Aris Mining Corporation Q1 FY2025 earnings call

Volume Growth

• Record volumes in Q1 2025 driven by higher-than-anticipated customer activity levels, strong sustained Produced Water volumes, and increased spot volume demand.

McNeill Ranch

• First full quarter integrating McNeill Ranch, evaluating inbound opportunities such as large-scale solar and surface royalty development; 330,000 barrels of permitted disposal capacity on the Texas side.

Beneficial Reuse and Desalination

• Progressing in desalination of Produced Water for reservoir replenishment, industrial, and non-consumptive agricultural use, leading industry efforts to reduce desalination costs.

Industrial Water Treatment

• Further integrating the new team joined in Q1 2025, making progress in strategic efforts.

Iodine Facility

• Finalized site selection for the first iodine facility, expected to be online in early 2026.

Balance Sheet

• Successfully refinanced senior notes, upsized offering to $500 million, Moody's credit upgrade from B1 to B2, net debt $480 million, liquidity $372 million, and declared a $0.14 per share dividend for Q2.

In the first quarter of 2025, Aris Water Solutions saw record volumes in both Produced Water Handling and Water Solutions, growing 7% sequentially from the fourth quarter of the previous year. The Produced Water Handling segment contributed significantly to revenue, driven by higher completion activity and sustained Produced Water takeaway demand. The Water Solutions segment also experienced strong growth. Adjusted operating margin was $0.44 per barrel, and adjusted EBITDA reached $56.5 million, an all-time high. The McNeill Ranch was integrated in the first full quarter, with evaluations of inbound opportunities like large-scale solar and surface royalty development.

Q2 Volumes

• Produced Water volumes expected to be between 1.2 million barrels per day and 1.25 million barrels per day, and Water Solutions volumes between 475,000 barrels per day and 525,000 barrels per day.

Margin

• Adjusted operating margin expected to be between $0.41 and $0.43 per barrel for Q2, slightly down from Q1 due to well maintenance timing and lower skim oil price realizations.

Tariffs

• No meaningful direct exposure to potential tariff increases within existing cost structure.

WTI Impact

• $6 to $8 million headwind from current WTI price strip, but offset by strong first half volumes, stronger skim oil volume recoveries, CPI-linked revenue escalation clauses, and Q1 outperformance.

• Commodity prices: Impact on customers' activity levels.
• Tariff uncertainty: Monitoring supply chain impacts and inflationary pressures.
• Market volatility: Potential impact on M&A activity and seller motivations.

Q: What are expectations for volumes if producers move to maintenance mode?

A: Can moderate CapEx by 25-30%, water cut remains the same, with volume impact.

Q: Update on M&A?

A: Bid-ask spread exists, few large water combinations, but well-positioned to take advantage of opportunities with strong balance sheet.

Q: Volume growth cadence?

A: Volumes strong due to better-than-expected well starts, spot volumes, but hard to forecast months in advance.

Q: Capital allocation in downside?

A: Can reduce 2025 capital by 20-30%, focus on balance sheet strength, consistent dividend growth planned.

Q: McNeill Ranch commercialization?

A: Exceeding expectations, evaluating inbounds like solar, 330,000 bbl permitted disposal capacity, early innings.

Q: Competitive landscape?

A: Western pipeline south of footprint, not competitive, well-positioned geographically with planned pipeline to McNeill Ranch in 2026.

Q: Iodine project economics?

A: Royalty-based, dependent on iodine production, site selection done, details on construction plans next quarter.

Q: Surface disposal competition?

A: Becoming more competitive, not on par with traditional disposal but less expensive than initial piloting.

Q: M&A preference?

A: Focused on core acquisitions, looking for complementary fit at right value, evaluating small bolt-ons.

Q: Desal cost recovery?

A: OpEx can be below $1 per barrel, depends on size.

Q: Customer resilience to oil price?

A: Customers like Chevron, Conoco, Oxy are resilient, unlike smaller private equity-backed operators.