LandBridge Q4 2024 Earnings Report

LandBridge EPS Results

• Actual EPS: N/A
• Consensus EPS: $0.35
• Beat/Miss: N/A
• One Year Ago EPS: N/A

LandBridge Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $38.27 million
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

LandBridge Announcement Details

• Quarter: Q4 2024
• Date: 3/5/2025
• Time: After Market Closes
• Conference Call Date: Thursday, March 6, 2025
• Conference Call Time: 9:00AM ET

LandBridge (NYSE:LB) owns and manages land and resources to support and enhance oil and natural gas development in the United States. It owns surface acres in and around the Delaware Basin in Texas and New Mexico. The company holds a portfolio of oil and gas royalties. It also sells brackish water and other surface composite materials. The company was founded in 2021 and is based in Houston, Texas. LandBridge Company LLC operates as a subsidiary of LandBridge Holdings LLC.

LandBridge Q4 2024 Earnings Call Transcript

Key Takeaways

• Landbridge achieved exceptional financial growth in Q4 2024 with revenues up 109% yoy and adjusted EBITDA up 108% (87% margin), and for FY 24 revenue rose 51% with a 55% increase in adjusted EBITDA (88% margin) and a 61% free cash flow margin.
• The company tripled its surface acreage from ~72,000 to ~273,000 acres in FY 24, highlighted by the 46,000-acre Wolfbone Ranch acquisition (securing a $25 M/year minimum five-year revenue commitment) and added ~3,000 contiguous acres in Lee County.
• Landbridge continues to actively commercialize its land through key agreements including a Western Midstream water infrastructure deal, 6,700-acre solar project pacts with DESRI (∼550 MW), and a data center lease option yielding an $8 M upfront payment and potential for ongoing lease, power and water fees.
• The active land management model drove surface use economic efficiency from $465/acre in 2022 to $10.18/acre in 2024, with non-oil & gas royalties comprising ~90% of Q4 revenue and near-zero capital expenditure supporting high free cash flow.
• With amended credit facilities (no quarterly amortization) and $107 M liquidity, Landbridge declared a $0.10/share dividend and reaffirmed 2025 guidance of $170-190 M in adjusted EBITDA, underpinned by strong capital allocation discipline.

Presentation

[Operator]

Thank you for standing by, and welcome to the LandBridge Fourth Quarter 2024 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press Star, followed by the number 1 on your telephone keypad. If you would like to withdraw your question, again, press Star 1. Thank you. I'd now like to turn the call over to Jason Long, Chief Executive Officer. You may begin.

[Jason Long, CEO at LandBridge]

Good morning, everyone, and thank you for joining our Fourth Quarter and Fiscal Year 2024 Earnings Conference Call. We continue our exceptional growth trajectory in the fourth quarter of 2024, growing revenue 109% and adjusted EBITDA 108% year-over-year, with an 87% adjusted EBITDA margin. For the full year ended December 31, 2024, we grew revenues 51% year-over-year, adjusted EBITDA by 55% year-over-year, and achieved 88% adjusted EBITDA margins. As we reflect on our first six months as a public company, it is clear that our active land management strategy is working as expected to create value for our shareholders. 2024 was a year of expansion for LandBridge. We more than tripled our land holdings, growing our total surface acreage from approximately 72,000 surface acres to approximately 273,000 surface acres, with 53,000 of those acres acquired in the fourth quarter alone.

[Jason Long, CEO at LandBridge]

In December, we acquired 46,000 largely contiguous surface acres known as the Wolf Bone Ranch, which expanded our position in Reeves and Pecos County, Texas, a highly strategic location for oil and natural gas production that also provides us access to the Waha Natural Gas Hub. As part of the acquisition, LandBridge secured a minimum annual revenue commitment of $25 million for each of the next five years from BTX and its affiliates, which includes surface operations, brackish water, and royalties from produced water handling. We've continued that momentum into 2025, closing on an acquisition in February for approximately 3,000 acres contiguous to our current land position in Lea County, New Mexico. This acquisition increased our current acreage position to approximately 276,000 acres. Additionally, we see significant future growth opportunities from digital infrastructure, renewable energy, and commercial real estate. Subsequent to the quarter, we executed two notable agreements.

[Jason Long, CEO at LandBridge]

We executed a development agreement with Western Midstream Partners, LP providing a surface and pore space solution for a portion of the recently announced Pathfinder Produced Water Pipeline and related produced water handling facilities on our East Stateline Ranch. Additionally, we executed solar energy project development agreements with affiliates of DESRI, a leading developer, owner, and operator of renewable energy projects. The agreements include 6,700 acres in Andrews County, Texas, and Lea County, New Mexico, for which DESRI has submitted interconnection requests to the Southwest Power Pool. We are excited to be able to announce these two agreements that speak to our continued success to actively commercialize our land. We remain confident that digital infrastructure will be an important growth driver for our business moving forward.

[Jason Long, CEO at LandBridge]

The rapid development of AI and related need for data centers, among other high computing power demands such as crypto mining, will continue to require access to cheap power and water for cooling. Our acreage in West Texas is well positioned to support these requirements and will remain actively engaged in seeking potential opportunities with these interested parties. As a reminder, in November 2024, we officially signed our first lease development agreement for the development of a data center and subsequently received an $8 million payment in December. The payment is a one-time non-refundable deposit for a two-year site selection period, with the potential for a data center to be constructed within four years thereafter. The success of our IPO, the increase of our surface acreage, and the signing of new commercial agreements speak to the momentum of our active land management strategy. Scott, now over to you.

[Scott McNeely, EVP and CFO at LandBridge]

Thank you, Jason, and good morning to everyone joining us today. To echo Jason, we're pleased with the results this quarter, proud of the milestones we reached in 2024, and excited for the promising growth opportunities ahead in 2025. Our fourth quarter revenues increased to $36.5 million, up 28% sequentially and 109% year-over-year. Our full year 2024 revenues increased to $110 million, up 51% year-over-year. Sequential revenue growth for the fourth quarter was driven by surface use, royalties, and revenues, which increased 54% sequentially, including the $8 million payment related to the data center lease development agreement Jason mentioned, as well as increased produced water royalty volumes. Revenue from oil and gas royalties also increased 54% sequentially in Q4, driven by an increase in net royalty production. Resource sales and royalties declined 28% sequentially, which is driven by a decrease in brackish water sales and royalty volumes.

[Scott McNeely, EVP and CFO at LandBridge]

As highlighted the past few quarters, we continue to shift our revenue mix towards non-oil and gas royalty-based arrangements to further insulate our exposure to commodity price fluctuations. In the fourth quarter, non-oil and gas royalty revenue, including surface use royalties and revenues and resource sales and royalties, accounted for nearly 90% of overall revenue, approximately flat from the prior quarter and up about 20% year-over-year. For the full year, non-oil and gas mineral royalty revenue represented 85% of total revenue, an increase of more than 13% year-over-year. Importantly, our results in 2024 validate our ability to capitalize on growth in the Permian Basin without incurring meaningful operating and capital expenditures. This key feature of our business model translated to an adjusted EBITDA margin of 88% and free cash flow margin of 61% in 2024.

[Scott McNeely, EVP and CFO at LandBridge]

In the fourth quarter, we delivered $31.7 million of adjusted EBITDA, up 27% sequentially and 108% year-over-year, with an adjusted EBITDA margin of 87%. For the full year ended in 2024, we delivered $97.1 million of adjusted EBITDA. We also generated free cash flow of approximately $26.7 million and a free cash flow margin of 73% in the fourth quarter. For the full year ended 2024, we generated $66.7 million of free cash flow. As noted last quarter, our free cash flow in 2024 was impacted by non-recurring IPO-related expenses and lease termination cost. Our Q4 free cash flow margin of around 70% is more in line with our long-term expectations. Additionally, we'd like to discuss our surface use economic efficiency, which we define as total revenues less oil and gas mineral royalty revenues divided by the applicable acreage.

[Scott McNeely, EVP and CFO at LandBridge]

This metric for our legacy 72,000-acre position has increased from $465 per acre in 2022 to $724 per acre in 2023 to $1,018 per acre in 2024. We think this speaks to our unique ability to significantly increase cash flows on our acreage over time through our active land management strategy, and we believe similar growth potential exists on the surface acquired in 2024, again, without any meaningful cash outlay for capital expenditures. Moving forward, we will continue to execute on our capital allocation priorities, which include pursuing value-enhancing land acquisitions with a focus on underutilized and undercommercialized surface. As a reminder, we seek to acquire surface that is not just financially accretive but also offers long-term growth potential that mirrors our existing portfolio. We are also focused on maintaining a strong balance sheet to maximize financial flexibility over time.

[Scott McNeely, EVP and CFO at LandBridge]

We ended the year with $385 million of debt outstanding under our credit and debt facilities, which is up from $281.3 million at the end of the third quarter of 2024. We updated and amended our debt facilities in part to fund our recent acquisitions. As part of the amendments, the requirement for quarterly amortization payments was removed, which will improve cash flow and liquidity to allow for more flexibility and optionality for future capital allocation alternatives. As a result of these updates, we ended the year with total liquidity of $107 million, including cash and cash equivalents of $37 million and $70 million available under our amended revolving credit facility. Finally, similar to last quarter, we've declared a cash dividend to shareholders of $0.10 per share.

[Scott McNeely, CFO at LandBridge Company LLC]

While we will revisit the amount of the dividend on a quarterly basis with our board, we will continue to focus our capital allocation strategy on a robust pipeline of attractive acquisition opportunities available to us. Looking ahead, we are reaffirming our previously announced guidance for 2025. For the full year, we expect $170-$190 million of adjusted EBITDA, driven by incremental contributions from our recent acquisitions, initial solar facility contributions to surface use revenues, and growth of surface use royalties through higher produced water volumes, among other factors detailed in our press release. In conclusion, we delivered another outstanding quarter to close out a year of strong growth. Our momentum remains promising, and we look forward to advancing development on our surface acreage in partnership with industry-leading developers and operators. We would like to open up the line for questions. Operator.

[Operator]

Thank you. We will now begin the question-and-answer session. If you would like to ask a question, please press Star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press Star 1 again. Your first question comes from the line of Jackie Koletas from Goldman Sachs. Your line is open.

[Jackie Koletas, Equity Research Analyst at Goldman Sachs]

Hi, good morning. Thank you so much for the time. First, just wanted to start, you know, you called out your ability to increase surface use economic efficiency year-over-year. You know, just looking ahead, where do you think this metric can go from here as you see the growth across your footprint?

[Scott McNeely, EVP and CFO at LandBridge]

Yeah, hey, good morning, Jackie. It's a great question. You know, we haven't defined a hard cap by any means right now, but we think there's still a lot of room to move that up. Just to quantify that a bit, you know, we can look at a section or one square mile, 640 acres, as a good example. You know, in that section, we can fit, you know, one produced water handling facility that can generate $1.5 million per year at that facility in royalty revenue. Then on top of that, you know, there's a lot of acreage that isn't used by just that 10-acre produced water handling facility site that we can do quite a bit with. You know, I'll give an obvious example.

[Scott McNeely, EVP and CFO at LandBridge]

You know, we can fill in, call up that extra space with opportunities like solar, similar to the opportunity we announced on this earnings release. You know, that could add easily another $500,000 plus, you know, across that section. To think we can do $2 million per section or per square mile, which equates to a little over $3,000 an acre, I would say is very, very achievable. That's not giving credit to some of the more, call it, economically dense opportunities, such as sand mines, such as digital infrastructure, and so on. A lot of running room left. You know, again, I think that $3,000 plus is a pretty good bogey here in the near term, but we definitely don't think that's the hard cap.

[Jackie Koletas, Equity Research Analyst at Goldman Sachs]

Got it. Appreciate it. Just following up, you know, on your agreement with WES, can you provide just more details on the size and the expected upside from that contract? Are there more third-party agreements that you can win from here beyond, you know, WaterBridge in general?

[Scott McNeely, EVP and CFO at LandBridge]

Yeah, good question. To start with the WES piece, the agreement is a bit bespoke, just given the fact that we are a portion of the solution there, albeit we think that we're one of the critical pieces of the solution. You know, in terms of just the economic impact, you know, we expect to get just, call it, low single-digit millions in terms of surface damages, rights of way, and those types of payments here, you know, over the next 12-18 months as they work out the construction of that asset. You know, once everything is operational, you know, we could see high single-digit millions, to call it, low to mid-teens of royalties. It really just depends on the total volumes and the source of those volumes. I would say a good deal for us, a good deal for WES.

[Scott McNeely, EVP and CFO at LandBridge]

We're happy to partner with them on this, and I think there's a, you know, great upside for both of us here. Now, as it relates to the second part of the question, we are in process with, in talks with a lot of other folks out there, a lot of third parties out there. You know, this WES agreement is certainly not, just call it, a one and done. You know, obviously, we have a lot going on with WaterBridge, but there are a lot of other folks in the water infrastructure space and the upstream space that find both access to our surface and through our surface incredibly valuable. We continue to have those commercial discussions and hope to share more wins later this year.

[Jackie Koletas, Equity Research Analyst at Goldman Sachs]

Thank you. I'll leave it there.

[Scott McNeely, EVP and CFO at LandBridge]

Thanks, Jackie.

[Operator]

Your next question comes from the line of Charles Meade from Johnson Rice. Your line is open.

[Charles Meade, Research Analyst at Johnson Rice]

Yes. Good morning, Jason and Scott. Jason, I want to go back to.

[Jason Long, CEO at LandBridge]

One drop.

[Charles Meade, Research Analyst at Johnson Rice]

Yeah, I want to go back to some of your prepared comments on the data center. First, it was great, and you guys have been talking about this for a while. It's great to see that $8 million in December. Can you, I think if I heard you right, you said you've got a two-year site selection period and then a four-year construction period. Can you give us a sense of the, you know, what the roadmap is from here, what the milestones would be for future revenue, and, you know, whether there's going to be anything when we exit that two-year site selection period, and then what the, you know, along the lines of what Scott was saying, what the kind of annual revenue opportunity is perhaps after that four-year construction period?

[Scott McNeely, EVP and CFO at LandBridge]

Yeah. Hey, Charles. I'll tackle this one. Yeah. You know, as we've mentioned previously, this two-year option period, our site selection period, kind of in the process of that right now. You know, the voiceover to us has been expectations likely closer to 12-18 months, but they do have that full 24 months. You know, after that site selection wraps up, we start to see, call it, a ration of cash flows that work to our benefit. It will start with a smaller, more subsidized lease component as they kind of stage for construction. Once they actually break ground on construction, we would expect to see that full $8 million a year in lease payments for that 2,000 acres.

[Scott McNeely, EVP and CFO at LandBridge]

Now, as different phases come online, that's when we would expect to see incremental revenue streams to include the profits interest on the power generation, as well as potentially any water sales that are needed for cooling either the power generation or the actual data center itself. You know, as you alluded to, it is a multi-year timeline. These are large capital projects. I think we're in a really good spot right now with everything moving forward as contemplated. You know, I guess the takeaway is we would expect to start seeing more revenues from that likely next year and seeing those continue to ratchet up over the subsequent years through construction as different phases of operations come online. You know, and I think finally kind of targeting again that one gigawatt being probably a few years after that first phase is online.

[Charles Meade, Research Analyst at Johnson Rice]

Got it. I know. Thank you for all that detail, Scott. I know you talked about it before, but it's good to get the refresher.

[Scott McNeely, EVP and CFO at LandBridge]

Yeah, of course.

[Charles Meade, Research Analyst at Johnson Rice]

The Wolf Bone Ranch, can you talk about how that integration is going and what, if anything, you've learned and any kind of, you know, opportunities that you may be aware of that you weren't when you struck that deal?

[Scott McNeely, EVP and CFO at LandBridge]

Yeah. I mean, from an integration standpoint, the beauty of surface and, again, not being necessarily an operating company is the integration component is actually pretty light other than just some back office work. And so, you know, that has gone seamlessly. I would say kudos to both, you know, our accounting and legal teams as well as those over at BTX. It was a very smooth process there. I mean, as we kind of think through opportunities, I think what we've found is just a lot of the, not necessarily the commercial underwriting, but the investment thesis that went into that acquisition. So proximity to Waha, large contiguous blocks, access to various infrastructure.

[Jason Long, CEO at LandBridge]

Highway frontage.

[Scott McNeely, EVP and CFO at LandBridge]

Highway frontage. All of that, yeah, has come into fruition very, very quickly. We've gotten quite a bit of interest in that, such as having a number of conversations right now for access to surface because of those various resources. Obviously, having just closed on that a couple of months ago, we're still kind of in the early innings here. I would say it's somewhat off to the races, and we've got great traction, you know, out of the gate here. Again, you know, hope to be able to share some of the wins later this year as a result of that acquisition.

[Charles Meade, Research Analyst at Johnson Rice]

That's great detail. Thanks, Scott. Thanks, Jason.

[Scott McNeely, EVP and CFO at LandBridge]

Yeah. Thanks, Charles.

[Operator]

Your next question comes from Derrick Whitfield from Texas Capital. Your line is open.

[Derrick Whitfield, Head of Energy Equity Research at Texas Capital]

Good morning, Alan. Congrats on an impressive first year as a public company.

[Scott McNeely, EVP and CFO at LandBridge]

Thanks, sir.

[Jason Long, CEO at LandBridge]

Thank you.

[Derrick Whitfield, Head of Energy Equity Research at Texas Capital]

First, I wanted to start with the land strategy on page four. Previously, you were building a wall around the state line for the benefit of advantage water captures. Northern Delaware water disposal needs grew. Could you speak to the opportunity you're seeing with the BLM SLO leases in Lea County?

[Scott McNeely, EVP and CFO at LandBridge]

On the BLM and stately stuff, majority of those acreage positions that we've bought, obviously, we're very strategic in the fact that it gave us the ability to bring some of our supply water from Texas up into New Mexico, as well as the produced water piece. Really leveraging on the fee pieces that we bought in and around those leases is where we've been able to get some really good tailwinds. I think it's important to note that we're not necessarily underwriting any value to those leases when we work through our M&A strategy. Now, just by nature of, call it, the New Mexico landscape, a lot of this fee surface includes some of these leases. You tend to be able to capture those in one fell swoop, call it.

[Scott McNeely, EVP and CFO at LandBridge]

When we think through, like, where is the real value proposition in these acquisitions, it is going to be largely on that fee surface. For the sake of the map, we wanted to call that out just to be transparent with folks. Yeah.

[Derrick Whitfield, Head of Energy Equity Research at Texas Capital]

Terrific. Perhaps bigger picture question on data centers for my follow-up. We've seen a trend of data centers being built in more remote locations like Stargate. Thinking about the progression of discussions with your customers, how are you seeing that picture unfold for more data centers in the Permian? I guess directionally, are you guys more bullish than three to six months ago?

[Scott McNeely, EVP and CFO at LandBridge]

Take this one, Jason.

[Jason Long, CEO at LandBridge]

Yeah. Look, I think that, you know, there is, we definitely are, I think, more bullish. I think that, you know, timing is everything here. Once this first domino falls, I think there will be a lot more to come with it. You know, power is a big piece of this. Obviously, access to surface, access to the grid, access to gas are all very important pieces of the puzzle. Look, I think that the data center hyperscalers are definitely getting more comfortable with these remote locations as we've seen on the Stargate side of things. Yeah, we're very excited about the opportunity. Our position and our surface gives us, you know, really good running room as we have these conversations.

[Derrick Whitfield, Head of Energy Equity Research at Texas Capital]

That's great. Thanks for taking my questions.

[Scott McNeely, EVP and CFO at LandBridge]

Yep. Thanks, Derek.

[Operator]

Your next question comes from Alexander Goldfarb from Piper Sandler. Your line is open.

[Alexander Goldfarb, Managing Director and Senior Research Analyst at Piper Sandler]

Hey. Good morning down there.

[Scott McNeely, EVP and CFO at LandBridge]

Morning.

[Jason Long, CEO at LandBridge]

Just a morning.

[Alexander Goldfarb, Managing Director and Senior Research Analyst at Piper Sandler]

Hey. Morning.

[Alexander Goldfarb, Managing Director and Senior Research Analyst at Piper Sandler]

Hey. Morning. Just a few questions. First, you know, you guys are certainly blessed with a great cost of capital in your equity. You also talked about restructuring your credit facility, I think, to eliminate amortization, have, you know, go to IO. I guess my question is, as you guys look at the landscape, certainly the market is placing a premium in your stock for data centers, but those deals take a lot longer cash flow-wise to materialize versus water, solar, et cetera, that seem to be much sooner in monetization. How are you guys thinking about the projects that you're looking at from a cash flow perspective versus the funding side where the market is paying a premium for the data centers, but those take longer?

[Scott McNeely, EVP and CFO at LandBridge]

Yeah. I think that it's a good question. I think, you know, that you're spot on. I mean, the market is definitely leaning into the data center theme, not just for us. I would say more broadly to anyone that kind of touches at this point. You know, the point I always make when folks bring that up is, first, I think we're in a fortunate spot where that opportunity is very real for us. And we're obviously working through that. We've discussed that quite publicly. You know, totally insulated from that data center narrative is this core oil and gas story or, call it, energy infrastructure and land story that you alluded to that provides just substantial growth here in the near term.

[Scott McNeely, EVP and CFO at LandBridge]

I mean, we, you know, we talked to the surface use economic efficiency metric, the growth there, you know, spoke a bit about where we think that could go. I think it's important to remember all of that is very achievable, you know, outside of the data center narrative, which is only going to provide, you know, further uplift as those come to fruition. Ultimately, when we think through our strategy and the action plan on our side, it's all of the above. I mean, I think we've got these very real opportunities to grow cash flows here in the near term that, again, cost us no capital that we are going to continue to pursue.

[Scott McNeely, EVP and CFO at LandBridge]

Now, we're trying to be mindful about the opportunity cost of certain areas of our surface where, you know, we think data centers could be, call it, best suited relative to some of the other opportunities. At the end of the day, I mean, there is a lot of runway we have out there on the surface today for opportunities outside of data centers. We're going to continue to push on those. Those will be the driver of the growth that we expect to see here in the coming, you know, couple of years. The data center, you know, call it, tailwinds are very real.

[Scott McNeely, EVP and CFO at LandBridge]

We think, you know, three, five plus years down the road, all of that will start to get layered on to the successes that we achieve, you know, in a lot of these other themes, a lot of these other investment opportunities. I tell folks it's great because, you know, we can increase or we believe we can increase our cash flows by orders of magnitude outside of data centers. I think we're executing on that. We're proving we're executing on that. There's a lot of runway left. The data center story is additive. The combination of those two things, I think, makes this a very, very powerful story in the market, which is why the market's received it the way it has.

[Scott McNeely, EVP and CFO at LandBridge]

You know, and it's on us to continue to execute on both fronts if we want to hold our ground here.

[Alexander Goldfarb, Managing Director and Senior Research Analyst at Piper Sandler]

Then along those lines, your funding, do you think that you'll go back and raise more equity? Are you planning to use debt? Like, what should we be modeling for capital raises for this year?

[Scott McNeely, EVP and CFO at LandBridge]

Yeah. I mean, I think, you know, if the right opportunity presents itself, we would raise equity. I think that said, you know, we obviously generate an immense amount of free cash flow. You know, I think keeping the balance sheet healthy is a priority. I mean, we're not afraid to put a little bit of leverage on there when it makes sense. I think keeping a sensible balance is probably the best approach here.

[Scott McNeely, EVP and CFO at LandBridge]

I mean, you know, we're in a very healthy position, not just from a leverage standpoint, but just from a debt service coverage standpoint. We want to make sure it stays that way. I mean, that will give us the ability to navigate, you know, any volatility or risk that may come up in the future that's unforeseen at the moment. We like that. For us to issue equity, it's got to make sense. It's got to have, you know, the acquisition opportunity needs to have a growth profile that we think, you know, mirrors our own in attractiveness. It needs to be a story that we can go out and tell the public, you know, that, look, this is why equity makes sense in this context. You know, there's no one size fits all. I think it's really going to depend on the situation.

[Scott McNeely, EVP and CFO at LandBridge]

Ultimately, maintaining a prudent balance sheet, making sure we're not diluting folks unnecessarily, but ensuring that we're staying kind of responsible in the full context of the company and continuing to drive growth, all of those aspects are top of mind.

[Alexander Goldfarb, Managing Director and Senior Research Analyst at Piper Sandler]

Okay. If you'll, just one more question. On the water needs for the data centers, and forgive me, you know, obviously coming from a real estate side, not an oil guy, the brackish water and the water that you guys, you know, take from others who are drilling or fracking for oil, does that brackish water, can that be converted to use in cooling data centers, or do data centers require pure fresh, you know, first generation water, if you will?

[Scott McNeely, EVP and CFO at LandBridge]

Yeah. Good question. You have just brackish water, which is not necessarily the same as produced water. You have, you know, brackish water wells out of the ground. You have produced water, which is coming up with the oil and gas. I think, you know, the latter certainly would require more treatment. You know, there is likely to be some level of treatment for either, most definitely with produced water. I do not want to give the impression it is, you know, you just connect the pipe up to the data center and it is good. I think there would be some cost associated with getting that water to the quality that is needed. All of that, you know, is kind of taken into consideration as a lot of these data center developers and operators work through their diligence and underwriting.

[Scott McNeely, EVP and CFO at LandBridge]

I think that said, where we have a big advantage in West Texas is we have an abundance of these resources, both in terms of brackish water and produced water. While there may be some incremental cost associated with treatment, there is not, you know, a large metropolitan area that you are competing with for these resources. I think, generally speaking, that is very attractive. Jason, you want to add?

[Jason Long, CEO at LandBridge]

I just, one thing to be clear is that cost would not be something that LandBridge would.

[Scott McNeely, EVP and CFO at LandBridge]

Great point. Yeah.

[Alexander Goldfarb, Managing Director and Senior Research Analyst at Piper Sandler]

Okay. Thank you.

[Scott McNeely, EVP and CFO at LandBridge]

Yeah. Thanks, Alan.

[Operator]

Your next question comes from Kevin McCurdy from Pickering Energy Partners. Your line is open.

[Kevin McCurdy, Managing Director at Pickering Energy Partners]

Hey. Good morning, Jason and Scott. My first question is on the macro outlook and impact on your business. Oil prices have kind of taken a hit over the last week. What oil price and corresponding level of activity is built into your 2025 guide, and how sensitive do you expect your EBITDA to be to oil prices this year?

[Scott McNeely, EVP and CFO at LandBridge]

Yeah. Good question, Kevin. Good to hear from you. No meaningful ramps whatsoever built into our 2025 guide. All that's based on firm guidance from operators we have, you know, both from the WaterBridge side and others. You know, I think generally speaking, as it relates to commodity price sensitivity, there would need to be a pretty massive swing to the economic potential for the Delaware Basin for that to, call it, move off track. You know, outside of our small minerals position, which is, you know, we expect to be sub 10% of our business this year, we really do not have any meaningful commodity price sensitivity.

[Scott McNeely, EVP and CFO at LandBridge]

I would say, you know, in summary, as long as the, you know, commodity prices kind of hold to a point where producers continue with their development plans this year, as kind of spoken to the public, no real impact on us.

[Kevin McCurdy, Managing Director at Pickering Energy Partners]

Great. Appreciate that detail. Thank you for, you know, the earlier comments on the Western Midstream EBITDA impact. I wonder if you could share the same thing for the newly announced solar agreement, looking for any EBITDA impact in the timing.

[Scott McNeely, EVP and CFO at LandBridge]

Yeah. Yeah. For those deals, it takes somewhere between two and three years to get through the permitting and development. In that interim period, we get, you know, a smaller, call it, we call it an option fee, development fee, something to that extent. Two to three years down the road, once that comes online, we would expect a project like this, about 7,000 acres, 550 MW to contribute, call it, mid to high single-digit millions of cash flow per year.

[Kevin McCurdy, Managing Director at Pickering Energy Partners]

Great. Thank you.

[Scott McNeely, EVP and CFO at LandBridge]

Yeah. Thanks, Kevin.

[Operator]

Your next question comes from the line of Theresa Chen from Barclays. Your line is open.

[Theresa Chen, Senior Analyst of Midstream and Refining Equity Research at Barclays]

Good morning. You have been very busy with a flurry of activity within the last year, both on the organic and inorganic front. I wanted to ask on your M&A outlook from here, if you could just remind us, you know, how fragmented is the market at this point? And are there still many areas of desirable surface acreage left and near your footprint that would fit well within your portfolio?

[Scott McNeely, EVP and CFO at LandBridge]

Yeah. Hey. Good morning, Theresa. We have been busy. No, I think to answer your question, there's still quite a bit out there. I think that's, you know, I alluded to that in the prepared remarks, you know, from a capital allocation standpoint. You know, M&A continues to be, by a wide margin, the best use of our capital. You know, generally speaking, the landscape is still very, very fragmented. There are still a lot of opportunities out there. You know, we're in talks with a number of those right now. I think, you know, there is a real benefit that we bring to the table, particularly in opportunities where the surface owner may own the underlying minerals and wants to encourage more development activity on that surface. That's something we can bring to the table.

[Scott McNeely, EVP and CFO at LandBridge]

In situations where a seller may have, you know, tax considerations, the ability to do, you know, a more tax-advantaged deal via our public currency is also another advantage that we have. You know, we continue to look at all the tools that we have to execute on our M&A strategy. We think that, again, the pipeline is very robust right now. We think there is a lot out there that makes a lot of sense and is incredibly additive to our platform. We will continue to pursue those.

[Theresa Chen, Senior Analyst of Midstream and Refining Equity Research at Barclays]

Understood. On the topic of surface efficiency for the assets already within your portfolio and getting to that, you know, incremental $3,000 per acre target, understanding that some of it will be relatively capital light and, you know, some of these opportunities might be more involved. When we think about the average going forward, how much CapEx do you expect to deploy in order to realize this target?

[Scott McNeely, EVP and CFO at LandBridge]

Yeah. I mean, you know, just as a reminder, we do not do any of the developing of any of these assets whatsoever. You know, I think for this upcoming year, we had expected somewhere between $1 million and $2 million of CapEx total. That is just kind of nickel-and-dime things on, like, trucks and other kind of field assets that we need just to manage the business. The beauty of the business model is, you know, we acquire surface. We, you know, will go through some of the efforts needed to make that surface commercially viable. That typically does not involve any capital. We go out and we try to drive business to that surface, you know, from other folks looking for sophisticated landowners in the right areas who know how to work with them. That has gone very, very well for us.

[Scott McNeely, EVP and CFO at LandBridge]

That has allowed us to drive that surface use efficiency metric on that legacy position, you know, up more than 100% in a couple of years. Like I mentioned earlier, we think that that is a very replicable growth strategy on the rest of our surface. You know, there is a very long runway for us to continue to drive growth on the position as it exists today. Like I mentioned, we think that M&A is only going to be additive and going to help drive that growth. The point I'd make is outside of acquiring surface, all of that growth does not necessitate CapEx, which is, again, the beauty of the business model here.

[Theresa Chen, Senior Analyst of Midstream and Refining Equity Research at Barclays]

Thank you.

[Scott McNeely, EVP and CFO at LandBridge]

Yeah. Thank you, Teresa.

[Operator]

Your next question comes from the line of of Roger Reed from Wells Fargo. Your line is open.

[Roger Read, Senior Energy Analyst at Wells Fargo]

Yeah. Good morning. Let me take a slightly different tack here just with the Texas legislature in session and some of the water issues are on their agenda. We do not know exactly where it will shake out. Is there anything you are watching there in terms of regulation that would be potentially enhancing for you or create an opportunity? It kind of ties into the earlier question on, you know, what kind of water you need for a data center because I understand some of the legislation or proposed legislation is about recycling water as opposed to just, you know, permanent disposal underground.

[Scott McNeely, EVP and CFO at LandBridge]

Yeah. Great question. We 100% are watching everything that's going on, obviously. It not only potentially could be a benefit for LandBridge, but also the same with WaterBridge on the WaterBridge side as well. As you think through the recycling piece of that, which, you know, our surface position gives us a really good opportunity to take advantage of that opportunity, right? You need access to large surface, large contiguous surface to create these recycling ponds and basically centers. Yeah, I mean, we do think it's a great opportunity and are watching it extremely closely.

[Roger Read, Senior Energy Analyst at Wells Fargo]

One of the other things out there was, and this gets back to, you know, the issue with some of the minor earthquakes out in West Texas, disposal of water from neighboring states, which in this case would obviously be New Mexico. Is there anything that you're looking at you might have to do differently or that would force the industry to be more likely to lean on LandBridge in order to deal with produced water from New Mexico?

[Scott McNeely, EVP and CFO at LandBridge]

Yeah. I mean, that has been one of our, you know, biggest theses from the start, right, is taking a lot of this water out of New Mexico where historically it's been handled in deep injection, which in our view and I think in the regulatory body's view, that's what's causing a lot of this seismicity. Actually getting that out of basin, that's one solution, but also just spreading out that injection in whole and having access to this large contiguous surface gives us the ability to give people like West, and that's a prime example with this recent deal we did with West, give them the opportunity to spread that injection out and bring that water from New Mexico. We've got that opportunity with every other third-party water provider out there as well.

[Roger Read, Senior Energy Analyst at Wells Fargo]

Just as a follow-up on that, are you seeing any change in how you, I'd say how you, I guess, what your costs are or what your revenue potential could change as a result of, you know, call it regulation, legislation needs to spread out? I mean, is that impacting at all what you are able to charge per gallon, per barrel? Then think about that on the revenue per acre that you were talking about earlier.

[Scott McNeely, EVP and CFO at LandBridge]

Yeah. Obviously, we have no cost associated with it. I do think that, you know, access to good pore space that's spread out and can be handled in a sustainable way, the price of that, I think, will go up over time. We have seen royalties increase over time as you have access to this pore space. We feel like we're in a really good spot. We continue to be optimistic as we think through, you know, adding to our portfolio of acreage, being very mindful of pore space going forward.

[Roger Read, Senior Energy Analyst at Wells Fargo]

All right. Thank you.

[Scott McNeely, EVP and CFO at LandBridge]

Thank you.

[Operator]

Your next question comes from Sean Milligan from Janney. Your line is open.

[Sean Milligan, Analyst at Janney]

Hey. Good morning, guys. Thanks for taking the questions. On the 2025 guidance, I was curious if you'd be willing to provide any guardrails around kind of expected produced water volume growth, you know, that's embedded in that guidance range.

[Scott McNeely, EVP and CFO at LandBridge]

Yeah. Hey. Good morning, Sean. Yeah. I can talk through a high level here. I think the way to think about it is, you know, with the inclusion of the Wolf Bone Ranch acquisition that's wrapped up at the end of 2024, you know, that'll put us, call it, just over a million barrels a day, kind of low millions. You know, through the course of the year, we've got a handful of projects coming online, two of which we've spoken about publicly. So I'll reiterate those. The first is WaterBridge's construction of the bpx Kraken line that will, you know, come online at the end of second quarter. And that will add meaningful volumes. And we've talked to that a bit. Rather, that has been published in a press release. So I won't go over the details of that.

[Scott McNeely, EVP and CFO at LandBridge]

You know, that's going to be fairly additive from a volume perspective towards the end of second quarter. The second piece is there are a number of new assets coming online on our legacy surface position that will also be used to handle Devon volumes that are flowing today that are being diverted off of their legacy position. You know, I would expect to see a pretty meaningful step change in produced water volume starting to hit in second quarter, but really fully materializing in third quarter. I would say it's very easy, you know, relative to the, call it, the million or so barrels a day today to see, you know, low to mid double-digit, call it, growth in those produced water volumes through the course of the year and kind of exiting 2025.

[Sean Milligan, Analyst at Janney]

Great. That's really helpful. On the solar side, I think previously you had talked about kind of receiving prepayments. Those had been pushed to 2025. I guess, like, I was expecting those to sort of be in line with what the data center payment was in the fourth quarter. Is that still the right way to think about those payments in 2025?

[Scott McNeely, EVP and CFO at LandBridge]

Yeah. Great, great question. You did not ask this, but I'll clarify an obvious point that the DESRI deal that we announced alongside earnings is different and additive relative to the solar opportunity we've spoken to previously. Yeah. That, you know, we are in the process of evaluating different proposals on that right now. I've spoken previously about the, you know, call it, the lack of, call it, conformity around how those proposals will look. You know, everyone or each of these developers and operators will put forward some upfront consideration and some recurring, you know, rent effectively. It is our job then to go through those proposals and determine what presents the best value for the company. Now, we would expect to receive those upfront milestone payments this year. From a total size perspective, it's about, you're thinking it the right way.

[Scott McNeely, EVP and CFO at LandBridge]

It's probably $8 million-$10 million, you know, this year. I kind of caveat that a bit with what I said initially, which is, you know, we will not favor the proposal that has the most, call it, cash upfront. If we get a situation where there is a smaller upfront but a much larger residual over an extended period of time that will just generate more value for the company, you know, we would, of course, go with that. That's something that, you know, as the dust settles and we choose a path forward, I'll be transparent to the market about just so folks can, you know, adjust their forecasts and expectations accordingly.

[Sean Milligan, Analyst at Janney]

Okay. Great. Just to confirm, the DESRI deal is separate from the prior deal that we talked about developing yourself.

[Scott McNeely, EVP and CFO at LandBridge]

Correct.

[Sean Milligan, Analyst at Janney]

Okay. Thank you. That's helpful.

[Scott McNeely, EVP and CFO at LandBridge]

Yeah. You got it.

[Operator]

That concludes our question and answer session. I will now turn the call back over to Scott McNeely for closing remarks.

[Scott McNeely, EVP and CFO at LandBridge]

Yeah. Thank you, Rob. Thank you, everyone, for joining us this morning again. We were very happy with how the year wrapped up and are very enthusiastic about the tailwinds of our business stepping into 2025. We look forward to sharing just more of our wins and successes with you through the course of this year. To the extent there are any questions or any follow-up discussions would be helpful, please feel free to reach out to contact@landbridgeco.com so we can get a call scheduled. Thanks again. We hope you all enjoy the weekend.

[Operator]

This concludes today's conference call. Thank you for your participation. You may now disconnect.

Participants

Executives

• Jason Long, CEO
• Scott McNeely, EVP and CFO
• Scott McNeely, CFO

Analysts

• Charles Meade, Research Analyst at Johnson Rice
• Theresa Chen, Senior Analyst of Midstream and Refining Equity Research at Barclays
• Kevin McCurdy, Managing Director at Pickering Energy Partners
• Sean Milligan, Analyst at Janney
• Derrick Whitfield, Head of Energy Equity Research at Texas Capital
• Roger Read, Senior Energy Analyst at Wells Fargo
• Jackie Koletas, Equity Research Analyst at Goldman Sachs
• Alexander Goldfarb, Managing Director and Senior Research Analyst at Piper Sandler