What EagleRock Land (EROK) Said on Its Q3 Earnings Call

Key Points

• EagleRock raised its 2026 adjusted EBITDA guidance to $133 million–$137 million, with organic growth and the Intrepid acquisition each contributing about $2 million to the increase. It reported $34 million in Q3 adjusted EBITDA and approximately $32 million in free cash flow.
• High-margin surface use revenue and royalties made up 71% of Q3 revenue and helped lift the adjusted EBITDA margin to 78.5%; the company expects a 73%–75% margin in Q4.
• A new dedication of about 35,000 acres from Double Eagle is expected to generate royalty revenue starting in 2027, with more meaningful growth from 2028 onward. EagleRock also bought two Midland Basin properties for $15.4 million and plans to continue reducing debt by about $10 million monthly.

EagleRock Land NYSE: EROK raised its full-year adjusted earnings outlook after reporting $34 million in third-quarter adjusted EBITDA, citing growth in high-margin surface revenue and contributions from its Intrepid Ranch acquisition.

The company also announced a new acreage dedication from its largest shareholder, Double Eagle, and two smaller Midland Basin acquisitions. Executives said they expect the dedication to contribute royalty revenue beginning in 2027, although they did not provide a specific financial forecast.

Third-quarter revenue totaled $43.3 million, while free cash flow was approximately $32 million, or 93% of adjusted EBITDA. Capital expenditures were approximately $1.1 million.

Guidance rises on organic growth and acquisition

EagleRock raised its normalized 2026 adjusted EBITDA guidance to $133 million to $137 million. The new midpoint of $135 million is $4 million above the prior midpoint, which excluded Intrepid’s contribution.

President and Chief Financial Officer Neal Shah said approximately $2 million of the increase came from additional organic growth and $2 million from Intrepid. It was the company’s second consecutive increase to its full-year outlook.

For 2027, Shah reiterated that 20% organic growth from the company’s original 2026 EBITDA baseline was a reasonable starting point, with acquisitions adding to that growth. He said current 2027 estimates looked conservative, but the company did not provide formal guidance.

Shah said EagleRock’s first- and second-quarter results had been presented on a normalized basis to account for its May initial public offering. The third quarter was the first reported without those adjustments.

Royalty mix supports margins

Surface use royalties accounted for $19.4 million, or 45%, of third-quarter revenue. Surface use revenue contributed $11.3 million, or 26%, while resource sales generated $12.7 million, or 29%.

Shah said the growing contribution from surface use revenue and royalties, neither of which carries associated cost of sales, helped lift the adjusted EBITDA margin to 78.5% from a normalized 77.5% in the second quarter. The company expects a margin of 73% to 75% in the fourth quarter.

Resource sales reflected brackish water volumes in New Mexico and increased volumes in Texas, where Shah said the Shallow Valley system benefited from its connection to the DE Flow water management system. He attributed a sequential decline in overall resource sales revenue to the timing of drilling and completions activity and said EagleRock expects a rebound in brackish water volumes and pricing in the fourth quarter.

Double Eagle dedication and acquisitions

The agreement with Double Eagle V dedicates approximately 35,000 acres in Midland and Glasscock counties, raising Double Eagle’s total acreage dedicated to EagleRock by 50% to more than 100,000 acres, Chief Executive Officer Greg Pipkin said.

Shah clarified that the arrangement is not a transfer of land. Instead, it dedicates water requirements, produced-water takeaway and recycling services to EagleRock. The company said the dedication required no capital outlay and will generate royalty revenue without associated cost of sales.

Shah expects a “robust” contribution in 2027 as drilling and completions activity ramps up, followed by more meaningful growth in 2028 and beyond. He said it was too early to provide precise figures because Double Eagle was still developing its plans.

EagleRock also closed two Midland Basin acquisitions for a combined $15.4 million, adding approximately 2,000 acres. Pipkin said the transactions expanded water supply, storage and disposal capabilities. Shah said he would be disappointed if the company did not grow the acquisitions’ EBITDA footprint by 50% to 80% over the next 18 months through commercialization efforts.

New royalty opportunities and debt reduction

EagleRock recently signed a lease for a sand mine on Intrepid Ranch, which Pipkin said could produce royalties from sand volumes and additional water sales. During the question-and-answer session, he also said the company had signed one acid gas injection project agreement that morning and had another in negotiations.

The company acquired Intrepid for approximately $78 million, primarily using its revolving credit facility. After an initial $80 million draw in August, EagleRock repaid $20 million through the end of October. Shah said the company expects to continue allocating approximately $10 million a month toward debt reduction.

As of Sept. 30, EagleRock had $12.3 million in cash and $70 million outstanding on its $200 million revolving facility. Shah said cash and debt remain the preferred sources of acquisition financing, while a potential nominal dividend is regularly discussed with the board.

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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