EagleRock Land NYSE: EROK reported second-quarter results that management said exceeded its internal forecast, as the recently public land and resource management company benefited from higher water-related activity, surface-use revenue and integration synergies across its Permian Basin assets.
The company, which completed its initial public offering in May, said normalized revenue rose 32.3% sequentially to $46.8 million in the second quarter. Normalized adjusted EBITDA increased about 31.7% from the first quarter to $36.2 million, producing an adjusted EBITDA margin of 77.5%.
President and Chief Financial Officer Neal Shah said the company’s normalized results treat contributions from the Double Eagle and Shallow Valley assets as if they had occurred on Jan. 1, 2026, and include assumptions for public-company costs.
Revenue mix and cash flow
Resource sales accounted for $24.2 million, or 52%, of normalized second-quarter revenue. Surface-use royalties contributed $15.5 million, or 33% of revenue, while surface-use revenue totaled $7.1 million, or 15%.
Water sales volumes increased 9% from the first quarter, driven by brackish-water volumes, Shah said. Produced-water takeaway volumes also continued to rise entering the second half of the year, supporting higher-margin surface-use royalty revenue.
EagleRock generated $22.2 million of free cash flow in the quarter while spending $1.2 million on capital expenditures, resulting in 75% free-cash-flow conversion. Shah said that excluding cash interest expense associated with the predecessor company’s credit facility, free cash flow would have been $6.4 million higher and conversion would have been about 96%.
As of June 30, the company had $61.8 million in cash and cash equivalents and $261.8 million of available liquidity.
Full-year outlook initiated
EagleRock initiated 2026 guidance for normalized adjusted EBITDA of $129 million to $133 million. The forecast excludes any contribution from the company’s recently announced Intrepid Ranch acquisition.
Management said it expects high-margin surface-use royalties to represent a larger portion of revenue in the second half of 2026. Shah attributed the outlook to commercial activity across the portfolio and accelerating synergies between the Shallow Valley and DE Flow systems.
The DE Flow system has begun selling water into Double Eagle acreage ahead of schedule, according to Chief Executive Officer Greg Pipkin. Double Eagle is EagleRock’s largest shareholder and one of its key strategic operating relationships in the Midland Basin. Pipkin said the relationship is supported by a long-term agreement containing minimum annual royalty commitments.
Looking beyond 2026, Shah said it was too early to provide 2027 guidance, but the company expects margin expansion as surface-use royalties and produced-water takeaway become larger contributors. He also cited increasing connectivity between DE Flow and Shallow Valley.
Intrepid Ranch acquisition expands New Mexico position
After the quarter ended, EagleRock announced the acquisition of Intrepid Ranch, an approximately 50,000-acre position in Lea County, New Mexico, directly adjacent to its existing footprint. The transaction includes about 22,000 fee acres and increases EagleRock’s New Mexico fee acreage by roughly 60%.
The acquisition carried a $78.2 million headline purchase price. Net of $1.1 million in deferred surface revenue, the net purchase price was $77.1 million, implying an acquisition multiple of less than nine times EBITDA, Shah said.
Management expects to improve the asset’s economics through active land management, including renegotiating and modernizing surface-use agreements, optimizing water infrastructure and water rights, and pursuing additional royalty opportunities such as sand development.
The company funded the deal with cash on hand and its existing $200 million revolving credit facility. Shah said EagleRock prefers using cash and debt for acquisitions rather than issuing equity that would dilute current shareholders. He said Intrepid is expected to add about $2 million of EBITDA per quarter on a run-rate basis, though it is not included in 2026 guidance.
M&A pipeline and additional commercialization opportunities
Pipkin said EagleRock has a handful of potential acquisitions at various stages of negotiation. Management said it is not focused exclusively on either the Delaware or Midland Basin, instead prioritizing assets that can be acquired at accretive valuations and incorporated into EagleRock’s existing footprint.
The company said its land holdings total approximately 286,000 surface acres across the Delaware Subbasin in New Mexico and the Midland Subbasin in Texas. EagleRock does not own oil and gas minerals; its revenue comes from land-related royalties, surface-use payments and resource sales.
Management also discussed potential uses of its land beyond conventional oil and gas activity, including power generation and transmission, renewables, data centers and commercial development. Pipkin said those opportunities are not included in the company’s projections and should be considered potential upside rather than requirements for the business plan.
- Potential projects under discussion include a solid-waste facility in New Mexico.
- EagleRock is also discussing evaporative disposal and desalination with international parties.
- Other potential opportunities include brine-water development, commercial real estate projects in New Mexico and Texas, and hydrogen fuel-cell-related power uses.
On capital allocation, Shah said EagleRock is considering the merits and timing of a modest dividend, which could expand its appeal to income-oriented investors. However, management said it currently views reinvestment in accretive acquisitions as the most compelling route for long-term shareholder value creation.
About EagleRock Land (NYSE:EROK)
EagleRock Land, LLC is a land management royalty company which controls surface acreage in the core of the Permian Basin providing access to land, resources and infrastructure for critical industries. EagleRock Land, LLC is based in HOUSTON.
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