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Aris Water Solutions, Inc. (ARIS)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered strong operational execution: Total revenue rose to $118.61M, up 14.0% year-over-year and 5.6% sequential; Adjusted EBITDA was $54.48M, up 10% YoY and slightly above Q3 .
  • Water Solutions hit a quarterly record with recycled produced water volumes of 463 kbpd (+18% q/q) and total Water Solutions volumes of 524 kbpd (+14% q/q), driving per-barrel gross margin of $0.31 and adjusted operating margin of $0.44 .
  • Results landed at the top end of guidance and exceeded several Q4 outlook items (e.g., Water Solutions volumes, skim oil recoveries), while dividend was raised 33% to $0.14/share for Q1 2025 and McNeill Ranch (45,000 acres) was acquired for strategic disposal capacity and optionality .
  • 2025 outlook calls for Adjusted EBITDA of $215–$235M, capex of $85–$105M, and free cash flow of $75–$95M; management highlighted progress on beneficial reuse (TCEQ discharge permit up to 475 kbpd) and industrial wastewater expansion .

What Went Well and What Went Wrong

What Went Well

  • Record Water Solutions volumes and resilient margins: “We achieved an adjusted operating margin of $0.44 a barrel and adjusted EBITDA of $54.5 million” (CEO) ; per-barrel margins maintained near highs .
  • Strategic growth optionality: Acquisition of McNeill Ranch for $45M adds disposal capacity and reduces future royalty burden; management cited “promising geology and porosity” and non-O&G surface income opportunities (solar, wind, battery) .
  • Shareholder returns momentum: Dividend increased 33% to $0.14/share reflecting confident 2025 outlook and low leverage (~2.0x) .

What Went Wrong

  • Sequential softness in produced water handling volumes: 1,112 kbpd vs 1,118 kbpd in Q3 (-1% q/q) .
  • Q1 2025 weather and customer downtime impact: ~-$1.5M Adjusted EBITDA expected due to January shut-ins and temporary completion delays; volumes guided lower than steady-state for Q1 .
  • Refinancing watch: $400M senior notes go current in April; management is assessing options, keeping leverage/ liquidity strong but adding near-term financing tasks .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Total Revenue ($USD Millions)$104.13 $112.31 $118.61
Net Income ($USD Millions)$13.03 $16.43 $13.81
Diluted EPS ($USD)$0.17 $0.22 $0.17
Adjusted Net Income ($USD Millions)$15.38 $20.99 $18.10
Adjusted EBITDA ($USD Millions)$49.31 $54.31 $54.48
Gross Margin per Barrel ($USD)$0.27 $0.32 $0.31
Adjusted Operating Margin per Barrel ($USD)$0.41 $0.45 $0.44

Segment revenue breakdown

Revenue Line ($USD Thousands)Q4 2023Q3 2024Q4 2024
Produced Water Handling$51,817 $59,006 $53,162
Produced Water Handling — Affiliate$27,965 $29,418 $34,404
Water Solutions$17,445 $16,600 $20,845
Water Solutions — Affiliate$6,416 $4,225 $5,137
Other Revenue$482 $3,063 $5,061
Total Revenue$104,125 $112,312 $118,609

Operational KPIs

KPIQ4 2023Q3 2024Q4 2024
Total Volumes (kbwpd)1,577 1,577 1,636
Produced Water Handling Volumes (kbwpd)1,095 1,118 1,112
Recycled Produced Water Volumes Sold (kbwpd)401 393 463
Groundwater Volumes Sold (kbwpd)81 66 61
Total Water Solutions Volumes (kbwpd)482 459 524
Skim oil recoveries (bopd)1,362 1,769 1,762
Direct Operating Costs/Barrel ($)$0.32 $0.32 $0.35

Guidance Changes

MetricPeriodPrevious GuidanceCurrent/ActualChange
Produced Water Handling Volumes (kbwpd)Q4 20241,080–1,110 1,112 Beat vs high end
Water Solutions Volumes (kbwpd)Q4 2024450–490 524 Beat
Adjusted Operating Margin/BBL ($)Q4 2024$0.43–$0.45 $0.44 In-line
Skim oil recoveries (bopd)Q4 2024~1,550 1,762 Beat
Adjusted EBITDA ($M)Q4 2024$51–$55 $54.48 Top end
Capital Expenditures ($M)Q4 2024$15–$22 $17.85 In-line
Adjusted EBITDA ($M)FY 2025—$215–$235 New guidance
Capital Expenditures ($M)FY 2025—$85–$105 New guidance
Free Cash Flow ($M)FY 2025—$75–$95 New guidance
Dividend per share ($)Q4 2024 vs Q1 2025$0.105 (Q4 declared) $0.14 (Q1 2025) Raised 33%
Produced Water Handling Volumes (kbwpd)Q1 2025—1,085–1,125 New guidance
Water Solutions Volumes (kbwpd)Q1 2025—510–550 New guidance
Adjusted Operating Margin/BBL ($)Q1 2025—$0.43–$0.45 New guidance
Adjusted EBITDA ($M)Q1 2025—$50–$54 (net of ~$1.5M weather impact) New guidance

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
Beneficial reuse / desalinationJIP pilots; 2 of 3 completed; optimism; regulatory engagement Third desalination pilot by year-end; scale-up in 2025; cost/energy reductions TCEQ discharge permit filed for up to 475 kbpd; target draft permits by YE 2025; discharge in 2026 Advancing from pilots to permitting and scale planning
Mineral extraction (iodine, magnesium)LOI for first iodine facility by YE 2025 Site selection for iodine; exploring magnesium/ammonia/lithium Iodine construction toward YE 2025; magnesium pilot progress; revenue unlikely in 2025 Pipeline maturing; monetization pushed to 2026+
Margins and skim oil recoveriesRecord margins; capex weighted 1H Durable margins; skim oil recoveries driving strength Margin range maintained ($0.43–$0.45/BBL in 2025); skim ~1,820 bopd guided Sustained margin framework with skim variability
Customer growth / dedicated acreageSteady volumes; contracted customers Mid-single-digit 2025 produced water growth outlook Extended Water Solutions dedication; ~80% of 2025 volumes under long-term contracts Visibility improving via contract extensions
Royalty/Opex managementEvaluating surface acreage to reduce disposal royalties —McNeill Ranch reduces royalties for disposed volumes; permits in hand Concrete action on royalty reduction
M&A and financingDisciplined M&A; no fit yet Continued evaluation; bid-ask wide $400M notes going current; refinancing under assessment Focus on selective M&A; upcoming refinancing

Management Commentary

  • “We achieved adjusted operating margin of $0.44 a barrel and adjusted EBITDA of $54.5 million… generated $73 million of free cash flow” (CEO) .
  • “We acquired the 45,000 acre McNeill Ranch… providing significant additional disposal capacity… opportunities to generate additional surface income” (CEO) .
  • “We have applied to the Texas Commission on Environmental Quality for a discharge permit for up to 475,000 barrels of reclaimed water per day” (CEO) .
  • “Adjusted EBITDA of $215 million to $235 million for 2025… capex $85–$105 million… free cash flow $75–$95 million” (CFO) .

Q&A Highlights

  • McNeill Ranch returns and timing: Development expected 2026–2027 with phased capex underwritten by long-term contracts; immediate Opex benefit from royalty elimination on-ranch .
  • Dividend philosophy: Sustainable annual evaluation; future increases likely more measured than the 33% step-up .
  • Q1 weather/completions impact: ~$1.5M Adjusted EBITDA headwind; volumes to normalize as shut-ins resolve; margins stable .
  • Beneficial reuse scale-up: Consortium approach with majors; modular desalination trains; FEED toward end of year; discharge permit pathway .
  • Financing: $400M senior notes to go current; refinancing options being assessed; leverage ~2.0x, liquidity robust .

Estimates Context

  • We attempted to retrieve S&P Global consensus for Q4 2024 EPS, revenue, and EBITDA, but the request limit was exceeded; consensus comparison is therefore unavailable at this time [GetEstimates error].
  • Management’s results were at the top end of company guidance (Adjusted EBITDA $54.48M vs $51–$55M), and Water Solutions volumes materially exceeded guidance, which could support upward bias to near-term Street expectations on recycling activity and free cash flow .
  • Values retrieved from S&P Global are unavailable due to API limits; please note estimates were not accessible.

Key Takeaways for Investors

  • Water Solutions strength is the key driver: recycled volumes and pricing supported robust per-barrel margins; continued customer completions in dedicated acreage provide 2025 visibility .
  • Concrete Opex and strategic benefits from McNeill Ranch: royalty savings and phased, contract-backed development should enhance long-term free cash flow profile .
  • 2025 guide implies steady growth with capital discipline: Adjusted EBITDA midpoint $225M, capex $95M midpoint, FCF $85M midpoint—supporting ongoing dividend growth .
  • Near-term watch items: Q1 2025 ~-$1.5M weather impact, potential timing shifts on completions, and senior notes refinancing—none expected to alter full-year margin framework .
  • Beneficial reuse/industrial wastewater optionality is advancing but monetization is 2026+; iodine royalty model and TCEQ permit progress de-risk the pathway without heavy capex burden .
  • Contracted volume base improving: ~80% of 2025 Water Solutions under long-term dedication with ~8-year average tenor, increasing revenue visibility and margin durability .
  • Execution remains consistent: Q4 results broadly met/beat guidance across key KPIs; dividend step-up signals confidence and could be a positive sentiment catalyst .