Part 1: Performance Analysis
Solaris Oilfield Infrastructure, Inc. is a company that designs and manufactures specialized equipment to provide services that help oil and natural gas operators and their suppliers reduce operational footprint and costs during the completion phase of well development. As the company predominantly influences its offering demands based on the level of oil and natural gas well drilling and completion activity, it is highly correlated with US land rig count activity over longer periods. Due to the new technology introductions in 2022, the company experienced an increase in activity, which outpaced general market growth. In 2023, the company expects slower market growth in North American land activity due to supply chain and labor constraints limiting the addition of additional drilling rig and completion crews. However, the company also expects its activity to outpace the market as it enhances its offering and gains additional market share through additional deployments of new technology.
During the year ended December 31, 2022, Solaris Oilfield Infrastructure, Inc. had total revenue of $320,005, an increase of $160,816 when compared to the year ended December 31, 2021. The revenue growth is attributable to the overall demand for the company's equipment and services, which fluctuated between $70 to over $120 per barrel for WTI oil and between $3.70 to nearly $10.00 per MMBtu for Henry Hub natural gas. However, the company reported an operating loss of $387 for the year ended December 31, 2022, compared to an operating income of $41,804 for the year ended December 31, 2021. The decline in operating income can be attributed to an increase in operating costs and expenses, especially in cost of services, selling, general and administrative expenses, and other operating expenses.
Part 2: Forward-Looking Analysis
Solaris Oilfield Infrastructure, Inc. expects slower market growth in North American land activity in 2023 due to supply chain and labor constraints limiting the addition of additional drilling rig and completion crews. However, it expects its activity to outpace the market growth and gain additional market share through additional deployments of its new technology. The sustainability of favorable supply-demand dynamics and a strong commodity environment will depend on multiple factors, including the health of the global economy, any further supply chain disruptions, or potential regulatory changes. Consolidation and financial discipline from publicly traded energy companies are likely to continue to be important themes for the industry going forward. The company expects to continue to face challenges to maintain its competitive position due to industry consolidation, which can drive procurement strategy changes and result in both market share gains and losses for the company. Furthermore, the pandemic is still ongoing, so the company may face challenges to maintain its operations and supply chain. In conclusion, Solaris Oilfield Infrastructure, Inc. expects its activity to outpace the market growth and gain additional market share through additional deployments of new technology in a challenging operating environment.