Q2 2024 LandBridge Company LLC Earnings Call

August 8, 2024

Good morning, my name is Audra and I will be your conference operator today. At this time, I would like to welcome everyone to the Land-Bridge Second Quarter 2024 Results Conference Call.

Operator: Welcome everyone to the LandBridge Second Quarter 2024 Results Conference Call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise.

Operator: 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 the star key followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. At this time, I would like to turn the conference over to Trey Madsen, Vice President of Finance and Treasury. Please go ahead.

Trey Madsen: Thank you, operator, and good morning everyone. We appreciate you joining us for LandBridge's conference call and webcast to review our financial and operational results for the 2nd quarter of 2024. With me today are Jason Long, Chief Executive Officer, and Scott McNeely, Chief Financial Officer. Before I turn the call over to Jason, I have a few housekeeping items to cover.

Trey Madsen: A replay of today's call will be available by webcast and accessible from our website at landbridgeco.com. There will also be a recorded telephonic replay available until August 22nd, 2024. The access information for this replay was also included in yesterday's earnings release. In addition, the comments made by management during this conference call may contain forward-looking statements within the meaning of the United States Federal Security Law. These forward-looking statements reflect the current views of LandBridge's management.

Speaker Change: A replay of today's call will be available by webcast and accessible from our website at Lam Bridge co Dot com. There will also be a recorded telephonic replay available until August 22024.

Trey Madsen: Access information for this replay was also included in yesterday's earnings release.

Trey Madsen: However, forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those discussed today. For a more detailed discussion of the factors that may affect the company's results, please refer to our earnings release for this quarter and to our SEC filings, including our most recently filed prospectus. During this call, we will also discuss certain non-GAAP financial measures. More information and reconciliations of these non-GAAP financial measures to their most comparable GAAP measures are contained in our earnings release, which will be available on the investor relations page of our website following this call. Now, I'd like to turn the call over to our CEO, Jason Long.

Trey Madsen: In addition, the comments made by management. During this conference call may contain forward looking statements within the meaning of the United States Federal Securities laws.

Trey Madsen: These forward looking statements reflect the current views of Lambert is management. However forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those discussed today.

Trey Madsen: For more detailed discussion of the factors that may affect the company's results. Please refer to our earnings release for this quarter and to our SEC filings, including our most recently filed prospectus.

Trey Madsen: During this call. We will also discuss certain non-GAAP financial measures more information and reconciliations of these non-GAAP financial measures to their most comparable GAAP measures are contained in our earnings release that will be available on the Investor Relations page of our website. Following this call now I'd like to turn the call over to our CEO Jason law.

Jason Long: Thank you, Trey, and thank you, everyone, for joining us this morning for our first quarterly earnings call as a publicly traded company. Our strong second quarter performance is a testament to the critical role our land plays in energy production and the promise it holds for future industrial development. During the quarter, we grew revenues by approximately 36 percent sequentially from Q1 and 20 percent year-over-year. We delivered adjusted EBITDA growth of roughly 38 percent sequentially and 24 percent year-over-year. And given the lean nature of our operations, our adjusted even margins for the quarter were 90%.

Jason Long: Thank you, Trey, and thank you, everyone, for joining us this morning for our first quarterly earnings call as a publicly traded company. Our strong second quarter performance is a testament to the critical role our land plays in energy production and the promise it holds for future industrial development. During the quarter, we grew revenues by approximately 36% sequentially from Q1 and 20% year over year. We delivered adjusted EBITDA growth of roughly 38% sequentially and 24% year over year. And given the lean nature of our operations, our adjusted even margins for the quarter were 90%.

Jason Long: Thank you Charlie and thank you everyone for joining us this morning for our first quarterly earnings call as a publicly traded company. Our strong second quarter performance is a testament to the critical role of land plays in energy production and the promise it holds for future industrial development during.

Jason Long: During the quarter, we grew revenues by approximately 36% sequentially from Q1 and 20% year over year.

Jason Long: Adjusted EBITDA growth of roughly 38% sequentially and 24% year over year.

Jason Long: And given the lean nature of our operations, our adjusted EBITDA margin for the quarter was 90%.

Jason Long: As this is our first earnings call, I'd like to spend a few minutes providing a deeper overview of our business model and why we believe LandBridge is poised to create significant shareholder value over the long term. Scott will then take you through the details of our performance during the quarter. LandBridge owns approximately 220,000 surface acres in and around the Delaware Sub-Basin and the Permian Basin, which is the most active region for oil and natural gas exploration and development in the United States.

Speaker Change: As this is our first earnings call I'd like to spend a few minutes, providing a deeper overview of our business model and why we believe lionbridge is poised to create significant shareholder value over the long term.

Speaker Change: <unk> will then take you through the details of our performance during the quarter.

Jason Long: Language owns approximately 220000 surface acres and then around the Delaware sub basin in the Permian Basin, which is the most active region for oil and natural gas exploration and developed in the United States.

Jason Long: It is also a growing area for renewable energy and other industrial developments, such as digital infrastructure. We acquired this land primarily through two series of acquisitions. In October of 2021, we purchased the Hanging Age Ranch, consisting of approximately 72,000 surface acres and 4,000 net minerals. Then earlier this year, we acquired additional ranches in Lee County, New Mexico, and Loving, Winkler, and Andrews Counties, Texas, expanding our footprint by an incremental 148,000 servers.

Jason Long: It is also a growing area for renewable energy and other industrial developments such as digital infrastructure. We acquired this land primarily through two series of acquisitions. In October of 2021, we purchased the Haney H Ranch, consisting of approximately 72,000 surface acres and 4,000 net minerals.

Jason Long: It is also a growing area for renewable energy and other industrial developments such as digital infrastructure.

Jason Long: We acquired this land primarily through two series of acquisitions.

Jason Long: In October of 2021 repurchase the hanging a tranche consisting of approximately 72000 surface acres and 4000 net mineral acres.

Jason Long: Then earlier this year, we acquired additional ranches in Lee County, New Mexico, and Loving, Winkler, and Andrews Counties, Texas, expanding our footprint by an incremental 148,000 acres. Our land today is strategically located in the heart of the basin, along and near the regulatory divide of the Texas-New Mexico state border, presenting compelling commercial opportunities both within and beyond the hydrocarbon value chain. Our strategy is focused on actively managing our land and resources to support and encourage oil and natural gas development, as well as other critical land uses that we expect will generate long-term revenue and free cash flow growth.

Jason Long: And then earlier this year, we acquired additional ranch's in Lea County, New Mexico, and loving Winkler and Andrews counties, Texas.

Jason Long: Expanding our footprint by an incremental 148000 surface acres.

Jason Long: Our land today is strategically located in the heart of the basin, along and near the regulatory divide of the Texas-New Mexico state border, presenting compelling commercial opportunities both within and beyond the hydrocarbon value chain. Our strategy is focused on actively managing our land and resources to support and encourage oil and natural gas development, as well as other critical land uses that we expect will generate long-term revenue and free cash flow growth. We're excited to share the growth with our new public market shareholders, and we believe there are several reasons Lambridge is an attractive long-term investment opportunity.

Jason Long: Our land today is strategically located in the heart of the basin along in here the regulatory to buy that the Texas, New Mexico state border presenting compelling commercial opportunities both within and beyond the hydrocarbon value chain.

Jason Long: Our strategy is focused on actively managing our land and resources to support and encourage oil and natural gas development as well as other critical languages that we expect will generate long term revenue and free cash flow growth.

Jason Long: We're excited to share the growth with our new public market shareholders, and we believe there are several reasons LandBridge is an attractive long-term investment opportunity. We are well-positioned to capitalize on the continued growth of the Permian Basin without incurring meaningful operating and capital expenditures. We're focused on encouraging the build-out of infrastructure on our surface, and our customers bear responsibility for substantially all expenditures related to their operations on our land. This key feature of our business model enables us to deliver industry-leading adjusted EBITDA and free cash flow margin and gives us tremendous confidence in our ability to drive revenue and earnings growth while maintaining relatively high free cash flow. Second, we believe the optionality afforded by owning the surface at the Texas-New Mexico state line is incredibly valuable.

Speaker Change: We're excited to share the growth with our new public market shareholders and we believe there are several reasons land bridge isn't attractive long term investment opportunity.

Jason Long: First.

Jason Long: We are well-positioned to capitalize on the continued growth of the Permian Basin without incurring meaningful operating and capital expenditures. We're focused on encouraging the build-out of infrastructure on our surface, and our customers bear responsibility for substantially all expenditures related to their operations on our land. This key feature of our business model enables us to deliver industry-leading adjusted EBITDA and free cash flow margin and gives us tremendous confidence in our ability to drive revenue and earnings growth while maintaining relatively high free cash flow.

Jason Long: We are well positioned to capitalize on the continued growth in Permian basin without incurring meaningful operating and capital expenditures were focused on encouraging the build out of infrastructure on our surface and our customers bear responsibility for substantially all expenditures related to the operations on our land.

Jason Long: This key feature of our business model enables us to deliver industry, leading adjusted EBITDA and free cash flow margin and gives us tremendous confidence in our ability to drive revenue and earnings growth, while maintaining relatively high free cash flow.

Jason Long: Second, we believe the optionality afforded by owning the surface at the Texas-New Mexico state line is incredibly valuable. While we are clearly well positioned to benefit from increasing oil and gas related activity in the heart of the basin, we know there are meaningful commercial opportunities from several other land uses. That includes renewable power generation from wind and solar farms, and we anticipate the development of the first two solar facilities on our surface to commence around year end.

Jason Long: Second we believe the optionality afforded by owning the surface at the Texas, New Mexico stabilize incredibly valuable while we are clearly well positioned to benefit from increasing the oil and gas related activity in the heart of the basin. We know there are meaningful commercial opportunities from several other land uses that includes renewable power generation from wind and <unk>.

Jason Long: While we are clearly well positioned to benefit from increasing oil and gas related activity in the heart of the basin, we know there are meaningful commercial opportunities from several other land uses. That includes renewable power generation from wind and solar farms, and we anticipate the development of the first two solar facilities on our surface to commence around year end. It also includes digital infrastructure. We believe that more data centers are needed to support demand for AI and cloud computing services, which require access to low-cost fuel, water for cooling, and fiber optic infrastructure, all of which we believe our land is ideally situated to offer.

Jason Long: It also includes digital infrastructure. We believe that more data centers are needed to support demand for AI and cloud computing services, which require access to low-cost fuel, water for cooling, and fiber optic infrastructure, all of which we believe our land is ideally situated to offer. For example, in July, we executed a non-binding letter of intent for the development of the first data center on our surface pursuant to a long-term ground lease, which we expect to have executed before year end. We are pleased with our commercial momentum to date and look forward to sharing additional details in the near term. Third, there is evidence in our results.

Jason Long: Solar farms, and we anticipate development at the first two solar facilities on our surface to condense around year end and also includes digital infrastructure. We believe that more data centers are needed to support demand for AI and cloud computing services, which requires access to low cost fuel water for cooling and fiber optic infrastructure.

Jason Long: All of which we believe are land is ideally situated to offer.

Jason Long: For example, in July, we executed a non-binding letter of intent for the development of the first data center on our surface, pursuant to a long-term ground lease, which we expect to have executed before year end. We are pleased with our commercial momentum to date and look forward to sharing additional details in the near term. Third, there is evidence in our results.

Jason Long: For example in July we executed a non binding letter of intent or the development of the first data center on our surface pursuant to a long term ground lease, which we expect to have executed before year end. We are pleased with our commercial momentum to date and look forward to sharing additional details in the near term.

Jason Long: Third as evidenced in our results this quarter, we benefit from diversified revenue streams. We report our revenues in three buckets surface use royalties and revenues which include fees from use of our land for oil and natural gas development and production produced water transportation and handling pipeline in electrical infrastructure and other commercial and industrial activities.

Jason Long: This quarter, we benefit from diversified revenue streams. We report our revenues in three buckets. Surface use royalties and revenues, which include fees from the use of our land for oil and natural gas development and production, produced water, transportation and handling, pipeline and electrical infrastructure, and other commercial and industrial activities. Resource sales and royalties, which consist of fees from the sale of resources from our land, such as the sale of brackish water used in connection with well completions and royalties from sand extracted for use in all natural gas operations.

Jason Long: This quarter, we benefit from diversified revenue streams. We report our revenues in three buckets. Surface use royalties and revenues, which include fees from the use of our land for oil and natural gas development and production, produce water, transportation and handling, pipeline and electrical infrastructure, and other commercial and industrial activities. Resource sales and royalties consist of fees from the sale of resources from our land, such as the sale of brackish water used in connection with well completions and royalties from sand extracted for use in all natural gas operations, and oil and gas royalties, where we receive a share of recurring revenues from the production of oil and natural gas from our mineral acres.

Jason Long: Resource sales and royalties consisting of fees from the sale of resources from our land such as the sale of brackish water used in connection with well completions and royalties from the sand extracted for use in the oil and natural gas operations.

Jason Long: And oil and gas royalties, where we receive a share of recurring revenues from the production of oil and natural gas from our mineral acres. We are focused on expanding the percentage of overall revenues delivered from fee-based arrangements versus oil and gas royalties, which fluctuate with commodity prices. In the second quarter, non-oil and gas revenue streams accounted for 83 percent of overall revenues, up from 77 percent in the same quarter last year.

Jason Long: And the oil and gas royalties, where we receive a share of recurring revenues from the production of oil and natural gas while mineral acres.

Jason Long: We are focused on expanding the percentage of overall revenues delivered from fee-based arrangements versus oil and gas royalties, which fluctuate with commodity prices. In the second quarter, non-oil and gas related revenue streams accounted for 83 percent of overall revenues, up from 77 percent in the same quarter last year.

Jason Long: We are focused on expanding the percentage of overall revenues delivered from fee based arrangement versus the oil and gas royalties.

Jason Long: Which fluctuate with commodity prices in the second quarter, non oil and gas royalty revenue streams accounted for 83% of overall revenues up from 77% in the same quarter last year.

Jason Long: Last but not least, our symbiotic relationship with WaterBridge provides superior visibility into long-term oil and gas trends and ultimately features revenue growth. We share a management team with WaterBridge, which is one of the largest water midstream companies in the United States. WaterBridge operates a large-scale network of pipelines and other infrastructure, primarily in the Delaware Basin, with long-term agreements in place with several leading EMP operators. WaterBridge currently operates approximately 600,000 barrels of produced water handling capacity on our land, with significant additional permitted capacity available for future development of new land.

Jason Long: Last but not least, our symbiotic relationship with WaterBridge provides superior visibility into long-term oil and gas trends and ultimately features revenue growth. We share a management team with WaterBridge, which is one of the largest water midstream companies in the United States. WaterBridge operates a large-scale network of pipelines and other infrastructure primarily in the Delaware Basin with long-term agreements in place with several leading EMP operators. WaterBridge currently operates approximately 600,000 barrels of produced water handling capacity on our land with significant additional permitted capacity available for future development of the land.

Jason Long: Last but not least our symbiotic relationship with water, which provides superior visibility into long term oil and gas trends and ultimately future revenue growth.

Jason Long: We share a management team with water bridge, which is one of the largest water midstream companies in the United States.

Outerbridge: Outerbridge operates a large scale network of pipelines and other infrastructure, primarily in the Delaware basin with long term agreements in place with several leading E&P operators.

Jason Long: <unk> currently operates approximately 600000 barrels a day of produced water handling capacity when they land with significant additional permitted capacity and available for future development Atlanta.

Jason Long: As a reminder, we receive royalties from each barrel of produced water handled by WaterBridge on our land, as well as surface use payments for infrastructure constructed on our land. More generally, as oil and natural gas production activity in the Delaware Basin continues to grow, we believe the basin will increasingly require access to additional pore space to support future produced water handling capacity. Because our large land position is strategically located in an intersection of significant producer activity and access to largely underutilized pore space, LandBridge is uniquely able to offer both WaterBridge and third-party water and midstream companies critical access to additional pore space for produced water handling.

Jason Long: As a reminder, we receive royalties from each barrel of produced water handled by water bridge on our land as well as surface use payments for infrastructure construction on our land.

Jason Long: More generally is all natural gas production activity in the Delaware Basin continues to grow we believe the basin will increasingly require access to additional floor space to support future produced water handling capacity.

Jason Long: Because our large land position is strategically located in the intersection of significant producer activity and access to largely underutilized ports base Lionbridge is uniquely able to offer both water bridge and third party water midstream companies critical access to additional core space for produced water handling.

Jason Long: And we strongly believe WaterBridge's growth, in particular, will continue to drive increased revenues, requiring minimal investment from us. In closing, we've constructed a unique business model that is closely aligned with industrial growth tailwinds while generating high margins and significant free cash flow growth. Our strong second quarter results underscore the significant opportunities in front of us. We're excited to be a public company, and we're encouraged by the market reaction received And we are committed to actively managing our land and resources with an eye toward creating value for our shareholders over the long term.

Jason Long: And we strongly believe WaterBridge's growth in particular will continue to drive increased revenues requiring minimal investment from us. In closing, we've constructed a unique business model that is closely aligned with industrial growth tailwinds while generating high margins and significant free cash flow growth. Our strong second quarter results underscore the significant opportunities in front of us. We're excited to be a public company, and we're encouraged by the market reaction received to date, and we are committed to actively managing our land and resources with an eye toward creating value for our shareholders over the long term.

Speaker Change: And we strongly believe Waterbury just growth in particular will continue to drive increased revenues requiring minimal investment from us.

Jason Long: In closing we've constructed a unique business model that is closely aligned with industrial growth tailwind as well generating high margins and significant free cash flow growth our strong second quarter results underscore the significant opportunities in front of US we're excited to be a public company and we're encouraged by the market reaction received to date and we are committed to.

Jason Long: Actively managing our land and resources with an eye towards creating value for our shareholders over the long term.

Jason Long: Scott.

Scott McNeely: Thank you, Jason. And good morning to everyone joining the call. As Jason mentioned, we delivered strong results in the second quarter, reflecting the continued level of activity in the Delaware Basin and the clear growth momentum that translates to for land. Since the start of 2023, we have delivered a 10% quarterly revenue increase. During the second quarter, total revenues grew 36% sequentially and 20% year-over-year to $26 million. The sequential growth was broad-based across revenue streams, as surface-use royalties and revenues grew 55% sequentially, driven primarily by incremental royalties associated with the East State Line Ranch acquisition.

Scott McNeely: Thank you, Jason. And good morning to everyone joining the call. As Jason mentioned, we delivered strong results in the second quarter, reflecting the continued level of activity in the Delaware Basin and the clear growth momentum that translates to you for LandBridge. Since the start of 2023, we have delivered a 10% quarterly revenue increase. During the second quarter, total revenues grew 36 percent sequentially and 20 percent year-over-year to $26 million. The sequential growth was broad-based across revenue streams, as surface-use royalties and revenues grew 55% sequentially, driven primarily by incremental royalties associated with the East State Line Ranch acquisition.

Speaker Change: Thank you, Jason and good morning to everyone joining the call as Jason mentioned, we delivered strong results in the second quarter, reflecting the continued level of activity in the Delaware basin and the clear growth momentum that translates to your per language. Since the start of 2023, we have delivered a 10% quarterly revenue CAGR.

Scott McNeely: Resource sales and royalties increased 28% sequentially, also driven predominantly by the East Stateline Ranch Acquisition, and revenue from oil and gas royalties increased 7% sequentially, largely as a result of mineral lease bonus income. We generated $114 of non-oil and gas royalty revenue per owned surface acre during the second quarter, which is down from $232 in the same period last year, reflecting our recent expansion through the acquisition of an additional 148,000 strategically located surface acres. Because this land has been historically underutilized, we see tremendous growth opportunities from applying our proven active land management strategy.

Scott McNeely: Resource sales and royalties increased 28% sequentially, also driven predominantly by the East Stateline Ranch Acquisition. Revenue from oil and gas royalties increased 7% sequentially, largely as a result of mineral lease bonus income. We generated $114 of non-oil and gas royalty revenue per owned surface acre during the second quarter, which is down from $232 in the same period last year, reflecting our recent expansion through the acquisition of an additional 148,000 strategically located surface acres. Because this land has been historically underutilized, we see tremendous growth opportunities from applying our proven active land management strategy.

Scott McNeely: Resource sales and royalties increased 28% sequentially also driven predominantly by the east Stateline Ranch acquisition, our revenue from oil and gas royalties increased 7% sequentially largely as a result of mineral lease bonus income.

Scott McNeely: We generated $114 of non oil and gas royalty revenue per one surface acre during the second quarter, which is down from $232 in the same period last year, reflecting our recent expansion through the acquisition of an additional 148000 strategically located surface acres.

Scott McNeely: Because this plan has been historically underutilized, we see tremendous growth opportunities from applying our proven active land management strategy.

Scott McNeely: As a result of our lean operating model, we delivered adjusted EBITDA of $23.4 million during the quarter, which represents a 90% adjusted EBITDA margin. SG&A expenses during the quarter were $2.1 million, which represents a step up from the first quarter and same quarter last year due to higher professional service fees primarily associated with amending our credit facilities and pre-IPO entity restructuring. We generated free cash flow of approximately $16 million and free cash flow margins of 60%. The sequential decrease in free cash flow margin was due to non-recurring costs associated with M&A activity during the quarter.

Scott McNeely: As a result of our lien operating model, we delivered adjusted EBITDA of $23.4 million during the quarter, which represents a 90% adjusted EBITDA margin. SG&A expenses during the quarter were $2.1 million, which represents a step up from the first quarter and same quarter last year due to higher professional service fees primarily associated with amending our credit facilities and pre-IPO entity restructuring. We generated free cash flow of approximately $16 million and free cash flow margins of 60%. The sequential decrease in free cash flow margin was due to non-recurring costs associated with M&A activity during the quarter.

Scott McNeely: As a result of our lean operating model, we delivered adjusted EBITDA of $23 4 million during the quarter, which represents a 90% adjusted EBITDA margin SG&A expenses during the quarter were $2 1 million, which represent a step up from the first quarter and same quarter last year due to higher professional service fees, primarily associated with amending our credit facilities.

Scott McNeely: Pre IPO entity restructuring.

Scott McNeely: We generated free cash flow of approximately $16 million and free cash flow margins of 60%.

Scott McNeely: The sequential decrease in free cash flow margin was due to nonrecurring costs associated with M&A activity during the quarter.

Scott McNeely: As a reminder, we closed our IPO in early July, providing net proceeds of approximately $271 million, which were used to further strengthen our balance sheet and distribute a dividend to our legacy shareholders. We ended the quarter with total liquidity of approximately $50 million. We had $400 million of debt under our term loan and revolving credit facility, of which approximately $265 million was used to fund the East State Line Ranch and Speed Ranch acquisitions during the quarter. Subsequent to the end of the quarter, we paid down $100 million of debt with IPO proceeds and made a regular amortization payment, bringing our net leverage ratio down to 2.6 times.

Scott McNeely: As a reminder, we closed our IPO in early July, providing net proceeds of approximately $271 million, which were used to further strengthen our balance sheet and distribute a dividend to our legacy shareholders. We ended the quarter with total liquidity of approximately $50 million. We had $400 million of debt under our term loan and revolving credit facility, of which approximately $265 million was used to fund the East Stateline Ranch and Speed Ranch acquisitions during the quarter. Subsequent to the end of the quarter, we paid down $100 million of debt with IPO proceeds and made a regular amortization payment, bringing our net leverage ratio down to 2.6 times.

Scott McNeely: As a reminder, we closed our IPO in early July providing net proceeds of approximately $271 million, which were used to further strengthen our balance sheet and distribute a dividend to our legacy shareholders. We ended the quarter with total liquidity of approximately $50 million, we had $400 million of debt under our term loan and revolving credit facility of which approximately 200.

Scott McNeely: $65 million was used to fund the east Stateline Ranch and speed ranch acquisitions during the quarter and ended the quarter with a net leverage ratio of four two times subsequent to the end of the quarter, we paid down $100 million of debt with IPO proceeds are made of regular amortization payment, bringing our net leverage ratio down to two six times.

Scott McNeely: Turning to capital management, as Jason mentioned, we expect our high-margin business model to generate substantial free cash flow over time. As we continue to grow free cash flow, our capital allocation priorities are threefold. First, maintaining a strong balance sheet to ensure maximum financial flexibility over time. Deleveraging is an accretive use of our excess cash, and we will continue to pay down borrowings under our credit facility. Following our IPO, our leverage ratio was approximately 2.6 times adjusted EBITDA, and we expect it to be around two times that by the second quarter of 2025.

Operator: Turning to capital management, as Jason mentioned, we expect our high-margin business model to generate substantial free cash flow over time. As we continue to grow free cash flow, our capital allocation priorities are threefold. First, maintaining a strong balance sheet to ensure maximum financial flexibility over time. Deleveraging is an accretive use of our excess cash, and we will continue to pay down borrowings under our credit facility. Following our IPO, our leverage ratio was approximately 2.6 times adjusted EBITDA, and we expect it to be around two times that by the second quarter of 2025.

Speaker Change: Turning to capital management as Jason mentioned, we expect our high margin business model to generate substantial free cash flow over time as we continue to grow free cash flow our capital allocation priorities are threefold.

Operator: First maintaining a strong balance sheet to ensure maximum financial flexibility over time deleveraging is an accretive use of our excess cash and we will continue to pay down borrowings under our credit facility. Following our IPO our leverage ratio was approximately two six times adjusted EBITDA and we expect to be around two times by the second quarter of 2025.

Scott McNeely: We are also committed to returning capital to shareholders through dividends. Our board will be discussing our dividend policy during the second half of the year, and we anticipate introducing a quarterly dividend following Q3 earnings. Finally, we will continue to pursue value-enhancing land acquisitions. We operate in a fragmented market with a significant opportunity to acquire underutilized and undercommercialized land, and we have proven our ability to create value through our active land management strategy.

Operator: We are also committed to returning capital to shareholders through dividends. Our board will be discussing our dividend policy during the second half of the year, and we anticipate introducing a quarterly dividend following Q3 earnings. Finally, we will continue to pursue value-enhancing land acquisitions. We operate in a fragmented market with a significant opportunity to acquire underutilized and undercommercialized land, and we have proven our ability to create value through our active land management strategy.

Operator: We are also committed to returning capital to shareholders through dividends, our board will be discussing our dividend policy during the second half of the year and we anticipate introducing a quarterly dividend following Q3 earnings.

Operator: Finally, we will continue to pursue value enhancing land acquisitions, we operate in a fragmented market with significant opportunity to acquire underutilized and under commercialized land and we have proven our ability to create value through our active land management strategy.

Scott McNeely: Before closing, I'd like to flag that we intend to provide annual guidance alongside Q3 earnings following our first full quarter as a public company. In conclusion, we are pleased with our second quarter results, and we see significant opportunities ahead as we leverage our high-margin, high-capital efficient business to drive long-term revenue and free cash flow growth, creating substantial value for our shareholders. With that, Operator, we are now ready for questions.

Operator: Before closing, I'd like to flag that we intend to provide annual guidance alongside Q3 earnings following our first full quarter as a public company. In conclusion, we are pleased with our second quarter results, and we see significant opportunities ahead as we leverage our high-margin, high-capital efficient business to drive long-term revenue and free cash flow growth, creating substantial value for our shareholders. With that, Operator, we are now ready for questions.

Operator: Before closing I'd like to flag that we intend to provide annual guidance alongside Q3 earnings following our first full quarter as a public company in conclusion, we are pleased with our second quarter results and we see significant opportunities ahead, as we leverage our high margin high capital efficient business to drive long term revenue and free cash flow growth, creating substantial value for our shareholders.

Operator: With that operator, we are now ready for questions.

Operator: Thank you. We will now begin the question and answer session. If you have dialed in and 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. We'll take our first question from John McKay at Goldman Sachs.

Speaker Change: Thank you we will now begin the question and answer session. If you have dialed in and we'd like to ask a question. Please press star one on your telephone keypad to raise your hand and join the queue. If he would like to withdraw your question simply press Star. One again, we will take our first question from John Mackay at Goldman Sachs.

John McKay: Hey, good morning. Congratulations on the first call and thanks for the time. I understand you guys aren't giving kind of formal guidance at this point for the year, but maybe if you could just talk a little bit about how you expect your overall EBITDA growth to look like on the base business, maybe, you know, for now, excluding the data center opportunity, et cetera.

John McKay: Hey, good morning, Congrats on the first call and thanks for the time.

John McKay: And you guys arent, giving kind of formal guidance at this point for the year.

John McKay: But maybe if you could just talk a little bit about how we expect our overall EBITDA growth to look like on the base business, maybe for now excluding the data center opportunity etcetera.

Jason Long: Yeah, hey, good morning, John. Thanks for joining us. That's right.

Speaker Change: Yeah, Hey, good morning, John Thanks for joining that's where I will be providing guidance at the Q3, but I mean, just as it relates to sentiment I would say you know our outlook for 2020 for is just as strong as it was at the beginning of the year, you know and what we've seen what we really liked saying just the commercial traction we've gotten over the last two.

Jason Long: We'll be providing guidance after Q3. But I mean, just as it relates to sentiment, I would say our outlook for 2024 is just as strong as it was at the beginning of the year. You know, what we've seen, what we really like seeing is just the commercial traction we've gotten over the last six weeks, particularly on the East Stateline Ranch opportunities. And as a result of that, I would say we're more optimistic going into 2025.

Speaker Change: Six weeks, particularly on.

Speaker Change: The east Stateline ranch opportunities and as a result of that I would say, we're more optimistic going into 2025, when I hesitate, providing any firm numbers on that just yet, but I would say.

Jason Long: I want to hesitate providing any firm numbers on that just yet. But I would say, you know, we continue to get more traction than we originally anticipated across all of our assets. And it's really going to shape up to be a good 24, and we think an even stronger 2025.

Jason Long: We continue to get more traction than we originally anticipated across all of our assets and it's really going to shape up to be a good 24.

Jason Long: They can even stronger 2025.

Jason Long: I'd appreciate that. I'm sure they'll get plenty of questions on the data center side, so I'll put that aside for right now. Maybe just talking about the produced water, volume growth in the corridor, really strong. Maybe you can unpack that a little bit for us on what was maybe contributions from the new acreage versus the Devon ramp versus anything else you can talk about in there.

Jason Long: I'd appreciate that. I'm sure you'll get plenty of questions on the data center side, so I'll put that aside for right now. Maybe just talking about the produced water, volume growth in the corridor, really strong. Maybe you can unpack that a little bit for us on what was maybe contributions from the new acreage versus the Devon ramp versus anything else you can talk about in there.

Speaker Change: I appreciate that.

Speaker Change: Surely get plenty of questions on the on the datacenter sides I'll put that aside for right now maybe just talk about the produced water volume growth in the quarter really strong maybe you can unpack that a little bit for us on what was maybe contributions from the new acreage versus the Devin ramp versus any anything else you can talk about in there.

Jason Long: Yeah, so we added, you know, roughly 150,000 barrels a day of incremental capacity in the second quarter, so pretty meaningful step up on capacity along the legacy state line asset base. And so we were able to continue to take both an increased amount of Devon volumes that had previously flown on their legacy system, as well as start to realize some commercial volumes, which we continue to kind of see grow here throughout the beginning of this quarter.

Speaker Change: Yeah. So we added you know call it roughly 150000 barrels a day of incremental capacity in second quarter, So a pretty meaningful step up on capacity along the the legacy Stateline asset base and so we were able to continue to take both an increased amount of Devon volumes that had previously flown on their legacy system as well as start to re.

Jason Long: <unk> some some commercial volumes, which we continue to kind of see grow here throughout the beginning of this quarter. So that that was certainly a big piece of it you know on the East Stateline Ranch Youre exactly right. There was the combination of first the conoco system, which we get royalties for which was a meaningful increase is.

Jason Long: So that was certainly a big part of it. You know, on the East State Line Ranch, you're exactly right. You know, there was the combination of first the Conoco system, which we get royalties for, which was a meaningful increase, as well as the infrastructure assets that WaterBridge NDB acquired as part of that acquisition that also contributed to the increase. And so when you think of just that step change from Q1 to Q2, a big piece of that is the acquisition, but you know, I would say we still saw a meaningful ramp just from the organic built on a legacy state line system from those Devon volumes.

Jason Long: So that was certainly a big piece of it. You know, on the East State Line Ranch, you're exactly right. There was the combination of first the Conoco system, which we get royalties for, which was a meaningful increase, as well as the infrastructure assets that WaterBridge NDB acquired as part of that acquisition that also contributed to the increase. And so when you think of just that step change from Q2 to Q4, excuse me, Q1 to Q2, a big piece of that is the acquisition, but you know, I would say we still saw a meaningful ramp just from the organic built on a legacy state line system from those Devon volumes.

John McKay: All right. I appreciate the detail. Thank you.

Jason Long: Well as the infrastructure assets that water bridge N D be acquired as part of that acquisition that also contributed to the increase in so when you think of just that step change from Q2 to Q4 or to Q2 Q1 to Q2.

John McKay: A big piece of that is the acquisition, but you.

John McKay: You know I would say, we still saw a meaningful ramp just from the organic build out of our legacy Stateline system from those debit volumes.

Speaker Change: Alright, I appreciate the detail. Thank you.

John McKay: Yep.

Operator: We'll move next to Charles Meade at Johnson Rice.

Speaker Change: Well move next to Charles Meade with Johnson Rice.

Charles Meade: Good morning Jason and Scott. My first question is kind of an open-ended one. I'd like to ask you guys, you know, your IPO marketing process was just a few weeks ago, and I'd like to ask you to offer: What did you do, did you have any kind of persistent surprises as part of that? And I'm thinking in particular about the parts of your business that I, you know, when you were talking to investors, that they immediately understood and, and at the other end of the spectrum, is, is there, part of the opportunity that you guys have in front of you that maybe require repeated explanations? Just any thoughts you had on that and what the investing public has an easier time understanding, what they have maybe a more difficult time coming to speed on.

John McKay: Okay.

Charles Meade: Good morning, Jason and Scott. My first question is kind of an open-ended one. I'd like to ask you guys, you know, your IPO marketing process was just a few weeks ago, and I'd like to ask you to offer: What did you do, did you have any kind of persistent surprises as part of that? And I'm thinking in particular about the parts of your business that I, you know, when you were talking to investors, that they immediately understood and, and at the other end of the spectrum, is, is there, part of the opportunity that you guys have in front of you that maybe require repeated explanations? Just any thoughts you had on that and what the investing public has an easier time understanding, what they have maybe a more difficult time coming to speed on.

Speaker Change: Jason and Scott.

Jason Long: It's a really good question. I would say the biggest education effort, I think, as a result of this being just a fairly new business model. I think the folks at TPL have done a great job growing and monetizing their asset base, and there was some familiarity with their model, which certainly helped inform initial discussions with investors. But more broadly speaking, there just hasn't been a lot of analysis or research on the land business that interacts with the energy industry.

Speaker Change: My first question was kind of an open ended one.

Speaker Change: I I'd like to ask you guys.

Speaker Change: Your your IPO marketing process is just a few weeks ago.

Speaker Change: I'd like to.

Charles Meade: I'd like to ask you to to offer you. What what did you did you have any kind of persistent surprises as part of that and I'm thinking in particular are the parts of your business that are that you know when you were talking to investors that they immediately understood and and at the other end of the spectrum is is there.

Charles Meade: Part of the opportunity that you guys have in front of you that that may be required repeated explanation just any any thoughts you had on that and what what the investing public you know has an easier time understanding what they have maybe a more difficult time coming up to speed on.

Jason Long: It's a really good question. I would say the biggest education effort is the result of this being just a fairly new business model. I think the folks at TPL have done a great job growing and monetizing their asset base, and there was some familiarity with their model, which certainly helped inform initial discussions with investors. But more broadly speaking, there just hasn't been a lot of analysis or research on the land business that interacts with the energy industry.

Jason Long: And it takes us on Jason Yeah, that's why yeah like publish on that a little bit Yeah, you know I would.

Speaker Change: It's a really good question I mean, I would say you know the the biggest education effort I think as a result of this being just a fairly new call. It a business model I think the folks at T. P. L. A done a great job, you know kind of growing and monetizing their asset base and there is some familiarity with their model, which certainly.

Jason Long: Certainly helped inform I think initial discussions with investors are but you know more broadly speaking there just hasn't been a lot of you know analysis of research.

Speaker Change: On the land business that that interacts with the energy industry and so you know really kind of talking through the dynamics of how land is so critical to not just the oil and gas industry in west, Texas, but just the broader opportunities that come at surface and as a result of just having these large contiguous acreage positions, it's something that I think when.

Jason Long: And so, really kind of talking through the dynamics of how land is so critical to not just the oil and gas industry in West Texas but just the broader opportunities that come with surface as a result of just having these large contiguous acreage positions.

Jason Long: So, really kind of talking through the dynamics of how land is so critical to not just the oil and gas industry in West Texas but just the broader opportunities that come with surface as a result of just having these large contiguous acreage positions.

Jason Long: It's something that I think when we talked through it with investors, folks would nod along, and they started to see it. It's just something that hadn't been readily discussed in the past. And as a result, I think it just took a little bit of dialogue. But I mean, fortunately, all of you, both on the research side and on the investor side, are very, very smart in the energy space. And so you start to put the pieces together as it relates to maybe their other coverage or their other investments, and people got it pretty quickly.

Jason Long: It's something I think when we talked through it with investors, folks would nod along, and they started to see it. It's just something that hadn't been readily discussed in the past. And as a result, I think it just took a little bit of dialogue. But I mean, fortunately, all of you both on the research side and on the investor side are very, very smart in the energy space. And so you start to put the pieces together as it relates to maybe their other coverage or their other investments. And people got it pretty quickly.

Jason Long: We talked through it with investors.

Speaker Change: You know folks and folks would not along and then they started to see it. It's just something that hadn't been readily discussed in the past and as a result, I think it just took a little bit of dialogue, but unfortunately, you know all.

Jason Long: All you all both on the research side on the Investor side are very very smart in the energy space and so you start to put the pieces together as it relates to maybe the other coverage are there other investments and people got it pretty quickly I think the big you know the big question. Ultimately was how do we think about valuation then and that look that was you know that continues to be.

Charles Meade: I think the big question ultimately was, how do we think about valuation then? And that continues to be a discussion. I think, again, TPL sitting out there with the assets they have serves as a great metric and one that we were able to point to. Now, that said, there are some differences between them and us. We are highly focused on the surface side, because we feel like that is what drives the ultimate premium valuation. And we will continue to focus on that going forward, but it was really just kind of a full cycle discussion of the whole thing.

Jason Long: I think the big question ultimately was, how do we think about valuation then? And that continues to be a discussion. I think, again, TPL sitting out there with the assets they have serves as a great metric and one that we were able to point to. Now, that said, there are some differences between them and us. We are highly focused on the surface side. We feel like that is what drives the ultimate premium valuation, and we will continue to focus on that going forward. But it was really just kind of a full-cycle discussion of the...

Charles Meade: And I think again, you know T. P. L sitting out there as you know with the assets. They have served as a great metric.

Charles Meade: One that you know we were able to point to now that said you know there are some differences between them and US you know where we are highly focused on the surface side, we feel like that is what drives the ultimate premium valuation and we will continue to focus on that going forward, but it was really just kind of a full cycle discussion of the business model you know what we have in common with you know with the one comp out there on the energy side.

Charles Meade: Syed.

Charles Meade: It sets us apart and I think investors were generally very receptive and very excited about the story and you know Fortunately, we've seen that continuing to play out post IPO.

Jason Long: Thank you. Thank you for that color!

Charles Meade: Thank you. Thank you for that color!

Speaker Change: Got it. Thank you. Thank you for that color you know it's interesting now in the market votes every day on what you were.

Charles Meade: You know, it's interesting. Now the market votes every day on what you're worth. You alluded to this just briefly in your response to the previous question. I wanted to ask you about the state line and, I guess, the East State line and Speed Ranch, those are newer assets for you. What's new for you guys in your view of the low-hanging fruit or the most immediate opportunities? You know, to add revenue there.

Jason Long: You know, it's interesting. Now the market votes every day on what you're worth. You alluded to this just briefly in your response to the previous question. I wanted to ask you about the state line and, I guess, the East State line and Speed Ranch, those are newer assets for you. What's new for you guys in your view of the low-hanging fruit or the most immediate opportunity?

Charles Meade: Right.

Speaker Change: I think you are now I think.

Speaker Change: Now you you alluded to this just briefly in your response to the previous question.

Speaker Change: Wanted to ask you this.

Speaker Change: The Stateline and I guess, the speed or E stateline, rather and speedway and so those are our newer assets for you.

Speaker Change: What are you what is what's new for you guys on your view of the low hanging fruit or the most immediate opportunities.

Speaker Change: To add revenue there.

Jason Long: Yeah, Charles, this is Jason. I'll take that one.

Charles Meade: Yeah. Charles This is Jason I'll take that one and then the branch itself both the E Stateline and the speed Ranch, we're just really.

Speaker Change: Really not developed from a commercial standpoint at all so we looked at we look at that as really a blank canvas to open up a ton of opportunity not just on the only gas side, but both in renewables in and yeah. We've got major thoroughfares that run run through that rash that really feed the Delaware basin, and we think that there's a massive opportunity on the real.

Jason Long: The branch itself, both the East State Line and the Speed Ranch, were just really not developed from a commercial standpoint at all. So, we look at that as really a blank canvas to open up a ton of opportunity, not just on the oil and gas side, but both in renewables. We've got major thoroughfares that run through that ranch that really feed the Delaware Basin. And we think that there's a massive opportunity on the real estate side, whether that's camp sites, fueling stations, etc., to really feed the basin as a whole.

Jason Long: The branch itself, both the East State Line and the Speed Ranch, were just really not developed from a commercial standpoint at all. So, we look at that as really a blank canvas to open up a ton of opportunity, not just on the oil and gas side, but both in renewables. We've got major thoroughfares that run through that ranch that really feed the Delaware Basin. And we think that there's a massive opportunity on the real estate side, whether that's manned camps, fueling stations, etc., to really feed the basin as a whole.

Jason Long: Estate side.

Jason Long: Whether that's man camps, fuelling stations et cetera to really to really feed the basin as a whole.

Jason Long: On top of that, I would say that, you know, well, the only thing I would say on top of that is that the produced water infrastructure was not utilized at all. So we looked at it. It was not only strategic as it was located on the state line, but also just the fact that there were limited disposal wells outside of ConocoPhillips' wells and systems that are on the surface. And so, really good running room. We did a really deep dive on the geology and the geophysics there to make sure that we've got plenty of pore space to really handle the produced water in a sustainable way for the future.

Speaker Change: Got it off of that I would probably say that you know well the only thing I would say on the top of that is that the produced water infrastructure.

Jason Long: Was not utilized at all so we looked at it it was not only strategic as it is located on the state line, but also just the fact that there was limited disposal wells outside of Conocophillips as wells and system that are that are on the surface and so a really really good running room, we did a really deep dive on the on the geology and geophysics.

Jason Long: Here to make sure that we've got plenty of floor space to really handle the produced water in a in a sustainable way for the future.

Operator: I would like to welcome everyone to the LandBridge second quarter, 2024 results conference call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise.

Speaker Change: Thank you.

Joe: Yeah. Thanks, Joe.

Operator: Our next question comes from Alexander Goldfarb at Piper Sandler.

Jason Long: Our next question comes from Alexander Goldfarb with Piper Sandler.

Operator: After the speakers remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again.

Alexander Goldfarb: Hey, good morning down there and welcome to public land. I have two questions for you. First, as you know, I'm a real estate guy, not an energy guy, but the political landscape is changing candidates for the White House, and certainly seems like a more progressive team from the Democratic ticket. Do you have any thoughts on a Harris presidency and what that would mean for regulations, especially around water injection and some of the other business lines that underlie the pipeline side of your business?

Alexander Goldfarb: Hey, good morning down there and welcome to public land. I have two questions for you. First, as you know, I'm a real estate guy, not an energy guy, but still on the political landscape, changing candidates for the White House, and certainly seems like a more progressive team from the Democratic ticket. Do you have any thoughts on a Harris presidency and what that would mean for regulations, especially around water injection and some of the other business lines that underlie the pipeline side of your business?

Speaker Change: Hey, good.

Speaker Change: Good morning, good morning down there and a welcome to public land.

Operator: [laughter].

Trey Mattson: At this time, I would like to turn the conference over to Trey Mattson, Vice President of Finance and Treasury, please go ahead. Thank you, operator and good morning, everyone. We appreciate you joining us for LandBridge's conference call and webcast to review our financial and operational results for the second quarter of 2024. With me today are Jason Long, Chief Executive Officer, and Scott McNeely, Chief Financial Officer.

Speaker Change: Two questions for me first.

Alexander Goldfarb: As you know I'm, a real estate guy.

Alexander Goldfarb: Not an energy guy, but still on a political landscape change and are candidates for the White house and certainly seems like a more progressive team from the from the dem ticket.

Speaker Change: Do you have any.

Alexander Goldfarb: Any thoughts on a Harris president and see what that would mean to regulations, especially around the water injection and some of the other.

Trey Mattson: Before I turn the call over to Jason, I have a few housekeeping items to cover. The replay of today's call will be available by webcast and accessible from our website at lambbridgeco.com. There will also be a recorded telephonic replay available until August 22, 2024. The access information for this replay was also included in yesterday's earnings release. In addition, the comments made by management during this conference call may contain forward-looking statements within the meaning of the United States Federal Security Laws.

Alexander Goldfarb: Thing.

Speaker Change: Business lines that underlie.

Speaker Change: The pipeline side of your business.

Jason Long: Hey, Alexander, good, good talking to you. Thanks for opening up with a softball here. Yeah, you know, we were certainly keeping an eye on it. You know, I think Look, we're generally not too concerned, I think, regardless of which way the election goes. We're certainly, you know, kind of focused more on the broader geopolitical situation and its, you know, ultimate impact on commodity prices. I think that is one that just impacts us as, you know, as an industry.

Jason Long: Hey, Alexander, good, good talking to you. Thanks for opening up with a softball here. Yeah, you know, we were certainly keeping an eye on it. You know, I think Look, we're generally not too concerned. I think regardless of which way the election goes, we're certainly, you know, kind of focused more on what we call the broader geopolitical situation and its, you know, ultimate impact on commodity prices. I think, I think that is one that just impacts us as, you know, as an industry.

Speaker Change: Hey, How's that are good good talking to you, thanks, but broken it up with a softball here [laughter]. Yeah. You know we were certainly keeping an eye on it you know I think.

Trey Mattson: These forward-looking statements reflect the current use of LandBridge's management. However, forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those discussed today. For more detailed discussion of the factors that may affect the company's results, please refer to our earnings release for this quarter and to our SEC filings, including our most recently thought perspective.

Jason Long: You know, we saw, you know, we saw the caught the regime change, so to speak, back in 2000. You know, but, but, ultimately, you know, while there was some impact on commodity prices and where folks are focusing on development, and so on, you know, I think most of the so-called direct regulation that impacts us is much more driven at the state level. And as a result of that, you know, it's tough to think that there's going to be any kind of knee-jerk reaction, regardless of who steps into office, that could really impact us, you know, quickly and in an unexpected way. And so, you know, we're keeping a watchful eye on it, but at this point, I would say I have no strong opinions one way or the other in terms of, you know, its impact on us.

Jason Long: Look we're generally not too concerned I think regardless of which way. The election goes. We're certainly you know kind of focused more on the call that the broader geopolitical situation and its ultimate impact on commodity prices I think I think that is that is the one that just impacts us as you know as an industry.

Jason Long: You know, we saw a regime change, so to speak, back in 2000, but ultimately, while there was some impact on commodity prices and where folks were focusing on development and so on, you know, I think most of the direct regulation that impacts us is much more driven at the state level. And as a result of that, you know, it's tough to think that there's going to be any kind of knee-jerk reaction regardless of who steps into office that could really impact us, you know, quickly and in an unexpected way. And so, you know, we're keeping a watchful eye on it, but at this point, I would say I have no strong opinions one way or the other in terms of the impact on us.

Speaker Change: You know we saw we saw the I'll call. It the regime change so to speak back in 2000, and you know Budd, but ultimately you know while there was some impact on commodity prices and where folks are focusing on development and so on.

Trey Mattson: During this call, we will also discuss certain non-gap financial measures, more information and reconciliation of these non-gap financial measures to their most comfortable gap measures are contained in our earnings release that will be available on the investor relations page of our website following this call.

Jason Long: Most of the call it the direct regulation that impacts us is much more driven at the state level.

Trey Mattson: Now, I'd like to turn the call over to our CEO, Jason Long. Thank you, Trey.

Jason Long: And as a result of that you know.

Jason Long: It's tough to think that doesn't mean, he kind of knee jerk reaction, regardless of who steps into office that could really impact us Oh call. It quickly and in an unexpected way and so we're keeping a watchful eye on it but but at this point I would say no strong opinions, one way or the other in terms of the you know an impact on us.

Jason Long: And thank you, everyone, for joining us this morning for our first quarterly earnings call as a publicly traded company. Our strong second quarter performance is a testament to the critical role our land plays and energy production in the promise it holds for future industrial development. During the quarter we grew revenues by approximately 36 percent sequentially from Q1 and 20 percent year over year. We delivered adjusted EBITDA growth of roughly 38 percent sequentially and 24 percent year over year. And given the lean nature of our operations, our adjusted EBITDA margins for the quarter was 90 percent.

Jason Long: Okay, and then the second question is on the data center and and commercial rollout of the land that you have, the holdings. Can you just talk a little bit more about, you know, the initial data center in terms of the deal, the timing on deal closing, entitlements, that, you know, how that's being managed as far as who's obtaining the entitlements and what the financial recourse is, and if there's any end user pre-leasing that's going on, basically trying to understand, you know, you guys protecting yourselves so you're not left holding the bag while, you know, the third-party user, which is also partly your sponsor, you know, is out there trying to get things, their ducks lined up and get this entitled and, you know, sign up users and stuff like that, that you're not left there, you know, with no recourse and also whether you're precluded from pursuing additional data center deals or other similar large-scale commercial deals until, you know, this first one pans out.

Alexander Goldfarb: Okay, and then the second question is on the data center and and commercial rollout of the land that you have, the holdings. Can you just talk a little bit more about, you know, the initial data center in terms of the deal, the timing on deal closing, entitlements, that, you know, how that's being managed as far as who's obtaining the entitlements and what the financial recourse is, and if there's any end user pre-leasing that's going on, basically trying to understand, you know, you guys protecting yourselves so you're not left holding the bag while, you know, the third-party user, which is also partly your sponsor, you know, is out there trying to get things, their ducks lined up and get this entitled and, you know, sign up users and stuff like that, that you're not left there, you know, with no recourse and also whether you're precluded from pursuing additional data center deals or other similar large-scale commercial deals until, you know, this first one pans out.

Jason Long: Okay and then the second question is on the data center and in commercial.

Jason Long: Yeah, those are those are all really, really good.

Speaker Change: Rollout of the land that you have the holdings can you just talk a little bit more about the data. The initial data center in terms of the deal.

Jason Long: As this is our first earnings call, I'd like to spend a few minutes providing a deeper overview of our business model and why we believe leverage is poised to create significant shareholder value over the long term.

Jason Long: <unk> on deal closing.

Jason Long: Entitlements that you know, how that's being managed as far as who's obtaining the entitlements and what the financial Recourses and if theres any end user pre leasing that's going on basically trying to understand.

Jason Long: Scott will then take you through the details about the performance during the quarter. Land bridge zones approximately 220,000 surface acres in and around the Delaware sub basin and the Permian basin, which is the most active region for all natural gas exploration and developed in the United States. It is also a growing area for renewable energy and other industrial development, such as digital infrastructure.

Jason Long: You guys protecting yourselves, so you're not left holding the bag while yogurt. The third party user which is also partly your sponsor is out there trying to get things their ducks lined up and get this entitled and sign up users and stuff like that that you're not left there with no <unk>.

Jason Long: We acquired this land primarily through two series of acquisitions. In October of 2021, we purchased the hanging age ranch, consistent with approximately 72,000 surface acres and 4,000 net mineral acres. Then earlier this year, we acquired additional ranches in Lee County, New Mexico and Webbing, Winkler and Andrews County Stacks. Texas. Expanding our footprint by an incremental 148,000 service acres. Our land today is strategically located in the heart of the basin, along and near the regulatory divide of the Texas New Mexico State border, presenting compelling commercial opportunities both within and beyond the hydrocarbon body chain.

Jason Long: Of course, and also whether you're precluded from pursuing additional data center deals or other similar large scale commercial deals until.

Jason Long: The first one.

Speaker Change: Pans out.

Jason Long: Yeah, those are all really, really good questions. So, you know, as we mentioned in the earnings release, we're currently sitting on a non-binding LOI that's being worked through with both affiliates, our sponsors, as well as some other parties. You know, we're obviously optimistic about the opportunity, but, you know, we're not going to release any of those details at this point. A lot of that is still being ironed out. I would say we have a focus on ensuring that, you know, we are protected and being cognizant of a lot of the concerns you flagged.

Jason Long: Yeah, those are...

Speaker Change: Yeah. Those are those are all really really good questions. So you know as we mentioned in the earnings release. We're currently we're currently sitting on a nonbinding LOI, that's being worked through with both our affiliates our sponsors as well as some other parties.

Jason Long: You know, we're we're obviously optimistic in the opportunity, but you know we're not going to release call. It any of those details at this point a lot of that is still being ironed out I would say, we have a focus on ensuring that.

Jason Long: Our strategy is focused on actively managing our land and resources to support and encourage all the natural gas development, as well as other critical lean uses that we expect will generate long-term revenue and free cash flow growth. We're excited to share the growth with our new public market shareholders and we believe there are several reasons LandBridge is an attractive long-term investment opportunity. First, we are well positioned to capitalize on the continued growth in Permian Basin without incurring meaningful operating and capital expenditures.

Jason Long: We are called protected and being cognizant of a lot of the concerns you flagged I think once we get.

Jason Long: And I think once we get, you know, a little further along in the process and the ground lease, for example, is executed, we plan on circling back and discussing in a bit more detail. But, you know, at this point, we're not going to really call it a talk-through or call it speculating on all those high-level concerns until the dust settles. Okay, thank you.

Jason Long: And I think once we get, you know, a little further along in the process and the ground lease, for example, is executed, we plan on circling back and discussing it in a bit more detail. But, you know, at this point, we're not going to really talk through or call it speculating on a lot of those high-level concerns until the dust settles.

Jason Long: A little further along in the process and the ground lease for example is executed we plan on circling back and discussing in a bit more detail, but you know at this point, we're not going to really call it that.

Jason Long: Talk through or speculate on the other side, although concerns until the dust settles.

Jason Long: We're focused on encouraging the build-out infrastructure on our surface and our customers' bare responsibility for substantially all expenditures related to the operations on our land. This key feature of our business model enables us to deliver industry-leading adjusted EBITI and free cash flow margin and gives us tremendous confidence in our ability to drive revenue and earnings growth while maintaining relatively high free cash flow. Second, we believe the optionality afforded by owning the surface at the Texas New Mexico state line is incredibly valuable.

Jason Long: Okay. Thank you.

Jason Long: Yeah. Thank you.

Operator: We'll go next to Kevin McCree at Pickering Energy Partners.

Jason Long: Yeah.

Jason Long: We'll go next to Kevin.

Speaker Change: Ah Picardy Pickering entry.

Pickering: <unk> Pickering.

Archie partners: And Archie partners.

Kevin McCree: Hey, good morning, guys. Yeah, following up on the data center, I just was curious if you guys quantified how many data center and solar lease opportunities you have out there, and if you wanted to provide some high-level thoughts on what the potential revenue impact could be from, you know, either a single deal or from all the opportunities you state.

Kevin McCree: Hey, good morning, guys.

Kevin McCree: Yeah following up on the data center.

Kevin McCree: Was curious if you guys had quantified how many data center and solar lease opportunities you had out there and if you wanted to provide some high level thoughts on what the potential revenue impact could be from.

Jason Long: While we are clearly well positioned to benefit from increasing oil and gas related activity in the heart of the basin, we know there are meaningful commercial opportunities from several other land uses. That includes renewable power generation from wind and solar farms and we anticipate development at the first two solar facilities on our surface to commence around year-end and also includes digital infrastructure. We believe that more data centers are needed to support demand for AI and cloud computing services which require as access to low-cost fuel, water for cooling, and fiber optic infrastructure, all of which we believe our land is ideally situated to offer. For example, in July, we executed a non-binding letter of intent of the development of the first data center on our surface pursuant to a long-term ground lease which we expect to have executed before year-end.

Speaker Change: Either a single dealer for them.

Speaker Change: Opportunities you see.

Kevin McCree:

Jason Long: Yeah, Kevin, so we've roughly identified five to six right off the bat from a data center standpoint. As far as you think about solar, one of the first data centers that we're focused on would be co-located with a large solar development, roughly 250 megawatts. As we think about the new acquisition, obviously, we just closed in May, and so we're still exploring a ton of opportunities. There's a lot of, again, like I said, really a blank canvas of opportunity, both for solar and for wind. So, the ability to have those co-located with some of these data center opportunities seems to be a good win for the hyperscalers. Yeah, I mean

Kevin McCree: Yes, Kevin So we've we've roughly identified five to six.

Speaker Change: Right off the bat from a data center standpoint, as far as you think about solar.

Jason Long: One of our one of the first data centers that we're focused on would be co located with a with a large solar development roughly 250 megawatts.

Jason Long: As we think about the new acquisition.

Jason Long: Obviously, we just closed in may and so we're still exploring a ton of opportunities. There's a lot of again like I said at a really a blank canvas of opportunity.

Jason Long: Both for solar and for wind so.

Jason Long: We are pleased with our commercial momentum to date and look forward to sharing additional details in the near term. Third is evidence in our results. This quarter, we benefit from diversified revenue strains. We report our revenues in three buckets. Surface use royalties and revenues which included fees from the use of our land for oil and natural gas development and production. Produced water transportation and handling, pipeline and electrical infrastructure and other commercial and industrial activities.

Jason Long: You know I had the ability to add those cold Lake co located with some of these data center opportunities as it seems to be a good good win for the the Hyperscale.

Jason Long: Yeah, I mean, on the economic side, you know, we obviously mentioned the upfront payment and the earnings release. You know, I think this initial opportunity we're working through as we kind of refine the terms and the details is really going to help inform us about the range of economic opportunities and impact of LamBridge. I'll say it's something that we're very excited about and something we think will be meaningful, but it's too early to really throw out any numbers at this point in a responsible way.

Jason Long: Yeah, I mean, on the economic side, you know, we obviously mentioned the upfront payment and the earnings release. You know, I think this initial opportunity we're working through as we kind of refine the terms and the details is really going to help inform us of the range of economic opportunities and impact on Lambridge. I'll say it's something that we're very excited about. It's something we think will be meaningful, but it's too early to really throw out any numbers at this point in a responsible way.

Speaker Change: Yeah, I mean on the on the economic side.

Speaker Change: You know we we.

Jason Long: Bobby Obviously, you mentioned the upfront payment in the earnings release I'm you know I think this is this initial opportunity we're working through as we kind of refine the terms in the details.

Jason Long: Are we going to help inform us of call it the.

Jason Long: Resource sales and royalties consisting of fees from the sell of resources from our land, such as the sell of brackish water used in connection with well-completions and royalties from sand extracted for use in oil and natural gas operations. And oil and gas royalties where we receive a share of the current revenues from the production of oil and natural gas from our millilikers. We are focused on expanding the percentage of overall revenues delivered from fee-based arrangement versus oil and gas royalties which fluctuate with commodity prices. In the second quarter, non-own gas royalty revenue strains accounted for 83% of overall revenues up from 77% in the same quarter last year.

Jason Long: The range of economic opportunities and impact of Lambert I'll say, it's something that we're very excited about and something we think that will be meaningful, but it's too early to.

Jason Long: To really throw out any numbers at this point.

Jason Long: So again, you know, we're looking forward to circling back to you and the market and kind of talking in a bit more detail when the time is right, which we don't think is too far down the road, but we do want to have things firmed up a bit more before we start discussing economics.

Jason Long: In a responsible way so again.

Jason Long: So again, you know, we're looking forward to circling back to you and the market and kind of talking in a bit more detail when the time is right, which we don't think is too far down the road. But we do want to have things firmed up a bit more before we start discussing economics.

Jason Long: We're looking forward to circling back to you all to the market and kind of talking a bit more detail.

Jason Long: When the time is right, which we don't think is too far down the road, but we do want to have things firmed up a bit more before we start discussing economics.

Kevin McCree: Yeah, sure. That makes sense. And then, as a follow-up question, just given the success of the IPO and the subsequent trading, does that change your M&A strategy? Are there any more opportunities that are arising or increased interest from your side to get bigger?

Kevin McCree: Yeah, sure, that makes sense. And then, as a follow-up question, just given the success of the IPO and the subsequent trading, does that change your M&A strategy? Are there any more opportunities that are arising or increased interest from your side to get bigger?

Speaker Change: Yeah sure that makes sense.

Speaker Change: And then as a follow up question just given the success of the IPO and the subsequent trading.

Jason Long: Last and not least, our symbiotic relationship with water bridge provides superior visibility into long-term oil and gas trends. And ultimately futures revenue growth. Both. We share a management team with Water Bridge, which is one of the largest water mentoring companies in the United States. Water Bridge operates a large-scale network of pipelines and other infrastructure primarily in the Delaware basin, with long-term agreements in place, with several leading EMP operators. Water Bridge currently operates approximately 600,000 barrels a day of produced water handling capacity on our land, with significant additional permitted capacity and available for future development at the land.

Speaker Change: Does that change anything on your M&A strategy or are there any more opportunities that are arising or increased interest from your side.

Jason Long: We're always evaluating M&A opportunities. But, I would say, just as a general rule, we're not going to really talk to anything in particular until it's far enough along where we've got a meaningful amount of confidence in it.

Kevin McCree: There.

Speaker Change: Yeah, I mean, we're we're always evaluating M&A opportunities you know I would say just as a general rule, we're not going to really talk to anything in particular until it is far enough along where we've got you know a meaningful amount of confidence in it but just taking a step back and I think addressing your question more high level M&A ideology.

Jason Long: But just taking a step back and addressing your question more on high-level M&A ideology, ultimately, the answer is we're going to continue to find opportunities that make sense. And we've said previously that we're really focused on ensuring we're not going out and executing on M&A that would cannibalize the existing opportunity set that exists on our surface today, and that's something we remain highly focused on. Now, there are smaller tuck-in and bolt-on opportunities where the economics make all the sense in the world, in much smaller denominations.

Speaker Change: Ultimately the answer is as you know we're going to continue to find opportunities that make sense and you know we've said previously that we're really focused on ensuring we're not going out and executing on M&A that would cannibalize the existing opportunity set that exists on our surface today and that's something we remain highly focused on now you know there are smaller.

Jason Long: As a reminder, we receive royalties from each barrel of produced water handle-by-water bridge on our land, as well as surface use payments for infrastructure constructed on our land. More generally, as all in natural gas production activity in the Delaware basin continues to grow, we believe the basin will increasingly require access to additional push-based to support future produced water handling capacity. Because our large land position is strategically located in an intersection of significant producer activity and access to largely underutilized push-based, LandBridge is uniquely able to offer both water bridge and third-party water mentoring companies critical access to additional push-based to produce water handling. And we strongly believe water bridges growth in particular will continue to drive increased revenues requiring minimal investment from us.

Speaker Change: In in bolt on opportunities, where the economics make all the sense in the world much smaller denomination, but I'll say you know our desire to pursue those really are driven are impacted necessarily by where we're trading.

Jason Long: But I'll say our desire to pursue those really isn't driven or impacted necessarily by where we're trading. Ultimately, our underwriting criteria haven't shifted as a result of where we're trading. We're ultimately really focused on making sure that we find accretive deals that generate meaningful free cash flow and free cash flow growth for our company, and that's going to continue to be the focus going forward.

Speaker Change: Ultimately our underwriting criteria haven't hasn't shifted as a result of where we're trading.

Speaker Change: We're ultimately really focused on making sure that we find accretive deals that generate meaningful free cash flow.

Speaker Change: And free cash flow growth for our company and that's going to continue to be the focus going forward.

Kevin McCree: Thank you for the answers and congratulations on your success so far. Yeah, thanks.

Speaker Change: Alright, Thank you for the answers and congratulations on the success so far.

Speaker Change: Yeah, Thanks, guys I appreciate it.

Jason Long: In closing, we've constructed a unique business model that is closely aligned with industrial growth tailwinds, while generating high margins and significant free cash growth. Our strong second quarter results underscore the significant opportunities in front of us. We're excited to be a public company and we're encouraged by the market reaction received a date.

Operator: We'll move next to Roger Reed at Wells Fargo.

Roger Read: We'll move next to Roger read at Wells Fargo.

Roger Reed: Good morning, and welcome to the world of public companies and quarterly earnings calls.

Speaker Change: Yes, good morning.

Speaker Change: Welcome to the world of public.

Speaker Change: With companies and in our quarterly earnings calls.

Roger Reed: Thank you.

Jason Long: Thank you.

Roger Reed: Thanks, Tom.

Roger Reed: Let me kind of change tack a little bit with some of the guys. Surface, you know, you have obviously sand sales access, things like that. Just curious, you know, from where you were at the time of the most recent acquisition to what you see now looking forward on that front.

Roger Reed: Let me kind of change tack a little bit with some of the guys surface, you know, you have obviously sand sales access, things like that. Just curious about where you were at the time of the most recent acquisition to what you see now looking forward to on that front.

Roger Reed: Let me, let me kind of changed tack, a little bit with some of the guys surface. You know you have obviously sand sales access things like that just curious.

Jason Long: And we are committed to actively managing our land and resources with an eye towards creating value for our shareholders over the long term.

Scott McNeely: Scott? Thank you, Jason and Maureen to everyone joining the call. As Jason mentioned, we delivered strong results in the second quarter reflecting the continued level of activity in the Delaware basin and the clear growth momentum that translates to you for LandBridge. Since the start of 2023, we have delivered a 10% quarterly revenue figure. During the second quarter, total revenues grew 36% sequentially and 20% year over year to 26 million. The sequential growth was broad-based across revenue streams.

Roger Reed: From where you were at the time of the most recent acquisition to what you see now looking forward on that front.

Jason Long: Yeah, I guess I want to make sure I understand the question. Are you talking about the opportunity set, or what are you addressing exactly there?

Speaker Change: Yes, I guess I want to make sure I understand the question are you talking about the opportunity set or what are your address and exactly there.

Roger Reed: Yeah, if anything has changed, I guess it looks a little better, looks a little clearer as we think about just surface access, right? Whether it's roads, whether it's pipes, whether it's, you know, sand sales, something along those lines.

Speaker Change: Yeah, if anything has changed I guess, you know it looks a little better it looks a little clearer as we think about just the surface access right, whether its roads, whether it's pipes, whether it's sand.

Scott McNeely: At surface use, royalties and revenues grew 55% sequentially driven primarily by incremental royalties associated with the East state line ranch acquisition. Resource sales and royalties increased 28% sequentially also driven predominantly by the East state line ranch acquisition. Our revenue from oil and gas royalties increased 7% sequentially largely as a result of mineral lease bonus income. We generated $114 of non-oil and gas royalty revenue per own surface acre during the second quarter, which is down from $232 in the same period last year, reflecting our recent expansion through the acquisition of an additional 148,000 strategically located surface acres.

Speaker Change: Sand sales something along those lines.

Jason Long: Yeah, I mean, I think, you know, with the addition of the State Line Ranch and these other acquisitions, just having access to more of that contiguous surface, particularly along the state line, just makes, call it our strategy, I don't want to say that it's that much easier to execute, but allows us to deploy so much in the way of both surface and resources to the industry in the region. And so, you know, it was interesting timing because we closed that acquisition kind of in mid Q2, and obviously, kind of parlayed that straight into the IPO.

Speaker Change: Yeah, I mean, I think you know with the addition of the Stateline ranking these other acquisitions, just having access to more of that contiguous surface, particularly along the stateline just makes called our.

Speaker Change: Strategy I don't see that much easier to execute but it allows us to deploy so much in the way of both surface and resources to the industry in the region and so.

Speaker Change: You know, it's it was interesting timing because we closed that acquisition kind of mid Q2, and obviously kind of parlay that straight into the IPO. So I think a lot of the players in the customers that we interact with.

Jason Long: So I think a lot of the players and the customers that we interact with, you know, kind of caught wind of what it is we did, kind of through the IPO process. And so we're getting a lot of inbound calls now. You know, as I mentioned earlier, commercial traction, you know, both on the WaterBridge side and, you know, more broadly on the LandBridge side, I think continues to outpace our initial expectations, which is a great problem to have.

Scott McNeely: Because this land has been historically underutilized, we see tremendous growth opportunities from applying our proven active land management strategy. As a result of our lean operating model, we delivered adjusted EBITDA at 23.4 million during the quarter, which represents a 90% adjusted EBITDA margin. S-GNA expenses during the quarter were 2.1 million, which represent a step up from the first quarter and same quarter last year through the higher professional service fees primarily associated with amending our credit facilities and pre-IPO entity restructuring, and Drink.

Speaker Change: Kind of caught wind of of what it is we did kind of through the IPO process and so we're getting a lot of inbounds now as I am.

Speaker Change: Mentioned earlier.

Speaker Change: Commercial traction you know both on the water bridge side, but just you know more broadly in the land bridge side. You know I think continues to outpace our initial expectations, which is a great problem to have and I mean in that I think is again, a good reflection of the asset that we have and the recognition of the value of that asset and so you know the full call. It opportunity set that you laid.

Jason Long: And I mean, and that is, again, a good reflection of the asset that we have, you know, and the recognition of the value of that asset. And so, you know, the full call it opportunity set that you laid out there continues to be very, very, I call it interesting for folks in the industry and something that they're very focused on, you know, thinking through, again, assets that have been historically underutilized and are now available.

Speaker Change: Out there continues to be very very I call. It interesting for folks in the industry and something that they're very focused on.

Scott McNeely: We generated free cashflow of approximately 16 million and free cashflow margins of 60 percent. The sequential decrease in free cashflow margin was due to non-recurring costs associated with M&A activity during the quarter. As a reminder, we closed our IPO in early July, providing net proceeds of approximately 271 million which were used to further strengthen our balance sheet and distributed dividend to our legacy shareholders. We ended the quarter with total liquidity of approximately 50 million.

Speaker Change: Thinking through again.

Speaker Change: You know assets that had been historically underutilized and are now available and so it's it's all kind of good news in that camp.

Jason Long: You know really know call it headwinds from a from a surface perspective.

Speaker Change: We continue to see a lot of interest and we expect to see a lot of growth as a result.

Jason Long: And so it's all kind of, you know, good news in that camp, you know, really no call it headwinds from a surface perspective. You know, we continue to see a lot of interest, and we expect to see a lot of growth as a result.

Roger Reed: That sounds great. There is one other question I had for you. This is on the, I guess, produced water side of it. We've noted several companies on the E&P side have, you know, done a little bit better on the OPEX side, and some of this is even in Marcella, so I know it's not you or your Opportunity Suite, but some of them are also Permian guys, that they've been able to lower some of their LOE by getting better at handling water. And I was just curious, you know, if you kind of look at

Scott McNeely: We had 400 million of debt under our term loan and revolving credit facility of which approximately 265 million was used to fund the E state line ranch and speed ranch acquisitions during the quarter and ended the quarter with a net leverage ratio of 4.2 times. Subsequent to the end of the quarter, we paid down 100 million of debt with IPO proceeds and made a regular amortization payment bringing our net leverage ratio down to 2.6 times.

Speaker Change: Yeah. It sounds great. One other question I had for you. This is on the I guess produced water side of it. We've noted several companies on the E&P side of.

Speaker Change: <unk> done a little bit better on the Opex side and some of this is even in Marcellus. So I know, it's not U R.

Roger Reed: Your opportunity suite, but some of them are also Permian guys that they've been able to lower some of their L. O E by getting better on handling water and I was just curious if you kind of look at.

Scott McNeely: Turning to capital management, as Jason mentioned, we expect our high margin business model to generate substantial free cashflow over time. As we continue to grow free cashflow, our capital allocation priorities are three fold. First, maintaining a strong balance sheet to ensure maximum financial flexibility over time. Deleveraging is an accretive use of our excess cash and we will continue to pay down borrowings under our credit facility. Following our IPO, our leverage ratio was approximately 2.6 times adjusted EBITDA and we expect to be around 2 times by the second quarter of 2025.

Speaker Change: Let's call it not industry best practice versus what you offer kind of if you think of the high cost of disposal of water versus what you offer and what sort of opportunity that maybe.

Speaker Change: Maybe even builds a greater growth possibility for you than than what's sort of baked into the current numbers.

Jason Long: Yeah, you know, it's an interesting question. I think it really points to the water handling industry, you know, in Delaware and how that, you know, subsequently flows through to LandBridge. I mean, the, you know, I would say the evolution of water handling over the last, call it six to eight years in Delaware has really reflected a shift from folks doing it largely in-house to looking at folks externally, whether it's, you know, WaterBridge, NGL, or one of the other peers that are out there.

Roger Reed: That sounds great. There is one other question I had for you.

Speaker Change: Yeah, you know it's a it's an interesting question I think it's one that really points to the water handling industry you know in.

Roger Reed: This is on the, I guess, produced water side of it. We've noted several companies on the E&P side have, you know, done a little bit better on the OPEC side, and some of this is even in Marcella, so I know it's not you or your Opportunity Suite, but some of them are also Permian guys, that they've been able to lower some of their LOE by getting better at handling water. And I was just curious, you know, if you kind of look at, let's call it, not industry best practice versus what you offer, kind of, you know, if you think of the high cost of disposal of water versus what you offer and what sort of opportunity that maybe even builds a greater growth possibility for you than what's sort of baked into the current numbers.

Scott McNeely: We are also committed to returning capital to shareholders through dividends. Our board will be discussing our dividend policy during the second half of the year and we anticipate introducing a quarterly dividend following Q3 earnings. Finally, we will continue to pursue value enhancing land acquisitions. We operate in a fragmented market with significant opportunity to acquire underutilized and under commercialized land and we have proven our ability to create value through our active land management strategy.

Speaker Change: In the Delaware and how that you know subsequently flows through to land bridge I mean, the you know I would say the evolution of water handling over the last call. It six to eight years in the Delaware is really reflected a shift of folks doing it largely in house to do looking at folks externally, whether it's water bridge NGL areas or are one of the other peers that are out.

Jason Long: They're in so.

Jason Long: You know I think folks have found that's generally more cost of producers have found that's generally more cost effective, particularly given the volumetric profile.

Scott McNeely: Before closing, I'd like to flag that we intend to provide annual guidance alongside Q3 earnings following our first full quarter as a public company.

Jason Long: And so, you know, folks have found that it's generally more cost-effective, particularly given the volumetric profile of water as it relates to upstream development in the Delaware, maybe compared to some other basins. But, you know, how that ultimately flows through for LandBridge, as we continue to see, you know, the Permian in Delaware, in particular, getting an outsized piece of the commodity growth here in the near term, it's just going to drive, you know, meaningful increases in water handling capacity and infrastructure to accommodate that growth.

Scott McNeely: In conclusion, we are pleased with our second quarter results and we see significant opportunities ahead as we leverage our high margin, high capital efficient business to drive long-term revenue and free cashflow growth, creating substantial value for our shareholders.

Jason Long: Of water as it relates to upstream development in the Delaware, maybe compared to some other basins, but you know how that ultimately flows through for land bridge as we continue to see you know the Permian in the Delaware in particular, getting an outsized piece of the commodity growth here in the near term.

Operator: With that, operator, we are now ready for questions. Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press start one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press start one again.

Jason Long: It's just going to drive you know meaningful increases in water handling capacity and infrastructure to accommodate that growth.

Jason Long: You know, and as we've kind of discussed in the past and we have in our material, one of the big core tenants of the investment thesis here was, you know, buying the surface along the state line that has, you know, kind of meaningfully underutilized pore space subsurface to accommodate that water handling infrastructure. And so, all of these things are called tailwinds for us, and the, you know, the dynamic around upstream producers continuing to lean on third-party water handling companies to accommodate the water needs for this, for their growth here in Delaware, I think it all plays out very, very well for LandBridge.

Jason Long: We've kind of discussed in the past and we have in our material you know one of the big call. It core tenets of the investment thesis here was bind the surface along the Stateline that has you know kind of meaningfully underutilized poor space subsurface to accommodate that water handling infrastructure and so all of these call it tailwind for us in the you know the diner.

John McKay: We will take our first question from John McKay at Goldman Sachs. Hey, good morning. Congrats on the first call and thanks for the time.

Jason Long: I understand you guys aren't giving formal guidance at this point for the year but maybe if you could just talk a little bit about how you expect your overall EBITDA growth to look like on the base business, maybe for now excluding the data center opportunity, et cetera. Yeah, hey, good morning, John. Thanks for joining.

Jason Long: Ohmic around upstream producer producers continuing to lean on third party water handling companies two to accommodate the water needs for this for their growth here in the Delaware I think all plays out very very well for Lambert. It's going to result, I think and you know more infrastructure being built very quickly on land bridge and that's ultimately going to play out for us in terms of.

Jason Long: It's going to result, I think, in, you know, more infrastructure being built very quickly on LandBridge, and that's ultimately going to play out for us in terms of, you know, surface use revenues and damage payments, also in produced water royalties. So, it's all very good momentum, kind of where we sit at the moment. Great.

Jason Long: That's where I will be providing guidance at the queue 3. But as it relates to sentiment, I would say our outlook for 2024 is just as strong as it was at the beginning of the year. What we've seen, what we really like seeing is just the commercial traction we've gotten over the last six weeks, particularly on the East state line ranch opportunities. And as a result of that, I would say we're more optimistic going into 2025.

Jason Long: Surface use revenues and damage payments also on produced water royalty. So it's all a very good momentum and kind of where we sit at the moment.

Roger Reed: Great. We'll look forward to it. Thanks.

Speaker Change: Great well I look forward to it thanks.

Jason Long: Yes, that's right.

Operator: We'll take our final question from Lawrence Goldstein at Santa Monica Partners.

Jason Long: We will take our final question from Lawrence Goldstein, Santa Monica partners.

Lawrence Goldstein: We haven't met yet, but I believe I'm the second oldest shareholder of TPL, having purchased it when I was about 13 years old, which was 75 years ago. Warren Buffett told me he, too, bought it when he was 13, and he's older than I. He never bought again, which is the oddest thing for that gentleman.

Unnamed Shareholder: We haven't met yet, but I believe I'm the second-oldest shareholder of TPL, having purchased it when I was about 13 years old, which was 75 years ago. Warren Buffett told me he, too, bought it when he was 13, and he's older than I. He never bought again, which is the oddest thing for that gentleman.

Speaker Change: We havent met yet.

Jason Long: I want to hesitate providing any firm numbers on that just yet but I would say we continue to get more traction than we originally anticipated across all of our assets and it's really going to shape up to be a good 24 when we think it can even stronger 2025. I appreciate that.

Speaker Change: But I.

Speaker Change: I believe the second oldest shareholder of GPL, having purchased it when I was about 13 years old, which was 75 years ago, and but I'm not the oldest.

Unnamed Shareholder: Warren Buffett told me he to board when he was 13 and he's older than I.

John McKay: I'm sure I get plenty of questions on the data center side, so I'll put that aside for right now.

John McKay: Maybe just talking on the produced water, volume growth in the quarter. Really strong.

Unnamed Shareholder: He never bought again, which is the honest thing for that gentleman.

Lawrence Goldstein: I did over the years, and that, of course, led me to investors who have purchased a great deal of TPL and a great deal of LandBridge. I'm just interested; the questions all seem to be focused on whether you're going to have a data center this year, a deal for one or not. What I'm interested in, being a long-term investor, and my investment partnership, which is 42 years old, makes nothing but long-term investments, what I'm interested in is, when this company was put together, and you had your dreams, if you just go out ten years from now, it's now 2034, what would you hope? That the, uh, profit and loss statement would look like.

Unnamed Shareholder: I did over the years, and that, of course, led me to investors who have purchased a great deal of TPL and a great deal of LandBridge. I'm just interested; the questions all seem to be focused on whether you're going to have a data center this year, a deal for one or not. What I'm interested in, being a long-term investor, and my investment partnership, which is 42 years old, makes nothing but long-term investments, what I'm interested in is, when this company was put together and you had your dreams, if you just go out ten years from now, it's now 2034, what would you hope the profit and loss statement would look like?

Jason Long: Maybe you can unpack that a little bit for us on what was maybe contributions from the new acreage versus the Devon ramp versus anything else you can talk about in there. Yeah, so we added roughly 150,000 barrels a day of incremental capacity in second quarter. So pretty meaningful step up on capacity along the legacy state line asset base. And so we were able to continue to take both an increase amount of Devon volumes that had previously flown on the legacy system as well start to realize some commercial volumes, which we continue to see grow here throughout the beginning of this quarter. So that was certainly a big piece of it.

Unnamed Shareholder: I did over the years and.

Unnamed Shareholder: That of course has led me to.

Unnamed Shareholder: Investors who have.

Unnamed Shareholder: Purchased a great deal of PPL.

Speaker Change: And a great deal of.

Unnamed Shareholder: Language.

Speaker Change: And I guess.

Speaker Change: Interested the quick question is all seem to be focused on.

Speaker Change: Whether youre going to have a data center this year a deal for one or not.

Mike: I'm interested in being a long term investor and my investment partnership, which is 42 years old makes nothing but long term investments, Mike Mike when I'm interested as well.

Jason Long: On the East State Line Ranch, you're exactly right. You know, there was the combination of first the conical system, which we get royalties for, which was a meaningful increase, as well as the infrastructure assets that Waterbridge NDV acquired as part of that acquisition that also contributed to the increase. And so when you think of just that step change from Q2 to Q4 or to Q1 to Q2, you know, a big piece of that is the acquisition. But, you know, I would say we still saw a meaningful ramp just from the organic built out on the legacy state line system from those Devon volumes. All right. Appreciate the detail. Thank you. Yep.

Speaker Change: When this.

Speaker Change: Company was put together.

Speaker Change: And you had your dreams.

Unnamed Shareholder: If you just go out 10 years from now it's now 2034, what would you hope.

Speaker Change: The profit and loss statement would be looking like.

Jason Long: Good morning, sir. It is good to good to connect. I hope we can meet in person. Congratulations on your TPL acquisition. That is amazing.

Speaker Change: Hey, good morning, sorry, good good to connect.

Speaker Change: He can meet in person and congratulations on your GPL acquisition that are amazing yeah. That's that's that's quite the whole I'm sure is doing fantastic for your yeah. It's it's a good question you know I think as we as we think through the near to medium term evolution of the company.

Jason Long: Yeah, that's, that's quite the whole thing. I'm sure it's doing fantastic for you. Yeah, it's, it's a good question. You know, I think as we think through the near to medium-term evolution of the company, you know, I'll start with the water side, and I'll move to the data center side, and I can kind of aggregate it here. You know, over the next few years, I think water is going to be a big piece of the story.

Charles Meade: We'll move next to Charles Meade at Johnson Rice.

Speaker Change: I'll start with the water side and I'll move to the data center side and I can kind of aggregated here you know over the next few years I think the water is going to be a big piece of the story you know we've talked to.

Jason Long: You know, we've talked about the pore space, the subsurface, and its ability to accommodate at least another three and a half million barrels a day of water handling capacity. And when you think through, like, what does that mean from an economic perspective, each million barrels a day of water handling capacity calculates to 40 to $60 million a year of free cash flow.

Charles Meade: Good morning, Jason and Scott. The first question is kind of an open-ended one. I'd like to ask you guys, you know, your IPO marketing process is just a few weeks ago. And I'd like to, I'd like to ask you to offer you what, did you have any kind of persistent surprises as part of that? And I'm thinking in particular are the parts of your business that when you were talking to investors that they immediately understood and at the other end of the spectrum, is there part of the opportunity that you guys have in front of you that may be required, repeated explanations? Just any thoughts you had on that and what the investing public, you know, has an easier time understanding what they have, maybe, a more difficult time coming to speed on.

Speaker Change: The the pore space, the subsurface and its ability to accommodate at least another year.

Speaker Change: Three and a half to 4 million barrels a day of water handling capacity and when you think through like what does that mean from an economic perspective.

Jason Long: And so, you know, there's pretty clear runway with just where we're at today with no M&A to add another call it roughly 200 million of free cash flow just through the water handling side. Now you look kind of a few years out to kind of that 10 year point like you mentioned, I think we start seeing other opportunities like solar, like solar, like data centers. You know, a lot of these other non-oil and gas infrastructure plays have really started to take advantages.

Speaker Change: You know each million barrels a day of water handling capacity.

Speaker Change: Calculates to $40 million to $60 million a year of free cash flow and so you know there is there's pretty clear runway with just where we're at today with no M&A to add another call it roughly $200 million of free cash flow just to the water handling side.

Speaker Change: Now you look kind of a few years out to kind of that 10 year point like you mentioned you know I think we start seeing other opportunities like solar liked that solar like data centers.

Speaker Change: A lot of these other non oil and gas infrastructure plays really start to take advantages take advantage of the benefits of West, Texas and that's cheap power. That's fiber accessibility. That's large contiguous blocks of land. There is just a lot commercially that Texas has to offer that's going to be challenging to find out the landscape in the U S to compete with and so you know we can see.

Jason Long: Can you take this one, Jason? Yeah, that's fine. Yeah, I think it's like probably shining a little bit. Yeah, you know, I would, it's a really good question. And I would say, you know, the biggest education effort, I think, is a result of this being just a fairly new business model. I think the folks at TPL have done a great job, you know, kind of growing and monetizing their asset base, and there was some familiarity with their model, which certainly helped inform, I think, initial discussions with investors.

Jason Long: Take advantage of the benefits of West Texas, and that's cheap power, fiber accessibility, and large contiguous blocks of land. There's just a lot commercially that Texas has to offer that's going to be, you know, challenging to find other landscapes in the US to compete with. And so, you know, just the data center and kind of the auxiliary opportunities that come with that add another couple hundred million dollars in free cash flow as well. And so I don't want to, call it, discrete numbers against discrete years and get myself into a bind here.

Speaker Change: He you know just the data center and kind of the exhilarate opportunities that come with that add another.

Speaker Change: Another couple of hundred million dollars in free cash flow as well and so I don't want to put you know call. It discrete numbers against discrete years and get myself into a bind here, but you know I would say you know you could ultimately look at just orders and orders of magnitude of growth you know over over the next decade very easily with the surface. We have today and just the op.

Jason Long: But, you know, I would say, you could ultimately look at just orders and orders of magnitude of growth, you know, over the next decade, very easily with the surface we have today and just the opportunity set that we have today. And as you know, I'm sure being a long-term TPL shareholder, you know, there's just a lot of new opportunities that come out of the woodworks when you hold land like this.

Jason Long: But, you know, more broadly speaking, there just hasn't been a lot of, you know, analysis or research on a land business that interacts with the energy industry. And so you know, really kind of talking through the dynamics of how land is so critical. You know, it's not just the oil and gas industry in West Texas, but just a broader opportunity to come with surface as a result of just having these large, continuous acreage positions.

Speaker Change: <unk> said that we have today.

Speaker Change: And as you know I'm sure hope being a long term G. P. L shareholder you know Theres, just a lot of new opportunities that come out of the woodwork. When you hold land like this that's not even being contemplated today and you know we always like to point out the data Center piece, you know 12 to 18 months ago, we knew as an option, but you know at the time latency may Texas, maybe not the best.

Jason Long: It's something that I think, when we talked through it with investors, you know, folks, folks would not along and they started to see it. It's just something that hadn't been readily discussed in the past. And as a result, I think it just took a little bit of dialogue. I mean, fortunately, you know, all you all both on the research side on the investor side are very, very smart in the energy space.

Jason Long: That's not even being contemplated today. And, you know, we always like to point out the data center piece. You know, 12 to 18 months ago, we knew it was an option. But, you know, at the time latency made Texas maybe not the best location. We've seen the evolution of that very quickly just over the last few quarters with the kind of advent and, you know, rapid growth of AI latency being less of an issue.

Jason Long: And all of a sudden, everyone's talking about data centers in West Texas. It's tough to say what that next, you know, that next phase of evolution is going to be that would just be additive to us. So Again, I kind of dance around your question a bit because I don't want to give any firm numbers, but I would say the outlook is very, very promising. You know, we've got the opportunity to grow both in the oil and gas space, particularly within water, here in the near term.

Speaker Change: Location, you know we've seen the evolution of that very quickly just over the last few quarters with kind of the advent and rapid growth of AI latency being less of an issue and all of a sudden everyone's talking data centers in west Texas.

Jason Long: And so, you know, you start to put the pieces together as it relates to maybe their other coverage or their other investments. And people got it pretty quickly. I think the big, you know, the big question ultimately was, you know, how do we think about valuation then? And that, look, that was, you know, that continues to be a discussion. I think, again, you know, TPL sitting out there as, you know, with the assets they have served as a great metric and one that, you know, we were able to point to.

Speaker Change: It's tough to say what that next you know that next phase of evolution is going to be that would just be additive to us. So.

Speaker Change: Again, I kind of I'm dancing around your question a bit because I don't want to give any firm numbers, but I would say the outlook is very very promising.

Speaker Change: We've got the opportunity to grow both in the oil and gas space, particularly.

Speaker Change: Particularly within water here in the near term, but we're also very very focused on data centers solar wind and these non oil and gas infrastructure plays but I think in the more medium to long term, it's going be a big piece of the story.

Jason Long: But we're also very, very focused on data centers, solar, wind, and these non-oil and gas infrastructure plays that I think in the medium to long term are going to be a big piece of the story.

Jason Long: Now that said, you know, there are some differences between them and us. You know, we are, we are highly focused on the surface side. We feel like that is what drives the ultimate premium valuation and we will continue to focus on that going forward. But it was really just kind of a full cycle discussion of the business model, you know, what we have in common with, you know, with the one comp out there on the energy side. And what sets us apart? And I think investors were generally very receptive and very excited about the story. And, you know, fortunately, we have seen that continue to play out post IPO.

Lawrence Goldstein: Is the solar and wind going to be associated with the data centers, i.e., are you going to have the utility, the power, as a separate operation, or does that go hand-in-hand with the data center? Obviously, data centers need that. And so does it – we won't have one or the other; we'll have both. Yes? No, yeah.

Speaker Change: So if the solar.

Unnamed Shareholder: And.

Speaker Change: When going to be associated with the data centers.

Speaker Change: E are you going to have.

Speaker Change: The utility.

Unnamed Shareholder: Power.

Speaker Change: As a separate operation or does that go hand in hand, with the data set obviously data centers need that and so we won't have one or the other we'll have both yes no.

Charles Meade: Thank you for the color. It's interesting. Now on the market votes every day on what you were. The follow-up. I think you alluded to this just briefly in your response to the previous question.

Jason Long: No, yes, I think that's exactly right. I mean, the data center, the Hyperscaler folks that are building these out would love to be able to check that box and have the code located, whether it's solar or wind, to have that alternative piece of power.

Speaker Change: No, yes, I think thats exactly right I mean the.

Speaker Change: The data center, the hydrogel or folks that are that are building. These out would love to be able to check that box and have the co located whether it's solar or wind to have that alternative piece of power.

Jason Long: I wanted to ask the state line, and I guess the speed or the you guys on your view of the low hanger fruit or the most immediate opportunities to add revenue there. Yeah, Charles. This is Jason. I'll take that one. The branch itself, both the East state line and the speed ranch were just really not developed from a commercial standpoint at all. So we looked at that. We look at that as really a blank canvas to open up a ton of opportunity, not just on the only gas side, but both in renewables.

Unnamed Shareholder: Mhm.

Lawrence Goldstein: Okay, thank you. I look forward to meeting you one day.

Speaker Change: Okay. Thank you I'll look forward to meeting you one day.

Operator: Yeah, thank you, sir. I appreciate it. And that concludes our Q&A session. I will now turn the conference back over to Scott McNeely for closing remarks.

Speaker Change: I appreciate it.

Unnamed Shareholder: And that concludes our Q&A session I will now turn the conference back over to Scott Mcnealy for closing remarks.

Operator: Yeah, thank you, Operator. And thanks again for everyone joining us today. You know, we're very excited about the initial performance of the business. And we're obviously very excited about the opportunities that lie ahead for LandBridge going forward.

Scott McNeely: Yeah, thank you, operator. And thanks again for everyone joining us today.

Speaker Change: Yes. Thank you operator, and thanks again for everyone. Joining today you know we're very excited about the initial performance of the business. We're obviously very excited about the opportunities that lay ahead for land bridge going forward.

Operator: You know, we want to be available to you all as a resource. Please feel free to reach out if there are any follow-up questions. But yeah, look forward to continuing to stay synced up. And, you know, we'll talk soon. Thank you.

Scott McNeely: You know, we're very excited about the initial performance of the business. We're obviously very excited about the opportunities that lie ahead for LandBridge going forward. You know, we want to be available to you all as a resource. Please feel free to reach out if there are any follow-up questions.

Speaker Change: We want to be available to you all as a resource please feel free to reach out 30 follow up questions, but yeah look forward to continuing to stay synced up and you know we'll talk soon thank you. Thanks for your time.

Jason Long: And we've got major thoroughfares that run through that ranch that really feed the Delaware basin. We think that there's a massive opportunity on the real estate side, whether that's man camps, fueling stations, et cetera, to really feed the basin as a whole. Top of that, I would really say that, you know, the only thing I would say on that top of that is the produce water infrastructure was not utilized at all.

Speaker Change: And this concludes today's conference call. Thank you for your participation you may now disconnect.

Operator: [music].

Jason Long: So we looked at it. It was not only strategic as it was located on the state line, but also just the fact that there was limited disposal wells outside of Conoco Phillips's wells and system that are on the surface. And so really a really good running room. We did a really deep dive on the geology and the geophysics there to make sure that we've got plenty of pore space to really handle the produce water in a sustainable way for the future. Thank you. Yeah, thanks, Charles.

Alexander Goldfarb: Our next question comes from Alexander Goldfarb at Piper Sandler.

Jason Long: Hey, morning down there and welcome to public land. Two questions for me. First, as you know, I'm a real estate guy, not an energy guy, but still on a political landscape change and candidates for the White House and certainly seems like a more progressive team from the from the demo ticket. Do you have any thoughts on a Harris presidency? What that would mean to regulations, especially round the water injection and some of the other thing, you know, business lines that underlie the pipeline side of your business?

Jason Long: Hey, I was on a good, good talking to you. Thanks for opening up with a softball here. Yeah, you know, we're certainly keeping an eye on it. You know, I think we're generally not too concerned. I think regardless of which way the election goes, we're certainly, you know, kind of focused more on the broader or called geopolitical situation and its, you know, ultimate impact on commodity prices. I think that is one that just impacts us as an industry.

Jason Long: You know, we saw the regime change so to speak back in 2000. But ultimately, you know, while there was some impact on commodity prices and where folks are focusing on development and so on, you know, I think most of the, called the direct regulation that impacts us is much more driven at the state level. And as a result of that, you know, it's tough to think that there's been any kind of knee jerk reaction regardless of who steps into office that could really impact us, you know, call it quickly in an unexpected way. And so, you know, we're keeping a watchful eye on it. But, but at this point, I would say no strong opinions one way or the other in terms of the, you know, an impact on it.

Alexander Goldfarb: Okay, and then the second question is on the data center and commercial rollout of the land that you have the holdings.

Jason Long: Can you just talk a little bit more about the initial data center in terms of the deal, the timing on deal closing entitlements that how that's being managed as far as who's obtaining the entitlements and what the financial recourses. And if there's any end user pre-leasing that's going on, basically trying to understand, you know, you guys protecting yourselves so you're not left holding the bag while you're the third part of user, which is also partly your sponsor, you know, it's out there trying to get things, their ducks lined up and get this entitled and, you know, sign up users and stuff like that, that you're not left there, you know, with no recourse and also whether you're precluded from pursuing additional data center deals or other similar large scale commercial deals until, you know, this first one pans out.

Jason Long: Yeah, those are, those are all really, really good questions. So, you know, as we mentioned in the earnings release, we're currently, we're currently sitting on a non-binding LOI that's being worked through with both affiliates or sponsors as well as some other parties. You know, we're obviously optimistic in the opportunity, but, you know, we're not going to release any of those details at this point. A lot of that is still being ironed out.

Jason Long: I would say we have a focus on ensuring that, you know, we are called protected and being cognizant of a lot of the concerns you flagged. And I think once we get, you know, a little further along the process and the ground lease, for example, is executed. You know, we plan on circling back and discussing in a bit more detail, but, you know, at this point, we're not going to really call it talk through or call it speculating on all this high level concerns until the dust settles.

Alexander Goldfarb: Okay. Thank you. Yeah.

Alexander Goldfarb: Thank you.

Kevin McCree: We'll go next to Kevin McCree at Pickering Injury, excuse me, Pickering Injure Energy Partners. Good morning, guys. Yeah, following up on the data center, I just was curious if you guys have quantified how many data center and solar lease opportunities you had out there.

Jason Long: And if you wanted to provide some high level thoughts on what the potential revenue impact could be from, you know, either a single dealer from all the opportunities you state. Yeah, Kevin, so we've roughly identified, you know, five to six right off the bat from a data center standpoint, as far as, as you think about solar, one of our, one of the first data centers that we're focused on would be co-located with a, with a large solar development, roughly 250 megawatts.

Jason Long: As we think about, you know, the new acquisition, you know, obviously, we just closed in May. And so we're still exploring a ton of opportunities. There's a lot of, again, like I said, a, a really blank canvas of opportunity, both for solar and for wind. So, you know, the ability to have those co-located with some of these data center opportunities is, seems to be a good, good wind for the high-per-scalers. Yeah, I mean, on the economic side, you know, we, we've probably obviously mentioned the upfront payment and the earnings release.

Jason Long: You know, I think this is, this initial opportunity we're working through as we kind of refine the terms and the details is really going to help inform us of the, the range of economic opportunities and impact alamers. I'll say it's something that we're very excited about and something we think that we'll be meaningful, but it's too early to, to really throw out any, any numbers at this point in a responsible way.

Jason Long: So, again, you know, I, we're looking forward to circling back to you all to the market and kind of talking in a bit more detail when the time is right, which we don't think is too far down the road, but we do want to have things firmed up a bit more before we start discussing economic.

Kevin McCree: Alex. Yeah, sure, that makes sense. And then, as a pile of question, just given the success of the IPO and the subsequent trading, you know, does that change anything on your M&A strategy? Are there any more opportunities that are rising or increased interest from your side to get bigger? Yeah, I mean, we're always evaluating M&A opportunities. You know, I would say just as a general rule, we're not going to really talk to anything in particular until it's far enough along where we've got, you know, a meaningful amount of confidence in it, but just taking a step back and I think addressing your question more high level M&A ideology.

Kevin McCree: You know, ultimately, the answer is, you know, we're going to continue to define opportunities that makes sense. And, you know, we've said, you know, previously that we're really focused on ensuring we're not going on executing on M&A that would cannibalize, you know, the existing opportunity set that exists on our surface today, and that's something we remain highly focused on. Now, you know, there are smaller tuck-in and both on opportunities where the economics make all the sense in the world, much smaller denominations, but I'll say, you know, our desire to pursue those really aren't driven or impacted necessarily by where we're trading.

Kevin McCree: You know, ultimately, our underwriting criteria haven't, you know, hasn't shifted as a result of where we're trading. You know, we're ultimately really focused on making sure that we find accretive deals and generate meaningful free cash flow and free cash flow growth for our company, and that's going to continue to be the focus going forward.

Kevin McCree: Thank you for the answers and congratulations on the successful parts. Yeah, thanks. I appreciate it.

Roger Reed: We'll move next to Roger Reed at Wells Fargo.

Roger Reed: Yeah, good morning, and welcome to the world of public public companies and quarterly earnings calls. Thank you.

Jason Long: Let me kind of change tack a little bit with some of the guys surface. You know, you have, obviously, sand sales, access, things like that. Just curious, you know, from where you were at the time of the most recent acquisition to what you see now looking forward on that front. Yeah, I guess I want to make sure I understand the question. Are you talking about the opportunity set or what are you addressing exactly there?

Jason Long: Yeah, if anything is changed, I guess, you know, looks a little better, looks a little clearer as we think about just the surface access, right? Whether it's roads, whether it's pipes, whether it's, you know, sand sales, something along those lines. Yeah, I mean, I think, you know, with the addition of the state line ransom, these other acquisitions, just having access to more of that continuous surface, particularly along the state line just makes call our strategy. I don't see that much easier to execute, but it allows us to deploy so much in the way of both surface and resources to the industry and the region.

Jason Long: And so, you know, it was interesting timing because we closed that acquisition kind of mid Q2 and obviously kind of parlayed that straight into the IPO. So I think a lot of the players and the customers that we interact with, you know, kind of caught wind of what it is we did kind of through the IPO process. And so we're getting a lot of in-bounds now. You know, as I mentioned earlier, you know, commercial traction, you know, both on the water bridge side, but just, you know, more broad in the land bridge side, you know, I think continues to outpace our initial expectations, which is a great problem to have.

Jason Long: And I mean, and that I think, again, a good reflection of the asset that we have, you know, and the recognition of the value of that asset. And so, you know, the full-call it opportunity set that you laid out there continues to be very, very call it interesting for folks in the industry and something that they're very focused on, you know, thinking through you again, you know, assets that have been historically underutilized and are now available. And so it's all kind of, you know, good news in that camp.

Jason Long: You know, really know, call it headwinds from a surface perspective. You know, we continue to see a lot of interest and we expect to see a lot of growth as a result.

Roger Reed: I had a question I had for you.

Jason Long: This is on the, I guess, produced water side of it. We've noted several companies on the E&P side have, you know, done a little bit better on the OPEX side, and some of this is even in Marcello, so I know it's not you or your opportunity suite, but some of them are also Permian guys, that they've been able to lower some of their L.O.E, by getting better on handling water. And I was just curious, you know, if you kind of look at, you know, let's call it not industry best practice versus what you offer, kind of, you know, if you think of the high cost of disposal water versus what you offer and what sort of opportunity that maybe even builds a greater growth possibility for you than what sort of baked into the current numbers.

Jason Long: Yeah, you know, it's an interesting question. I think it's one that really points to the water handling industry, you know, in the Delaware and how that, you know, subsequently flows through to LandBridge. I mean, the, you know, I would say the evolution of water handling over the last six to eight years in the Delaware is really reflected a shift of folks doing it largely in house to, to looking at folks externally, whether it's, you know, water bridge and GL areas are one of the other peers that are out there.

Jason Long: And so, you know, I think folks have found that's generally more cost of producers have found that's generally more cost effective. You know, particularly given the volumetric profile of water as it relates to upstream development in the Delaware, maybe compared to some other basins. But, you know, how that ultimately flows through for LandBridge is we continue to see, you know, the Permian and the Delaware in particular getting an outsized piece of the commodity growth here in the near term.

Jason Long: It's just going to drive, you know, meaningful increases in water handling capacity and infrastructure to accommodate that growth. You know, and as we've kind of discussed in the past and we have in our material, you know, one of the big core tenets of the investment pieces here was, you know, buying the surface along the state line that has, you know, kind of meaningfully underutilized pore space subsurface to accommodate that water handling infrastructure.

Jason Long: And so, all of these call it tailwinds for us and the, you know, the dynamic around upstream producers, producers continuing to lean on third party water handling companies to accommodate the water needs for this, for their growth here in the Delaware. I think all plays out very, very well for LandBridge. It's going to result, I think in, you know, more infrastructure being built very quickly on LandBridge. And that's ultimately going to play out for us in terms of, you know, surface use revenues and damage payments also and produced water royalties. So it's all very good momentum, kind of a worrisome moment.

Roger Reed: Great. We'll look forward to it. Thanks. Yeah, thanks, Ryder.

Laurence Goldstein: We'll take our final question from Laurence Goldstein at Santa Monica Partners.

Laurence Goldstein: We haven't met yet, but I believe I'm the second oldest shareholder of TPL having purchased it when I was about 13 years old, which was 75 years ago. And, but I'm not the oldest Warren Buffett told me he too bought when he was 13 and he's older than I. He never bought again, which is the oddest thing for that gentleman. I did over the years. And that, that, of course, led me to investors who have purchased a great deal of TPL and a great deal of LandBridge.

Laurence Goldstein: And I'm just interested to quit. Question is all seemed to be focused on whether you're going to have a data center this year, a deal for one or not.

Laurence Goldstein: What I'm interested in being a long-term investor and my investment partnership, which is 42 years old, makes nothing but long-term investments. My, what I'm interested in is when this company was put together and you had your dreams, if you just go out 10 years from now, it's now, 2034. What would you hope that the profit and lower statement would be looking like?

Jason Long: Thank you. Good morning, sir. Good to connect. Hope you can meet in person. Congratulations on your TPL acquisition. That's amazing. Yeah, that's quite the whole I'm sure it's doing fantastic for you. Yeah, it's a good question. I think as we think through the near to medium term evolution of the company, I'll start with the water side and I'll move to the data center side and I can aggregate it here. You know, over the next few years, I think the water is going to be a big piece of the story.

Jason Long: You know, we've talked to the poor space, the subsurface and its ability to accommodate at least another, you know, three and a half to four million barrels a day of water handling capacity. And when you think through like what does that mean from an economic perspective, you know, each, you know, each million barrels a day of water handling capacity calculates to 40 to $60 million a year of free cash flow. And so, you know, there's there's pretty clear runway with just where we're at today with no M&A to add another called roughly 200 million of free cash flow just through the water handling side.

Jason Long: Now, you look kind of a few years out to kind of that tenure point like you mentioned. You know, I think we start seeing other opportunities like solar, like that solar, like data centers. You know, a lot of these other non oil and gas infrastructure plays really start to take advantages, take advantage of the benefits of West Texas. And that's cheap power, that's fiber accessibility, that's large continuous blocks of land. There's just a lot commercially that Texas has to offer that's going to be, you know, challenging to find other landscapes in the U.S, to compete with.

Jason Long: And so, you know, we could see, you know, just the data center and kind of the auxiliary opportunities to come with that ad, you know, another couple hundred million dollars in free cash flow as well. And so, I don't want to put, you know, call it discrete numbers against discrete years and get myself into a bind here. But, you know, I would say, you know, you could ultimately look at just orders and orders of magnitude of growth.

Jason Long: You know, over the next decade, very easily with the surface we have today and just the opportunity set that we have today. And as you know, I'm sure, hoping a long-term KPL shareholder, you know, there's just a lot of new opportunities that come out of the woodworks when you hold land like this.

Jason Long: That's not even being contemplated today. And, you know, we always like to point out the data center piece, you know, 12 to 18 months ago. We knew it was an option, but, you know, at the time, latency may, Texas may be not the best location. You know, we've seen the evolution of that very quickly, just over the last few quarters with kind of the advent and, you know, rapid growth of AI, latency being less of an issue and all the sudden, everyone's talking data centers in less Texas.

Jason Long: It's tough to say what that next, you know, that next phase of evolution is going to be that would just be added to us. So, again, I kind of, I'm dancing around your question a bit because I don't want to give any firm numbers, but I would say the outlook is very, very promising. You know, we've got the opportunity to grow both in the oil and gas space, you know, particularly within water here in the near term, but we're also very, very focused on data centers, solar, wind, and these non oil and gas infrastructure plays. So, I think in the more medium-belong term, it's going to be a big piece of the story.

Jason Long: Is the solar and wind going to be associated with the data centers? IE, are you going to have the utility, the power as a separate operation or is that go hand in hand with the data center? Obviously, data centers need that. And so, we won't have one or the other. We'll have both. Yes, no? No, yes. I think that's exactly right. I mean, the data centers, the hot-sheeler folks that are building these out would love to be able to check that box and have the co-located whether it's solar or wind to have that alternative piece of power.

Laurence Goldstein: Thank you.

Laurence Goldstein: I look forward to meeting you one day.

Scott McNeely: And that concludes our Q&A session.

Scott McNeely: I will now turn the conference back over to Scott McNeely for closing remarks. Yeah. Thank you, operator. Thanks again for joining today. We're very excited about the initial performance of the business. We're obviously very excited about the opportunities that lay ahead for LandBridge going forward. You know, we want to be available to you all as a resource. Please feel free to reach out. There are any follow up questions. But yeah, look forward to continuing to stay synced up. And, you know, we'll talk soon. Thank you. Thanks for your time.

Operator: And this concludes today's conference call. Thank you for your participation. You may now disconnect. Thank you.

Q2 2024 LandBridge Company LLC Earnings Call

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