LandBridge Company LLC(LB) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported second quarter revenues of $47.5 million, an increase of 8% sequentially and 83% year over year [11] - Adjusted EBITDA reached $42.5 million, representing a sequential increase of 981% year over year, with an adjusted EBITDA margin of 89% [12][13] - Free cash flow was approximately $36.1 million, with a free cash flow margin of 76%, aligning with long-term expectations of about 70% [13] Business Line Data and Key Metrics Changes - Surface use royalties and revenue increased by 31% sequentially, driven by easements and other surface-related revenue [11] - Resource sales and royalties experienced a 26% sequential decline due to lower brackish water sales and royalty volumes [12] - Oil and gas royalties declined by 19% sequentially, with net royalty production volumes falling from 9.23 BOE per day in Q1 2025 to 8.14 BOE per day in Q2 2025 [12] Market Data and Key Metrics Changes - The company has increased its land holdings by over 50,000 acres in the past year, positioning itself to capitalize on growth opportunities in the Permian Basin [5] - The relationship with Waterbridge is highlighted as a strategic advantage, providing reliable recurring revenue through market-driven surface royalties [6] Company Strategy and Development Direction - The company aims to maintain a capital-light business model, focusing on growth in the Permian Basin without significant operating and capital expenditures [4] - There is a commitment to diversifying revenue streams to reduce commodity risk, with fee-based arrangements now accounting for 94% of total revenues [12] - The company is actively pursuing value-enhancing land acquisitions and has adjusted its adjusted EBITDA guidance for 2025 to between $160 million and $180 million [15] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about growth opportunities in the Permian Basin and the potential for new projects in digital infrastructure and renewable energy [5][8] - Recent regulatory changes in Texas regarding produced water handling are viewed positively, aligning with the company's sustainable management strategy [9][50] - The management believes that the fundamentals for data centers in the Permian Basin are strong, despite the current lack of announcements from major tech companies [74][76] Other Important Information - The company declared a quarterly dividend of $0.10 per share, reinforcing its commitment to returning capital to shareholders [13] - The company ended the quarter with total liquidity of $95.3 million, including cash and cash equivalents of $20.3 million [13] Q&A Session Summary Question: Can you elaborate on the DBR solar project and its timeline? - Management explained that the solar project was delayed due to the need to finalize preparations and that they are now ready to market it to developers [20][21] Question: How does the Devon deal relate to the Speedway pipeline? - The management indicated that the Devon deal complements the Speedway project, highlighting the critical need for pore space in future growth [24][25] Question: Thoughts on the ARRIS acquisition by WES? - Management noted that the acquisition underscores the value of pore space, reinforcing their thesis about its importance in the industry [31][34] Question: Can you summarize the new Texas Railroad Commission guidelines on injection pressure? - The management stated that the new regulations focus on spreading out injection to avoid overconcentration, which positions the company favorably due to its contiguous acreage [47][50] Question: Why are there no announcements for data centers in the Permian Basin? - Management acknowledged the challenges of introducing tech companies to a new region but remains optimistic about future developments as fundamentals align [72][74]