LB Q1 2025: Speedway Pipeline to Add 500k bbl/d for $30M Royalties
- WaterBridge’s strategic partnerships with Five Point and Bechtel are driving pilot projects in desalination, potentially unlocking new revenue streams.
- LandBridge’s agnostic stance allows it to benefit from these initiatives through royalty streams, providing stable and economically beneficial revenue exposure to emerging water infrastructure needs.
- Improving cost curves in desalination signal a gradual move toward scalability, which could enhance long-term operating margins and growth prospects.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | Increased to $43.95M in Q1 2025 (≈131% increase) | Total Revenue jumped from around $19.0M in Q1 2024 to $43.95M in Q1 2025 driven by robust growth in surface use royalties, easements revenues, and resource sales. This leap was largely due to substantial increases in produced water handling (boosted by acquisitions and organic growth) and enhanced pricing dynamics observed in previous periods. |
Surface Use Royalties | Increased to $17.44M in Q1 2025 (≈314% increase) | Surface Use Royalties surged from approximately $4.2M in Q1 2024 to $17.44M in Q1 2025 primarily because of a major increase in produced water handling volumes by about 1,100 MBbl/d, bolstered by the acquisition of Wolf Bone Ranch (expanding production from 831 to 1,433 MBbl/d) and compounded by additional industrial waste handling royalties, compared to previous period levels. |
Operating Income | Increased from $13.52M to $25.04M in Q1 2025 | Operating Income nearly doubled, rising from $13.52M in Q1 2024 to $25.04M in Q1 2025, as the significant revenue growth from multiple streams (e.g., surface use royalties and easement revenues) more than offset the increased operating expenses such as general and administrative costs observed in the prior period. |
Net Income | Reached $15.46M overall; LB LLC net income of $6.46M | Net Income improved markedly in Q1 2025 compared to previous performance, reflecting the successful leverage of higher total revenues and better operational efficiencies. This improvement is drawn from the stronger revenue mix and margin gains seen over previous periods, despite the increased expense base. |
Cash and Cash Equivalents | Declined from $37.03M to $14.94M | Cash and Cash Equivalents dropped significantly from $37.03M at the end of Q4 2024 to $14.94M in Q1 2025, mainly due to heavy outflows from acquisitions and financing activities, which exceeded the operating cash flow of $15.91M. This shift directly contrasts the previous period’s higher balance, highlighting the impact of capital-intensive strategies and financing outflows. |
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Macro Impact
Q: Slowdown impact on water handling growth?
A: Management noted that despite slowing Permian activity, the company is insulated by having 92% of revenues from non‐mineral royalties and customers with unchanged development plans, ensuring robust water handling growth. -
Pipeline Growth
Q: Pipeline demand details?
A: They explained that the Speedway Pipeline, stretching from Eddy to Lea County, could provide up to 500,000 barrels/day of incremental capacity, generating more than $30+ million annually, with the first phase expected in Q4. -
Permian Rollover
Q: Implications from Permian oil rollover?
A: Despite industry chatter about a basin-wide oil rollover, management emphasized that their core area is well-positioned with consolidated production and development plans remaining robust through 2027/28, supporting continued growth in water production. -
Water Volume Growth
Q: Baseline produced water growth trends?
A: They observed that in core production areas, rising water–oil ratios due to deeper, more water-wet intervals are expected to drive water volume growth that eclipses oil production growth. -
Desalination Initiatives
Q: How are desalination projects addressed?
A: Management indicated that via WaterBridge and its partner Five Point, pilot desalination projects are underway; while scalability awaits further cost improvements, any progress will benefit the company through associated land royalty streams.