Delaware | | | 1389 | | | 87-1022110 |
(State or other jurisdiction of incorporation or organization) | | | (Primary Standard Industrial Classification Code Number) | | | (I.R.S. Employer Identification Number) |
Hillary H. Holmes Andrew L. Fabens Gibson, Dunn & Crutcher LLP 811 Main Street, Suite 3000 Houston, Texas 77002 (346) 718-6600 | | | David J. Miller Trevor Lavelle Latham & Watkins LLP (713) 546-5400 |
Large accelerated filer | | | ☐ | | | Accelerated filer | | ☐ | |
Non-accelerated filer | | | ☒ | | | Smaller reporting company | | | ☐ |
| | | | Emerging growth company | | | ☒ |
Title of Each Class of Securities to be Registered | | | Proposed Maximum Aggregate Offering Price(1)(2) | | | Amount of Registration Fee |
Class A common stock, par value $0.01 per share | | | $100,000,000 | | | $10,910 |
| | Per Share | | | Total | |
Initial public offering price | | | $ | | | $ |
Underwriting discounts and commissions(1) | | | $ | | | $ |
Proceeds, before expenses, to us | | | $ | | | $ |
|
(1) | See “Underwriting” for a description of all underwriting compensation payable in connection with this offering. |
Goldman Sachs & Co. LLC | | | Citigroup |
J.P. Morgan | | | Wells Fargo Securities |
Barclays | | | Evercore ISI |
Capital One Securities | | | Johnson Rice & Company L.L.C. | | | Raymond James |
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Stifel | | | | | U.S. Capital Advisors |
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As of June 30, 2021 | | | Pipelines (miles) | | | Number of Water Handling Facilities | | | Water Handling Capacity (kbwpd) |
Installed | | | 640 | | | 48 | | | 1,232 |
As of June 30, 2021 | | | Pipelines (miles) | | | Number of Water Handling Facilities | | | Water Handling Capacity (kbwpd) |
Permitted Not Installed | | | 225 | | | 48 | | | 1,530 |
Volumes (kbwpd) | | | Six Months Ended June 30, 2021 | | | Year Ended December 31, 2020 |
Produced Water Handling Volumes | | | 684 | | | 570 |
As of June 30, 2021 | | | Number of Water Recycling Facilities | | | Water Recycling Capacity (kbwpd) |
Active Facilities | | | 10 | | | 550 |
As of June 30, 2021 | | | Number of Water Recycling Facilities | | | Water Recycling Capacity (kbwpd) |
Permitted or In Process Facilities | | | 14 | | | 950 |
Volumes (kbwpd) | | | Six Months Ended June 30, 2021 | | | Year Ended December 31, 2020 |
Recycled Produced Water Volumes Sold | | | 88 | | | 44 |
Percentage of Produced Water Handling Revenue(1) | | | Six Months Ended June 30, 2021 | | | Year Ended December 31, 2020 |
Acreage Dedication | | | 75% | | | 71% |
Minimum Volume Commitments | | | 17% | | | 21% |
Spot Volumes | | | 8% | | | 8% |
Total | | | 100% | | | 100% |
(1) | Produced Water Handling Revenue does not include skim oil sales. |
Acreage Dedications | | | As of June 30, 2021 |
Acreage Under Contract (thousands of acres) | | | 550 |
Weighted Average Remaining Life (years) | | | 9.7 |
| | ||
Minimum Volume Commitments | | | |
Volumetric Commitment (kbwpd) | | | 162 |
Weighted Average Remaining Life (years) | | | 3.6 |
(1) | Includes ConocoPhillips, Trilantic, Yorktown, certain of our officers and directors and the other current members of Solaris LLC. |
(1) | Includes ConocoPhillips, Trilantic, Yorktown, certain of our officers and directors and the other current members of Solaris LLC. See “Corporate Reorganization.” |
(Dollars in thousands) | | | Six Months Ended June 30, | | | Year Ended December 31, | ||||||
| | 2021 | | | 2020 | | | 2020 | | | 2019 | |
| | (unaudited) | | | | | ||||||
Statement of Operations Data: | | | | | | | | | ||||
Revenue: | | | | | | | | | ||||
Produced Water Handling | | | $85,810 | | | $69,031 | | | $141,659 | | | $81,418 |
Water Solutions | | | 16,963 | | | 15,061 | | | 29,813 | | | 37,375 |
Total revenues | | | 102,773 | | | 84,092 | | | 171,472 | | | 118,793 |
Cost of revenue: | | | | | | | | | ||||
Direct operating costs | | | 43,206 | | | 49,433 | | | 95,431 | | | 71,973 |
Depreciation, amortization and accretion | | | 30,172 | | | 19,778 | | | 44,027 | | | 19,670 |
Total cost of revenue | | | 73,378 | | | 69,211 | | | 139,458 | | | 91,643 |
Operating expenses: | | | | | | | | | ||||
General and administrative | | | 10,012 | | | 8,648 | | | 18,663 | | | 15,299 |
(Gain) loss on disposal of asset, net | | | 217 | | | 67 | | | 133 | | | (5,100) |
Transaction costs | | | 77 | | | 3,099 | | | 3,389 | | | 1,010 |
Abandoned projects | | | 1,356 | | | 1,133 | | | 2,125 | | | 2,444 |
Total operating expenses | | | 11,662 | | | 12,947 | | | 24,310 | | | 13,653 |
Operating income | | | 17,733 | | | 1,934 | | | 7,704 | | | 13,497 |
Other expense: | | | | | | | | | ||||
Other expense | | | 380 | | | — | | | — | | | 176 |
Interest expense, net | | | 9,975 | | | 3,265 | | | 7,674 | | | 260 |
Total other expense | | | 10,355 | | | 3,265 | | | 7,674 | | | 436 |
Income (loss) before taxes | | | 7,378 | | | (1,331) | | | 30 | | | 13,061 |
Income tax expense | | | 2 | | | 6 | | | 23 | | | 1 |
Net income (loss) | | | $7,376 | | | $(1,337) | | | $7 | | | $13,060 |
(Dollars in thousands, except per share and per barrel data) | | | Six Months Ended June 30, | | | Year Ended December 31, | ||||||
| | 2021 | | | 2020 | | | 2020 | | | 2019 | |
| | (unaudited) | | | | | ||||||
Pro Forma Statement of Operations Data(1) | | | | | | | | | ||||
Pro forma net income (loss)(2) | | | | | | | | | ||||
Pro forma non-controlling interest(3) | | | | | | | | | ||||
Pro forma net income (loss) attributable to common stockholders(2) | | | | | | | | | ||||
Pro forma net income (loss) per share attributable to common stockholders(4) | | | | | | | | | ||||
Basic and diluted | | | | | | | | | ||||
Pro forma weighted average shares outstanding | | | | | | | | | ||||
Basic and diluted | | | | | | | | | ||||
Balance Sheet Data (at end of period): | | | | | | | | | ||||
Cash and cash equivalents | | | $31,123 | | | $14,986 | | | $24,932 | | | $7,083 |
Accounts receivable, net | | | 25,928 | | | 22,893 | | | 21,561 | | | 33,523 |
Accounts receivable from affiliates | | | 18,346 | | | 12,086 | | | 11,538 | | | 15,837 |
Total current assets | | | 80,824 | | | 52,950 | | | 66,068 | | | 60,763 |
Total property, plant and equipment, net | | | 649,980 | | | 596,074 | | | 618,188 | | | 481,790 |
Total assets | | | 1,088,762 | | | 1,033,165 | | | 1,057,805 | | | 838,234 |
Total current liabilities | | | 49,366 | | | 53,679 | | | 45,789 | | | 69,166 |
Long-term debt, net | | | 391,115 | | | 280,000 | | | 297,000 | | | 220,000 |
Total liabilities | | | 447,445 | | | 339,418 | | | 349,512 | | | 292,726 |
Total mezzanine equity | | | — | | | 72,391 | | | 74,378 | | | — |
Total members’ equity | | | 641,317 | | | 621,356 | | | 633,915 | | | 545,508 |
Consolidated Statements of Cash Flows Data: | | | | | | | | | ||||
Operating activities | | | $30,690 | | | $40,911 | | | $67,771 | | | $4,149 |
Investing activities | | | (42,353) | | | (92,581) | | | (139,589) | | | (228,368) |
Financing activities | | | 17,854 | | | 59,572 | | | 89,667 | | | 223,959 |
Non-GAAP Measures: | | | | | | | | | ||||
Adjusted EBITDA(5) | | | $54,029 | | | $35,919 | | | $73,896 | | | $47,199 |
Adjusted Operating Margin(5) | | | $63,820 | | | $43,780 | | | $91,020 | | | $62,431 |
Adjusted Operating Margin per Barrel(5) | | | $0.41 | | | $0.36 | | | $0.36 | | | $0.35 |
Operating Data (kbwpd): | | | | | | | | | ||||
Produced Water Handling Volumes | | | 684 | | | 562 | | | 570 | | | 343 |
Recycled Produced Water Volumes Sold | | | 88 | | | 29 | | | 44 | | | 20 |
Groundwater Water Volumes Sold | | | 51 | | | 65 | | | 61 | | | 77 |
Total Water Solutions Volumes Sold | | | 139 | | | 94 | | | 105 | | | 97 |
Groundwater Water Volumes Transferred | | | 43 | | | 11 | | | 11 | | | 49 |
Total Water Solutions Volumes Sold or Transferred | | | 182 | | | 105 | | | 116 | | | 146 |
Total Volumes | | | 866 | | | 667 | | | 686 | | | 489 |
(1) | For additional information regarding our pro forma information, please see the pro forma financial statements and the related notes thereto appearing elsewhere in this prospectus. |
(2) | Pro forma net loss reflects a pro forma income tax benefit of $ million and $ million, respectively, for the six months ended June 30, 2021 and the year ended December 31, 2020, of which $ million and $ million, respectively, is associated with the income tax effects of the corporate reorganization described under “Corporate Reorganization” and this offering. Aris Inc. is a corporation and is subject to U.S. federal and State of Texas income tax. Our predecessor, Solaris LLC, was not subject to U.S. federal income tax at an entity level. As a result, the consolidated net loss in our historical financial statements does not reflect the tax expense we would have incurred if we were subject to U.S. federal income tax at an entity level during such periods. |
(3) | Reflects the pro forma adjustment to non-controlling interest and net income (loss) attributable to common stockholders to reflect the ownership of Solaris LLC Units by each of the Existing Owners. |
(4) | Pro forma net loss per share attributable to common stockholders and weighted average shares outstanding reflect the estimated number of shares of Class A common stock we expect to have outstanding upon the completion of our corporate reorganization described under “Corporate Reorganization.” Pro forma weighted average shares outstanding used to compute pro forma earnings per share for the six months ended June 30, 2021 and the year ended December 31, 2020 excludes shares and shares, respectively, of weighted average restricted Class A common stock expected to be issued in connection with this offering under our long-term incentive plan. |
(5) | Adjusted EBITDA, Adjusted Operating Margin and Adjusted Operating Margin per Barrel are non-GAAP financial measures. Please read “—Non-GAAP Financial Measures” for additional information regarding these non-GAAP financial measures and a reconciliation to the most comparable GAAP measures of each. |
| | Three Months Ended June 30, | | | Six Months Ended June 30, | | | Year Ended December 31, | ||||||||||
(Dollars in thousands) | | | 2021 | | | 2020 | | | 2021 | | | 2020 | | | 2020 | | | 2019 |
| | (unaudited) | | | (unaudited) | | | | | |||||||||
Net income (loss) | | | $4,561 | | | $(931) | | | $7,376 | | | $(1,337) | | | $7 | | | $13,060 |
Interest expense, net | | | 7,324 | | | 1,675 | | | 9,975 | | | 3,265 | | | 7,674 | | | 260 |
Income tax expense | | | 2 | | | 2 | | | 2 | | | 6 | | | 23 | | | 1 |
Depreciation, amortization and accretion | | | 15,215 | | | 10,289 | | | 30,172 | | | 19,778 | | | 44,027 | | | 19,670 |
Abandoned projects | | | 1,145 | | | 498 | | | 1,356 | | | 1,133 | | | 2,125 | | | 2,444 |
Temporary power costs(1) | | | 1,604 | | | 3,898 | | | 4,253 | | | 9,121 | | | 14,979 | | | 15,611 |
(Gain) loss on sale of assets, net(2) | | | 173 | | | 67 | | | 217 | | | 67 | | | — | | | (5,173) |
Settled litigation(3) | | | — | | | 440 | | | — | | | 597 | | | 1,482 | | | 316 |
Transaction costs(4) | | | 15 | | | 1,352 | | | 77 | | | 3,099 | | | 3,389 | | | 1,010 |
Other(5) | | | 601 | | | 190 | | | 601 | | | 190 | | | 190 | | | — |
Adjusted EBITDA | | | $30,640 | | | $17,480 | | | $54,029 | | | $35,919 | | | $73,896 | | | $47,199 |
| | Three Months Ended June 30, | | | Six Months Ended June 30, | | | Year Ended December 31, | ||||||||||
(Dollars in thousands, except per barrel data) | | | 2021 | | | 2020 | | | 2021 | | | 2020 | | | 2020 | | | 2019 |
| | (unaudited) | | | (unaudited) | | | | | |||||||||
Gross margin(6) | | | $18,917 | | | $7,193 | | | $29,395 | | | $14,881 | | | $32,014 | | | $27,150 |
Depreciation, amortization and accretion | | | 15,215 | | | 10,289 | | | 30,172 | | | 19,778 | | | 44,027 | | | 19,670 |
Temporary power costs(1) | | | 1,604 | | | 3,898 | | | 4,253 | | | 9,121 | | | 14,979 | | | 15,611 |
Adjusted Operating Margin | | | $35,736 | | | $21,380 | | | $63,820 | | | $43,780 | | | $91,020 | | | $62,431 |
Total Volumes (mmbw) | | | 84 | | | 55 | | | 157 | | | 120 | | | 251 | | | 178 |
Adjusted Operating Margin per Barrel | | | $0.42 | | | $0.39 | | | $0.41 | | | $0.36 | | | $0.36 | | | $0.35 |
| | Three Months Ended June 30, | | | Six Months Ended June 30, | | | Year Ended December 31, | ||||||||||
(Dollars in thousands) | | | 2021 | | | 2021 | | | 2021 | | | 2020 | | | 2020 | | | 2019 |
| | (unaudited) | | | (unaudited) | | | | | |||||||||
Revenues | | | $56,584 | | | $37,645 | | | $102,773 | | | $84,092 | | | $171,472 | | | $118,793 |
Cost of revenue | | | (37,667) | | | (30,452) | | | (73,378) | | | (69,211) | | | (139,458) | | | (91,643) |
Gross margin (GAAP) | | | $18,917 | | | $7,193 | | | $29,395 | | | $14,881 | | | $32,014 | | | $27,150 |
(Dollars in thousands) | | | Six Months Ended June 30, | | | Year Ended December 31, | ||||||
| | 2021 | | | 2020 | | | 2020 | | | 2019 | |
| | (unaudited) | | | | | ||||||
Statement of Operations Data: | | | | | | | | | ||||
Revenue: | | | | | | | | | ||||
Produced Water Handling | | | $85,810 | | | $69,031 | | | $141,659 | | | $81,418 |
Water Solutions | | | 16,963 | | | 15,061 | | | 29,813 | | | 37,375 |
Total revenues | | | 102,773 | | | 84,092 | | | 171,472 | | | 118,793 |
Cost of revenue: | | | | | | | | | ||||
Direct operating costs | | | 43,206 | | | 49,433 | | | 95,431 | | | 71,973 |
Depreciation, amortization and accretion | | | 30,172 | | | 19,778 | | | 44,027 | | | 19,670 |
Total cost of revenue | | | 73,378 | | | 69,211 | | | 139,458 | | | 91,643 |
Operating expenses: | | | | | | | | | ||||
General and administrative | | | 10,012 | | | 8,648 | | | 18,663 | | | 15,299 |
(Gain) loss on disposal of asset, net | | | 217 | | | 67 | | | 133 | | | (5,100) |
Transaction costs | | | 77 | | | 3,099 | | | 3,389 | | | 1,010 |
Abandoned projects | | | 1,356 | | | 1,133 | | | 2,125 | | | 2,444 |
Total operating expenses | | | 11,662 | | | 12,947 | | | 24,310 | | | 13,653 |
Operating income | | | 17,733 | | | 1,934 | | | 7,704 | | | 13,497 |
Other expense: | | | | | | | | | ||||
Other expense | | | 380 | | | — | | | — | | | 176 |
Interest expense, net | | | 9,975 | | | 3,265 | | | 7,674 | | | 260 |
Total other expense | | | 10,355 | | | 3,265 | | | 7,674 | | | 436 |
Income (loss) before taxes | | | 7,378 | | | (1,331) | | | 30 | | | 13,061 |
Income tax expense | | | 2 | | | 6 | | | 23 | | | 1 |
Net income (loss) | | | $7,376 | | | $(1,337) | | | $7 | | | $13,060 |
(Dollars in thousands, except per share and per barrel data) | | | Six Months Ended June 30, | | | Year Ended December 31, | ||||||
| | 2021 | | | 2020 | | | 2020 | | | 2019 | |
| | (unaudited) | | | | | ||||||
Pro Forma Statement of Operations Data(1) | | | | | | | | | ||||
Pro forma net income (loss)(2) | | | | | | | | | ||||
Pro forma non-controlling interest(3) | | | | | | | | | ||||
Pro forma net income (loss) attributable to common stockholders(2) | | | | | | | | | ||||
Pro forma net income (loss) per share attributable to common stockholders(4) | | | | | | | | | ||||
Basic and diluted | | | | | | | | | ||||
Pro forma weighted average shares outstanding | | | | | | | | | ||||
Basic and diluted | | | | | | | | | ||||
Balance Sheet Data (at end of period): | | | | | | | | | ||||
Cash and cash equivalents | | | $31,123 | | | $14,986 | | | $24,932 | | | $7,083 |
Accounts receivable, net | | | 25,928 | | | 22,893 | | | 21,561 | | | 33,523 |
Accounts receivable from affiliates | | | 18,346 | | | 12,086 | | | 11,538 | | | 15,837 |
Total current assets | | | 80,824 | | | 52,950 | | | 66,068 | | | 60,763 |
Total property, plant and equipment, net | | | 649,980 | | | 596,074 | | | 618,188 | | | 481,790 |
Total assets | | | 1,088,762 | | | 1,033,165 | | | 1,057,805 | | | 838,234 |
Total current liabilities | | | 49,366 | | | 53,679 | | | 45,789 | | | 69,166 |
Long-term debt, net | | | 391,115 | | | 280,000 | | | 297,000 | | | 220,000 |
Total liabilities | | | 447,445 | | | 339,418 | | | 349,512 | | | 292,726 |
Total mezzanine equity | | | — | | | 72,391 | | | 74,378 | | | — |
Total members’ equity | | | 641,317 | | | 621,356 | | | 633,915 | | | 545,508 |
Consolidated Statements of Cash Flows Data: | | | | | | | | | ||||
Operating activities | | | $30,690 | | | $40,911 | | | $67,771 | | | $4,149 |
Investing activities | | | (42,353) | | | (92,581) | | | (139,589) | | | (228,368) |
Financing activities | | | 17,854 | | | 59,572 | | | 89,667 | | | 223,959 |
Non-GAAP Measures: | | | | | | | | | ||||
Adjusted EBITDA(5) | | | $54,029 | | | $35,919 | | | $73,896 | | | $47,199 |
Adjusted Operating Margin(5) | | | $63,820 | | | $43,780 | | | $91,020 | | | $62,431 |
Adjusted Operating Margin per Barrel(5) | | | $0.41 | | | $0.36 | | | $0.36 | | | $0.35 |
Operating Data (kbwpd): | | | | | | | | | ||||
Produced Water Handling Volumes | | | 684 | | | 562 | | | 570 | | | 343 |
Recycled Produced Water Volumes Sold | | | 88 | | | 29 | | | 44 | | | 20 |
Groundwater Water Volumes Sold | | | 51 | | | 65 | | | 61 | | | 77 |
Total Water Solutions Volumes Sold | | | 139 | | | 94 | | | 105 | | | 97 |
Groundwater Water Volumes Transferred | | | 43 | | | 11 | | | 11 | | | 49 |
Total Water Solutions Volumes Sold or Transferred | | | 182 | | | 105 | | | 116 | | | 146 |
Total Volumes | | | 866 | | | 667 | | | 686 | | | 489 |
(1) | For additional information regarding our pro forma information, please see the pro forma financial statements and the related notes thereto appearing elsewhere in this prospectus. |
(2) | Pro forma net loss reflects a pro forma income tax benefit of $ million and $ million, respectively, for the six months ended June 30, 2021 and the year ended December 31, 2020, of which $ million and $ million, respectively, is associated with the income tax effects of the corporate reorganization described under “Corporate Reorganization” and this offering. Aris Inc. is a corporation and is subject to U.S. federal and State of Texas income tax. Our predecessor, Solaris LLC, was not subject to U.S. federal income tax at an entity level. As a result, the consolidated net loss in our historical financial statements does not reflect the tax expense we would have incurred if we were subject to U.S. federal income tax at an entity level during such periods. |
(3) | Reflects the pro forma adjustment to non-controlling interest and net income (loss) attributable to common stockholders to reflect the ownership of Solaris LLC Units by each of the Existing Owners. |
(4) | Pro forma net loss per share attributable to common stockholders and weighted average shares outstanding reflect the estimated number of shares of Class A common stock we expect to have outstanding upon the completion of our corporate reorganization described under “Corporate Reorganization.” Pro forma weighted average shares outstanding used to compute pro forma earnings per share for the six months ended June 30, 2021 and the year ended December 31, 2020 excludes shares and shares, respectively, of weighted average restricted Class A common stock expected to be issued in connection with this offering under our long-term incentive plan. |
(5) | Adjusted EBITDA, Adjusted Operating Margin and Adjusted Operating Margin per Barrel are non-GAAP financial measures. Please read “—Non-GAAP Financial Measures” for additional information regarding these non-GAAP financial measures and a reconciliation to the most comparable GAAP measures of each. |
(Dollars in thousands) | | | Six Months Ended June 30, | | | Year Ended December 31, | ||||||
| | 2021 | | | 2020 | | | 2020 | | | 2019 | |
| | (unaudited) | | | | | ||||||
Statement of Operations Data: | | | | | | | | | ||||
Revenue: | | | | | | | | | ||||
Produced Water Handling | | | $85,810 | | | $69,031 | | | $141,659 | | | $81,418 |
Water Solutions | | | 16,963 | | | 15,061 | | | 29,813 | | | 37,375 |
Total revenues | | | 102,773 | | | 84,092 | | | 171,472 | | | 118,793 |
Cost of revenue: | | | | | | | | | ||||
Direct operating costs | | | 43,206 | | | 49,433 | | | 95,431 | | | 71,973 |
Depreciation, amortization and accretion | | | 30,172 | | | 19,778 | | | 44,027 | | | 19,670 |
Total cost of revenue | | | 73,378 | | | 69,211 | | | 139,458 | | | 91,643 |
Operating expenses: | | | | | | | | | ||||
General and administrative | | | 10,012 | | | 8,648 | | | 18,663 | | | 15,299 |
(Gain) loss on disposal of asset, net | | | 217 | | | 67 | | | 133 | | | (5,100) |
Transaction costs | | | 77 | | | 3,099 | | | 3,389 | | | 1,010 |
Abandoned projects | | | 1,356 | | | 1,133 | | | 2,125 | | | 2,444 |
Total operating expenses | | | 11,662 | | | 12,947 | | | 24,310 | | | 13,653 |
Operating income | | | 17,733 | | | 1,934 | | | 7,704 | | | 13,497 |
Other expense: | | | | | | | | | ||||
Other expense | | | 380 | | | — | | | — | | | 176 |
Interest expense, net | | | 9,975 | | | 3,265 | | | 7,674 | | | 260 |
Total other expense | | | 10,355 | | | 3,265 | | | 7,674 | | | 436 |
Income (loss) before taxes | | | 7,378 | | | (1,331) | | | 30 | | | 13,061 |
Income tax expense | | | 2 | | | 6 | | | 23 | | | 1 |
Net income (loss) | | | $7,376 | | | $(1,337) | | | $7 | | | $13,060 |
(Dollars in thousands, except per share and per barrel data) | | | Six Months Ended June 30, | | | Year Ended December 31, | ||||||
| | 2021 | | | 2020 | | | 2020 | | | 2019 | |
| | (unaudited) | | | | | ||||||
Pro Forma Statement of Operations Data(1) | | | | | | | | | ||||
Pro forma net income (loss)(2) | | | | | | | | | ||||
Pro forma non-controlling interest(3) | | | | | | | | | ||||
Pro forma net income (loss) attributable to common stockholders(2) | | | | | | | | | ||||
Pro forma net income (loss) per share attributable to common stockholders(4) | | | | | | | | | ||||
Basic and diluted | | | | | | | | | ||||
Pro forma weighted average shares outstanding | | | | | | | | | ||||
Basic and diluted | | | | | | | | | ||||
Balance Sheet Data (at end of period): | | | | | | | | | ||||
Cash and cash equivalents | | | $31,123 | | | $14,986 | | | $24,932 | | | $7,083 |
Accounts receivable, net | | | 25,928 | | | 22,893 | | | 21,561 | | | 33,523 |
Accounts receivable from affiliates | | | 18,346 | | | 12,086 | | | 11,538 | | | 15,837 |
Total current assets | | | 80,824 | | | 52,950 | | | 66,068 | | | 60,763 |
Total property, plant and equipment, net | | | 649,980 | | | 596,074 | | | 618,188 | | | 481,790 |
Total assets | | | 1,088,762 | | | 1,033,165 | | | 1,057,805 | | | 838,234 |
Total current liabilities | | | 49,366 | | | 53,679 | | | 45,789 | | | 69,166 |
Long-term debt, net | | | 391,115 | | | 280,000 | | | 297,000 | | | 220,000 |
Total liabilities | | | 447,445 | | | 339,418 | | | 349,512 | | | 292,726 |
Total mezzanine equity | | | — | | | 72,391 | | | 74,378 | | | — |
Total members’ equity | | | 641,317 | | | 621,356 | | | 633,915 | | | 545,508 |
Consolidated Statements of Cash Flows Data: | | | | | | | | | ||||
Operating activities | | | $30,690 | | | $40,911 | | | $67,771 | | | $4,149 |
Investing activities | | | (42,353) | | | (92,581) | | | (139,589) | | | (228,368) |
Financing activities | | | 17,854 | | | 59,572 | | | 89,667 | | | 223,959 |
Non-GAAP Measures: | | | | | | | | | ||||
Adjusted EBITDA(5) | | | $54,029 | | | $35,919 | | | $73,896 | | | $47,199 |
Adjusted Operating Margin(5) | | | $63,820 | | | $43,780 | | | $91,020 | | | $62,431 |
Adjusted Operating Margin per Barrel(5) | | | $0.41 | | | $0.36 | | | $0.36 | | | $0.35 |
Operating Data (kbwpd): | | | | | | | | | ||||
Produced Water Handling Volumes | | | 684 | | | 562 | | | 570 | | | 343 |
Recycled Produced Water Volumes Sold | | | 88 | | | 29 | | | 44 | | | 20 |
Groundwater Water Volumes Sold | | | 51 | | | 65 | | | 61 | | | 77 |
Total Water Solutions Volumes Sold | | | 139 | | | 94 | | | 105 | | | 97 |
Groundwater Water Volumes Transferred | | | 43 | | | 11 | | | 11 | | | 49 |
Total Water Solutions Volumes Sold or Transferred | | | 182 | | | 105 | | | 116 | | | 146 |
Total Volumes | | | 866 | | | 667 | | | 686 | | | 489 |
(1) | For additional information regarding our pro forma information, please see the pro forma financial statements and the related notes thereto appearing elsewhere in this prospectus. |
(2) | Pro forma net loss reflects a pro forma income tax benefit of $ million and $ million, respectively, for the six months ended June 30, 2021 and the year ended December 31, 2020, of which $ million and $ million, respectively, is associated with the income tax effects of the corporate reorganization described under “Corporate Reorganization” and this offering. Aris Inc. is a corporation and is subject to U.S. federal and State of Texas income tax. Our predecessor, Solaris LLC, was not subject to U.S. federal income tax at an entity level. As a result, the consolidated net loss in our historical financial statements does not reflect the tax expense we would have incurred if we were subject to U.S. federal income tax at an entity level during such periods. |
(3) | Reflects the pro forma adjustment to non-controlling interest and net income (loss) attributable to common stockholders to reflect the ownership of Solaris LLC Units by each of the Existing Owners. |
(4) | Pro forma net loss per share attributable to common stockholders and weighted average shares outstanding reflect the estimated number of shares of Class A common stock we expect to have outstanding upon the completion of our corporate reorganization described under “Corporate Reorganization.” Pro forma weighted average shares outstanding used to compute pro forma earnings per share for the six months ended June 30, 2021 and the year ended December 31, 2020 excludes shares and shares, respectively, of weighted average restricted Class A common stock expected to be issued in connection with this offering under our long-term incentive plan. |
(5) | Adjusted EBITDA, Adjusted Operating Margin and Adjusted Operating Margin per Barrel are non-GAAP financial measures. Please read “—Non-GAAP Financial Measures” for additional information regarding these non-GAAP financial measures and a reconciliation to the most comparable GAAP measures of each. |
| | Three Months Ended June 30, | | | Six Months Ended June 30, | | | Year Ended December 31, | ||||||||||
(Dollars in thousands) | | | 2021 | | | 2020 | | | 2021 | | | 2020 | | | 2020 | | | 2019 |
| | (unaudited) | | | (unaudited) | | | | | |||||||||
Net income (loss) | | | $4,561 | | | $(931) | | | $7,376 | | | $(1,337) | | | $7 | | | $13,060 |
Interest expense, net | | | 7,324 | | | 1,675 | | | 9,975 | | | 3,265 | | | 7,674 | | | 260 |
Income tax expense | | | 2 | | | 2 | | | 2 | | | 6 | | | 23 | | | 1 |
Depreciation, amortization and accretion | | | 15,215 | | | 10,289 | | | 30,172 | | | 19,778 | | | 44,027 | | | 19,670 |
Abandoned projects | | | 1,145 | | | 498 | | | 1,356 | | | 1,133 | | | 2,125 | | | 2,444 |
Temporary power costs(1) | | | 1,604 | | | 3,898 | | | 4,253 | | | 9,121 | | | 14,979 | | | 15,611 |
(Gain) loss on sale of assets, net(2) | | | 173 | | | 67 | | | 217 | | | 67 | | | — | | | (5,173) |
Settled litigation(3) | | | — | | | 440 | | | — | | | 597 | | | 1,482 | | | 316 |
Transaction costs(4) | | | 15 | | | 1,352 | | | 77 | | | 3,099 | | | 3,389 | | | 1,010 |
Other(5) | | | 601 | | | 190 | | | 601 | | | 190 | | | 190 | | | — |
Adjusted EBITDA | | | $30,640 | | | $17,480 | | | $54,029 | | | $35,919 | | | $73,896 | | | $47,199 |
| | Three Months Ended June 30, | | | Six Months Ended June 30, | | | Year Ended December 31, | ||||||||||
(Dollars in thousands, except per barrel data) | | | 2021 | | | 2020 | | | 2021 | | | 2020 | | | 2020 | | | 2019 |
| | (unaudited) | | | (unaudited) | | | | | |||||||||
Gross margin(6) | | | $18,917 | | | $7,193 | | | $29,395 | | | $14,881 | | | $32,014 | | | $27,150 |
Depreciation, amortization and accretion | | | 15,215 | | | 10,289 | | | 30,172 | | | 19,778 | | | 44,027 | | | 19,670 |
Temporary power costs(1) | | | 1,604 | | | 3,898 | | | 4,253 | | | 9,121 | | | 14,979 | | | 15,611 |
Adjusted Operating Margin | | | $35,736 | | | $21,380 | | | $63,820 | | | $43,780 | | | $91,020 | | | $62,431 |
Total Volumes (mmbw) | | | 84 | | | 55 | | | 157 | | | 120 | | | 251 | | | 178 |
Adjusted Operating Margin per Barrel | | | $0.42 | | | $0.39 | | | $0.41 | | | $0.36 | | | $0.36 | | | $0.35 |
(1) | In the past, to secure long-term produced water handling contracts we constructed assets in advance of grid power infrastructure availability. As a result, we rented temporary power generation equipment that would not be necessary if grid power connections were available. Temporary power costs are calculated by taking temporary power and rental expenses incurred during the period and subtracting estimated expenses that would have been incurred during such period had permanent grid power been available. Power infrastructure and permanent power availability rapidly expanded in the Permian Basin in 2020 and the first quarter of 2021 and we made significant progress in reducing these expenses. Our temporary power expenses have been substantially eliminated as of the end of the second quarter of 2021. |
(2) | Includes gains and losses on sale of assets. |
(3) | Litigation is primarily related to a dispute regarding rights-of-way that was successfully settled in arbitration. Amounts represent legal expenses solely related to this dispute. |
(4) | Represents certain transaction expenses primarily related to certain advisory and legal expenses associated with a recapitalization process that was terminated in first quarter 2020 and the Concho Acquisitions (as defined herein). |
(5) | Represents severance charges and loss on debt modification. |
(6) | The following table sets forth the calculation of our gross margin for each of the periods presented: |
| | Three Months Ended June 30, | | | Six Months Ended June 30, | | | Year Ended December 31, | ||||||||||
(Dollars in thousands) | | | 2021 | | | 2021 | | | 2021 | | | 2020 | | | 2020 | | | 2019 |
| | (unaudited) | | | (unaudited) | | | | | |||||||||
Revenues | | | $56,584 | | | $37,645 | | | $102,773 | | | $84,092 | | | $171,472 | | | $118,793 |
Cost of revenue | | | (37,667) | | | (30,452) | | | (73,378) | | | (69,211) | | | (139,458) | | | (91,643) |
Gross margin (GAAP) | | | $18,917 | | | $7,193 | | | $29,395 | | | $14,881 | | | $32,014 | | | $27,150 |
| | As of June 30, 2021 | ||||
(Dollars in thousands, except par values) | | | Actual | | | As Adjusted |
Cash and cash equivalents | | | $31,123 | | | $ |
Long-term debt: | | | | | ||
Credit Facility | | | $— | | | $ |
7.625% Senior Sustainability-Linked Notes | | | 400,000 | | | $ |
Unamortized deferred financing costs | | | (8,885) | | | |
Total long-term debt | | | $391,115 | | | $ |
Members’/Stockholders’ equity: | | | | | ||
Members’ equity | | | $641,317 | | | $ |
Class A common stock, $0.01 par value; no shares authorized, issued or outstanding (Actual); shares authorized, shares issued and outstanding (As Adjusted) | | | — | | | |
Class B common stock, $0.01 par value; no shares authorized, issued or outstanding (Actual); shares authorized, shares issued and outstanding (As Adjusted) | | | — | | | |
Additional paid-in capital | | | — | | | |
Total members’/stockholders’ equity | | | $641,317 | | | $ |
Non-controlling interest | | | — | | | |
Total capitalization | | | $1,032,432 | | | $ |
Initial public offering price per share | | | | | $ | |
Pro forma net tangible book value per share as of June 30, 2021 (after giving effect to our corporate reorganization) | | | $ | | | |
Increase per share attributable to new investors in this offering | | | | | ||
As adjusted pro forma net tangible book value per share after giving further effect to this offering | | | | | ||
Dilution in pro forma net tangible book value per share to new investors in this offering(1) | | | | | $ |
(1) | If the initial public offering price were to increase or decrease by $1.00 per share, then dilution in pro forma net tangible book value per share to new investors in this offering would equal $ or $ , respectively. |
| | Shares Acquired(1) | | | Total Consideration(2) | | | Average Price Per Share | |||||||
| | Number | | | Percent | | | Number | | | Percent | | |||
Existing Owners | | | | | % | | | | | % | | | $ | ||
New investors in this offering | | | | | % | | | | | % | | | $ | ||
Total | | | | | 100.0% | | | | | 100.0% | | | $ |
(1) | If the underwriters exercise their option to purchase additional shares in full, our Existing Owners would own approximately % and our new investors in this offering would own approximately % of the total number of shares of our Class A common stock outstanding after this offering. |
(2) | If the underwriters exercise their option to purchase additional shares in full, the total consideration paid by our new investors would be approximately $ (or %). |
(Dollars in thousands) | | | Six Months Ended June 30, | | | Year Ended December 31, | ||||||
| | 2021 | | | 2020 | | | 2020 | | | 2019 | |
| | (unaudited) | | | | | ||||||
Statement of Operations Data: | | | | | | | | | ||||
Revenue: | | | | | | | | | ||||
Produced Water Handling | | | $85,810 | | | $69,031 | | | $141,659 | | | $81,418 |
Water Solutions | | | 16,963 | | | 15,061 | | | 29,813 | | | 37,375 |
Total revenues | | | 102,773 | | | 84,092 | | | 171,472 | | | 118,793 |
Cost of revenue: | | | | | | | | | ||||
Direct operating costs | | | 43,206 | | | 49,433 | | | 95,431 | | | 71,973 |
Depreciation, amortization and accretion | | | 30,172 | | | 19,778 | | | 44,027 | | | 19,670 |
Total cost of revenue | | | 73,378 | | | 69,211 | | | 139,458 | | | 91,643 |
(Dollars in thousands) | | | Six Months Ended June 30, | | | Year Ended December 31, | ||||||
| | 2021 | | | 2020 | | | 2020 | | | 2019 | |
| | (unaudited) | | | | | ||||||
Operating expenses: | | | | | | | | | ||||
General and administrative | | | 10,012 | | | 8,648 | | | 18,663 | | | 15,299 |
(Gain) loss on disposal of asset, net | | | 217 | | | 67 | | | 133 | | | (5,100) |
Transaction costs | | | 77 | | | 3,099 | | | 3,389 | | | 1,010 |
Abandoned projects | | | 1,356 | | | 1,133 | | | 2,125 | | | 2,444 |
Total operating expenses | | | 11,662 | | | 12,947 | | | 24,310 | | | 13,653 |
Operating income | | | 17,733 | | | 1,934 | | | 7,704 | | | 13,497 |
Other expense: | | | | | | | | | ||||
Other expense | | | 380 | | | — | | | — | | | 176 |
Interest expense, net | | | 9,975 | | | 3,265 | | | 7,674 | | | 260 |
Total other expense | | | 10,355 | | | 3,265 | | | 7,674 | | | 436 |
Income (loss) before taxes | | | 7,378 | | | (1,331) | | | 30 | | | 13,061 |
Income tax expense | | | 2 | | | 6 | | | 23 | | | 1 |
Net income (loss) | | | $7,376 | | | $(1,337) | | | $7 | | | $13,060 |
(Dollars in thousands, except per share and per barrel data) | | | Six Months Ended June 30, | | | Year Ended December 31, | ||||||
| | 2021 | | | 2020 | | | 2020 | | | 2019 | |
| | (unaudited) | | | | | ||||||
Pro Forma Statement of Operations Data(1) | | | | | | | | | ||||
Pro forma net income (loss)(2) | | | | | | | | | ||||
Pro forma non-controlling interest(3) | | | | | | | | | ||||
Pro forma net income (loss) attributable to common stockholders(2) | | | | | | | | | ||||
Pro forma net income (loss) per share attributable to common stockholders(4) | | | | | | | | | ||||
Basic and Diluted | | | | | | | | | ||||
Pro forma weighted average shares outstanding | | | | | | | | | ||||
Basic and Diluted | | | | | | | | | ||||
Balance Sheet Data (at end of period): | | | | | | | | | ||||
Cash and cash equivalents | | | $31,123 | | | $14,986 | | | $24,932 | | | $7,083 |
Accounts receivable, net | | | 25,928 | | | 22,893 | | | 22,457 | | | 33,523 |
Accounts receivable from affiliates | | | 18,346 | | | 12,086 | | | 10,642 | | | 15,837 |
Total current assets | | | 80,824 | | | 52,950 | | | 66,068 | | | 60,763 |
Total property, plant and equipment, net | | | 649,980 | | | 596,074 | | | 618,188 | | | 481,790 |
Total assets | | | $1,088,762 | | | 1,033,165 | | | 1,057,805 | | | 838,234 |
Total current liabilities | | | 49,366 | | | 53,679 | | | 45,789 | | | 69,166 |
Long-term debt, net | | | 391,115 | | | 280,000 | | | 297,000 | | | 220,000 |
Total liabilities | | | 447,445 | | | 339,418 | | | 349,512 | | | 292,726 |
Total mezzanine equity | | | — | | | 72,391 | | | 74,378 | | | — |
Total members’ equity | | | 641,317 | | | 621,356 | | | 633,915 | | | 545,508 |
Consolidated Statements of Cash Flows Data: | | | | | | | | | ||||
Operating activities | | | 30,690 | | | $40,911 | | | $67,771 | | | $4,149 |
Investing activities | | | (42,353) | | | (92,581) | | | (139,589) | | | (228,368) |
Financing activities | | | 17,854 | | | 59,572 | | | 89,667 | | | 223,959 |
(Dollars in thousands, except per share and per barrel data) | | | Six Months Ended June 30, | | | Year Ended December 31, | ||||||
| | 2021 | | | 2020 | | | 2020 | | | 2019 | |
| | (unaudited) | | | | | ||||||
Non-GAAP Measures | | | | | | | | | ||||
Net income (loss) | | | $7,376 | | | $(1,337) | | | $7 | | | $13,060 |
Interest expense, net | | | 9,975 | | | 3,265 | | | 7,674 | | | 260 |
Income tax expense | | | 2 | | | 6 | | | 23 | | | 1 |
Depreciation, amortization and accretion | | | 30,172 | | | 19,778 | | | 44,027 | | | 19,670 |
Abandoned projects | | | 1,356 | | | 1,133 | | | 2,125 | | | 2,444 |
Temporary power costs(5) | | | 4,253 | | | 9,121 | | | 14,979 | | | 15,611 |
(Gain) loss on sale of assets, net(6) | | | 217 | | | 67 | | | — | | | (5,173) |
Settled litigation(7) | | | — | | | 597 | | | 1,482 | | | 316 |
Transaction costs(8) | | | 77 | | | 3,099 | | | 3,389 | | | 1,010 |
Other(9) | | | 601 | | | 190 | | | 190 | | | — |
Adjusted EBITDA | | | $54,029 | | | $35,919 | | | $73,896 | | | $47,199 |
| | | | | | | | |||||
Gross margin | | | $29,395 | | | $14,881 | | | $32,014 | | | $27,150 |
Depreciation, amortization and accretion | | | 30,172 | | | 19,778 | | | 44,027 | | | 19,670 |
Temporary power costs(5) | | | 4,253 | | | 9,121 | | | 14,979 | | | 15,611 |
Adjusted Operating Margin | | | $63,820 | | | $43,780 | | | $91,020 | | | $62,431 |
(1) | For additional information regarding our pro forma information, please see the pro forma financial statements and the related notes thereto appearing elsewhere in this prospectus. |
(2) | Pro forma net loss reflects a pro forma income tax benefit of $ million and $ million, respectively, for the six months ended June 30, 2021 and the year ended December 31, 2020, of which $ million and $ million, respectively, is associated with the income tax effects of the corporate reorganization described under “Corporate Reorganization” and this offering. Aris Inc. is a corporation and is subject to U.S. federal and State of Texas income tax. Our predecessor, Solaris LLC, was not subject to U.S. federal income tax at an entity level. As a result, the consolidated net loss in our historical financial statements does not reflect the tax expense we would have incurred if we were subject to U.S. federal income tax at an entity level during such periods. |
(3) | Reflects the pro forma adjustment to non-controlling interest and net income (loss) attributable to common stockholders to reflect the ownership of Solaris, LLC Units by each of the Existing Owners. |
(4) | Pro forma net loss per share attributable to common stockholders and weighted average shares outstanding reflect the estimated number of shares of Class A common stock we expect to have outstanding upon the completion of our corporate reorganization described under “Corporate Reorganization.” Pro forma weighted average shares outstanding used to compute pro forma earnings per share for the six months ended June 30, 2021 and the year ended December 31, 2020 excludes shares and shares, respectively, of weighted average restricted Class A common stock expected to be issued in connection with this offering under our long-term incentive plan. |
(5) | In the past, we constructed assets in advance of grid power infrastructure availability to secure long-term produced water handling contracts. As a result, we rented temporary power generation equipment that would not be necessary if grid power connections were available. Temporary power costs are calculated by taking temporary power and rental expenses incurred during the period and subtracting estimated expenses that would have been incurred during such period had permanent grid power been available. Power infrastructure and permanent power availability rapidly expanded in the Permian Basin in 2020 and the first quarter of 2021 and we made significant progress in reducing these expenses. Our temporary power expenses have been substantially eliminated as of the end of the second quarter of 2021. |
(6) | Includes gains and losses on sale of assets. |
(7) | Litigation is primarily related to a dispute regarding rights-of-way that we successfully settled in arbitration. Amount represents legal expenses solely related to this dispute. |
(8) | Represents certain transaction expenses primarily related to certain advisory and legal expenses associated with a recapitalization process that was terminated in first quarter 2020 and the Concho Acquisitions (as defined herein). |
(9) | Represents severance charge and loss on debt modification. |
(Dollars in thousands, except per barrel data) | | | Six Months Ended June 30, | | | Year Ended December 31, | ||||||
| | 2021 | | | 2020 | | | 2020 | | | 2019 | |
Operating Metrics: | | | | | | | | | ||||
Produced Water Handling Volumes (kbwpd) | | | 684 | | | 562 | | | 570 | | | 343 |
Recycled Produced Water Volumes Sold (kbwpd) | | | 88 | | | 29 | | | 44 | | | 20 |
Groundwater Volumes Sold (kbwpd) | | | 51 | | | 65 | | | 61 | | | 77 |
Groundwater Volumes Transferred (kbwpd) | | | 43 | | | 11 | | | 11 | | | 49 |
Total Water Solutions Volumes (kbwpd) | | | 182 | | | 105 | | | 116 | | | 146 |
Total Volumes (kbwpd) | | | 866 | | | 667 | | | 686 | | | 489 |
| | | | | | | | |||||
Recycled Produced Water Volumes Sold (kbwpd) | | | 88 | | | 29 | | | 44 | | | 20 |
Groundwater Volumes Sold (kbwpd) | | | 51 | | | 65 | | | 61 | | | 77 |
Total Water Solutions Volumes Sold (kbwpd) | | | 139 | | | 94 | | | 105 | | | 97 |
| | | | | | | | |||||
Produced Water Handling Revenue per Barrel | | | $0.69 | | | $0.67 | | | $0.68 | | | $0.65 |
Water Solutions Revenue per Barrel | | | $0.51 | | | $0.79 | | | $0.70 | | | $0.70 |
Revenue per Barrel of Total Volumes Handled, Sold or Transferred | | | $0.66 | | | $0.69 | | | $0.68 | | | $0.67 |
Temporary Power Costs | | | $4,253 | | | $9,121 | | | $14,979 | | | $15,611 |
Adjusted Operating Margin(1) | | | $63,820 | | | $43,780 | | | $91,020 | | | $62,431 |
Total Volumes (mmbw) | | | 157 | | | 120 | | | 251 | | | 178 |
Adjusted Operating Margin per Barrel(1) | | | $0.41 | | | $0.36 | | | $0.36 | | | $0.35 |
(1) | Adjusted Operating Margin and Adjusted Operating Margin per Barrel are non-GAAP financial measures. Please read “Prospectus Summary—Non-GAAP Financial Measures” for additional information regarding these non-GAAP financial measures and a reconciliation to the most comparable GAAP measures of each. |
| | Six Months Ended June 30, | | | Amount of Increase (Decrease) | | | Percentage Change | ||||
(Dollars in thousands) | | | 2021 | | | 2020 | | |||||
| | (unaudited) | | | | | ||||||
Statement of Operations Data: | | | | | | | | | ||||
Revenue: | | | | | | | | | ||||
Produced Water Handling | | | $85,810 | | | $69,031 | | | $16,779 | | | 24.3% |
Water Solutions | | | 16,963 | | | 15,061 | | | 1,902 | | | 12.6% |
Total revenues | | | 102,773 | | | 84,092 | | | 18,681 | | | 22.2% |
Cost of revenue: | | | | | | | | | ||||
Direct operating costs | | | 43,206 | | | 49,433 | | | (6,227) | | | (12.6%) |
Depreciation, amortization and accretion | | | 30,172 | | | 19,778 | | | 10,394 | | | 52.6% |
Total cost of revenue | | | 73,378 | | | 69,211 | | | 4,167 | | | 6.0% |
Operating costs and expenses: | | | | | | | | | ||||
General and administrative | | | 10,012 | | | 8,648 | | | 1,364 | | | 15.8% |
Loss on disposal of asset, net | | | 217 | | | 67 | | | 150 | | | 223.9% |
Transaction costs | | | 77 | | | 3,099 | | | (3,022) | | | (97.5%) |
Abandoned projects | | | 1,356 | | | 1,133 | | | 233 | | | 19.7% |
Total operating expenses | | | 11,662 | | | 12,947 | | | (1,285) | | | (9.9%) |
Operating income | | | 17,733 | | | 1,934 | | | 15,799 | | | 816.9% |
Other expense: | | | | | | | | | ||||
Other expense | | | 380 | | | — | | | 380 | | | |
Interest expense, net | | | 9,975 | | | 3,265 | | | 6,710 | | | 205.5% |
Total other expense | | | 10,355 | | | 3,265 | | | 7,090 | | | 217.2% |
Income (loss) before taxes | | | 7,378 | | | (1,331) | | | 8,709 | | | 654.3% |
Income tax expense | | | 2 | | | 6 | | | (4) | | | (66.7%) |
Net income (loss) | | | $7,376 | | | $(1,337) | | | $8,713 | | | 651.7% |
| | Year Ended December 31, | | | Amount of Increase (Decrease) | | | Percentage Change | ||||
(Dollars in thousands) | | | 2020 | | | 2019 | | |||||
Statement of Operations Data: | | | | | | | | | ||||
Revenue: | | | | | | | | | ||||
Produced Water Handling | | | $141,659 | | | $81,418 | | | $60,241 | | | 74.0% |
Water Solutions | | | 29,813 | | | 37,375 | | | (7,562) | | | (20.2%) |
Total revenues | | | 171,472 | | | 118,793 | | | 52,679 | | | 44.3% |
Cost of revenue: | | | | | | | | | ||||
Direct operating costs | | | 95,431 | | | 71,973 | | | 23,458 | | | 32.6% |
Depreciation, amortization and accretion | | | 44,027 | | | 19,670 | | | 24,357 | | | 123.8% |
Total cost of revenue | | | 139,458 | | | 91,643 | | | 47,815 | | | 52.2% |
| | Year Ended December 31, | | | Amount of Increase (Decrease) | | | Percentage Change | ||||
(Dollars in thousands) | | | 2020 | | | 2019 | | |||||
Operating expenses: | | | | | | | | | ||||
General and administrative | | | 18,663 | | | 15,299 | | | 3,364 | | | 22.0% |
(Gain) loss on disposal of asset, net | | | 133 | | | (5,100) | | | 5,233 | | | (102.6%) |
Transaction costs | | | 3,389 | | | 1,010 | | | 2,379 | | | 235.5% |
Abandoned projects | | | 2,125 | | | 2,444 | | | (319) | | | (13.1%) |
Total operating expenses | | | 24,310 | | | 13,653 | | | 10,657 | | | 78.1% |
Operating income | | | 7,704 | | | 13,497 | | | (5,793) | | | (42.9%) |
Other expense: | | | | | | | | | ||||
Other expense | | | — | | | 176 | | | (176) | | | (100.0%) |
Interest expense | | | 7,674 | | | 260 | | | 7,414 | | | 2,851.5% |
Total other expense | | | 7,674 | | | 436 | | | 7,238 | | | 1,660.1% |
Income before taxes | | | 30 | | | 13,061 | | | (13,031) | | | (99.8%) |
Income tax expense | | | 23 | | | 1 | | | 22 | | | 2,200.0% |
Net income | | | $7 | | | $13,060 | | | $(13,053) | | | (99.9%) |
| | Year Ended December 31, | ||||
(Dollars in thousands) | | | 2020 | | | 2019 |
Depreciation expense | | | $23,388 | | | $13,450 |
Amortization expense | | | $20,413 | | | $6,075 |
Accretion expense | | | $226 | | | $145 |
Total | | | $44,027 | | | $19,670 |
As of June 30, 2021 | | | Pipelines (miles) | | | Number of Water Handling Facilities | | | Water Handling Capacity (kbwpd) |
Installed | | | 640 | | | 48 | | | 1,232 |
As of June 30, 2021 | | | Pipelines (miles) | | | Number of Water Handling Facilities | | | Water Handling Capacity (kbwpd) |
Permitted Not Installed | | | 225 | | | 48 | | | 1,530 |
Volumes (kbwpd) | | | Six Months Ended June 30, 2021 | | | Year Ended December 31, 2020 |
Produced Water Handling Volumes | | | 684 | | | 570 |
As of June 30, 2021 | | | Number of Water Recycling Facilities | | | Water Recycling Capacity (kbwpd) |
Active Facilities | | | 10 | | | 550 |
As of June 30, 2021 | | | Number of Water Recycling Facilities | | | Water Recycling Capacity (kbwpd) |
Permitted or In Process Facilities | | | 14 | | | 950 |
Volumes (kbwpd) | | | Six Months Ended June 30, 2021 | | | Year Ended December 31, 2020 |
Recycled Produced Water Volumes Sold | | | 88 | | | 44 |
Percentage of Produced Water Handling Revenue | | | Six Months Ended June 30, 2021 | | | Year Ended December 31, 2020 |
Acreage Dedication | | | 75% | | | 71% |
Minimum Volume Commitments | | | 17% | | | 21% |
Spot Volumes | | | 8% | | | 8% |
Total | | | 100% | | | 100% |
Acreage Dedications | | | As of June 30, 2021 |
Acreage Under Contract (thousands of acres) | | | 550 |
Weighted Average Remaining Life (years) | | | 9.7 |
| | ||
Minimum Volume Commitments | | | |
Volumetric Commitment (kbwpd) | | | 162 |
Weighted Average Remaining Life (years) | | | 3.6 |
Name | | | Age | | | Position |
William A. Zartler | | | | | Founder and Executive Chairman | |
Amanda M. Brock | | | 60 | | | President and Chief Executive Officer and Director |
Brenda R. Schroer | | | 45 | | | Chief Financial Officer |
Joseph Colonnetta | | | 59 | | | Director Nominee |
Debra G. Coy | | | 63 | | | Director Nominee |
W. Howard Keenan, Jr. | | | 70 | | | Director Nominee |
Christopher Manning | | | 53 | | | Director Nominee |
Andrew O’Brien | | | 47 | | | Director Nominee |
Donald C. Templin | | | 58 | | | Director Nominee |
M. Max Yzaguirre | | | 61 | | | Director Nominee |
Name and Principal Position | | | Year | | | Salary ($)(1) | | | Bonus ($) | | | All Other Compensation ($)(2) | | | Total ($) |
William A. Zartler Founder and Executive Chairman | | | 2020 | | | 381,808 | | | 250,000 | | | 7,266 | | | 639,074 |
Amanda M. Brock President and Chief Executive Officer | | | 2020 | | | 328,173 | | | 255,000 | | | 11,400 | | | 594,573 |
Chris B. Work Former Chief Financial Officer | | | 2020 | | | 271,060 | | | — | | | 136,837 | | | 407,897 |
(1) | We typically have 26 payroll periods in each calendar year; however salary amounts for 2020 include one additional payroll period resulting in numbers that slightly exceed the executive’s annual base salary for the year. |
(2) | Amounts in this column represent: (i) matching contributions under the Company’s 401(k) plan during the 2020 Fiscal Year for each NEO, and (ii) a $100,000 severance payment and $25,437 in accrued but unused paid time off that were paid to Mr. Work in connection with his November 2020 departure. |
| | Option Awards(1) | |||||||||||||
Name | | | Number of Securities Underlying Unexercised Options (#) Exercisable(2) | | | Number of Securities Underlying Unexercised Options (#) Unexercisable(3) | | | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)(4) | | | Option Exercise Price(5) | | | Option Expiration Date(4) |
William A. Zartler | | | 138,000 | | | — | | | 92,000 | | | N/A | | | N/A |
Amanda M. Brock | | | 68,000 | | | 16,000 | | | 56,000 | | | N/A | | | N/A |
Chris B. Work | | | 108,000 | | | — | | | — | | | N/A | | | N/A |
(1) | Although the Profits Units do not require the payment of an exercise price, they are most economically similar to stock options, and as such, they are more properly classified as “options” under the definition provided in Item 402 of Regulation S-K as an instrument with an “option-like feature.” |
(2) | Amounts in this column represent vested Profits Units. Unlike an option, these are not “exercisable” at the holder’s election, but rather entitle to holder to participate in certain distributions as described under “Narrative Disclosure to Summary Compensation Table—Profits Units” above. |
(3) | Amounts in this column represent unvested Profits Units, which will vest as to one-half on March 7, 2021 and one-half on March 7, 2022, subject to the NEO’s continued employment through each vesting date. |
(4) | Amounts in this column represent unvested Profits Units, which will vest only upon the occurrence of a monetization event, subject to the NEO’s continued employment through such event. The consummation of this offering will be a monetization event for these purposes. |
(5) | The Profits Units are not traditional options, and therefore, there is no exercise price or expiration date associated with them. |
Annual retainer for Board membership | | | $ 30,000 |
Annual retainer for Lead Independent Director | | | $ 10,000 |
Additional annual retainers | | | |
• Chair of the Audit Committee | | | $ 65,000 |
• Chair of the Compensation Committee | | | $ 20,000 |
• Chair of the Nominating and Corporate Governance Committee | | | $ 10,000 |
• Member of the Audit Committee (other than Chair) | | | $ 40,000 |
(Dollars in thousands) | | | Six Months Ended June 30, 2021 | | | Year Ended December 31, 2020 |
Produced Water Handling | | | $38,849 | | | $50,915 |
Water Solutions | | | 12,805 | | | 15,011 |
Total | | | $51,654 | | | $65,926 |
| | Shares Beneficially | After the Offering if Underwriters’ Option is Not Exercised(1) | | | Shares Beneficially Owned After the Offering if Underwriters’ Option is Exercised in Full(1) | |||||||||||||||||||||||||||
Name | | | Class A Common Stock Owned Number | | | Class B Common Stock Owned Number | | | Total Voting Power(2) % | | | Class A Common Stock Owned Number | | | Class B Common Stock Owned Number | | | Total Voting Power(2) % | |||||||||||||||
5% | | | | | | | | | | | | | |||||||||||||||||||||
COG Operating LLC(3) | | | | | | | | | | | | | |||||||||||||||||||||
Entities | | | | | | | | | | | | | |||||||||||||||||||||
Yorktown Energy Partners XI, L.P.(5) | | | | | | | | | | | | | |||||||||||||||||||||
Entities associated with HBC Investments(6) | | | | | | | | | | | | | |||||||||||||||||||||
| | | | | | | | | | | | ||||||||||||||||||||||
Named Executive Officers, Directors and Director Nominees: | | | | | | | | | | | | | |||||||||||||||||||||
William A. Zartler | (8) | | | | | | | | | | | | | ||||||||||||||||||||
Amanda M. Brock | (8) | | | | | | | | | | | | | ||||||||||||||||||||
Brenda R. Schroer | | ||||||||||||||||||||||||||||||||
| | | | | | | | | | | |||||||||||||||||||||||
Joseph Colonnetta | | | | | | | | | | | | | |||||||||||||||||||||
Debra G. Coy | | | | | | | | | | | | | |||||||||||||||||||||
W. Howard Keenan, Jr. | | | | | | | | | | | | | |||||||||||||||||||||
Christopher Manning | | | | | | | | | | | | | |||||||||||||||||||||
Andrew O’Brien | | | | | | | | | | | | |
Donald C. Templin | | | | | | | | | | | | | |||||||||||||||||||||
M. Max Yzaguirre | | | | | | | | | | | | | |||||||||||||||||||||
All executive officers, | |||||||||||||||||||||||||||||||||
| | | | | | | | | | | |
(1) | Subject to the terms of the Solaris LLC Agreement, each Existing Owner will, subject to certain limitations, have the right to cause Solaris LLC to acquire all or a portion of its Solaris LLC Units for shares of our Class A common stock at a redemption ratio of one share of Class A common stock for each Solaris LLC Unit redeemed. In connection with such acquisition, the corresponding number of shares of Class B common stock will be cancelled. See “Certain Relationships and Related Person Transactions—Solaris LLC Agreement.” Pursuant to Rule 13d-3 under the Exchange Act, a person has beneficial ownership of a security as to which that person, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares voting power and/or |
(2) | Represents percentage of voting power of our Class A common stock and Class B common stock voting together as a single class. The Existing Owners will hold one share of Class B common stock for each Solaris LLC Unit that they own. Each share of Class B common stock has no economic rights, but entitles the holder thereof to one vote for each Solaris Unit held by such holder. Accordingly, the Existing Owners collectively have a number of votes in Aris Inc. equal to the number of Solaris LLC Units that they hold. See “Corporation Reorganization,” “Description of Capital Stock—Class A Common Stock” and “—Class B Common Stock.” |
(3) | COG Operating LLC is a wholly owned subsidiary of ConocoPhillips. The address for COG Operating LLC is One Concho Center, 600 W. Illinois Avenue, Midland, Texas 79701. |
(4) | Represents shares beneficially owned by Trilantic Capital Partners Associates MGP V LLC (“TCP MGP V”). TCP MGP V is the sole general partner of Trilantic Capital Partners Associates V L.P. (“TCPAV”) and Trilantic Energy Partners Associates L.P. (“TEPA”). TCPAV is the sole general partner of Trilantic Capital Partners V (North America) L.P. (“Trilantic Fund V”), and TEPA is the sole general partner of Trilantic Energy Partners (North America) L.P. (“Trilantic Energy Partners”). Trilantic Capital Management L.P. (“TCM”) is the investment adviser of Trilantic Fund V and Trilantic Energy Partners. TCM, TCPAV, TEPA, as well as Charles Ayres, E. Daniel James and Christopher R. Manning (collectively, the “Trilantic Partners”) in their capacity as partners, members of the Board of Managers of TCP MGP V and Board of Directors of TCM, and majority owners of TCM, may be deemed to share voting and dispositive power of the voting interests in the shares beneficially owned by TCP MGP V. TCM, TCPAV, TEPA and the Trilantic Partners disclaim beneficial ownership of all shares beneficially owned by TCP MGP V. The address of each of the foregoing entities and individuals is c/o Trilantic Capital Management L.P., 399 Park Avenue, 39th Floor, New York, NY 10022. |
(5) | Yorktown XI Company LP is the sole general partner of Yorktown Energy Partners XI, L.P. Yorktown XI Associates LLC is the sole general partner of Yorktown XI Company LP. As a result, Yorktown XI Associates LLC may be deemed to share the power to vote or direct the vote or to dispose or direct the disposition of the securities owned by Yorktown Energy Partners XI, L.P. Yorktown XI Company LP and Yorktown XI Associates LLC disclaim beneficial ownership of the securities held by Yorktown Energy Partners XI, L.P. in excess of their pecuniary interest therein. W. Howard Keenan, Jr. is a a manager of Yorktown XI Associates LLC. Mr. Keenan disclaims beneficial ownership of the securities held by Yorktown Energy Partners XI, L.P. The address for Yorktown Energy Partners XI, L.P. is 410 Park Avenue, 20th Floor, New York, New York 10022. |
(6) | HBC Water Resources GP LP is the general partner of HBC Water Resources LP and HBC Water Resources II GP LP is the general partner of HBC Water Resources II LP. J. Hale Hoak and Joseph Colonnetta are the managers of the general partner of HBC Water Resources LP. J. Hale Hoak and Joseph Colonnetta are the managers of the general partner of HBC Water Resources II LP. As a result, J. Hale Hoak and Joseph Colonnetta have the power to vote and dispose of the securities held by each of HBC Water Resources LP and HBC Water Resources II LP. The address for HBC Water Resources LP and HBC Water Resources II LP is Reagan Place at Old Parkland, 3963 Maple Avenue, Suite 450, Dallas, Texas 75219. |
(7) |
exercised in full or in part. Solaris |
Underwriter | | | Number of Shares |
Goldman Sachs & Co. LLC | | | |
Citigroup Global Markets Inc. | | | |
J.P. Morgan Securities LLC | | | |
Wells Fargo Securities, LLC | | | |
Barclays Capital Inc. | | | |
Evercore Group L.L.C. | | | |
Capital One Securities, Inc. | | | |
Johnson Rice & Company L.L.C. | | | |
Raymond James & Associates, Inc. | | | |
Stifel, Nicolaus & Company, Incorporated | | | |
USCA Securities LLC | | | |
Total | | |
| | Per Share | | | Total | |||||||
| | Without Option | | | With Option | | | Without Option | | | With Option | |
Underwriting discounts and commissions paid by us | | | $ | | | $ | | | $ | | | $ |
Proceeds, before expenses, to us | | | $ | | | $ | | | $ | | | $ |
|
(a) | to any legal entity which is a qualified investor as defined in the Prospectus Regulation; |
(b) | by the underwriters to fewer than 150 natural or legal persons (other than qualified investors as defined in the Prospectus Regulation), subject to obtaining the prior written consent of the representatives for any such offer; or |
(c) | in any other circumstances falling within Article 1(4) of the Prospectus Regulation, |
(a) | to any legal entity which is a qualified investor as defined under Article 2 of the UK Prospectus Regulation; |
(b) | to fewer than 150 natural or legal persons (other than qualified investors as defined under Article 2 of the UK Prospectus Regulation), subject to obtaining the prior consent of the representatives for any such offer; or |
(c) | in any other circumstances falling within Section 86 of the |
| | Page | |
Aris Water Solutions, Inc. | | | |
Unaudited Pro Forma Condensed Consolidated Financial Statements | | | |
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Solaris Midstream Holdings, LLC | | | |
Condensed Consolidated Financial Statements (Unaudited) | | | |
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Annual Financial Statements | | | |
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Aris Water Solutions, Inc. | | | |
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| | Historical Solaris Midstream Holdings, LLC | | | Pro Forma Adjustments | | | | | Pro Forma Aris Water Solutions, Inc. | ||
Assets | | | | | | | | | ||||
Cash and Cash Equivalents | | | $31,123 | | | $ | | | (a) | | | $ |
Accounts Receivable, Net | | | 25,928 | | | | | | | |||
Accounts Receivable from Affiliate | | | 18,346 | | | | | | | |||
Other Receivables | | | 3,278 | | | | | | | |||
Prepaids, Deposits and Other Current Assets | | | 2,149 | | | | | | | |||
Total Current Assets | | | 80,824 | | | | | | | |||
| | | | | | | | |||||
Fixed Assets | | | | | | | | | ||||
Property, Plant and Equipment | | | 706,806 | | | | | | | |||
Accumulated Depreciation | | | (56,826) | | | | | | | |||
Total Property, Plant and Equipment, Net | | | 649,980 | | | | | | | |||
Intangibles, Net | | | 321,233 | | | | | | | |||
Goodwill | | | 34,585 | | | | | | | |||
Deferred Tax Assets, Net | | | ― | | | | | (b) | | | ||
Other Assets | | | 2,140 | | | | | | | |||
Total Assets | | | $ 1,088,762 | | | $ | | | | | $ | |
| | | | | | | | |||||
Liabilities, Mezzanine Equity and Members' Equity | | | | | | | | | ||||
Accounts Payable | | | $10,414 | | | $ | | | | | $ | |
Payables to Affiliate | | | 1,693 | | | | | | | |||
Accrued and Other Current Liabilities | | | 37,259 | | | | | | | |||
Total Current Liabilities | | | 49,366 | | | | | | | |||
Asset Retirement Obligation | | | 5,629 | | | | | | | |||
Long-Term Debt, Net of Debt Issuance Costs | | | 391,115 | | | | | | | |||
Deferred Revenue Liability and Other Long-Term liabilities | | | 1,335 | | | | | | | |||
Payable related to parties pursuant to tax receivable agreements | | | ― | | | | | (b) | | | ||
Total Liabilities | | | 447,445 | | | | | | | |||
| | | | | | | | |||||
Commitment and Contingencies | | | ― | | | | | | | |||
| | | | | | | | |||||
Members' Equity | | | 641,317 | | | | | (c) | | | ||
Shareholders' Equity: | | | | | | | | | ||||
Class A common stock | | | ― | | | | | (c) | | | ||
Class B common stock | | | ― | | | | | (c) | | | ||
Additional Paid-In Capital | | | ― | | | | | (c)(d) | | | ||
Total Stockholders' Equity attributable to Aris Water Solutions, Inc. and Member's Equity | | | 641,317 | | | | | | | |||
Non-Controlling Interest | | | ― | | | | | (c)(e) | | | ||
Total Liabilities and Stockholders' Equity | | | $ 1,088,762 | | | $ | | | | | $ |
| | Historical Solaris Midstream Holdings, LLC | | | Pro Forma Adjustments | | | | | Pro Forma Aris Water Solutions, Inc. | ||
Statement of Operations Data | | | | | | | | | ||||
Revenue | | | | | | | | | ||||
Produced Water Handling | | | $85,810 | | | | | | | |||
Water Solutions | | | 16,963 | | | | | | | |||
Total Revenue | | | 102,773 | | | | | | | |||
| | | | | | | | |||||
Cost of Revenues | | | | | | | | | ||||
Direct Operating Costs | | | 43,206 | | | | | | | |||
Depreciation, Amortization and Accretion | | | 30,172 | | | | | | | |||
Total Cost of Revenue | | | 73,378 | | | | | | | |||
| | | | | | | | |||||
Operating Costs and Expenses | | | | | | | | | ||||
General and Administrative | | | 10,012 | | | | | | | |||
Loss on Disposal of Asset, Net | | | 217 | | | | | | | |||
Transaction Costs | | | 77 | | | | | | | |||
Abandoned Projects | | | 1,356 | | | | | | | |||
Total Operating Expenses | | | 11,662 | | | | | | | |||
Operating Income | | | 17,733 | | | | | | | |||
| | | | | | | | |||||
Other Expense | | | | | | | | | ||||
Interest Expense, Net | | | 9,975 | | | | | | | |||
Loss on Debt Modification | | | 380 | | | | | | | |||
Total Other Expense | | | 10,355 | | | | | | | |||
Income Before Taxes | | | 7,378 | | | | | | | |||
Income Taxes | | | 2 | | | | | (f) | | | ||
Net Income | | | 7,376 | | | | | | | |||
Equity Accretion and Dividend Related to Redeemable Preferred Units | | | 21 | | | | | (g) | | | ||
Net Income Attributable to Members' Equity | | | $7,397 | | | | | | | |||
Less: Net Income Attributable to Non-Controlling Interest | | | | | | | (h) | | | |||
Net Income Attributable to Stockholders | | | $7,397 | | | | | | | |||
| | | | | | | | |||||
Net Income Per Common Share (i) | | | | | | | | | ||||
Basic and Diluted | | | | | | | | | $ | |||
| | | | | | | | |||||
Weighted Average Common Shares Outstanding (i) | | | | | | | | | ||||
Basic and Diluted | | | | | | | | |
| | Historical Solaris Midstream Holdings, LLC | | | Pro Forma Adjustments | | | | | Pro Forma Aris Water Solutions, Inc. | ||
Statement of Operations Data | | | | | | | | | ||||
Revenue | | | | | | | | | ||||
Produced Water Handling | | | $ 141,659 | | | | | | | |||
Water Solutions | | | 29,813 | | | | | | | |||
Total Revenue | | | 171,472 | | | | | | | |||
| | | | | | | | |||||
Cost of Revenues | | | | | | | | | ||||
Direct Operating Costs | | | 95,431 | | | | | | | |||
Depreciation, Amortization and Accretion | | | 44,027 | | | | | | | |||
Total Cost of Revenue | | | 139,458 | | | | | | | |||
| | | | | | | | |||||
Operating Costs and Expenses | | | | | | | | | ||||
General and Administrative | | | 18,663 | | | | | | | |||
Loss on Disposal of Asset, Net | | | 133 | | | | | | | |||
Transaction Costs | | | 3,389 | | | | | | | |||
Abandoned Projects | | | 2,125 | | | | | | | |||
Total Operating Expenses | | | 24,310 | | | | | | | |||
Operating Income | | | 7,704 | | | | | | ||||
| | | | | | | | |||||
Other Expense | | | | | | | | | ||||
Interest Expense, Net | | | 7,674 | | | | | | | |||
Loss on Debt Modification | | | — | | | | | | | |||
Total Other Expense | | | 7,674 | | | | | | | |||
Income Before Taxes | | | 30 | | | | | | | |||
Income Taxes | | | 23 | | | | | (f) | | | ||
Net Income (Loss) | | | 7 | | | | | | | |||
Equity Accretion and Dividend Related to Redeemable Preferred Units | | | (4,335) | | | | | (g) | | | ||
Net Loss Attributable to Members' Equity | | | $(4,328) | | | | | | | |||
Less: Net Loss Attributable to Non-Controlling Interest | | | | | | | (h) | | | |||
Net Loss Attributable to Stockholders | | | $(4,328) | | | | | | | |||
| | | | | | | | |||||
Net Income Per Common Share (i) | | | | | | | | | ||||
Basic and Diluted | | | | | | | | | $ | |||
| | | | | | | | |||||
Weighted Average Common Shares Outstanding (i) | | | | | | | | | ||||
Basic and Diluted | | | | | | | | |
(a) | Reflects estimated gross proceeds of $ million from the issuance and sale of shares of Class A common stock based on an assumed initial offering price of $ per share, the midpoint of the range set forth on the cover of this prospectus, net of underwriting discounts and commissions of $ million, in the aggregate, and additional estimated expenses related to the Offering of approximately $ million. |
(b) | Reflects adjustments to give effect to tax adjustments associated with the Corporate Reorganization and adjustments to give effect to the Tax Receivable Agreement (as described in “Certain Relationships and Related Party Transactions—Tax Receivable Agreement”) based on the following assumptions: |
(c) | Represents an adjustment to members’/stockholders’ equity reflecting (i) par value of $ for Class A common stock and $ for Class B common stock to be outstanding following this offering and (ii) a decrease of $ million in members’ equity to allocate a portion of Aris Inc. |
(d) | Represents the effect of (i) the issuance of shares of Class A common stock in this Offering and the application of the net proceeds therefrom and (ii) the net impact of the recording of deferred tax assets and the payable related to the Corporate Reorganization and the Tax Receivable Agreement, as described under note (b) above; and |
(e) | Represents non-controlling interest due to consolidation of financial results of Solaris LLC. As described in “Corporate Reorganization,” Aris Inc. will become the sole managing member of Solaris LLC. Aris Inc. will initially have a minority economic interest in Solaris LLC, but will have 100% of the voting power and control over the management of Solaris LLC. As a result, we will consolidate the financial results of Solaris LLC and will report a non-controlling interest on our consolidated balance sheet for the percentage of Solaris LLC units not held by the Class A common stockholders. Upon completion of the contemplated transactions, the non-controlling interest is expected to own approximately % of Solaris LLC. |
(f) | Reflects estimated incremental income tax expense of $ for the six months ended June 30, 2021 and $ for the year ended December 31, 2020 associated with the Company’s historical results of operations assuming the Company’s earnings had been subject to federal income tax as a subchapter C corporation using a statutory tax rate of approximately % and based on the Company’s ownership of approximately % ( % if the underwriters’ option to purchase additional shares of Class A |
(g) | Reflects the portion of equity accretion and dividend related to redeemable preferred units attributable to the non-controlling interest |
(h) | Reflects the reduction in consolidated net income attributable to non-controlling interest for Solaris LLC’s historical results of operations. Upon completion of the Corporate Reorganization, the non-controlling interest will be approximately % ( % if the underwriters’ option to purchase additional shares of Class A common stock is exercised in full). |
(i) | On a pro forma basis, basic earnings per share and diluted earnings per share are the same as there were no anti-dilutive securities during the periods presented. Earnings per share on a pro forma basis is computed as follows: |
| | Year Ended December 31, 2020 | |
Pro forma income before income taxes | | | $ |
Adjusted pro forma income taxes | | | |
Adjusted pro forma net income | | | |
Net income (loss) attributable to existing non-controlling interest | | | |
Adjusted pro forma net income to Aris Inc. stockholders(2) | | | |
Weighted average shares of Class A common stock outstanding | | | |
Pro forma net income available to Class A common stock per share | | |
| | June 30, 2021 | | | December 31, 2020 | |
Assets | | | | | ||
Cash and Cash Equivalents | | | $31,123 | | | $24,932 |
Accounts Receivable, Net | | | 25,928 | | | 21,561 |
Accounts Receivable from Affiliate | | | 18,346 | | | 11,538 |
Other Receivables | | | 3,278 | | | 3,722 |
Prepaids, Deposits and Other Current Assets | | | 2,149 | | | 4,315 |
Total Current Assets | | | 80,824 | | | 66,068 |
| | | | |||
Fixed Assets | | | | | ||
Property, Plant and Equipment | | | 706,806 | | | 661,446 |
Accumulated Depreciation | | | (56,826) | | | (43,258) |
Total Property, Plant and Equipment, Net | | | 649,980 | | | 618,188 |
Intangibles, Net | | | 321,233 | | | 337,535 |
Goodwill | | | 34,585 | | | 34,585 |
Other Assets | | | 2,140 | | | 1,429 |
Total Assets | | | $1,088,762 | | | $1,057,805 |
| | | | |||
Liabilities, Mezzanine Equity and Members' Equity | | | | | ||
Accounts Payable | | | $10,414 | | | $16,067 |
Payables to Affiliate | | | 1,693 | | | 1,884 |
Accrued and Other Current Liabilities | | | 37,259 | | | 27,838 |
Total Current Liabilities | | | 49,366 | | | 45,789 |
Asset Retirement Obligation | | | 5,629 | | | 5,291 |
Long-Term Debt, Net of Debt Issuance Costs | | | 391,115 | | | 297,000 |
Deferred Revenue Liability and Other Long-Term liabilities | | | 1,335 | | | 1,432 |
Total Liabilities | | | 447,445 | | | 349,512 |
Commitment and Contingencies (Note 10) | | | | | ||
Mezzanine Equity: | | | | | ||
Redeemable Preferred Units, $10,000.00 par value, none issued or outstanding as of June 30, 2021 and 7,500 issued and 7,307 outstanding as of December 31, 2020 | | | — | | | 74,378 |
Members' Equity | | | | | ||
Class A units, $10.00 par value, 27,797,658 issued and outstanding as of June 30, 2021 and 27,797,207 issued and outstanding as of December 31, 2020 | | | 323,809 | | | 318,394 |
Class B units, $10.00 par value, 3,556,051 issued and outstanding as of June 30, 2021 and as of December 31, 2020 | | | 37,715 | | | 37,023 |
Class C units, $0.00 par value, 878,850 issued and outstanding as of June 30, 2021 and 806,350 issued and outstanding as of December 31, 2020 | | | — | | | — |
Class D units, $10.00 par value, 6,651,100 issued and outstanding as of June 30, 2021 and as of December 31, 2020 | | | 279,793 | | | 278,498 |
Total Members' Equity | | | 641,317 | | | 633,915 |
Total Liabilities, Mezzanine Equity and Members' Equity | | | $1,088,762 | | | $1,057,805 |
| | Three Months Ended June 30, | | | Six Months Ended June 30, | |||||||
| | 2021 | | | 2020 | | | 2021 | | | 2020 | |
Revenue | | | | | | | | | ||||
Produced Water Handling | | | $46,074 | | | $35,775 | | | $85,810 | | | $69,031 |
Water Solutions | | | 10,510 | | | 1,870 | | | 16,963 | | | 15,061 |
Total Revenue | | | 56,584 | | | 37,645 | | | 102,773 | | | 84,092 |
| | | | | | | | |||||
Cost of Revenue | | | | | | | | | ||||
Direct Operating Costs | | | 22,452 | | | 20,163 | | | 43,206 | | | 49,433 |
Depreciation, Amortization and Accretion | | | 15,215 | | | 10,289 | | | 30,172 | | | 19,778 |
Total Cost of Revenue | | | 37,667 | | | 30,452 | | | 73,378 | | | 69,211 |
| | | | | | | | |||||
Operating Expenses | | | | | | | | | ||||
General and administrative | | | 5,317 | | | 4,530 | | | 10,012 | | | 8,648 |
Loss on Disposal of Asset, Net | | | 173 | | | 67 | | | 217 | | | 67 |
Transaction Costs | | | 15 | | | 1,352 | | | 77 | | | 3,099 |
Abandoned Projects | | | 1,145 | | | 498 | | | 1,356 | | | 1,133 |
Total Operating Expenses | | | 6,650 | | | 6,447 | | | 11,662 | | | 12,947 |
Operating Income | | | 12,267 | | | 746 | | | 17,733 | | | 1,934 |
| | | | | | | | |||||
Other Expense | | | | | | | | | ||||
Interest Expense, Net | | | 7,324 | | | 1,675 | | | 9,975 | | | 3,265 |
Loss on Debt Modification | | | 380 | | | — | | | 380 | | | — |
Total Other Expense | | | 7,704 | | | 1,675 | | | 10,355 | | | 3,265 |
Income (Loss) before Taxes | | | 4,563 | | | (929) | | | 7,378 | | | (1,331) |
Income Taxes | | | 2 | | | 2 | | | 2 | | | 6 |
Net Income (Loss) | | | $4,561 | | | $(931) | | | $7,376 | | | $(1,337) |
Equity Accretion and Dividend Related to Redeemable Preferred Units | | | 14 | | | (417) | | | 21 | | | (417) |
Net Income (Loss) Attributable to Members' Equity | | | $4,575 | | | $(1,348) | | | $7,397 | | | $(1,754) |
| | Three and Six Months Ended June 30, 2021 | |||||||||||||||||||||||||
| | Class A | | | Class B | | | Class C | | | Class D | | | Total Members’ Equity | |||||||||||||
| | Units | | | Amount | | | Units | | | Amount | | | Units | | | Amount | | | Units | | | Amount | | |||
Balance at January 1, 2021 | | | 27,797 | | | $318,394 | | | 3,556 | | | $37,023 | | | 807 | | | $— | | | 6,651 | | | $278,498 | | | $633,915 |
Capital Contributions | | | 1 | | | 5 | | | — | | | — | | | — | | | — | | | — | | | — | | | 5 |
Issuance of Class C Units | | | — | | | — | | | — | | | — | | | 69 | | | — | | | — | | | — | | | — |
Equity Accretion and Dividend related to Redeemable Preferred Units | | | — | | | 5 | | | — | | | 1 | | | — | | | — | | | — | | | 1 | | | 7 |
Net Income | | | — | | | 2,059 | | | — | | | 263 | | | — | | | — | | | — | | | 493 | | | 2,815 |
Balance at March 31, 2021 | | | 27,798 | | | 320,463 | | | 3,556 | | | 37,287 | | | 876 | | | — | | | 6,651 | | | 278,992 | | | 636,742 |
Issuance of Class C Units | | | — | | | — | | | — | | | — | | | 3 | | | — | | | — | | | — | | | — |
Equity Accretion and Dividend related to Redeemable Preferred Units | | | — | | | 10 | | | — | | | 1 | | | — | | | — | | | — | | | 3 | | | 14 |
Net Income | | | — | | | 3,336 | | | — | | | 427 | | | — | | | — | | | — | | | 798 | | | 4,561 |
Balance at June 30, 2021 | | | 27,798 | | | $323,809 | | | 3,556 | | | $37,715 | | | 879 | | | $— | | | 6,651 | | | $279,793 | | | $641,317 |
| | Three and Six Months Ended June 30, 2020 | |||||||||||||||||||||||||
| | Class A | | | Class B | | | Class C | | | Class D | | | Total Members’ Equity | |||||||||||||
| | Units | | | Amount | | | Units | | | Amount | | | Units | | | Amount | | | Units | | | Amount | | |||
Balance at January 1, 2020 | | | 22,104 | | | $232,945 | | | 3,440 | | | $36,296 | | | 833 | | | $— | | | 6,386 | | | $276,267 | | | $545,508 |
Forfeiture of Class C Units | | | — | | | — | | | — | | | — | | | (26) | | | — | | | — | | | — | | | — |
Net Loss | | | — | | | (281) | | | — | | | (44) | | | — | | | — | | | — | | | (81) | | | (406) |
Balance at March 31, 2020 | | | 22,104 | | | 232,664 | | | 3,440 | | | 36,252 | | | 807 | | | — | | | 6,386 | | | 276,186 | | | 545,102 |
Issuance of Class A Units as consideration for the asset acquisition of Concho's Lea County, New Mexico produced water gathering, transportation and disposal assets | | | 4,561 | | | 77,602 | | | — | | | — | | | — | | | — | | | — | | | — | | | 77,602 |
Forfeiture of Class C Units | | | — | | | — | | | — | | | — | | | (1) | | | — | | | — | | | — | | | — |
Equity Accretion and Dividend related to Redeemable Preferred Units | | | — | | | (305) | | | — | | | (39) | | | — | | | — | | | — | | | (73) | | | (417) |
Net Loss | | | — | | | (680) | | | — | | | (88) | | | — | | | — | | | — | | | (163) | | | (931) |
Balance at June 30, 2020 | | | 26,665 | | | $309,281 | | | 3,440 | | | $36,125 | | | 806 | | | $— | | | 6,386 | | | $275,950 | | | $621,356 |
| | Six Months Ended June 30, | ||||
| | 2021 | | | 2020 | |
Cash Flow from Operating Activities | | | | | ||
Net Income (Loss) | | | $7,376 | | | $(1,337) |
Adjustments to reconcile Net Income (Loss) to Net Cash provided by Operating Activities | | | | | ||
Depreciation, Amortization and Accretion | | | 30,172 | | | 19,778 |
Amortization of Deferred Financing Costs | | | 763 | | | 362 |
Loss on Debt Modification | | | 380 | | | — |
Loss on Disposal of Asset, Net | | | 217 | | | 67 |
Abandoned Projects | | | 1,356 | | | 1,133 |
Changes in operating assets and liabilities: | | | | | ||
Accounts Receivable | | | (4,367) | | | 9,896 |
Accounts Receivable from Affiliate | | | (6,808) | | | 4,485 |
Other Receivables | | | 602 | | | (10) |
Prepaids, Deposits and Other Current Assets | | | 1,711 | | | 1,345 |
Accounts Payable | | | (4,817) | | | (1,510) |
Payables to Affiliate | | | (191) | | | 1,235 |
Adjustment in Deferred Revenue | | | (50) | | | 650 |
Accrued Liabilities and Other | | | 4,346 | | | 4,817 |
Net Cash Provided by Operating Activities | | | 30,690 | | | 40,911 |
| | | | |||
Cash Flow from Investing Activities | | | | | ||
Property, Plant and Equipment Expenditures | | | (42,353) | | | (92,581) |
Net Cash Used in Investing Activities | | | (42,353) | | | (92,581) |
| | | | |||
Cash Flow from Financing Activities | | | | | ||
Proceeds from Credit Facility | | | — | | | 60,000 |
Repayment of Credit Facility | | | (297,000) | | | — |
Proceeds from Senior-Sustainability Linked Bonds | | | 400,000 | | | — |
Payments of Financing Costs related to Issuance of Senior-Sustainability Linked Bonds | | | (9,352) | | | — |
Payments of Financing Costs related to Credit Facility | | | (1,442) | | | (428) |
Member's Contributions | | | 5 | | | — |
Redemption of Redeemable Preferred Units | | | (74,357) | | | — |
Net Cash Provided by Financing Activities | | | 17,854 | | | 59,572 |
| | | | |||
Net Increase in Cash and Cash Equivalents | | | 6,191 | | | 7,902 |
| | | | |||
Cash and Cash Equivalents, Beginning of Period | | | 24,932 | | | 7,083 |
Cash and Cash Equivalents, End of Period | | | $31,123 | | | $14,985 |
| | Six Months Ended June 30, | ||||
| | 2021 | | | 2020 | |
Capital Expenditures Incurred but Not Paid Included in Accounts Payable and Accrued Liabilities | | | $17,375 | | | $23,412 |
Asset Retirement Obligation | | | 205 | | | 1,463 |
Accretion and Dividend related to Redeemable Preferred Units | | | 21 | | | (417) |
Equity Issued in Acquisitions | | | — | | | 77,602 |
Redeemable Preferred Units Issued in Acquisition | | | — | | | 71,974 |
Cash Paid for Interest | | | 5,418 | | | 5,055 |
| | June 30, 2021 | | | December 31, 2020 | |||||||
| | Carrying Amount | | | Fair Value | | | Carrying Amount | | | Fair Value | |
Sustainability-Linked Bonds | | | $400,000 | | | $426,000 | | | $— | | | $— |
Credit Facility | | | $— | | | $— | | | $297,000 | | | $297,000 |
| | ||
Fair Value of Consideration | | | |
Class A Units Issued to Seller | | | $77,602 |
Redeemable Preferred Units Issued to Seller | | | 71,974 |
Total Consideration | | | 149,576 |
| | ||
Fair Value of Assets and Liabilities Acquired | | ||
Property, Plant & Equipment – Water Handling Facilities | | | 18,566 |
Property, Plant & Equipment – Pipelines (including right of way) | | | 33,897 |
Intangibles – Contracts | | | 90,300 |
Asset Retirement Obligations | | | (776) |
Fair Value of Assets and Liabilities Acquired | | | 141,987 |
Total Assets Acquired | | | 141,987 |
Goodwill | | | $7,589 |
| | For the Six Months Ended June 30, 2020 | |
Pro forma (unaudited) | | | |
Total Revenues | | | $3,677 |
Net Income | | | 1,438 |
Customer contracts | | | June 30, 2021 | | | December 30, 2020 |
Gross value | | | $365,032 | | | $365,032 |
Accumulated amortization | | | (43,799) | | | (27,497) |
Net value | | | $321,233 | | | $337,535 |
| | Amount | |
Remaining 2021 | | | $16,303 |
2022 | | | 36,735 |
2023 | | | 37,404 |
2024 | | | 36,888 |
2025 | | | 35,050 |
Thereafter | | | 158,853 |
| | June 30, 2021 | | | December 31, 2020 | |
Accrued Operating Expenses | | | $14,158 | | | $14,367 |
Accrued Capital Expenses | | | 11,320 | | | 6,292 |
Accrued Interest Expense | | | 7,625 | | | 2,661 |
Other | | | 4,156 | | | 4,518 |
Total Accrued and Other Liabilities | | | $37,259 | | | $27,838 |
| | June 30, 2021 | | | December 31, 2020 | |
Revolving Credit Facility | | | $— | | | $297,000 |
7.625% Senior Sustainability-Linked Notes | | | 400,000 | | | — |
Less: Unamortized deferred financing costs on 7.625% Senior Sustainability-Linked Notes | | | (8,885) | | | — |
Total Long-term debt | | | $391,115 | | | $297,000 |
| | Remaining 2021 | | | 2022 | | | 2023 | | | 2024 | | | 2025 | | | Thereafter | | | Total | |
Purchase commitments | | | $10,731 | | | $— | | | $— | | | $— | | | $— | | | $— | | | $10,731 |
Surface use and compensation agreement obligation | | | — | | | 1,100 | | | 1,150 | | | 1,200 | | | 1,250 | | | 5,750 | | | 10,450 |
Operating leases | | | 376 | | | 765 | | | 631 | | | 622 | | | 514 | | | 1,255 | | | 4,163 |
Total | | | $11,107 | | | $1,865 | | | $1,781 | | | $1,822 | | | $1,764 | | | $7,005 | | | $25,344 |
| | Three Months Ended June 30, | | | Six Months Ended June 30, | |||||||
| | 2021 | | | 2020 | | | 2021 | | | 2020 | |
Revenue | | | $29,292 | | | $12,495 | | | $51,886 | | | $27,772 |
Operating expenses reimbursed to ConocoPhillips | | | (73) | | | (168) | | | 728 | | | 1,973 |
| | December 31, | ||||
| | 2020 | | | 2019 | |
Assets | | | | | ||
Cash and cash equivalents | | | $24,932 | | | $7,083 |
Accounts receivable, net | | | 22,457 | | | 33,523 |
Accounts receivable from affiliates | | | 10,642 | | | 15,837 |
Other receivables | | | 3,722 | | | 63 |
Prepaids, deposits and other current assets | | | 4,315 | | | 4,257 |
Total current assets | | | 66,068 | | | 60,763 |
Total property, plant and equipment, net | | | 618,188 | | | 481,790 |
Goodwill | | | 34,585 | | | 26,357 |
Intangibles, net | | | 337,535 | | | 267,648 |
Other assets | | | 1,429 | | | 1,676 |
Total assets | | | $1,057,805 | | | $838,234 |
| | | | |||
Liabilities, mezzanine equity and members' equity | | | | | ||
Accounts payable | | | $16,067 | | | $40,768 |
Accrued and other current liabilities | | | 29,722 | | | 28,398 |
Total current liabilities | | | 45,789 | | | 69,166 |
Deferred revenue liability | | | 1,300 | | | — |
Asset retirement obligation | | | 5,291 | | | 3,375 |
Long-term debt | | | 297,000 | | | 220,000 |
Other long-term liabilities | | | 132 | | | 185 |
Total liabilities | | | 349,512 | | | 292,726 |
Commitments and contingencies (Note 12) | | | | | ||
Mezzanine equity: | | | | | ||
Redeemable preferred units, $10,000.00 par value, 7,500 issued and 7,307 outstanding as of December 31, 2020 and none issued and outstanding as of December 31, 2019 | | | 74,378 | | | — |
Members' Equity | | | | | ||
Class A units, $10.00 par value, 27,797,207 issued and outstanding as of December 31, 2020 and 22,103,709 issued and outstanding as of December 31, 2019 | | | 318,394 | | | 232,945 |
Class B units, $10.00 par value, 3,556,051 issued and outstanding as of December 31, 2020 and 3,440,083 issued and outstanding as of December 31, 2019 | | | 37,023 | | | 36,296 |
Class C units, $0.00 par value, 806,100 issued and outstanding as of December 31, 2020 and 832,500 issued and outstanding as of December 31, 2019 | | | — | | | — |
Class D units, $10.00 par value, 6,651,100 issued and outstanding as of December 31, 2020 and 6,385,948 issued and outstanding as of December 31, 2019 | | | 278,498 | | | 276,267 |
Total members' equity | | | 633,915 | | | 545,508 |
Total liabilities, mezzanine equity and members’ equity | | | $1,057,805 | | | $838,234 |
| | For the years ended December 31, | ||||
| | 2020 | | | 2019 | |
Revenue | | | | | ||
Produced Water Handling | | | $141,659 | | | $81,418 |
Water Solutions | | | 29,813 | | | 37,375 |
Total revenue | | | 171,472 | | | 118,793 |
| | | | |||
Cost of revenue | | | | | ||
Direct operating costs | | | 95,431 | | | 71,973 |
Depreciation, amortization and accretion | | | 44,027 | | | 19,670 |
Total cost of revenue | | | 139,458 | | | 91,643 |
| | | | |||
Operating expenses | | | | | ||
General and administrative | | | 18,663 | | | 15,299 |
(Gain) loss on disposal of asset, net | | | 133 | | | (5,100) |
Transaction costs | | | 3,389 | | | 1,010 |
Abandoned projects | | | 2,125 | | | 2,444 |
Total operating expenses | | | 24,310 | | | 13,653 |
Operating income | | | 7,704 | | | 13,497 |
| | | | |||
Other expense | | | | | ||
Other expense | | | — | | | 176 |
Interest expense | | | 7,674 | | | 260 |
Total other expense | | | 7,674 | | | 436 |
Income before taxes | | | 30 | | | 13,061 |
Income tax expense | | | 23 | | | 1 |
Net income | | | $7 | | | $13,060 |
Accretion and dividend related to redeemable preferred units | | | (4,335) | | | — |
Net income (loss) attributable to members' equity | | | $(4,328) | | | $13,060 |
| | Class A | | | Class B | | | Class C | | | Class D | | | Total Members’ Equity | |||||||||||||
| | Units | | | Amount | | | Units | | | Amount | | | Units | | | Amount | | | Units | | | Amount | | |||
Balance at January 1, 2019 | | | 17,631 | | | $177,879 | | | 2,921 | | | $29,486 | | | 846 | | | $— | | | — | | | $— | | | $207,365 |
Capital contributions | | | 4,473 | | | 44,729 | | | 519 | | | 5,189 | | | — | | | — | | | — | | | — | | | 49,918 |
Issuance of Class D units as consideration for the asset acquisition of certain Concho assets in Eddy County, New Mexico and Reeves & Culberson Counties, Texas | | | — | | | — | | | — | | | — | | | — | | | — | | | 6,386 | | | 275,165 | | | 275,165 |
Issuance of Class C units | | | — | | | — | | | — | | | — | | | 141 | | | — | | | — | | | — | | | — |
Forfeiture of Class C units | | | — | | | — | | | — | | | — | | | (154) | | | — | | | — | | | — | | | — |
Net income | | | — | | | 10,337 | | | — | | | 1,621 | | | — | | | — | | | — | | | 1,102 | | | 13,060 |
Balance at December 31, 2019 | | | 22,104 | | | 232,945 | | | 3,440 | | | 36,296 | | | 833 | | | — | | | 6,386 | | | 276,267 | | | 545,508 |
| | | | | | | | | | | | | | | | | | ||||||||||
Capital contributions | | | 939 | | | 9,391 | | | 116 | | | 1,160 | | | — | | | — | | | 265 | | | 2,652 | | | 13,203 |
Issuance of Class A units as consideration for the asset acquisition of certain Concho assets in Lea County, New Mexico | | | 4,561 | | | 77,602 | | | — | | | — | | | — | | | — | | | — | | | — | | | 77,602 |
Redeemable preferred units converted in lieu of cash capital call | | | 193 | | | 1,930 | | | — | | | — | | | — | | | — | | | — | | | — | | | 1,930 |
Issuance of Class C units | | | — | | | — | | | — | | | — | | | 16 | | | — | | | — | | | — | | | — |
Forfeiture of Class C units | | | — | | | — | | | — | | | — | | | (42) | | | — | | | — | | | — | | | — |
Accretion and dividend related to redeemable preferred units | | | — | | | (3,479) | | | — | | | (434) | | | — | | | — | | | — | | | (422) | | | (4,335) |
Net income | | | — | | | 5 | | | — | | | 1 | | | — | | | — | | | — | | | 1 | | | 7 |
Balance at December 31, 2020 | | | 27,797 | | | $318,394 | | | 3,556 | | | $37,023 | | | 807 | | | $— | | | 6,651 | | | $278,498 | | | $633,915 |
| | For the year ended | ||||
| | December 31, 2020 | | | December 31, 2019 | |
Cash flow from operating activities | | | | | ||
Net income | | | $7 | | | $13,060 |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | ||
Depreciation, amortization & accretion | | | 44,027 | | | 19,670 |
Amortization of deferred financing costs | | | 783 | | | 511 |
(Gain) loss on disposal of asset, net | | | 133 | | | (5,100) |
Abandoned projects | | | 2,125 | | | 2,444 |
Bad debt expense | | | 446 | | | 119 |
Changes in operating assets and liabilities: | | | | | ||
Accounts receivable | | | 10,620 | | | (20,228) |
Accounts receivable from affiliates | | | 5,195 | | | (15,531) |
Other receivables | | | (3,659) | | | (54) |
Prepaids, deposits and other current assets | | | (58) | | | (2,491) |
Accounts payable | | | 193 | | | 4,583 |
Accrued liabilities and other | | | 6,659 | | | 7,166 |
Deferred revenue liability | | | 1,300 | | | — |
Net cash provided by operating activities | | | 67,771 | | | 4,149 |
Cash flow from investing activities | | | | | ||
Cash paid for business acquisitions | | | — | | | (55,430) |
Property, plant and equipment expenditures | | | (139,589) | | | (182,964) |
Cash proceeds from sale of property, plant and equipment | | | — | | | 10,026 |
Net cash used in investing activities | | | (139,589) | | | (228,368) |
Cash flow from financing activities | | | | | ||
Proceeds from Credit Facility | | | 77,000 | | | 200,000 |
Repayment of Credit Facility | | | — | | | (25,000) |
Payments of financing costs | | | (536) | | | (959) |
Member's contributions | | | 13,203 | | | 49,918 |
Net cash provided by financing activities | | | 89,667 | | | 223,959 |
Net increase (decrease) in cash and cash equivalents | | | 17,849 | | | (260) |
| | | | |||
Cash and cash equivalents, beginning of year | | | 7,083 | | | 7,343 |
Cash and cash equivalents, end of year | | | $24,932 | | | $7,083 |
Supplemental cash flow disclosure | | | | | ||
Non-cash investing activities | | | | | ||
Asset retirement obligations | | | $1,690 | | | $2,480 |
Equity issued in acquisitions | | | 77,602 | | | 275,165 |
Redeemable preferred units issued in acquisitions | | | 71,974 | | | — |
Redeemable preferred units converted in lieu of cash capital call | | | 1,930 | | | — |
Capital expenditures incurred but not paid included in accounts payable and accrued liabilities | | | 13,183 | | | 43,465 |
Accretion and dividend related to redeemable preferred units | | | 4,335 | | | — |
Cash paid for: | | | | | ||
Interest | | | 8,610 | | | 5,978 |
Useful Life | |||
Pipelines | | | 30-50 years |
Wells, facilities and related equipment | | | 30 years |
Water ponds | | | 30 years |
Vehicles | | | 10 years |
Office furniture, equipment and improvements | | | 7 years |
Computer and other equipment | | | 5 years |
Fair value of consideration | | | |
Class A units issued to seller | | | $77,602 |
Redeemable Preferred Units issued to seller | | | 71,974 |
Total consideration | | | $149,576 |
| | ||
Fair value of assets and liabilities acquired | | | |
Property, plant & equipment – water handling facilities | | | 18,566 |
Property, plant & equipment – pipelines (including right-of-way) | | | 33,897 |
Intangibles – contracts | | | 90,300 |
Asset retirement obligations | | | (776) |
Fair value of assets and liabilities acquired | | | 141,987 |
Total assets acquired | | | 141,987 |
Goodwill | | | $7,589 |
Fair value of consideration | | | |
Cash Payment | | | $55,430 |
Class D Units issued to seller | | | 275,165 |
Total consideration | | | $330,595 |
Fair value of assets acquired | | | |
Property, plant & equipment – water handling facilities | | | 35,976 |
Property, plant & equipment – pipelines (including right-of-way) | | | 13,405 |
Property, plant & equipment – casing | | | 850 |
Intangibles – contracts | | | 270,399 |
Asset retirement obligations | | | (1,181) |
Fair value of assets and liabilities acquired | | | 319,449 |
Total assets acquired | | | 319,449 |
Goodwill | | | $11,146 |
| | For the year ended December 31, 2020 | | | For the year ended December 31, 2019 | |||||||
Pro forma (unaudited) | | | Actual | | | Pro Forma | | | Actual | | | Pro Forma |
Total revenues | | | $172,772 | | | $176,399 | | | $118,793 | | | $137,926 |
Net income | | | 1,307 | | | 2,618 | | | 13,060 | | | 22,311 |
| | 2020 | | | 2019 | |
Prepaid insurance and other | | | $4,067 | | | $2,979 |
Deposits and other | | | 72 | | | 115 |
Prepaid groundwater | | | 176 | | | 1,163 |
Total | | | $4,315 | | | $4,257 |
| | 2020 | | | 2019 | |
Wells, facilities and related equipment | | | $331,322 | | | $248,128 |
Pipelines | | | 276,433 | | | 155,551 |
Projects and construction in progress | | | 33,128 | | | 84,881 |
Water ponds | | | 3,774 | | | 2,273 |
Land | | | 2,063 | | | 2,063 |
Vehicles | | | 5,123 | | | 4,370 |
Computer and other equipment | | | 8,994 | | | 3,994 |
Office furniture, equipment & improvements | | | 609 | | | 576 |
Total property, plant and equipment | | | 661,446 | | | 501,836 |
Accumulated depreciation | | | (43,258) | | | (20,046) |
Total property, plant and equipment, net | | | $618,188 | | | $481,790 |
| | Total | |
Balance as of December 31, 2018 | | | $15,211 |
Additions | | | 11,146 |
Balance as of December 31, 2019 | | | $26,357 |
Additions | | | 7,589 |
Measurement period adjustment | | | 639 |
Balance as of December 31, 2020 | | | $34,585 |
Customer contracts | | | 2020 | | | 2019 |
Gross value | | | $365,032 | | | $274,732 |
Accumulated amortization | | | (27,497) | | | (7,084) |
Net value | | | $337,535 | | | $267,648 |
Year ending December 31, | | | Amount |
2021 | | | $32,605 |
2022 | | | 36,735 |
2023 | | | 37,404 |
2024 | | | 36,888 |
2025 | | | 35,050 |
Thereafter | | | 158,853 |
| | 2020 | | | 2019 | |
Asset retirement obligation – beginning of year | | | $3,375 | | | $750 |
Liabilities incurred on acquisition | | | 776 | | | 1,181 |
Liabilities incurred | | | 936 | | | 1,298 |
Reduction due to assets sold | | | (22) | | | — |
Accretion | | | 226 | | | 146 |
Asset retirement obligation – end of year | | | $5,291 | | | $3,375 |
| | For the year ending December 31, | |||||||||||||||||||
| | 2021 | | | 2022 | | | 2023 | | | 2024 | | | 2025 | | | Thereafter | | | Total | |
Purchase commitments | | | $10,040 | | | $— | | | $— | | | $— | | | $— | | | $— | | | $10,040 |
Surface use and compensation agreement obligation | | | 1,050 | | | 1,100 | | | 1,150 | | | 1,200 | | | 1,250 | | | 5,750 | | | 11,500 |
Operating leases | | | 496 | | | 833 | | | 700 | | | 691 | | | 585 | | | 1,809 | | | 5,114 |
Total | | | $11,586 | | | $1,933 | | | $1,850 | | | $1,891 | | | $1,835 | | | $7,559 | | | $26,654 |
| | 2020 | | | 2019 | |
Revenue | | | $66,507 | | | $23,245 |
Operating expense | | | 3,532 | | | 2,765 |
| | 2021 | |
ASSETS | | | |
Total assets | | | $— |
LIABILITIES AND STOCKHOLDER’S EQUITY | | | |
Total Liabilities | | | $— |
Commitments and Contingencies | | | — |
Stockholder’s Equity: | | | |
Receivable from Solaris Midstream Holdings, LLC | | | $(10) |
Common Stock, $0.01 Par Value; 1,000 Shares Authorized, Issued, and Outstanding at | | | 10 |
Total Stockholder’s Equity | | | $— |
Total Liabilities & Stockholder’s Equity | | | $— |
1. | Organization and Background of Business |
2. | Summary of Significant Accounting Policies |
3. | Stockholder's Equity |
Item 13. | Other Expenses of Issuance and Distribution. |
SEC Registration Fee | | | $10,910 |
FINRA Filing Fee | | | 15,500 |
NYSE Listing Fee | | | * |
Printing Costs | | | * |
Legal Fees and Expenses | | | * |
Accounting Fees and Expenses | | | * |
Transfer Agent Fees and Expenses | | | * |
Miscellaneous Expenses | | | * |
Total | | | $ * |
* | To be provided by amendment. |
Item 14. | Indemnification of Directors and Officers. |
Item 15. | Recent Sales of Unregistered Securities. |
Item 16. | Exhibits and Financial Statement Schedules. |
Exhibit No. | | | Description of Exhibit |
| | Form of Underwriting Agreement. | |
| | Form of Amended and Restated Certificate of Incorporation. | |
| | Form of Amended and Restated Bylaws. | |
| | Indenture, dated as of April 1, 2021, among Solaris Midstream Holdings, LLC, the guarantors party thereto and Wells Fargo Bank, National Association, as trustee. | |
| | Form of Registration Rights Agreement. | |
| | Opinion of Gibson, Dunn & Crutcher LLP. | |
| | Form of Fourth Limited Liability Company Agreement of Solaris Midstream Holdings, LLC. | |
| | Form of Tax Receivable Agreement. | |
| | Form of Indemnification Agreement. | |
| | Second Amended and Restated Credit Agreement, dated as of April 1, 2021, among Solaris Midstream Holdings, LLC, the lenders party thereto and Wells Fargo Bank, National Association, as administrative agent and lead arranger. | |
| | Form of Aris Water Solutions, Inc. 2021 Equity Incentive Plan. | |
| | Letter Agreement between Solaris Midstream Holdings, LLC and William Zartler dated January 29, 2021. | |
| | Letter Agreement between Solaris Midstream Holdings, LLC and Amanda Brock dated January 29, 2021. | |
| | Amended and Restated Water Gathering and Disposal Agreement, dated June 11, 2020, by and among Solaris Midstream DB-NM, LLC, COG Operating LLC, COG Production LLC, Concho Oil & Gas LLC and COG Acreage LP. | |
| | List of subsidiaries of Aris Water Solutions, Inc. | |
| | Consent of BDO USA, LLP. | |
| | Consent of BDO USA, LLP. | |
| | Consent of Gibson, Dunn & Crutcher LLP | |
| | Power of Attorney (included on the signature page | |
| | Consent of Joseph Colonnetta. | |
| | Consent of Debra G. Coy. | |
| | Consent of W. Howard Keenan, Jr. | |
| | Consent of Christopher Manning. | |
| | Consent of Andrew O’Brien. | |
| | Consent of Donald C. Templin. | |
| | Consent of M. Max Yzaguirre. |
* |
** |
† | Management contract or compensatory plan or arrangement. |
# | Certain confidential information contained in this agreement has been omitted because it is both (i) not material and (ii) the type of information that the Company treats as private or confidential. |
Item 17. | Undertakings. |
| | ARIS WATER SOLUTIONS, INC. | ||||
| | | ||||
| | By: | | | /s/ Amanda M. Brock | |
| | Name: | | | Amanda M. Brock | |
| | Title: | | | President and Chief Executive Officer |
Signature | | | Title |
| | ||
/s/ Amanda M. Brock | | | President and Chief Executive Officer and Director (principal executive officer) |
Amanda M. Brock | | ||
| | ||
/s/ Brenda R. Schroer | | | Chief Financial Officer (principal financial officer) |
Brenda R. Schroer | | ||
| | ||
/s/ Dustin A. Hatley | | | Chief Accounting Officer (principal accounting officer) |
Dustin A. Hatley | | ||
| | ||
/s/ William A. Zartler | | | Executive Chairman |
William A. Zartler | |