LandBridge Co LLC Q4 FY2025 Earnings Call

Ladies and gentlemen, thank you for joining us, and welcome to the LandBridge Fourth Quarter 2025 Results Call. I will now hand the conference over to Mae Harrington, Director of Investor Relations. Mae, please go ahead.

Good morning, and thank you for joining LandBridge's Fourth Quarter and Fiscal Year 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 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 and today's conference call will contain discussions of non-GAAP financial measures, which we believe are useful in evaluating our performance. The 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.

Thank you, Mae, and good morning, everyone. 2025 was a year of accretive expansion for LandBridge with Q4 marking our seventh consecutive quarter of revenue growth as a public company. While Scott will delve more deeply into our operational and financial results, I'll start by highlighting the proven growth potential of our business model. In 2025, we grew revenues by 81% and adjusted EBITDA by 83% year-over-year and achieved an adjusted EBITDA margin of 89%. Fourth quarter results strongly contributed to that growth with revenue and EBITDA increasing 12% and 14% quarter-over-quarter, respectively. We have many compelling organic growth opportunities before us as well as accretive opportunities to expand our footprint, which now totals more than 315,000 mostly contiguous acres strategically located across the Delaware Basin. We often talk about LandBridge advancing the paradigm of active land management, and I want to spend a few minutes talking about what that means and how we're able to demonstrate those results. We are focused on acquiring strategic high-quality land positions that are well positioned for development across key industries such as energy, power, digital infrastructure and broader industrial development. In parallel, we work to drive capital-light growth on existing acreage through commercial efforts by leveraging our deep expertise in the Delaware Basin across multiple industries to attract and advance commercial opportunities on our acreage, maximizing each acre's revenue potential and creating compounding revenue across our position. Our active land management strategy is delivering long-term value across diversified revenue streams and driving gains in surface use economic efficiency, or SUEE. This metric, which we disclose on an annual basis for acreage with similar acquisition vintages, represents the average revenue per acre generated by our acreage portfolio over time. For example, our legacy acreage position of approximately 72,000 acres generated less than $465 per acre when we acquired it. And last year, it averaged also $1,160 per acre, representing nearly 150% growth since 2022. For 2024, vintage acreage, including the East Stateline and Wolf Bone Ranches, we achieved year-over-year growth of 145% in 2025. Across our full acreage portfolio of more than 315,000 acres, we delivered SUEE growth of 21% year-over-year, representing a dollar value growth of $543 per acre to $658 per acre on average. Over the past year, this significant growth was accompanied by increased diversification of our customer base across revenue categories, accelerating commercial growth with a record of approximately 450 new easements and agreements on our acreage including large-scale agreements with blue-chip partners. In the energy space, we executed 2 battery energy storage systems or BESS facility development agreements with Samsung C&T Renewables in December granting exclusive rights to develop BESS facilities with an aggregate capacity of 350 megawatts. These BESS facilities, which could achieve commercial operation as soon as year-end 2028 are designed to enhance grid stability, support renewable energy integration, deliver clean power to the local grid and unlock more potential opportunities with Samsung in the future. Additional energy developments in 2025, including finalizing the sale of a 3,000-acre solar energy project with a proposed generation capacity of up to 250 megawatts and entering into a long-term lease with a subsidiary of ONEOK for a natural gas processing facility. We also entered into a strategic agreement with NRG Energy for the potential construction of a 1.1 gigawatt grid connected natural gas power generation facility intended to power our data center. Our agreements with Samsung, ONEOK and NRG reflect and emphasize our commitment to securing development across conventional and renewable energy while also positioning LandBridge as a key enabler of digital infrastructure development across West Texas, a geography that has all the necessary components for such development, in particular, low-cost synergy, abundant water volumes, proximity to fiber and favorable regulatory environment. These data center projects represent large, long-term, capital-intensive investments, and we support any potential counterparties in their due diligence on West Texas opportunities. Our team has significant experience with data center project underwriting and extensive relationships with West Texas counterparties who provide power, water and other key infrastructure to facilitate complex multiparty agreements and shorten time to value for our customers. Overall, our conviction in the West Texas value position for data centers has never been stronger and we look forward to the ultimate broader industrial impact of such important projects on West Texas and LandBridge specifically. Another key growth driver continues to be produced water royalties, where our ample high-quality pore space is an important differentiator. As forward-looking and capital-efficient E&Ps increasingly value the flow assurance offered by large-scale out-of-basin solutions, we expect that our synergistic relationship with WaterBridge will continue to contribute to growth as WaterBridge expands its water infrastructure across our acreage through projects like their Speedway Pipeline, where they recently announced an open season for its second phase. As we look ahead to 2026, we look forward to advancing our critical role in multi-industry development throughout the region. We are confident in our proven business strategy and are well positioned to continue delivering differentiated value for our shareholders. And now I'll turn the call over to Scott, our Chief Financial Officer.

Thank you, Jason, and good morning to everyone joining today. As Jason noted, we entered 2026 from a position of strength with the momentum of a strong fourth quarter and a full year of growth. In the fourth quarter, we delivered total revenue of $56.8 million, up 12% sequentially and 56% year-over-year. And for the year, we delivered revenue of $199.1 million, representing 81% year-over-year growth. Sequential growth for the fourth quarter was driven by surface use royalties and revenues which increased 12%, primarily driven by increased royalties from WaterBridge's BPX Kraken development as well as new project easement payments. Resource sales and royalties revenues also rose 12%, attributable to water and sand sales. This growth came in spite of a 6% quarterly decline in revenue from oil and gas royalties driven by lower activity levels on our acreage. Our direct exposure to commodity prices remains limited. For the full year, oil and gas royalties represented less than 10% of LandBridge's total revenues. Our advantaged margins are evident in our adjusted EBITDA of $51.1 million for the quarter, up 14% sequentially and 61% year-over-year, representing a 90% margin. For the full year, we delivered $177 million in adjusted EBITDA, above the upper end of our guidance range, reflecting an 83% sequential increase and a margin of 89%. We generated free cash flow of $36.4 million for the quarter, representing a 64% margin. For the full year, we generated free cash flow of $122 million, representing a 61% margin. In November, we further optimized our balance sheet through an inaugural $500 million senior notes offering accompanied by a new $275 million revolving credit agreement. These new agreements enhance our balance sheet strength by improving our cost of capital, increasing our liquidity, reducing our interest expense and overall providing a more scalable and efficient financing solution to support any future accretive M&A. We ended the year with total liquidity of $236 million, including $31 million of cash and cash equivalents and $205 million undrawn under our revolving credit facility. Our covenant net leverage ratio was 2.8x at the end of Q4 as a result of the financing of the 1918 Ranch acquisition and our long-term net leverage ratio target remains between 2 and 2.5x. We will continue to deploy our free cash flow in a disciplined manner focused on creating long-term shareholder value across 3 priorities. First, we continue to prioritize value-enhancing M&A as we execute on our proven active land management strategy. We see significant opportunities in the market to acquire underutilized and undercommercialized land. Second, we are intent on maintaining a strong balance sheet with an appropriate capital structure. Our notes offering helped to further optimize our balance sheet and provides us with financial flexibility as we execute on our goals. And finally, we intend to return capital to shareholders over time through dividends and opportunistic share repurchases. This quarter, we declared a 20% increase to our quarterly dividend, bringing it up to $0.12 per share. Our Board also authorized a share repurchase program of up to $50 million in shares through December 2027, increasing the flexibility with which we can opportunistically buy back shares. Looking ahead, for full year 2026, we are excited to announce our 2026 adjusted EBITDA guidance of $205 million to $225 million which represents over 20% year-over-year growth at the midpoint. We are proud to have delivered another strong quarter and year of growth. We are focused on continuing to advance development, expand our partnerships and customer base and deliver compelling value to our shareholders. Finally, I would like to highlight our upcoming Investor Day scheduled for the afternoon of March 19 in New York City. The event will include presentations by our CEO, Jason Long; Chairman of the Board and Five Point's CEO and Managing Partner, David Capobianco and myself, along with other members of the LandBridge team. We expect to present an overview of West Texas macro backdrop across our key growth industries, detail how we view our surface acreage as a perpetual call option on growth opportunities and provide insight into the value proposition of our unique business model. In addition, the event will include a fireside chat with subject matter experts deep diving into the nuances and implications of the data center thesis for West Texas as well as insights from experienced data center leaders such as Power Bridge Founder and CEO, Alex Hernandez. We encourage all investors to attend. Please contact ir@landbridgeco.com to register, and we look forward to welcoming you. Thank you and we would now like to open the line for questions.

Your first question comes from the line of Keith Beckmann of Pickering Energy Partners.

I just wanted to get a sense on what the moving pieces were that drove the really strong sequential growth in produced water and maybe how you expect that to trend looking forward based on some of the projects we expect to come online here over the next year?

I appreciate the question, Keith. In the third quarter, we saw the BPX Kraken project from WaterBridge come online, and we anticipate volumes to continue increasing through the end of the year. This has been a significant contributor, along with the heightened activity at the East Stateline Ranch, creating great momentum as we head into 2026. Looking ahead to 2026, the rise in expectations compared to 2025 will mainly revolve around surface use royalties and other surface use revenues. To reiterate, WaterBridge's BPX Kraken project is expected to see a rise in volumes throughout the year. Furthermore, the Speedway Pipeline will go live midyear, leading to a noteworthy increase in volumes over the summer. These factors related to WaterBridge's activity are strong drivers. Additionally, if we look at the broader surface use expectations, which are primarily linked to oil and gas activity, they represent the two key drivers for the expected uptick in 2026.

That's very helpful. And then my second question just stems around. We saw the dividend increase and the buyback authorization, which were great. I think I noticed in the presentation, you guys are still prioritizing M&A as it comes. I just wanted to get a sense of kind of the current landscape of how deals are looking. Is it easier or harder to get things done right now in West Texas? And then maybe as sort of a follow-up to that, did you ever look at anything outside of West Texas that could potentially make sense?

Yes, the opportunity pipeline for M&A is incredibly strong. We are actively pursuing a variety of opportunities of different sizes and have not experienced any slowdown in that area. We are well positioned to continue growing through M&A, which is our top capital allocation priority for 2026. Regarding opportunities outside the Delaware Basin, we consider everything that comes our way. If we decide to enter another region, we want to approach that thoughtfully. We are actively exploring creative ways to expand our platform, including the possibility of stepping beyond the Delaware Basin.

Your next question comes from the line of John Annis from Texas Capital.

For my first one, regarding 2026 EBITDA guidance, are there 1 or 2 drivers in your assumptions that could lead you to the high end versus low end of your guide?

Yes, John, thank you for the question. I definitely want to highlight that when we were developing our guidance for the year, we aimed to be cautiously conservative with our projections. As I mentioned in response to Keith's question, we anticipate significant growth from both Speedway and BPX Kraken as the year progresses. Additionally, WaterBridge has several projects in the pipeline that could lead to water production volumes that exceed our expectations. If commodity prices remain in the mid-60s and above, the resulting activity levels will likely surpass the forecasts we've set. I wanted to be aware of the macro environment and the changes that may occur during our budgeting process, but I do see considerable upside potential for us to outperform, which is intentional on our part.

That makes sense. For my follow-up, the 2024 vintage acreage saw surface use economic efficiency grow from $204 an acre to $499 in 1 year, which is an impressive jump while the 42,000 acres acquired in 2025 sits at $208 an acre. Based on what you know about the commercial opportunities on that acreage today, do you think a similar trajectory is possible?

Absolutely. This is a powerful metric because it truly reflects the financial outcomes of our active land management strategy and the opportunities available following a heavy M&A year. We experienced significant growth from 2024 to 2025 with that vintage, as you noted. Looking ahead to the potential for 2026 to exceed expectations, I would highlight the 1918 Ranch, which we just closed on in the fourth quarter. We have not factored in any substantial uplift from the commercialization of 1918 in our 2026 guidance. The opportunities are there, and we are actively working on those efforts today. And that serves as a really obvious example of a potential upside driver relative to that baseline guidance that we provided. So the punchline is yes. We go out and we buy land that we think that we can commercialize quickly, and that is going to be a quick growth driver. And again, 1918 is a great example of one of those opportunities that we have in front of us for 2026.

Your next question comes from the line of Alexander Goldfarb from Piper Sandler.

Switching to data centers and power plants, it seems that since your IPO, the political discussion around the power needs of data centers has intensified compared to a year or two ago. As you evaluate the possibility of expanding or adding data centers, do you think the political approval process is as you anticipated at the time of the IPO, or has it become more challenging or demanding in terms of approvals? I'm trying to understand how this situation has evolved compared to your initial expectations.

Alex, I appreciate the thoughtful question. I mean I think if you look at just the approval of the broader regulatory landscape, what we've really seen is the benefit of Texas', call it, more business-friendly regulatory environment. I mean, as it relates to data centers, I want to say 2025 by orders of magnitude, saw more canceled data centers in other states than has ever been seen in history, and there's been a number of articles that have come out on challenges facing other states and proposed legislation to make future data centers that much more challenging because of this whole not in my backyard dynamic around the impact of power consumption and water consumption in major metropolitan areas. And so the more we see that getting out there, I think the more just kind of further reinforces just West Texas appeal as it relates to data centers. I mean, it's easy to point to the fundamentals around water availability, power generation and so on, all of those things that really make West Texas such an attractive place for these folks to operate. The regulatory side doesn't get as much credit as it should because I mean, Texas is eager to find ways to bring data centers.

Okay. The second question is related to the guidance and EBITDA for '26. You mentioned Speedway coming online, WaterBridge contributions, and the 1918 Ranch. Considering your fourth-quarter run rate, how much additional revenue is included in the EBITDA guidance of $205 million to $225 million, and is there potential for upside beyond that? It appears you've been very active, so I would have expected more EBITDA growth, but that might be due to the timing of these projects or some uncertainty. I'm trying to understand how much of the additional items you mentioned are included in the current estimates versus what isn't, and what the potential upside to the range might be.

Yes, it's a good question. So we've baked in, I could call it, the majority of the impact coming from Speedway and BPX Kraken and both of those either Speedway comes online over the course of the summer and BPX Kraken is expected to increase in volumes over the summer. And then the one other component, obviously, 1918 closing in fourth quarter, we'd see the benefit of a full year of that contribution although I flagged earlier on Keith and John's questions that we're not really baking in much in the way of upside commercialization of that asset, which I think we would certainly expect and are actively actioning at the moment. And so when we think through just what else could happen, we've been conservative around, call it, new development expectations. We've been conservative on volumes, as I've mentioned, conservative on 1918 commercialization and have not baked in any of these other kind of in-process projects that we've kind of alluded to on this call. And so there is just an ample amount of commercial opportunity and opportunity sets that we're working through at the moment that aren't included there. And so as we continue to kind of notch those wins, we would expect to come back to the market and voice over what is driving, hopefully, to beat expectations and the increased guidance, but wanted to be mindful stepping into the year in terms of where we are offsetting our expectations initially. And as we continue to get those wins, we'll continue to message that to the Street.

Your next question comes from John Mackay of Goldman Sachs.

I want to revisit the revenue per acre metrics because we all agree they are important to monitor. When considering the 2024 and 2025 acquisitions, which currently sit at $500 and $200 respectively, compared to the legacy acquisitions at $1,000 per acre, is it structurally feasible for those 2024 and 2025 packages to reach that $1,000 per acre mark? Without pushing for a specific timeline, could you walk us through what the overall platform might look like over time, assuming we set aside larger projects like data centers?

Yes, John, I appreciate the questions. Absolutely, $1,000 plus is not just achievable, but I would say actionable in the near term. As a reminder, when we acquired that legacy acreage, we often refer to the $465 number as the starting point in 2022. However, when we purchased that surface in 2021, it was significantly below $465. That acreage is now valued at $1,159 over the past four years. We see no reason why a similar growth trajectory isn't feasible for the 2024 and 2025 acreage we acquired. We believe that the acreage itself and the opportunities available are comparable to that legacy acreage at a minimum, and we see incremental opportunities that we can continue to pursue as well. We feel optimistic about our position. Regarding the future, we've identified a medium- to long-term target range of $2,500 to $3,500 per acre, which we believe is achievable over a 7- to 10-year period. This expectation is based on the ongoing growth of commercial activity in that sector. There are various strategies we can employ to reach this target. At our upcoming Investor Day, we will discuss multiple approaches and scenarios regarding the commercial development of our acreage that can help us achieve this goal.

Your final question comes from the line of Charles Meade of Johnson Rice.

Apologies for joining the call a bit late. If I bring up anything that's already been discussed, I apologize. I'm really interested in the new SUEE metric, and I assume it's been a topic of internal discussion for some time, so it's great to hear your perspective. I'm curious about how the competitive landscape has shifted regarding the acquisition of new assets. Specifically, are your competitors able to enhance their capabilities, and what sets you apart in terms of driving more SUEE? Does this make you more competitive, or is it attracting more capital to the space, thus leading to increased competition for opportunities?

Yes, Charles, I appreciate the thoughtful questions. I'll address it in two parts. First, when we consider the competitive landscape for acquisitions, we certainly find ourselves in a position where our own success attracts attention from others looking to replicate our strategy. I want to emphasize the advantages of our platform, which also relates to why it's challenging for competitors to effectively enter this space. Every land position we have is unique and cannot be duplicated. Considering the land we hold, especially on the Texas side of the Stateline, not only gives us a significant advantage in capitalizing on oil and gas activities, particularly in water, but it also provides an exceptional platform for scalability that is extremely difficult for others to replicate. But second, the partnership we have with our sister company, WaterBridge, is incredibly valuable. And it's not just a byproduct of call it WaterBridge bringing activity to LandBridge and exchange LandBridge serving as the floor space provider to WaterBridge. But the nature of having an operating team out there, boots on the ground just provides a kind of competitive intelligence that we can get day-to-day, macro update that we can get day-to-day on a very granular level, that would be impossible for a land-only company to be able to replicate there.

Yes. I mean the one thing I'd add to that is not only everything that Scott just mentioned there on the WaterBridge side, but also being able to really leverage the technical side of it, the geological and electrical engineering and really understanding where infrastructure is, where these opportunities exist, and a lot of that skill set is not there on a lot of these start-ups.

Yes, it's exactly right. And so ultimately, like having a sophisticated operation of scale kind of married with an operating company with that in-house technical expertise, just makes it very tough for a new entrant to come in even above and beyond that competitive mode we have from our existing asset base. And so look, we feel very good about continuing to affect both the commercial strategy that we have today as well as the acquisition strategy that we've effectively, I think, worked through to date, and we don't see that changing going forward.

There are no further questions at this time. I will now turn the call back to Scott McNeely for closing remarks.

Yes. Thank you, operator, and thanks for everyone joining us today. Again, very happy with the quarter, fantastic momentum stepping into 2026. We're incredibly excited about a myriad of opportunities we have to work through. And then my final plug, again, we look forward to outline just the broader strategy in a lot more detail in the upcoming Investor Day. So we hope to see you all there. Thank you again.

This concludes today's call. Thank you for attending. You may now disconnect.