Executive Summary / Key Takeaways

• LandBridge operates a unique, asset-light land management model in the core Delaware Basin, generating high-margin revenue primarily from surface use and resource sales, significantly insulating it from oil and gas price volatility.
• The company has demonstrated strong growth, particularly in Q1 2025, with triple-digit increases in revenue and Adjusted EBITDA, driven by strategic land acquisitions and increasing commercialization of its expanded acreage.
• A key operational differentiator is the increasing surface use economic efficiency, with legacy acreage reaching over $1,000 per acre in 2024, and management targeting over $3,000 per acre in the future through diverse commercial opportunities like water handling, solar, and digital infrastructure.
• Management's 2025 Adjusted EBITDA guidance of $170 million to $190 million is underpinned by contributions from recent acquisitions, initial solar revenue, and significant expected growth in high-margin produced water volumes, driven by geological trends and new infrastructure projects.
• While smaller in scale than traditional E&P or midstream giants, LandBridge's specialized focus, strategic land position, and differentiated operational approach provide a competitive moat and a clear runway for continued cash flow growth with minimal capital expenditure.

The Foundation: A Unique Model in Prime Territory

In the heart of the prolific Delaware Basin, LandBridge Company LLC (LB) has carved out a distinct niche, operating not as a traditional oil and gas producer or midstream operator, but as a specialized land management business. Founded in 2021, LB's core strategy revolves around owning and actively managing extensive surface acreage to generate diversified revenue streams. This model is inherently asset-light compared to the capital-intensive nature of drilling or building vast pipeline networks, positioning LB with industry-leading margins and robust cash flow generation potential.

LB's historical journey is marked by a strategic evolution, increasingly focusing on monetizing its land and resources through avenues less tied to the volatile swings of commodity prices. This shift is evident in the composition of its revenue, with non-oil and gas royalty streams (primarily surface use and resource sales like water) growing from 65% in Q3 2023 to approximately 92% in Q1 2025. This deliberate insulation from direct commodity price exposure is a foundational element of the investment thesis.

The company's scale expanded dramatically in 2024 and early 2025 through significant, strategically located acquisitions, more than tripling its surface holdings to around 276,000 acres. Key among these was the Wolf Bone Ranch acquisition in late 2024, adding 46,000 acres in Reeves and Pecos Counties, Texas, and securing a valuable minimum annual revenue commitment. These acquisitions were not merely about increasing acreage but were targeted to enhance existing operations, create synergies, and provide access to critical resources and infrastructure, reinforcing LB's competitive position.

In the competitive landscape of the Permian Basin, LB operates alongside much larger players like EOG Resources (EOG), Occidental Petroleum (OXY), and Williams Companies (WMB). While these giants focus on large-scale E&P or extensive midstream networks, LB's competitive advantage lies in its specialized focus and differentiated operational approach – its "technology," if you will. This isn't about cutting-edge drilling tech or complex processing plants, but rather its expertise in strategic land aggregation, sophisticated surface management, and leveraging its unique pore space access. This operational "technology" enables LB to facilitate complex infrastructure projects (like water pipelines, data centers, solar farms) on its land more efficiently than competitors might achieve through fragmented land ownership or less specialized management. This can translate into tangible benefits for its partners, such as potentially faster permitting processes or lower operating costs for water users, giving LB a competitive edge in securing commercial agreements. While LB's scale and R&D investment in traditional energy tech lag behind the majors, its niche focus and operational efficiency in land and resource management provide a distinct moat.

Performance Reflecting Strategy and Scale

LandBridge's financial performance in the first quarter of 2025 vividly illustrates the impact of its strategic expansion and diversified model. The company delivered impressive triple-digit growth year-over-year, with revenues climbing 131% to $44.0 million and Adjusted EBITDA increasing 129% to $38.8 million. This resulted in a robust Adjusted EBITDA margin of 88%, a testament to the low operating and capital expenditure nature of its business model where customers bear the majority of development costs.

Sequentially, Q1 2025 revenue grew 20% from Q4 2024. This growth was primarily fueled by a significant 118% sequential increase in resource sales and royalties, largely attributable to frac head water sales and royalty volumes from the newly acquired Wolf Bone Ranch. Surface use royalties and revenues also contributed, increasing 3% sequentially, driven by a 72% rise in surface use royalty volumes across both legacy and new acreage. In contrast, oil and gas royalties saw a sequential decline of 24% due to lower net royalty production, highlighting the effectiveness of LB's strategy to reduce reliance on this more volatile revenue stream. The fact that non-oil and gas revenues constituted approximately 92% of the total in Q1 2025 underscores the success of this diversification.

Profitability remains a core strength, with the 88% Adjusted EBITDA margin reflecting the company's asset-light structure. While free cash flow in Q1 2025 was $15.8 million (36% margin), a sequential decrease from Q4 2024's ~70% margin, this was primarily attributed to a temporary increase in accounts receivable stemming from the significant sequential growth in higher-margin surface use and resource sales revenues. Management views the Q4 2024 margin as more indicative of long-term expectations, free from the nonrecurring IPO-related expenses that impacted earlier periods.

A key metric highlighting LB's operational effectiveness is the surface use economic efficiency on its legacy 72,000 acres, which grew from $465 per acre in 2022 to $1,018 per acre in 2024. This demonstrates the company's ability to significantly increase cash flows per acre over time through active management and commercialization, a potential management believes is replicable across its expanded acreage base without requiring meaningful capital outlays from LB.

Strategic Momentum and a Clear Outlook

LandBridge is actively translating its expanded land position into future growth through a series of strategic initiatives and commercial agreements. The company's outlook for 2025 reflects confidence in its ability to continue this trajectory, with Adjusted EBITDA guidance set at $170 million to $190 million.

This guidance is underpinned by several key drivers. The incremental contributions from recent acquisitions, particularly the Wolf Bone Ranch with its minimum revenue commitment, provide a baseline of growth. Beyond this, a significant driver is the expected growth in high-margin produced water volumes. Management anticipates a "meaningful step change" in these volumes starting in Q2 2025 and fully materializing in Q3 2025. This growth is fueled by new infrastructure projects coming online, such as WaterBridge's BPX Kraken line and new assets handling Devon (DVN) volumes, and is supported by the geological reality of deeper benches in the core Delaware Basin having inherently higher water cuts. Management expects low to mid-double-digit growth in produced water volumes through 2025 relative to Q1 levels, projecting water growth to "eclipse oil growth" in their core area for the foreseeable future. The recently announced Speedway Pipeline open season, connecting New Mexico counties to LB's pore space, further underscores the potential for future water handling revenue, with initial surface damage payments expected in late 2025 and volume royalties ramping up in 2026.

Beyond water, LB is actively commercializing its surface for other high-growth opportunities. The company has executed solar energy project development agreements, such as the one with DESRI for 6,700 acres. While full operational revenue from such projects is 2-3 years out, initial upfront milestone payments (estimated at $8 million to $10 million for other solar opportunities) are expected in 2025, contributing to the guidance. Digital infrastructure, particularly data centers requiring significant power and water, represents another major opportunity. LB signed its first lease development agreement for a data center in late 2024, receiving an $8 million deposit. While the full revenue uplift (lease payments escalating upon construction, plus profit interest on power generation and water sales) is expected later, likely starting in 2026 and ratcheting up over subsequent years, this project highlights the potential for substantial, long-term revenue streams from non-traditional sources. Management is also seeing broader opportunities in in-basin power generation beyond digital infrastructure, expecting more positive updates in the near term.

LB's capital allocation priorities support this growth strategy: maintaining a strong balance sheet, returning capital (evidenced by the declared quarterly dividend), and pursuing accretive land acquisitions. The recent amendment to debt facilities, removing amortization requirements, enhances financial flexibility for future acquisitions. The company's low capital intensity means that growth outside of land purchases requires minimal CapEx, with expected total CapEx for the upcoming year around $1 million to $2 million.

While the outlook is positive, risks remain. Macroeconomic volatility could impact overall activity levels in the basin, although LB's diversified, low-CapEx model offers a degree of insulation. Regulatory changes regarding water handling could also present challenges or opportunities. Furthermore, the long lead times for large commercial projects like data centers mean that significant revenue contributions from these ventures are further out, requiring patience from investors.

Conclusion

LandBridge Company presents a compelling investment thesis centered on its unique, asset-light land management model in the highly prospective Delaware Basin. By strategically acquiring and actively commercializing its extensive surface acreage, LB is successfully diversifying its revenue streams away from direct commodity price exposure, focusing instead on high-margin opportunities in surface use, resource sales (especially water), solar, and digital infrastructure.

The company's recent financial performance, particularly the strong Q1 2025 results, validates its strategy and the immediate benefits of its expanded scale. The increasing surface use economic efficiency metric underscores the significant untapped potential on its land base. Looking ahead, the 2025 Adjusted EBITDA guidance reflects confidence in continued growth, driven by contributions from recent acquisitions and, notably, the expected surge in high-margin produced water volumes fueled by geological trends and new infrastructure. While facing competition from larger industry players, LB's specialized focus, strategic land position, and differentiated operational approach provide a competitive edge in its niche. The long-term potential from large-scale commercial projects like data centers adds further upside, positioning LandBridge to unearth significant value beyond the barrel for its shareholders.