DEFA14A: Solaris Oilfield Infrastructure Announces Q2 2024 Results and Acquisition of Mobile Energy Rentals

Solaris Oilfield Infrastructure reports Q2 2024 financial results, highlighted by revenue of $74 million, net income of $10 million, and the announcement of an agreement to acquire Mobile Energy Rentals LLC.

Summary

• Solaris Oilfield Infrastructure announced its second quarter 2024 financial results.
• Revenue for the quarter was $74 million.
• Net income reached $10 million, or $0.20 per diluted Class A share.
• Adjusted EBITDA was $21 million.
• The company generated $19 million in cash flow from operations and $18 million in free cash flow.
• Solaris returned $5 million to shareholders through dividends in Q2 2024, bringing the cumulative total to $178 million since 2018.
• A third quarter 2024 dividend of $0.12 per share was announced on July 29, 2024, payable on September 6, 2024.
• Solaris entered into a definitive agreement on July 9, 2024, to acquire Mobile Energy Rentals LLC (MER) for an initial purchase price of approximately $200 million, consisting of $60 million in cash and 16.5 million shares of Class B common stock at $8.50 per share.
• The MER acquisition is expected to close in the third quarter of 2024, subject to shareholder and regulatory approvals.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While the company reports solid revenue and shareholder returns, there are declines in Adjusted EBITDA and fully utilized systems. The acquisition of MER is a positive strategic move, but its success is still uncertain.

Positives

• The company reported a solid revenue of $74 million.
• Net income was $10 million, or $0.20 per diluted Class A share.
• Adjusted EBITDA reached $21 million.
• Solaris generated $19 million in cash flow from operations and $18 million in free cash flow.
• The company returned $5 million to shareholders through dividends.
• The acquisition of Mobile Energy Rentals LLC (MER) diversifies Solaris into the distributed power market.

Negatives

• Adjusted EBITDA decreased by 8% from Q1 2024 and 22% from Q2 2023.
• Total fully utilized systems were down 10% from Q1 2024 and 15% from Q2 2023.
• Adjusted pro forma net income for second quarter 2024 was $6 million, or $0.13 per fully diluted share, compared to first quarter 2024 adjusted pro forma net income of $7 million, or $0.16 per fully diluted share, and second quarter 2023 adjusted pro forma net income of $11 million, or $0.25 per fully diluted share.

Risks

• The MER acquisition is subject to shareholder and regulatory approvals, and customary closing conditions.
• Forward-looking statements are subject to inherent uncertainties, risks, and changes in circumstances.
• Decreases in revenue and Adjusted EBITDA from the second quarter 2023 were primarily due to a decrease in fully utilized systems.

Future Outlook

The company expects the MER acquisition to provide an exciting opportunity to diversify into the growing distributed power market, which will provide an additional business line that they expect to deliver continued strong shareholder returns from a new earnings base with access to new end markets.

Management Comments

• Chairman and Chief Executive Officer Bill Zartler commented that Solaris delivered another quarter of strong free cash flow.
• Bill Zartler stated that the MER acquisition will provide Solaris an exciting opportunity to diversify into the growing distributed power market.

Industry Context

The acquisition of Mobile Energy Rentals LLC reflects a trend in the oilfield services industry towards diversification and expansion into related energy sectors, such as distributed power generation. This move allows Solaris to reduce its reliance on the cyclical oil and gas market and tap into new revenue streams.

Comparison to Industry Standards

• Halliburton and Schlumberger, major players in the oilfield services sector, have also been diversifying their service offerings to include digital solutions and renewable energy technologies.
• The acquisition of MER is similar to moves by other companies to expand into power solutions, such as Caterpillar's investments in microgrids and distributed power systems.
• Compared to competitors like U.S. Well Services, which focuses on electric fracking, Solaris's move into distributed power provides a broader market opportunity beyond just well completion.

Stakeholder Impact

• Shareholders will see continued returns through dividends.
• Employees may experience changes due to the MER acquisition and integration.
• Customers will have access to a broader range of services, including distributed power solutions.
• Suppliers may see increased demand due to the expanded business operations.

Next Steps

• Shareholder vote on the MER acquisition.
• Receipt of regulatory approvals for the MER acquisition.
• Closing of the MER acquisition, expected in Q3 2024.
• Integration of MER into Solaris's operations.

Key Dates

Keywords

Solaris Oilfield Infrastructure, Mobile Energy Rentals, MER, acquisition, dividends, shareholder returns, financial results, EBITDA, revenue, net income, oilfield services