WaterBridge Infrastructure - Earnings Call - Q3 2025

Executive Summary

• Pro forma revenue rose 8% QoQ to $205.5M and pro forma Adjusted EBITDA reached $105.7M, as combined produced water volumes climbed to 2.5MM bpd; management framed this as a strong first public quarter with infrastructure momentum and a healthier balance sheet post-IPO and debt refinancing.
• Versus Street: company-reported pro forma Adjusted EBITDA ($105.7M) was above the S&P Global EBITDA consensus ($102.6M); pro forma revenue ($205.5M) was above the S&P Global revenue consensus ($199.6M), while S&P’s GAAP-reported revenue actual ($123.3M) reflects reporting differences vs company pro forma.
• Liquidity and capital structure improved following a $1.425B senior notes issuance (6.25% due 2030; 6.50% due 2033) and a new $500M secured revolver, with total liquidity of $547M at quarter-end; ratings assigned BB-/Ba3 by agencies.
• Strategic catalysts: BPX Kraken pipeline came online (initial ~400 kbpd capacity), Speedway Pipeline Phase 1 reached FID (expected ISD mid-2026; ~$290M capex) and the team highlighted future water reuse/data center opportunities and tariff/regulatory positioning in Texas.
• Pro forma net loss was $18.7M with a 51% pro forma Adjusted EBITDA margin; management emphasized long-term MVC-backed growth, pricing tailwinds, and flow assurance as drivers of margin durability.

What Went Well and What Went Wrong

What Went Well

• Combined produced water volumes increased 7% QoQ to 2.5MM bpd; pro forma revenue rose 8% QoQ to $205.5M, with pricing contributing alongside volumes.
• BPX Kraken pipeline placed into service (initial 400 kbpd, scalable to ~600 kbpd) and Speedway Pipeline Phase 1 FID, underscoring infrastructure scale and flow assurance strategy: “We provide industry-leading flow assurance…with best-in-class control room and proprietary forecast management software, WAVE”.
• Balance sheet reset post-IPO and notes offering improved liquidity and reduced interest/amortization burden; CFO: “We streamlined and optimized our balance sheet…increasing our liquidity and decreasing our annual interest and amortization expense burdens”.

What Went Wrong

• Reported pro forma net loss of $18.7M and continued GAAP complexity (Up-C structure, partial-period EPS) may cloud comparability in the first public quarter.
• Leverage remained notable at quarter-end ($1.727B legacy borrowings before notes refinancing), though subsequent actions materially changed the debt stack.
• Regulatory volatility in New Mexico and broader macro uncertainty were flagged; management noted Texas permitting alignment but variability in New Mexico could affect competitors and legacy capacity.

Transcript

Operator (participant)

Hello, and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the WaterBridge Third Quarter 2025 Earnings 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 would like to ask a question during that time, simply press star, then the number one on your telephone keypad. I would now like to turn the call over to Mae Harrington, Director of Investor Relations. Mae, please go ahead.

Mae Harrington (Director of Investor Relations)

Good morning, everyone, and thank you for joining the WaterBridge Third Quarter 2025 earnings call. I'm joined today by our CEO, Jason Long, our COO, Michael Chop Reitz and our CFO, Scott McNeely. Before we begin, I'd like to remind you that in this call and the related presentation, we will make certain 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 certain 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. Prior to the closing of WaterBridge's initial public offering on September 18th, 2025, WaterBridge completed the successful combination of its legacy entities, WaterBridge Equity Finance, WaterBridge NDV Operating, and Desert Environmental.

Third quarter key operational metrics discussed today are presented on a combined basis, and financial results discussed today are presented on a pro forma basis in accordance with Article 11 of Regulation S-X, assuming the combination and the IPO had occurred on January 1st, 2024, with the exception of cash flow statement items, which are presented at the standalone entity level in accordance with SEC guidelines. I'll now turn the call over to our Chief Executive Officer, Jason Long.

Jason Long (CEO)

Thanks, Mae, and thank you, everyone, for joining us this morning for our first quarterly earnings call as a public company. We are proud to have brought WaterBridge to the public markets this September, listing on the NYSE and NYSE Texas, and the largest energy sector IPO since 2019. We look forward to capitalizing on our momentum with a proven business strategy, a strong balance sheet, and an unparalleled infrastructure that is well-positioned to meet the ever-growing needs of current and future customers. The market's belief in our business model and enthusiasm for our listing was demonstrated with an upsized offering that was significantly oversubscribed and priced at the high end of the range.

As this is our first earnings call, I'll spend a few minutes providing an overview of our business model before turning it over to our COO, Michael Chop Reitz, to discuss our competitive advantages and why we believe WaterBridge is well-positioned to create significant shareholder value in the near and long term. WaterBridge is a leading integrated pure-play water infrastructure company with operations primarily in the Delaware Basin, the most prolific oil and natural gas base in North America. Our infrastructure network is comprised of approximately 2,500 mi of pipeline and nearly 200 produced water handling facilities capable of handling more than 4.5 MMbpd of produced water. Produced water handling is critical to enabling oil and gas development in the Delaware Basin.

Every barrel of oil brought to the surface is accompanied by multiple barrels of produced water, and without efficient, reliable, and environmentally responsible systems to gather, treat, transport, and dispose of the water, production simply cannot continue. The scale of the Delaware Basin makes this challenge even more complex: enormous volumes, long distances, evolving regulatory considerations, and the need for continuous operational uptime. Effective produced water infrastructure not only keeps oil and gas flows flowing but also protects freshwater resources, reduces truck traffic and emissions, and enables E&P operators to plan, invest, and grow with confidence. It is one of the quiet but essential backbones of the nation's energy economy. Today, produced water handling comprises approximately 90% of our revenue derived from fixed-fee contracts for the transportation, treatment, handling, and disposal of produced water.

Our water solutions business, which includes fees received from sales of brackish water, recycled, and produced water, and our waste management business, which receives fees from the disposal of industry waste, provide the remainder of our revenue. I'd like to conclude by saying that we are excited to bring this company to the public markets and begin the next chapter in our evolution. This step allows us to broaden our partnerships and align with public equity investors who share our long-term vision and commitment to discipline growth. As the importance of produced water infrastructure continues to expand alongside development in the Delaware Basin, we believe we are exceptionally well-positioned to drive value through scale, reliability, and innovation. I'd like to now hand it over to Chop to talk through some of those advantages in a bit more detail.

Michael Reitz (COO)

Thanks, Jason, and thank you all for joining us today. As Jason mentioned, we see several key advantages for our business over the long term. First, our infrastructure and produced water solutions are best in class with substantial scale, strategic location, high operational efficiency, and fit-for-purpose measurement and monitoring capabilities. Second, our access to underutilized pore space supports new and continued produced water handling capacity, which we believe is key to supporting the expected future growth of produced water in the Delaware Basin. We have secured significant access to pore space through our relationship with LandBridge, an active land management company with more than 300,000 mostly contiguous acres in the state line region of the northern Delaware Basin, and a 64,000 acre AMI with Texas Pacific Land.

Our relationships with LandBridge and Texas Pacific Land provide contractually agreed-upon access to economic, properly managed pore space, as well as access to surface acreage for the continued build-out of our strategically located infrastructure network. Third, we provide industry-leading flow assurance. Our infrastructure network has built-in operational redundancies to provide customers with uninterrupted water management solutions. Combined with our access to real-time monitoring through our best-in-class control room and proprietary forecast management software, Wave, we are able to provide reliable flow assurance, which is a critical priority for our E&P operators. Fourth, we prioritize long-term relationships with a diversified customer base that includes some of the largest and most active producers in the Delaware Basin. Our fixed-fee contracts typically span 10-15 years, with acreage dedications or minimum volume commitments in certain cases, and annual fee escalators tied to the CPI or similar inflation index for substantially all the contracts.

Our customer base is diversified, with no customer representing more than about 17% of revenue. This insulates us from volatility tied to individual customer activity levels and provides us with broad visibility into future activity levels, which allows us to forecast our business with a high degree of confidence. Finally, WaterBridge is committed to responsibly managing produced water. We work collaboratively with E&P operators as well as the Texas Railroad Commission, providing feedback as well as pressure and seismic data to contribute to constructive solutions for responsible, long-term produced water management. Beyond supporting energy production, we are also actively exploring opportunities to expand our operations to serve customers across a wide range of industries, including water needs for data center cooling and beneficial reuse of produced water.

Now turning to our activities this quarter beyond the IPO, we continued our commercial momentum, bringing the previously announced BPX Kraken project online at the beginning of the third quarter. This project features a 10 year minimum volume commitment from BPX and supports sustainable water solutions for their long-term development plans in the state line region of the Delaware Basin. The project is constructed to include the initial produced water handling capacity of approximately 400,000 bbl per day, with the ability to increase that capacity to approximately 600,000 bbl per day. We also announced our final investment decision for the 1st phase of the Speedway Pipeline project, which will connect oil and gas developments in the northern Delaware Basin to out-of-basin pore space owned by LandBridge in the Central Basin Platform.

This transformational project garnered strong industry demand from both new and existing customers, demonstrating the need for reliable out-of-Basin solutions for growing New Mexico volumes. Construction is underway, and we expect an in-service date mid 2026. Before I turn things over to Scott, I just want to reiterate that we're excited to begin this journey as a public company, and we are looking forward to growing and creating sustainable value for our new public shareholders. Now I'll turn the call over to Scott to take you through some of our financial results in more detail.

Scott McNeely (CFO)

Thanks, Chop, and good morning, everyone. We're pleased to deliver a strong first public quarter. Combined produced water handling volumes for the quarter were 2.5 million bbl per day, representing quarter-over-quarter growth of 7%. Sequential volume growth was driven by new volumes coming online on our BPX Kraken infrastructure and continued organic growth across our existing contract portfolio. Pro forma revenue for the third quarter increased to $205.5 million, up 8% compared to last quarter, driven mainly by the previously discussed increase in volumes as well as by increased rates in the period. Pro forma net loss was $18.7 million for the third quarter, and pro forma adjusted EBITDA was $105.7 million, with pro forma adjusted EBITDA margin of 51%. Regarding capital structure, we received net proceeds of approximately $673 million from our IPO, which were used to strengthen our balance sheet and position us for future growth.

We ended the quarter with total liquidity of $547 million, including cash and cash equivalents of $347 million, and $200 million of undrawn legacy revolving credit facilities. As of September 30th, we had approximately $1.73 billion of borrowings outstanding associated with our legacy entities. Since the end of the third quarter, we streamlined and optimized our balance sheet through an inaugural $1.425 billion senior notes offering that closed in early October, increasing our liquidity and decreasing our annual interest and amortization expense burdens. Concurrent with the senior notes offering, we put in place a new revolving credit agreement, replacing $200 million in legacy undrawn senior secured credit facilities with a new undrawn $500 million senior secured revolving credit facility maturing in September of 2030.

Our disciplined approach to our capital allocation framework is designed to balance our top priorities, which are first, to build out our water infrastructure network and commercial relationships. This includes organic growth, which we have been able to achieve at very attractive multiples, as well as highly accretive acquisitions and expansion opportunities. Second, to maintain a conservative balance sheet to ensure maximum financial flexibility over time with a long-term leverage target of less than three times. Finally, to potentially return capital to shareholders, which could include dividends as well as opportunistic share repurchases in the future. A quick note on guidance before we take your questions. We anticipate providing 2026 guidance concurrent with our fourth quarter and full year 2025 earnings call. To conclude, we're pleased to report the strong first public quarter.

With the expansion of our network, including the opening of the BPX Kraken pipeline and the advancement of our Speedway Pipeline project, we are well-positioned to support the growing demand for water handling in the Delaware Basin. Our business is underpinned by high-quality assets, strong contracts and customer relationships, attractive operating margins, and predictable cash flows, which allow us to continue driving profitable growth and creating long-term value for our shareholders. Operator, we'd now like to open up the line for questions.

Operator (participant)

At this time, if you would like to ask a question, press star, then the number one on your telephone keypad. To withdraw your question, simply press star one again. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Teresa Chan with Barclays. Please go ahead.

Teresa Chan (Analyst)

Good morning. Thank you for taking my questions. Would you be able to provide some color on the level of demand that you're seeing for Speedway for additional phases at this point? If you were to upsize the project, what would the magnitude be and how much more CapEx would that require, considering it would likely be pump work rather than looping, and what kind of build multiple would additional phases see?

Michael Reitz (COO)

Yeah, thanks, Teresa. I can take the first part of that question. We're seeing a lot of demand for the Speedway Pipeline project. We were oversubscribed on the first phase, which can get that capacity up to 500,000 bbl a day. The additional line, we can add an additional 500,000 bbl a day, and we're working with customers currently on what the final route for that will be. I can't really speak to an exact CapEx number, but we do think it will be less than the initial CapEx for Speedway phase one.

Scott McNeely (CFO)

Yeah, and Chop, if you were to think through the build multiple there, it's probably three to four times, conservatively speaking, with upside?

Michael Reitz (COO)

Yeah, that's right.

Teresa Chan (Analyst)

Great. Maybe just zooming out a bit, looking at the broader basin and the forward trajectory for growth, can you provide some color on your view on a macro backdrop over the near to medium term, given the volatility we've seen in the forward price outlook? What have recent conversations been like with your producer customers? Have you seen any shifts in tone or concrete plans impacting demand for water purchase services?

Michael Reitz (COO)

Yeah, Teresa, I'll take that one. I would say we're in a fortunate position with the bulk of our growth expected to come out of the state line in New Mexico to be much more insulated than the rest of the lower 48. A couple of points I'd hit is first, and just to make sure we can level set on this, the expectations we set forward with investors and with y'all during the IPO process was already very much calibrated for the current commodity price environment. As it relates to go-forward expectations, no meaningful shifts just based on more recent news.

Second, you think through the growth expectations we are expecting to see over the next several years, it's important to keep in mind that the vast majority of that is going to be underpinned by minimum volume commitment back contracts that are both coming online and ratcheting up over the next several years. There is a lot of certainty there that certainly helps provide some cushion relative to some of the concerns some other companies have voiced over. I would say lastly, the real benefit of kind of water here, again, particularly in New Mexico, is it is critical to enable production.

You're seeing water volumes grow at meaningful rates, and you're seeing the demand for our services grow even above those water growth rates as a byproduct of, one, recycling no longer having the ability to absorb the bulk of produced water growth in New Mexico, and two, so much of that legacy capacity along the state line starting to decline as a result of poor pressure issues. Despite kind of the macro backdrop and despite a lot of the chatter, I think we're incredibly well-positioned not just to deliver on the growth that we set forward during the IPO process, but outdeliver.

Teresa Chan (Analyst)

Thank you.

Operator (participant)

Your next question comes from the line of Eli Jossen with JPMorgan. Please go ahead. Eli, your line is open.

Eli Jossen (Analyst)

Hey, can you guys hear me?

Michael Reitz (COO)

Yeah, good morning, Eli. Yeah, we got you.

Eli Jossen (Analyst)

Sorry about that. Thanks. Just wanted to start on the competitive landscape. I know we've seen a little bit of change there, but obviously, you guys have some of the best acreage on the state line. Just want to get a sense of how discussions have gone with producer customers, more opportunities that you guys are seeing, and what that landscape looks like right now. Thanks.

Michael Reitz (COO)

Yeah, no, thanks for the question, Eli. No, I mean, I would say commercially, we've got an abundance of traction. Obviously, wrapping up Kraken earlier this year, FID-ing Speedway, also getting the Devon contract announced alongside their second quarter earnings earlier this year. We have seen an abundance of success. Like I mentioned in response to Teresa's question, the demand is still very much there, and there are a number of producers really looking for those kinds of long-term, large-scale flow assurance solutions, particularly for growth that's expected to come out of New Mexico. Certainly, there are others that are in discussions with a lot of these producers, but ultimately, in discussions with E&P operators, there are really four things that they're looking for.

They want to make sure they're partnering with, one, prudent operators with experience, two, a company with the balance sheet and the ability to scale and grow alongside them, three, assets of scale today to be able to support large-scale development campaigns that we're seeing, and four, access that differentiated pore space that provides the maximum flow assurance with the least amount of risk. Typically, as we work through those four items, we typically come ahead of our peers as we kind of think through competing for business.

Eli Jossen (Analyst)

That's awesome color. Thank you.

Michael Reitz (COO)

Yeah, thanks, Eli.

Eli Jossen (Analyst)

Yeah, maybe just on the contract rate outlook, I mean, I know we're seeing what I would expect sort of rates move up, especially on these large projects that you're announcing. Can you just talk about what the sort of new contracting and portfolio rollover looks like compared to the base business, how the rates, particularly in the Delaware, compare and kind of the outlook there?

Michael Reitz (COO)

Yeah, I mean, we're fortunate where we've seen a meaningful increase in rates in some of these more recent deals that we've been able to wrap up. Part of that is a byproduct of underwriting just larger capital programs. I think part of that is also recognition that premium de-risk flow assurance is worth a higher price than the rock bottom pricing that E&P operators were chasing five-plus years ago. It is certainly going to continue to accrue to our advantage.

While we have, I would say, no material near-term contractual walls or kind of renewals that we're working through, as we see BPX Kraken come online, we see Speedway come online, we see Devon come online, as well as a lot of these other opportunities that we're working through, you're going to see the average unit-level revenue and operating margin on a per-barrel basis increase across our company.

Eli Jossen (Analyst)

Great. All right, I'll leave it there. Thanks, guys.

Michael Reitz (COO)

Yeah, thank you.

Operator (participant)

Your next question comes from the line of Derrick Whitfield with Texas Capital. Please go ahead.

Derrick Whitfield (Analyst)

Good morning, all, and thanks for your time.

Michael Reitz (COO)

Good morning, Derrick.

Derrick Whitfield (Analyst)

For my first question, I wanted to focus on the 1918 surface acquisition LandBridge announced earlier or closed and announced that earlier today. Specifically, to what degree could the pore space value of that asset on the east side be driven by WaterBridge versus industry? Over what period as you think through water disposal dynamics in the basin?

Michael Reitz (COO)

Yeah, it's a great question. As we mentioned earlier in discussing 1918 from LandBridge's perspective, I'll just repeat, I think, a key point, which was this is an acquisition that, again, was designed to unlock new surface, to unlock new pore space contiguous to LandBridge's east state line ranch, not just as a benefit to WaterBridge, but really to the industry and all the other players looking for access to pore space. Now, as we kind of think through this through the lens of WaterBridge, there's clearly option value there for WaterBridge to access that surface and that pore space in the future if there's a commercial justification for that. Geographically speaking, it's close to some offsetting WaterBridge infrastructure, so we could access that pore space from WaterBridge's perspective at a fairly economic on a fairly economic basis there.

As it sits today, no near-term plans for WaterBridge to construct infrastructure on 1918.

Derrick Whitfield (Analyst)

Great. For my follow-up, I wanted to touch on just the beneficial reuse case and the opportunity you guys see. If I think about the prepared comments on beneficial reuse for both data centers and other industries, how large of a lift would that be for your organization? Could you operate that business with similar margins if it were tied to produced water disposal?

Michael Reitz (COO)

Yeah, I'll take this one as well, Derrick. This is an opportunity that we're very, very excited about. I mean, as we and others have spoke to, West Texas is certainly blowing up as it relates to its attractiveness for both power and for digital infrastructure. As we all know, one of the real advantages is the access to water as it relates to cooling that. It's not just that brackish water in the ground, but it's also the potential to redeploy produced water that's treated and used for cooling rather than being disposed of. This is something that we're actively looking at. We're actively in conversations with counterparties on today from WaterBridge's perspective. We would certainly pursue or explore treating that ourselves as well as options of partnering with third parties.

Ultimately, we would go with, I think, with what makes the most sense for both our business relative to the margins and the incremental lift and any capital requirements, as well as weighing that with the demands of the customer. It has not been formally set as it relates to our approach on how to tackle that yet, but I think what is important to take away is, one, we are trying to be very thoughtful about the ultimate approach there, and two, regardless if that is done in-house or if that is done via partnership, we would expect a meaningful economic uplift for WaterBridge.

Derrick Whitfield (Analyst)

Thanks for the question. I'll turn it back to the operator.

Michael Reitz (COO)

Thanks, sir.

Operator (participant)

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

Kevin McCurdy (Research Analyst)

Hey, for my first question, I wanted to ask about the volumes on the Kraken side. How much of the initial 400,000 bbl a day is filled up currently, and what does that ramp look like over the next few quarters? Anything you could provide on the timeline for phase two, which is the additional build-out of 200,000 bbl a day?

Michael Reitz (COO)

Yeah, thanks for that question. The initial capacity is probably taken from a pipeline standpoint, about 50%-60% by BPX, depending on their development cadence. We do expect that to increase materially over the next several years as those MVCs ratchet up. The additional 200,000 bbl a day that can be added to that system will not be added immediately. We will add that when the commercial need is justified.

Kevin McCurdy (Research Analyst)

Great. Appreciate that. As a second question, I wonder, I mean, you kind of have a slide on this in your deck, but I wonder if maybe big picture, you can explain some of the big regulatory reforms that have happened in Texas as far as permitting and how you think that might be a tailwind or how WaterBridge is well set up for that. Just do you have any view on how the regulatory environment could change for both Texas and New Mexico into the future?

Michael Reitz (COO)

Yeah, I'll take that one as well. We've got a great relationship with the Railroad Commission as well as industry and working through a lot of these new permitting guidelines and practices. What you'll see is the way that WaterBridge has typically approached permitting is very similar to the way that the Railroad Commission is now guiding people to approach permitting. We really haven't had it affect us negatively, mainly because of our approach to spreading out our injection facilities and how we view the subsurface. Yeah, we think that it's not going to affect us. It could affect others if they didn't have that access to vast amounts of undeveloped pore space like we do through LandBridge. Just speaking to New Mexico, I really can't speak to that. It's a very volatile regulatory environment, as you may be aware.

Texas is favorable, and again, we have a great relationship with them. I don't see anything drastic happening there, though.

Kevin McCurdy (Research Analyst)

Thank you. Appreciate the details, and thanks for taking my question again.

Operator (participant)

Your next question comes from the line of Praneeth Satish with Wells Fargo. Please go ahead.

Praneeth Satish (Senior Equity Analyst)

Thanks. Good morning, everyone. Maybe just to elaborate on kind of the data center opportunity here, if we were to try to come up with a TAM, I mean, I assume the cost to treat water is going to be quite high, maybe supporting a tariff of over maybe $2 a barrel. Is that reasonable? Maybe if you could just give us a sense of how many data centers are around your footprint that you could service, how would you get the water to these data centers, and any types of kind of rule of thumbs of how we should think about how much water is needed per gigawatt of capacity? Finally, just what's a realistic timeline to see some of these deals get FIDed?

Michael Reitz (COO)

Hey, Praneeth. Thanks for joining. Thanks for the question. Yeah, it's a fantastic way to look at it. There's obviously still quite a bit that's moving around on the landscape in West Texas. I would say both the quantity of water that is used for a single, we'll call it 1 GW facility plus power, as well as the number of those that will ultimately be in West Texas is a bit of a moving target, although I would say clearly we expect the demand to be very robust. That's not just driven off of the successful commercial progress that LandBridge is making, but zooming out, it's really the progress that the broader industry is making in West Texas attracting those kinds of opportunities. We have heard different figures as it relates to the amount of water that's needed for a 1 GW opportunity.

That could be 100,000 bbl to several hundred thousand barrels a day, and the range could be potentially even wider than that, just depending on the technology that's used. As you kind of alluded to, the ultimate rate that would be needed is going to vary depending on the amount of water as well as the level of treatment that's needed. It's very challenging to say that the opportunity set today could represent X hundreds of millions of dollars of EBITDA potential for us at WaterBridge because it's a fairly wide goalpost at the moment. I think what's exciting is very few players out there have the infrastructure of scale, the expertise with water, or the quantity of water, the kind of concentrations that we have to be able to deliver this type of solution.

I think as a result of that, we put ourselves in a very advantageous position as it relates to these kinds of discussions. When appropriate, and as we continue to make progress, we'll certainly circle back and share more of those details.

Praneeth Satish (Senior Equity Analyst)

Gotcha. That's helpful. Maybe shifting gears, if you could just talk about kind of your approach to securing MVCs for Speedway phase II. Will you aim for a similar level of commitments as phase I? How do you think about balancing MVCs versus overall returns? I know you're saying the build multiple is very attractive already at three to four times, but could it get even more attractive if you reduce the MVC requirements there? Just trying to think about that trade-off.

Michael Reitz (COO)

Yeah, no, it's a great flag, and it's a great way to think through the balance between underwriting a project with MVCs versus leaving ourselves some upside. When we think through the MVC volumes relative to the size, call it the potential capacity of the system for Speedway, call it three years in, you're looking, call it 60%-65% MVC-driven relative to its capacity. Clearly, some ability to go out and capture incremental volumes that, depending on the market at the time, could be at a meaningfully higher rate than those MVCs.

The way we kind of balance it from our side is we take a look at a number of factors, including the customer concentration on the project, the scale of the project, the, call it, the macro landscape, but, call it, the ability to kind of commercialize the asset with other E&Ps kind of in and around that area on the same set of assets. We weigh all of those. Ultimately, we decide to scale the project and scale the MVCs to ensure we're providing effectively an asymmetric risk profile where our downside is protected, but there's as much upside as we can possibly capture.

Praneeth Satish (Senior Equity Analyst)

Got it. Thank you.

Michael Reitz (COO)

Yeah, thank you.

Operator (participant)

That concludes our question and answer session. I will now turn the call back over to Scott McNeely for closing remarks.

Scott McNeely (CFO)

Yeah, thanks again for joining us today on our first WaterBridge earnings call. To echo both Jason and Chop's comments, we're very excited about the success of the IPO and the ability to bring this company to the market and partner with like-minded investors who are excited about the growth of water infrastructure in West Texas and New Mexico alongside what is a very thriving oil and gas industry. We look forward to staying synced up. We are very much focused on transparency, so we ask if there are any questions, please feel free to reach out, and we'll get back to you as soon as we can. Otherwise, we look forward to touching base with you all with year end results. Thank you.

Operator (participant)

Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.