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 Second Quarter 2025 Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Mae Harrington, Director of Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining the LandBridge Second Quarter 2025 Earnings Call. I am joined today by our CEO, Jason Long; 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 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.

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 4 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 have 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 that will add 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. And 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…

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 service-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 2 other revenue categories. Resource sales 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 '25. 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,…

[Operator Instructions] Our first question will come from the line of Charles Meade with Johnson Rice.

Scott, I want to pick up right where you left off there, the DBR Solar. And can you just -- can you elaborate a little bit more on the history of this project and where you -- obviously, you had that $10 million of EBITDA revenue in '25. But can you just kind of put the overall timeline in context and what this -- I guess, what precipitated the shift? And 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.

Yes. No, Charles, happy to. So if you recall, this solar project was one where we had worked through effectively all of the prep work, which includes the tax abatement work, the coordination with the mineral owners and so on, on part of our surface position that was part of the original acquisition we closed on in 2021. And so 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. And so we punted on marketing that site to the solar developers until after that was wrapped up. So that was -- obviously, we got that option agreement in place with the data center at the end of '24 and as such, going to flip and put the -- excuse me, the solar facility to market here in early '25. 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. But as I've spoken to in the past, all of that was obviously subject to commercial progress discussions and so on. And so ultimately, this was one where we got good traction with several really good brand-name developers, have landed on a great partner and look forward to sharing more details on that. But 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 kind of the reality at this point. And so 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. But 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.

Got it. That's helpful. I appreciate it. And then as a follow-up, I wanted to ask about the deal that you guys signed with Devon to bring produced water to East Stateline and Speed Ranch. And really, the -- my understanding is that Speedway Pipeline, which I guess secondly isn't LandBridge, but you guys are building capacity on that line. So can you just put that Devon deal in the context of the Speedway line that is going to be coming to your Speed Ranch?

Yes. I mean you could 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, it just is an incredibly exciting opportunity. I mean this was one where I think we clearly have a close relationship with the Devon team via WaterBridge and their interest in WaterBridge. But I think this is just a real reflection from a very smart, prudent operator who's looking out at kind of 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 in 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. And so that was ultimately what kind of 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.

Yes. The only thing I would add, Charles, is that this is -- there's definitely volumes and pore space is being reserved up on Speed Ranch, but also on our East Stateline. So it's a combination of both.

Yes, I think it's right. I mean it gets back to the redundancy that we're able to offer producers is unmatched. And again, it gets back to that differentiated approach, that differentiated value proposition, and that was ultimately what got Devon excited about the opportunity here directly with LandBridge.

Our next question comes from the line of Derrick Whitfield with Texas Capital.

Congrats on your operational accomplishments over the last quarter. With my first question, I wanted to ask for your thoughts on the Aris acquisition by WES. While we question it from a value recognition perspective, it seems to support your thesis for the value of pore space. So I'd love to hear your thoughts on that.

Yes. Yes. I think that's -- I think we -- I'll answer this from LandBridge's perspective. I mean I think the biggest takeaway from LandBridge's perspective as you read through that is the criticality of pore space. And if you look at the headline that was put out, that first slide that was put out by Western, they flag the McNeill Ranch and the pore space offered by McNeill 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 to valuation, there's a little bit to unpack there. As is very typical in M&A deals. But look, I mean, again, this shows Western is very focused on pore space. I mean 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. I mean -- and so 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. And you're seeing that manifest itself directly through deals with us, like we've seen with Devon, like we've done with Western previously, but 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. So all of this -- I think, reinforces the thesis and the narrative that we've been communicating to the market historically.

Great. And for my follow-up, I wanted to shift the focus to your power announcement 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 and that IPP has a line of sight to a combined cycle gas turbine given the tightness we're seeing right now among the OEMs.

Yes. So this -- 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, Derrick. I'll just say it's a brand name and one, just when that release comes out, I think we will speak a lot to the offering. So 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.

Our next question comes from the line of John Mackay with Goldman Sachs.

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

Yes. 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, and 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. So that's definitely top of mind.

That's fair. And then 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? And then 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.

Yes. No, there's always going to be a mix of renewals versus upfront payments. And so 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, but 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. Yes, 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. And 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.

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

I wanted to ask for a little bit more color on the new Texas Railroad Commission guidelines 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?

Yes, for sure. As we thought about this, if you put both the WaterBridge and the LandBridge side on, what puts us in a really unique position is our access to this large, contiguous block of acreage. And 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 is making sure we're not concentrating that injection in specific areas. So 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 our -- the contiguous nature of our footprint. There's -- that does not really exist along the state line in and around New Mexico. And so it puts us in a really good position to capitalize on a lot of these new volumes coming from New Mexico.

Yes. I mean 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 do we 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 kind of the philosophy we've always deployed when we think through building out our assets in our company. And it was the recognition of the problems from these differing approaches, this overconcentration 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. And so we think it's great. We think it's very smart for the regulators to be focused on that. Again, it's something that we have pushed ourselves both from our WaterBridge seats and our LandBridge seats. And I think, again, 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. And so it's great. It's great to see, call it, the spotlight shine on this now because we do think it's important. And again, we do think it highlights what it is we bring to the table.

And 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.

Yes. So 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. And so we feel very confident that how we think through rate structure versus our differentiated value proposition is very much aligned to the commercial success that we would hope to see. And I think the market is kind of proving out our view. I'll leave it at that. But I mean, as you would imagine, great impact for us, obviously, from a financial perspective, as this comes online here in early '27.

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

Just have 2 questions. The first is on the power generation deal that you guys announced, is this tied directly to -- is there any relationship with Five Point? 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 project down there?

No, good question. So the agreement that we're talking through here is directly between LandBridge and the IPP. There is the potential for Five Point'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, as we've said in the past, the beauty of the Five Point 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. And so 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. But again, it's a valuable tool, I think, that we have available to us.

Yes. And one thing I'd 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. So we see this as a great opportunity on all fronts.

And did you say the entity is called PowerBridge or you were just using that term...

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

Okay. And then the second question is, you guys -- you announced the Devon 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. So 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 months 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? So if we want to -- as we model your growth over the next number of years, we should think about, hey, if the deal hasn't been announced by x date, that means that revenue growth is going to take 2 years longer than 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. So just trying to understand the EBITDA ramp relative to project announcement timing.

So 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 a much quicker timeline. I mean the Devon example here, I think, is 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. And so 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. But when you look at other other commercial activity we have kind of in the hopper at the moment, you obviously have the BPX Kraken deal that was both announced at the beginning of this year, is already online today and we'll continue to ratchet over the next several years is a good example of a meaningfully, call it, meaningful EBITDA contribution that can come online quickly and ratchet up quickly. And 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-ed here within the next few weeks on the WaterBridge side, and you would start to see capital go out the door at the end of this year, going into early next year. And that will -- we'll start to see EBITDA contribution for that potentially at the end of this year, definitely early next year. So there -- again, like 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.

But 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?

So 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. Now there'll be a sequencing and timing of those step-ups. And once we get through FID, once we get that fully underwritten on the WaterBridge side, we can message that a bit more clearly.

Okay. But you said $30 million plus some potential upside from that when fully online.

That's right.

Our final question will come from the line of Lawrence Goldstein with Santa Monica Partners L.P.

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 data center, data center, data center, billions here, billions there. Why do you suppose we don't hear a word about the Permian Basin?

Lawrence, very good question. So 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. And it's just taken time to get them familiar with the region, familiar with the risk, familiar with the opportunity set. I mean, ultimately, we haven't gotten any pushback on just the fundamentals making so much sense where this is an inevitability. But 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. And so 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 -- 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. But ultimately, the fundamentals work. I think they acknowledge that. And so from our point of view, it is an inevitability this gets across the finish line. And 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. So there's been a number of projects announced in places like Abilene and Lubbock. And so 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. But all of these trends, we think, continue to work to our advantage here. And again, it's just -- it's going to take that first domino to fall. And we think the fundamentals are just too good for that not to happen.

Yes. 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 Access to Water for Cooling. So it checks all the boxes 100%. To Scott's point, once the first domino falls, I think there'll be a lot more heading our way.

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 population in the area. And I'm sure you're aware of the articles, particularly a lengthy one in the New York Times, I think, about 2 weeks ago, about how some towns turn on the water faucet or the toilet, no water. And yet you say they -- it takes a while to learn about what you have in the way of assets, everything available and everything at the lowest prices. And in Oregon or the Pacific Northwest, Washington, there, they never heard in those places either. But it's so obvious what your assets are, and yet we've not heard a single company. So 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...

We 100% agree. And I think from our seat, coming from an oil and gas background, I think 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. And so we do think that for folks who are used to working in, call it, more of these tech hubs, it's just -- it's a foreign environment when they think to places like Midland. But again, it's -- from our point of view, it's a quick education effort to show them like you've got people coming in from top-tier universities already stepping out in the West Texas to work in the oil and gas space. The talent is going to show up for data centers. In fact, it's already there. And so yes, look, we agree. All the pieces are there. The stage is set. The fundamentals ultimately are going to be what dictates this happening, and we think it's an inevitability.

Yes. I understand you think it is. I think it is. A lot of people think it is. And I don't think what you've got every asset required for a data center. And by the way, you don't have population, which is obviously an asset, if 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. So I accept what you're saying, but I find it hard to believe. Something else, I have no idea what just something else is.

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

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

Yes. 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. But otherwise, we hope you all enjoy the rest of your summer. Thanks.

Thanks.

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