Solaris Oilfield Infrastructure ((SEI)) has held its Q1 earnings call. Read on for the main highlights of the call.
The recent earnings call of Solaris Oilfield Infrastructure revealed a generally positive sentiment, underscored by robust growth in both its power and logistics segments. The company highlighted a significant upsizing of a power generation contract and reported increased revenue. Despite these achievements, there were concerns about potential softness in oil-directed activity and challenges within the supply chain. Overall, the positive developments were seen to outweigh the negatives.
Upsizing of Power Generation Contract
Solaris announced a substantial upsizing of its commercial contract for a data center campus, increasing from 500 megawatts to 900 megawatts. This extension not only lengthens the initial tender from six to seven years but also signifies the company’s strong foothold in the power generation market.
Strong Performance in Logistics Segment
The logistics segment of Solaris demonstrated a strong first quarter, with system activity rising over 25% sequentially. This growth was driven by new customer acquisitions and the adoption of the top-fill system, showcasing the segment’s expanding influence and operational success.
Increase in Revenue and EBITDA
Solaris reported a total revenue of $126 million, marking a 31% increase from the previous quarter. The adjusted EBITDA also saw a 25% rise, reaching $47 million, reflecting the company’s effective financial strategies and operational efficiency.
New Capacity Secured for Future Growth
In anticipation of future growth, Solaris secured approximately 330 megawatts of additional generation capacity from its manufacturing partner. This capacity is expected to be delivered in the second half of 2026, positioning the company for continued expansion.
Significant Free Cash Flow Generation
The company continued to generate significant free cash flow from previous fleet investments, strengthening its financial position and providing a solid foundation for future investments and growth opportunities.
Potential Impact of Commodity Price Softness
Solaris noted that some operators are responding to recent commodity price softness by delaying jobs or reducing the number of fractures expected in the latter half of the year. This could potentially impact the company’s operations if the trend continues.
Tight Supply Chain for Power Generation Equipment
The supply chain for power generation equipment has become increasingly tight, posing challenges for Solaris in securing additional capacity. This situation requires strategic planning to mitigate potential disruptions.
Oil-Directed Activity Softness
There is an expectation of a softening in oil-directed activity in the third quarter if commodity prices remain at or below current levels. This could influence Solaris’ operations and financial performance in the near term.
Forward-Looking Guidance
During the earnings call, Solaris provided detailed guidance, highlighting an upsized commercial contract for its power solutions business. The company expects to generate a consolidated annual run-rate adjusted EBITDA of $575 million to $600 million, with Solaris’ net portion estimated at $440 million to $465 million. For the upcoming quarters, Solaris anticipates adjusted EBITDA between $50 million and $55 million for the second quarter, and between $55 million and $60 million for the third quarter. Additionally, a senior secured term loan facility of up to $550 million was secured to support capital expenditures related to a joint venture.
In conclusion, the Solaris Oilfield Infrastructure earnings call showcased a strong performance with significant growth in key segments, despite some challenges. The upsizing of contracts and increased revenue highlight the company’s robust strategy and market position. However, potential softness in oil-directed activity and supply chain constraints remain areas to watch. Overall, Solaris appears well-positioned for continued success in the coming quarters.