LandBridge Co LLC (LB) 2025 Q3 法說會逐字稿

Thank you for standing by. My name is Tina and I will be your conference operator today. At this time, I would like to welcome everyone to the Land Bridge third quarter 2025 results call. (Operator Instructions)

Thank you. It is now my pleasure to turn the call over to Mae Harrington, director of investor relations. Ma'am, the floor is yours.

Good morning and thank you for joining Landbridge's third quarter 2025 earnings call. I'm joined today by our Chief Executive Officer, Jason Long, and our Chief Financial Officer, Scott McNeely. Before we begin, I'd like to remind you that in this call and the related presentation, we will make forward-looking statements regarding our current beliefs, plans, and expectations which are not guarantees of future performance and which are subject to a number of known and unknown risks and uncertainties that could cause actual results to differ materially from results and events contemplated by such forward-looking statements.

You are cautioned not to place undue reliance on forward-looking statements. Please refer to the risk factors and other cautionary statements included in our filings with the SEC.

I would also like to point out that our investor presentation in today's conference call will contain discussions of non-GAAP financial measures which we believe are useful in evaluating our performance.

These supplemental measures should not be considered in isolation or as a substitute for financial measures prepared in accordance with GAAP.

Reconciliations to the most directly comparable GAAP measures are included in our earnings release and the appendix of today's accompanying presentation. I'll now turn the call over to our CEO Jason Long.

Thanks, Mae. We're pleased to report another strong quarter marking our 6th consecutive quarter of revenue and even outgrowth since going public. In Q3, revenue increased 7% sequentially, adjusted EBITDA rose 6% with contributions from all of our key revenue streams.

Our growth strategy remains focused on maximizing the economic output of our surface position. In the near term, we continue to focus on delivering a differentiated value proposition through our force space offering. To summarize three core advantages of our approach, first, we control over 300,000 highly contiguous acres largely insulated from the elevated pore pressure challenges impacting other areas of the statewide region. Second, our partnerships, particularly with Water Bridge, enable critical transportation and produced water to underutilize pore space across our acreage.

Water Bridge, one of the largest produced water infrastructure operators in the US, continues to expand its footprint on our land, reinforcing mutual growth.

Third, our development strategy aligns with recent guidance from Texas Railroad Commission, which emphasizes responsible force-based management. We actively avoid overconcentration of produced water handling assets by our customers to preserve force-based integrity.

Further, this quarter demonstrated the value of our active land management strategy beyond the oil and gas industry. We continue to unlock new opportunities with leading developers across energy, infrastructure, and environmental sectors, creating diverse and resilient cash flow streams that we believe will continue to compound over the long-term.

Let me highlight a few of our recent and ongoing commercial developments.

First, we finalized the sale of a 3,000 acre solar energy project in Reeves County with the proposed generation capacity of up to 250 megawatts. The transaction includes an upfront payment and contingent milestone-based payments.

We also entered into a new long-term lease with a subsidiary of One Oak for a natural gas processing facility in Loving County, Texas.

Further, we continue to execute our strategy of creative land acquisitions as demonstrated in a recent acquisition of approximately 37,500 acres from 1,918 ranch and Malton. This acquisition brings immediate cash flows and long-term growth potential. The Loving County acreage enhances our force base offering while the Reeves County position is well suited for future alternative energy development. We expect this acquisition to contribute approximately $20 million in EBITDA beginning in 2026.

And finally, our progress on power infrastructure and data center initiatives is accelerating. And we're eager to keep you informed there's new milestones were used.

Before I turn it over to Scott, I want to briefly address our approach to transparency. We remain committed to keeping investors informed and we'll continue to share meaningful updates on our commercial progress. At times, the level of detail we could provide may be limited due to commercial sensitivities, contractual obligations, or legal constraints. We appreciate your understanding and continued engagement as we balance transparency with these considerations. With that, I'll turn the call over to Scott to talk to the financial results.

Thank you, Jason. We delivered another quarter of strong financial performance with total revenue reaching $50.8 million up 7% sequentially and 78% year over year.

Quarterly growth was broad-based across all three revenue streams. Surface use royalties and revenue increased 2%, driven by higher commercial activity, new project easements, and increased royalties from WaterBridge's BPX cracking development, which commenced operations early in the quarter. Resource sales and royalties also rose 2%, supported by a rebound in water sales from Q2 levels.

Oil and gas royalties posted a 22% sequential increase, with net royalty production rising from 814 barrels of oil equivalent per day in Q2 to 912 in Q3. Importantly, our direct exposure to commodity prices remains limited, with oil and gas royalties representing approximately 7% of year-to-date revenue.

Adjusted EBITDA for the quarter was $44.9 million, up 6% sequentially and 79% year over year, with a margin of 88%. The strong margin performance underscores the efficiency and scalability of our operating model.

Cash flow from operations totalled $34.9 million and free cash flow was $33.7 million. Capital expenditures were $1.2 million and net cash used in investing activities was $1.1 million.

At quarter end, total liquidity stood at $108.3 million, including $28.3 million in cash and $80 million in available borrowing capacity.

Total borrowings outstanding under our term loan and credit facility were $369.3 million, down from $374.3 million at the end of Q2. Our net leverage ratio was 2.1 times at the end of the third quarter compared to 2.4 times last quarter.

We continue to deploy free cash flow in a disciplined and balanced manner focused on 3 priorities.

First, pursuing a creative M&A opportunities, particularly in acquiring underutilized and under commercialized land where we remain committed to rigorous underwriting criteria. Second, maintaining a strong balance sheet with an optimal capital structure, targeting a net leverage ratio of 2 to 2.5 times.

And finally, returning capital to shareholders through dividends and opportunistic share repurchases. This quarter we've declared a quarterly dividend of $0.10 per share payable on December 18, 2025 to shareholders of record as of December 4th.

Finally, we are reaffirming the midpoint of our full year 2025 guidance with a jets at EBITDA expected between $165 million and $175 million.

We're proud of our consistent performance and remain focused on executing our growth strategy, expanding our asset portfolio, and delivering long-term value to our shareholders.

Thank you for your continued support. With that, we'll now open the line for questions, operator.

As a reminder to ask a question, press star one on your telephone keypad. Our first question comes from the line of John McKay with Goldman Sachs. Your line is open.

Hey guys, thank you for the time. Can we talk about the new acquisition a little bit? You framed up some related to EBITDA for 26. Maybe you can kind of talk about your visibility on that visibility of growth on the footprint. And maybe more broadly as part of that, how do you think right now about kind of what's the right kind of price to pay for some of these acreage packages out there? Is it multiple? Is it $1 per barrel per space available? Maybe just walk us through the framework as well.

Hey, good morning, John. Thanks for the thoughtful question so, really excited about 1,918 as we kind of think through it here, kind of conservatively expecting $20 million of EBITDA being contributed from that acquisition to next year.

That's not really predicated on any growth relative to the run rate when we bought it. And so kind of conservatively forecasting that flat, but that said, the economic profile of this acquisition is very similar to what we've seen previously, when we acquired Hanging Edge Ranch, we acquired E State Line Ranch, as two good examples, kind of stepping in at a 12-ish times investment multiple, and then through driving growth, getting that down to more of a 3 to 4 times investment multiple over several years.

When you think through what is, you know. What is driving the potential there? I'd really categorize it into two buckets, the first on the eastern portion of the footprint, there's roughly 900,000 barrels a day of incremental pore space capacity that not just adds to the depth of our pore space inventory, but also gives us additional reach into the southern Loving County which really unlocks some new commercial opportunities.

So that space just at today's prevailing market rate for royalties could generate mid-50s of EBITDA. And then on the western side of the footprint there's already a very impressive bed down of transmission and power infrastructure that makes it a very attractive location for clean energy and energy transition projects and then incremental to those two, I've just summarized by also saying.

This is fantastic surface as you think through potential for digital infrastructure, so all of that would be obviously very additive incremental growth and so as we see kind of the investment here again, it's very similar to the underwriting, thought process that went into those prior investments that have worked out well for us and we're excited to get this one done now to the second part of your question, how do we think through acquisitions? There's no magic formula.

Ultimately we look through underwriting, each acquisition a bit differently and it's really a function of ensuring the land we're buying has, both an attractive entry point as well as a lot of upside that we can capture through our active land management strategy, 1,918 is a great example of that where, the sellers, very sharp group of folks, but not necessarily folks that look to monetize it in the same way and same fashion that that we did.

And so we think there's a lot of upside there. So when we think through, kind of stepping into new M&A deals, very similar we're going to look for the right land in the right locations that have just been under commercialized historically, relative to our expectations, and as long as the math works and we feel good about that option value, the M&A opportunities can make sense in that context.

Thanks, Scott. I appreciate those comments. Maybe just a second one from me. Understand you guys aren't really ready on this call to talk about anything kind of formal on the power side. But if we look more broadly, compared to a year ago, we are starting to see a bunch of kind of power and data center projects pop up kind of more formally across the Permian.

Can you just walk us through one more time when you guys are having these conversations, what are you saying you're bringing to the table relative to some of those other kind of, locations or partners out there?

The announcements have come out recently are no surprise. I mean, the economic fundamentals of West Texas just made that inevitable and as I've said before, it was always a when, not if discussion, and we're starting to see those come to fruition here from our seat, we are further along into existing conversations and also engaged with a number of new blue chip counterparties in these discussions and so we're very excited and very optimistic about the progress we're making and we look forward to sharing new milestones.

When the time is right, ultimately being able to deliver, what is the package solution of land, power partnerships, and water, as well as, in locations that are very conducive to put power in data centers, particularly as you think of things like fiber availability, it really just allows us to deliver this call it de-risk package that, that's just challenging for others to match and that's something that's been very well received by counterparties, again, several processes kind of fairly far along and we're really excited about what's to come.

Stay tuned.

Thank you for the time.

Thanks John.

The next question comes from the line of Teresa Chen with Barclays. Your line is open.

Good morning. I have a follow-up to the 1,918 transaction.

Scott, specifically to your comments about the southern portion of Loving County unlocking new opportunities and reaching potentially that incremental mid $50 million of EBITDA. What kind of time frame? Or cadence are you expecting for that? How much commercial visibility do you have on inking those agreements?

And then on the western side, as far as the opportunities for incremental transmission and power, it sounds like these could come as more discrete events, if you will. How much visibility do you have there as well, please?

Good morning, Teresa. The on the western side of the poor space, we're already actively engaged with discussions on, they call it opportunities for folks to unlock that poor space. And so while we're not baking that into the $20 million dollar figure, we've included for next year, I certainly think, we could start seeing, call it incremental EBITDA or outperformance, particularly on the back half of the year, just given the pace of those conversations at this point.

When you think through growing to kind of the levels you alluded to we think that's called a 3 to 4 year timeline in terms of our ability to go out and action that on the western side on those energy transition and clean energy projects, those are just inherently longer runway projects, but ones we're actively engaged on now and so when you think through, the ability for us to get those, commercialized here over the next 6 to 12 months.

We'll certainly kind of make those announcements, let the public know the progress we're making, although the material even the contribution on those types of projects are typically 3 to 4 years out just given the development runway.

Thank you. And on your solar project transaction, understanding that there are many commercial sensitivities here, but if you can help us frame up even qualitatively what this economically means for your company or what are the next steps or milestones, that'd be really helpful.

This is one that we're excited to get done. We've voiced over, both with y'all on the analyst side as well as the public, effectively since our IPO that we've been working towards this. Towards getting this opportunity across the finish line, we're excited about the counterparty.

It's a large, very reputable public clean energy developer and operator, out of respect to their, ask for confidentiality here, we can't share their name or too much about the details on the project, but that said. I'll just say we're excited to get it done.

It's a great win for the company, as we kind of see the project come online here get developed out over the next several years, we would expect to see those milestone payments hit and then once the project is online and running we would expect to see more recurring revenue, as a result of that.

Thank you.

Thank you, Teresa.

Next question is from Alexander Goldfarb with Piper Sandler. Your line is open.

Hey, good morning down there just two questions. First, just going back to the amount of, that are, number of people talking about building power data centers in West Texas, is this one of these things like sort of. Field of Dreams, if it's built, the hyper scalers will come, or are the hyper scalers, already like committing that they want to access West Texas and therefore it's just a matter of people coming online and building the facilities and then the hyper scalers will be there.

I'm just trying to figure out, if it's sort of field of dreams or the hyper scalers are already, out there and they want to be and they're just waiting for someone to build.

The kind of chicken and egg dynamic you're speaking to was more prevalent last year when West Texas really kind of got on the map, so to speak, when it relates to data centers the engagement we've seen, over the last 6 to 12 months has shifted a bit, where typically these hyper scalers or the data center developers and operators are partnering directly.

With power providers and so it's more of a package negotiation not necessarily waiting for the power to be committed to in the hopes that the data center comes and so I would say it's a much more sophisticated call it packaged approach now and as a result of that I think you're seeing just a lot more willingness for folks to kind of move quickly and get these projects across the finish line.

Okay, and then can we get an update on the existing data center deal that you did? It's been a few quarters since you received the initial deposit, and 5 Point is still sort of that option window, but they, you think they're close to getting everything signed and fully committed and rolling out, or, just what's the update on the, on their process?

Just to kind of remind the group it's a 2 year option period, that partnership between 5 Point and Commonwealth Asset Management which, also works in partnership with Silver Lake, still active. I can't provide any specifics on where they're at in their process though.

Okay.

Thank you.

Thanks.

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

Yes, good morning, Jason, Scott, and the rest of the Landbridge team there. Jason, I want to ask a question about, the natural gas processing lease with one oak and I'm respecting your prepared comments, you have to balance transparency with commercially sensitive terms, but can you give us some detail on how those sorts of deals are typically structured.

Whether it's a upfront payment, an annual payment, duration, just anything you could add to just kind of, help us size that, at least in our mind.

No problem, these are all usually, upfront payments for long-term lease, when you have additional, payments per year. The other thing that opens up a big opportunity here is just the amount of infrastructure associated with these plants, the pipelines, the electrical, etc. So there's recurring revenue, associated with this.

Got it. So it's not just if I understand you correctly, it's not just this processing plant, but it's all the infrastructure and pipelines and electrical transmission that needs to get there that's all other revenue opportunities for whatever damages easements okay, great.

And then, I want to ask you a question about this new slide or it's at least new to me on page 15 where you guys are putting out the long-term shortfall of disposal capacity, in the Delaware Basin, and I get the main point of the slide which is, access support space is going to be going to become more valuable over time, not less, but I wonder if you could just give your interpretation of what, why you guys put the slide together and also maybe talk through what some of the, some of the important assumptions are like I know it looks like this is specific to the Delaware Basin, so this is kind of does that shortfall exclude the possibility of moving say Delaware basin produce water up to the central basin platform, that things like that.

Good morning, Charles. I'll take this one. Jason is struggling with his voice, from a cold if you couldn't pick up on that. So we take a continue to take a close look at poor space in the Delaware Basin, and the punchline on this slide is that that poor space is not a commodity.

There truly is a differentiation as it relates to the poor space, and the approach with managing that poor space and. We've spoken in the past about the overconcentration of assets along the state line, and just the negative core space of the negative geology reaction as a result of that, and as a reminder, the recognition of that is ultimately what drove us to start Landbridge initially in 2021 is we wanted to ensure that we did have.

A very different differentiated force based solution. We wanted to have large amounts of contiguous acres. We wanted to have geographic proximity to operations, and we wanted to have. Not just a clean slate from a force space perspective to ensure it's unencumbered by historical mismanagement, but control of that force space to ensure that going forward we weren't going to be burdened with the mismanagement of other landowners or other operators and so what we're really showing on this slide is the byproduct of some of that overconcentration again, particularly along the state line and what it's doing to poor space capacity and operating capacity of existing produced water infrastructure assets and so on the bottom left we're showing a chart of just produced water growth that's expected in the Delaware Basin through 2035, after 2026 this is effectively assuming a 1% growth rate on oil.

And this was a forecast that was put out by a combined effort between the Pickering Energy consulting arm as well as B3 Insights, which is a great consulting firm that's very sharp on this type of stuff and the as you can see there's a healthy amount of produced water growth, but the unfortunate byproduct of these poor space issues is the existing produced water infrastructure today represented by that yellow line is going to be losing operating capacity going forward, and you see that delta continue to grow over time, and by the time you're at you're in 2035, there's going to be a $9 million barrel a day shortfall between the produced water that's expected in the Delaware Basin. And the infrastructure based on what's currently in place today and so.

It really drives two very real needs. The first is just the need for more produced water handling infrastructure, but the second, more importantly in this context, is the need for access to the kind of poor space that Landbridge offers to serve as an outlet. And so we really like this slide because it really does highlight not just the fact that poor space isn't a commodity and a differentiated approach matters, but also that the macro tailwinds are really going to drive the need for further poor space access, and we're in pole position to capture a lot of that.

Thank you for that elaboration, Scott.

Thanks.

The next question is from Derek Whitfield with Texas Capital. Your line is open.

Good morning all and congrats on all of your operational accomplishments over the last quarter.

With my first question, I wanted to focus on your outlook. While I realize you're not offering 2026 guidance today, how would you frame the step up in EBITDA in next year, over the next year, kind of based on the line of sight growth you have from WaterBridge, the acquisition you've recently closed, and the other surface agreements you've recently announced?

Great question. When we look through next year and kind of the primary growth drivers, obviously the 1,918 acquisition is going to be an immediate step change, but in addition to that just given the line of sight on produced water volumes we have from WaterBridge, we would expect to see pretty healthy growth to the rest of the year and I want to we're going to wait to provide full year 2026 guidance, and when we do that we'll break down kind of more of the more quantitative specifics, but I do think the surface use expect to see, pretty healthy growth through the course of the year on the surface use royalty side. royalties piece is worth calling out because we have line of sight there and that is going to be a meaningful driver.

But incremental to that we've got a great backlog right now of commercial opportunities on the other surface use revenues piece so we continue to see both the surface use royalties as well as the other revenues be. The primary growth driver for our business stepping into 2026, it continues to exceed, our expectations that generally speaking, not just the oil and gas industry, but more broadly, the economic industries out in West Texas are eager to partner with landowners like ourselves who have the right surface in the right areas and are very eager to do commercial deals.

And so I would expect the surface use side both on royalties as well as the rents and other revenues to be the main growth driver stepping into next year. But as it sits today, I would say our 2026 expectations are certainly exceeding what they were a year ago.

Terrific. And as my follow-up, I wanted to take a slightly different approach on the power and data center discussion.

As you guys kind of think about the sheer magnitude of power and AI developments that have recently been announced across West Texas and the implication it has for the opportunity set for Lambridge, how do you, I guess, how do you see that? while we've clearly seen the size of data center development double since we first started talking about it, do you still see a pathway to 2 to 44 to 6 developments? Just how do you think about it?

It's a great question. I would say we've got a number in the pipeline right now, and I don't want to give what that specific number is, but.

It is an opportunity set that has only expanded I would say relative to what we thought when we, initially started exploring this opportunity initially.

I would add outside of just those primary opportunities there are just so many secondary opportunities that exist because of the compounding ecosystem that's kind of growing in West Texas as a result of all this activity and when you think through just what's going to be needed to support these data centers outside of just the direct power but just.

The broader commercial ecosystem, the broader industrial ecosystem, all of that is going to necessitate land access, and again we're in the best position to be the providers of that. So, we obviously will continue to pursue and we're very excited about our direct opportunities as it relates to power and data centers, but we're also going to catch the broader macro tailwinds that are benefiting West Texas, as we continue to see the ecosystem out there compound.

Great, and thanks for the call and I'll turn it back to the operator.

Your final question comes from Kevin McCarty with Pickering Energy Partners.

Hey, thanks for taking my question. I wanted to dig in a little bit into the segment results. We see easement and other surface-related revenues is kind of outpacing our expectations pretty handily this year. And I wonder if you could talk a little bit about the drivers of growth in that segment over the last several quarters and was there anything that kind of surprised you guys to the upside there?

It's a great question, Kevin. Appreciate you hopping on. I would say when we put out, expectations at the beginning of the year, coming off of the back of both the Wolbone acquisition as well as the larger series of acquisitions earlier.

We took a conservative stance on expectations they're obviously relative to what's come to fruition, very much by design, and kind of with where we sit today, we've got a really healthy view of that commercial backlog stepping into next year, but ultimately that outperformance we saw this year is going to be driven by, called intentional conservatism coming off of acquisitions, but as we've said many times over, there is a very high demand for access to our surface by a number of different counterparties. And you know what you're really seeing is the financial impact of that reality coming to fruition here.

I appreciate that, Scott. And then maybe on the produced water side, going back to the forecasted shortfall in disposal capacity is there anything that you can share like high level on what you're seeing on royalty rates on new contracts versus legacy contracts, and do you think that the market is kind of beginning to forecast and realize there's constraints in poor spaces?

As it sits today, we haven't seen call it any meaningful shift in the prevailing market rate for royalties relative to within the last one or two quarters call it, obviously supply and demand economics continue to play out. That is certainly subject to change and, just based on the dynamics we spoke to, just, a few minutes ago with Charles, that's certainly, very real potential for us to capture additional econs going forward now.

Does the market generally call it recognized force space constraints, going forward? I would say the prudent operators out there are the ones that are getting ahead of it, like we announced last quarter, Devin is a fantastic example of a forward thinking Operator in our area who is very intentional about securing the force base that they need access to over the long-term and that led to the minimum volume commitment and force base access agreement directly with LandBridge rather than with, WaterBridge or another water infrastructure company and so you know there's absolutely an acknowledgment of the criticality of what it is we bring to the table. It's already been validated commercially again by Devin and others, and we expect that trend to continue.

Thanks, appreciate it.

And with no further questions, thank you. I will hand the call back to Scott McNeely for closing remarks.

Thanks again for joining us today. Again, we're very excited about the quarter. We're very excited about what we're working through commercially at the moment across multiple opportunity sets, and we look forward to circling back and sharing more news with you here in the future. But again, I appreciate you all effort on learning more a bit about us and look forward to staying in touch. Thanks.

And this concludes today's conference call. You may now disconnect.