My current valuation is $35/share.
Solaris Energy Infrastructure, Inc. (NYSE:SEI) ("Solaris" or the "Company"), today announced a financial and operational update for the fourth quarter 2024 as well as updates to its growth capital program to further support the Solaris Power Solutions segment in response to rapidly evolving customer demand.
Fourth Quarter 2024 Financial and Operational Update
The Company is increasing its fourth quarter 2024 Adjusted EBITDA* guidance to a range of $36 million to $39 million, compared to its prior expectation for a range of $33 million to $36 million. The primary drivers behind the updated range are continued enhanced utilization levels and improved cost absorption in the Solaris Power Solutions segment. The Company expects to deploy an average of approximately 250 MW during the fourth quarter, which reflects full utilization of its currently available asset base. In its Solaris Logistics Segment, the Company expects results to be relatively in line with expectations, which should continue to support strong total company operating cash flow generation in the fourth quarter.
Solaris Power Solutions Growth Capital Update
The Company recently placed orders for 9 additional 16.5 megawatt ("MW") gas-fired turbines to support rapidly accelerating customer demand, totaling approximately 145 MW in incremental generation capacity. Solaris now expects to exit first quarter 2026 with approximately 680 MW of generation capacity. The Company expects to invest up to $120 million for the new turbine order, including ancillary equipment. Additionally, the Company expects to invest approximately $40 million in Selective Catalytic Reduction ("SCR") technology to further enhance the emissions profile of the fleet in support of multi-year installations on selected locations. This expected approximately $160 million growth capital investment should occur primarily over the course of 2025, with equipment deliveries scheduled to occur from fourth quarter 2025 through first quarter 2026.
"Demand for Solaris’ power-as-a-service offering continues to exceed our available capacity, providing us with the confidence to place this additional equipment order," commented Bill Zartler, Solaris’ Chairman and Chief Executive Officer. "Additionally, the increasing site design and engineering complexities associated with the extending tenor of our contract fixtures presents an opportunity for Solaris to offer incremental ‘balance of plant’ equipment, such as the emissions control technology, that complements our power generation offering and is expected to enhance returns. This new equipment order will provide Solaris’ customers with near-term solutions in support of some of the most demanding ‘behind-the-meter’ power applications in operation today."
My valuation will be going up.
Solaris Energy Infrastructure (SEI) Update - Dec 5
Solaris Energy Infrastructure (SEI) Update - Dec 5
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Solaris Energy Infrastructure (SEI) Update - Dec 5
Looking forward to seeing your revised forecast on these guys Dan. Since the newly ordered equipment won't start coming in until 4Q of next year, it looks like next year's numbers won't go up that much, but 2026 should get real interesting.
With $130M of cap ex budgeted for the current quarter, and then something like $325m of cap ex now being budgeted for next year, it seems that they will have to either find additional debt financing, do an equity raise, or sell the Logistics business. I believe they should hold off on taking on much more debt. An equity raise would not be a bad idea at this time IMO, with the stock price as high as it is. The added benefit of the raise would be that it would get more shares into the float, which is pretty tight right now. Curious what your thoughts are on this.
With $130M of cap ex budgeted for the current quarter, and then something like $325m of cap ex now being budgeted for next year, it seems that they will have to either find additional debt financing, do an equity raise, or sell the Logistics business. I believe they should hold off on taking on much more debt. An equity raise would not be a bad idea at this time IMO, with the stock price as high as it is. The added benefit of the raise would be that it would get more shares into the float, which is pretty tight right now. Curious what your thoughts are on this.
Re: Solaris Energy Infrastructure (SEI) Update - Dec 5
Nice to see these guys thinking the same way I am -- they just announced a secondary offering. Not so sure I would have offered that many shares (6.5M), but presumably they have a good sense that they can get that number of shares sold without tanking the price too much. They are using Santander US Capital Markets for the offering. Do you know anything about those guys Dan? That is not exactly a household name, at least not in the oil & gas space. But I guess this company is not really going to be much of an oil service company going forward, vs. an electrification company. Kinda interesting that they did not let Stifel in on least a piece of the deal, given that the Stifel analyst has been the only one with the guts to put out a good price target on the company.
In any event, it will be interesting to see what this deal prices at. Usually the pricing ends up being something less than the recent trading price, but on this one, who knows, some institutions may get real interested in story, and with the added float that will come from the newly issued shares, may be more comfortable taking a position in the stock at this point
In any event, it will be interesting to see what this deal prices at. Usually the pricing ends up being something less than the recent trading price, but on this one, who knows, some institutions may get real interested in story, and with the added float that will come from the newly issued shares, may be more comfortable taking a position in the stock at this point
Re: Solaris Energy Infrastructure (SEI) Update - Dec 5
My view is that it is very early innings on this one. A significant capital raise after a nice run up in stock based upon a good story is no problem with me. There is potential for significant appreciation on this one and they will need more capital than they can generate. Also, getting more float and institutional following is positive. If shares dip I will be adding.
Re: Solaris Energy Infrastructure (SEI) Update - Dec 5
Thanks for your thoughts Chuck. Pretty impressive move in the stock today. The offering was obviously way oversubscribed and the green shoe will obviously be exercised. I imagine that SEI management must have been tempted to increase the size of the offering, but I give them credit for not doing that. This money they just got should be plenty enough to see them through to the days when they should be back into positive FCF mode.
I was hoping to buy more stock and did bid for some today but did not bid high enough I guess. I'm thinking that there will be one more event that may bring a bunch of shares onto the market -- when the shares issued in the MER acquisition become free-trading. I believe that will happen sometime in March or so.
I was hoping to buy more stock and did bid for some today but did not bid high enough I guess. I'm thinking that there will be one more event that may bring a bunch of shares onto the market -- when the shares issued in the MER acquisition become free-trading. I believe that will happen sometime in March or so.
Re: Solaris Energy Infrastructure (SEI) Update - Dec 5
I think the institutions got in today, the Smart money. So the only way to get in cheap now is sell some puts which I did previously and now I am keeping the premium and no additional stock. Worse things could happen but I wanted the stock. So I'll raise the bar and do it again after I get comfortable that the stock is going up with a bullet.
Re: Solaris Energy Infrastructure (SEI) Update - Dec 5
SEI is now up 300% since they announced the decision to get into the Distributed Power Business. It makes me look good, but I had no idea they were going to do it.
I do think the share price could go to $50, which is why I purchased Call Options instead of the stock. I wish I'd purchased a lot more of them.
Sometimes it is better to be lucky than good.
Once companies like Diamondback (FANG) start building their own natural gas fired power generation, EVERYONE in the Permian Basin will think it is a brilliant idea. This "FAD" has long legs.
I do think the share price could go to $50, which is why I purchased Call Options instead of the stock. I wish I'd purchased a lot more of them.
Sometimes it is better to be lucky than good.
Once companies like Diamondback (FANG) start building their own natural gas fired power generation, EVERYONE in the Permian Basin will think it is a brilliant idea. This "FAD" has long legs.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Solaris Energy Infrastructure (SEI) Update - Dec 5
GEVernova the supplier of the gas turbines is another way to play this. Up 5%today after a couple of unexplained down days. Strap in.
Re: Solaris Energy Infrastructure (SEI) Update - Dec 5
I am up 150% on my SEI Call Options in six weeks. Should buy more.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Solaris Energy Infrastructure (SEI) Update - Dec 5
Congratulations on your option purchase Dan, great call there. I also bought a few Nov. '25 $15 calls along with some stock, on the day they announced 3Q earnings.
I need to correct something I'd said earlier. In the final prospectus for the offering, which they filed with the SEC yesterday, it turns out that Santander only placed around half of the shares, and the other half was spread among a list of 12 firms that can be considered a "Who's Who" list of capital markets providers, including Goldman Sachs, Piper Sandler, Stifel, etc. See page S-28.
The fact that this many firms decided to jump onboard this ship is very encouraging and, along with the strong move in the price post-deal, provides further clues that the deal must have been significantly oversubscribed.
Yorktown and SEI management had to sign 60 day lockups on their stock as part of the deal, but at this point I'm wondering whether Santander may waive the remaining period of those lockups given the strong move in the stock.
I need to correct something I'd said earlier. In the final prospectus for the offering, which they filed with the SEC yesterday, it turns out that Santander only placed around half of the shares, and the other half was spread among a list of 12 firms that can be considered a "Who's Who" list of capital markets providers, including Goldman Sachs, Piper Sandler, Stifel, etc. See page S-28.
The fact that this many firms decided to jump onboard this ship is very encouraging and, along with the strong move in the price post-deal, provides further clues that the deal must have been significantly oversubscribed.
Yorktown and SEI management had to sign 60 day lockups on their stock as part of the deal, but at this point I'm wondering whether Santander may waive the remaining period of those lockups given the strong move in the stock.