2M*; normalized/primary EPS $0.35 vs $0.30*; both above expectations driven by stronger‑than‑anticipated activity and interruptible volumes .
  • Prior quarter context: Q4 2024 revenue $118.6M vs consensus $109.9M*; adjusted diluted EPS $0.29 vs consensus $0.36* (EPS miss on mix, but margins remained strong) .
  • Implications: Near‑term estimate revisions likely upward for volumes and revenue; margin guide for Q2 ($0.41–$0.43/BBL) and skim oil sensitivity could temper EPS revisions in Q2.
    Values marked with an asterisk (*) are retrieved from S&P Global.

Key Takeaways for Investors

  • Volume strength plus durable margins under long‑term contracts drove a clear Q1 beat; Q2 guide signals sustained volumes but slightly lower per‑barrel margins on maintenance timing and skim oil prices .
  • Macro headwind quantified ($6–$8M) but offset drivers (CPI escalators, strong H1 volumes, skim recovery) reduce downside risk to FY 2025 EBITDA range maintained at $215–$235M .
  • Optionality expanding: McNeil Ranch permits and commercial interest position ARIS for mid‑’26–’27 growth with potential OpEx advantages from royalty avoidance on ranch disposals .
  • Beneficial reuse is moving from pilot to scale; desalination OpEx sub‑$1/BBL is a milestone, with iodine monetization targeted early 2026 and magnesium likely next .
  • Capital flexibility remains a differentiator: ability to flex capex down 20–30% in a downturn while sustaining dividend growth supports defensive equity profile .
  • Competitive long‑haul pipelines are unlikely to displace ARIS’s source‑controlled network near‑term; long‑term agreements and system flexibility are key moats .
  • Trading lens: Near‑term catalysts are Q2 execution vs margin guide and any updates on customer activity/tariffs; medium‑term thesis centers on contracted volume growth, optionality from McNeil/beneficial reuse, and disciplined shareholder returns .