LandBridge Company - Earnings Call - Q2 2025

Executive Summary

• Q2 2025 delivered strong growth on core land economics: revenue $47.5 million (+83% YoY, +8% QoQ) and adjusted EBITDA $42.5 million (+81% YoY, +9% QoQ), sustaining exceptional margins (Adj. EBITDA margin 89%).
• Mix shifted further toward fee-based, capital-light surface use royalties; Surface Use Royalties and Revenue set a quarterly record at $34.2 million (+31% QoQ), while resource sales/royalties and oil & gas royalties declined sequentially on lower brackish water sales and net royalty production.
• FY2025 adjusted EBITDA guidance was updated to $160–$180 million (from $170–$190 million), primarily due to DBR Solar revenue timing; dividend maintained at $0.10 per share (payable Sept 18).
• Strategic wins underpin the medium-term growth vector: 10-year pore space reservation with Devon, IPP CCGT option for in-basin power, and a power solutions partnership; management emphasized regulatory tailwinds for distributed, sustainable pore space solutions.
• Free cash flow rebounded sharply (FCF margin 76% vs 36% in Q1) as working capital compression reversed, supporting liquidity of $95.3 million and lower debt quarter-over-quarter.

What Went Well and What Went Wrong

What Went Well

• Record surface use royalties and revenue ($34.2 million) drove sequential growth; CFO cited several large renewal payments, new projects (WaterBridge, Desert Environmental), and increased commercial activity on LB lands.
• High-margin, capital-light model persisted: adjusted EBITDA margin 89% with minimal capex ($1.2 million), and FCF margin expanded to 76% as Q1 working capital headwinds reversed.
• Strategic agreements reinforce multi-year visibility: 10-year Devon pore space reservation (300,000 bpd capacity starting 2027, 175,000 bpd MVC), IPP CCGT option tied to future data center load, and a power partnership to deliver long-term, low-cost power; “We are the solution to the issue these regulations aim to address” (CEO).

What Went Wrong

• Sequential declines in resource sales/royalties (-26%) and oil & gas royalties (-19%) on lower brackish water volumes and net royalty production falling from 923 boe/d (Q1) to 814 boe/d (Q2).
• FY2025 adjusted EBITDA guidance lowered to $160–$180 million due to DBR Solar revenue recognition shifting beyond year-end 2025, delaying previously expected near-term uplift.
• Consensus comparisons: S&P Global shows Q2 revenue and EPS below Street (see Estimates Context) and EBITDA (GAAP) below consensus; the mix shift and timing of renewals/lumpiness create near-term variability versus quarterly run rates.*

Transcript

Speaker 8

Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I'd like to welcome everyone to the LandBridge Company LLC second quarter 2025 results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star, then the number one on your telephone keypad. To withdraw your question, press star one again. I would now like to turn the conference over to Mae Harrington, Director of Investor Relations. Please go ahead.

Speaker 2

Good morning, everyone, and thank you for joining the LandBridge Company LLC second quarter 2025 earnings call. I am joined today by our CEO, Jason Long, and our CFO, Trey Mattson, from LandBridge Company LLC, Scott McNeely. Before we begin, I'd like to remind you that in this call and the related presentation, we will make forward-looking statements regarding our current beliefs, plans, and expectations, which are not guarantees of future performance and which are subject to a number of known and unknown risks and uncertainties that could cause actual results to differ materially from results and events contemplated by such forward-looking statements. You are cautioned not to place undue reliance on forward-looking statements. Please refer to the risk factors and other cautionary statements included in our filings with the SEC.

I would also like to point out that our investor presentation and today's conference call will contain discussions of non-GAAP financial measures, which we believe are useful in evaluating our performance. These supplemental measures should not be considered in isolation or as a substitute for financial measures prepared in accordance with GAAP. Reconciliations to the most directly comparable GAAP measures are included in our earnings release and the appendix of today's accompanying presentation. I'll now turn the call over to our Chief Executive Officer, Jason Long.

Speaker 7

Thank you, Mae. We're pleased to report strong second quarter results, which drove year-over-year revenue and adjusted EBITDA growth of 83% and 81% respectively. As we pass the anniversary of our listing, it's a good time to reflect on four key factors that continue to differentiate our business model and position us to create sustainable value for shareholders. First, our business is capital light, enabling us to benefit from continued growth in the Permian Basin without incurring meaningful operating and capital expenditures. This is reflected in our adjusted EBITDA margin of 89% during the second quarter. We remain excited about growth opportunities across the Permian, and I've increased our land holdings by more than 50,000 acres over the past 12 months to make sure we're in a position to capitalize on such opportunities. Second, owning surface acreage provides significant optionality.

Over the past year, we have deepened and developed relationships with clients and blue chip operators across key industries, including renewable energy and digital infrastructure. That includes our first development agreement for a data center, which was signed in November of 2024, as well as the solar energy project development agreements with affiliates of Desri earlier this year. We look forward to continuing to explore opportunities to support the development of data centers and other digital infrastructure in the region. While digital infrastructure has not to date represented a meaningful contribution to revenues or related projections, we are actively working to identify additional projects to allow incremental revenue. Third, our diversified revenue streams reduce commodity risk and provide numerous growth opportunities between surface use royalties and revenues, resource sales and royalties, and oil and gas royalties.

Finally, our symbiotic relationship with WaterBridge, as we have discussed regularly since the launch of our IPO process in 2024, we see this relationship as one of LandBridge's biggest strategic advantages, providing superior visibility into long-term trends and ultimately revenue growth. We provide WaterBridge access to underutilized pore space in exchange for market-driven surface royalties from each barrel of produced water handled by WaterBridge on our land, as well as market-driven surface use payments for infrastructure constructed on our land. This relationship with the largest pure-play integrated water infrastructure company in the Delaware Basin helps to drive reliable, recurring revenue for our business and compelling returns for our shareholders. Each agreement with WaterBridge is vetted and approved by an established, well-tested corporate governance process and fully disclosed via public filings.

Turning to more recent developments, I'm pleased to share that our team has continued to make commercial progress, executing a number of new high-impact agreements this year. First, we recently executed a 10-year surface use and pore space reservation agreement with Devon Energy, securing 300,000 barrels a day of pore space capacity on our East State Line and Speed Ranches to accommodate long-term water takeaway and disposal for developments concentrated in the core of the New Mexico-Delaware Basin. This agreement will begin in the second quarter of 2027 and includes an obligation to deliver at least 175,000 barrels per day. We also executed an option agreement with a large public IPP for the development and construction of a natural gas-fired CCGT plant on our Reeves County acreage to service future prospective co-located data center load demand.

This project marks a pivotal step in meeting West Texas' growing power needs, driving transformative in-basin power generation investments. Finally, we're excited to announce a strategic partnership with a leading vertically integrated power generation and solutions provider to accelerate the development of scalable, resilient, and sustainable energy infrastructure in West Texas. This collaboration strengthens our platform by aligning our assets with a trusted partner capable of delivering cost-effective long-term power through power purchase agreements. This initiative is expected to support energy-intensive customers, including data centers, while significantly enhancing the value of our asset portfolio. Turning to recent regulatory developments in Texas, we're pleased to note that recently announced changes governing produced water handling facilities are not only beneficial for our company, but ones we fully support. These updates shine a spotlight on our responsible pore space management strategy, underscoring that pore space is not a simple commodity.

Instead, our historical and current operating approach prioritizes sustainable use, resulting in superior asset longevity and flow assurance, which in turn delivers a truly differentiated value proposition for our stakeholders. Make no mistake, we are the solution to the issue these regulations aim to address, not part of the problem. Our approach is fundamentally different, and we believe it's essential for long-term success in this evolving landscape. We're looking forward to the second half of the year and continuing to identify new opportunities to increase revenues. I'll now turn the call over to Scott McNeely to walk through the numbers.

Speaker 3

Thank you, Jason, and thanks and welcome to everyone joining us on the call today. As Jason already stated, we're pleased with the quarter and performance throughout the first half of 2025. Our second quarter revenues increased to $47.5 million, up 8% sequentially and 83% year over year. Sequential revenue growth for the quarter was driven by surface use royalties and revenue, which increased 31% sequentially. This growth was driven by an increase in easements and other surface-related revenue, including several large renewal payments, multiple new projects, and an overall increase in commercial activity on our acreage. Overall revenue growth was partially offset by sequential declines across our two other revenue categories.

Resource sales and royalties experienced a 26% sequential decline, driven by lower brackish water sales and royalty volumes, and oil and gas royalties declined 19% sequentially, driven by a decrease in net royalty production, with volumes falling from 923 BOE a day in Q1 2025 to 814 BOE a day in Q2 2025. Overall, we have successfully shifted our revenue mix in favor of fee-based arrangements versus royalties that fluctuate with commodity prices. Today, such arrangements account for a record 94% of total revenues. The efficiency of our capital model continues to deliver strong adjusted EBITDA, $42.5 million, representing a sequential increase of 9% and 81% year over year, with an 89% adjusted EBITDA margin. We generated free cash flow of approximately $36.1 million and a free cash flow margin of 76%, which is in line with our previously discussed long-term free cash flow margin expectations of about 70%.

We ended the quarter with total liquidity of $95.3 million, including cash and cash equivalents of $20.3 million and approximately $75 million under our revolving credit facility. Our capital allocation priorities remain the same for 2025, and we continue to execute these priorities, which, as a reminder, include maintaining a strong balance sheet to maximize financial flexibility over time. We ended the quarter with $374.3 million of debt outstanding under our term loan and revolving credit facility, which is down from $379.3 million at the end of Q1 2025. Our net leverage ratio was 2.4 times compared to the 2.5 times at the end of the first quarter. We remain committed to returning capital to shareholders and have declared a quarterly dividend to shareholders of $0.10 per share. Our dividend provides shareholders with the opportunity to share in our successes.

Finally, we will continue to evaluate a host of value-enhancing land acquisitions in the second half of the year, which will further solidify our standing in the marketplace. In anticipation of the execution of the DBR solar opportunity with a large public renewable energy developer and operator, we are adjusting our adjusted EBITDA guidance range for full year 2025 to between $160 million and $180 million. This adjustment is primarily driven by an expectation that the majority of the revenue associated with the DBR solar opportunity will be recognized following year-end 2025, later than initial revenue expectations based on an earlier execution of this opportunity. We would like to open up the line for questions. Operator?

Speaker 8

We will now begin the question and answer session. In order to ask a question, simply press star followed by the number one on your telephone keypad. Our first question will come from the line of Charles Meade with Johnson Rice. Please go ahead.

Speaker 4

Good morning, Jason and Scott. Scott, I want to pick up right where you left off there, the DBR solar. Can you just elaborate a little bit more on the history of this project and where you, you know, obviously you had that $10 million of EBITDA revenue in 2025, but can you just kind of put the overall timeline in context and what this, I guess, what precipitated the shift? Perhaps as part of that, it seems like it's a shift in that it hasn't disappeared, but maybe you can just confirm that.

Speaker 0

Yeah, no, good morning, Charles. Happy to. If you recall, this solar project was one where we had worked through all of the prep work, which includes the tax abatement work, the coordination with the mineral owners, and so on. I'm part of our surface position that was part of the original acquisition we closed on in 2021. We had worked through the preparation for several years. We had planned to put it out to market to a developer last year. The site itself is located immediately adjacent to where the primary site is that's associated with the data center opportunity that we worked through last year. We punted on marketing that site to the solar developers until after that was wrapped up. That was obviously we got that option agreement in place for the data center at the end of 2024.

As such, kind of flipped and put the solar facility to market here in early 2025. We had baked in about $10 million expected just based on input from our consultants in terms of what you could typically see for a project like that this year. As I've spoken to in the past, all of that was obviously subject to commercial progress, progress discussions, and so on. Ultimately, this was one where we got good traction with several really good brand name developers. We have landed on a great partner. I look forward to sharing more details on that. Just given how timing is playing out and when we expect those payments and that revenue to be made and recognized, kind of shifting out of this year is just the reality at this point. We're really excited to get it done.

We think it's, again, it's another testament to our ability to execute on a wide variety of opportunities. As I've said many times before, we're always focused here on long-term value creation, not on accelerating cash flows if that is just not the most economic outcome for the company. I think this is just a very good example of that.

Speaker 4

Got it. That's helpful. I appreciate it. As a follow-up, I wanted to ask about the deal that you guys signed with Devon Energy to bring produced water to East State Line and Speed Ranch. My understanding is that Speedway pipeline, which I guess technically isn't LandBridge Company LLC, but you guys are building capacity on that line. Can you just put that Devon Energy deal in the context of the Speedway line that is going to be coming to your Speed Ranch?

Speaker 0

Yeah, I mean, you can see in the map, there are certainly some capital synergies for WaterBridge as it relates to this Devon project and the broader Speedway project. I think from LandBridge's perspective, this just is an incredibly exciting opportunity. This was one where I think we clearly have a close relationship with the Devon team via WaterBridge and their interest in WaterBridge. I think this is just a real reflection from a very smart, prudent operator who's looking out at the realities of what's needed from a pore space perspective to accommodate future growth.

From our view, this is somewhat of an inflection point, certainly a new contract structure where you've got an operator going directly to a landowner saying, "I need to lock up large amounts of pore space over an extended period of time, and I'm willing to give you a meaningful guarantee to backstop that because that's how critical pore space is going to be to my development program going forward." That was ultimately what catalyzed the discussion between LandBridge and Devon directly and led to this. Now, how it relates to Speedway, this is, again, from WaterBridge's perspective, they complement each other, but not necessarily the same. I think this is great momentum both from the WaterBridge side and clearly from the LandBridge side.

Speaker 4

Yeah, the only thing I would add, Charles, is that this is definitely volumes and pore space that's being reserved up on Speed Ranch, but also on our East State Line Ranch. It's a combination of both.

Speaker 0

Yeah, it's a good point. I mean, it gets back to the redundancy that we're able to offer producers is unmatched. It gets back to that differentiated approach, that differentiated value proposition. That was ultimately what got Devon excited about the opportunity here directly with LandBridge.

Speaker 4

Got it. That's great detail. Thanks, Jason. Thanks, Scott.

Speaker 0

Yeah, thanks, Charles.

Speaker 4

Thanks, Charles.

Speaker 8

Our next question comes from the line of Derek Whitfield with Texas Capital. Please go ahead.

Good morning all. Congrats on your operational accomplishments over the last quarter. With my first question, I wanted to ask for your thoughts on the Aris Water Solutions acquisition by Western Midstream Partners. We question it from a value recognition perspective. It seems to support your thesis for the value of pore space. I'd love to hear your thoughts on that.

Speaker 0

I think that's, you know, I think we, I'll answer this from LandBridge's perspective. I think the biggest takeaway from LandBridge's perspective as you read through that is the criticality of pore space. If you look at the headline that was put out, that first slide that was put out by Western, they flag the McNeal Ranch and the pore space offered by McNeal Ranch as being such a big piece of the value that's ultimately brought to the table here. I think more broadly speaking, obviously, as they talk through valuation, there's a little bit to unpack there, as it's very typical in M&A deals. Look, I mean, again, this shows Western is very focused on pore space. That's shown not just through this deal, but if you recall, we announced our deal with them earlier as part of their Pathfinder pipeline.

It all kind of circles back to, for responsible water handling, particularly going forward, this pore space, the surface access is just so, so critical. You're seeing that manifest itself directly through deals with us, like we've seen with Devon, like we've done with Western previously. You're also seeing it on the actual midstream side where very smart, prudent midstream operators, as they look through M&A with folks like Aris, are very much valuing the pore space that they have to offer. All of this, I think, reinforces the thesis and the narrative that we've been communicating to the market historically.

Great. For my follow-up, I wanted to shift the focus to your power announcements for the quarter. Are we safe to assume the IPP reference would be a new development for the Delaware, i.e., not CPV Basin Energy or Basin Ranch Energy? That IPP has a line of sight to a combined cycle gas turbine, given the tightness we're seeing right now among the OEMs?

Yeah, I hesitate to give too much detail now because the larger public IPP wants to put out a joint press release here in the coming weeks to speak to a lot of those details, Derek. I'll just say it's a brand name, and when that release comes out, I think it will speak a lot to the offering. I hate to put that one on pause, but I think we look forward to getting more details out here over the next few weeks.

That's terrific. I'll leave it there.

Okay, thanks, Derek. Appreciate it.

Speaker 8

Our next question comes from the line of John McKay with Goldman Sachs. Please go ahead.

Hey, good morning, guys. Thanks for the time. I wanted to start maybe just on the Devon Energy deal. If we look across the footprint right now, could you just catch us up on really like how much pore space you guys have is spoken for at this point? Maybe on a related piece, how you're looking about looking around that kind of land acquisition market to add to that. Thanks.

Speaker 0

Yeah, I mean, as you think about what we've identified from a pore space standpoint, we've identified way more than 5 million barrels a day of potential access to capacity. That's the underutilized pore space. As you think to answer your second question, we continue with our geological teams to look for additional pore space and underutilized access to land as we expand our position. That's definitely top of mind.

That's fair. Maybe just looking at the quarter, easements were stronger. You guys kind of touched on that. Were any of these renewal payments kind of one-offs in there, or is this kind of a new good run rate? Similarly, resource sales being a little softer, I think makes sense given activity levels, but also just wondering if there's any kind of more one-offs in there. Thanks.

Yeah, no, there's always going to be, there's always going to be a mix of renewals versus upfront payments. It's kind of important to note that. I think the bulk of the upfront payments we get, though, typically manifest themselves down the road as some type of renewal. Very rarely do we get like a one-off and then it's done. Certainly not never. As you look through the rest, obviously surface use royalties saw a great quarter there. I think largely in line with our expectation. Ultimately, I think the way you need to think about it is it's not going to be like a run rate going forward, so to speak, where that will be repeated, but I think you'll start to see it just compound over time.

There'll be a little bit of lumpiness kind of quarter over quarter, but as we've seen historically and kind of continue to progress today, the slope is up to the right and that will continue.

All right. That's it for me. Appreciate the time. Thank you.

Yeah, thanks, Jason.

Speaker 8

Our next question comes from the line of Kevin MacCurdy with Pickering Energy Partners. Please go ahead.

Hey, good morning. I wanted to ask for a little bit more color on the new Texas Railroad Commission regulations on injection pressure. Can you maybe summarize the new rules and compare that to your internal view of water disposal and competitive position in the basin?

Speaker 0

Yeah, for sure. As we've thought about this, if you put both the WaterBridge and the LandBridge hat on, what puts us in a really unique position is our access to this large contiguous block of acreage. With that, we have the ability to make sure that we're spreading out the injection. That really, for the most part, as you think through the new rules and regulations, is what they're really, really focused on, making sure we're not concentrating that injection in specific areas. Really having the ability to spread that out, which in turn gives you access to lower pressure. As you think through just our strategic ability, I would go back to the fact that the contiguous nature of our footprint does not really exist along the state line in and around New Mexico.

It puts us in a really good position to capitalize on a lot of these new volumes coming in from New Mexico. I would just add, on the WaterBridge side, we put out a press release endorsing the new regulations. We think it's great for the industry. We think there's a real healthy focus now on how do we add longevity to the industry and how to be more thoughtful about these longer-term approaches. I think we're really proud in the sense that both from the WaterBridge and the LandBridge side, it mirrors our operating philosophy and the philosophy we've always deployed when we think through building out our assets in our company. It was the recognition of the problems from these differing approaches, these over-concentration of assets, that ultimately led us to start LandBridge back in 2020, 2021.

We knew large contiguous pore space that had been unutilized or underutilized historically would be immensely valuable for WaterBridge, but again, for the broader industry. We think it's great. We think it's very smart for the regulators to be focused on that. It's something that we have pushed ourselves, both from our WaterBridge seats and our LandBridge seats. I think it really reinforces the fact that we have this differentiated value proposition to offer not just WaterBridge, but anyone in the industry that needs to have that surface and pore space access. It's great to see the spotlight shine on this now because we do think it's important. We do think it highlights what it is we bring to the table.

All right. Thank you for that. I think those are important details. Definitely important for the LandBridge story. For my follow-up, any thoughts on the long-term potential EBITDA impact of the Devon deal or even some high-level thoughts on the royalty rates compared to your current rates? I realize you may be hesitant to give too many details.

Yeah, we can't provide the exact royalty rate. I'll say that the rates we're getting today for deals, this one included, certainly align with our view of the prevailing market rate at the moment. We feel very confident that how we think through rate structure versus our differentiated value proposition is very much aligning to, call it, the commercial success that we would hope to see. I think the market's kind of proving out our view. I'll leave it at that. I mean, as you would imagine, great impact for us, obviously, from a financial perspective as this comes online here in early 2027.

Thanks, Scott.

Thanks, Tim.

Speaker 8

Our next question comes from the line of Alexander Goldfarb with Piper Sandler. Please go ahead.

Speaker 0

Hey, good morning. Morning down there. Just have two questions. The first is on the power generation deal that you guys announced, is this tied directly to, is there any relationship with FivePoint, and is this tied directly to that specific data center project, or this is a sort of generic power generation deal that would apply for any projects, data center projects down there? No, good questions, Alex. The agreement that we're talking through here is directly between LandBridge and the IPP. There is the potential for FivePoint's PowerBridge platform to step in in some capacity, but that's by no means firm either way. I would say this was one where the IPP saw the value that LandBridge brought to the table, was happy to do a deal with us.

I think that said, and as we've said in the past, the beauty of the FivePoint ecosystem is they've got these different enabling entities to ensure that deals can get across the finish line to the benefit of all companies. When we think through what PowerBridge could bring to the table here, it's really a question of, is there a gap between LandBridge and the IPP where maybe PowerBridge stepping in could fill that gap to ensure this project gets brought online? Uncertain whether or not that's needed at this point in time. Again, it's a valuable tool, I think, that we have available to us. Yeah. The one thing I would add is that the IPP is, they saw the need for the power in the region just in general, not just as it related to data center opportunities. We see this as a great opportunity on all fronts.

Did you say the entity is called WaterBridge, or you were just using that term?

No, so that is the FivePoint entity that was announced earlier this year. That is run by Alex. That is not this IPP. No, this is a totally independent public IPP. That is not in any way associated with FivePoint outside of, again, the potential that PowerBridge, which is a separate FivePoint entity, could step in if there is a need.

Okay. The second question is, you know, you guys, you announced the Devon Energy deal. I don't know if you announced all the economics of that, but obviously, that doesn't take effect until 2027. The data center thing is announced, but obviously, that takes years. You guys clearly want to grow EBITDA. As we think about announcements that you make, it sounds, I mean, just based on what you've announced so far, there's like a 12 to 24-month, you know, sort of lead time, if you will, before the EBITDA starts flowing, or more like 24 months, if you will. Is that the way we should think about it?

If we want to, as we model your growth over the next number of years, we should think about, hey, if a deal hasn't been announced by X date, that means that revenue growth is going to take two years longer before. We're just trying to get a sense of, you guys are very active, but obviously, these things take a while to manifest and drop to the bottom line. Just trying to understand the EBITDA ramp relative to project announcement timing.

It very much depends on the project. I think when you think through power projects or renewable projects, those inherently have longer timelines. When you think through some of these more water infrastructure, energy infrastructure type projects, those can be much quicker timelines. I mean, the Devon example here, I think it's more a reflection of them very much wanting to get ahead of future needs and a willingness to backstop that with this minimum volume commitment. It is not necessarily reflective of, call it, a build-out timeline or anything along those lines, but much more so Devon wanting to stay ahead of things, which we think is a very prudent move on their part.

When you look at other commercial activity we have kind of in the hopper at the moment, you obviously have the DPX Kraken deal that was both announced at the beginning of this year, is already online today and will continue to ratchet over the next several years as a good example of a meaningful EBITDA contribution that can come online quickly and ratchet up quickly. That's one that we'll see continue. I think the Speedway project is another great example where we would expect to have that fully FID'd here within the next few weeks on the WaterBridge side. You would start to see capital go out the door at the end of this year, going into early next year. That will start to see EBITDA contribution for that potentially at the end of this year, definitely early next year.

There, again, the sequencing and the timing, I think, is very much a byproduct of the type of activity it is, not necessarily indicative of all commercial activities that we work through.

Can you just give us a sense of the EBITDA contribution from Speedway, Devon, that we can think about what's going to come online in the next 12 to 24 months?

We haven't spoken to that publicly yet. I think once we get the opportunity to have Speedway through FID, we can start giving the street a little better idea in terms of the ratcheting of the cash flow there. I know previously we've discussed the potential for Speedway to be a 500,000 barrel a day project when it's fully online, which would equate to roughly $30 million of cash flow in terms of royalties, plus obviously the related surface activity that goes on. There'll be a sequencing and timing of those step-ups. Once we get through FID, once we get that fully underwritten on the WaterBridge side, we can message that a bit more clearly.

Okay, you said $30 million plus some potential upsides from that when fully online.

That's right. That's right.

Okay, cool. Thank you.

Yeah, you got it, Alexander.

Speaker 8

Our final question will come from the line of Lawrence Goldstein with Santa Monica Partners LP. Please go ahead.

Speaker 5

Good morning. I wonder if you.

Good morning, Lawrence.

Hi. I wonder what you could say about the fact that every single major, let's call them high-tech company, announces data centers all over the country, but we hear of nothing in the Permian Basin. Nothing with you. I'm not asking about your company specifically. I'm asking generically, your neighbor, big landowner, TPL. It astounds me that we don't hear a word. We hear, you know, data center, data center, data center, billions here, billions there. Why do you suppose we don't hear a word about the Permian Basin?

Speaker 0

Yeah, hey, good morning, Lawrence. It's a very good question. I think ultimately here, we're talking about a step out into a new region, away from major metropolitan areas, which is just different, different for what a lot of these data center players have done historically. It's just taken time to get them familiar with the region, familiar with the risks, familiar with the opportunities set. Ultimately, we haven't gotten any pushback on just the fundamentals making so much sense where this is an inevitability. You are talking about getting folks over the line in an area they're not just, they're not familiar with yet or operating with or deploying large amounts of capital in this kind of new area. We feel good about the discussions we're having. I imagine there are others in the Permian who feel the same way right now.

It's just taking the time to get these very large tech companies who are very risk-averse, comfortable with stepping out into a new region. Ultimately, the fundamentals work. I think they acknowledge that. From our point of view, it is an inevitability this gets across the finish line. Once that first domino falls, as you can appreciate, the rest of them start falling pretty quickly thereafter. It's just convincing that first player to ultimately be the one that announces the step out. The only other thing I'd add is you are seeing growing comfort of folks heading into West Texas. There's been a number of projects announced in places like Abilene and Lubbock. Certainly, they're starting to get growing comfort moving away from major metropolitan areas into other, still populated areas in West Texas, but certainly not the Permian.

All of these trends, we think, continue to work to our advantage here. Again, it's just going to take that first domino to fall. We think the fundamentals are just too good for that not to happen.

Yeah, and those fundamentals are easy to speak to, right? It's access to large contiguous land, access to cheap power, both on grid and behind the grid, as we talked through this opportunity with the new IPP, and then, you know, access to water for cooling. It checks all the boxes 100%. It's to Scott's point, once the first domino falls, I think there'll be a lot more heading our way.

Speaker 5

You know, it sounds logical, but to me personally, it sounds illogical. By the way, the one thing that you don't have, which is an asset, is population in the area. I'm sure you're aware of the articles, particularly a lengthy one in The New York Times, I think about two weeks ago, about how some towns turned on the water faucet or the toilet, no water. Yet, you say it takes a while to learn about what you have in the way of assets, everything available and everything at the lowest prices. You know, Oregon or the Pacific Northwest, Washington, they never heard of those places either. It's so obvious what your assets are, yet we've not heard a single company. When you say it takes a while for them to learn about it, with all due respect, come on. They haven't heard of Texas.

They haven't heard of this.

Speaker 0

We 100% agree. I think from our seat, coming from an oil and gas background, we're very, very familiar with just how great the manpower and the talent is out in places like Midland. We've seen just some very, very smart folks continue to pile into West Texas to support the oil and gas industry. We do think that for folks who are used to working in, call it more of these tech hubs, it's just a foreign environment when they think through places like Midland. Again, from our point of view, it's a quick education effort to show them you've got people coming in from top-tier universities already stepping out into West Texas to work in the oil and gas space. The talent's going to show up for data centers. In fact, it's already there. Yeah, look, we agree. All the pieces are there. The stage is set.

The fundamentals ultimately are going to be what dictate this happening, and we think it's an inevitability.

Speaker 5

Yeah, I understand you think it is. I think it is. A lot of people think it is. I don't think you've got every asset required for a data center. By the way, you don't have a population, which is obviously an asset. What have you got? The biggest city down there in the basin, 15 people or something like that? I can't believe they haven't heard of it, that they aren't familiar with it. These are the smartest people in the country. I accept what you're saying, but I find it hard to believe. There's something else. I have no idea what this something else is.

Speaker 0

We feel great about where we're at in a lot of those talks right now, you know, and aim to bring the market some good news as it relates to that as quickly as we can here.

Speaker 5

Okay, thank you.

Speaker 0

Thank you, Lawrence.

Speaker 8

That will conclude our question and answer session. I'll hand the call back over to Scott McNeely for any closing remarks.

Speaker 0

Yeah, thanks again for everyone participating today. As always, we very much appreciate the support and the engagement. Please feel free to reach out to us with any questions. Otherwise, we hope you all enjoy the rest of your summer. Thanks.

Thanks.

Speaker 8

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