UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission File Number: 001-40955

Aris Water Solutions, Inc.

(Exact name of registrant as specified in its charter)


Delaware	87-1022110
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

9651 Katy Freeway, Suite 400

Houston, Texas

77024

(Address of principal executive offices)

(Zip Code)

(832) 304-7003

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, $0.01 par value per share	ARIS	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☒

If an emerging growth company indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 31, 2023, the registrant had 30,148,929 shares of Class A common stock, $0.01 par value per share, and 27,543,565 shares of Class B common stock, $0.01 par value per share, outstanding.

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Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10‑Q (this “Quarterly Report”) includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact contained in this Quarterly Report, including, without limitation, statements regarding our future results of operations or financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “guidance,” “preliminary,” “project,” “estimate,” “outlook,” “expect,” “continue,” “will,” “intend,” “plan,” “targets,” “believe,” “forecast,” “future,” “potential,” “should,” “may,” “possible,” “could” and variations of such words or similar expressions.

You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition and operating results. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022 (our “2022 Annual Report”) and found elsewhere in this Quarterly Report, including, but not limited to, the following:

●

the impact of the ongoing Russia-Ukraine and Israel-Hamas conflicts on the global economy, including their impacts on financial markets and the energy industry;

●

the impacts of cost inflation on our operating margins and capital costs;

●

the impact of current and future laws, rulings and federal and state governmental regulations, including those related to hydraulic fracturing, accessing water, handling of produced water, carbon pricing, taxation of emissions, seismic activity, drilling and right-of-way access on governmental lands, and various other matters;

●

our reliance on a limited number of customers and a particular region for substantially all of our revenues;

●

the level of capital spending and development by oil and gas companies, including potential reductions in capital expenditures by oil and gas producers in response to commodity price volatility and/or reduced demand;

●

our ability to renew or replace expiring contracts on acceptable terms;

●

our customers’ ability to complete and produce new wells;

●

risks related to acquisitions and organic growth projects, including our ability to realize their expected benefits;

●

capacity constraints on regional oil, natural gas and water gathering, processing and pipeline systems that result in a slowdown or delay in drilling and completion activity, and thus a slowdown or delay in the demand for our services;

●

our ability to retain key management and employees and to hire and retain skilled labor;

●

our health, safety and environmental performance;

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●

the impact of competition on our operations;

●

the degree to which our customers may elect to operate their water-management services in-house rather than outsource these services to companies like us;

●

delays or restrictions in obtaining, utilizing or maintaining permits and/or rights-of-way by us or our customers;

●

constraints in supply or availability of equipment used in our business;

●

changes in global political or economic conditions, both generally, and in the specific markets we serve, such as an economic slowdown or recession, concern over a potential recession, or increased uncertainty regarding the economic outlook;

●

physical, electronic and cybersecurity breaches; and

●

the other risks described in our 2022 Annual Report filed with the United States Securities and Exchange Commission (“SEC”).

Many of the factors that will determine our future results are beyond the ability of management to control or predict. Should one or more of the risks or uncertainties described in this Quarterly Report or in our 2022 Annual Report occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements. All forward-looking statements, expressed or implied, are expressly qualified in their entirety by this cautionary statement. We do not undertake to update any forward-looking statement that we may make from time to time except as required by applicable law.

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PART 1. FINANCIAL INFORMATION

Item 1. Financial Statements

Aris Water Solutions, Inc.

Condensed Consolidated Balance Sheets

(unaudited)


(in thousands, except for share and per share amounts)	September 30,		December 31,
	2023		2022
Assets
Cash	$	24,184	$	1,122
Accounts Receivable, Net		57,820		81,683
Accounts Receivable from Affiliate		23,296		46,029
Other Receivables		18,077		4,354
Prepaids and Deposits		2,241		5,805
Total Current Assets		125,618		138,993
Fixed Assets
Property, Plant and Equipment		1,021,516		907,784
Accumulated Depreciation		(112,151)		(88,681)
Total Property, Plant and Equipment, Net		909,365		819,103
Intangible Assets, Net		241,550		269,845
Goodwill		34,585		34,585
Deferred Income Tax Assets, Net		25,783		30,424
Right-of-Use Assets		16,760		9,135
Other Assets		853		1,281
Total Assets	$	1,354,514	$	1,303,366
Liabilities and Stockholders' Equity
Accounts Payable	$	30,974	$	22,982
Payables to Affiliate		1,177		3,021
Accrued and Other Current Liabilities		81,189		65,411
Total Current Liabilities		113,340		91,414
Long-Term Debt, Net of Debt Issuance Costs		429,324		428,921
Asset Retirement Obligation		18,136		17,543
Tax Receivable Agreement Liability		98,164		97,980
Other Long-Term Liabilities		16,756		10,421
Total Liabilities		675,720		646,279
Commitments and Contingencies (see Note 10)
Stockholders' Equity
Preferred Stock $0.01 par value, 50,000,000 authorized. None issued or outstanding as of September 30, 2023 and December 31, 2022		—		—
Class A Common Stock $0.01 par value, 600,000,000 authorized, 30,334,399 issued and 30,023,826 outstanding as of September 30, 2023; 30,115,979 issued and 29,919,217 outstanding as of December 31, 2022		303		300
Class B Common Stock $0.01 par value, 180,000,000 authorized, 27,543,565 issued and outstanding as of September 30, 2023; 27,575,519 issued and outstanding as of December 31, 2022		275		276
Treasury Stock (at Cost), 310,573 shares as of September 30, 2023; 196,762 shares as of December 31, 2022		(4,259)		(2,891)
Additional Paid-in-Capital		325,655		319,545
Accumulated Deficit		(2,683)		(7,722)
Total Stockholders' Equity Attributable to Aris Water Solutions, Inc.		319,291		309,508
Noncontrolling Interest		359,503		347,579
Total Stockholders' Equity		678,794		657,087
Total Liabilities and Stockholders' Equity	$	1,354,514	$	1,303,366

The accompanying notes are an integral part of these condensed consolidated financial statements

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Aris Water Solutions, Inc.

Condensed Consolidated Statements of Operations

(unaudited)


	Three Months Ended				Nine Months Ended
(in thousands, except for share and per share amounts)	September 30,				September 30,
	2023		2022		2023		2022
Revenue
Produced Water Handling	$	47,574	$	39,674	$	143,390	$	110,299
Produced Water Handling — Affiliate		28,036		24,796		74,357		69,084
Water Solutions		20,370		20,392		49,180		46,744
Water Solutions — Affiliate		3,048		5,668		19,195		11,640
Other Revenue		761		246		1,871		364
Total Revenue		99,789		90,776		287,993		238,131
Cost of Revenue
Direct Operating Costs		44,687		43,885		132,978		101,337
Depreciation, Amortization and Accretion		19,445		16,942		57,137		49,724
Total Cost of Revenue		64,132		60,827		190,115		151,061
Operating Costs and Expenses
Abandoned Well Costs		1,214		9,222		1,214		14,637
General and Administrative		13,526		11,052		38,007		33,330
Impairment of Long-Lived Assets		—		—		—		15,597
Research and Development Expense		809		430		1,867		530
Other Operating (Income) Expense		(2,121)		239		(2,096)		1,816
Total Operating Expenses		13,428		20,943		38,992		65,910
Operating Income		22,229		9,006		58,886		21,160
Other Expense
Interest Expense, Net		7,955		6,763		23,587		21,863
Income (Loss) Before Income Taxes		14,274		2,243		35,299		(703)
Income Tax Expense (Benefit)		2,032		287		4,918		(81)
Net Income (Loss)		12,242		1,956		30,381		(622)
Net Income (Loss) Attributable to Noncontrolling Interest		6,829		1,257		16,892		(493)
Net Income (Loss) Attributable to Aris Water Solutions, Inc.	$	5,413	$	699	$	13,489	$	(129)

Net Income (Loss) Per Share of Class A Common Stock
Basic	$	0.17	$	0.02	$	0.42	$	(0.03)
Diluted	$	0.17	$	0.02	$	0.42	$	(0.03)
Weighted Average Shares of Class A Common Stock Outstanding
Basic		30,050,560		24,499,953		30,007,433		22,779,077
Diluted		30,050,560		24,546,632		30,007,433		22,779,077

The accompanying notes are an integral part of these condensed consolidated financial statements

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Aris Water Solutions, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)


(in thousands)	Nine Months Ended September 30,
	2023		2022
Cash Flow from Operating Activities
Net Income (Loss)	$	30,381	$	(622)
Adjustments to reconcile Net Income (Loss) to Net Cash provided by Operating Activities:
Deferred Income Tax Expense (Benefit)		4,773		(96)
Depreciation, Amortization and Accretion		57,137		49,724
Stock-Based Compensation		8,945		9,134
Impairment of Long-Lived Assets		—		15,597
Abandoned Well Costs		1,214		14,637
(Gain) Loss on Disposal of Assets, Net		(2,574)		481
Amortization of Debt Issuance Costs, Net		1,580		1,563
Other		(345)		377
Changes in Operating Assets and Liabilities:
Accounts Receivable		22,594		(33,683)
Accounts Receivable from Affiliate		22,771		(5,581)
Other Receivables		(13,359)		(2,139)
Prepaids and Deposits		3,564		4,215
Accounts Payable		(155)		3,233
Payables to Affiliate		(1,844)		913
Accrued Liabilities and Other		17,843		19,432
Net Cash Provided by Operating Activities		152,525		77,185

Cash Flow from Investing Activities
Property, Plant and Equipment Expenditures		(131,874)		(96,991)
Cash Paid for Asset Acquisitions		—		(3,353)
Proceeds from Sale of Property, Plant and Equipment		20,119		7,441
Net Cash Used in Investing Activities		(111,755)		(92,903)

Cash Flow from Financing Activities
Dividends and Distributions Paid		(16,083)		(19,157)
Repurchase of Shares		(625)		—
Repayment of Credit Facility		(51,000)		—
Proceeds from Credit Facility		50,000		—
Net Cash Used in Financing Activities		(17,708)		(19,157)

Net Increase (Decrease) in Cash		23,062		(34,875)
Cash, Beginning of Period		1,122		60,055
Cash, End of Period	$	24,184	$	25,180

Supplementary Cash Flow Data
Cash Paid for Interest	$	18,230	$	15,250

The accompanying notes are an integral part of these condensed consolidated financial statements

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Aris Water Solutions, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(unaudited)


		Three and Nine Months Ended September 30, 2023
(in thousands, except for share and per share amounts)		Class A			Class B			Additional									Non-			Total
		Common Stock			Common Stock			Paid-in		Treasury Stock			Accumulated			controlling			Stockholders'
	Amount			Shares	Amount		Shares	Capital		Amount		Shares		Deficit			Interest			Equity
Balance at January 1, 2023		$	300	30,115,979	$	276	27,575,519	$	319,545	$	(2,891)	196,762		$	(7,722)		$	347,579		$	657,087
Redemption of Class B Shares for Class A Shares			-	20,953		-	(20,953)		267		-	-			-			(267)			-
Stock-based Compensation Expense			2	175,717		-	-		2,383		-	-			-			83			2,468
Increase in TRA Liability Related to Share Redemption			-	-		-	-		(110)		-	-			-			-			(110)
Deferred Tax Assets Acquired			-	-		-	-		82		-	-			-			-			82
Dividends and Distributions ($0.09 per share or unit)			-	-		-	-		-		-	-			(2,826)			(2,588)			(5,414)
Purchase of Treasury Stock			-	-		-	-		-		(599)	42,293			-			-			(599)
Net Income			-	-		-	-		-		-	-			3,378			4,330			7,708
Balance at March 31, 2023		$	302	30,312,649	$	276	27,554,566	$	322,167	$	(3,490)	239,055		$	(7,170)		$	349,137		$	661,222
Redemption of Class B Shares for Class A Shares			-	524		-	(524)		7		-	-			-			(7)			-
Stock-based Compensation Expense			-	-		-	-		1,626		-	-			-			1,491			3,117
Increase in TRA Liability Related to Share Redemption			-	-		-	-		(3)		-	-			-			-			(3)
Deferred Tax Assets Acquired			-	-		-	-		2		-	-			-			-			2
Dividends and Distributions ($0.09 per share or unit)			-	-		-	-		-		-	-			(2,819)			(2,584)			(5,403)
Net Income			-	-		-	-		-		-	-			4,698			5,733			10,431
Balance at June 30, 2023		$	302	30,313,173	$	276	27,554,042	$	323,799	$	(3,490)	239,055		$	(5,291)		$	353,770		$	669,366
Redemption of Class B Shares for Class A Shares			1	10,477		(1)	(10,477)		136		-	-			-			(136)			-
Stock-based Compensation Expense			-	10,749		-	-		1,816		-	-			-			1,544			3,360
Increase in TRA Liability Related to Share Redemption			-	-		-	-		(71)		-	-			-			-			(71)
Deferred Tax Assets Acquired			-	-		-	-		48		-	-			-			-			48
Dividends and Distributions ($0.09 per share or unit)			-	-		-	-		-		-	-			(2,805)			(2,577)			(5,382)
Purchase of Treasury Stock			-	-		-	-		(73)		(769)	71,518			-			73			(769)
Net Income			-	-		-	-		-		-	-			5,413			6,829			12,242
Balance at September 30, 2023		$	303	30,334,399	$	275	27,543,565	$	325,655	$	(4,259)	310,573		$	(2,683)		$	359,503		$	678,794



		Three and Nine Months Ended September 30, 2022
(in thousands, except for share and per share amounts)		Class A			Class B			Additional									Non-			Total
		Common Stock			Common Stock			Paid-in		Treasury Stock			Accumulated			controlling			Stockholders'
	Amount			Shares	Amount		Shares	Capital		Amount		Shares		Deficit			Interest			Equity
Balance at January 1, 2022		$	218	21,858,022	$	317	31,716,104	$	212,926	$	(135)	10,191		$	(457)		$	389,670		$	602,539
Redemption of Class B Shares for Class A Shares			1	148,087		(1)	(148,087)		1,786		-	-			-			(1,786)			-
Stock-based Compensation Expense			-	515		-	-		958		-	-			-			1,379			2,337
Increase in TRA Liability Related to Share Redemption			-	-		-	-		(1,531)		-	-			-			-			(1,531)
Deferred Tax Assets Acquired			-	-		-	-		1,666		-	-			-			-			1,666
Dividends and Distributions ($0.09 per share or unit)			-	-		-	-		-		-	-			(2,062)			(2,947)			(5,009)
Net Loss			-	-		-	-		-		-	-			(2,222)			(4,395)			(6,617)
Balance at March 31, 2022		$	219	22,006,624	$	316	31,568,017	$	215,805	$	(135)	10,191		$	(4,741)		$	381,921		$	593,385
Redemption of Class B Shares for Class A Shares			1	107,914		(1)	(107,914)		1,315		-	-			-			(1,315)			-
Stock-based Compensation Expense			-	-		-	-		1,318		-	-			-			1,884			3,202
Increase in TRA Liability Related to Share Redemption			-	-		-	-		(1,021)		-	-			-			-			(1,021)
Deferred Tax Assets Acquired			-	-		-	-		422		-	-			-			-			422
Dividends and Distributions ($0.09 per share or unit)			-	-		-	-		-		-	-			(2,068)			(2,966)			(5,034)
Net Income			-	-		-	-		-		-	-			1,394			2,645			4,039
Balance at June 30, 2022		$	220	22,114,538	$	315	31,460,103	$	217,839	$	(135)	10,191		$	(5,415)		$	382,169		$	594,993
Class A Shares issued for Acquisition			34	3,365,907		-	-		54,588		-	-			-			16,601			71,223
Redemption of Class B Shares for Class A Shares			7	648,781		(7)	(648,781)		8,275		-	-			-			(8,275)			-
Stock-based Compensation Expense			-	37,174		-	-		1,848		-	-			-			1,747			3,595
Increase in TRA Liability Related to Share Redemption			-	-		-	-		(3,446)


PART I. FINANCIAL INFORMATION
Cautionary Note Regarding Forward Looking Statements		3
Item 1.	Financial Statements (unaudited)	5
Condensed Consolidated Balance Sheets		5
Condensed Consolidated Statements of Operations		6
Condensed Consolidated Statements of Cash Flows		7
Condensed Consolidated Statements of Stockholders’ Equity		8
Notes to Unaudited Condensed Consolidated Financial Statements		9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	38
Item 4.	Controls and Procedures	38
PART II. OTHER INFORMATION		39
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3.	Defaults upon Senior Securities	39
Item 4.	Mine Safety Disclosures	39
Item 5.	Other Information	40
Item 6.	Exhibits	40
Signatures		41