(州或其他司法管轄區 成立或組織) |
(初級標準工業 分類代碼號) |
(國稅局僱主 識別號) |
大型數據庫加速的文件管理器 | ☐ | 加速的文件管理器 | ☐ | |||
☒ | 規模較小的新聞報道公司 | |||||
新興市場和成長型公司 |
本招股說明書中的信息不完整,可能會被更改。在向美國證券交易委員會提交的註冊聲明生效之前,不得出售本文所述的證券。本招股說明書不是出售此類證券的要約,也不是在任何不允許要約或出售的州或司法管轄區徵求購買此類證券的要約。
完成日期爲2024年12月30日
初步招股說明書
59,058,271股A類股
蘭德布里奇公司
A類股
代表有限責任公司利益
本招股說明書涉及本招股說明書中確定的出售股東(「出售股東」)不時要約及出售代表特拉華州有限責任公司Landbridge Company LLC(「Landbridge」、「Company」、「We」、「Us」或「Our」)有限責任公司權益的總計59,058,271股A類股份(「A類股」),包括(I)約53,227,852股A類股,可由Landbridge Holdings LLC於贖回同等數目的OpCo單位(定義見下文)(連同註銷同等數目的B類股(定義見下文)後轉售)及(Ii)於12月定向增發中向其他出售股東發行的5,830,419股A類股(定義見下文)。
出售股東可按現行市價或協議價格,公開或以私下交易方式發售、出售或分派在此登記的全部或部分A類A股。根據本招股說明書,我們不會出售任何A類股,也不會收到出售股東出售A類股的任何收益。我們將承擔與這些證券註冊有關的所有成本、費用和費用,包括與遵守國家證券或「藍天」法律有關的費用。出售股東將承擔出售我們A類股所產生的所有佣金和折扣(如果有的話)。A類股可由出售股東直接轉售予投資者,或透過承銷商、交易商或其他代理人轉售,詳情見本招股說明書。我們不知道出售股東是否、何時或以多少金額可以提供A類股轉售。出售股東可在一次或多次交易中轉售本招股說明書涵蓋的全部、部分或全部A類股。有關更多信息,請參閱標題爲「分配計劃」的部分。
我們的A類股票在紐約證券交易所(「NYSE」)上市,代碼爲「lb」。我們A類股最近一次在紐約證交所公佈的銷售價格是2024年12月27日,即每股A類股64.80美元。
我們有兩類已發行的授權股權證券:A類股份和代表有限責任公司權益的B類股份(「B類股份」,與A類股份一起稱爲「普通股」)。我們的B類股沒有經濟權利,但有權讓持有人在所有由股東投票表決的事項上每股B類股有一票投票權。除適用法律或我們的經營協議(定義見此)另有規定外,A類股票和B類股票的持有人在提交給我們的股東投票或批准的所有事項上作爲一個類別一起投票。
根據適用的聯邦證券法,我們是一家「新興成長型公司」,也是一家「較小的報告公司」,因此,我們選擇利用此次招股說明書和未來申報文件中某些降低的上市公司報告要求。請參閱標題爲「風險因素」的章節。我們也是紐約證券交易所規則意義上的「受控公司」,因此,我們有資格並依賴於某些公司治理要求的豁免。有關更多信息,請參閱管理-受控公司狀態。
投資我們的A股是有風險的。請參閱“危險因素從本招股說明書的第28頁開始,閱讀您在投資我們的A類股之前應考慮的因素。這些風險包括:
• | 我們的收入在很大程度上依賴於我們土地上或周圍正在進行的石油和天然氣勘探、開發和生產活動。如果勘探和勘探公司不維持鑽井、完井 由於我們的土地上或周圍的土地和生產活動減少,對我們土地和資源的使用需求,以及我們從我們土地上的石油和天然氣生產及相關活動中獲得的特許權使用費可能會減少,這可能會對我們的運營業績、現金流和財務狀況產生重大不利影響。 |
• | 勘探和開採公司在我們的土地上和周圍從事鑽探、完井和生產活動的意願在很大程度上受到石油和天然氣市場價格的影響,石油和天然氣的市場價格波動很大。石油和天然氣價格大幅或持續下跌可能會對我們的運營結果、現金流和財務狀況產生不利影響。 |
• | 由於我們未來收入增長的很大一部分預計將來自Water Bridge和Desert Environmental(各自,定義見本文),任何對其業務、運營或財務狀況產生重大不利影響的發展都可能對我們產生重大不利影響。 |
• | 我們依賴Water Bridge及其人員來管理和運營我們的業務,這使我們面臨一定的風險。 |
• | 朗橋控股(定義見此)有能力指導對我們大部分普通股的投票,並控制與我們的管理和業務有關的某些決策,包括某些同意權和只要它及其關聯公司實益擁有我們至少40%的已發行普通股就有權指定超過大多數董事會成員,以及只要它及其關聯公司實益持有我們的已發行普通股少於40%但至少10%,就有權指定較少的董事。朗橋控股的利益可能與我們其他股東的利益衝突。 |
• | Landbridge Holdings、Five Point(本文定義)和Water Bridge及其附屬公司與我們競爭的能力並不侷限於此,他們可能會從我們原本可能獲得的機會中受益。 |
• | 在我們的經營協議中,有關於董事的受信責任、我們的高級職員和董事的免責和賠償以及批准與特拉華州一般公司法(「DGCL」)不同的衝突交易的某些條款,其方式可能會減少對我們公衆股東的利益的保護,並限制股東對我們的高級職員和董事採取的行動採取的補救措施,否則如果我們受制於DGCL,可能會構成違反受託責任。 |
美國證券交易委員會(「美國證券交易委員會」)和任何州證券委員會都沒有批准或不批准這些證券,也沒有就本招股說明書的充分性或準確性發表意見。任何相反的陳述都是刑事犯罪。
招股說明書日期爲 ,2025年。
目錄
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F-1 |
吾等或出售股東均未授權任何人向閣下提供不同於本招股說明書、任何隨附的招股說明書增刊或吾等準備的任何免費撰寫招股說明書所載資料的資料。我們和出售股票的股東對其他人可能向您提供的任何其他信息的可靠性不承擔任何責任,也不能提供任何保證。出售A股的股東提出出售A類股,並尋求只有在此類要約和出售是合法的情況下和在司法管轄區內才購買A類股。本招股說明書中的信息僅截至本招股說明書日期爲止是準確的,無論本招股說明書的交付時間或任何出售A類股的時間。自本招股說明書發佈之日起,我們的業務、流動資金狀況、財務狀況、經營前景或經營結果可能發生了變化。
本招股說明書包含受許多風險和不確定性影響的前瞻性陳述,其中許多風險和不確定性是我們無法控制的。請參閱標題爲「風險因素」和「關於前瞻性陳述的注意事項」的章節。
i
陳述的基礎
本公司由Water Bridge NDB LLC(「NDB LLC」)於2023年9月27日成立,除與本公司於2024年7月1日結束的首次公開招股(「IPO」)有關的若干活動外,並無在「概要-首次公開招股及公司重組」(該等交易,「公司重組」)所述交易完成前進行任何重大業務運作。
我們的前身是特拉華州的有限責任公司DBR Land Holdings LLC及其子公司。我們是一家控股公司,其唯一重大資產包括在OpCo(「OpCo Units」)的會員權益。我們也是OpCo的唯一管理成員。OPCO並無營運、收入(虧損)、負債或重大資產,但其於DBR Land LLC(一家特拉華州有限責任公司及OpCo(「DBR Land」)的全資附屬公司)的權益除外。
我們的組織結構允許我們保留OpCo的直接股權,根據美國聯邦所得稅的目的,OpCo被歸類爲合夥企業。相比之下,A類股的持有人以此類A類股的形式持有我們的直接所有權權益,並通過我們對OpCo單位的所有權持有OpCo的間接所有權權益。儘管我們是作爲一家有限責任公司成立的,但我們已經選擇作爲一家公司來納稅,以達到美國聯邦所得稅的目的。
根據吾等的營運協議及OpCo LLC協議(定義見此),吾等的資本結構與OpCo的資本結構一般互相複製,並訂立慣常的反攤薄機制,以維持一對一OpCo單位和我們的A類股之間的交換比率。
欲了解更多信息,請參閱「概要-首次公開募股和公司重組」和「某些關係和關聯方交易-OpCo LLC協議」。
在整個招股說明書中,我們將介紹有關OpCo業務的運營和財務信息。這些信息通常是在整個企業範圍內提供的。Landbridge Holdings LLC(「Landbridge Holdings」)目前持有OpCo的大部分經濟權益,作爲非控制性權益持有人,透過其擁有已發行OpCo大部分單位的所有權。朗橋控股直接控制我們,因此,通過其持有的B類股份間接控制OpCo,佔我們已發行普通股的多數。由於A類股目前間接代表OpCo的少數經濟權益,因此潛在投資者應相應地評估本招股說明書中的業績指標和財務信息。在一定程度上,隨着時間的推移,OpCo單位(連同相應數量的我們的B類股票)被贖回爲我們的A類股票(或,在我們選擇的情況下,爲現金),相對於Landbridge Holdings,Landbridge和我們的公衆股東在OpCo經濟業績中的相對經濟利益將增加。
最近的收購
如「概要-最新發展-收購」一節所述,2024年11月1日,我們從一傢俬人第三方賣家(「溫克勒縣收購」)手中收購了德克薩斯州溫克勒縣約1,280英畝的土地。
2024年11月22日,我們從一傢俬人第三方賣家手中收購了新墨西哥州利縣約5,800英畝的土地(「Brininstool Areage」)。
2024年12月19日,我們從VTX Energy Partners,LLC(「VTX Energy」)的子公司VTX Energy Partners,LLC(「VTX Energy」),一家Vitol Investment(此類收購,「狼骨收購」,連同Winkler縣收購和Brininstool收購,統稱爲「近期收購」)手中收購了德克薩斯州裏夫斯縣和佩科斯縣的46,026英畝土地(「狼骨牧場」)。
ii
財務和運營數據列報
除另有說明外,本文所載歷史財務及經營數據一般包括(I)於完成公司重組及首次公開招股前、OpCo及其附屬公司及(Ii)完成公司重組及首次公開招股後、Landbridge及其附屬公司(包括OpCo及其附屬公司)的綜合財務及經營業績。OPCO除於DBR Land擁有權益外,並無營運、收入(虧損)、負債或重大資產,其財務業績計入Landbridge的綜合財務報表。
在本招股說明書的某些情況下,我們在「形式」的基礎上提供財務數據。如本文所用及根據所列述期間適用,「備考」一詞於有關財務數據時,指經調整以實施East Stateline收購、信貸協議修訂、公司重組及首次公開招股、首次公開招股同時私募(定義見下文)、狼骨收購及十二月私募(統稱「備考交易」)的Landbridge歷史財務數據(統稱「備考交易」)。
除非另有說明,否則截至2023年12月31日的年度的備考財務數據將使備考交易生效,就像每筆交易已於2023年1月1日完成一樣。除非另有說明,否則截至2024年9月30日的9個月的備考財務數據將使備考交易生效,就好像每筆交易都在2023年1月1日完成一樣。截至2024年9月30日的形式財務數據使狼骨收購、第二次信貸協議修正案和12月私募以及由此產生的淨收益的應用生效,就像每筆交易都在2024年9月30日完成一樣。備考財務數據包含某些重新分類調整,以使歷史上的狼骨牧場和East State eline牧場的財務報表列報與公司的財務報表列報相一致(如適用)。
備考財務數據僅供說明之用,不應將其作爲假若備考交易發生在指定日期時本可實現的財務狀況的指標。此外,未來的結果可能與這種形式數據所反映的結果有很大不同,不應將其作爲未來結果的指標。有關其他資料,請參閱本招股說明書其他部分所載的未經審核備考簡明綜合財務報表及其相關附註。
行業數據
本招股說明書中包含的一些市場數據和統計信息基於管理層的估計和計算,這些估計和計算源自我們對公開的行業出版物、我們的內部研究以及我們對我們目前運營的市場的了解,以及截至本招股說明書發佈之日,我們對未來運營的預期。此信息涉及許多假設和限制,提醒您不要過度重視此類信息。從這些來源獲得的預測和其他前瞻性信息受到與本招股說明書中其他前瞻性陳述相同的限制和不確定性。雖然我們沒有意識到與本文中提出的行業數據有關的任何錯誤陳述,但我們的估計涉及風險和不確定因素,並可能根據各種因素而發生變化,包括本招股說明書中「風險因素」和「有關前瞻性陳述的警示說明」標題下討論的那些因素。
商標和商品名稱
我們擁有或有權使用與我們的業務運營相關的各種商標、服務標記和商號。本招股說明書還可能包含以下內容的商標、服務標誌和商品名稱
iii
第三方,是其各自所有者的財產。我們在本招股說明書中使用或展示第三方的商標、服務標記、商品名稱或產品無意也不暗示與我們的關係或我們的認可或贊助。僅爲方便起見,本招股說明書中提及的商標、服務標記和商品名稱可能不包含 ®、TM或Sim符號,但省略此類參考並不旨在以任何方式表明我們不會根據適用法律在最大程度上主張我們或適用所有者或許可人對這些商標、服務商標和商品名稱的權利。
iv
總結
本摘要重點介紹了本招股說明書中其他部分包含的某些信息。由於這是一個摘要,它可能不包含對您和您在我們的A類股票中的投資決策可能重要的所有信息。本招股說明書的其他部分包括更詳細的信息和財務報表以及與此相關的附註,以對以下摘要進行完整的限定。閣下應仔細閱讀本招股說明書,並應考慮「風險因素」及「管理層對財務狀況及經營業績的討論及分析」所載事項,以及本招股說明書其他部分所載的歷史及預計財務報表及其相關附註,然後才決定投資我們的A類股。此外,本招股說明書中的某些陳述包括受風險和不確定因素影響的前瞻性信息。有關更多信息,請參閱本招股說明書中的「有關前瞻性陳述的告誡」。
除非上下文另有說明或要求,否則本招股說明書中提及的「Landbridge」、「公司」、「我們」和類似術語指(I)在公司重組和首次公開募股完成之前,指OpCo及其附屬公司,以及(Ii)在公司重組和首次公開募股完成後,指Landbridge及其附屬公司,包括OpCo及其附屬公司。見「首次公開募股和公司重組」。本招股說明書中提及的「出售股東」是指本文所列的出售股東。請參閱「主要股東和銷售股東」。本招股說明書中提及的「Five Point」指的是Five Point Energy LLC。本招股說明書所指的「水橋新開發銀行」指的是水橋新開發銀行經營有限責任公司,而「水橋」則統稱爲水橋新開發銀行及水橋經營有限責任公司及其各自的經營附屬公司。本招股說明書中提及的「沙漠環境」指的是沙漠環境有限責任公司。有關本招股說明書中使用的其他定義術語,請參閱「某些行業術語詞彙表」。
公司概述
土地對能源開發和生產至關重要。我們在特拉華州及其周圍擁有約273,000英畝的土地子流域多產的二疊紀盆地,這是美國石油和天然氣勘探開發最活躍的地區。獲得廣闊的地面面積對於石油和天然氣開發、太陽能發電、電力儲存、數據中心和非危險的油田復墾和固體廢物設施。此外,爲了服務和支持能源發展而存在的重要工業經濟需要獲得地面種植面積來支持這些活動。我們的戰略是積極管理我們的土地和資源,以支持和鼓勵石油和天然氣開發以及其他土地使用,這將爲我們帶來長期收入和自由現金流,併爲我們的股東帶來回報。
特拉華盆地擁有豐富的剩餘油氣資源和低盈虧平衡開發成本,是二疊紀盆地最活躍的油氣開發和生產區。特拉華盆地的活動主要由資本充裕的大型上市生產商主導。我們的土地主要位於特拉華州盆地的中心,沿着和靠近監管分水嶺德克薩斯州--新墨西哥州邊界,代表着特拉華州盆地產量最高的一些地區,碳氫化合物濃度高,鑽探和完井活動多。我們相信,我們的戰略位置使我們能夠從促進這些資源開發所需的基礎設施的增長中獲得額外的收入。
我們共享一個財務贊助商Five Point,以及我們與Water Bridge的管理團隊。Water Bridge是美國最大的中游水務公司之一,在特拉華州盆地運營着一個大規模的管道和其他基礎設施網絡,截至2024年12月30日,該網絡處理了超過200萬桶與石油和天然氣生產相關的水,總處理能力約爲340萬桶。這些關係使我們的共同管理團隊能夠了解石油和天然氣生產的關鍵領域和長期趨勢,我們利用這些關係鼓勵和支持我們土地上的關鍵基礎設施的發展,併爲我們創造額外的收入。
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Five Point和我們的管理團隊成立了Landbridge,以收購、管理和擴大特拉華州盆地中心的戰略土地位置,以支持Water Bridge大型產出水處理基礎設施的發展,並積極管理我們的土地和資源,以支持和鼓勵更廣泛的工業和商業發展。自我們成立以來,我們的管理層和Five Point成功地啓動和擴大了業務,通過捕獲我們土地上和附近的商業活動並將其貨幣化,爲我們創造了新的和不斷增長的收入。這些關係的好處的例子包括Water Bridge與Devon Energy的戰略合作伙伴關係,這支持在我們的土地上和周圍發展重要的額外基礎設施。我們相信,Water Bridge未來的增長將繼續爲我們增加收入奠定基礎,我們對此有很大的可見性,這隻需要我們最少的投資。此外,五點形成了沙漠環境開發非危險的我們土地上的油田復墾和固體廢物設施。
除了與Water Bridge和Desert Environmental的關係外,我們還積極增加第三方收入。我們利用具有多元化客戶基礎的協作商業方法,爲客戶在我們土地上的開發活動提供可用性、時機和一致的條款。作爲土地所有者,我們根據客戶對我們土地和資源的使用情況收取費用和特許權使用費,從而從這些活動中受益。此外,我們土地上的開發成本主要由我們的客戶承擔,使我們能夠在部署我們自己的最少資本的同時,從他們在我們土地上的增長中受益。爲了進一步推進我們的戰略,我們和Water Bridge與德克薩斯州最大的土地所有者之一德克薩斯太平洋土地公司(「TPL」)簽訂了協議,在共同感興趣的地區提供互惠的過境權和生產用水特許權使用費和收入分享,爲我們的客戶(包括Water Bridge)提供更高的開發效率,並使他們能夠增加在我們土地上的業務。有關我們與第三方物流協議的更多信息,請參閱「業務-我們的資產-我們的國家立場」。
我們通過使用我們的地面面積、出售我們的土地資源以及石油和天然氣特許權使用費產生了多種收入來源。
• | 地面使用費和收入:我們從客戶那裏收取使用我們的地面面積進行商業活動的費用,目前包括石油和天然氣的開發和生產、產出水的運輸和處理、管道和電力基礎設施、商業燃料分配設施以及其他商業和工業活動,包括非危險的油田復墾和固體廢物設施。這一收入流還將包括目前在我們土地上開發的兩個太陽能設施產生的收入。 |
• | 資源銷售和版稅:我們從出售我們土地的資源中收取費用,包括出售與油井和天然氣井完井有關的微鹹水,以及從我們的土地上開採的沙子用於石油和天然氣作業的特許權使用費。這些資源被我們的客戶用於他們在我們的土地上和周圍以及整個特拉華盆地的其他地方的項目中。 |
• | 石油和天然氣特許權使用費:我們通過擁有礦產權益從我們4,180英畝礦產上生產石油和天然氣的經常性收入中分得一杯羹,其中約96%是我們地面面積的基礎。除了我們的總礦產英畝以外,我們並不擁有作爲我們地表面積基礎的礦產權益。 |
我們商業模式的一個關鍵屬性是簽訂協議,根據協議,我們的客戶承擔幾乎所有與他們在我們土地上的運營有關的運營和資本支出,而我們自己對當前和未來商業機會的資本需求最低,從而能夠創造大量的自由現金流。
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主動土地管理
我們積極管理我們土地的商業開發,通過確定和開發,或支持開發新的用途和土地收入,尋求最大限度地提高我們的地面面積和資源的長期價值。我們經常與現有和潛在客戶就來自我們土地的新機會和收入來源進行溝通。與主要專注於農業或畜牧業運營的土地所有者不同,我們積極推動我們的土地作爲商業和工業用途的地點,我們爲客戶提供高效的合同流程,爲他們的運營需求提供整體解決方案。
此外,我們正在積極發展碳氫化合物價值鏈以外的收入來源,以最大限度地利用我們的土地和資源。隨着我們繼續在我們的土地上吸引和支持業務,由此產生的基礎設施提供了機會來吸引新的企業,這些企業可以利用現有的基礎設施來尋求更多的商業機會。例如,我們土地上現有的道路、電力和其他基礎設施降低了天然氣處理設施、加密貨幣礦山和數據中心的開發成本。我們土地上的基礎設施支持石油和天然氣的開發和生產,這吸引了我們的土地在鑽探和生產領域附近的額外用途,如現場發電、硫化氫處理和儲存、管道和道路建設。雖然這些額外的活動爲我們創造了收入,但它們不是土地密集型活動,可以將我們的土地用於其他用途。
我們的目標是最有效地利用我們的地面面積,允許相同的地面面積用於多種活動和/或提高周圍面積的價值,並且已經或目前正在主要與專注於太陽能發電、電力儲存、加密貨幣開採和數據管理以及其他行業和應用的企業建立或正在尋求長期商業關係。例如,我們最近與一家第三方開發商和Five Point附屬基金之間的一家合資企業簽訂了一項租賃開發協議,用於在我們位於德克薩斯州裏夫斯縣的約2,000英畝土地上開發一個數據中心和相關設施。與在我們的土地上進行的其他業務類似,我們預計將與這些項目的所有者達成地面使用或類似協議,我們預計將從這些項目中獲得與我們的土地使用相關的地面使用費和其他付款,但我們預計不會擁有或運營該等項目,也不預期會產生與此相關的重大資本支出。
截至2023年9月30日的三個月和九個月,我們分別產生了1,150萬美元和4,050萬美元的非油品和天然氣特許權使用費收入,分別爲每英畝159美元和562美元。在截至2024年9月30日的三個月和九個月裏,我們增加了非油品和天然氣特許權使用費收入分別爲2560萬美元和6190萬美元,或每英畝土地分別爲116美元和409美元。截至2024年9月30日的三個月和九個月包括從2024年3月18日開始的Lea縣收購和從2024年5月10日開始的2024年春季收購的影響。在截至2023年12月31日的一年中,我們產生了5210萬美元的非石油和天然氣特許權使用費收入,或每英畝土地724美元。
土地與採出水的關係
採出水自然存在於地下地層中,並在原油和天然氣生產過程中,在油井或天然氣井的整個生命週期內被帶到地面。產出的水必須經過可靠的分離和處理,才能使這些油井上線並保持生產。採出水的收集、處理、處理和再循環既需要獲得作業所需的大量地表面積,也需要有可注入和隔離產出水的多孔、均勻和穩定的地下儲水池。
由於特拉華盆地在過去三年中經歷了石油和天然氣生產活動的顯著增長,從而導致產出水量增加,因此獲得用於處理採出水的大量地面和地下水庫對特拉華盆地的運營商尤其重要。
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我們認爲,石油和天然氣生產活動的這種增長將需要增加產出水的處理能力,因爲特拉華州盆地油井產生的產出水數量遠遠超過相關的石油和天然氣產量。
產出水處理設施及其進入特定地質區的途徑由州一級管理,並要求符合相關國家機構規定的準則。由於特拉華盆地橫跨德克薩斯州和新墨西哥州的邊界,因此產出水基礎設施的規劃、許可和建設取決於德克薩斯州或新墨西哥州的法律法規。
與新墨西哥州相比,德克薩斯州通常爲採油用水許可提供了更有利的監管環境。有利的地質特徵和相對寬鬆的監管環境相結合,推動了對德克薩斯州一側污水處理設施的需求增加德克薩斯州--新墨西哥州邊境。我們的Stateline和Northern倉位受益於德克薩斯州對地表面積和孔隙空間的需求,這是由德克薩斯州和新墨西哥州之間的監管分歧以及特拉華州北部盆地的石油和天然氣活動水平推動的。新墨西哥州還提供了更嚴格的監管和水文環境,以採購用於石油和天然氣井完井活動的微鹹水。因此,供應給新墨西哥州石油和天然氣行業的鹹水大多來自德克薩斯州。我們的Stateline和Northern位置蘊藏着大量的地下微鹹水資源,可以從中生產微鹹水出售給公司,這些公司將這些水輸送給新墨西哥州的勘探和開發公司,用於其鑽井和完井活動。
我們認爲,特拉華盆地未來產出水量的預期增長將需要增加的孔隙空間,以確保適當的處理。我們還相信,我們巨大的土地位置戰略上位於重要的生產商活動和獲得大部分未被充分利用的孔隙空間的交匯點,爲生產水處理提供了關鍵的產能,加上我們管理團隊在生產水行業的豐富經驗,我們處於獨特的地位,爲生產商和生產水公司提供進入我們的土地和孔隙空間的機會,以建立大規模、可靠的生產水處理解決方案,我們將從中產生多種收入來源,包括出售我們的土地資源和生產水處理特許權使用費。
截至2024年12月30日,Water Bridge在我們的土地上運營着約76.7萬桶的產出水處理能力,並有約170萬桶的額外許可能力可用於我們土地的未來開發。我們爲在我們的土地上處理的每桶產出水收取特許權使用費,併爲在我們的土地上建造的基礎設施支付地面使用費。
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我們的資產
截至2024年12月30日,我們在德克薩斯州和新墨西哥州的特拉華州盆地及其周圍擁有約27.3萬英畝土地,這是美國最活躍的石油和天然氣開發和生產地區。我們的水面面積分布在三個不同的區域,我們稱之爲國家線、北部和南部位置。我們的土地狀況如下:
香港的土地狀況概覽
我們的狀態線立場
我們的Stateline位置由大約137,000英畝的表面積組成,主要位於德克薩斯州的洛夫縣、裏夫斯縣和溫克勒縣,以及新墨西哥州的利縣,靠近德克薩斯州--新墨西哥州邊界,截至2024年12月30日。我們的Stateline位置由大量的陸地位置和地質構造組成,通常具有高滲透性和孔隙度的特點,我們相信這將使可靠的水處理成爲可能。在我們的Stateline位置下方和附近有大量的碳氫化合物資源,吸引了高質量、資本充足的生產商,包括德文能源、EOG Resources、康菲石油、大陸資源、二疊紀海軍上將和西方石油公司。我們相信,我們地理上靠近資本雄厚的大型生產商的業務,使我們能夠從我們土地上和周圍石油和天然氣開發的預期增長中受益。
我們Stateline位置的西部是半連續的,或稱棋盤格,地面面積由德克薩斯州最大的土地所有者之一TPL持有。棋盤格種植面積的性質導致了E&P
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該地區的公司、中游公司、服務公司和其他運營商通常需要進入Our和TPL的地面面積才能獲得通行權。爲了發掘棋盤格狀地表面積的機會,我們與Water Bridge於2022年第一季度與TPL簽訂了協議,在我們的Stateline位置的大部分西部和鄰近的TPL地表面積上建立了約64,000英畝的共同利益區域(「Stateline AMI」)。這些協議提供了互惠的穿越權利以及整個Stateline AMI的特許權使用費和收入分享,併爲Water Bridge提供了在此類土地及其周圍開發大規模水利基礎設施資產所需的確定性。我們相信,這些協議爲Water Bridge在我們的Stateline位置的西部地區提供了更多的水處理機會,我們預計這將爲我們帶來額外的特許權使用費收入。有關我們與第三方物流協議的更多信息,請參閱「業務-我們的資產-我們的國家立場」。
截至2024年12月30日,Water Bridge和第三方運營商在我們的Stateline位置運營着約100萬桶/日的現有產出水處理能力。我們相信,假設每天有25,000桶產出水處理許可證,我們Stateline位置西部和東部下面的孔隙空間將能夠支持大約260萬桶/日的額外產出水處理能力。一英里所有未來產出水處理設施之間的間距。
我們Stateline位置的東部包括德克薩斯州溫克勒縣和洛夫縣以及新墨西哥州利縣的104,000英畝連續地面。水橋公司運營着產出水處理基礎設施和鹹水供應系統,爲活躍在East Stateline牧場的生產商提供服務,包括康菲石油、大陸資源公司、德文能源公司、西方石油公司、海軍上將和二疊紀資源公司。這些生產商受到管理East Stateline牧場商業活動的SUA(如本文所定義)的約束。此外,我們相信,East Stateline牧場蘊藏着大量的沙子資源,我們預計隨着時間的推移,這些資源將支持更多的砂礦開發,併爲我們創造與土地利用相關的地面使用收入。
由於該地區的碳氫化合物濃度相對較高,我們的Stateline位置和周圍的種植面積代表了特拉華州盆地一些最具生產力的種植面積。此外,在我們的Stateline位置及其周圍生產的石油伴隨着大量的產出水。這些水必須得到可靠的處理,才能使這些油井上線並保持生產,從而推動對靠近生產商作業的面積進行水處理的持續需求。我們相信,我們的土地處於有利地位,可以參與處理這些大量產出水所需的戰略基礎設施的增長。
雖然石油和天然氣生產及相關服務佔我們Stateline職位的大部分活動,但沙漠環境公司已經建立了兩個非危險的油田回收和固體廢物設施,它們根據處理的廢物向我們支付特許權使用費。此外,隨着石油和天然氣活動繼續支持電力和數據基礎設施的建設,開發商尋求在我們的Stateline位置建設數據中心、加密貨幣開採設施、電力儲存設施和商業加油站的機會也隨之而來。
我們的北方陣地
我們的北方頭寸,包括新墨西哥州埃迪縣和利縣以及德克薩斯州安德魯斯縣的土地頭寸,由大約56,000人組成收費自有截至2024年12月30日,表面積和從BLM和新墨西哥州租賃的額外表面積33,285英畝。我們的BLM和新墨西哥州土地分別根據慣常的BLM和新墨西哥州租賃條款以按年計算基礎。特拉華州盆地北部目前正在經歷石油和天然氣開發活動的顯著增長,這將需要對產出水處理能力進行投資。
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我們的北方地位支持急需的水利基礎設施發展,以服務於特拉華州盆地北部的石油和天然氣開發。我們認爲,需要爲利阿縣和埃迪縣中部和北部提供生產水系統,以便將生產水從特拉華盆地向東輸送。我們北部的斯比德和利縣牧場提供了進入孔隙空間的關鍵通道,我們相信這些空間將能夠處理大量的產出水。
截至2024年12月30日,Water Bridge和第三方運營商在我們的北部地區運營着約90,000桶/日的現有產出水處理能力。我們相信,假設每天有25,000桶污水處理許可證,我們北部位置下面的孔隙空間將能夠支持大約100萬桶/日的額外產出水處理能力。一英里所有未來產出水處理設施之間的間距。
我們的南方陣地
截至2024年12月30日,我們的南部陣地位於特拉華州盆地得克薩斯州裏夫斯縣和佩科斯縣,佔地約80,000英畝。多家生產商在我們的南方陣地或附近開展業務,包括康菲石油、APA公司、二疊紀資源公司和響尾蛇能源公司,我們從他們使用我們的南方陣地英畝及其資源中獲得收入。
2024年12月,我們完成了對狼骨的收購,該項目在特拉華州南部盆地擁有大約46,000英畝的土地,基本上是連續的。狼骨牧場毗鄰我們在得克薩斯州裏夫斯縣現有的地面面積,地理位置優越,位於石油和天然氣勘探和運輸的戰略交叉口,可以到達Waha天然氣市場樞紐。這塊土地還支持生產水業務,目前產量約爲300 MBbls/d,由VTX Energy擁有和運營的基礎設施以及Water Bridge擁有和管理的資產提供服務。根據對狼骨的收購,VTX Energy已同意未來五年對Landbridge的最低年收入承諾爲2500萬美元。
2024年11月6日,我們與Power Land Partners LLC簽訂了一項租賃開發協議,將在我們位於德克薩斯州裏夫斯縣的約2,000英畝土地上開發一個數據中心和相關設施,Power Land Partners是一家第三方開發商和Five Point Energy(「PowLan」)附屬基金的合資企業。租賃開發協議包括,除其他外,不能退款2024年12月支付的800萬美元按金兩年制選址和前期開發句號。PowLan有義務達到某些時間裏程碑以維持其租約,包括在兩年制並在隨後的四年內完成數據中心的建設。在開始建設數據中心後,PowLan將在開發期內每年支付200萬美元的租賃費,自開工日期一週年起每年支付800萬美元的租賃費,受年度消費物價指數(CPI)最低2%和最高4%的影響。PowLan還將根據與租賃物業上的發電設施有關的淨收入支付額外款項。如果PowLan沒有在簽訂租賃開發協議的兩年內開始場地開發,或在隨後的四年內開始建設數據中心,該協議將自動終止。此外,PowLan還可在數據中心開始建設後終止協議,但須繳納巨額提前終止費。如果受租賃開發協議約束的總面積超過25%,則PowLan可按比例減少未來應支付的年度租金,比例相同。我們不能保證交易對手將租用該場地,也不能保證PowLan將成功開發數據中心或任何發電設施。
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此外,我們還將繼續尋找並尋求與衆多客戶的合作機會,包括我們在南方地區的新業務。例如,通過我們的子公司DBR Solar,我們允許建設和運營一個設施,其中包括250兆瓦此外,我們還在我們的南部地區確定了鄰近的英畝地區,我們相信該地區將是增加120兆瓦太陽能發電能力的有吸引力的地點。我們之前通過我們的子公司Pecos Renewables尋求許可的設施已無限期推遲,原因是相關面積上的現有項目正在建設中。此外,我們的南方位置毗鄰I-10州際駭維金屬加工走廊,全國第四長的州際駭維金屬加工系統,以及I-20,每一個單獨和共同的通道都是重要的車輛交通和管道和電力基礎設施的走廊,爲這一地面面積提供了額外的發展機會。
我們的礦產權益
我們在特拉華州盆地擁有4,180英畝礦產,加權平均特許權使用費權益基於面積23.9%,截至2024年12月30日,已探明開發的平均每口井的淨收入利息爲4.2%。我們的礦產權益被出租給特拉華州盆地的一些頂級運營商,包括APA公司、雪佛龍、康菲石油和西方石油公司。我們與這些公司和其他勘探和銷售公司的租賃允許承租人在我們的土地上勘探和生產石油、天然氣和NGL,並使我們有權獲得預付現金付款或租賃獎金,以及以石油和天然氣特許權使用費權益的形式銷售這些商品所得收益的一定比例。與擁有石油和天然氣資產權益的所有者不同,我們沒有義務爲鑽井和完井成本、封堵和廢棄成本或與石油和天然氣生產相關的租賃運營費用提供資金。作爲一個礦產擁有者,我們只需繳納一定比例的生產稅和從價稅,在某些情況下還要承擔採集費、加工費和運輸費。如果承租人不滿足某些要求,如在指定日期前在租賃礦產面積內鑽探和完成鑽井,承租人必須支付延長租約的費用,否則租約將終止。如果被終止,我們將尋求轉租我們的礦產權益轉讓給了另一家勘探和開發公司。在我們的總礦產英畝中,大約96%是我們的地表面積。除了我們的總礦產英畝以外,我們並不擁有作爲我們地表面積基礎的礦產權益。
與專注於購買石油和天然氣特許權使用費權益的企業不同,後者更直接地受到大宗商品價格的影響,我們的重點是地表面積所有權和相關的按費用收費收入。因此,我們預計僅在與主要用於其他用途的財產相關的情況下才會獲得額外的礦產權益,因此,隨着時間的推移,石油和天然氣預計將在我們的總收入中佔據較小的比例。
我們的商業模式
我們專注於從使用我們的地面面積和出售我們的土地資源中積極增加收入,同時繼續從我們目前的礦產權益中獲得最大價值。我們相信我們的大部分按費用收費合同,以及我們來自客戶石油和天然氣生產的強大收入基礎,有助於減少我們對大宗商品價格波動的直接敞口,並通過大宗商品價格週期促進現金流穩定。
收入來源
我們目前的收入來源包括:
地面使用費和收入
• | 地面使用費:根據我們的地面使用權使用費協議,包括採水處理設施租賃和某些包含水處理權使用費的地面使用協議(「SURA」), |
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它通常提供五到五個10年期在最初的條款中,我們根據使用我們的土地和/或大量使用我們的土地上安裝的基礎設施以換取我們的土地使用權而獲得的毛收入的百分比收取特許權使用費。我們從SURAS下的作業中獲得的特許權使用費包括產出水運輸和裝卸作業、脫脂油回收和產出水處理量以及廢物回收,所有這些都是在油井整個生命週期中生產石油和天然氣所必需的。 |
• | 地役權和與地表相關的收入:根據我們的地面使用協議,包括地役權和通行權(統稱爲「SuA」),這些協議通常規定5- 至10年期最初的條款,我們通常在合同執行時收到一筆費用,固定的月度或年度付款,通常在每個續約期開始時收取額外費用。這類協議通常包括預定義對於我們的客戶開發和使用鑽探場地、新的和現有的道路、管道地役權和電力傳輸地役權,我們將收到費用的條款。我們的SuA通常要求我們的客戶使用我們土地上的資源,如鹹水和沙子,用於他們在我們土地上的運營,我們爲此收取我們的慣常費用。 |
資源銷售和版稅
• | 資源銷售:根據我們的供水協議,我們銷售微鹹水主要用於完井,以換取每桶費用。這些費用是經過協商的,根據苦鹹水的目的地而有所不同,苦鹹水通常以批發價出售給Stateline AMI以外的地方使用,而用於Stateline AMI的苦鹹水直接以零售價出售給生產商。銷售用於Stateline AMI的苦鹹水的收入與TPL分享(有關我們與TPL協議的更多信息,請參閱「-我們的資產-我們的Stateline立場」)。我們和第三方物流與Stateline AMI中的許多E&P公司有着牢固的關係和合同承諾。此外,我們的Stateline位置緊鄰德克薩斯州--新墨西哥州邊境爲我們提供了向新墨西哥州市場輸送鹹水的能力,否則市場將受到限制。通過我們的關係,以及我們鹹水水資源的戰略位置,我們相信我們將受益於德克薩斯州和新墨西哥州未來的強勁需求。同樣,我們的客戶從我們這裏購買石棉,用於修建通道和井墊,我們因此獲得了固定費用從我們的地表面積中每立方碼提取一立方碼的石棉。在我們的土地上經營的企業通常被要求從我們那裏購買他們在我們土地上使用的所有印花布。 |
• | 資源使用費:根據我們的沙子租賃協議,我們將我們的地面面積出租給客戶建設和運營,費用由他們提供盆地內用於石油和天然氣完井作業的砂子。我們每開採一噸沙子就會收到固定的特許權使用費,以及固定費用 用於支持砂石開採作業的每桶鹹水。 |
石油和天然氣特許權使用費
• | 根據我們的石油和天然氣礦產租賃,我們在開始時以及與任何延期相關的租賃獎金以及石油和天然氣特許權使用費,按市場價格計算,減去生產稅,在某些情況下,還包括採集、加工和運輸成本。我們的租約通常有效期爲 一- 爲期三年的主要期限,允許承租人從我們的土地中勘探和生產石油、天然氣和液化天然氣,並使我們有權以特許權使用費的形式獲得銷售這些商品的一定比例的收益。如果承租人不滿足某些要求,例如在指定日期之前在租賃的礦區內鑽探和完工,承租人必須支付延長租賃費用,否則租賃將終止。如果終止,我們將尋求 轉租 我們的礦產權益轉讓給另一家勘探開發公司。 |
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我們期待我們的按費用收費隨着時間的推移,收入將相對於我們從石油和天然氣特許權使用費產生的收入增長。當我們的注意力集中在按費用收費根據協議,我們從石油和天然氣特許權使用費產生的收入隨石油和天然氣的市場價格波動。在截至2024年9月30日的九個月中,我們總收入的55%是地面使用特許權使用費和收入,29%是資源銷售和特許權使用費,16%是石油和天然氣特許權使用費。在截至2023年12月31日的一年中,我們總收入的35%是地面使用特許權使用費和收入,36%是資源銷售和特許權使用費,29%是石油和天然氣特許權使用費。
我們尋求在我們的每一份地面使用特許權使用費和收入以及資源銷售和特許權使用費的合同中包括通脹自動扶梯,這與我們相對較低的運營和資本支出相結合,可能有助於減輕我們面臨的成本上升的風險。鑑於特拉華盆地生產的預期長期性質,我們預計這些合同將在較長一段時間內續簽。雖然我們預計這些收入來源將在長期內重複出現,但我們與我們的重要客戶簽訂的合同--佔我們收入的很大一部分--通常不包含購買土地使用或鹹水水量的最低承諾條款。因此,我們的收入依賴於這些客戶的持續需求,儘管我們目前對客戶在我們土地上的長期活動抱有期望,但由於我們無法控制的因素,這些需求可能會減少。在我們面臨的其他風險中,我們受到地理集中在二疊紀盆地的風險的影響,在那裏,我們與其他土地所有者競爭,爲尋求開發和/或建設基礎設施或採購其項目和運營所需資源的有限潛在客戶提供有吸引力的開發地點。
財務業績
我們商業模式的關鍵是簽訂協議,根據協議,我們的客戶承擔幾乎所有與其運營相關的運營和資本支出,而我們只需要適度的資本投資。因此,我們能夠在保持相對較高的自由現金流的同時,實現收入、淨收入和調整後的EBITDA的增長。
我們通過積極管理我們的土地成功地簽署了新的商業協議,再加上我們現有合同的實力和我們積極的土地收購戰略,使我們的業務實現了顯著增長。
儘管我們相信我們已經成功地發展了我們的業務,但這些收購需要大量的資本支出,截至2024年12月30日,我們的未償債務總額爲385.0美元。截至2024年11月30日,我們的營運資本(定義爲流動資產減去流動負債)爲1,900萬美元,現金和現金等價物爲1,390萬美元。更多信息見「管理層對財務狀況和經營成果的討論和分析--流動性和資本資源」。
我們與水橋的關係
我們與Water Bridge共享一個管理團隊和財務贊助商。水橋擁有並運營着美國最大的綜合中游系統之一,爲德克薩斯州、新墨西哥州和俄克拉何馬州的主要石油和天然氣生產盆地提供水源和採出水處理。水橋公司的主要客戶包括雪佛龍、德文能源、EOG Resources、康菲石油、響尾蛇能源、西方石油、生命能源、二疊紀資源、穆伯恩石油公司和APA公司。截至2024年12月30日,Water Bridge處理了約250萬桶的聚合產出水,擁有約420萬桶的聚合處理能力,每種情況下,其聚合業務區都擁有約420萬桶的聚合處理能力。水橋有權在我們的Stateline和Northern位置建設生產水基礎設施,是我們最大的客戶之一,佔我們截至2024年9月30日的9個月收入的25%。這些收入包括:
• | 採油污水處理費; |
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• | 脫脂石油特許權使用費;以及 |
• | 與管道、設備和道路的通行權相關的費用以及相關的地面使用許可證。 |
在截至2024年9月30日的9個月中,我們從Water Bridge獲得了1830萬美元的收入。每10萬桶增量產出水進入我們的地表,我們預計每年產生400萬至600萬美元的特許權使用費,其中包括脫脂石油收入。Landbridge和Water Bridge的共同管理團隊促進了我們的共同目標,即通過互惠互利的關係利用二疊紀盆地的能源生產。此外,我們共享的管理團隊對石油和天然氣生產的可見性以及水橋平台導致的二疊紀盆地的長期趨勢使我們能夠促進某些主要地點的基礎設施開發,從而獲得額外的收入來源。
在二疊紀盆地,Water Bridge主要專注於建設和運營綜合水網,爲其上游客戶提供運營連續性。水橋公司的集成系統爲生產操作中產生的水提供了持續的處理能力。Water Bridge的網絡在其整個二疊紀盆地區域提供運營冗餘、客戶流量保證以及回收和再交付。截至2024年12月30日,在特拉華州盆地內,Water Bridge擁有約1,675英里的管道,日處理水能力爲340萬桶。特別是,截至2024年12月30日,Water Bridge在我們的土地上運營着一個綜合水網,現有的水處理能力約爲76.7萬桶/日,主要是在我們的Stateline位置,並有大約170萬桶的額外許可能力可用於我們土地上的未來開發。
此外,Stateline AMI爲Water Bridge提供了在我們的土地上開發大型水利基礎設施資產所需的確定性,我們相信這將爲Water Bridge提供更多的水源和處理機會,並將爲我們帶來額外的特許權使用費收入。
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我們與沙漠環境的關係
我們與沙漠環境共享一個財務贊助商。沙漠環境公司開發了兩個環境修復設施,用於非危險的我們土地上的油田復墾和固體廢物處理。我們將從固體廢物處理和回收業務的總收入中獲得一定比例的收入,以及爲堆填區業務提供苦鹹水的收入。水橋已經與沙漠環境公司簽訂了合同,處理幾乎所有的固體廢物,這提供了支持我們土地上的兩個廢物設施所需的基本業務水平。
我們與Five Point的關係
Five Point是一家投資公司,專注於在環境、水管理和可持續基礎設施領域建立業務。Five Point的獲得和發展盆地內資產,提供增長資本,並建立行業領先的公司,擁有經驗豐富的管理團隊和大型E&P合作伙伴。截至2024年12月30日,Five Point管理的資產約爲70億美元。Five Point間接擁有我們的大部分普通股,並擁有Water Bridge和Desert Environmental的大部分股權。
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最新發展動態
最近的收購
2024年11月1日,我們從一傢俬人第三方賣家手中收購了溫克勒縣約1,280英畝的土地。溫克勒縣的收購包括與一個活躍的砂礦簽訂的長期供水合同,合同的基礎是到2031年10月的最低水量承諾。我們預計,到2031年,這一最低銷量承諾將提供約220萬美元的年收入。
2024年11月22日,我們以2650萬美元的價格從一傢俬人第三方賣家手中收購了新墨西哥州利縣約5800英畝的Brininstool種植面積。
2024年12月19日,我們以245.0美元從VTX Energy手中收購了位於德克薩斯州裏夫斯縣和佩科斯縣的狼骨牧場,佔地約46,000英畝。根據對狼骨的收購,我們從VTX Energy獲得了爲期五年、每年2,500萬美元的最低收入承諾。收購狼骨的收購價格由以下所述的12月份私募淨收益的一部分和我們信貸安排下的借款提供資金。
我們相信,最近的收購增加了我們的土地頭寸對資本充足的大型生產商的業務的敞口,並使我們能夠受益於石油和天然氣的預期增長,以及我們土地上和周圍的其他開發,以及其他好處。
第二次信貸協議修正案
於2024年11月4日,吾等簽訂了第二次信貸協議修正案(「第二次信貸協議修正案」),修訂了DBR Land、作爲擔保人的我們的某些子公司、作爲行政代理和信用證發行方的德克薩斯資本銀行以及不時與其有關的其他貸款人之間管理我們信貸安排的信貸協議。其中,第二次信貸協議修正案將我們的循環信貸安排下的最高可用金額增加到100.0美元,將定期貸款的本金增加到300.0美元,增加了7,500萬美元的未承諾延遲提取定期貸款,取消了我們支付定期貸款攤銷付款的義務,並允許我們在最近結束的四個財季期間,只要我們的槓桿率低於3.50%至1.00%,就可以進行限制性付款,但須受某些條件和例外情況的限制。
商業發展
2024年11月6日,我們與PowLan簽訂了一項租賃開發協議,在我們位於德克薩斯州裏夫斯縣的大約2,000個地面面積上開發一個數據中心和相關設施。租賃開發協議包括,除其他外,不能退款2024年12月到期的800萬美元按金兩年制選址和前期開發在此期間,年度租賃費用不斷上升,以及PowLan爲維持其租賃而必須達到的某些時間裏程碑。有關更多信息,請參閱「業務-我們的資產-我們的南方地位」。
12月私募
於2024年12月,吾等完成私募配售,據此,若干合理相信爲認可投資者或合資格機構買家的人士以每股60.03美元向吾等購買合共5,830,419股A類股(「十二月私募配售」)。我們使用去年12月私募所得款項中的約200.0,000,000美元(扣除配售費用)爲收購狼骨提供部分資金,並使用該等收益中約150.0,000,000美元(扣除配售費用)由Landbridge Holdings購買2,498,751個OpCo單位(同時註銷相應數量的B類股)。
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股息公告
2024年11月5日,我們的董事會宣佈向截至2024年12月5日登記在冊的股東支付2024年12月19日向登記在冊的股東支付的A類股每股0.10美元的股息。
首次公開募股與公司重組
2024年7月1日,我們完成了16,675,000股A類股的IPO,向公衆公佈的價格爲每股A類股17.00美元。爲配合首次公開招股的完成及作爲公司重組的一部分,我們完成了以下交易,這些交易在本招股說明書中統稱爲我們的「公司重組」:
• | 成立了Landbridge Holdings,並收購了NDB LLC在OpCo和Landbridge的權益; |
• | 朗橋控股促使朗橋和Opco各自修改和重述各自的運營協議,以促進IPO; |
• | 朗橋在IPO中向公衆發行16,675,000股A類股,以每股A類股17.00美元的價格換取IPO所得款項; |
• | 朗橋將IPO所得款項淨額(包括行使承銷商購買額外A類股選擇權所得款項淨額)全部貢獻予OpCo,以換取相當於IPO發行的A類股數目的OpCo單位數目; |
• | Landbridge Holdings在IPO後立即獲得了相當於其持有的OpCo單位數量的B類股;以及 |
• | OPCO利用IPO所得款項淨額(包括行使承銷商購買額外A類股份選擇權所得款項淨額)償還信貸安排項下若干未償還借款,並向Landbridge Holdings作出分派。 |
於首次公開招股的同時,吾等與一名認可投資者訂立普通股購買協議,根據該協議,該投資者以每股A類A股17.00美元的價格購買750,000股A類A股,獲豁免遵守與首次公開招股同時結束的證券法的登記規定(「首次公開發售同時私募」)。高盛有限責任公司擔任與IPO併發私募有關的配售代理,並獲得慣常的配售代理費。在扣除承銷折扣和佣金後,我們從首次公開招股和首次公開招股同時進行的私募中獲得淨收益約270.9美元。吾等將首次公開招股同時私募所得款項淨額全部貢獻予OpCo,以換取OpCo單位,而OpCo使用該等所得款項淨額的方式與上述所得款項淨額的運用方式一致。
我們的普通股
我們的第一份經修訂及重訂的有限責任公司協議(「經營協議」)規定兩類普通股,A類股份及B類股份。只有我們的A類股擁有經濟權利,並有權讓其持有人蔘與我們董事會可能宣佈的任何股息。A類股的每位持有人有權就所有事項投一票,由我們的股東一般投票表決。
B類股無權參與我們董事會可能宣佈的任何股息,但有權在與A類股相同的基礎上投票。除適用法律或我們的經營協議另有規定外,A股和B股的持有者在提交給我們的股東投票或批准的所有事項上作爲一個類別一起投票。B類股票沒有在任何證券交易所上市。我們所有的B類股票目前由Landbridge Holdings擁有。關於股東在我們的經營協議下的權利和特權的說明,包括投票權,請參閱「股份說明」和「我們的經營協議」。
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贖回權
根據OpCo有限責任公司協議(「OpCo LLC協議」),在某些限制的規限下,OpCo單位的每名持有人有權(「贖回權」)促使OpCo收購其全部或部分OpCo單位(連同相應數量的我們的B類股的註銷),以在OpCo的選擇下:(I)按贖回比例爲每個贖回的OpCo單位贖回一股A類股,但須受股權拆分、股息和重新分類及其他類似交易的換算率調整(「適用的換算率調整」),或(Ii)購買等同於該等A類股份的現金選擇金額(定義見此)的現金,但須受股權發行條件(定義見此)的規限。OPCO將根據決定作出時存在的事實,決定是發行A類股還是支付相當於現金選擇金額的現金,以代替發行A類股,我們預計這將包括A類股的相對價值(包括當時A類股的交易價)、現金購買價、收購OpCo單位的其他流動性來源(如額外發行普通股)的可用性以及該等現金的替代用途。或者,於行使贖回權後,吾等(而非OpCo)將有權(而非OpCo)爲行政方便,直接向OpCo單位的贖回持有人(「OpCo Unithold」)收購每一投標的OpCo單位,以(X)一股A類股,但須受適用的換算率調整所規限,或(Y)現金,金額相等於該等A類股的現金選擇金額,但須受股權發售條件所規限。本公司只有在OpCo單位持有人首先行使其贖回權,以及OpCo單位持有人可隨時酌情行使其贖回權的情況下,方可行使贖回權。作爲OpCo的唯一管理成員,我們在行使贖回權或贖回權時支付現金選擇金額的決定可能由一個完全由獨立董事組成的衝突委員會做出。就根據贖回權贖回OpCo單位或根據認購權收購OpCo單位而言,贖回OpCo單位持有人所持有的相應數目的B類股份將自動註銷。根據行使贖回權或贖回權,我們收購(或被視爲出於美國聯邦所得稅目的)OpCo單位預計將導致OpCo有形資產和無形資產的稅基調整,此類調整將分配給我們。如果沒有我們對OpCo Units的收購或視爲收購,我們將無法進行這些調整,預計將減少我們未來需要支付的現金稅額。
我們的經營協議包含有效地將每個OpCo單位與我們的其中一股B類股聯繫起來的條款,因此在沒有轉讓同等數量的OpCo單位的情況下,B類股不能轉讓,反之亦然。
有關其他信息,請參閱「某些關係和關聯方交易-OpCo LLC協議」。
我們的控股股東
雖然我們與我們的金融贊助商Five Point及其附屬公司,包括Landbridge Holdings和Water Bridge的關係是一個重要的優勢,但它也是潛在衝突的來源。請參閱「利益衝突」和「風險因素」。
截至2024年12月30日,Landbridge Holdings通過擁有53,227,852股B類股份持有我們的重大權益,相當於我們約70.0%的投票權,以及相應數量的OpCo單位。
利益衝突
我們的一名或多名高級管理人員和董事對我們以外的實體負有責任和承諾。例如,我們有一些與Five Point和Water Bridge相同的董事和高級管理人員。此外,我們還提供
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沒有明確禁止我們的董事、高級管理人員、證券持有人或關聯公司從事我們爲他們自己進行的類型的業務活動的政策。
雖然我們制定了某些旨在緩解和解決利益衝突的政策和程序,但不能保證這些政策和程序將在這樣做方面有效。實際的、潛在的或感覺到的利益衝突可能會引起投資者的不滿、訴訟或監管執法行動。
我們的運營協議規定,Landbridge Holdings及其關聯公司不受擁有資產的限制,也不被禁止從事其他業務或活動,包括可能與我們直接競爭的業務或活動。此外,朗橋控股及其關聯公司,包括Five Point和Water Bridge,可能會與我們競爭投資機會,並可能在與我們競爭的實體中擁有權益。吾等的經營協議亦規定,吾等放棄於任何可能不時向朗橋控股提出的任何商機中的任何權益或預期,或放棄參與該商機的任何機會,否則,該商機將受制於DGCL項下的公司機會或其他類似原則。朗橋控股及其聯屬公司,包括Five Point和Water Bridge,以及我們的某些董事,可能會不時意識到某些商業機會(如收購機會),並可能將這些機會引導到他們投資的其他業務,在這種情況下,我們可能不知道或沒有能力追求這些機會。這些聯屬公司可能會獲得有意義的資本,這可能會隨着時間的推移而變化,這取決於各種因素,包括可用股本和債務融資、市場狀況和手頭現金。Five Point擁有多個現有和計劃中的基金,專注於投資於我們目前並可能在未來尋求運營的行業,每個基金都有重大的當前或預期的資本承諾。
我們的某些關鍵協議,包括我們的運營協議和OpCo LLC協議,是由相關方談判達成的,它們各自的條款,包括費用和其他應付金額,可能不如在一臂長在與非關聯方的基礎上。
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組織結構
下圖反映了截至2024年12月30日我們當前的簡化組織結構。
* | 此圖表僅用於說明目的,並通過不描述每個單獨的運營子公司而進行了簡化。 |
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彙總風險因素
與我們的業務和運營相關的風險
• | 我們的收入在很大程度上依賴於我們土地上或周圍正在進行的石油和天然氣勘探、開發和生產活動。如果E&P公司不在我們的土地上或周圍維持鑽探、完井和生產活動,對我們土地和資源的使用需求,以及我們從我們土地上的石油和天然氣生產及相關活動中獲得的特許權使用費可能會減少,這可能會對我們的運營業績、現金流和財務狀況產生重大不利影響。 |
• | 勘探和開採公司在我們的土地上和周圍從事鑽探、完井和生產活動的意願在很大程度上受到石油和天然氣市場價格的影響,石油和天然氣的市場價格波動很大。石油和天然氣價格大幅或持續下跌可能會對我們的運營結果、現金流和財務狀況產生不利影響。 |
• | 未來的土地收購將使我們面臨與收購和更多土地商業化相關的風險。 |
• | 由於我們未來收入增長的很大一部分預計將來自Water Bridge和Desert Environmental,任何對其業務、運營或財務狀況產生重大不利影響的發展都可能對我們產生重大不利影響。 |
• | 我們依賴Water Bridge及其人員來管理和運營我們的業務,這使我們面臨一定的風險。 |
• | 我們的種植面積位於二疊紀盆地,這使得我們很容易受到與地理集中在單一地理區域相關的風險的影響。 |
• | 我們的經營歷史有限,投資我們的A類股具有很高的投機性。由於我們的經營歷史有限,可能很難評估我們成功實施業務戰略的能力。 |
• | 我們可能不會成功地在我們的土地上尋求額外的商業機會非碳氫化合物以能源生產等用戶爲主。 |
• | 我們的客戶在我們的土地上建設新的基礎設施,受到監管、建設、供應鏈和其他設施和其他基礎設施的開發和運營中常見的風險的影響。 |
• | 與水力壓裂替代技術相關的技術進步可能會減少對我們的微鹹水銷售以及Water Bridge在我們土地上的產出水運輸和處理業務的需求。 |
• | 我們已探明的未開發儲量最終可能不是由我們的礦產或特許權使用費權益的經營者開發或生產的,或者可能需要比預期更長的時間來開發。 |
• | 砂礦作業面臨的經營風險往往超出礦山經營者的控制範圍。這些風險可能會對產量水平和成本產生不利影響,這可能會對我們種植面積的砂岩生產產生不利影響。 |
• | 儲量估計取決於許多可能最終被證明是不準確的假設。這些儲量估計或基本假設中的任何重大不準確,都可能對我們的儲量數量和現值產生重大影響。 |
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與環境和其他法規相關的風險
• | 我們的運營結果、現金流和財務狀況受到行業主要趨勢的影響,如脫碳,並可能受到我們無法控制的未來發展的不利影響。 |
• | 旨在應對地震活動、超壓或下沉的立法或監管舉措可能會限制鑽井、完井和生產活動,以及Water Bridge處理從客戶那裏收集的採出水的能力,這可能會對我們的運營業績、現金流和財務狀況產生重大不利影響。 |
與我們的財務狀況有關的風險
• | 我們受到利率風險的影響,這可能會導致我們的償債義務大幅增加。截至2024年9月30日止九個月的新信貸安排下未償還貸款的加權平均利率爲8.45%(循環信貸)及8.49%(定期貸款)。 |
• | 我們受到交易對手信用風險的影響。我們的客戶不付款或不履行義務可能會對我們的運營結果、現金流和財務狀況產生不利影響。 |
• | 我們在信貸安排下的債務以我們幾乎所有資產和各種擔保的優先擔保權益爲擔保。 |
與我們A類股相關的風險
• | 作爲一家上市公司的要求,包括遵守交易所法案的報告要求和薩班斯-奧克斯利法案的要求,將使我們的資源緊張,增加我們的成本,並分散管理層的注意力,我們可能無法及時或具有成本效益地遵守這些要求。 |
• | 如果我們不繼續定期支付我們的A類股現金股息,您可能無法獲得投資回報,除非您以高於您購買A類股的價格出售您的A類股。 |
• | 朗橋控股有能力指導我們大多數普通股的投票,並控制有關我們管理和業務的某些決策,包括某些同意權和只要它及其關聯方實益擁有我們至少40%的已發行普通股就有權指定超過大多數董事會成員,以及只要它及其關聯方實益持有少於40%但至少10%的我們的已發行普通股就有權指定較少的董事。朗橋控股的利益可能與我們其他股東的利益衝突。 |
• | Landbridge Holdings、Five Point和Water Bridge及其附屬公司在與我們競爭的能力方面並不受限,可能會從原本可能爲我們提供的機會中受益。 |
• | 我們的某些董事和高級管理人員可能對其他實體負有重大責任,並花費大量時間爲其他實體服務,包括可能在尋求收購和商業機會方面與我們競爭的實體,因此在分配時間或追求商業機會方面可能存在利益衝突。 |
• | 美國聯邦所得稅對我們A類股股息向持有人的處理將取決於我們的稅收屬性和我們普通股的持有者的納稅基礎,這些不一定是可預測的,可能會隨着時間的推移而變化,並可能導致出售我們A類股的應稅損益或多或少超過預期。 |
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新興成長型公司和較小的報告公司地位
我們是一家「新興成長型公司」,根據《創業啓動法案》(JOBS Act)的定義。只要我們是一家新興成長型公司,就不像其他上市公司那樣,根據《就業法案》,我們不是新興成長型公司,我們就不需要:
• | 根據《薩班斯-奧克斯利法案》第404(B)節,提供一份核數師證明報告,說明管理層對財務報告內部控制制度有效性的評估; |
• | 提供兩年以上經審計的財務報表及相關管理層對財務狀況的討論和分析; |
• | 遵守上市公司會計監督委員會(「PCAOB」)通過的要求強制輪換審計公司或補充核數師報告的任何新要求,其中核數師將被要求提供有關審計和我們的財務報表的額外信息; |
• | 就大型上市公司要求的高管薪酬提供某些披露,或就《多德-弗蘭克華爾街改革和消費者保護法》(「多德-弗蘭克法案」)要求的高管薪酬進行股東諮詢投票;或 |
• | 獲得股東批准之前未獲批准的任何金降落傘付款。 |
我們將不再是一家新興的成長型公司,最早的情況是:
• | 財政年度的最後一天,我們的年收入爲1.235美元或更多; |
• | 我們成爲「大型加速申請者」的日期(財年年終我們持有的普通股證券的總市值非附屬公司截至6月30日(當年6月30日)爲7億美元或更多); |
• | 我們發行超過10億美元的不可兌換三年內的債務;或 |
• | 在我們首次公開募股五週年之後的財政年度的最後一天。 |
此外,《就業法案》第107節規定,新興成長型公司可以利用《證券法》第(7)(A)(2)(B)節規定的延長過渡期,以遵守新的或修訂的會計準則。這允許新興成長型公司推遲採用某些會計準則,直到這些準則適用於私營公司。我們選擇利用這一延長的過渡期,因此,我們將在私營公司需要採用新的或修訂的會計準則的相關日期遵守這些準則。
根據證券法的定義,我們也是一家「較小的報告公司」。即使我們不再是一家新興的成長型公司,我們也可能繼續是一家規模較小的報告公司。我們可能會利用某些可供較小報告公司使用的按比例披露的信息,直到確定我們持有的普通股由非附屬公司 根據第二財年最後一個工作日計算,我們的年收入爲7億美元或更多,在最近完成的財年或持有的普通股中,我們的年收入爲1億美元或更多 非附屬公司 按第二財年最後一個工作日計算,價值爲2.5億美元或更多。
受控公司狀態
由於LandBridge Holdings擁有53,227,852個運營公司單位和53,227,852股b類股票,約佔我們截至2024年12月30日合併投票權的70.0%,因此根據《薩班斯-奧克斯利法案》和紐約證券交易所規則,我們是一家受控公司。受控公司不需要董事會中有多數獨立董事,也不需要組建獨立薪酬或提名和
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公司治理委員會。作爲一家受控公司,我們仍然受到薩班斯-奧克斯利法案和紐約證券交易所規則的約束,這些規則要求我們有一個完全由獨立董事組成的審計委員會。
如果我們在任何時候不再是一家受控公司,我們打算採取一切必要的行動來遵守《薩班斯-奧克斯利法案》和《紐約證券交易所規則》,包括任命大多數獨立董事進入我們的董事會,並建立一個薪酬委員會和一個提名和公司治理委員會,每個委員會都完全由獨立董事組成,但須符合允許的條件。「逐步引入」句號。
主要執行辦公室和互聯網地址
我們的主要執行辦公室位於德克薩斯州休斯敦,郵編:77056,聖費利佩大街5555,Suite1200,電話號碼是(713)230-8864.我們的網站位於Www.landbridgeco.com。我們期望在以電子方式向美國證券交易委員會提交或向美國證券交易委員會提供這些報告和其他信息後,在合理可行的情況下儘快通過我們的網站免費提供我們向美國證券交易委員會提交或提供給美國證券交易委員會的定期報告和其他信息。我們網站或任何其他網站上的信息或可通過其他方式訪問的信息不包含在此作爲參考,也不構成本招股說明書的一部分。
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供品
出售股東可能發行的A類股 |
59,058,271股A股。 |
在此登記的所有A類股發行完成後緊接發行的A類股 |
76,483,271股A類股。 |
投票權 |
每一股A類股賦予其持有人對所有事項的一票投票權,這些事項一般由股東投票表決。每一股B類股賦予其持有人對所有事項的一票投票權,這些事項一般由股東投票表決。除適用法律或我們的經營協議另有要求外,我們A股和B股的持有者在提交給我們的股東投票或批准的所有事項上作爲一個類別一起投票。請參閱「股份說明」和「我們的經營協議」。 |
根據股東協議,只要朗橋控股及其聯營公司實益持有我們至少40%的已發行普通股,朗橋控股就有權指定超過大多數的董事會成員,而只要它及其聯營公司實益擁有少於40%但至少10%的已發行普通股,朗橋控股就有權指定較少的董事指定權。 |
此外,根據我們的經營協議,只要朗橋控股實益擁有我們至少40%的已發行普通股,朗橋控股就批准某些業務事項、產生債務和交易擁有某些同意權。 |
因此,只要朗橋控股實益擁有我們至少40%的已發行普通股,我們的公衆股東就無權提名我們董事會的多數成員或批准某些交易。見「某些關係和關聯方交易-股東協議」和「我們的經營協議-特拉華州法律的反收購效力和我們的經營協議-同意權」。 |
收益的使用 |
我們不會收到出售股東出售A類股所得的任何款項。 |
股利政策 |
我們打算向我們的A類股支付股息,金額由董事會不時決定。2024年11月5日,我們的董事會宣佈我們的A類股每股派息0.10美元,於2024年12月19日支付給截至2024年12月5日登記在冊的股東。未來任何關於宣佈和支付股息的決定,如果有的話,將由我們的董事會酌情決定,並將取決於當時的現有條件,包括我們的財務狀況和結果 |
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經營、合同限制、資本要求、業務前景以及我們董事會可能認爲相關的其他因素。此外,我們支付股息的能力可能會受到我們未來可能達成的任何協議的限制。請參閱「股利政策」。 |
贖回權 |
根據OpCo LLC協議,在若干限制的規限下,每名OpCo單位持有人及其任何獲准受讓人(吾等除外)有權根據贖回權利促使OpCo收購其全部或部分OpCo單位(連同註銷相應數目的B類股),以在OpCo的選擇下(I)贖回A類股,贖回比率爲每贖回一個OpCo單位兌換一股A類股,但須受適用的換算率調整所規限,或(Ii)購買金額相等於該等A類股的現金選擇金額的現金,但須受股權發售條件規限。此外,於行使贖回權後,吾等(而非OpCo)將有權根據認購權直接向贖回OpCo單位持有人收購每個投標的OpCo單位,在吾等的選擇下,(X)一股A類股份,但須受適用的換算率調整或(Y)相當於該等A類股的現金選擇金額的現金(須受股權發售條件規限)。我們只有在OpCo單位持有人首先行使其贖回權,以及OpCo單位持有人可酌情行使其贖回權的情況下,才可行使贖回權。就根據贖回權贖回OpCo單位或根據認購權收購OpCo單位而言,贖回OpCo單位持有人所持有的相應數目的B類股份將會註銷。 |
OpCo LLC協議和我們的運營協議包含有效地將每個OpCo單位與我們的其中一股B類股聯繫起來的條款,因此在沒有轉讓相應數量的OpCo單位的情況下,B類股不能轉讓,反之亦然。 |
有關其他信息,請參閱「某些關係和關聯方交易-OpCo LLC協議」。 |
上市及買賣編號 |
我們的A類股在紐約證券交易所掛牌上市,代碼爲「lb」。 |
風險因素 |
在決定投資我們的A類股之前,您應該仔細閱讀和考慮在「風險因素」標題下列出的信息以及本招股說明書中列出的所有其他信息。 |
上述資料不包括3,600,000股根據本公司長期投資協議(定義見下文)預留供發行的A類A股。
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彙總歷史財務數據
下表顯示了所示各期間的歷史財務數據摘要。以下列出的截至2023年和2022年12月31日及截至12月31日的年度的歷史綜合財務摘要數據來自於本招股說明書中其他部分包括的OpCo(我們的前身)的經審計綜合財務報表。下面列出的截至2024年9月30日和截至2024年9月、2024年和2023年9月的九個月的歷史綜合財務數據摘要來自我們的未經審計的綜合財務報表,包括在本招股說明書的其他地方。
摘要歷史綜合財務數據由本招股說明書內的「管理層對財務狀況及經營成果的討論及分析」一節及本招股說明書內的綜合財務報表及相關附註及其他財務資料一併閱讀。歷史結果不一定代表未來任何時期可能取得的結果。
截至9月30日的9個月, |
截至2013年12月31日的一年, | |||||||||||||||
2024 | 2023 | 2023 | 2022 | |||||||||||||
(單位:千) | ||||||||||||||||
運營報表數據: |
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收入: |
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石油和天然氣特許權使用費 |
$ | 11,563 | $ | 14,948 | $ | 20,743 | $ | 18,286 | ||||||||
資源銷售 |
12,237 | 17,534 | 19,830 | 14,869 | ||||||||||||
地役權和其他與地面有關的收入 |
19,242 | 9,526 | 12,644 | 9,744 | ||||||||||||
地面使用費 |
21,031 | 8,590 | 13,216 | 7,672 | ||||||||||||
資源使用費 |
9,382 | 4,810 | 6,432 | 1,206 | ||||||||||||
總收入 |
73,455 | 55,408 | 72,865 | 51,777 | ||||||||||||
資源銷售相關費用 |
1,739 | 3,081 | 3,445 | 3,840 | ||||||||||||
其他運維費用 |
1,837 | 1,956 | 2,740 | 2,648 | ||||||||||||
一般和行政費用(收入) |
98,114 | (20,610 | ) | (12,091 | ) | 41,801 | ||||||||||
折舊、損耗、攤銷和增值 |
6,294 | 6,396 | 8,762 | 6,720 | ||||||||||||
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營業(虧損)收入 |
(34,529 | ) | 64,585 | 70,009 | (3,232 | ) | ||||||||||
利息開支淨額 |
16,235 | 4,173 | 7,016 | 3,108 | ||||||||||||
其他收入 |
(241 | ) | (541 | ) | (549 | ) | (143 | ) | ||||||||
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稅前經營收入(損失) |
(50,523 | ) | 60,953 | 63,542 | (6,197 | ) | ||||||||||
所得稅(福利)費用 |
(890 | ) | 303 | 370 | 164 | |||||||||||
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淨(損失)收入 |
$ | (49,633 | ) | $ | 60,650 | $ | 63,172 | $ | (6,361 | ) | ||||||
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淨(損失)收益率 |
(68 | )% | 109 | % | 87 | % | (12 | )% | ||||||||
現金流量數據表: |
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提供的現金淨額(用於): |
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經營活動 |
$ | 40,708 | $ | 40,559 | $ | 53,042 | $ | 20,500 | ||||||||
投資活動 |
(432,021 | ) | (2,623 | ) | (2,772 | ) | (11,672 | ) | ||||||||
融資活動 |
367,907 | (45,995 | ) | (37,798 | ) | 3,269 | ||||||||||
營業現金流利潤率(1) |
55 | % | 73 | % | 73 | % | 40 | % | ||||||||
補充財務數據: |
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調整後的EBITDA(2) |
$ | 65,330 | $ | 47,579 | $ | 62,804 | $ | 41,212 | ||||||||
調整EBITDA率(2) |
89 | % | 86 | % | 86 | % | 80 | % | ||||||||
自由現金流(2) |
$ | 39,947 | $ | 37,925 | $ | 50,259 | $ | 17,209 | ||||||||
自由現金流按金(2) |
54 | % | 68 | % | 69 | % | 33 | % |
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截至9月30日的9個月, |
截至2013年12月31日的一年, | |||||||||||||||
2024 | 2023 | 2023 | 2022 | |||||||||||||
(單位:千) | ||||||||||||||||
選定資產負債表數據(期末): |
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現金和現金等值物,包括受限制現金 |
$ | 14,417 | $ | 37,823 | $ | 25,351 | ||||||||||
總資產 |
$ | 689,888 | $ | 288,949 | $ | 276,020 | ||||||||||
長期債務 |
$ | 242,430 | $ | 108,343 | $ | 45,917 | ||||||||||
總負債 |
$ | 285,871 | $ | 138,202 | $ | 66,061 | ||||||||||
會員權益 |
$ | — | $ | 150,747 | $ | 209,959 | ||||||||||
股東權益 |
$ | 97,209 | ||||||||||||||
非控制性權益 |
$ | 306,808 |
(1) | 經營現金流利潤率的計算方法是將經營活動提供的淨現金除以總收入。 |
(2) | 調整後EBITDA、調整後EBITDA利潤率、自由現金流和自由現金流利潤率爲 非公認會計原則 財務措施。看到 ”-非GAAP 以下是財務措施”,了解有關這些措施的更多信息 非公認會計原則 衡量標準和與最具可比性的GAAP衡量標準的調節。 |
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非公認會計原則財務措施
調整後的EBITDA和調整後的EBITDA利潤率
我們的管理層和財務報表的外部用戶(如投資者、研究分析師和其他人)使用調整後的EBITDA和調整後的EBITDA利潤率來評估我們資產的長期財務表現,以產生足夠的現金來向股權持有人返還資本或償還債務。我們將調整後的EBITDA定義爲扣除利息、稅項、折舊、攤銷、損耗和增值前的淨收益(虧損);基於股份的薪酬;非經常與交易有關的費用和其他非現金 或 非經常費用。我們將調整後的EBITDA利潤率定義爲調整後的EBITDA除以總收入。
管理層相信,調整後的EBITDA和調整後的EBITDA利潤率是有用的,因爲它們使我們能夠更有效地評估我們的運營業績,並將我們的運營結果與不同時期的運營結果進行比較,而不考慮我們的融資方式或資本結構。我們將上述項目從調整後EBITDA和調整後EBITDA利潤率的淨收益(虧損)中剔除,因爲根據會計方法、資產賬面價值、資本結構和資產收購方法的不同,這些金額可能在我們行業內的不同公司之間存在很大差異。
下表列出了根據公認會計原則確定的淨收入(虧損)與所示期間的調整後EBITDA和調整後EBITDA利潤率的對賬。
截至9月30日的9個月, |
截至2013年12月31日的一年, | |||||||||||||||
2024 | 2023 | 2023 | 2022 | |||||||||||||
(單位:千) | ||||||||||||||||
淨(損失)收入 |
$ | (49,633 | ) | $ | 60,650 | $ | 63,172 | $ | (6,361 | ) | ||||||
調整: |
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折舊、損耗、攤銷和增值 |
6,294 | 6,396 | 8,762 | 6,720 | ||||||||||||
利息開支淨額 |
16,235 | 4,173 | 7,016 | 3,108 | ||||||||||||
所得稅(福利)費用 |
(890 | ) | 303 | 370 | 164 | |||||||||||
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EBITDA |
(27,994 | ) | 71,522 | 79,320 | 3,631 | |||||||||||
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調整: |
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股份制薪酬激勵單位(1) |
82,402 | (24,434 | ) | (17,230 | ) | 36,360 | ||||||||||
基於股份的薪酬-RSU |
1,794 | — | — | — | ||||||||||||
交易相關費用(2) |
1,266 | 497 | 598 | 1,175 | ||||||||||||
非複發性費用(3) |
7,825 | — | — | — | ||||||||||||
其他 |
37 | (6 | ) | 116 | 46 | |||||||||||
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調整後的EBITDA |
$ | 65,330 | $ | 47,579 | $ | 62,804 | $ | 41,212 | ||||||||
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淨(損失)收益率 |
(68 | )% | 109 | % | 87 | % | (12 | )% | ||||||||
調整EBITDA率 |
89 | % | 86 | % | 86 | % | 80 | % |
(1) | 截至2024年9月30日的9個月的基於股份的薪酬激勵單位包括與新開發銀行激勵單位相關的7260萬美元和與Landbridge Holdings發行的激勵單位相關的980萬美元。截至2023年9月30日止九個月的以股份爲基礎的薪酬激勵單位只包括新開發銀行的激勵單位。新開發銀行獎勵單位是責任獎勵,導致在該司之前定期重新計量公允價值。首次公開招股後,與該等獎勵單位有關的任何實際現金開支均由朗橋控股獨家承擔,而非本公司。獎勵單位應占分派乃根據Landbridge Holdings的投資者於達到若干回報門檻後所收到的回報而厘定,既非本公司的責任,亦非向本公司的投資者分派的考慮因素。 |
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(2) | 與交易相關的費用包括不可資本化與已完成或嘗試的收購、債務修訂、實體結構和不可資本化 與IPO相關指控。 |
(3) | 非複發性支出主要包括500萬美元的與IPO相關員工獎金和與合同終止付款有關的260萬美元。 |
自由現金流量和自由現金流量邊際
自由現金流和自由現金流按金被我們的管理層和我們財務報表的外部用戶(如投資者、研究分析師和其他人)用來評估我們償還債務、向股東返還資本和爲潛在收購提供資金的能力,而不需要爲此獲得外部融資來源。我們將自由現金流定義爲經營活動的現金流減去資本支出投資。我們將自由現金流邊際定義爲自由現金流除以總收入。
管理層相信自由現金流和自由現金流按金是有用的,因爲它們可以有效地評估我們的運營和財務業績,以及我們業務的資本密集度,以及我們業務產生現金流的能力,這些現金流可以分配給我們的股東,降低槓桿率或支持收購活動。
下表列出了根據公認會計原則確定的經營活動的現金流量與自由現金流量和自由現金流量利潤率之間的對賬。
截至9月30日的9個月, |
年 截至12月31日, |
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2024 | 2023 | 2023 | 2022 | |||||||||||||
經營活動提供的淨現金 |
$ | 40,708 | $ | 40,559 | $ | 53,042 | $ | 20,500 | ||||||||
投資活動所用現金淨額 |
(432,021 | ) | (2,623 | ) | (2,772 | ) | (11,672 | ) | ||||||||
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經營和投資活動提供(用於)的現金 |
$ | (391,313 | ) | $ | 37,936 | $ | 50,270 | $ | 8,828 | |||||||
調整: |
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收購 |
431,260 | — | — | 8,381 | ||||||||||||
處置資產收益 |
— | (11 | ) | (11 | ) | — | ||||||||||
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自由現金流 |
$ | 39,947 | $ | 37,925 | $ | 50,259 | $ | 17,209 | ||||||||
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營業現金流利潤率(1) |
55 | % | 73 | % | 73 | % | 40 | % | ||||||||
自由現金流按金 |
54 | % | 68 | % | 69 | % | 33 | % |
(1) | 經營現金流利潤率的計算方法是將經營活動提供的淨現金除以總收入。 |
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危險因素
投資我們的A類股涉及很大程度的風險。以下描述的風險以及本招股說明書中的所有其他信息,包括歷史和預計財務報表及其附註,以及在「管理層對財務狀況和經營結果的討論和分析」和「關於前瞻性陳述的告誡」一節中涉及的事項,在決定投資我們的A類股票之前,應仔細考慮。下面描述的風險和不確定性並不是我們面臨的唯一風險和不確定性。我們目前不知道或我們目前認爲無關緊要的其他風險也可能對我們的業務產生重大影響。發生下列任何風險或其他風險及不明朗因素,可能會對本公司的業務、財務狀況、流動資金、經營業績、現金流及前景造成重大不利影響。在這種情況下,我們A類股的交易價格可能會下降,您可能會損失全部或部分投資。
與我們的業務和運營相關的風險
我們的收入在很大程度上依賴於我們土地上或周圍正在進行的石油和天然氣勘探、開發和生產活動。如果E&P公司不在我們的土地上或周圍維持鑽探、完井和生產活動,對我們土地和資源的使用需求,以及我們從我們土地上的石油和天然氣生產及相關活動中獲得的特許權使用費可能會減少,這可能會對我們的運營業績、現金流和財務狀況產生重大不利影響。
我們不是一家勘探和開發公司,我們無法控制我們土地上或周圍的石油和天然氣開發活動。勘探和開發公司在我們的土地上和周圍繼續開發活動的意願和能力取決於他們和我們控制之外的各種因素,包括:
• | 石油和天然氣的需求和供應; |
• | 鑽探、完井和生產活動所需的資本成本,這可能大大超過預期; |
• | 獲得資本的能力和成本; |
• | 當前石油和天然氣價格; |
• | 是否有合適的鑽井設備、生產和運輸基礎設施以及合格的操作人員; |
• | 與其他地區的機會相比,生產商在我們土地上或周圍鑽探的油井的預期投資回報;以及 |
• | 監管動態。 |
我們進入的蘇丹以及我們或我們的客戶出售的沙子、鹹水和其他資源在很大程度上取決於勘探和勘探公司在我們種植面積或周圍的鑽探、完井和生產活動。同樣,我們從中賺取特許權使用費和費用的水橋和沙漠環境提供的服務在很大程度上依賴於這些相同的活動。如果E&P公司不在我們的土地上或周圍維持這樣的活動,他們對使用我們的土地和資源以及Water Bridge和Desert Environmental的服務的需求將會下降,從而對我們的運營業績、現金流和財務狀況產生負面影響。
對使用我們的土地和資源的需求,以及水橋和沙漠環境公司提供的服務,在很大程度上取決於生產商的資本支出,以建設和維護我們耕地及其周圍的基礎設施,並在該地區勘探、開發和生產石油和天然氣。這些支出通常取決於這些生產者的整體財務狀況、資本分配優先順序
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以及獲得資本的能力,以及他們對未來石油和天然氣的需求和價格的看法。石油或天然氣價格的波動(或石油或天然氣價格將下降的看法)影響到這些生產者的資本支出和從事發展活動的意願。這反過來可能導致對我們的土地和資源的使用需求降低,或對Water Bridge和Desert Environmental的服務的需求降低,延遲支付或不支付欠我們的款項,並導致我們的土地費率和利用率降低。此外,我們擁有石油和天然氣特許權使用費權益,根據石油和天然氣價格和產量產生收入。因此,石油和天然氣價格的大幅下降或我們土地上和周圍地區石油和天然氣產量的下降可能會對我們的運營業績、現金流和財務狀況產生不利影響。欲了解更多信息,請參閱“-勘探和生產公司在我們的土地上和周圍從事鑽探、完井和生產活動的意願在很大程度上受到石油和天然氣市場價格的影響,石油和天然氣的市場價格波動很大。石油和天然氣價格大幅或持續下跌可能會對我們的經營業績、現金流和財務狀況產生不利影響。“
在截至2024年9月30日的9個月裏,我們從大約150名客戶那裏獲得了收入,我們的前十名客戶佔我們總收入的80%。雖然我們預計這些收入流將會反覆出現,但我們與佔我們收入很大一部分的重要客戶簽訂的合同,通常不包含購買土地使用或鹹水水量的最低數量承諾條款。因此,我們的收入依賴於這些客戶的持續需求,而這些需求可能會因爲我們無法控制的因素而減少。我們的生產商對他們油井的投資和生產做出所有決定,我們的收入取決於這些生產商做出的決定,以及其他因素。例如,我們無法控制生產商是否選擇開發物業或鑽探和開發活動的成功,這取決於該生產商控制的若干因素。不能保證這些生產商會採取對我們有利的行動或決定,這可能會對我們的經營業績、現金流和財務狀況造成不利影響。
勘探和開採公司在我們的土地上和周圍從事鑽探、完井和生產活動的意願在很大程度上受到石油和天然氣市場價格的影響,石油和天然氣的市場價格波動很大。石油和天然氣價格大幅或持續下跌可能會對我們的運營結果、現金流和財務狀況產生不利影響。
石油和天然氣的市場價格波動很大,價格下跌可能會減少生產商在我們土地上或周圍的鑽探、完井和生產活動,從而減少我們的土地和資源以及Water Bridge和Desert Environmental的服務的使用,以及我們從生產石油和天然氣中獲得的收入。石油和天然氣的市場價格受到美國和全球宏觀經濟和地緣政治等因素的影響,從歷史上看,價格一直受到重大波動的影響,未來可能會繼續變化。石油和天然氣的價格可能會大幅波動,以應對相對較小的供需變化、市場不確定性以及我們和我們土地上或周圍的生產商無法控制的各種額外因素,例如:
• | 總體市場狀況,包括宏觀經濟趨勢、通貨膨脹、利率上升和聯儲局的相關政策; |
• | 國內外石油、天然氣供需情況; |
• | 外國進口和美國出口石油和天然氣的價格和數量; |
• | 市場對未來石油和天然氣價格的預期; |
• | 石油和天然氣鑽探、完井和生產活動及其費用; |
• | 國內和外國石油和天然氣生產國的政治和經濟狀況和事件,包括禁運、包括伊朗和黎巴嫩在內的中東敵對行動加劇和其他持續的軍事行動、俄羅斯-烏克蘭戰爭和對俄羅斯的相關經濟制裁、以色列-哈馬斯衝突、南美洲、中美洲、中國和俄羅斯的狀況以及恐怖主義或破壞行爲; |
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• | 石油輸出國組織(「歐佩克」)、俄羅斯和其他盟國(連同歐佩克、「歐佩克+」)和其他成員國的能力和採取的行動產油國與維持石油價格和生產控制的安排有關的國家; |
• | 疫情、暴發或其他公共衛生事件對全球經濟活動的影響; |
• | 消費品需求水平和加快向低碳經濟; |
• | 天氣狀況,如冬季風暴、地震和洪水以及其他自然災害; |
• | 美國國內石油和天然氣產量水平; |
• | 美國和非美國政府法規和能源政策,包括環境倡議和稅收; |
• | 全球和國內政治和經濟條件的變化,包括任何新關稅的影響; |
• | 訴訟的效果; |
• | 物理、電子和網絡安全漏洞; |
• | 股東激進主義或其活動非政府組織組織限制石油和天然氣的勘探、開發和生產,以最大限度地減少二氧化碳的排放,這是一種溫室氣體; |
• | 石油和天然氣管道及其他運輸基礎設施的距離、成本、可獲得性和能力; |
• | 影響能源消耗、能源儲存和能源供應的技術進步; |
• | 替代燃料的價格和可獲得性; |
• | 節能工作的影響。 |
這些因素有時導致、並可能在未來導致全球經濟活動減少和全球金融市場波動,使人們極難準確預測未來石油和天然氣價格走勢。石油和天然氣價格的持續下跌可能會減少生產者在我們的土地上或周圍經濟上能夠生產的石油和天然氣的數量,這可能會降低這些生產者開發這些土地和使用我們的土地和資源以及水橋和沙漠環境服務的意願。我們土地上或周圍的生產商也可以在石油和天然氣價格較低的時期決定關在家裏或者削減這些土地上油井的產量,或者堵住和放棄邊際油井,否則這些油井可能會在價格上漲的情況下繼續生產更長時間。這些因素的影響規模和持續時間無法預測,但可能導致我們客戶的運營成本增加或我們或我們客戶的收入減少,而石油和天然氣價格的任何大幅下降或石油和天然氣價格長期處於低位可能會對我們的運營業績、現金流和財務狀況產生重大不利影響。
未來的土地收購將使我們面臨與收購和更多土地商業化相關的風險。
我們可能會尋求機會性的未來土地收購,我們預計這些收購將補充或擴大我們目前的土地狀況。我們可能無法找到有吸引力的收購機會,即使我們這樣做了,我們也可能無法以商業上可接受的條款完成收購,或者根本無法完成收購。不能保證我們將能夠找到更多合適的收購機會、談判可接受的條款、以可接受的條款獲得收購融資、或完全或成功收購該等已確定的種植面積。
整合收購面積的進程可能涉及不可預見的困難,並可能需要我們不成比例的管理和財政資源。我們未能實現預期的利益
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我們的收購可能會對我們的運營結果、現金流和財務狀況產生實質性的不利影響。要成功地收購和整合種植面積,需要評估幾個因素,包括:
• | 鹹水的可獲得性和土地是否適合處理採出水; |
• | 接近可採石油和天然氣儲量以及目標區域的鑽探、完井和生產作業水平; |
• | 存在可開採的沙子; |
• | 未來石油和天然氣價格及其適用的差額; |
• | 潛在的環境和其他責任; |
• | 禁止或限制在目標土地上從事某些活動的任何限制性契約或其他用途限制;以及 |
• | 監管、許可和其他類似事項。 |
這些評估的準確性本質上是不確定的。儘管我們將對我們認爲與行業實踐大體一致的主題面積進行審查,但這些評估的準確性本質上是不確定的,可能不會揭示所有現有或潛在的問題,也可能不會充分評估它們的不足和能力。檢查並不總是對這種總面積進行,即使進行了檢查,也不一定能觀察到環境問題。即使發現了問題,賣方也可能不願意或不能針對全部或部分問題提供有效的合同保護。
由於我們未來收入增長的很大一部分預計將來自Water Bridge和Desert Environmental,因此任何對他們的業務、運營或財務狀況產生重大不利影響的發展都可能對我們產生重大不利影響。
水橋公司是我們最重要的客戶之一,預計沙漠環境公司也將是我們最重要的客戶之一,預計從長遠來看,它將在我們的財務業績中發揮越來越重要的作用。因此,我們間接受到水橋和沙漠環境所面臨的業務風險的影響。由於我們很大一部分收入來自Water Bridge和Desert Environmental,因此任何對Water Bridge或Desert Environmental的業務、運營或財務狀況產生重大不利影響的開發都可能對我們產生重大不利影響。
此外,Water Bridge並不擁有其基礎設施所在的所有土地,位於我們土地以外的此類基礎設施的某些部分需要租賃,通行權以及與第三方的地役權。這樣的基礎設施對於向我們土地上的設施輸送產生的水量是必要的,如果Water Bridge失去這些權利或被要求搬遷其基礎設施,我們的業務可能會因產出水供應中斷而受到實質性和不利的影響。如果Water Bridge不能以有利的條款簽訂有利的合同或獲得必要的監管和土地使用批准,它可能無法按預期建設和運營其資產,或者根本不能,這可能會對我們的運營結果、現金流和財務狀況產生負面影響。
我們依賴Water Bridge及其人員來管理和運營我們的業務,這使我們面臨一定的風險。
根據《共享服務協議》(此處的定義),Water Bridge爲我們提供一般和行政服務以及有限的運營和維護服務,另外還有四名專職員工提供現場服務,三名專職員工提供公司服務。我們的成功有賴於這些人員的努力、經驗、勤奮、技能和業務聯繫網絡。
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以及Water Bridge提供的服務質量。不過,這類資源的分配一般由Water Bridge自行決定。我們不能保證Water Bridge將繼續爲我們提供服務,也不能保證我們將繼續接觸Water Bridge的人員。如果共享服務協議終止,且未找到合適的替代者爲我們的土地提供管理和運營服務,我們可能無法執行我們的業務計劃,我們的運營結果、現金流和財務狀況可能會受到重大和不利的影響。
我們依賴少數關鍵個人,他們中的某些人對關聯實體負有責任,他們的缺席或流失可能會對我們的業務產生不利影響,難以吸引和留住經驗豐富的人員可能會降低我們的競爭力和未來成功的前景。
我們業務的成功運營和增長在很大程度上取決於少數人,他們被賦予了我們業務中的許多關鍵責任。這些人在我們的附屬公司(包括Five Point、Water Bridge和Desert Environmental)擔任職務,並將部分時間和資源投入到這些附屬公司的活動中,一方面無法保證未來我們的業務與我們的員工和管理團隊擁有權益的附屬公司之間的時間和資源分配。我們依賴我們的關鍵人員對能源行業的知識、行業內的關係以及在二疊紀盆地運營業務的經驗。失去一名或多名關鍵員工的服務,以及無法招聘或留住更多關鍵人員,可能會對我們的業務產生不利影響。此外,我們目前沒有繼任計劃,也不維持「關鍵人物」壽險保單上,這樣的關鍵人員。
此外,我們的業務及其成功在一定程度上也取決於我們吸引和留住合格人才的能力。由於更廣泛的能源行業內部的競爭,獲得和留住這些人員可能會比估計的更困難或成本高得多。其他公司也許能夠提供更好的薪酬和福利方案來吸引和留住這些人員。如果我們不能留住我們有經驗的人員或吸引更多有經驗的人員,我們在行業中的競爭能力可能會受到損害,這可能會對我們的運營業績、現金流和財務狀況產生實質性的不利影響。
我們的種植面積位於二疊紀盆地,這使得我們很容易受到與地理集中在單一地理區域相關的風險的影響。
我們的種植面積位於德克薩斯州和新墨西哥州的二疊紀盆地,這使得我們很容易受到與該盆地地理集中相關的風險的影響。特別是,我們和我們的客戶可能會受到區域供需因素、該地區石油和天然氣井生產延遲或中斷、設備、設施、人員或服務的可用性、市場限制、政府監管和政治活動、加工或運輸能力限制、自然災害、不利天氣條件、缺水或其他乾旱相關條件或石油和天然氣加工或運輸中斷的影響。此外,波動對供需的影響可能在特拉華州盆地等特定地理石油和天然氣產區變得更加明顯,這可能會導致這些條件更頻繁地發生或放大這些條件的影響。
此外,我們的苦鹹水銷售和砂礦特許權使用費可能會受到與我們的地理集中度相關的風險的不利影響,包括我們土地上或附近的潛在客戶數量有限,與鄰近土地所有者競爭爲這些資源提供有吸引力的開發地點,特別是如果這些土地所有者更接近石油和天然氣開發活動的地點,以及立法或監管舉措限制二疊紀盆地微鹹水和沙子的利用。
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我們的經營歷史有限,投資我們的A類股具有很高的投機性。由於我們的經營歷史有限,可能很難評估我們成功實施業務戰略的能力。
我們的前身OpCo成立於2021年9月,因此,我們的運營歷史和業績記錄有限。因此,我們之前的經營歷史和歷史財務報表可能不是評估我們的業務前景或我們A類股未來價值的可靠基礎,可能會使我們難以評估我們的盈利運營能力。我們未來的業績將取決於「總結-公司概述」中討論的一些因素和趨勢,以及這一「風險因素」部分中其他部分討論的風險,以及我們執行業務模式的能力。我們的商業模式可能不會成功,如果不成功,我們可能無法及時成功地進行修改。
由於我們的經營歷史有限,我們的商業模式、我們的種植面積對我們客戶的吸引力以及任何其他未來資產的表現都尚未得到證實。因此,可能很難評估我們迄今的業務和運營結果,以及評估我們的未來前景。
此外,我們可能會遇到業績依賴於新收購資產的公司遇到的風險和困難,例如未能整合或實現此類資產的預期收益。由於上述原因,與經營歷史較長的公司相比,我們在實現能夠從運營中產生現金流的穩定收入基礎方面可能不那麼成功。此外,與那些經營歷史較長的公司相比,我們在識別和應對業務開展中的風險和危險方面的能力可能較差。
我們可能會在實現和管理未來增長方面遇到困難。
未來的增長可能會給我們的資源帶來壓力,可能會對我們的運營結果、現金流和財務狀況產生負面影響。我們的增長能力將取決於許多因素,包括:
• | 我們的客戶對我們土地上或周圍的基礎設施的投資; |
• | 這種苦鹹水的使用量和相關價格; |
• | 在我們的土地上和附近進行鑽探作業的結果; |
• | 法律或環境法規施加的未來和現有限制; |
• | 石油和天然氣價格; |
• | 我們有能力開發現有和未來的項目,包括沙礦和太陽能項目; |
• | 我們識別和獲得更多種植面積的能力; |
• | 我們繼續留住和吸引技術人才的能力; |
• | 我們維持客戶或與客戶建立新關係的能力;以及 |
• | 在我們尋求未來收購的情況下,我們獲得資金的機會和成本。 |
我們也可能無法進行有吸引力的收購,這可能會抑制我們的增長能力,或者我們可能會遇到將任何收購面積商業化的困難。可能很難確定有吸引力的收購機會,即使發現了此類機會,我們現有和/或未來的債務協議也包含或可能包含對我們進行某些交易的能力的限制,這可能會限制我們未來的增長。
我們可能不會成功地在我們的土地上尋求額外的商業機會非碳氫化合物以能源生產等用戶爲主。
我們的戰略之一是擴大不從事碳氫化合物能源開發的客戶對我們土地的使用。我們可能無法正確識別此類商業機會,或者可能
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未能吸引行業參與者在我們的土地上開發項目。例如,我們是租賃開發協議的一方,根據該協議,交易對手擁有在我們的土地上開發數據中心和相關設施的選擇權;然而,我們不能保證交易對手將租賃該場地,也不能保證該交易對手將成功開發數據中心或任何發電設施。
我們計劃發展的許多行業發展迅速,競爭激烈,因此很難評估這些項目的未來前景。此外,我們對可能對我們土地上或其他地方的此類項目的發展產生不利影響的新興趨勢的洞察有限,這些項目的開發商如果成爲現實,將遇到快速變化行業中的成長型公司和項目開發商經常遇到的風險和困難,包括不可預測和不穩定的收入、增加的費用、不確定的監管環境、新的訴訟以及相應的結果和商業條件的變化。這項商業策略的可行性,以及這些項目發展商對土地和資源用途的需求,將會受到很多我們無法控制的因素影響,可能不會成功。
我們的客戶在我們的土地上建設新的基礎設施,受到監管、建設、供應鏈和其他設施和其他基礎設施的開發和運營中常見的風險的影響。
我們打算通過來自SuA或其他合同的收入來增長我們的業務,根據這些合同,我們的客戶將在我們的土地上開發基礎設施。這些基礎設施項目涉及許多監管、環境、政治和法律方面的不確定性,包括環保團體、當地團體和其他倡導者的政治反對。這種反對可以採取多種形式,包括拖延或拒絕所需的政府許可、有組織的抗議、試圖阻止或破壞我們客戶的運營、干預與我們客戶的許可努力或以其他方式涉及他們的資產相關的監管或行政程序,或者旨在阻止、擾亂或拖延我們客戶的資產或業務運營的訴訟或其他行動。我們不能保證這樣的基礎設施會得到發展,也不能保證我們的客戶會按計劃或以經濟的成本完成這些項目,我們可能無法實現這些項目的預期好處。
我們的客戶在建造這種基礎設施的過程中也可能遇到技術困難,導致容量減少或使用壽命縮短。此外,我們的客戶可能會進行擴展項目,以獲取預期的未來增長,但這些增長並未實現或無法獲得新客戶。因此,我們的客戶在我們的種植面積上開發的新設施和基礎設施可能無法吸引足夠的需求來實現他們的預期投資回報,這可能對我們的運營業績、現金流和財務狀況產生重大不利影響。
此外,破壞行爲或生態恐怖主義可能對人員、財產或環境造成重大損害或傷害,或導致作業長期中斷。此外,政府當局在發放許可證的時間和範圍方面擁有相當大的自由裁量權,公衆可以參與許可證發放過程,包括通過干預法院。公衆的負面看法可能會導致我們的客戶開展業務所需的許可證被扣留、推遲或因限制客戶開展業務的盈利能力的要求而加重負擔。任何此類事件如果延遲或以其他方式中斷我們客戶的運營所產生的收入,或導致他們進行保險不覆蓋的重大支出,可能會對他們在使用現有基礎設施方面向我們支付的款項以及我們土地上基礎設施的未來發展產生不利影響。
與水力壓裂替代技術相關的技術進步可能會減少對我們的微鹹水銷售以及Water Bridge在我們土地上的產出水運輸和處理業務的需求。
大規模開發回收用於完井活動或其他活動的產出水的技術,可能會對輸送到我們土地和在我們土地上處理的產出水量產生不利影響,這將
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可能對我們的經營業績、現金流和財務狀況產生重大不利影響。一些勘探和開發公司正在專注於開發和利用非水壓裂技術,包括使用丙烷、二氧化碳或氮氣代替水的技術。如果二疊紀盆地的生產商在開發油井時開始將壓裂技術轉向無水壓裂,我們的苦鹹水銷售可能會受到實質性的負面影響。
鹹水供應不足可能會對我們的收入產生實質性的不利影響。
我們的重要收入來源之一是銷售用於石油和天然氣鑽井、完井作業的苦鹹水。我們能否滿足目前和未來對苦鹹水的需求,取決於我們的種植面積是否有足夠的苦鹹水供應。此外,對微鹹水的使用和開發微鹹水井的監管限制、缺乏可用的水權、乾旱、過度使用水源、保護受威脅物種或棲息地或其他因素可能會限制微鹹水的供應。不能保證我們能夠生產足夠的苦鹹水來完全滿足未來客戶的需求。
如果我們無法生產足夠的苦鹹水供應,我們的運營結果、現金流和財務狀況可能會受到以下方面的不利影響:
• | 我們出售的苦鹹水的數量減少,收入減少; |
• | 經營成本增加;以及 |
• | 與修建管道以連接替代微鹹水供應來源、新建水井以取代不再使用或因其他原因不足以滿足客戶需求的水井以及水庫和其他設施以節約或回收水有關的資本支出增加。 |
我們可能能夠也可能無法及時收回因缺水而增加的運營和資本成本,或者根本無法收回。
我們已探明的未開發儲量最終可能不是由我們的礦產和特許權使用費權益的運營商開發或生產的,或者可能需要比預期更長的時間才能開發。
截至2023年12月31日,在我們估計的2913 Mboe總探明儲量中,有1,495 Mboe,即51.3%,是已探明的已開發儲量。我們剩餘的總估計已探明儲量被歸類爲PUD,可能不會最終由我們的礦產和特許權使用費權益的運營商開發或生產。將PUD轉化爲產量需要大量的資本支出,以及此類運營商成功的鑽探和開發。我們的獨立石油工程師馮·貢滕(Von Gonten)的儲量報告中包含的儲量數據假設,這些運營商需要投入大量資本支出來開發此類PUD。參見「商業-石油、天然氣和天然氣數據-PUD」。我們不能確定開發這些PUD的估計成本是準確的,我們的運營商將根據任何公開宣佈的時間表開發我們的礦產和特許權使用費權益所涉及的物業,或者該等開發的結果將如估計的那樣。我們PUD的開發可能需要比預期更長的時間,原因包括各種因素,包括意外的鑽井條件、地層中的壓力或不規則情況、運輸設施距離較近或能力不足、設備故障或事故以及在提供鑽機、設備、人員和服務以及遵守政府要求方面的短缺或延誤,並可能要求運營商支付比預期更高的資本支出。我們PUD開發的延遲、鑽探和開發PUD成本的增加或大宗商品價格的下降或持續波動將減少我們估計的未開發儲量未來的淨現金流,並可能導致一些項目對我們的礦產和特許權使用費權益的運營商來說變得不經濟。
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砂礦作業面臨的經營風險往往超出礦山經營者的控制範圍。這些風險可能會對產量水平和成本產生不利影響,這可能會對我們種植面積的砂岩生產產生不利影響。
我們不在我們的土地上經營砂礦,但我們進行此類作業的客戶通常會面臨採礦業,特別是採砂業遇到的風險。這些風險包括:
• | 交通、天然氣或電力的價格和可獲得性的變化; |
• | 意想不到的地面、等級或水條件; |
• | 異常或意想不到的地質構造或壓力; |
• | 井壁坍塌或地表崩塌; |
• | 惡劣或危險的天氣條件,以及氣候變化的任何影響; |
• | 環境危害和工業事故; |
• | 適用法律法規的變更(或其解釋); |
• | 無法維持必要的許可證或採礦權或水權; |
• | 對爆破作業的限制; |
• | 無法獲得必要的採礦或生產設備或更換部件; |
• | 火災、爆炸或者工業事故或者其他事故; |
• | 技術困難或關鍵設備故障; |
• | 勞動爭議; |
• | 物資遲交;以及 |
• | 爲應對環境監管行動,工廠關閉。 |
這些風險中的任何一項都可能導致對我們土地上現有和未來的採礦財產或生產設施造成損害、人身傷害、環境破壞、採礦或加工的延誤、損失或可能的法律責任。我們土地上任何採礦物業或生產設施的任何長時間停工或停工,都可能對我們的經營業績、現金流和財務狀況產生重大不利影響。
此外,運輸和相關的物流成本是石油和天然氣作業所需的砂子總運輸成本的重要組成部分。因此,將砂子運輸到井場的成本是我們客戶購買決定的關鍵因素。附加技術的發展盆地內離鑽探活動區域更近的砂礦可能會減少對我們種植面積生產的沙子的需求。例如,一些公司已經宣佈了開發或收購的計劃,目前正在開發或擴大,或最近在特拉華州盆地收購或完成了可能更接近正在進行的開發活動的砂礦項目。我們土地對沙子需求的任何這種減少都可能對我們的運營業績、現金流和財務狀況產生重大影響。
我們客戶供應鏈的中斷可能會對我們的業務和運營產生負面影響,並減少我們的收入。
我們客戶供應鏈中的任何重大中斷,例如鑽探和完成油井和天然氣井、在我們的土地上建造採出水管道和以其他方式建設基礎設施以及從我們的土地上開採資源所需的資源的重大中斷,例如由於在我們客戶的分銷範圍內運輸貨物的第三方供應商或公共承運人的服務中斷造成的中斷
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通過各種渠道,貿易限制,如增加關稅或配額、禁運或海關限制、社會或勞工動亂、自然災害、流行病或流行病或政治爭端和軍事衝突,可能會對我們的業務和我們的盈利能力產生負面影響。如果我們的客戶供應鏈中斷,他們在正常業務過程中所依賴的勞動力和材料可能無法以合理的價格獲得,甚至根本無法獲得。
任何此類供應中斷都可能對我們土地上或周圍的活動水平產生不利影響,或顯著推遲我們土地上的建設和開發,這可能會對我們的運營業績、現金流和財務狀況產生重大不利影響。
由於天氣、自然災害、恐怖主義或其他類似原因,我們土地上或周圍的運營中斷可能會影響我們的運營結果、現金流和財務狀況。
自然災害(如地震、龍捲風、火災或洪水)或恐怖主義行爲可能會損壞或摧毀我們的客戶在我們土地上或周圍的基礎設施,或導致我們土地上或周圍的業務中斷。
此外,我們的土地位於二疊紀盆地,可能受到地震和不利天氣條件的不利影響。在大雨或龍捲風等極端天氣條件下,或在地震或野火等其他破壞性事件之後,我們或我們的客戶可能無法訪問我們的土地,我們客戶的基礎設施可能會受損。此類中斷可能會對我們的運營結果、現金流和財務狀況產生實質性的不利影響。
全球事件,如新冠肺炎如果疫情爆發,可能會對我們或我們客戶的業務產生類似的影響,影響到我們或我們客戶的土地上或周圍的服務區、我們客戶所需用品的可用性、我們或我們客戶所服務的客戶或運營我們或我們客戶業務的員工。
任何此類對基礎設施的破壞或損壞或運營中斷都可能對我們的運營結果、現金流和財務狀況產生重大不利影響。
我們或我們的客戶可能無法獲得和續簽運營所需的許可證,這可能會對我們的運營業績、現金流和財務狀況產生重大不利影響。
我們或我們的客戶開展業務的能力受到各種政府當局的各種必要許可的限制,這些許可可能會限制此類業務,包括與石油和天然氣鑽探、完井和生產活動、產出水和其他危險材料或廢物或油田廢物的處置或運輸、建築、雨水、用水、空氣排放、採礦和其他可能與我們英畝上的業務相關的活動。公衆通常有權對許可證申請發表意見,並以其他方式參與許可證發放過程,包括通過法院干預。因此,開展我們或我們客戶運營所需的許可證可能不會被髮放、維護或續簽,可能不會及時發放或續簽,或者可能涉及限制我們或我們客戶經濟運營能力的要求。由於無法獲得或續期必要的許可證或類似的批准,我們或我們的客戶開展業務的能力受到限制,可能會對我們的運營業績、現金流和財務狀況產生重大不利影響。
我們客戶的財務狀況惡化可能會對我們的業務產生不利影響,而一個或多個重要客戶終止在我們土地上或周圍的活動可能會對我們的運營業績、現金流和財務狀況產生重大不利影響。
在截至2024年9月30日的9個月中,西方石油、EOG Resources、康菲石油和Water Bridge的收入分別佔我們總收入的10%以上
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合計佔我們總收入的61%。截至2024年9月30日,水橋、EOG Resources、康菲石油、阿帕奇公司和西方石油分別約佔應收賬款的13%、11%、10%、10%和15%,合計約佔未償還應收賬款的59%。沒有其他客戶佔我們總收入或未付應收賬款的10%以上。
我們預計在可預見的未來將繼續依賴主要客戶來支持我們的收入,儘管西方石油、EOG Resources、康菲石油和Water Bridge中的每一家都根據長期合同在我們的土地上運營,但在某些情況下,這些客戶中的每一家都有權自行決定減少或停止在我們的土地上的運營,因爲我們與這些客戶的合同一般不包含關於購買土地使用或鹹水水量的最低承諾條款。有關我們與西方石油公司、EOG資源公司、康菲石油公司和沃特布里奇公司簽訂的協議的更多信息,請參閱「商業-客戶;材料合同和營銷」。這些客戶在我們土地上的任何業務所產生的收入損失都可能對我們的業務業績、現金流和財務狀況產生不利影響。在石油和天然氣市場疲軟的時期,我們的客戶更有可能遇到財務困難,包括由於石油和天然氣價格下降而產生的現金流減少,以及無法獲得與債務或股權融資相關的優惠條款,這可能會導致我們的客戶在我們的土地上或周圍的活動減少。此外,客戶決定在我們的土地上或周圍發起或維持活動,很大程度上取決於我們的地面面積相對於該客戶運營的性質和位置的位置,以及該客戶對我們土地和資源的使用需求。我們的客戶僅限於在特拉華州盆地我們的種植面積及其周圍運營的實體。
我們不能向您保證我們的任何客戶將繼續與我們做生意。如果這些客戶不在我們的土地上或周圍維持他們的活動,他們對使用我們的土地和資源的需求將會減少。主要客戶的收入損失、到期後未能續簽合同或主要客戶的需求持續下降可能導致收入的大幅損失,並可能對我們的運營業績、現金流和財務狀況產生重大不利影響。
我們可能在支付特許權使用費和費用方面遇到延遲,無法更換不向我們支付所需款項的客戶或生產商,並且我們可能無法終止與宣佈破產的違約客戶的協議。
我們可能會在收到客戶或生產商的特許權使用費、費用和其他付款方面遇到延遲。如果生產商未能支付特許權使用費,我們通常有權終止租賃協議,收回財產,並根據協議履行付款義務。如果我們收回任何礦產權益,我們就會尋找替代生產商。然而,我們可能找不到替代的生產商,如果找到了,我們可能無法在合理的時間內以優惠條件簽訂新的租約。此外,對於根據《美國法典》(《破產法》)第11章提起訴訟的客戶或生產商,我們強制執行或終止任何違約(包括不付款)協議的權利可能會大大延遲或以其他方式受到損害。一般來說,在根據《破產法》進行的訴訟中,破產的客戶或生產商將有相當長的時間來決定是否最終拒絕或接受我們的協議,這可能會阻止執行新協議或將現有協議轉讓給另一家客戶或生產商。如果客戶或生產商拒絕協議,我們收回欠款的能力將大大延遲,我們最終收回的可能只是欠款的一小部分,或者什麼都沒有。此外,如果我們能夠與新的客戶或生產商達成新的協議,替代的客戶或生產商可能無法以與其取代的客戶或生產商相同的價格在我們的土地上或周圍實現相同的活動水平。
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總體經濟、商業或行業狀況的下降以及通貨膨脹可能會對我們的經營業績、現金流和財務狀況產生重大不利影響。
對全球經濟狀況、全球健康威脅、供應鏈中斷、需求增加、與充分就業的美國勞動力相關的勞動力短缺、地緣政治問題、通脹、信貸可獲得性和成本以及美國金融市場等因素的擔憂,加劇了經濟的不確定性。儘管美國的通貨膨脹率多年來一直處於相對較低的水平,但從2021年下半年開始,通貨膨脹率大幅上升,從2022年下半年開始普遍下降。截至2023年12月31日的年度平均通脹率爲3.4%。儘管我們在大部分長期客戶合約中加入了通脹自動扶梯,但某些合約中有關通脹自動扶梯的條款是有上限的,這可能會限制任何一次加價的金額,而且該等加價的開始日期及適用調整的時間和計算方法也可能有所不同。因此,通貨膨脹率可能會超過這些規定提供的收入調整。我們的客戶還可能面臨供應鏈限制和成本結構的通脹壓力,這可能會影響我們從他們那裏獲得的收入。我們的客戶還可能面臨設備、原材料、用品、商品、勞動力和服務的短缺,這可能會阻止他們在我們的土地上或周圍執行他們的發展計劃。這些供應鏈限制和通脹壓力可能會繼續對我們客戶的運營成本產生不利影響,如果他們無法管理他們的供應鏈,這可能會影響他們以及時和具有成本效益的方式採購材料和設備的能力,這可能會對我們的客戶在我們的土地上或周圍運營所收到的收入產生重大和不利的影響。
此外,與俄羅斯-烏克蘭戰爭以及以色列-哈馬斯衝突有關的敵對行動加劇,以及包括伊朗在內的中東緊張局勢加劇,以及美國或其他國家發生或威脅發動恐怖襲擊,都可能對全球經濟造成不利影響。這些因素和其他因素,如企業和消費者信心下降,可能會導致經濟放緩和經濟衰退。最近對全球經濟增長的擔憂對全球金融市場和大宗商品價格產生了重大不利影響。如果美國或國外的經濟環境惡化,全球對石油和天然氣產品的需求可能會減少,這可能會影響我們土地上或周圍的運營,影響我們客戶繼續運營的能力,並最終對我們的運營業績、現金流和財務狀況產生不利影響。
我們可能會受到人身傷害和財產損失、災難性事件以及與客戶運營造成的污染相關的索賠,這些可能會對我們的運營業績、現金流和財務狀況產生實質性和不利的影響。
我們的客戶將面臨與其業務有關的所有危險和經營風險,包括石油和天然氣鑽探、完井和生產活動、採砂、苦鹹水的生產和分配、水處理、廢物處理、建造和運營非危險的油田回收和固體廢物設施、加油站、電池和/或太陽能設施,以及可能在我們的土地上進行的任何其他操作。這些危險可能包括火災、爆炸、井噴、地震事件、地面凹陷、原油、天然氣、天然氣和採出水的失控流動、管道或管道故障、異常壓力地層、套管坍塌和環境危害,如原油和天然氣泄漏、天然氣泄漏和有毒氣體破裂或排放、向環境中釋放有害物質,以及工人的健康和安全問題。任何此類事件的發生都可能導致我們的客戶因受傷或生命損失、財產、自然資源和設備的嚴重損壞或破壞、污染或其他環境破壞而遭受重大損失,清理責任、監管調查和處罰、暫停運營和恢復運營所需的維修。
此外,在我們的種植面積上發生的訴訟可能會導致我們被指定爲訴訟的被告,這些訴訟主張潛在的大筆索賠,包括辯護、賠償和懲罰性損害賠償索賠。我們通常要求我們的客戶賠償他們在我們的土地上經營所產生的責任,我們
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維持我們認爲是慣例和合理的保險,以保護我們的業務免受這些潛在損失,但這種賠償和保險可能不足以支付我們的責任,並且我們沒有針對所有風險進行全面保護或投保。
除某些例外情況外,我們的客戶承擔責任,包括控制和清除他們在我們的種植面積上的業務可能產生的所有其他污染或污染,例如Desert Environmental的油田回收、固體廢物和垃圾填埋業務。在這種情況下,如果我們嚴重疏忽或故意行爲,或者作爲土地所有者,根據法律對污染施加嚴格的、連帶的和共同的責任,我們可能會承擔責任。清理,例如CERCLA(如這裏定義的)。我們的客戶一般同意就其運營造成的污染以及相關的關閉和補救義務、油井、水庫、地質構造、地下地層或水資源的損壞或損失,或石油、天然氣、礦物或水的損失向我們進行賠償和抗辯,但有時此類賠償和抗辯會受到重大疏忽或故意不當行爲索賠的例外,如果適用客戶陷入財務困境,我們可能無法根據這些賠償收取賠償金。我們的客戶一般也會對其員工的人身傷害或死亡,或其財產的損壞或損失承擔責任,只要他們的員工因我們的種植面積的操作而受傷或他們的財產受損,但有時此類賠償和抗辯會受到因我們的嚴重疏忽或故意不當行爲而導致的索賠的例外,如果適用的客戶處於財務困境中,我們可能無法根據這些賠償收取賠償。然而,我們可能無法成功地執行這種合同風險分配,或者可能招致超出這種風險分配範圍的不可預見的責任。
任何此類事件的發生都可能導致我們客戶的運營中斷或對我們或我們的客戶造成重大損失,這可能會對我們的運營業績、現金流和財務狀況產生重大不利影響。
我們的保險覆蓋範圍可能不能完全彌補我們的損失,而且我們未來可能會遇到與保險相關的成本增加和缺乏保險的情況。
雖然我們將保險範圍維持在我們認爲合理和審慎的水平,但我們不能保證我們目前的保險水平足以彌補我們已經發生或未來可能發生的任何損失,無論是由於免賠額、承保範圍挑戰或其他限制。此外,我們將來可能無法按我們認爲在商業上合理的費率或其他條款維持足夠的保險。此外,保險將不承保可能發生的多種類型的中斷或事件,也不承保與我們的業務相關的所有風險。此外,任何此類保險的收益可能不會及時支付,如果發生此類事件,可能會不足。重大事件的發生,其後果要麼不在保險範圍內,要麼沒有得到充分的保險,或者重大保險索賠的重大延誤或拒絕支付,都可能對我們的運營業績、現金流和財務狀況產生重大和不利的影響。
針對石油和天然氣行業使用的系統和基礎設施的網絡事件或攻擊可能會對我們的運營產生不利影響,而網絡事件或系統故障可能會導致信息被盜、數據損壞或運營中斷,我們的運營結果、現金流或財務狀況可能會受到不利影響。
我們和我們的客戶,以及整個能源行業,越來越依賴不間斷的信息技術系統和數字技術來運營我們各自的業務。這種依賴延伸到我們和我們客戶的大多數運營,從監控和管理關鍵基礎設施到處理和存儲專有和敏感信息。我們的信息技術系統和網絡,以及我們的客戶、供應商和其他業務合作伙伴的信息技術系統和網絡,都會受到網絡攻擊、停電、計算機和電信故障、自然災害或戰爭行爲或恐怖主義等災難性事件、我們員工的使用錯誤以及其他無法預見或通常無法控制的事件的破壞或中斷。對信息技術系統的損壞可能導致重大成本,並可能導致重大責任、關鍵數據丟失、聲譽損害以及服務或運營中斷。
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與網絡安全風險和網絡事件或攻擊有關的對信息技術系統的威脅繼續增加。包括蓄意攻擊在內的網絡事件在全球範圍內越來越頻繁,與能源相關的資產尤其面臨風險。由於這些資產的危害性,對能源基礎設施的任何此類攻擊都可能導致廣泛的服務中斷和維護公衆信任的挑戰。美國政府已發佈公開警告,明確表示能源資產可能成爲網絡安全威脅的目標。我們的技術和系統、網絡以及我們的客戶、附屬公司、供應商和其他業務合作伙伴的技術和系統、網絡可能成爲網絡攻擊或信息安全漏洞的目標,這些攻擊或信息安全漏洞可能導致未經授權訪問、發佈、收集、監控、腐敗、濫用或破壞專有、個人和其他信息,或其他業務運營中斷。任何此類事件都可能導致重大責任、關鍵數據丟失、聲譽損害以及我們的服務或運營中斷。
雖然我們已經實施並維持了商業上合理的安全措施和保障措施,但這些安全措施和保障措施可能不足以防止攻擊。攻擊者越來越多地使用人工智能和加密繞過等技術進步,這可能會逃避我們的努力。此外,我們的一些網絡和系統由第三方服務提供商管理,不在我們的直接控制之下。我們經常與第三方進行交易,其中一些人的電子系統或網絡可能不那麼複雜,可能更容易受到網絡攻擊。我們對這些第三方的依賴意味着,他們系統中的任何漏洞都可能傳播到我們自己的系統中,增加我們的風險敞口,儘管我們的內部控制。
此外,某些網絡事件,如監控、勒索軟件、基於深度假冒的社會工程攻擊和憑據填充,可能會在一段時間內保持不被檢測到,並且網絡事件和攻擊不斷演變和不可預測。隨着網絡事件和攻擊的不斷髮展,我們可能需要花費更多的資源來繼續修改或加強我們的保護措施,或者調查和補救網絡安全事件的任何漏洞。雖然我們利用各種程序和控制措施來降低發生網絡事件的風險,但不能保證我們的業務、財務、系統和資產不會在網絡事件中受到損害。任何未能有效檢測或響應網絡安全事件的行爲都可能導致重大責任,破壞股東和利益相關者的信任,並對業務連續性造成負面影響。此外,我們受制於不斷變化的監管格局,包括州、聯邦和國際數據隱私法,這些法律要求嚴格的網絡安全標準。遵守各種數據隱私和網絡安全法規可能會帶來巨大的成本,任何被認爲或實際不遵守的行爲都可能導致監管處罰、訴訟和聲譽損害。
儲量估計取決於許多可能最終被證明是不準確的假設。這些儲量估計或基本假設中的任何重大不準確,都可能對我們的儲量數量和現值產生重大影響。
估計石油和天然氣儲量的過程很複雜,因爲不可能以準確的方式衡量石油、天然氣或天然氣的地下儲量,需要對現有的技術數據、估計和許多假設進行主觀解釋,包括與經濟因素有關的假設,如未來石油、天然氣和天然氣的價格、產量水平、最終採收率以及運營和開發成本。這些解讀、主觀估計或假設中的任何重大不準確都可能對我們的儲備估計數量和現值產生重大影響,而這些數據可能最終被證明是不正確的。
我們對截至2023年12月31日、2023年和2022年12月31日的儲量和相關估值的估計是由我們的獨立石油工程師Von Gonten準備的。馮·貢滕利用我們提供並由其收集的信息,對其儲量報告涵蓋的期間內我們的所有財產進行了詳細審查。隨着時間的推移,馮·貢滕可能會考慮到實際鑽探、測試和生產的結果以及價格的變化,對儲量估計進行實質性修改。在估計我們的儲量時,我們的儲量工程師做出了一些可能被證明是不正確的假設,包括關於未來石油、天然氣和NGL的假設
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價格、生產水平以及運營和開發成本。我們很大一部分儲量估計是在沒有受益於漫長的生產歷史的情況下做出的,這比基於漫長的生產歷史的估計更不可靠。這些假設與實際數字之間的任何重大差異都可能大大影響我們對儲量的估計、可歸因於任何特定資產組的石油和天然氣的經濟可採數量、基於開採風險的儲量分類以及我們石油和天然氣儲量未來從石油和天然氣開發中產生的特許權使用費。如上所述,隨着時間的推移,我們的儲量估計所依據的假設發生了許多變化,往往導致最終開採的石油、天然氣和天然氣的實際數量與我們的儲量估計不同。
你不應該假設來自已探明儲量的未來淨現金流的現值就是我們估計的石油和天然氣儲量的當前市場價值。根據美國證券交易委員會和財務會計準則委員會的要求,馮·貢滕根據我們已探明儲量的估計貼現未來現金流量淨額12個月平均石油和天然氣指數價格,計算爲正月初一上一歷年的收盤價,以及在估價之日生效的成本,使價格和成本在物業的整個生命週期內保持不變。未來實際價格和成本可能與現值估計中使用的價格和成本大不相同,而使用當時的價格和成本估計的未來淨現值可能比當前估計的要少得多。此外,根據不時生效的利率和與我們或一般石油和天然氣行業相關的風險,計算貼現未來現金流量時使用的10%貼現率可能不是最合適的貼現率。
本報告所載未經審核備考簡明綜合財務報表及任何其他備考數據均基於若干初步估計及假設,而本公司的實際營運結果、現金流及財務狀況可能與本公司的實際經營業績、現金流及財務狀況存在重大差異。
本文所載未經審核備考簡明綜合財務報表及任何其他備考數據僅作說明之用,乃根據現有資料及吾等認爲合理的若干假設及估計編制,並不一定顯示假若備考事項於指定日期完成,本公司的實際財務狀況或經營業績將會如何。此外,我們在預計事件發生後的實際結果和財務狀況可能與本文中的預計信息大不相同。本文所包括的未經審核備考簡明綜合財務報表乃由吾等根據公認會計原則與會計收購方共同編制,並反映根據擬收購資產及擬承擔負債的公允價值初步估計而作出的調整。
如果我們不有效地管理我們擴大的業務,我們收購後的未來業績將受到影響。
自我們成立以來,我們的資產基礎規模大幅增加。我們未來的成功將在一定程度上取決於我們管理這一擴大的業務的能力,這給管理帶來了巨大的挑戰,包括與管理和監測新業務以及相關增加的成本和複雜性有關的挑戰。由於我們的業務規模顯著擴大,我們還可能面臨政府當局更嚴格的審查。我們不能保證我們會成功,也不能保證我們會實現預期的運營效率、成本節約、收入增加或目前預期的收購帶來的其他好處。
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與環境和其他法規相關的風險
我們的運營結果、現金流和財務狀況受到行業主要趨勢的影響,如脫碳,並可能受到我們無法控制的未來發展的不利影響。
我們從客戶使用我們的土地和資源獲得的收入的價值在很大程度上取決於石油和天然氣鑽探和生產活動的水平。我們的收入可能會受到脫碳努力等趨勢推動的變化的負面影響。這種變化可能與需求的能源類型或來源有關,例如轉向可再生能源發電(例如風能和太陽能),以及監管、投資者、客戶和消費者政策和偏好的持續變化。雖然我們打算追求這些額外的機會,但我們最終可能不會成功。全球能源的演變受到我們無法控制的因素的影響,例如技術發展的速度和相關的成本考慮、世界各地不同市場的經濟增長水平以及與氣候變化有關的政策的採取。此外,對碳排放徵稅的可能性可能會影響對原油和天然氣的需求,以及我們土地上或周圍生產商的運營成本。
旨在應對地震活動、超壓或下沉的立法或監管舉措可能會限制鑽井、完井和生產活動,以及Water Bridge處理從客戶那裏收集的採出水的能力,這可能會對我們的運營業績、現金流和財務狀況產生重大不利影響。
Water Bridge根據監督此類產出水處理活動的政府當局頒發的許可證,處理與其客戶的鑽探和生產作業相關的大量產出水。雖然這些許可證是根據現行法律和法規發放的,但這些法律要求可能會發生變化,這可能會導致施加更嚴格的運營限制或新的監測和報告要求,原因除其他外,公衆或政府當局對此類產出水處理活動的擔憂。例如,人們越來越擔心,將產出水注入某些產出水處理設施會在某些地區引發地震活動,包括我們大部分種植面積所在的德克薩斯州。這導致了操作員主導新墨西哥州石油保護部(NMOCD)和德克薩斯州鐵路委員會(TRRC)分別在新墨西哥州或德克薩斯州的某些地區制定了應對計劃,其中可能包括TRRC暫停或拒絕發放採油廢水處理許可證,限制可處理的材料數量,或要求生產商停止在某些採油廢水處理設施中處置。
州和聯邦監管機構最近側重於與水力壓裂相關的活動,特別是將產出水注入產出水處理設施的地下活動與地震活動增加之間的可能聯繫,各級監管機構正在繼續研究石油和天然氣活動與誘發地震活動之間的可能聯繫。美國地質調查局最近確定,德克薩斯州和新墨西哥州是誘發地震活動危害最嚴重的六個州中的兩個。此外,一些州還提起了一些訴訟,指控污水處理作業引發了地震事件,對附近的財產造成了破壞,或者違反了州和聯邦政府關於廢物處理的規定。爲了回應這些擔憂,一些州的監管機構正在尋求施加額外的要求,包括關於採出水處理許可證的要求,以評估地震活動與使用此類採出水處理設施之間的關係。例如,TRRC之前發佈了一項規則,規定允許或重新許可關於產出水處理設施,除其他外,需要提交關於在產出水處理設施地點特定半徑內發生的地震事件的信息,以及與有關水處理區域有關的日誌、地質橫截面和結構圖。TRRC還暫停了採出水處理許可證,並在某些地震響應區(SRAS)的邊界內引入了注入量削減。我們種植面積的某些部分目前位於
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在SRAS內,不能保證我們的更多面積在未來不會包括在SRA中。另外,2021年11月,NMOCD實施了要求生產商在特定地震活動範圍內採取各種行動的協議,包括要求在產出水處理設施的指定半徑內發生特定震級的地震事件時限制注入速度。此外,2024年7月11日,NMOCD宣佈行政取消75個待決的UIC二類油井許可證申請10英里縣線SRA,因爲該地區內的地震活動可能會增加。採用和實施任何新的法律或法規,限制我們的客戶處理從E&P公司收集的產出水的能力,通過限制水量、處理率、產出水處理設施的位置或其他方式,或要求我們的客戶關閉生產水處理設施,可能會限制我們客戶在受影響地區的現有運營和未來的開發活動,包括Water Bridge,並減少他們對我們土地和資源使用的需求,這可能對我們的運營結果、現金流和財務狀況產生重大不利影響。
此外,與水力壓裂相關的活動與下沉和擴張有關。將產出水注入產出水設施,以及從地下開採水、石油、天然氣或礦產資源,都可能導致地下變化(例如,但不限於體積損失和壓力耗盡)引起的地面下沉和抬升。這與不同的地緣關係和環境危害,如當地生態系統的改變和對當地社區的影響,包括地震活動增加和天坑的形成。在應對下沉和擴張風險方面可能通過和實施的任何新法律或法規都可能導致對我們客戶運營的限制,這可能會對我們的運營業績、現金流和財務狀況產生重大不利影響。
我們依賴苦鹹水銷售和產出水處理活動產生的收入,使我們面臨潛在的監管風險。
處理採出水有獨特的風險,與將採出水處理成不生產根據公衆或政府當局的關切,產出水處理設施的地質構造可能會發生變化。通過產出水處理設施處理產出水仍然存在很大的不確定性,對這些設施的監管可能會以一種無法預測的方式對我們的客戶產生實質性的不利影響。這些問題包括與放射性材料的處理、處理、儲存、處置、運輸、釋放和使用有關的責任,這些材料可能是產出水中的放射性物質,以及與改裝或退役產出水處理設施有關的最終和可能面臨的技術和財務風險的不確定性。聯邦或州監管機構可以出於安全原因要求關閉產出水處理設施,或者拒絕允許在計劃外或計劃內停電後重新啓動任何設施。新的或修訂的安全和監管要求可能會產生額外的操作和維護成本以及資本支出。此外,老化的設備可能需要更多的資本支出,以保持生產水基礎設施高效運行或符合適用的法律和法規。這類設備還可能需要定期升級和改進,以保持合規。儘管採出水處理的安全記錄總體上很好,但也發生了一些事故和其他不可預見的問題。重大事故的後果可能是嚴重的,包括生命損失和財產損失。重大環境或災難性事件所產生的任何責任都可能對我們的客戶造成實質性的不利影響,並限制他們在我們土地上的業務。
瀕危物種法案(「歐空局」)和候鳥條約法案(「MBTA」)管理我們和我們客戶的運營,未來可能會施加額外的限制,這些限制可能會對我們擴大一些現有業務的能力產生不利影響,或限制我們客戶在我們的土地上開發新基礎設施的能力。
歐空局和類似的州法律限制可能影響瀕危或受威脅物種或其棲息地的活動。根據MBTA,對候鳥也提供了類似的保護。根據歐空局或類似的州法律列出的物種,或受MBTA保護的物種,生活在我們和我們的
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如果我們和我們的客戶都在運營,我們和我們的客戶進行或擴大運營和建設設施的能力可能會受到限制,或者我們和我們的客戶都可能被迫產生額外的材料成本。此外,食品安全監督委員會可對未列入歐空局瀕危或受威脅物種名單作出決定。例如,2022年11月,FWS指定了歐空局下屬的兩個不同的小草原雞種群群,它們生活在新墨西哥州東南部和得克薩斯州西部的某些地區;然而,美國參議院投票廢除了這一決定,儘管聯合決議被總裁·拜登否決,列入名單的決定目前正受到訴訟。2024年5月,FWS將沙丘鼠尾草蜥蜴列入歐空局名下,該蜥蜴也生活在新墨西哥州東南部和德克薩斯州西部的某些地區,這一列入決定也可能受到訴訟。指定以前未被確認的瀕危或受威脅物種可能會間接導致我們或我們的客戶產生額外成本,導致我們或我們客戶的運營受到經營限制或禁令的約束,並限制受影響地區未來的開發活動,這些發展可能對我們的運營業績、現金流和財務狀況產生重大不利影響。
我們的客戶以及我們土地上或周圍的生產商的運營結果可能會受到向低碳經濟轉型的努力的實質性影響。
對氣候變化風險的擔憂增加了全球、區域、國家、州和地方監管機構對包括二氧化碳排放在內的溫室氣體排放以及向低碳未來過渡的關注。一些國家和州已經或正在考慮採用監管框架來減少溫室氣體排放。除其他外,這些監管措施可能包括採用總量管制和交易制度、徵收碳稅、提高能效標準、禁止銷售帶有內燃機的新汽車,以及對電池驅動的汽車和/或風能、太陽能或其他形式的替代能源進行激勵或強制執行。其中包括IRA等法律,該法案爲可再生能源倡議撥出了大量聯邦資金,並修訂了《清潔空氣法》(Clean Air Act,簡稱CAA),從2024年開始,對需要向EPA報告溫室氣體排放的來源的甲烷排放徵收首次費用,從2024年開始,每噸甲烷900美元,到2025年增加到1200美元,2026年及以後每年設置爲1500美元。然而,我們無法預測即將上任的特朗普政府是否、如何或何時可能採取行動,修改或廢除甲烷排放收費規則或環保局最終敲定的與溫室氣體排放相關的規則。此外,國會可能會採取行動廢除或修訂《愛爾蘭共和軍》,包括在甲烷排放收費方面,這一時間或結果同樣無法預測。遵守與氣候變化相關的法律、法規和義務的變化可能會導致我們的客戶在我們的土地或周圍地區的合規成本增加,或爲此類產品消耗石油和天然氣的成本增加,從而減少對我們土地和資源的使用需求,這可能會降低我們的盈利能力。法律法規的變化還可能導致與獲得石油和天然氣作業所需許可證相關的延誤或成本增加。此外,我們土地上或周圍的客戶可能會招致聲譽風險,這些風險與不斷變化的客戶或社區對我們客戶的看法或他們的客戶對向低碳經濟轉型的貢獻或減損有關。這些觀念的改變可能會降低對石油和天然氣產品的需求,導致價格更低、收入更低,因爲消費者會避開碳密集型行業,還可能迫使銀行和投資經理轉移投資,減少放貸。
另外,銀行和其他金融機構,包括投資者,可能基於與氣候變化相關的擔憂,決定採取限制或禁止在我們或我們的土地上或周圍投資或以其他方式爲我們的客戶提供資金的政策,這可能會影響我們或我們的客戶在我們的土地上或周圍獲得潛在增長項目的機會和資金成本。此外,基於與氣候變化相關的擔憂,保險公司可能決定提高費率和/或停止爲我們或我們的客戶在我們的土地上或周圍投保。
應對氣候變化和向低碳經濟轉型的方法,包括政府監管、公司政策和消費者行爲,都在不斷演變。例如,美國證券交易委員會通過了一項關於氣候變化的新規則,該規則已被擱置,等待各種法律挑戰,如果最終生效,將履行重大的信息披露義務,並將要求我們更新和發展我們的控制措施,以適應這些新的義務。然而,即將上任的特朗普政府可能會尋求廢除美國證券交易委員會規則,儘管廢除的時間表--如果有的話--會受到一些不確定性的影響。雖然我們打算
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在尋求與向低碳經濟轉型相關的機會時,不能保證我們的努力一定會成功。目前,我們無法預測這些方法將如何發展,或以其他方式合理或可靠地估計它們對我們或我們客戶的財務狀況、運營結果和競爭能力的影響。然而,對石油和天然氣行業的任何長期重大不利影響都可能影響我們的運營業績、現金流和財務狀況。
氣候變化可能導致天氣波動增加,並可能影響用水量和相關收入。
氣候多變性問題正在全國和全世界受到越來越多的關注。氣候科學家的共識是,未來與氣候變異性相關的天氣波動將會惡化。許多氣候變化預測給能源行業帶來了幾個潛在的挑戰,包括與石油和天然氣生產相關的微鹹水銷售和水服務,例如:
• | 增加乾旱的頻率和持續時間; |
• | 與溫度變化相關的挑戰; |
• | 潛在的水質退化; |
• | 可用水供應的減少和用水模式的變化; |
• | 風暴和其他天氣事件的頻率和嚴重程度增加; |
• | 服務中斷增加;或 |
• | 增加成本,以減少與自然事件日益頻繁和嚴重相關的風險,包括提高客戶供水服務所需基礎設施和系統的復原力和可靠性。 |
由於與氣候變化相關的天氣波動的不確定性,我們無法預測其對我們或我們客戶的業務、財務狀況、運營結果、現金流和流動性的潛在影響。反過來,這可能導致對我們土地和資源的使用需求、費率和利用率降低,以及延遲支付或不支付欠我們的款項。此外,已經頒佈了旨在減少或限制溫室氣體排放的法律和法規,並要求進行額外的報告和監測,鑑於政府議程和優先事項的變化,這些法規可能會變得更加普遍或更加嚴格,儘管這些變化的確切性質和時間尚不確定。不能保證我們或我們的客戶能夠及時或根本收回與氣候變化和相關法律法規的影響相關的任何支出或成本。
投資者對環境、社會和治理(「ESG」)問題的日益關注可能會影響我們或我們客戶的業務。
所有行業的公司都面臨着與其ESG實踐相關的利益相關者越來越多的審查。不適應或不遵守投資者或利益相關者的期望和標準、不斷髮展的預期和標準,或者被認爲沒有對日益關注的ESG問題做出適當反應的公司,無論是否有法律要求這樣做,都可能遭受聲譽損害,此類公司的業務、財務狀況和/或股價可能受到實質性和不利的影響。越來越多的人關注氣候變化,社會對公司應對氣候變化的期望越來越高,消費者可能會使用替代能源的商品,這可能會導致成本增加,對客戶的產品和服務的需求減少,對土地和資源使用的需求降低,利潤減少,政府調查增加和針對我們的私人訴訟。
此外,在越來越大的程度上,許多機構投資者已經宣佈計劃將他們的投資組合轉變爲淨零未來二三十年的溫室氣體排放,作爲應對氣候變化承諾的一部分。這已經並將繼續導致一些(也許是越來越多的)
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金融機構將不符合最低投資標準的公司股票從其投資組合中剔除。此外,銀行和其他資本提供者正在重新評估他們對我們或我們客戶所在行業的資本配置,或者對他們的參與設定條件。這種撤資或限制未來對涉及開發、生產、運輸和使用化石燃料的公司的投資的趨勢,可能會對我們的股票價格產生不利影響,並限制我們通過債務和股票市場獲得資本,爲我們的增長提供資金。
此外,儘管我們可能會不時創建和發佈有關ESG事項的自願披露,但這些自願披露中的許多陳述都是基於可能不正確或可能隨着時間的推移而變化的假設預期和假設。這種期望和假設必然是不確定的,可能容易出錯或受到誤解,因爲所涉及的時間很長,而且缺乏確定、衡量和報告許多ESG事項的既定單一辦法。此外,有關ESG事項的自願披露,以及法律規定的任何ESG披露,可能會導致關於此類披露的充分性或有效性的私人訴訟或政府調查或執法行動。此外,未能實施ESG戰略或未能實現ESG目標或承諾,包括任何溫室氣體減排或中和目標或承諾的失敗或看法(無論是否有效),可能會導致私人訴訟,損害我們的聲譽,導致我們的投資者或消費者對我們失去信心,或以其他方式對我們的運營產生負面影響。
此外,向投資者提供公司治理和相關事項代理諮詢服務的組織已經制定了評級程序,以評估公司對ESG事項的處理方式。目前,此類評分或評級沒有統一的標準,但可持續發展評估的重要性正越來越廣泛地被投資者和股東接受。這樣的評級被一些投資者用來爲他們的投資和投票決定提供信息。此外,某些投資者使用這些分數來比較公司與同行的表現,如果一家公司被認爲落後,這些投資者可能會與公司接觸,要求改善ESG披露或業績。不利的ESG評級可能會導致投資者對我們或我們的客戶的負面情緒增加,並將投資轉移到其他行業,這可能會對我們的股價和/或我們獲得資金的機會和成本產生負面影響。
此外,與ESG事項有關的公開聲明,如減排目標、其他環境目標或涉及某些社會問題的其他承諾,正日益受到公衆和政府當局的更嚴格審查,這些審查涉及潛在的「綠色清洗」風險(即誤導性信息或誇大潛在ESG好處的虛假聲明)。一定的非政府組織組織和其他私人行爲者也根據各種證券和消費者保護法提起訴訟,聲稱某些ESG-聲明,目標或標準是誤導性的、虛假的或具有欺騙性的。因此,我們可能面臨來自私人當事人和政府當局與我們的ESG努力相關的更多訴訟風險。此外,任何針對我們或我們行業內其他人的洗白指控都可能導致進一步的負面情緒和投資轉移。此外,當我們試圖遵守和駕馭進一步的法規時,我們可能會面臨不斷增加的成本ESG相關聚焦和審視。
由於環境、健康和安全要求,我們的客戶在我們土地上的運營可能面臨重大延誤、成本和責任,我們可能會因根據這些要求而導致的此類運營造成的污染而承擔嚴格的以及連帶責任,即使我們無法控制此類運營。任何此類延誤、成本和負債的發生可能會對我們客戶的業務、運營或財務狀況產生重大不利影響,這可能會減少對我們土地及其資源的使用需求,以及我們從土地和資源中獲得的特許權使用費和其他付款,從而對我們的運營業績、現金流和財務狀況產生重大影響。
在我們的土地上,環保活動、採砂、污水處理、油田回收、固體廢物設施、垃圾填埋場和其他作業都受到許多環境、健康和安全要求的約束。我們的客戶可能會因適用於他們在我們土地上的活動的聯邦、州和地方環境、健康和安全要求而招致重大延誤、成本和責任。這些法律法規可能要求
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我們的客戶有權獲得和維護各種許可證、批准書、證書或其他授權,以管理與鑽探、生產和運輸石油及天然氣或其他作業相關的空氣排放、廢水排放、廢物處置或其他環境影響;監管鑽井、壓裂和完井過程中用水的來源和處置;限制或禁止在某些地區以及荒野、溼地、邊境、地震多發區和其他保護區內的某些土地上的鑽探活動;要求採取補救行動,防止或減輕以前作業造成的污染,例如封堵廢棄的水井或關閉土坑;和/或對泄漏、污染或未能遵守監管申報的行爲追究重大責任。此外,這些法律法規可能會限制石油或天然氣的生產速度。這些法律法規復雜,變化頻繁,隨着時間的推移,往往會變得越來越嚴格。不遵守這些法律和法規可能會導致對行政、民事和刑事處罰的評估,徵收清理和現場修復費用和留置權,暫停或吊銷必要的許可證、執照和授權,要求安裝額外的污染控制,在某些情況下,發佈限制或要求停止某些業務的命令或禁令,這可能對我們客戶在我們土地上的運營產生重大和不利影響。此外,任何不遵守規定的行爲都可能導致對我們客戶的業務和行業內其他人的負面情緒。
此外,根據某些施加嚴格責任以及連帶責任的環境法,我們可能被要求對我們擁有的受污染物業進行補救,即使客戶的操作導致了污染。此外,我們的客戶可能有責任對目前或以前運營的設施和第三方設施的污染進行補救,這些設施和設施接收了我們客戶的運營產生的廢物,無論此類污染是由其他人的行爲造成的,還是由於採取這些行動時符合所有適用環境法的行爲的後果造成的。此外,對包括自然資源在內的人員或財產的損害索賠可能是由於我們客戶的運營對環境、健康和安全造成的影響。雖然我們尋求通過賠償、習慣保險單和補救活動來減輕我們可能承擔的任何潛在責任,但在每種情況下,根據我們的合同要求,以及依賴國家資助的計劃(如TRRC的孤兒井計劃)來承保封堵和放棄責任,如果我們的任何客戶宣佈破產或如果我們的保險單沒有完全覆蓋此類責任,我們可能不會得到充分的保護。此外,雖然我們通常有權檢查我們的財產及其運營,但我們可能不知道所有環境、健康和安全事項。此外,隨着時間的推移,公衆對環境保護的興趣往往會增加。更廣泛和更嚴格的環境立法和法規適用於採掘業,如我們的客戶從事的行業,這一趨勢可能會繼續下去,導致經營成本增加,從而影響盈利能力。只要頒佈法律或採取其他政府行動限制鑽探或實施更嚴格和更昂貴的運營、廢物處理、處置和清理要求,我們客戶的運營可能面臨成本增加和潛在的運營削減,從而可能間接對我們的業務、現金流、前景、財務狀況或運營結果產生重大不利影響。
與我們的財務狀況有關的風險
我們可能無法產生足夠的現金來償還我們所有的債務和財務承諾,未來的任何債務都可能對我們的財務狀況產生不利影響。
截至2024年9月30日,我們有281.9億美元的未償債務,截至2024年12月30日,我們有385.0億美元的未償債務。我們對債務和財務承諾進行定期付款或再融資的能力取決於我們的財務狀況和經營業績,這些情況會受到當時的經濟和競爭狀況的影響,包括財務、商業和其他我們無法控制的因素,而且每年可能會有很大差異。因此,我們在某些時期能夠管理的債務金額在其他時期可能不適合我們,我們可能無法產生足夠的現金流來支付債務的本金、保費(如果有的話)和利息。任何不足都可能影響我們的業務。
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如果我們的現金流和資本資源不足以爲債務和其他債務提供資金,我們可能會被迫減少或推遲資本支出、出售資產、尋求籌集額外資本或對債務進行再融資或重組。我們對債務進行重組或再融資的能力,將取決於資本市場的狀況和我們當時的財務狀況。任何債務的再融資都可能是以不利的條件進行的,包括利率更高,並可能要求我們遵守更具限制性的契約。我們現有或未來債務工具的條款可能會限制我們採用其中一些替代方案。我們不能向您保證任何再融資或重組是可能的,包括土地在內的任何資產都可以出售,或者如果出售,出售的時機和出售所得的收益將對我們有利,或者可以優惠的條款獲得額外的融資(如果有的話)。此外,任何未能償還我們的債務,包括及時支付利息或本金,都可能導致我們的信用評級降低,如果有的話,這可能會損害我們產生額外債務的能力。此外,如果我們未能遵守管理我們債務的任何協議的契約或其他條款,我們的貸款人將有權加快債務的到期日,並取消擔保該債務的抵押品(如果有的話)。
我們的債務可能會對您產生重要後果,並對我們的業務產生重大影響,包括:
• | 使我們更容易受到一般經濟、工業和競爭條件不利變化的影響,並限制我們應對這些變化的能力; |
• | 要求我們將運營現金流的很大一部分用於償還債務,從而減少了我們現金流用於一般公司和其他目的的可用資金,包括股息支付; |
• | 限制我們利用商機和進行戰略性土地收購; |
• | 使我們更難履行財政義務,包括償還我們的債務以及合同和商業承諾; |
• | 與負債較少的競爭對手相比,我們處於不利地位; |
• | 要遵守規管這類債務的文件所載的契約,我們可能需要符合或維持某些財務測試,這可能會影響我們在規劃和回應行業轉變時的靈活性,例如能夠在收購機會出現時把握機會;以及 |
• | 增加我們的借貸成本或以其他方式限制我們爲執行業務戰略而借入額外資金的能力。 |
最後,管理我們未償債務的協議限制了我們產生額外債務的能力,但這些協議並不禁止我們這樣做。因此,我們未來可能會招致更多債務,這將加劇上述風險。
我們受到利率風險的影響,這可能會導致我們的償債義務大幅增加。截至2024年9月30日,我們的信貸安排下未償還借款的加權平均利率爲8.45%(循環信貸借款)和8.49%(定期貸款借款)。
我們的信貸安排下的借款以浮動利率計息,使我們面臨利率風險。截至2024年9月30日,我們的信貸安排下未償還借款的加權平均利率爲8.45%(循環信貸借款)和8.49%(定期貸款借款)。如果利率上升,即使借款金額保持不變,我們在可變利率債務上的償債義務也會增加,我們將被要求將更多的現金流用於償還債務。
2022年3月,聯儲局開始加息,並一直持續到2023年,以努力遏制通脹。儘管聯儲局在9月、11月和11月下調了基準利率
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2024年12月,目前預計2025年將進一步削減,如果利率保持在較高水平,如果借款、信貸安排和債務發行的利率與之前的水平相比上升,我們可能會繼續經歷融資成本的進一步上升。利率的變化,無論是積極的還是消極的,也可能影響投資我們A類股的投資者的收益率要求,而利率環境的提高可能會對我們的A類股的價格產生不利影響,或者我們爲收購或其他目的而發行股票或產生債務的能力。
適用稅法和法規的變化、額外所得稅負債的風險敞口、我們有效稅率的變化或因審查我們的收入或其他納稅申報單而產生的納稅評估,可能會對我們的運營業績、現金流和財務狀況產生不利影響,包括我們償還債務的能力。
我們受制於各種複雜和不斷變化的美國聯邦、州和地方稅。美國聯邦、州和地方稅收法律、政策、法規、規則、法規或條例可能被解釋、更改、修改或適用於我們,在每一種情況下都可能具有追溯力,並可能對我們的運營結果、現金流和財務狀況產生不利影響,包括我們償還債務的能力。已經提出了幾項稅收提案,如果成爲法律,這些提案將對美國稅法做出重大改變。這些建議包括提高適用於個人和公司的美國所得稅稅率,以及取消對化石燃料的稅收補貼。國會可能會考慮,並可能包括這些與可能進行的稅收改革有關的部分或全部提案。目前尚不清楚這些或類似的變化是否會生效,如果通過,任何此類變化將在多長時間內生效。由於這些提案和美國聯邦所得稅法的其他類似變化而導致的任何立法的通過,都可能對我們的運營業績、現金流和財務狀況產生不利影響。
我們的有效稅率或納稅負債的變化也可能對我們的經營業績、現金流和財務狀況產生不利影響。我們未來的實際稅率可能會出現波動或受到多個因素的不利影響,包括:
• | 我們的遞延稅項資產和負債的估值變化; |
• | 預計發放任何稅收估值免稅額的時間和金額; |
• | 擴展到未來在新司法管轄區的活動; |
• | 提供減稅、抵免、免稅、退稅和其他福利,以減少納稅義務;以及 |
• | 基於股份的薪酬的稅收效應。 |
此外,審查我們的收入或其他納稅申報表所產生的不利結果可能會導致更高的稅收敞口、罰款、利息或其他負債,這可能會對我們的運營業績、現金流和財務狀況產生不利影響。
我們受到交易對手信用風險的影響。我們的客戶不付款或不履行義務可能會對我們的運營結果、現金流和財務狀況產生不利影響。
我們承擔因客戶不付款或不履行各自義務而造成損失的風險。雖然我們維持限制此類風險的政策和程序,但我們的信用程序和政策可能不足以完全消除客戶信用風險。如果我們未能充分評估現有或未來客戶的信譽,或他們的信譽意外惡化,導致他們不付款或不履行各自義務的任何增加,以及我們無法收回未償還的應付款或尋找替代客戶,可能會對我們的運營結果、現金流和財務狀況產生不利影響。石油和天然氣價格的下跌可能會對我們客戶的財務狀況產生負面影響,而持續的低價可能會影響他們滿足客戶需求的能力
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對我們的義務。此外,我們的合同對手方可能不履行或遵守我們現有或未來的合同安排。只要我們的一個或多個合同對手方陷入財務困境或啓動破產程序,根據破產法的適用條款,與這些對手方的合同可能會受到重新談判或拒絕的影響。我們的合同對手方由於不能或不願意履行或遵守合同安排而導致的任何重大不付款或不履行,都可能對我們的運營結果、現金流和財務狀況產生不利影響。
如果我們未能遵守我們的信貸安排或未來債務協議中的限制和契約,根據此類協議的條款,可能會發生違約事件,這可能會導致付款速度加快。
根據適用協議的條款,違反我們的信貸安排或任何未來債務協議中的任何限制或契約可能會導致違約,而我們遵守此類限制和契約的能力可能會受到我們無法控制的事件的影響。因此,我們不能向您保證我們將能夠遵守這些限制和公約。違約可能導致債務加速,並宣佈所有已到期和應支付的借款金額,這可能會對我們產生不利影響,並對我們的借款能力產生負面影響。如果出現加速,我們可能無法支付所需的所有款項,也可能無法找到替代融資。即使當時有可供選擇的融資方式,也可能不是以對我們有利或可接受的條款。此外,我們可能無法修改我們的信貸協議或此類管理我們債務的未來協議,或在令人滿意的條款下獲得必要的豁免。
我們在信貸安排下的債務以我們幾乎所有資產和各種擔保的優先擔保權益爲擔保。
根據我們的信貸協議條款借入的金額以我們和我們的子公司目前和之後收購的幾乎所有資產爲抵押。此外,我們在信貸安排下的義務由我們和我們的主要子公司共同和各自擔保。
如上所述,在我們的信貸安排下發生違約的情況下,行政代理可能會強制執行其對我們和/或我們子公司資產的擔保權益(爲了我們信貸安排下的貸款人和其他擔保方的應計利益),以保證我們的信貸安排下的義務,控制我們的資產和業務,迫使我們尋求破產保護,或迫使我們削減或放棄目前的業務計劃。如果發生這種情況,您可能會失去對我們A類股的全部或部分投資。
我們目前沒有關於我們種植面積的石油和天然氣生產的對沖協議,我們將受到石油和天然氣價格下跌的影響。
我們目前沒有套期保值安排,以預先確定從我們的種植面積生產的石油和天然氣的銷售價格。因此,儘管我們可能會意識到石油和天然氣價格的短期上漲帶來的好處,但我們不會受到油價下降或長期低石油和自然價格的保護,這些因素加上我們所有的種植面積僅位於二疊紀盆地,可能會對我們的運營業績、現金流和財務狀況產生實質性的不利影響。任何未來的價格對沖策略和未來的對沖交易將由我們酌情決定。如果我們在未來達成套期保值安排,可能會限制我們實現價格上漲的好處的能力,並可能導致對沖損失。
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與我們的公司結構和我們的A類股相關的風險
作爲一家上市公司的要求,包括遵守交易所法案的報告要求和薩班斯-奧克斯利法案的要求,可能會使我們的資源緊張,增加我們的成本,並分散管理層的注意力,我們可能無法及時或具有成本效益地遵守這些要求。
由於首次公開募股,我們成爲了一家上市公司,因此,我們必須遵守新的法律、法規和要求,薩班斯-奧克斯利法案的某些公司治理條款,美國證券交易委員會的相關法規和紐約證券交易所規則,作爲一傢俬人公司,我們沒有必要遵守這些規定。遵守這些法規、法規和要求將佔用我們董事會和管理層的大量時間,並將顯著增加我們的成本和支出。我們正繼續努力:
• | 建立更全面的合規職能; |
• | 遵守紐約證券交易所頒佈的規則; |
• | 根據聯邦證券法規定的義務,準備和分發定期公開報告; |
• | 準確執行和解釋公認會計准則; |
• | 制定新的內部政策,例如與內幕交易有關的政策;以及 |
• | 在更大程度上讓外部法律顧問和會計師參與並留住他們參與上述活動。 |
我們必須遵守美國證券交易委員會實施薩班斯-奧克斯利法案第302和404節的規則,這兩節要求管理層在我們的季度和年度報告中認證財務和其他信息,並提供關於財務報告內部控制有效性的年度管理報告。雖然我們被要求每季度披露內部控制程序的變更,但我們不需要根據第404節對我們的財務報告內部控制進行第一次年度評估,直到我們被要求向美國證券交易委員會提交第一份年度報告的第二年。此外,我們沒有必要讓我們的獨立註冊會計師事務所證明我們的內部控制的有效性,直到我們不再是適用的聯邦證券法所規定的「新興成長型公司」或「較小的報告公司」之後的第一份年度報告。因此,如果我們不再是一家「較小的報告公司」,我們可能不會被要求讓我們的獨立註冊會計師事務所證明我們的內部控制的有效性,直到我們截至2029年12月31日的財年的年度報告。一旦我們的獨立註冊會計師事務所被要求這樣做,如果它對我們的控制被記錄、設計、操作或審查的水平不滿意,它可能會發布一份不利的報告。遵守這些要求將使我們的資源緊張,增加我們的成本,並分散管理層的注意力,我們可能無法及時或具有成本效益地遵守這些要求。
此外,我們預計,作爲一家受這些規則和法規約束的上市公司,可能會使我們更難和更昂貴地獲得董事和高級人員責任保險,我們可能被要求接受降低的保單限額和承保範圍,或者產生更高的成本才能獲得相同或類似的保險。因此,我們可能更難吸引和留住合格的人士加入我們的董事會或擔任高管。我們不能預測或估計我們可能產生的額外成本的金額或此類成本的時間。
如果我們未來遇到任何重大弱點,或未能在未來發展或維持有效的內部控制制度,我們可能無法準確報告我們的財務狀況或經營業績,這可能會對投資者對我們的信心產生不利影響,從而影響我們的A類股的價值。
有效的內部控制對於我們提供可靠的財務報告、防止欺詐和作爲一家上市公司成功運營是必要的。如果我們不能提供可靠的財務報告或防止欺詐,我們的
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聲譽和經營業績將受到損害。根據薩班斯-奧克斯利法案第404節,我們必須提交一份管理層報告,其中包括從我們向美國證券交易委員會提交第一份年度報告後的第二年開始,我們對財務報告的內部控制的有效性。這項評估將需要包括披露我們管理層在財務報告內部控制方面發現的任何重大弱點。我們將酌情采取措施改進控制流程,通過測試驗證控制是否如文件所述發揮作用,併爲我們的財務報告內部控制實施持續報告和改進流程。如果我們在評估和測試過程中發現我們的財務報告內部控制存在一個或多個重大弱點,我們可能無法得出我們的內部控制有效的結論。
此外,當我們不再是聯邦證券法規定的「新興成長型公司」或「較小的報告公司」時,我們的獨立註冊會計師事務所可能被要求就我們內部控制的有效性發表意見。如果我們無法確認我們對財務報告的內部控制是有效的,或者如果我們的獨立註冊會計師事務所無法對我們的內部控制的有效性發表無保留意見,我們可能會失去投資者對我們財務報告的準確性和完整性的信心,這可能會導致我們的A類股價格下跌。
我們向股東支付股息的能力可能會受到我們控股公司結構、合同限制和監管要求的限制。
我們是一家控股公司,除了我們在OpCo的股權外,將沒有任何實質性資產,我們沒有任何獨立的收入來源。只要OpCo有可用現金,我們打算促使OpCo進行:(I)一般地按比例分配給包括我們在內的所有OpCo單位持有人(「OpCo單位持有人」),至少足以讓我們納稅;(Ii)在某些OpCo單位持有人的選舉中,額外分配的金額通常旨在允許這些OpCo單位持有人就其在OpCo收入中的可分配份額履行各自的所得稅義務(基於某些假設和慣例),這些額外分配可以按比例分配給所有OpCo單位持有人(包括我們)或非專業人士向OpCo單位持有人(我們除外)贖回OpCo單位的比率基準,以及(三)非專業人士按比例分配給我們的金額足以支付我們的上市公司和其他管理費用。此外,作爲OpCo的唯一管理成員,我們打算促使OpCo按比例向包括我們在內的所有單位持有人分配股息,金額足以讓我們根據我們的股息政策爲我們的股東提供股息資金,前提是我們的董事會宣佈了此類股息。OPCO是一個不同的法律實體,可能會受到法律或合同的限制,在某些情況下,可能會限制我們從該公司獲得現金的能力。如果OpCo無法進行分配,我們可能得不到足夠的分配,這可能會對我們的運營業績、現金流、財務狀況和爲任何股息提供資金的能力產生重大不利影響。
雖然我們打算爲我們的A類股分紅,但我們沒有義務這樣做。我們沒有采用正式的書面股息政策,也沒有采取股息政策,每季度就每股A類股支付固定金額的現金,或支付基於自由現金流等任何特定財務指標的成就或可衍生的金額。股息支付不受保證,並在我們董事會的絕對酌情權範圍內。我們的董事會將考慮總體經濟和商業狀況、我們的財務狀況和經營結果、我們來自經營的現金流以及當前和預期的現金需求、我們的資本要求、法律、稅收、監管和合同限制,以及董事會在決定是否派發股息以及派發多少股息時可能認爲相關的其他因素的影響。此外,我們的債務協議可能會限制OpCo的子公司可以向OpCo和OpCo向我們進行的分配的金額,以及可以進行分配的目的。請閱讀「管理層對財務狀況和經營結果的討論和分析--流動性和資本資源--債務工具」,以進一步討論我們的債務協議。因此,即使我們的董事會認爲適當,我們也可能無法支付股息。請參閱「股利政策」、「管理層對財務狀況和經營結果的討論和分析--流動性和資本資源」和「股份說明」。
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如果我們不繼續定期支付我們的A類股現金股息,您可能無法獲得投資回報,除非您以高於您購買它們的價格出售您的A類股。
未來宣佈和支付現金股息的任何決定將由我們的董事會自行決定,並將取決於除其他外的一般和經濟狀況、我們的經營結果和財務狀況、我們的可用現金以及當前和預期的現金需求、資本要求、合同、法律、稅收和監管限制,以及我們董事會可能認爲相關的其他因素。此外,我們支付現金股息的能力受到我們或我們的子公司產生的任何當前或未來未償債務的契約的限制。對我們A類股的任何投資回報可能完全取決於我們A類股在公開市場上的價格升值,而這種情況可能不會繼續發生。
有關這些限制的更多信息,請參閱「股利政策」。不能保證我們將繼續支付紅利。投資者應在不依賴於未來任何股息支付的情況下對我們的A類股進行任何投資。
朗橋控股有能力指導我們大多數普通股的投票,並控制有關我們管理和業務的某些決策,包括某些同意權和只要它及其關聯方實益擁有我們至少40%的已發行普通股就有權指定超過大多數董事會成員,以及只要它及其關聯方實益持有少於40%但至少10%的我們的已發行普通股就有權指定較少的董事。朗橋控股的利益可能與我們其他股東的利益衝突。
截至2024年12月30日,Landbridge Holdings總共擁有53,227,852股B類股票,約佔我們投票權的70.0%。Landbridge Holdings實益擁有我們超過50%的普通股,這意味着Landbridge Holdings能夠控制需要股東批准的事項,包括董事選舉、我們組織文件的更改、收購要約的批准和其他重大公司交易。這種所有權的集中使得我們A股的任何其他持有者或持有者群體不太可能能夠影響我們的管理方式或我們業務的方向。朗橋控股在潛在或實際涉及或影響我們的事項方面的利益,例如未來的收購、融資和其他公司機會以及收購我們的企圖,可能會與我們其他股東的利益衝突。
此外,就完成首次公開招股,吾等與朗橋控股訂立股東協議(定義見本文),規定只要朗橋控股及其若干聯營公司實益擁有吾等至少40%的已發行普通股,朗橋控股即有權委任相當於董事會多數席位的董事人數加一名董事;而只要朗橋控股及其該等聯營公司實益擁有吾等至少30%、20%及10%的已發行普通股,則朗橋控股應有權分別任命至少三名董事、兩名董事及一名董事。只要朗橋控股有權指定一名或多名董事,並通知董事會其有意無故或無故將其先前指定給董事會的任何董事撤職,吾等即須採取一切必要行動促使有關撤職。只要蘭橋控股有權指定至少一名董事進入我們的董事會,它也將有權任命許多董事會觀察員,他們將有權出席一年內的所有董事會會議無投票權,觀察員身份,等於Landbridge Holdings有權任命的董事人數。
此外,根據吾等經修訂及重訂的有限責任公司協議(「經營協議」),只要朗橋控股及其若干聯屬公司實益擁有我們至少40%的已發行普通股,吾等已同意在未經朗橋控股事先同意的情況下,不採取並將採取一切必要行動,使我們的附屬公司不採取下列直接或間接行動(或達成採取該等行動的協議):
• | 增加或縮小董事會、董事會委員會或子公司董事會、委員會的規模; |
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• | 解僱我們的首席執行官或罷免我們的董事會主席和/或聘用或任命他們的繼任者之一; |
• | 同意或達成任何可能導致公司控制權變更的交易,或就控制權變更交易達成最終協議; |
• | 爲借款產生債務(或保證此類債務的留置權)的數額將導致未償債務超過我們在緊接此類債務發生的擬議日期之前的四個季度期間的調整後EBITDA 4.00至1.00; |
• | 授權、設立(通過重新分類、合併、合併或其他方式)或發行任何類型的股權證券(除非依照我們董事會或董事會委員會批准的任何股權薪酬計劃或公司與我們子公司之間的公司內部發行); |
• | 自願選擇清算或解散或啓動破產或破產程序,或就上述任何事項通過計劃,或決定不反對由第三方發起的此類訴訟或程序;以及 |
• | 在一項或一系列交易中出售、轉讓或處置在正常業務過程以外的資產,而該等交易或一系列交易的公平市價超過吾等綜合有形資產淨值(定義見經營協議)的2%,而該等綜合有形資產淨值是於緊接該等交易或該系列交易建議完成日期前最近完成的財政季度或年度(視何者適用而定)厘定的。 |
此外,只要朗橋控股及其某些聯營公司實益擁有我們至少10%的已發行普通股,未經朗橋控股批准,我們及我們的附屬公司不得對我們的經營協議或任何其他管治文件作出任何對朗橋控股有重大不利影響的修訂、修改或豁免。
見「某些關係和關聯方交易--股東協議」。朗橋控股作爲大股東的存在可能會阻止敵意收購,推遲或阻止控制權的變更或管理層的變動,或者限制我們的其他股東批准他們認爲符合我們公司最佳利益的交易的能力。此外,朗橋控股的股權集中可能會對我們A類股票的交易價格產生不利影響,只要投資者認爲擁有一家有大股東的公司的股票是不利的。
此外,Landbridge Holdings可能與我們的稅務立場不同,這可能會影響其是否以及何時支持資產處置以及新債務或現有債務的產生或再融資的決定。此外,任何稅務機關在厘定未來稅務申報倉位、安排未來交易及處理對我們稅務申報倉位的任何挑戰時,可能會考慮朗橋控股的稅務或其他考慮因素,而這些因素可能與我們其他股東的考慮不同。
Landbridge Holdings、Five Point和Water Bridge及其附屬公司在與我們競爭的能力方面並不受限,可能會從原本可能爲我們提供的機會中受益。
吾等的經營協議規定,吾等的高級職員及董事、彼等各自的聯屬公司及Landbridge Holdings、Five Point及Water Bridge,以及彼等的高級職員、董事及聯營公司(各自爲「不受限制人士」)不受擁有資產的限制或不得從事其他業務或活動,包括可能與吾等直接競爭的業務或活動,且吾等放棄在任何可能不時呈現予彼等的任何業務機會中的任何權益或預期,否則將受特拉華州一般公司法(「DGCL」)所指的公司機會或其他類似原則所規限。此外,不受限制的各方可能會與我們競爭投資機會,並可能擁有
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對與我們競爭的實體的興趣。特別是,在受適用法律限制的情況下,吾等的經營協議規定(I)不受限制的人士可進行與吾等競爭的業務,並可投資於吾等可能投資的任何種類的物業,及(Ii)如果任何不受限制的人士獲悉潛在的商業機會、交易或其他事項,則在法律允許的最大範圍內,彼等並無責任將該等要約通知吾等、吾等的股東或吾等的聯屬公司。
我們可以將涉及任何不受限制的各方的任何利益衝突或潛在利益衝突提交衝突委員會解決,該委員會必須完全由獨立董事組成。此外,本公司董事會通過了一項關於批准關聯方交易的書面關聯方交易政策,根據該政策,任何此類交易,包括與不受限制各方的交易,將由我們的審計委員會或此類衝突委員會或根據該政策概述的程序進行審查和批准或批准。
朗橋控股可能會不時意識到某些商業機會(如收購機會),並可能將這些機會引導到他們所投資的其他業務,在這種情況下,我們可能不會意識到或以其他方式有能力追求這些機會。此外,這些企業可能會選擇與我們爭奪這些機會,可能會導致我們無法獲得這些機會,或者導致我們追求這些機會的成本更高。此外,Landbridge Holdings、Five Point和Water Bridge不需要利用位於我們土地上的設施來應對任何現有或未來出現的商業機會,並且可能會與競爭的土地所有者尋求開發機會,或在沒有通知我們或向我們提供該機會的情況下尋求另一種土地位置。放棄我們對任何商機的興趣和預期,可能會在我們與Landbridge Holdings、Five Point和Water Bridge之間造成實際和潛在的利益衝突,並導致如果Landbridge Holdings、Five Point和Water Bridge爲了自身利益而不是爲了我們的利益而追求有吸引力的商機,對我們和我們的股東的待遇不佳。
我們的某些董事和高級管理人員可能對其他實體負有重大責任,並花費大量時間爲其他實體服務,包括可能在尋求收購和商業機會方面與我們競爭的實體,因此在分配時間或追求商業機會方面可能存在利益衝突。
我們的某些董事和官員負責管理我們的業務,他們可能會擔任其他實體的責任職位,包括能源行業的那些實體。這些董事和高級管理人員現有的和潛在的職位可能會產生與他們對我們的責任相沖突的受託責任或其他職責,否則也可能需要投入到我們業務上的注意力和時間。這些董事和管理人員可能會意識到可能適合向我們以及他們所屬或可能與之有關聯的其他實體介紹的商業機會。由於這些現有的和潛在的未來關係,這些董事和高管可能會在向我們展示之前向其他實體展示潛在的商業機會,這可能會導致額外的利益衝突。他們還可能決定某些機會更適合於他們所屬的其他實體,因此,他們可能會選擇不向我們提供這些機會。這些衝突的解決可能不符合我們或您的最佳利益。
如果朗橋控股大幅減少其在美國的所有權權益,可能會對我們產生不利影響。
我們相信,朗橋控股對我們的所有權權益爲其提供了幫助我們取得成功的經濟動機。在到期時鎖定如無轉讓或出售我們證券的限制,Landbridge Holdings將不受任何義務維持其在我們的所有權權益,並可在任何時間選擇出售全部或大部分或以其他方式減少其在我們的所有權權益。如果朗橋控股出售其在我們的全部或大部分所有權權益,它可能沒有多少動力幫助我們取得成功,預計將擔任我們董事會成員的關聯公司(S)可能會辭職。是這樣的
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行動可能會對我們成功實施業務戰略的能力產生不利影響,這可能會對我們的運營結果、現金流和財務狀況產生不利影響。
美國聯邦所得稅對我們A類股股息向持有人的處理將取決於我們的稅收屬性和我們普通股的持有者的納稅基礎,這些不一定是可預測的,可能會隨着時間的推移而變化,並可能導致出售我們A類股的應稅損益或多或少超過預期。
我們就我們的A類股票向股東分配的金額,即我們稱爲「股息」的金額,將構成美國聯邦所得稅的「股息」,根據美國聯邦所得稅原則,從我們當前或累計的收益和利潤中支付。如果分配金額超過我們當前和累積的收益和利潤,則該分配金額將被視爲免稅資本返還至我們A類股票的持有者稅基範圍內,此後作爲出售或交換該等股票的資本收益。
如果持有人出售其持有的A類股,持有人將確認相當於該A類股的變現金額與持有人的納稅基礎之間的差額的收益或虧損。在某種程度上,我們的股息被視爲免稅如上所述的資本返還,此類股息將降低A類股持有人的稅基。因此,該等超額股息將導致持有人在出售A類股或隨後就該等股份派發股息時確認的收益金額相應增加或虧損金額相應減少。此外,對於我們A類股票的美國公司持有人,如果我們A類股票的股息超過我們當前和累計的收益和利潤以及該等股票的持有人的納稅基礎,則該等持有人將無法就該等超額股息產生的收益利用公司股息收入扣除(在其他情況下適用於該持有人)。
我們鼓勵我們A類股的潛在投資者就收到我們A類股股息的稅收後果諮詢他們的稅務顧問,這些股息不被視爲美國聯邦所得稅目的的股息。
美國國稅局(IRS)表格1099-DIV我們的股東從他們的經紀人那裏獲得的股息收入可能會爲了美國聯邦所得稅的目的而多報我們A類股票的股息收入,並且沒有以與美國國稅局表格一致的方式報告股息收入1099-DIV可能導致美國國稅局對股東的美國聯邦所得稅申報單進行審計調整。爲非美國我們A類股票的持有者、經紀人或其他扣繳義務人可能會從支付的股息中超額扣繳稅款,在這種情況下,股東通常必須及時提交美國納稅申報單或適當的退款申請,才能要求退還被超額扣繳的稅款。
我們就A類股支付的股息僅在我們當前和累積的收益和利潤的範圍內,才構成美國聯邦所得稅的「股息」。我們支付的股息超過我們的收入和利潤將不會被視爲美國聯邦所得稅的「股息」;相反,它們將首先被視爲免稅按股東在其A類股票中的納稅基礎返還資本,然後作爲出售或交換該等股票所實現的資本收益。我們可能無法及時確定我們的股息中屬於美國聯邦所得稅目的的「股息」部分。
對於我們A類股票的美國持有者,美國國稅局1099-DIV 可能與我們對構成美國聯邦所得稅「股息」金額的確定不一致,或者股東可能會收到更正的國稅局表格 1099-DIV (and因此,可能需要提交修改後的聯邦、州或地方所得稅申報表)。我們將嘗試及時通知股東可用信息,以協助所得稅申報(例如在我們的網站上發佈正確的信息)。然而,我們向股東提供的信息可能與經紀人在IRS表格上報告的金額不一致 1099-DIV, 國稅局可能不同意任何此類信息,並可能對股東的納稅申報表進行審計調整。
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爲.非美國對於我們A類股票的持有者而言,美國聯邦所得稅的「股息」將按30%的稅率預扣美國聯邦所得稅,除非適用的所得稅條約規定了較低的稅率,或者股息與美國貿易或企業的行爲有效相關。請閱讀《美國聯邦所得稅考慮事項》非美國持有者--分紅。如果我們無法及時確定我們的股息中屬於美國聯邦所得稅用途的「股息」部分,或者股東經紀人或扣繳義務人選擇以與我們爲此目的確定的「股息」金額不一致的方式扣繳股息稅款,股東經紀人或其他扣繳義務人可能會從支付的股息中超額扣繳稅款。在這種情況下,股東通常必須及時提交美國納稅申報單或適當的退款申請,以獲得多繳預扣稅款的退還。
只要我們是一家新興的成長型公司和/或規模較小的報告公司,我們就不會被要求遵守某些報告要求,包括適用於其他上市公司的會計準則和高管薪酬披露要求。
JOBS法案包含了一些條款,其中包括放寬對「新興成長型公司」的某些報告要求,包括與審計標準和薪酬披露有關的某些要求。根據《就業法案》,我們被歸類爲「新興成長型公司」。與其他上市公司不同,只要我們是一家新興成長型公司,可能長達五個完整的財政年度,我們就不會被要求,尤其是:(I)根據《薩班斯-奧克斯利法案》第404(B)節,提供關於管理層對我們財務報告內部控制制度有效性的評估的核數師證明報告;(Ii)遵守PCAOB通過的要求強制性審計公司輪換的任何新要求或核數師報告的補充,其中核數師將被要求提供有關審計和發行人財務報表的額外信息;(Iii)就大型上市公司要求的高管薪酬提供某些披露;或(Iv)就高管薪酬舉行不具約束力的諮詢投票。我們目前正在利用上述豁免。我們還選擇使用延長的過渡期來遵守《就業法案》第102(B)(2)節規定的新的或修訂的會計準則。這次選舉使我們能夠推遲採用新的或修訂的會計準則,這些準則對上市公司和私營公司具有不同的生效日期,直到這些準則適用於私營公司。因此,我們的財務報表可能無法與符合上市公司生效日期的公司進行比較,如果將我們與此類公司進行比較,我們的股東和潛在投資者可能難以分析我們的經營業績。我們將一直是一家新興的成長型公司,直到首次公開募股五週年後的財年最後一天,或者更早的時候,我們在一個財年的收入超過1.235億美元,我們持有的A類股票的市值超過700.0美元。非附屬公司(並已上市至少12個月),或發行超過10億美元的不可兌換三年內的債務。
此外,我們有資格成爲規則第10(F)(1)項所界定的「較小的報告公司」。S-K根據證券法。較小的報告公司可以利用某些減少的披露義務,其中包括在其定期報告中只提供兩年的經審計的財務報表。我們仍將是一家規模較小的報告公司,直到本財年的最後一天:(I)增加我們持有的普通股的市值非附屬公司截至該財年第二財季結束時,我們的年收入爲2.5億美元或更多;或(Ii)在該完成的財年內,我們的年收入爲1億美元或更多,我們持有的普通股的市值爲非附屬公司截至該財年第二財季結束時爲7億美元或更多。在我們利用這種減少的披露義務的程度上,這也可能使我們的財務報表很難或不可能與其他上市公司進行比較。
在某種程度上,如果我們依賴新興成長型公司和/或較小報告公司可獲得的任何豁免,您收到的有關我們的財務狀況、高管薪酬和財務報告內部控制的信息將少於非新興成長型公司或較小報告公司的發行人。此外,我們打算利用延長的過渡期,根據《就業法案》採用新的或修訂的財務會計準則,直到我們不再是新興的增長
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company. Our election to use the transition periods permitted by this election may make it difficult to compare our financial statements to those of non-emerging growth companies and other emerging growth companies that have opted out of the extended transition periods permitted under the JOBS Act and who will comply with new or revised financial accounting standards.
If some investors find our Class A shares to be less attractive as a result, there may be a less active trading market for our Class A shares and our Class A share price may be more volatile.
If securities or industry analysts do not publish research or reports about our business, if they adversely change their recommendations regarding our Class A shares or if our operating results do not meet their expectations, our share price could decline.
The trading market for our Class A shares is influenced by the research and reports that industry or securities analysts publish about us or our business. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our share price or trading volume to decline. Moreover, if one or more of the analysts who cover us downgrade our Class A shares or if our operating results do not meet their expectations, our Class A share price could decline.
The market price of our Class A shares could be adversely affected by sales of substantial amounts of our Class A shares in the public or private markets or the perception in the public markets that these sales may occur, including sales by LandBridge Holdings after the exercise of the Redemption Right.
As of December 30, 2024, we had 23,255,419 Class A shares and 53,227,852 Class B shares outstanding. Future sales by LandBridge Holdings after the exercise of the Redemption Right (as described in the OpCo LLC Agreement) or sales by other large holders of our Class A shares in the public markets, or the perception that such sales might occur, could have a material adverse effect on the price of our Class A shares or could impair our ability to obtain capital through an offering of equity securities. In addition, we have agreed to provide registration rights to LandBridge Holdings. Alternatively, we may be required to undertake a future public or private offering of Class A shares and use the net proceeds from such offering to purchase an equal number of OpCo Units, with the cancellation of a corresponding number of Class B shares, from LandBridge Holdings.
We may sell additional Class A shares in future offerings. Sales of substantial amounts of our Class A shares (including shares issued in connection with an acquisition), or the perception that such sales could occur, may adversely affect prevailing market prices of our Class A shares.
We cannot predict the size of future issuances of our Class A shares or securities convertible into Class A shares or the effect, if any, that future issuances and sales of our Class A shares will have on the market price of our Class A shares. Sales of substantial amounts of our Class A shares (including shares issued in connection with an acquisition), or the perception that such sales could occur, may adversely affect prevailing market prices of our Class A shares.
We are a “controlled company” within the meaning of the NYSE rules and, as a result, qualify for and intend to rely on exemptions from certain corporate governance requirements.
LandBridge Holdings holds a majority of the voting power of our common shares. As a result, we are a controlled company within the meaning of the NYSE rules. Under the NYSE rules, a company of which more than 50% of the voting power for the election of directors is held by an individual, a group or another company is a controlled company and may elect not to comply with certain NYSE corporate governance requirements, including the requirements that:
• | a majority of the board of directors consists of independent directors as defined under the rules of the NYSE; |
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• | the nominating and governance committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and |
• | the compensation committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities. |
These requirements will not apply to us as long as we remain a controlled company. A controlled company does not need its board of directors to have a majority of independent directors or to form independent compensation and nominating and governance committees. We currently utilize all of these exemptions. Accordingly, you may not have the same protections afforded to shareholders of companies that are subject to all of the rules of the NYSE. Please see “Management” for additional information.
Our Operating Agreement, as well as Delaware law, contains provisions that could discourage acquisition bids or merger proposals, which may adversely affect the market price of our Class A shares and deprive our investors of the opportunity to receive a premium for their shares.
Our Operating Agreement authorizes our board of directors to issue preferred shares without shareholder approval in one or more series, designate the number of shares constituting any series, and fix the rights, preferences, privileges and restrictions thereof, including dividend rights, voting rights, rights and terms of redemption, redemption prices and liquidation preferences of such series. If our board of directors elects to issue preferred shares, it could be more difficult for a third party to acquire us.
In addition, certain provisions of our Operating Agreement could make it more difficult for a third party to acquire control of us, even if the change of control would be beneficial to our shareholders. Among other things, such provisions of our Operating Agreement include:
• | providing that after LandBridge Holdings and certain of its affiliates no longer beneficially own or control the voting of more than 40% of our outstanding common shares (the “Trigger Event”), our board of directors will be divided into three classes that are as nearly equal in number as is reasonably possible and each director will be assigned to one of three classes, with each class of directors elected for a three-year term to succeed the directors of the same class whose terms are then expiring; provided that LandBridge Holdings shall have the right to designate the initial class assigned to each director immediately following the occurrence of the Trigger Event; |
• | prohibiting cumulative voting in the election of directors; |
• | providing that after the Trigger Event, the affirmative vote of the holders of not less than 66 2/3% in voting power of all then-outstanding common shares entitled to vote generally in the election of our board of directors, voting together as a single class, will be required to remove any director from office, and such removal may only be for “cause”; |
• | providing that after the Trigger Event, all vacancies, including newly created directorships, may, except as otherwise required by the terms of the Shareholder’s Agreement, law or, if applicable, the rights of holders of a series of preferred shares, only be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum, or by a sole remaining director; |
• | providing that after the Trigger Event, shareholders will not be permitted to call special meetings of shareholders; |
• | providing that after the Trigger Event, our shareholders may not act by written consent and may only act at a duly called annual or special meeting; |
• | establish advance notice procedures with respect to shareholder proposals and nominations of persons for election to our board of directors, other than nominations made by or at the direction of our board of directors or any committee thereof; and |
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• | providing that a majority of our board of directors is expressly authorized to adopt, or to alter or repeal our Operating Agreement. |
Pursuant to our Operating Agreement, for so long as LandBridge Holdings beneficially owns at least 40% of our outstanding common shares, we have agreed not to take, and will take all necessary action to cause our subsidiaries not to take, certain direct or indirect actions (or enter into an agreement to take such actions) without the prior consent of LandBridge Holdings.
Our Operating Agreement designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our shareholders, which could limit our shareholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or agents.
Our Operating Agreement provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery of the State of Delaware does not have jurisdiction, the Superior Court of the State of Delaware, or, if the Superior Court of the State of Delaware does not have jurisdiction, the United States District Court for the District of Delaware, in each case, subject to that court having personal jurisdiction over the indispensable parties named defendants therein) will, to the fullest extent permitted by applicable law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, employees or agents to us or our shareholders, (iii) any action asserting a claim against us or any director or officer or other employee of ours arising pursuant to any provision of the Delaware Limited Liability Company Act (the “Delaware LLC Act”) or our Operating Agreement or (iv) any action asserting a claim against us or any director or officer or other employee of ours that is governed by the internal affairs doctrine. Our Operating Agreement also provides that, to the fullest extent permitted by applicable law, the United States District Court for the District of Delaware will be the sole and exclusive forum for resolving any complaint asserting a cause of action under the Securities Act. This provision would not apply to claims brought to enforce a duty or liability created by the Exchange Act, the Securities Act or any other claim for which the federal courts have exclusive jurisdiction. Any person or entity purchasing or otherwise acquiring any interest in our common shares will be deemed to have notice of, and consented to, the provisions of our Operating Agreement described in the preceding sentence. This choice of forum provision may limit a shareholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, employees or agents, which may discourage such lawsuits against us and such persons. Alternatively, if a court were to find these provisions of our Operating Agreement inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our results of operations, cash flows and financial position.
There are certain provisions in our Operating Agreement regarding fiduciary duties of our directors, exculpation and indemnification of our officers and directors and the approval of conflicted transactions that differ from the DGCL in a manner that may be less protective of the interests of our public shareholders and restricts the remedies available to shareholders for actions taken by our officers and directors that might otherwise constitute breaches of fiduciary duties if we were subject to the DGCL.
Our Operating Agreement contains certain provisions regarding exculpation and indemnification of our officers and directors and the approval of conflicted transactions that differ from the DGCL in a manner that may be less protective of the interests of our public shareholders. For example, our Operating Agreement provides that to the fullest extent permitted by applicable law our directors or officers will not be liable to us. In contrast, under the DGCL, a director or officer would be liable to us for (i) breach of duty of loyalty to us or our shareholders, (ii) intentional misconduct or knowing violations of the law that are not done in good faith, (iii) improper redemption of shares or declaration of dividends or (iv) a transaction from which the director derived an improper personal benefit.
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Pursuant to our Operating Agreement and indemnification agreements, we must indemnify our directors and officers for acts or omissions to the fullest extent permitted by law. In contrast, under the DGCL, a corporation can only indemnify directors and officers for acts and omissions if the director or officer acted in good faith, in a manner he or she reasonably believed to be in or not opposed to the best interest of the corporation, and, in a criminal action, if the officer or director had no reasonable cause to believe his or her conduct was unlawful.
Additionally, our Operating Agreement provides that in the event a potential conflict of interest exists or arises between any of our directors, officers, equity owners or their respective affiliates, including LandBridge Holdings, on the one hand, and us, any of our subsidiaries or any of our public shareholders, on the other hand, a resolution or course of action by our board of directors shall be deemed approved by all of our shareholders, and shall not constitute a breach of the fiduciary duties of members of our board of directors to us or our shareholders, if such resolution or course of action (i) is approved by a conflicts committee, which is composed entirely of independent directors, (ii) is approved by shareholders holding a majority of our common shares that are disinterested parties, (iii) is determined by our board of directors to be on terms that, when taken together in their entirety, are no less favorable than those generally provided to or available from unrelated third parties or (iv) is determined by our board of directors to be fair and reasonable to us, taking into account the totality of the relationships between the parties involved (including other transactions that may be particularly favorable or advantageous to us). In contrast, under the DGCL, a corporation is not permitted to exempt board members from claims of breach of fiduciary duty under such circumstances.
Accordingly, our Operating Agreement may be less protective of the interests of our public shareholders, when compared to the DGCL, insofar as it relates to the exculpation and indemnification of our officers and directors.
We are a holding company. Our sole material asset is our equity interest in OpCo, and accordingly, we will be dependent upon distributions from OpCo to pay taxes and cover our corporate and other overhead expenses.
We are a holding company and have no material assets other than our equity interest in OpCo. We have no independent means of generating revenue. To the extent OpCo has available cash and subject to the terms of any debt instruments or other applicable agreements, we intend to cause OpCo to make (i) generally pro rata distributions to OpCo Unitholders, including us, in an amount at least sufficient to allow us to pay our taxes, (ii) at the election of certain holders of OpCo Units, additional distributions in an amount generally intended to allow such OpCo Unitholders to satisfy their respective income tax liabilities with respect to their allocable share of the income of OpCo (based on certain assumptions and conventions), which additional distributions may be made on a pro rata basis to all OpCo Unitholders (including us) or a non-pro rata basis to OpCo Unitholders (other than us) in redemption of OpCo Units from such holders and (iii) non pro rata distributions to us in an amount at least sufficient to reimburse us for our corporate and other overhead expenses. In addition, as the sole managing member of OpCo, we intend to cause OpCo to make pro rata distributions to all of its unitholders, including us, in an amount sufficient to allow us to fund dividends to our shareholders in accordance with our dividend policy, to the extent our board of directors declares such dividends. Therefore, although we expect to pay dividends on our Class A shares in amounts determined by our board of directors, from time to time, our ability to do so may be limited to the extent OpCo and its subsidiaries are limited in their ability to make these and other distributions to us. To the extent that we need funds and OpCo or its subsidiaries are restricted from making distributions under applicable law or under the terms of any current or future financing or other arrangements or are otherwise unable to provide such funds, our results of operations, cash flows and financial position could be materially and adversely affected.
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In certain circumstances, OpCo will be required to make tax distributions to OpCo Unitholders, and such tax distribution may be substantial. To the extent we receive tax distributions in excess of our actual tax liabilities and retain such excess cash, the OpCo Unitholders would benefit from such accumulated cash balances if they exercise their Redemption Right.
Pursuant to the OpCo LLC Agreement, OpCo will make generally pro rata distributions to the OpCo Unitholders, including us, in an amount sufficient to allow us to satisfy our actual tax liabilities. In addition, to the extent OpCo has available cash, OpCo will be required to make additional pro rata tax distributions to all OpCo Unitholders in an amount generally intended to allow the OpCo Unitholders (other than us) to satisfy their assumed tax liabilities with respect to their allocable share of the income of OpCo (based on certain assumptions and conventions and as determined by OpCo). For this purpose, the determination of available cash will take into account, among other factors, (i) the existing indebtedness and other obligations of OpCo and its subsidiaries and their anticipated borrowing needs, (ii) the ability of OpCo and its subsidiaries to take on additional indebtedness on commercially reasonable terms and (iii) any necessary or appropriate reserves.
The amount of such additional tax distributions will be determined based on certain assumptions, including assumed income tax rates, and will be calculated after taking into account other distributions (including other tax distributions) made by OpCo. Additional tax distributions may significantly exceed the actual tax liability for many of the OpCo Unitholders, including us. If we retain the excess cash we receive from such distributions, the OpCo Unitholders would benefit from any value attributable to such accumulated cash balances as a result of their exercise of the Redemption Right. However, we intend to take steps to eliminate any material excess cash balances, which could include, but are not necessarily limited to, a distribution of the excess cash to holders of our Class A shares or the reinvestment of such cash in OpCo for additional OpCo Units.
In addition, the tax distributions that OpCo may be required to make may be substantial, and the amount of any additional tax distributions OpCo is required to make likely will exceed the tax liabilities that would be owed by a corporate taxpayer similarly situated to OpCo. Funds used by OpCo to satisfy its obligation to make tax distributions will not be available for reinvestment in our business, except to the extent we or certain other OpCo Unitholders use any excess cash received to reinvest in OpCo for additional OpCo Units. In addition, because cash available for additional tax distributions will be determined taking into account the ability of OpCo and its subsidiaries to take on additional borrowing, OpCo may be required to increase its indebtedness in order to fund additional tax distributions. Such additional borrowing may adversely affect our results of operations, cash flows and financial position by, without limitation, limiting our ability to borrow in the future for other purposes, such as capital expenditures, and increasing our interest expense and leverage ratios.
If OpCo were to become a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes, significant tax inefficiencies might result.
We intend to operate such that OpCo does not become a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes. A “publicly traded partnership” is a partnership the interests of which are traded on an established securities market or are readily tradable on a secondary market or the substantial equivalent thereof. Under certain circumstances, redemptions of OpCo Units pursuant to the Redemption Right (or our Call Right (as described in the OpCo LLC Agreement)) or other transfers of OpCo Units could cause OpCo to be treated as a publicly traded partnership. Applicable U.S. Treasury regulations provide for certain safe harbors from treatment as a publicly traded partnership, and we intend to operate such that redemptions or other transfers of OpCo Units qualify for one or more such safe harbors. For example, we intend to limit the number of OpCo Unitholders, and the OpCo LLC Agreement, provides for limitations on the ability of OpCo Unitholders to transfer their OpCo Units and provides us, as managing member of OpCo, with the right to impose restrictions (in addition to those already in place) on the ability of OpCo Unitholders to redeem their OpCo Units pursuant to the Redemption Right to the extent we believe that it is necessary to ensure that OpCo will continue to be treated as a partnership for U.S. federal income tax purposes. Additionally, the OpCo LLC Agreement provides that an OpCo Unitholder may exercise its Redemption Right in its discretion.
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If OpCo were to become a publicly traded partnership, significant tax inefficiencies might result for us and for OpCo, including as a result of our inability to file a consolidated U.S. federal income tax return with OpCo.
Because we have elected to take advantage of the extended transition period pursuant to Section 107 of the JOBS Act, our financial statements may not be comparable to those of other public companies.
Section 107 of the JOBS Act provides that an emerging growth company can use the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. This permits an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We are choosing to take advantage of this extended transition period and, as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for private companies. Accordingly, our financial statements may not be comparable to companies that comply with public company effective dates, and our shareholders and potential investors may have difficulty in analyzing our operating results by comparing us to such companies.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the information in this prospectus may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. All statements, other than statements of historical fact, included in this prospectus regarding our strategy, future operations, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this prospectus, words such as “may,” “assume,” “forecast,” “could,” “would,” “should,” “will,” “plan,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project,” “forecast,” “may,” “objective,” “plan,” “budget” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on our current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events at the time such statements were made. These forward-looking statements are based on management’s current belief, based on currently available information, as to the outcome and timing of future events When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements described under the section titled “Risk Factors” included in this prospectus. By their nature, forward-looking statements involve known and unknown risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Although we believe that the forward-looking statements contained in this prospectus are based on reasonable assumptions, you should be aware that many factors could affect our actual results of operations, cash flows and financial position and could cause actual results to differ materially from those in such forward-looking statements. Forward-looking statements may include statements about:
• | our customers’ demand for and use of our land and resources; |
• | the success of WaterBridge and Desert Environmental in executing their business strategies, including their ability to construct infrastructure, attract customers and operate successfully on our land; |
• | our customers’ ability to develop our land or any potential acquired acreage to accommodate any future surface use developments; |
• | our ability to continue the payment of dividends; |
• | the domestic and foreign supply of, and demand for, energy sources, including the impact of actions relating to oil price and production controls by OPEC+ with respect to oil production levels and announcements of potential changes to such levels; |
• | our reliance on a limited number of customers and a particular region for substantially all of our revenues; |
• | our ability to enter into favorable contracts regarding surface uses, access agreements and fee arrangements, including the prices we are able to charge and the margins we are able to realize; |
• | our business strategies and our ability to execute thereon, including our ability to attract non-traditional energy customers to use our land and resources; |
• | the risk that we may not realize the anticipated benefits and synergies from our acquisitions, including the Wolf Bone Acquisition; |
• | costs associated with the Wolf Bone Acquisition; |
• | commodity price volatility and trends related to changes in commodity prices, and our customers’ ability to manage through such volatility; |
• | the level of competition from other companies, including those offering resources that compete with the resources from our land, such as sand and brackish water; |
• | changes in the price charged to our customers and availability of services necessary for our customers to conduct their businesses, as a result of oversupply, government regulations or other factors; |
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• | the development of advances or changes in energy technologies or practices; |
• | our ability to successfully implement our growth plans, including through future acquisitions of acreage and/or introduction of new revenue streams, including through the Wolf Bone Acquisition or otherwise; |
• | the potential deterioration of our customers’ financial condition and their ability to access capital to fund their development programs; |
• | the degree to which consolidation among our customers may affect spending on U.S. drilling and completions in the near-term; |
• | our customers’ ability to obtain necessary supplies, raw materials and other critical components on a timely basis, or at all; |
• | our and our customers’ ability to obtain government approvals or acquire or maintain necessary permits, including those related to the development and operation of produced water handling facilities, sand mines and brackish water wells; |
• | operational disruptions and liability related thereto associated with our customers, including those due to environmental hazards, fires, explosions, chemical mishandling or other industrial accidents; |
• | our liquidity and our ability to access the capital markets on favorable terms, or at all, which depends on general market conditions, including the impact of inflation, elevated interest rates and Federal Reserve policies and potential economic recession; |
• | uncertainty of estimates of oil, natural gas and NGL reserves and production; |
• | the effects of political instability or armed conflict in oil and natural gas producing regions, including the Russia-Ukraine war, as well as the Israel-Hamas conflict and heightened tensions in the Middle East and potential energy insecurity in Europe, which may decrease demand for oil and natural gas or contribute to volatility in the prices for oil and natural gas, which could decrease demand for the use of our land and resources; |
• | uncertainty surrounding recent U.S. elections, including potential legal, regulatory and policy changes, such as proposed tariffs, as well as the potential for general market volatility and political uncertainty; |
• | the uncertainty of future estimates of oil and natural gas and mineral reserves; |
• | the demand for sand and the amount of sand that customers on our land are able to excavate and process, which could be adversely affected by, among other things, operating difficulties and unusual or unfavorable geological conditions; |
• | our level of indebtedness and our ability to service our indebtedness; |
• | actions taken by the federal, local or state governments in relation to surface uses; |
• | title defects in the acreage that we acquire; |
• | the markets for surface acreage in the areas in which we operate and own or plan to own surface acreage, including pricing estimates, availability of land and our ability to acquire such land on favorable terms, or at all; |
• | our ability to integrate acquired acreage, including the Wolf Bone Ranch and any future acquisitions, and manage growth; |
• | our ability to recruit and retain key management and employees; |
• | actions taken by the federal or state governments, such as executive orders or new or expanded regulations, that may impact future energy production in the U.S. and any acceleration of the domestic and/or international transition to a low-carbon economy as a result of the IRA or otherwise; |
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• | changes in laws and regulations (or the interpretation thereof), including those related to hydraulic fracturing, accessing water, disposing of wastewater, transferring produced water, interstate brackish water transfer, carbon pricing, pipeline construction, taxation or emissions, leasing, permitting or drilling and various other environmental matters; |
• | changes in effective tax rates, or adverse outcomes resulting from other tax increases or an examination of our income or other tax returns and tax inefficiencies; |
• | the severity and duration of world health events, natural disasters or inclement or hazardous weather conditions, including cold weather, hurricanes, droughts, earthquakes, flooding and tornadoes; |
• | evolving cybersecurity risks, such as those involving unauthorized access, third-party provider defects and service failures, denial-of-service attacks, malicious software, data privacy breaches by employees, insider or others with authorized access, cyber or phishing-attacks, ransomware, social engineering, physical breaches or other actions; and |
• | other factors discussed elsewhere in this prospectus including in the section titled “Risk Factors.” |
We caution you that these forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond our control, incident to the operation of business in our industry. We disclose important factors that could cause our actual results to differ materially from our expectations under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this prospectus. This information should be considered carefully, together with other information in this prospectus and materials we file with the SEC. Should one or more of the risks or uncertainties described in this prospectus occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make.
Reserve engineering is a process of estimating underground accumulations of oil and natural gas that cannot be measured in an exact way. The accuracy of any reserves estimate depends on the quality of available data, the interpretation of such data and price and cost assumptions made by reserve engineers. In addition, the results of drilling, testing and production activities may justify revisions of estimates that were made previously. If significant, such revisions would change the schedule of any further production and development drilling. Accordingly, reserves estimates may differ significantly from the quantities of oil and natural gas that are ultimately recovered.
All forward-looking statements, expressed or implied, included in this prospectus are expressly qualified in their entirety by this cautionary note. This cautionary note should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue. Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this prospectus.
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USE OF PROCEEDS
This prospectus relates to Class A shares that may be offered for resale by the Selling Shareholders. To the extent any Selling Shareholder chooses to sell Class A shares covered by this prospectus, we will not receive any proceeds from any such resales of our Class A shares. The net proceeds from any resale of such Class A shares will be received by the applicable Selling Shareholders. See the section titled “Principal and Selling Shareholders.”
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DIVIDEND POLICY
We intend to pay dividends on our Class A shares in amounts determined from time to time by our board of directors. On November 5, 2024, our board of directors declared a dividend on our Class A shares of $0.10 per share, which was paid on December 19, 2024 to shareholders of record as of December 5, 2024.
While we intend to pay dividends, we have not adopted a formal written dividend policy to pay any particular amount of dividends based on the achievement of, or derivable from, any specific financial metrics. Furthermore, we are not contractually obligated to pay any dividends and do not have any required minimum dividend amount, and our credit facility limits our ability to pay dividends. If our board of directors determines to pay dividends in the future, the amount of such dividends may vary from quarter to quarter and may be significantly reduced or eliminated entirely. The actual amount of any dividends we pay may fluctuate depending on our cash flow needs, which may be impacted by the availability of financing alternatives, the need to service any future indebtedness or other liquidity needs, potential acquisition opportunities and general industry and business conditions, including the level of use of our land and its resources. Given our reliance on our customers and their activity on our land, we cannot provide any assurance that we will pay dividends in the future. The declaration and payment of any dividends by us will be at the sole discretion of our board of directors, which may change our dividend policy or discontinue payment of dividends at any time. Our board of directors will take into account:
• | general economic and business conditions; |
• | our financial condition and results of operations; |
• | our cash flows from operations and current and anticipated cash needs; |
• | our capital requirements, including future acreage acquisitions; |
• | legal, tax, regulatory and contractual (including under our credit facility and future financing arrangements) restrictions and implications on the payment of dividends by us to our shareholders or the payment of distributions by our subsidiaries to us; and |
• | such other factors as our board of directors may deem relevant. |
We are a holding company and have no material assets other than OpCo Units. As a consequence, our ability to declare and pay dividends to the holders of our Class A shares is subject to the ability of our subsidiaries to make distributions to OpCo and of OpCo to make distributions to us. The ability of our subsidiaries to make distributions to OpCo depends upon the amount of cash they generate from their businesses, the cash flow needs of our subsidiaries and the restrictions contained in our credit facility, any future financing arrangement or any other arrangement, as well as such subsidiaries’ governing documents. For more information see “Risk Factors—Risks Related to Our Corporate Structure and Our Class A Shares—Our ability to pay dividends to our shareholders may be limited by our holding company structure, contractual restrictions and regulatory requirements.”
If OpCo makes such distributions, OpCo Unitholders, including LandBridge Holdings, will generally be entitled to receive equivalent distributions from OpCo on a pro rata basis. However, because we must pay federal income taxes, amounts ultimately distributed to Class A shareholders are expected to be less on a per share basis than the amounts distributed by OpCo to the OpCo Unitholders on a per unit basis.
Assuming OpCo makes distributions to us and the OpCo Unitholders, including LandBridge Holdings, in any given year, we intend to pay dividends in respect of our Class A shares out of some or all of such dividends, if any, remaining after the payment of taxes and other expenses. However, because our board of directors may determine to pay or not pay dividends in respect of our Class A shares based on the factors described above, holders of our Class A shares may not necessarily receive dividends, even if OpCo makes such distributions to us.
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CAPITALIZATION
The following table sets forth our cash and cash equivalents and capitalization as of September 30, 2024, as follows:
• | on an actual basis; and |
• | on a pro forma basis to give effect to the Wolf Bone Acquisition, the Second Credit Agreement Amendment and the December Private Placement and the use of proceeds therefrom. |
The information set forth below is illustrative only. The table below should be read in conjunction with, and is qualified in its entirety by reference to, the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical consolidated and unaudited pro forma condensed consolidated financial information for the periods and as of the dates indicated.
As of September 30, 2024 | ||||||||
Actual | Pro Forma | |||||||
(in thousands, except number of common shares) |
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Cash and cash equivalents |
$ | 14,417 | $ | 27,718 | ||||
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Long-term debt: |
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Credit facility(1) |
281,250 | 348,500 | ||||||
Other |
640 | 640 | ||||||
Current portion of long-term debt |
(35,547 | ) | (35,547 | ) | ||||
Unamortized debt issuance costs |
(3,913 | ) | (4,937 | ) | ||||
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|
|
|
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Total long-term debt |
242,430 | 308,656 | ||||||
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|
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Equity: |
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Class A shares; unlimited shares authorized and 17,425,000 Class A shares issued and outstanding (actual); unlimited shares authorized and 23,255,419 Class A shares issued and outstanding (pro forma) |
94,553 | 432,933 | ||||||
Class B shares; unlimited shares authorized and 55,726,603 Class B shares issued and outstanding (actual); unlimited shares authorized and 53,227,852 Class B shares issued and outstanding (pro forma) |
— | |||||||
Noncontrolling interest(2) |
306,808 | 161,397 | ||||||
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|
|
|
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Total capitalization |
$ | 643,791 | $ | 902,986 | ||||
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|
|
|
(1) | As of December 30, 2024, we had $385.0 million of outstanding borrowings under our credit facility, consisting of $30.0 million of revolving credit facility borrowings and $355.0 million in term loan borrowings. |
(2) | On a pro forma basis, includes the OpCo Units not owned by us, which represent approximately 70.0% of outstanding OpCo Units immediately after consummation of the December Private Placement and the use of proceeds therefrom. LandBridge Holdings holds a non-controlling economic interest in OpCo. We hold approximately 30.0% of outstanding OpCo Units immediately after the December Private Placement and the use of proceeds therefrom. |
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the section titled “Summary—Summary Historical Financial Data” and the accompanying financial statements and related notes included elsewhere in this prospectus. The following discussion contains “forward-looking statements” reflecting our current expectations, future plans, estimates, beliefs and assumptions concerning events and financial trends that may affect our future results of operations, cash flows and financial position. Our actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including certain factors outside our control. Factors that could cause or contribute to such differences include, but are not limited to, market prices for oil and natural gas, production volumes, economic and competitive conditions, regulatory changes, including proposed tariffs, and other uncertainties, as well as those factors discussed below and elsewhere in this prospectus, particularly in the sections titled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements,” all of which are difficult to predict. In light of these risks, uncertainties and assumptions, the forward-looking events discussed may not occur. We assume no obligation to publicly update any of these forward-looking statements except as otherwise required by applicable law.
Unless otherwise indicated, the historical financial information in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” reflects only our historical financial results and does not give effect to the Pro Forma Transactions.
Market Condition and Outlook
Over the last several years, the global economy, and more specifically the oil and natural gas industry, has experienced significant volatility, impacted by the COVID-19 pandemic and recovery, the Russia-Ukraine war and the related sanctions imposed on Russia, as well as the Israel-Hamas conflict and heightened tensions in the Middle East, domestic political uncertainty, the activities of OPEC, a potential economic recession and elevated inflation, interest rates and costs of capital and industry consolidation. More recently, high levels of activity in the Delaware Basin have resulted in industry consolidation and labor and supply chain challenges, which has impacted drilling, completion and production activity. This volatility has driven material swings in WTI pricing, which has subsequently impacted development and production decisions of E&P companies.
Despite these challenges, we believe the outlook for the oil and natural gas industry, particularly within the Permian Basin, remains positive, which will subsequently require significant build out of related infrastructure in the region and access to surface acreage to support such operations.
In addition to positive momentum within the oil and natural gas industry, we expect to benefit from advancements in clean energy alternatives. In August 2022, the IRA was signed into law. The IRA contains hundreds of billions of dollars in incentives for the development of renewable energy, clean hydrogen, clean fuels, electric vehicles and supporting infrastructure and carbon capture and sequestration, amongst other provisions. While these incentives could further accelerate the transition of the U.S. economy away from the use of fossil fuels towards lower- or zero-carbon emissions alternatives, like oil and natural gas, clean energy technologies often require access to material surface acreage and supporting infrastructure, which we are well positioned to facilitate.
For additional information regarding recent developments impacting the markets in which we operate, see “Summary” and “Summary—Recent Developments.”
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Third Quarter Results
Significant financial and operating highlights for the third quarter of 2024 include:
• | Revenues of $28.5 million, an increase of 60% as compared to the third quarter of 2023; |
• | Net loss of $2.8 million as compared to net income of $16.6 million in the third quarter of 2023; |
• | Net loss margin of 10% as compared to net income margin of 93% in the third quarter of 2023; |
• | Adjusted EBITDA(1) of $25.0 million, an increase of 62% as compared with the third quarter of 2023; |
• | Adjusted EBITDA Margin(1) of 88%, an increase of 1% as compared with the third quarter of 2023; |
• | Cash flow from operating activities of $7.5 million, a decrease of 54% as compared to the third quarter of 2023; |
• | Free Cash Flow(1) of $7.1 million, a decrease of 55% as compared to the third quarter of 2023; |
• | Operating cash flow margin of 26%, a decrease of 65% as compared to the third quarter of 2023; and |
• | Free Cash Flow Margin(1) of 25%, a decrease of 65% as compared to the third quarter 2023; |
(1) | Adjusted EBITDA, Adjusted EBITDA Margin, Free Cash Flow and Free Cash Flow Margin are non-GAAP financial measures. See “Summary—Non-GAAP Financial Measures” for more information regarding these non-GAAP measures and reconciliations to the most comparable GAAP measures. See also “—How We Evaluate Our Operations” for more information regarding Adjusted EBITDA, Adjusted EBITDA Margin, Free Cash Flow and Free Cash Flow Margin. |
Net loss and net loss margin for the third quarter of 2024 include non-cash share-based compensation expense of $11.6 million, of which $1.8 million is attributable to RSUs issued by the Company and $9.8 million is attributable to Incentive Units issued by LandBridge Holdings. Net income and net income margin for the third quarter of 2023 include non-cash share-based compensation income of $6.9 million attributable to the NDB Incentive Units. Subsequent to the IPO, any actual cash expense associated with such Incentive Units is borne solely by LandBridge Holdings and not the Company. Distributions attributable to Incentive Units are based on returns received by investors of LandBridge Holdings once certain return threshold have been met and are neither an obligation of the Company nor taken into consideration for distributions to investors in the Company.
How We Generate Revenue
We generate revenue from multiple sources, including the use of our surface acreage, the sale of resources from our land and oil and gas and mineral royalties. The fees, royalty rates, payment structure and other related terms in our contracts are negotiated on a case-by-case basis, taking into account the surface use of our land, the type of resources extracted, the amount of use expected to be made of our land, and the amount of resources to be produced and/or extracted. In any given period, the amount and sources of revenues we receive from any particular customer can fluctuate based on the nature, timing and scope of such customer’s activities on our land. For example, during the initial phase of a customer’s activities on our land, we would generally expect to receive usage-based fees and revenues under our SURAs and SUAs related to installation of infrastructure necessary to support long-term operations. Over time, these revenues would generally be expected to migrate to royalty revenue and resource sales based on such customer’s use of our land and resources. Our revenue consists of the principal components discussed below.
Surface Use Royalties and Revenues
Surface Use Royalties. We enter into SURAs and certain overarching SUAs with operators that require royalty payments to us based on a percentage of the customer’s gross revenues derived from use of our land and/
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or volumetric use of infrastructure installed on our land in exchange for rights of use of our land. Our SURAs typically obligate the operator to meter its volumetric utilization of infrastructure installed on our land and to include a report of such utilization for our review along with its periodic payment. Royalties we receive from operations under our SURAs include produced water transportation and handling operations, skim oil recovery and produced water throughput and waste reclamation. Our SURAs generally have terms ranging from a minimum of five years to 10 years and impose only nominal obligations on us. As of September 30, 2024: (i) produced water royalties under our SURAs ranged from $0.10 per barrel to $0.25 per barrel; and (ii) skim oil royalties under our SURAs ranged from 15% to 50% of net proceeds. However, the terms of our SURAs are negotiated on a customer-by-customer basis. Our SURAs typically do not include minimum purchase or use commitments by our customers but do generally provide for automatic renewal-based increases in royalties that are tied to the CPI or are negotiated on a case-by-case basis, depending on a number of factors, such as general economic conditions, the surface use of our land, competitor pricing and/or customer specific considerations. Our contractual provisions providing for inflation escalators are generally based on CPI or a specified fixed percentage, which may limit the amount of any single pricing increase. Such provisions may also vary as to the commencement date of such increases and the timing and calculation of the applicable adjustment based on the term of the agreement or particular use of our land. Our SURAs generally include standard provisions relating to maintenance by our customers of insurance of specified types and amounts, environmental, health and safety covenants and indemnification of us for the unauthorized use of hazardous material or environmental claims.
Easements and other surface-related income. SUAs permit operators to install drilling sites, pipelines, roadways, electric lines and other facilities and equipment on land owned by us. We typically receive a per-rod or per-acre fee when the contract is executed, based on the aggregate amount of our land that is utilized under such SUA, and we often receive additional fees at the beginning of each renewal period or on a monthly or annual basis. Such agreements typically include pre-defined terms for fees that we will receive for our customers’ development and use of drilling sites, new and existing roads, pipeline easements and electric transmission easements. Our SUAs generally require our customers to use the resources from our land, such as brackish water and sand, for their operations on our land, for which we receive our customary fees. Our SUAs generally have terms ranging from a minimum of five years to 10 years, with early termination rights for non-use over a pre-determined period of time, typically 12 to 18 months. Beyond making our land available in accordance with our SUAs, our SUAs impose only nominal obligations on us. As of September 30, 2024: (i) standard pipeline easements ranged from $20 per rod to $450 per rod based, in part, on the diameter of the pipeline and the easement term; (ii) road easements for new roads ranged from $75 per rod to $150 per rod based, in part, on the easement term; (iii) utility line easements ranged from $20 per rod to $150 per rod based, in part, on capacity and width of the utility line and the easement term; and (iv) well pads ranged from $7,000 per acre to $12,000 per acre. However, the terms of our SUAs are negotiated on a customer-by-customer basis. Our SUAs typically do not include minimum commitments with respect to the type and amount of infrastructure to be installed on our property or the amount of revenue to be received by us, but do generally provide for automatic renewal-based increases in royalties that are tied to the CPI or negotiated on a case-by-case basis, depending on a number of factors, such as general economic conditions, the surface use of our land, competitor pricing and/or customer specific considerations. Our contractual provisions providing for inflation escalators are generally based on CPI or a specified fixed percentage, which may limit the amount of any single pricing increase. Such provisions may also vary as to the commencement date of such increases and the timing and calculation of the applicable adjustment based on the term of the agreement or particular use of our land. Our SUAs generally include standard provisions relating to maintenance by our customers of insurance of specified types and amounts, environmental, health and safety covenants and indemnification of us for environmental claims.
Resource Sales and Royalties
Resource Sales. Resource sales generally include brackish water to be used primarily in well completions in exchange for a per barrel fee, which is negotiated and varies depending on the destination of the brackish water. We have strong relationships with, and contractual commitments from, many of the E&P companies in the Stateline Position. Additionally, the immediate proximity of our Stateline Position to the Texas-New Mexico
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state border provides us the ability to deliver brackish water volumes into the otherwise constrained market in New Mexico. Similarly, our customers buy other surface composite materials from us for the construction of access roads and well pads for which we receive a fixed-fee per cubic yard extracted from our surface acreage. Our agreements related to the sale of resources generally have terms ranging from a minimum of five years to 10 years, with early termination rights for non-use over a pre-determined period of time, typically 12 to 18 months. As of September 30, 2024: (i) per barrel prices for brackish water sold to third parties on a spot basis ranged from $0.50 to $1.10; (ii) per barrel prices for brackish water sold to oil and gas producers ranged from $0.35 to $0.95; (iii) per barrel prices for brackish water sold to resellers for delivery into New Mexico ranged from $0.15 to $0.35; and (iv) prices for caliche ranged from $5 per cubic yard to $10 per cubic yard. Such agreements may include certain exclusivity rights, such as the exclusive right to require the purchase of the subject resource for any operations on our land, and may include minimum commitments that are negotiated on a case-by-case basis, taking into account the amount of activity on our land, the specific use of our land and any resultant production thereon, among other things. These agreements typically provide rights to monitor activities on our land and contain standard provisions relating to confidentiality, indemnification of us for environmental claims and maintenance of insurance of specified types and amounts.
Resource Royalties. We lease our surface acreage to customers to construct and operate at their expense brackish water wells and sand mines to provide in-basin water and sand for use in oil and natural gas completion operations. Such customers hold the exclusive right to the water and sand they extract from the leased surface acreage and may be required to make minimum royalty payments as a result. The agreements pursuant to which we receive resource royalties have varying primary terms of at least one year, and contain rights for renewal so long as the customer continues to operate on our land. We typically receive a fee when the contract is executed and a fixed royalty per barrel of water or ton of sand extracted. In situations where our customers do not operate brackish water wells on our surface but require the use of water for their operations, they generally must acquire such water from us for our customary fee. Such fees are negotiated on a case-by-case basis, depending on a number of factors, such as general economic conditions, the type of resources extracted, the amount of use expected to be made of our land or the amount of resources to be produced and/or extracted, competitor pricing and/or customer specific considerations. As of September 30, 2024, resource royalties received per ton of sand extracted ranged from $2.00 to $3.00, subject to certain minimum payment obligations, and resource royalties received per barrel of brackish water extracted ranged from $0.15 to $0.40. These leases generally do not impose minimum production requirements on our customers. These lease agreements contain standard provisions relating to confidentiality, indemnification of us for the unauthorized use of hazardous material or environmental claims and maintenance of insurance of specified types and amounts.
Oil and Gas Royalties
Oil and Gas Royalties. Oil and gas royalties are received in connection with oil and natural gas mineral interests owned by us. Oil and gas royalties are recognized as revenue as oil and gas are produced or severed from the mineral lease. The oil and gas royalties we receive are dependent upon market prices for oil and natural gas, and producer specific location and contractual price differences. Oil and gas royalties also include mineral lease bonus revenues. We receive lease bonus revenue by leasing our mineral interests to E&P companies. When we execute a mineral lease contract, the lease generally transfers the rights to any oil or natural gas discovered to the E&P company and grants us the right to a specified royalty interest payable on future production. Mineral lease bonuses are nonrefundable. Royalties from oil and natural gas production are generally negotiated on a case-by-case basis, depending on the particular mineral interests and holder of such mineral interests.
We expect our fee-based revenues to grow over time relative to our oil and gas royalties. While our focus is on fee-based arrangements, our oil and gas royalties fluctuate with market prices for oil and natural gas.
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The following table presents the amount and relative percentage of each component of our revenues for the following periods:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||
2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||||||||
Amount ($) |
% | Amount ($) |
% | Amount ($) |
% | Amount ($) |
% | |||||||||||||||||||||||||
Surface use royalties and revenues |
||||||||||||||||||||||||||||||||
Surface use royalties |
$ | 9,854 | 34.6 | % | $ | 3,193 | 18.0 | % | $ | 21,031 | 28.6 | % | $ | 8,590 | 15.5 | % | ||||||||||||||||
Easements and other surface-related revenues |
6,641 | 23.3 | % | 2,316 | 13.0 | % | 19,242 | 26.2 | % | 9,526 | 17.2 | % | ||||||||||||||||||||
Resource sales and royalties |
||||||||||||||||||||||||||||||||
Resource sales |
4,931 | 17.3 | % | 4,329 | 24.3 | % | 12,237 | 16.7 | % | 17,534 | 31.6 | % | ||||||||||||||||||||
Resource royalties |
4,158 | 14.6 | % | 1,638 | 9.2 | % | 9,382 | 12.8 | % | 4,810 | 8.7 | % | ||||||||||||||||||||
Oil and gas royalties |
2,903 | 10.2 | % | 6,323 | 35.5 | % | 11,563 | 15.7 | % | 14,948 | 27.0 | % | ||||||||||||||||||||
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Total revenue |
$ | 28,487 | 100.0 | % | $ | 17,799 | 100.0 | % | $ | 73,455 | 100.0 | % | $ | 55,408 | 100.0 | % | ||||||||||||||||
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The following table presents the amount and relative percentage of each component of our revenues for the following periods:
Year Ended December 31, | ||||||||||||||||
2023 | 2022 | |||||||||||||||
Amount ($) | % | Amount ($) | % | |||||||||||||
Surface use royalties and revenues |
||||||||||||||||
Surface use royalties |
$ | 13,216 | 18.1 | % | $ | 7,672 | 14.8 | % | ||||||||
Easements and other surface-related revenues |
12,644 | 17.4 | % | 9,744 | 18.8 | % | ||||||||||
Resource sales and royalties |
||||||||||||||||
Resource sales |
19,830 | 27.2 | % | 14,869 | 28.7 | % | ||||||||||
Resource royalties |
6,432 | 8.8 | % | 1,206 | 2.4 | % | ||||||||||
Oil and gas royalties |
20,743 | 28.5 | % | 18,286 | 35.3 | % | ||||||||||
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Total revenue |
$ | 72,865 | 100.0 | % | $ | 51,777 | 100.0 | % | ||||||||
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Our revenues may vary significantly from period to period as a result of the activity level of producers on and around our land, the development of new revenue streams, commodity prices, changes in volumes produced on our land and our acquisition strategy, among other things, and are significantly dependent on our customers’ activities on and around our land. For example, oil and natural gas prices have historically been volatile. Lower commodity prices may decrease our revenues as customers on and around our land decrease their activity levels in response to low commodity prices. Although we intend to pursue additional opportunities to increase our revenue streams and introduce additional revenue components, including through solar power generation, power storage and battery projects, water treatment and desalination facilities, fueling stations, data centers, telecommunication towers and equipment and other opportunities, there can be no assurance that such revenue streams will materially diversify our revenue streams.
Costs of Conducting our Business
Our costs consist primarily of resource sales-related expenses, other operating and maintenance expenses to maintain our surface acreage and general administrative expenses. Our principal costs are as follows:
Resource Sales-Related Expenses. Resource sales-related expenses are costs incurred for utilization and maintenance of our assets and facilities in the extraction or production of resources available on our land that are sold by us. These costs generally include utilities to operate our facilities and assets and repairs and maintenance expenses related to those assets.
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Other Operating and Maintenance Expenses. Operating and maintenance expenses are costs incurred for maintaining our surface acreage and other assets, including field operating overhead and supervision, production taxes, insurance costs, ad valorem and property taxes, and repairs and maintenance expense.
General and Administrative Expenses. General and administrative expenses include a corporate shared services allocation from WaterBridge, directly incurred corporate costs and share-based compensation expense. Corporate shared services generally include the cost of shared management and administrative services. The corporate shared service allocation is based on an approximation of time spent on activities supporting us as well as by underlying business activities. The shared service allocation expense is reimbursed to WaterBridge through the Shared Services Agreement. Direct corporate costs are incurred for direct corporate employees, including payroll, benefits and other employee-related expenses of our direct corporate staff, professional services that generally consist of audit, tax, legal and valuation services and expenses for corporate insurance policies.
Prior to the IPO, share-based compensation expense only included expense allocated to us for NDB LLC’s Incentive Unit plan. The NDB Incentive Unit awards were classified as liability awards by NDB LLC and required periodic remeasurement. On July 1, 2024, in accordance with the Division, the holders of the NDB Incentive Units were issued an identical number of Incentive Units at LandBridge Holdings. As of the date of the Division, the Incentive Units held at LandBridge Holdings are the only incentive units attributable and allocated to the Company. The Incentive Units are accounted for as a modification and have been transitioned to equity award accounting and, as such, do not require periodic remeasurements. The share-based compensation for the Incentive Units is fully allocated to the noncontrolling interest as the contractual obligation to satisfy the Incentive Units exists at LandBridge Holdings. Subsequent to the IPO, any actual cash expense associated with such Incentive Units is borne solely by LandBridge Holdings and not the Company.
In connection with the IPO, our board of directors adopted the LTIP. The LTIP allows for the grant of options, SARs, RSUs, share awards, dividend equivalents, other share-based awards, cash awards, substitute awards or any combination thereof. Under the LTIP, participants have been granted RSUs. Share-based compensation associated with RSUs is allocated between the Company and the noncontrolling interest based on relative ownership. Substantially all share-based compensation is included in general and administrative expense (income) with an immaterial amount included in other operating and maintenance expense on the unaudited condensed statements of operations prior to allocation to the noncontrolling interest.
How We Evaluate Our Operations
We use a variety of financial and operational metrics to assess the performance of our business.
Revenue
Revenue is a key performance metric of our company. We analyze realized monthly, quarterly and annual revenues and compare the results against our internal projections and budgets. Results are used to validate, or when applicable update, existing assumptions on macroeconomic drivers of our business, contractual mix driving average unit-level revenues and E&P customer development activity and commodity pricing, absent the impact of our operating costs.
Surface Use Economic Efficiency
We calculate surface use economic efficiency as (i) total revenues less oil and gas royalty revenues divided by (ii) owned surface acreage or in periods in which we acquire or dispose of acreage, the weighted average surface acreage owned during the period. This metric provides valuable insight into the effectiveness of our active land management strategy by examining our ability to generate value on our owned surface and track trends of our results over time, while inherently adjusting for any surface acreage acquisitions or divestitures that may occur. Further, we believe this metric serves as a worthwhile benchmark of our team’s management and growth strategy, as well as the relative value of our surface acreage, compared to our peers.
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Adjusted EBITDA and Adjusted EBITDA Margin
Adjusted EBITDA and Adjusted EBITDA Margin are used by our management and by external users of our financial statements, such as investors, research analysts and others, to assess the financial performance of our assets over the long term to generate sufficient cash to return capital to equity holders or service indebtedness. We define Adjusted EBITDA as net income (loss) before interest; taxes; depreciation, amortization, depletion and accretion; share-based compensation; non-recurring transaction-related expenses and other non-cash or non-recurring expenses. We define Adjusted EBITDA Margin as Adjusted EBITDA divided by total revenues.
Management believes Adjusted EBITDA and Adjusted EBITDA Margin are useful because they allow us to more effectively evaluate our operating performance and compare the results of our operations from period to period, and against our peers, without regard to our financing methods or capital structure. We exclude the items listed above from net income (loss) in arriving at Adjusted EBITDA and Adjusted EBITDA Margin because these amounts can vary substantially from company to company within our industry depending upon accounting methods, book values of assets, capital structures and the method by which the assets were acquired. Please read “—Non-GAAP Financial Measures” for reconciliations and additional information regarding these non-GAAP financial measures.
Free Cash Flow and Free Cash Flow Margin
Free Cash Flow and Free Cash Flow Margin are used by our management and by external users of our financial statements, such as investors, research analysts and others, to assess our ability to repay our indebtedness, return capital to our shareholders and fund potential acquisitions without access to external sources of financing for such purposes. We define Free Cash Flow as cash flow from operating activities less investment in capital expenditures. We define Free Cash Flow Margin as Free Cash Flow divided by total revenues.
Management believes Free Cash Flow and Free Cash Flow Margin are useful because they allow for an effective evaluation of both our operating and financial performance, as well as the capital intensity of our business, and subsequently, the ability of our operations to generate cash flow that is available to distribute to our shareholders, reduce leverage or support acquisition activities. Please read “—Non-GAAP Financial Measures” for reconciliations and additional information regarding these non-GAAP financial measures.
Factors Affecting the Comparability of Our Results of Operations
In this prospectus, we present our historical results of operations for the three and nine months ended September 30, 2024 and 2023 and for the years ended December 31, 2023 and 2022. Our future results of operations will not be directly comparable to our historical results of operations or the historical results of operations of our predecessor for the periods presented as a result of the significant growth of our business and new contracting activity completed during each year of our operation, which are not reflected in our operating results until such contracting activity has been completed. We have also experienced additional significant growth in our business following the completion of the Acquisitions, resulting in our future results of operations for periods following the consummation of such Acquisitions to not be directly comparable with our historical results.
Public Company Costs
As a result of the IPO, we incurred incremental, non-recurring costs related to our transition to a publicly traded and taxable entity, including the costs of the IPO and the costs associated with the initial implementation of our Sarbanes-Oxley Act internal controls and testing. We have incurred and expect to continue to incur additional significant and recurring expenses as a publicly traded company, including costs associated with SEC reporting and compliance requirements, consisting of the preparation and filing of annual and quarterly reports, registrar and transfer agent fees, national stock exchange fees, audit fees, legal fees, investor relations expenses,
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incremental director and officer liability insurance costs and director and officer compensation expenses. These expenses are not included in our results of operations prior to the IPO. Additionally, we have hired additional employees and consultants, including accounting and legal personnel, in order to comply with the requirements of being a publicly traded company.
Corporate Reorganization
We were formed to serve as the issuer in the IPO and had no operations, assets or liabilities prior to the consummation of the IPO. Certain of the historical consolidated financial statements included in this prospectus are based on the financial statements of our accounting predecessor, OpCo, prior to the Corporate Reorganization in connection with the IPO. As a result, the historical consolidated financial data may not give you an accurate indication of what our actual results would have been if the Corporate Reorganization had been completed at the beginning of the periods presented or of what our future results of operations are likely to be.
Long-Term Incentive Plan
In order to incentivize individuals providing services to us or our affiliates, our board of directors adopted a long-term incentive plan (“LTIP”) for employees and directors. Any individual who is our officer or employee or an officer or employee of any of our affiliates, and any other person who provides services to us or our affiliates, including our directors, may be eligible to receive awards under the LTIP at the discretion of our board of directors or a committee thereof, as applicable. The LTIP provides for the grant, from time to time, at the discretion of our board of directors, or a committee thereof, of options, share appreciation rights, restricted shares, restricted share units, share awards, dividend equivalents, other share-based awards, cash awards, substitute awards and performance awards intended to align the interests of employees, directors and service providers with those of our shareholders. As such, our historical financial data may not present an accurate indication of what our actual results would have been if we had implemented the LTIP program prior to the periods presented within.
Acquisitions
During 2024, we acquired approximately 200,000 surface acres through the consummation of the Acquisitions, which will impact the comparability of our results of operations. We expect to pursue opportunistic future land acquisitions that compliment or expand our current land position, which may impact the comparability of our results.
Credit Facility
For information regarding our credit facility, please see “—Liquidity and Capital Resources—Debt Instruments—Credit Facility.”
Income Taxes
Prior to the IPO, OpCo and its subsidiaries were primarily entities that were treated as partnerships or disregarded entities for federal income tax purposes but were subject to certain minimal Texas franchise taxes. One of our subsidiaries is a qualified REIT for federal income tax purposes. There is no tax imposed on a REIT as long as the REIT complies with the applicable tax rules and avails itself of the opportunity to reduce its taxable income through distributions. A REIT must comply with a number of organizational and operational requirements, including a requirement that it must pay at least 90% of its taxable income to shareholders.
As a result of our predominately non-taxable structure historically, income taxes on taxable income or losses realized by our predecessor, OpCo, were generally the obligation of the individual members or partners. Accordingly, the financial data attributable to our predecessor, OpCo, contains no provision for U.S. federal
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income taxes or income taxes in any state or locality (other than margin tax in the State of Texas). Following consummation of the IPO, although we are a limited liability company, we have elected to be taxed as a corporation and are subject to U.S. federal, state and local income taxes on our allocable share of the income and loss of OpCo.
Results of Operations
Three Months Ended September 30, 2024 Compared to the Three Months Ended September 30, 2023
Three Months Ended September 30, |
||||||||
2024 | 2023 | |||||||
(In thousands) | ||||||||
Revenues: |
||||||||
Surface use royalties |
$ | 9,854 | $ | 3,193 | ||||
Easements and other surface-related revenues |
6,641 | 2,316 | ||||||
Resource sales |
4,931 | 4,329 | ||||||
Oil and gas royalties |
2,903 | 6,323 | ||||||
Resource royalties |
4,158 | 1,638 | ||||||
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Total revenues |
28,487 | 17,799 | ||||||
Resource sales-related expense |
423 | 1,003 | ||||||
Other operating and maintenance expense |
708 | 701 | ||||||
General and administrative expense (income) |
22,131 | (5,571 | ) | |||||
Depreciation, depletion, amortization and accretion |
2,038 | 2,562 | ||||||
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Operating income |
3,187 | 19,104 | ||||||
Interest expense, net |
7,071 | 2,893 | ||||||
Other income, net |
— | (526 | ) | |||||
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(Loss) income from operations before taxes |
(3,884 | ) | 16,737 | |||||
Income tax (benefit) expense |
(1,128 | ) | 104 | |||||
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Net (loss) income |
$ | (2,756 | ) | $ | 16,633 | |||
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Total revenues. Total revenues increased by $10.7 million, or 60%, to $28.5 million for the three months ended September 30, 2024, as compared to $17.8 million for the three months ended September 30, 2023. The increase was primarily attributable to increased surface use royalties of $6.7 million, easements and other surface-related revenues of $4.3 million, resource royalties of $2.5 million and resource sales of $0.6 million, partially offset by decreased oil and gas royalties of $3.4 million. Please see our discussion below regarding comparative period variances in revenue sources.
Surface use royalties. Surface use royalties increased by $6.7 million, or 209%, to $9.9 million for the three months ended September 30, 2024, as compared to $3.2 million for the three months ended September 30, 2023. The increase was primarily attributable to increased produced water handling and associated skim oil royalties of $6.3 million and industrial waste handling royalties of $0.2 million on our surface for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023.
Easements and other surface-related revenues. Easements and other surface-related revenues increased by $4.3 million, or 187%, to $6.6 million for the three months ended September 30, 2024, as compared to $2.3 million for the three months ended September 30, 2023. The increase was primarily attributable to oil and gas transportation and gathering pipelines and produced water handling infrastructure of $3.4 million and other surface and subsurface easements of $0.8 million during the three months ended September 30, 2024, as compared to the three months ended September 30, 2023.
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Resource sales. Resource sales increased by $0.6 million, or 14%, to $4.9 million for the three months ended September 30, 2024, as compared to $4.3 million for the three months ended September 30, 2023. The increase was primarily attributable to an increase in brackish water sales volume by 0.7 million barrels, or 9%, for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, while the unit price per barrel of brackish water sold remained flat. The brackish water sales volume increase is primarily due to the timing of customer demand in the areas surrounding our surface acreage, primarily upstream drilling and completion operations.
Oil and gas royalties. Oil and gas royalties decreased by $3.4 million, or 54%, to $2.9 million for the three months ended September 30, 2024, as compared to $6.3 million for the three months ended September 30, 2023, which consists of decreased royalty income of $3.3 million and lower mineral lease income of $0.1 million. The decrease in mineral lease income is attributable to an immaterial adjustment to a mineral lease during the three months ended September 30, 2024, as compared to no activity during the three months ended September 30, 2023. The table below provides operational and financial data by oil and gas royalty stream for the periods indicated.
Three Months Ended September 30, |
||||||||
2024 | 2023 | |||||||
Net royalty volumes: |
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Oil (MBbls) |
35 | 65 | ||||||
Natural Gas (MMcf) |
179 | 229 | ||||||
NGL (MBbls) |
18 | 30 | ||||||
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Equivalents (MBoe) |
83 | 133 | ||||||
Equivalents (MBoe/d) |
0.9 | 1.5 | ||||||
Oil and gas royalties (in thousands): |
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Oil royalties |
$ | 2,574 | $ | 5,145 | ||||
Natural gas royalties |
79 | 653 | ||||||
NGL royalties |
361 | 525 | ||||||
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Oil and gas royalties |
3,014 | 6,323 | ||||||
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Mineral lease income |
$ | (111 | ) | — | ||||
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Total oil and gas royalties |
$ | 2,903 | $ | 6,323 | ||||
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Realized prices |
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Oil ($/Bbl) |
$ | 73.54 | $ | 79.15 | ||||
Natural gas ($/Mcf) |
$ | 0.44 | $ | 2.85 | ||||
NGL ($/Bbl) |
$ | 20.06 | $ | 17.50 | ||||
Equivalents ($/Boe) |
$ | 36.31 | $ | 47.54 |
Resource royalties. Resource royalties increased by $2.5 million, or 156%, to $4.2 million for the three months ended September 30, 2024, as compared to $1.6 million for the three months ended September 30, 2023. The increase was attributable to brackish water royalties in connection with the East Stateline Ranch acquisition of $2.5 million and increased sand mine volumes of $0.1 million for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023.
Resource sales-related expense. Resource sales related expense decreased by $0.6 million, or 60%, to $0.4 million for the three months ended September 30, 2024, as compared to $1.0 million for the three months ended September 30, 2023. The decrease was primarily attributable to lower utility expenses due to installation and connection to overhead electric infrastructure and lower water well repairs and maintenance for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023.
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General and administrative expense (income). General and administrative expense (income), excluding share-based compensation expense, increased by $9.1 million, or 650%, to $10.5 million for the three months ended September 30, 2024, as compared to $1.4 million for the three months ended September 30, 2023. The increase was primarily attributable to Offering-related employee bonuses of $5.0 million, a contract termination payment of $2.6 million and higher professional services fees and other non-capitalizable expenses associated with transitioning to a publicly traded company of $1.3 million.
General and administrative expense (income), inclusive of share-based compensation, increased by $27.7 million, or 495%, to $22.1 million for the three months ended September 30, 2024, as compared to income of $5.6 million for the three months ended September 30, 2023. The increase was attributable to the change in share-based compensation expense of $18.5 million and increased cash expenses noted above. The share-based compensation is comprised of an increase related to the Incentive Units of $16.7 million and $1.8 million related to the issuance of RSUs issued during the three months ended September 30, 2024. The Incentive Units expense increase is primarily due to new issuances and post-modification equity award accounting amortization resulting in expense of $9.8 million for the three months ended September 30, 2024, as compared to income of $6.9 million for the three months ended September 30, 2023 due to the remeasurement of the NDB Incentive Units.
Depreciation, depletion, amortization and accretion. Depreciation, depletion, amortization and accretion decreased by $0.6 million, or 23%, to $2.0 million for the three months ended September 30, 2024, as compared to $2.6 million for the three months ended September 30, 2023. The decrease was primarily attributable to lower depletion expense of $0.6 million due to a natural decline in oil and gas production with minimal oil and gas royalty development activities during 2024.
Interest expense, net. Interest expense, net, increased by $4.2 million, or 145%, to $7.1 million for the three months ended September 30, 2024, as compared to $2.9 million for the three months ended September 30, 2023. The increase was primarily attributable to additional borrowings under our Credit Facilities during the three months ended September 30, 2024, as compared to the three months ended September 30, 2023.
Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023
Nine Months Ended September 30, |
||||||||
2024 | 2023 | |||||||
(In thousands) | ||||||||
Revenues: |
||||||||
Surface use royalties |
$ | 21,031 | $ | 8,590 | ||||
Easements and other surface-related revenues |
19,242 | 9,526 | ||||||
Resource sales |
12,237 | 17,534 | ||||||
Oil and gas royalties |
11,563 | 14,948 | ||||||
Resource royalties |
9,382 | 4,810 | ||||||
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|
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Total revenues |
73,455 | 55,408 | ||||||
Resource sales-related expense |
1,739 | 3,081 | ||||||
Other operating and maintenance expense |
1,837 | 1,956 | ||||||
General and administrative expense (income) |
98,114 | (20,610 | ) | |||||
Depreciation, depletion, amortization and accretion |
6,294 | 6,396 | ||||||
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|
|||||
Operating (loss) income |
(34,529 | ) | 64,585 | |||||
Interest expense, net |
16,235 | 4,173 | ||||||
Other income |
(241 | ) | (541 | ) | ||||
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|
|
|
|||||
(Loss) income from operations before taxes |
(50,523 | ) | 60,953 | |||||
Income tax (benefit) expense |
(890 | ) | 303 | |||||
|
|
|
|
|||||
Net (loss) income |
$ | (49,633 | ) | $ | 60,650 | |||
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|
|
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Total revenues. Total revenues increased by $18.1 million, or 33%, to $73.5 million for the nine months ended September 30, 2024, as compared to $55.4 million for the nine months ended September 30, 2023. The increase was comprised of an increase in surface use royalties of $12.4 million, easements and other surface-related revenues of $9.7 million and resource royalties of $4.6 million, partially offset by decreased resource sales of $5.3 million and oil and gas royalties of $3.3 million. Please see our discussion below regarding comparative period variances in revenue sources.
Surface use royalties. Surface use royalties increased by $12.4 million, or 144%, to $21.0 million for the nine months ended September 30, 2024, as compared to $8.6 million for the nine months ended September 30, 2023. The increase was primarily attributable to increased produced water handling and associated skim oil royalties of $11.8 million and industrial waste handling royalties of $0.5 million on our surface for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023.
Easements and other surface-related revenues. Easements and other surface-related revenues increased by $9.7 million, or 102%, to $19.2 million for the nine months ended September 30, 2024, as compared to $9.5 million for the nine months ended September 30, 2023. The increase was primarily attributable to oil and natural gas gathering and transportation pipelines and produced water handling infrastructure of $7.6 million and $2.1 million in other surface easements for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023.
Resource sales. Resource sales decreased by $5.3 million, or 30%, to $12.2 million for the nine months ended September 30, 2024, as compared to $17.5 million for the nine months ended September 30, 2023. Brackish water sales volume decreased by 7.7 million barrels, or 22%, to 27.8 million barrels for the nine months ended September 30, 2024, as compared to 35.5 million barrels for the nine months ended September 30, 2023. Additionally, the per unit sales price decreased by approximately 15%. The brackish water sales volume decrease is primarily due to the timing of customer demand in the areas surrounding our surface acreage, primarily upstream drilling and completion operations. Lower unit sales rates are driven by the customer contract mix for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023.
Oil and gas royalties. Oil and gas royalties decreased by $3.3 million, or 22%, to $11.6 million for the nine months ended September 30, 2024, as compared to $14.9 million for the nine months ended September 30, 2023, which consists of decreased royalty income of $3.0 million offset by lower mineral lease income of $0.3 million. Mineral lease income decreased $0.3 million, primarily attributable to fewer net mineral acres leased during the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023. The table below provides operational and financial data by oil and gas royalty stream for the periods indicated.
Nine Months Ended September 30, |
||||||||
2024 | 2023 | |||||||
Net royalty volumes: |
||||||||
Oil (MBbls) |
123 | 163 | ||||||
Natural Gas (MMcf) |
534 | 482 | ||||||
NGL (MBbls) |
55 | 47 | ||||||
|
|
|
|
|||||
Equivalents (MBoe) |
267 | 290 | ||||||
Equivalents (MBoe/d) |
1.0 | 1.1 | ||||||
Oil and gas royalties (in thousands): |
||||||||
Oil royalties |
$ | 9,460 | $ | 12,188 | ||||
Natural gas royalties |
554 | 1,221 | ||||||
NGL royalties |
1,142 | 879 | ||||||
|
|
|
|
|||||
Oil and gas royalties |
11,156 | 14,288 | ||||||
|
|
|
|
|||||
Mineral lease income |
$ | 407 | 660 | |||||
|
|
|
|
|||||
Total oil and gas royalties |
$ | 11,563 | $ | 14,948 | ||||
|
|
|
|
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Nine Months Ended September 30, |
||||||||
2024 | 2023 | |||||||
Realized prices |
||||||||
Oil ($/Bbl) |
$ | 76.91 | $ | 74.77 | ||||
Natural gas ($/Mcf) |
$ | 1.04 | $ | 2.53 | ||||
NGL ($/Bbl) |
$ | 20.76 | $ | 18.70 | ||||
Equivalents ($/Boe) |
$ | 41.78 | $ | 49.27 |
Resource royalties. Resource royalties increased by $4.6 million, or 96%, to $9.4 million for the nine months ended September 30, 2024, as compared to $4.8 million for the nine months ended September 30, 2023. The increase was primarily attributable to brackish water royalties in connection with the East Stateline Ranch acquisition of $3.6 million and an increase attributable to sand mine royalty rates of $0.5 million and sand mine volumes of $0.4 million.
Resource sales-related expense. Resource sales-related expense decreased by $1.4 million, or 45%, to $1.7 million for the nine months ended September 30, 2024, as compared to $3.1 million for the nine months ended September 30, 2023. The decrease was primarily attributable to lower utility expenses and purchase of third-party water and transfer costs associated with sales of brackish water driven by the lower volumes sold during the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023.
Other operating and maintenance expense. Other operating and maintenance expense decreased by $0.2 million, or 10%, to $1.8 million for the nine months ended September 30, 2024, as compared to $2.0 million for the nine months ended September 30, 2023. The decrease was primarily attributable to lower production taxes on oil and gas royalties due to decreased oil and gas royalty income for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023.
General and administrative expense (income). General and administrative expense (income), excluding share-based compensation expense, increased by $10.2 million, or 268%, to $14.0 million for the nine months ended September 30, 2024, as compared to $3.8 million for the nine months ended September 30, 2023. The increase was primarily attributable to Offering-related employee bonuses of $5.0 million, a contract termination payment of $2.6 million, higher professional services fees and other non-capitalizable expenses associated with transitioning to a publicly traded company of $1.3 million, professional services fees primarily associated with amending the Company’s Credit Facilities in conjunction with acquisition-related activities and entity restructuring of $0.7 million and $0.3 million in increased corporate shared services allocation from WaterBridge.
General and administrative expense (income), inclusive of share-based compensation, increased by $118.7 million, or 576%, to expense of $98.1 million for the nine months ended September 30, 2024, as compared to income of $20.6 million for the nine months ended September 30, 2023. The increase was attributable to the change in share-based compensation expense of $108.5 million and increased cash expenses noted above. The share-based compensation is comprised of an increase related to the Incentive Units of $106.8 million and $1.8 million related to the issuance of RSUs. The Incentive Units expense increase is primarily due to the periodic remeasurements of NDB Incentive Units prior to the Division of $72.6 million when the awards were accounted for as liability awards at NDB LLC and new issuances and post-modification equity award accounting amortization of $9.8 million for the nine months ended September 30, 2024, as compared to income of $24.4 million due to remeasurement of the NDB Incentive Units for the nine months ended September 30, 2023.
Depreciation, depletion, amortization and accretion. Depreciation, depletion, amortization and accretion decreased by $0.1 million, or 2%, to $6.3 million for the nine months ended September 30, 2024, as compared to $6.4 million for the nine months ended September 30, 2023. The decrease was primarily attributable to lower
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depletion expense of $0.2 million due to a natural decline in oil and gas production with minimal oil and gas royalty development activities during 2024 partially offset by higher depreciation expense of $0.1 million related to capital expenditures associated with brackish water supply infrastructure.
Interest expense, net. Interest expense, net, increased by $12.0 million, or 286%, to $16.2 million for the nine months ended September 30, 2024, as compared to $4.2 million for the nine months ended September 30, 2023. The increase was primarily attributable to additional principal borrowings under our Credit Facilities during the nine months ended September 30, 2024, as compared to borrowings under our then-existing debt instruments for the nine months ended September 30, 2023.
Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022
Year Ended December 31, |
||||||||
2023 | 2022 | |||||||
(In thousands) | ||||||||
Revenues: |
||||||||
Oil and gas royalties |
$ | 20,743 | $ | 18,286 | ||||
Easements and other surface-related revenues |
12,644 | 9,744 | ||||||
Resource sales |
19,830 | 14,869 | ||||||
Surface use royalties |
13,216 | 7,672 | ||||||
Resource royalties |
6,432 | 1,206 | ||||||
|
|
|
|
|||||
Total revenues |
72,865 | 51,777 | ||||||
Resource sales-related expense |
3,445 | 3,840 | ||||||
Other operating and maintenance expense |
2,740 | 2,648 | ||||||
General and administrative (income) expense |
(12,091 | ) | 41,801 | |||||
Depreciation, depletion, amortization and accretion |
8,762 | 6,720 | ||||||
|
|
|
|
|||||
Operating income (loss) |
70,009 | (3,232 | ) | |||||
Interest expense, net |
7,016 | 3,108 | ||||||
Other income, net |
(549 | ) | (143 | ) | ||||
|
|
|
|
|||||
Income (loss) from operations before taxes |
63,542 | (6,197 | ) | |||||
Income tax expense |
370 | 164 | ||||||
|
|
|
|
|||||
Net income (loss) |
$ | 63,172 | $ | (6,361 | ) | |||
|
|
|
|
Total revenues. Total revenues increased by $21.1 million, or 41%, to $72.9 million for the year ended December 31, 2023, as compared to $51.8 million for the year ended December 31, 2022. The increase was comprised of an increase in oil and gas royalties of $2.5 million, resource sales of $4.9 million, easements and other surface-related revenues of $2.9 million, surface use royalties of $5.5 million and resource royalties of $5.2 million. Please see our discussion below regarding comparative period variances in revenue sources.
Oil and gas royalties. Oil and gas royalties decreased by $2.5 million, or 13%, to $20.7 million for the year ended December 31, 2023, as compared to $18.3 million for the year ended December 31, 2022. Mineral lease income increased $0.2 million, primarily attributable to additional mineral interests leased during the year ended December 31, 2023, as compared to the year ended December 31, 2022. The table below provides operational and financial data by oil and gas royalty stream for the year ended December 31, 2023, and the year ended December 31, 2022.
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Year Ended December 31, |
||||||||
2023 | 2022 | |||||||
Net royalty volumes: |
||||||||
Oil (MBbls) |
225 | 145 | ||||||
Natural Gas (MMcf) |
693 | 438 | ||||||
NGL (MBbls) |
68 | 24 | ||||||
|
|
|
|
|||||
Equivalents (MBoe) |
409 | 242 | ||||||
Equivalents (MBoe/d) |
1.1 | 0.7 | ||||||
Oil and gas royalties (in thousands): |
||||||||
Oil royalties |
$ | 17,138 | 13,897 | |||||
Gas royalties |
1,623 | 2,965 | ||||||
NGL royalties |
1,322 | 929 | ||||||
Mineral lease income |
660 | 495 | ||||||
|
|
|
|
|||||
Total oil and gas royalties |
$ | 20,743 | $ | 18,286 | ||||
|
|
|
|
|||||
Realized prices |
||||||||
Oil ($/Bbl) |
$ | 76.17 | $ | 95.84 | ||||
Natural gas ($/Mcf) |
$ | 2.34 | $ | 6.77 | ||||
NGL ($/Bbl) |
$ | 19.44 | $ | 38.71 | ||||
Equivalents ($/Boe) |
$ | 49.10 | $ | 73.52 |
Resource sales. Resource sales increased by $4.9 million, or 33%, to $19.8 million for the year ended December 31, 2023, as compared to $14.9 million for the year ended December 31, 2022. The increase was primarily attributable to higher realized per unit sales prices. Brackish water sales volume decreased by 2.9 million barrels, or 7%, for the year ended December 31, 2023, as compared to the year ended December 31, 2022. However, the per unit sales price increased by approximately 50%, which more than offset the decline in volume. The brackish water sales volume decrease is primarily due to a shift in focus to higher margin sales in Texas rather than lower margin, long haul sales into New Mexico resulting in lower sales volume but increased overall water sales revenues for the year ended December 31, 2023, as compared to December 31, 2022.
Easements and other surface-related revenue. Easements and other surface-related revenue increased by $2.9 million, or 30%, to $12.6 million for the year ended December 31, 2023, as compared to $9.7 million for the year ended December 31, 2022. The increase was primarily attributable to new oil and natural gas transportation and gathering pipelines and continued expansion of the WaterBridge produced water handling infrastructure for the year ended December 31, 2023, as compared to the year ended December 31, 2022.
Surface use royalties. Surface use royalties increased by $5.5 million, or 72%, to $13.2 million for the year ended December 31, 2023, as compared to $7.7 million for the year ended December 31, 2022. The increase was primarily attributable to new produced water throughput agreements and increased WaterBridge produced water handling on our surface for the year ended December 31, 2023, as compared to the year ended December 31, 2022.
Resource royalties. Resource royalties increased by $5.2 million, or 433%, to $6.4 million for the year ended December 31, 2023, as compared to $1.2 million for the year ended December 31, 2022. The increase was primarily attributable to increased sand mine royalties. The sand mine commenced operations in September 2022 resulting in a full year of royalty revenue in 2023, as compared to four months for the year ended December 31, 2022.
Resource sales-related expenses. Resource sales related expenses decreased by $0.4 million, or 10% to $3.4 million for the year ended December 31, 2023, as compared to $3.8 million for the year ended December 31, 2022. The decrease was primarily attributable to lower utility expenses associated with sales of brackish water driven by the lower volumes sold during the year ended December 31, 2023, as compared to the year ended December 31, 2022.
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Other operating and maintenance expense. Other operating and maintenance expense increased by $0.1 million, or 3%, to $2.7 million for the year ended December 31, 2023, as compared to $2.6 million for the year ended December 31, 2022. The increase was primarily attributable to higher production taxes on oil and gas and skim oil royalties due to increased additional upstream production wells drilled and completed on our mineral acreage and increased produced water handling activity on our surface for the year ended December 31, 2023, as compared to the year ended December 31, 2022.
General and administrative expense. General and administrative expense, excluding share-based compensation expense, decreased by $0.3 million, or 5%, to $5.1 million for the year ended December 31, 2023, as compared to $5.4 million for the year ended December 31, 2022. The decrease was primarily attributable to lower professional services fees of $0.7 million for cancelled acquisitions and audit and tax services and lower employee compensation expense of $0.2 million related to short-term variable compensation offset by $0.6 million in increased corporate shared services allocation from WaterBridge. General and administrative expense, inclusive of share-based compensation, decreased by $53.9 million, or 129%, to income of $12.1 million for the year ended December 31, 2023, as compared to expense of $41.8 million for the year ended December 31, 2022. The decrease was primarily attributable to the change in share-based compensation expense of $53.6 million. Share-based compensation is associated with NDB LLC’s Incentive Units which are allocated to us. Such Incentive Units are classified as liability awards and primarily reflect the impacts of change in the liability remeasurement. See “Note 10—Share-Based Compensation” within the notes to our consolidated financial statements included elsewhere in this prospectus.
Depreciation, depletion, amortization and accretion. Depreciation, depletion, amortization and accretion increased by $2.0 million, or 30%, to $8.8 million for the year ended December 31, 2023, as compared to $6.7 million for the year ended December 31, 2022. The increase was primarily attributable to higher depletion expense of $1.4 million due to increased oil and gas royalty development activities and depreciation expense of $0.6 million related to capital expenditures associated with brackish water supply sales.
Interest expense, net. Interest expense, net increased by $3.9 million, or 126%, to $7.0 million for the year ended December 31, 2023, as compared to $3.1 million for the year ended December 31, 2022. The increase was primarily attributable to additional principal borrowings under our credit facility during the year ended December 31, 2023, as compared to the year ended December 31, 2022. See “—Liquidity and Capital Resources” for additional information regarding the Company’s debt instruments and interest expense.
Income tax expense. Income tax expense increased by $0.2 million, or 126%, to $0.4 million for the year ended December 31, 2023, as compared to $0.2 million for the year ended December 31, 2022. The increase was primarily attributable to higher Texas franchise tax related to increased taxable income. See “Note 7—Income Taxes” within the notes to our consolidated financial statements included elsewhere in this prospectus.
Liquidity and Capital Resources
Overview
Historically, our primary sources of liquidity have been capital contributions from NDB LLC, cash flows from operating activities and borrowings under our debt instruments. Following the completion of the IPO, our primary sources of liquidity are cash flows from operating activities and, if required, proceeds from borrowings under our credit facility. Our primary liquidity and capital requirements will be for our operating expenses, servicing of our debt, the payment of dividends to our shareholders, general company needs and investing in our business, including the potential acquisition of additional surface acreage, such as the Acquisitions. We believe that we are able to fully fund our ongoing capital expenditures, working capital requirements and other capital needs for the foreseeable short-term and long-term future through cash on hand and cash flows from our operating activities. Although we believe that we will be able to fully fund our ongoing capital expenditures,
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working capital requirements and other capital needs for the foreseeable future through cash on hand and cash flows from our operating activities, we may choose to use borrowings under our credit facility to finance our operating and investing activities.
We strive to maintain financial flexibility and proactively monitor potential capital sources, including equity and debt financing, to meet our target liquidity and capital requirements. If market conditions were to change and our revenues were to decline significantly or operating costs were to increase, our cash flows and liquidity could be reduced and we could be required to seek alternative financing sources. As of September 30, 2024, we had a working capital deficit, defined as current assets less current liabilities, of $11.7 million and we had cash and cash equivalents of $14.4 million. As of December 31, 2023, we had working capital of $25.2 million and cash and cash equivalents of $37.8 million.
Cash Flow
The following tables summarize our cash flow for the periods indicated:
Nine Months Ended September 30, 2024 Compared to the Nine Months Ended September 30, 2023
Nine Months Ended September 30, |
||||||||
2024 | 2023 | |||||||
(In thousands) | ||||||||
Consolidated Statement of Cash Flow Data: |
||||||||
Net cash provided by operating activities |
$ | 40,708 | $ | 40,559 | ||||
Net cash used in investing activities |
(432,021 | ) | (2,623 | ) | ||||
Net cash provided by (used in) financing activities |
367,907 | (45,995 | ) | |||||
|
|
|
|
|||||
Net decrease in cash and cash equivalents |
$ | (23,406 | ) | $ | (8,059 | ) |
Net Cash Provided by Operating Activities. Net cash provided by operating activities increased $0.1 million or less than 1% to $40.7 million for the nine months ended September 30, 2024, as compared to $40.6 million for the nine months ended September 30, 2023. The increase was attributable to cash flow related to working capital accounts, primarily accounts receivable, of $2.1 million offset by lower net income, net of non-cash items, of $2.0 million.
Net Cash Used in Investing Activities. Net cash used in investing activities increased $429.4 million or 16,515% to $432.0 million for the nine months ended September 30, 2024, as compared to $2.6 million for the nine months ended September 30, 2023. The increase was attributable to acquisition-related expenditures of $431.3 million consisting of the purchase of the Spring 2024 Acquisitions offset by lower capital expenditures, primarily supporting brackish water supply sales, of $1.9 million for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023.
Net Cash Provided by (Used In) Financing Activities. Net cash provided by financing activities increased $413.9 million or 900% to $367.9 million of cash provided by financing activities for the nine months ended September 30, 2024, as compared to cash used of $46.0 million for the nine months ended September 30, 2023. For the nine months ended September 30, 2024, cash provided by financing activities consisted of $271.3 million of proceeds from the IPO, net of offering costs and discount, $147.5 million of debt borrowings, net of repayments and debt issuance costs, primarily used to fund the Spring 2024 Acquisitions, offset by net distributions to member prior to the Corporate Reorganization of $50.9 million. For the nine months ended September 30, 2023, cash used in financing activities was attributable to member distributions of $105.2 million and by debt proceeds, net of repayments and issuance costs, of $59.2 million.
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Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022
Year Ended December 31, |
||||||||
2023 | 2022 | |||||||
(In thousands) | ||||||||
Consolidated Statement of Cash Flow Data: |
||||||||
Net cash provided by operating activities |
$ | 53,042 | $ | 20,500 | ||||
Net cash used in investing activities |
(2,772 | ) | (11,672 | ) | ||||
Net cash (used in) provided by financing activities |
(37,798 | ) | 3,269 | |||||
|
|
|
|
|||||
Net increase in cash and cash equivalents |
$ | 12,472 | $ | 12,097 | ||||
|
|
|
|
Net Cash Provided by Operating Activities. Net cash provided by operating activities increased $32.5 million to $53.0 million for the year ended December 31, 2023, as compared to $20.5 million for the year ended December 31, 2022. The increase was primarily attributable to higher net income, net of non-cash items of $18.1 million, lower federal income taxes paid of $8.4 million (see “Note 7—Income Taxes” within the notes to our consolidated financial statements included elsewhere in this prospectus), and an increase related to working capital accounts of $6.0 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022.
Net Cash Used in Investing Activities. Net cash used in investing activities decreased $9.0 million to $2.8 million for the year ended December 31, 2023, as compared to $11.7 million for the year ended December 31, 2022. The decrease was attributable to no acquisition-related expenditures for the year ended December 31, 2023 as compared to $8.4 million for the year ended December 31, 2022 and lower capital expenditures, primarily supporting brackish water supply sales, of $0.5 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022.
Net Cash Used in Financing Activities. Net cash used in financing activities increased $41.1 million to $37.8 million for the year ended December 31, 2023, as compared to cash provided by financing activities of $3.3 million for the year ended December 31, 2022. For the year ended December 31, 2023, cash used in financing activities consisted of $105.2 million in distributions to members offset by debt borrowings, net of repayments and debt issuance costs, of $69.1 million and deferred offering costs of $1.7 million. For the year ended December 31, 2022, cash provided by financing activities was attributable to member contributions of $11.0 million offset by debt repayments of $6.6 million and distributions to member of $1.1 million.
Capital Requirements
We focus our business model on entering into agreements under which our customers bear substantially all of the operating and capital expenditures related to their operations on our land, while minimizing our capital requirements for both current and future commercial opportunities, resulting in the ability to create significant free cash flows. Our contracts generally include inflation escalators, which, when combined with our relatively low operating and capital expenditures, may assist in mitigating our exposure to broader inflationary pressures. As a landowner, we incur the initial cost to acquire our acreage, but thereafter we incur modest development capital expenditures and operating expenses as it relates to operations on our land or our mineral and royalty interests, as such expenses are borne primarily by our customers. As a result, we expect that additional significant capital expenditures would be related to our acquisition of additional surface acreage, such as the Acquisitions, should we elect to do so.
The amount and allocation of future acquisition-related capital expenditures will depend upon a number of factors, including the size of the acquisition opportunity, our cash flows from operating activities and our investing and financing activities. For the three months ended September 30, 2024, we incurred approximately $0.8 million for acquisition-related capital expenditures. For the nine months ended September 30, 2024, we
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incurred approximately $431.3 million in acquisition-related capital expenditures, inclusive of $2.7 million of transaction-related expenses, in connection with the consummation of the Spring 2024 Acquisitions.
We periodically assess changes in current and projected cash flows, acquisition and divestiture activities and other factors to determine the effects on our liquidity. We believe that our cash on hand and cash flow from operating activities will provide us with sufficient liquidity to execute our current strategy. However, our ability to generate cash is subject to a number of factors that may directly or indirectly affect us, many of which are beyond our control, including commodity prices and general economic, financial, competitive, legislative, regulatory and other factors. If we require additional capital for acquisitions or other reasons, we may seek such capital through traditional borrowings under our debt instruments, offerings of debt and equity securities or other means. If we are unable to obtain funds when needed or on acceptable terms, we may not be able to complete acquisitions that may be favorable to us.
As our board of directors declares cash dividends to our Class A shareholders, we expect the dividend to be paid from Free Cash Flow. We do not currently expect to borrow funds or to adjust planned capital expenditures to finance dividends on our Class A shares. The timing, amount and financing of dividends, if any, will be subject to the discretion of our Board from time to time. See “Dividend Policy.”
Debt Instruments
Ag Loan
On October 14, 2021, our subsidiary, Delaware Basin Ranches, Inc., entered into a $65.0 million credit agreement (the “Ag Loan”) that was scheduled to mature on October 1, 2028. Borrowings under the Ag Loan were repaid in full with borrowings under our new credit facility in July 2023.
Credit Facility
On July 3, 2023, we entered into our credit facility which initially provided for (i) a four-year $100.0 million term loan facility (“Term Loan”) and (ii) a four-year $50.0 million revolving credit facility (“Revolving Credit Facility”), each of which matures on July 3, 2027. In connection with entering into our credit facility, we borrowed $100.0 million under the Term Loan and borrowed $25.0 million under the Revolving Credit Facility. Net proceeds from these borrowings were used to repay the $49.4 million outstanding under our prior credit facility and to make a distribution of $72.9 million to NDB LLC. On May 10, 2024, in order to fund a portion of the purchase price for the Spring 2024 Acquisitions, we entered into a credit agreement amendment (the “First Credit Agreement Amendment” and, together with the Second Credit Agreement Amendment, the “Credit Agreement Amendments”), which, among other things, increased the principal amount of the Term Loan to $350.0 million and the maximum available amount under the Revolving Credit Facility to $75.0 million. Following our entry into the First Credit Agreement Amendment, we borrowed $265.0 million under our credit facility to fund a portion of the purchase price of the Spring 2024 Acquisitions. On November 4, 2024, we entered into the Second Credit Agreement Amendment, which, among other things, increased the maximum available amount under our Revolving Credit Facility to $100.0 million, increased the principal amount of the Term Loan to $300.0 million, with an additional $75.0 million uncommitted delayed draw term loan, and eliminate the Company’s obligation to make Term Loan amortization payments. Following our entry into the Second Credit Agreement Amendment, we borrowed $55.0 million to fund a portion of the purchase price of the Wolf Bone Acquisition. Our credit facility is secured by a first-priority lien on substantially all of our assets and guaranteed by us and our subsidiaries (other than certain immaterial subsidiaries). Our credit facility includes certain affirmative and restrictive covenants common in such agreements that apply to DBR Land and its subsidiaries. As of December 30, 2024, we had $385.0 million of total debt outstanding, inclusive of $355.0 million outstanding under the Term Loan and $30 million outstanding under our Revolving Credit Facility. See “Note 8–Debt” within the notes to our consolidated financial statements included elsewhere in this prospectus for further information with respect to such affirmative and restrictive covenants.
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The estimated fair value of our credit facility approximates the principal amount outstanding because the interest rates are variable and reflective of market rates and the debt may be repaid, in full or in part, at any time without penalty.
We may elect for outstanding borrowings under our credit facility to accrue interest at a rate based on either (i) a forward-looking term rate based on the secured overnight financing rate (“Term SOFR”) plus 0.10%, or (ii) the base rate, in each case plus an applicable margin. Borrowings under our credit facility accrue interest based on a five-tiered pricing grid tied to our current leverage ratio. The applicable margin ranges from (i) prior to the consummation of the IPO, 3.00% to 4.00% in the case of Term SOFR loans and letter of credit fees, and 2.00% to 3.00% in the case of base rate loans, and commitments fees of 0.50%, and (ii) following consummation of the IPO, 2.75% to 3.75% in the case of Term SOFR loans and letter of credit fees, and 1.75% to 2.75% in the case of base rate loans, and commitment fees range from 0.375% to 0.50%. Our credit facility is secured by a first priority security interest in substantially all of our assets and the assets of our restricted subsidiaries, which are party to our credit facility as guarantors, and all outstanding equity interests issued by DBR Land, which are held by OpCo.
As of September 30, 2024, we had $281.3 million of outstanding borrowings consisting of $15.0 million of revolving credit borrowings and $266.3 million of term loan borrowings. The weighted average interest rate on the total amount of borrowings outstanding under new credit facility for the three months ended September 30, 2024 was 8.54% in the case of revolving credit borrowings, and 8.56% in the case of term loan borrowings. The weighted average interest rate on the total amount of borrowings outstanding under new credit facility for the nine months ended September 30, 2024 was 8.45% in the case of revolving credit borrowings and 8.49% in the case of term loan borrowings. We are currently in compliance with all affirmative and negative covenants under our new credit facility.
Critical Accounting Policies and Estimates
The preparation of our financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and disclosures of contingent assets and liabilities. We consider our critical accounting estimates those that require subjectivity and that could inherently influence our financial result based on changes in those estimates.
Share-Based Compensation
Incentive Units
The Company accounts for share-based compensation expense for incentive units granted in exchange for employee services.
Prior to the Division, our management and employees participated in an equity-based incentive unit plan, managed by NDB LLC, the direct parent of the Company.
The NDB Incentive Units represented a substantive class of equity of NDB LLC and were accounted for under FASB ASC 718. Features of the NDB Incentive Units included the ability for NDB LLC to repurchase NDB Incentive Units during a 180-day option period, whereby the fair value price was determined as of the termination date, not the repurchase date, which temporarily takes away the rights and risks and rewards of ownership from the NDB Incentive Unit holder during the option period. Under ASC 718, a feature for which the employee could bear the risks, but not gain the rewards, normally associated with equity ownership requires liability classification. NDB LLC classified the NDB Incentive Units as liability awards. The liability related to the NDB Incentive Units was recognized at NDB LLC as the entity responsible for satisfying the obligation. Share-based compensation income or expense pushed down to the Company was recognized as a deemed non-cash contribution to or distribution from member’s equity on the condensed consolidated balance sheets. The
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share-based compensation income or expense was recognized consistent with NDB LLC’s classification of a liability award resulting in the initial measurement, and subsequent remeasurements, recognized ratably over the vesting period.
At each reporting period, the NDB Incentive Units were remeasured at their fair value, consistent with liability award accounting, using a Monte Carlo Simulation. The Monte Carlo Simulation requires judgment in developing assumptions, which involve numerous variables. These variables include, but are not limited to, the expected unit price volatility over the term of the awards, the expected distribution yield and the expected life of the NDB Incentive Unit. The vested portion of the NDB Incentive Unit liability was allocated pro rata to the Company, and other NDB LLC operating subsidiaries, as general and administrative expense or income on the consolidated statements of operations. The allocation was based on the Company’s share of the aggregate equity value derived in NDB LLC’s business enterprise valuation.
The Company updated its assumptions each reporting period based on new developments and adjusted such amounts to fair value based on revised assumptions, if applicable, over the vesting period. The fair value measurement was based on significant inputs not observable in the market, and thus represented Level 3 inputs within the fair value hierarchy.
The risk-free rate was determined by reference to the U.S. Treasury yield curve in effect at the time of grant of each award and updated at each balance sheet date for the time period approximating the expected term of such award. The expected distribution yield was based on no previously paid distributions and no intention of paying distributions on the NDB Incentive Units for the foreseeable future.
Due to the Company not having sufficient historical volatility, the Company used the historical volatilities of publicly traded companies that were similar to the Company in size, stage of life cycle and financial leverage.
On July 1, 2024, as a result of the Division, holders of NDB Incentive Units received an identical number of Incentive Units consisting of time-based awards of profits interests in LandBridge Holdings. Following the Division, the Incentive Units held at LandBridge Holdings are the only Incentive Units attributable and allocated to the Company.
Further, as part of the Division, the repurchase feature triggering liability award accounting of the NDB Incentive Units under the Amended and Restated Limited Liability Company Agreement of NDB LLC (the “NDB LLC Agreement”) was amended in connection with the entry into the LandBridge Holdings Limited Liability Company Agreement, dated July 1, 2024 (the “Holdings LLC Agreement”). Features of the Incentive Units include the ability for LandBridge Holdings to repurchase Incentive Units during a 180-day option period, whereby the fair value price is determined as of the repurchase date. As such, beginning on July 1, 2024, the Incentive Units are no longer required to be remeasured at fair value, as the modification results in equity award classification and accounting. See “Note 8—Share-Based Compensation” for additional information related to the modification.
Distributions attributable to Incentive Units are based on returns received by investors of LandBridge Holdings once certain return thresholds have been met. Incentive Units are solely a payment obligation of LandBridge Holdings, and neither the Company nor OpCo has any cash or other obligation to make payments in connection with the Incentive Units.
Revenue Recognition
Oil and gas royalties
Oil and gas royalties are received in connection with oil and natural gas mineral interests owned by the Company. Oil and gas royalties are recognized as revenue as oil and gas are produced or severed from the
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mineral lease. The oil and gas royalties we receive includes variable consideration that is dependent upon market prices for oil and gas, and producer specific location and contractual price differences. As a result, our oil and gas royalty revenues are typically constrained at the inception of the contract but will be resolved once volumes are produced and settled. Oil and gas royalty payments are typically received one to three months following the month of production. We accrue oil and gas royalties produced but not yet paid based on the historical or estimated royalty interest production and current market prices, net of estimated location and contract pricing differentials. The difference between estimated and actual amounts received for oil and gas royalties are recorded in the period the payment is received.
We monitor drilling and completion activity on our mineral acreage position from publicly available sources to identify when new royalty interest production may be coming online. We estimate our royalty interest ownership in new production wells based on our assessment of available information. Ultimate determination of division order interest from the operator could results in amounts that differ from our initial estimates. The differences related to estimated interest estimated and actual division order interest are recorded in the period in which final division orders are issued or in the period in which the initial payment is received.
During the three and nine months ended September 30, 2024 and 2023, we accrued $1.3 million and $3.6 million of oil and gas royalties in our condensed consolidated statements of operations, respectively.
During years ended December 31, 2023 and 2022, we accrued $3.2 million and $4.8 million of oil and gas royalties in our condensed consolidated statements of operations, respectively.
Recently Issued Accounting Pronouncements
We adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), on January 1, 2023, which changed how we account for credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The adoption of this did not have a significant impact on our financial statements.
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280). This guidance requires a public entity, including entities with a single reportable segment, to disclose significant segment expenses and other segment items on an annual and interim basis and provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. We plan to adopt this guidance and conform with the applicable disclosures retrospectively when it becomes mandatorily effective for our annual report for the year ending December 31, 2024.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740). This guidance further enhances income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. We plan to adopt this guidance and conform with the disclosure requirements when it becomes mandatorily effective for our annual report for the year ending December 31, 2025.
Internal Controls and Procedures
We are not currently required to comply with the SEC’s rules implementing Section 404 of the Sarbanes-Oxley Act and are therefore not required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. We are required to comply with the SEC’s rules implementing Section 302 of the Sarbanes-Oxley Act, which requires our management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of our internal control over financial reporting. We will not be required to make our first assessment of the effectiveness of our internal control over financial reporting under Section 404 until our second annual report on Form 10-K after our IPO.
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Further, our independent registered public accounting firm is not yet required to formally attest to the effectiveness of our internal controls over financial reporting and will not be required to do so for as long as we are an “emerging growth company” and/or a “smaller reporting company” under applicable federal securities laws.
Off Balance Sheet Arrangements
We currently have no material off-balance sheet arrangements.
Quantitative and Qualitative Disclosure about Market Risk
We are exposed to market risks, which includes the effects of adverse changes in commodity prices and counter-party and customer credit risks and interest rate risk as described below. The primary objective of the following information is to provide quantitative and qualitative information about our potential exposure to market risks. The term “market risk” refers to the risk of loss arising from adverse changes in commodity prices and counter-party and customer credit and interest rate risk. The disclosures are not meant to be precise indicators of expected future losses, but rather indicators of reasonably possible losses. This forward-looking information provides indicators of how we view and manage our ongoing market risk exposures.
Commodity Price Risks
One of our major market risk exposures relates to the prices that our customers receive for the oil and natural gas produced from, or serviced on, our land. The market for the use of our land and its resources is indirectly exposed to fluctuations in the price of oil and natural gas, to the extent such fluctuations impact drilling, completion and production activity levels and thus impact the activity levels of our customers in the exploration and production and oilfield services industries. Realized prices are primarily driven by the prevailing prices for oil and natural gas in the United States. We are also directly exposed to these risks with respect to revenues we receive from the oil and natural gas interests. Pricing for oil and natural gas has been historically volatile and unpredictable, and we expect this volatility to continue in the future.
During the past five years, the Henry Hub spot market price for natural gas has ranged from a low of $1.25 per MMBtu in March 2024 to a high of $23.86 per MMBtu in February 2021. The posted price for WTI has ranged from a low of negative $36.98 per barrel in April 2020 to a high of $123.64 per barrel in March 2022. As of September 30, 2024, the Henry Hub spot market price of natural gas was $2.65 per MMBtu and the posted price for oil was $68.75 per barrel. Lower prices may not only decrease our revenues, but also potentially the amount of oil and natural gas that our customers can produce or service economically. We expect this market will continue to be volatile in the future. A substantial or extended decline in commodity prices may adversely affect our results of operations, cash flows and financial position.
We do not currently intend to hedge our indirect exposure to commodity price risk. We may in the future enter into derivative instruments, such as collars, swaps and basis swaps, to partially mitigate the impact of commodity price volatility. These hedging instruments would allow us to reduce, but not eliminate, the potential effects of the variability in cash flow from operations due to fluctuations in oil and natural gas prices.
Market Risks
Demand for the use of land and resources are largely dependent upon the level of activity in the energy industry in the Permian Basin. These activity levels are influenced by numerous factors over which we have no control, including: the supply of and demand for oil and natural gas; the level of prices and expectations about future prices of oil and natural gas; the cost of exploring for, developing, producing and delivering oil and natural gas; the expected rates of declining current production; the discovery rates of new oil and natural gas reserves; available pipeline, rail and other transportation capacity; weather conditions; domestic and worldwide economic
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conditions; political instability domestically, as a result of recent elections or otherwise, and in oil-producing countries; environmental regulations; technical advances affecting energy consumption; the transition to a low-carbon economy; the price and availability of alternative fuels; technological advancements in the production of alternative energy; the ability of energy companies to raise equity capital and debt financing; and industry consolidation and merger and divestiture activity among energy companies.
The level of U.S. energy production, including oil and natural gas development activity, is volatile. Any prolonged and substantial reduction in oil and natural gas prices would likely affect development and production activity levels and therefore affect demand for oil and natural gas and the use of our land and resources. A material decline in energy, including oil and natural gas, prices or Permian Basin activity levels could have an adverse effect on our results of operations, cash flows and financial position.
Counterparty and Customer Credit Risks
We are subject to risks of loss resulting from nonpayment or nonperformance by our counter-parties and customers of their contractual obligations. Our principal exposure to credit risk is through receivables generated by the activities of customers on our land. The inability or failure of our significant customers to meet their obligations to us or their insolvency or liquidation may adversely affect our financial results. We examine the creditworthiness of any counter-party and customer and monitor our exposure to such counter-parties and customers through credit analysis, and monitoring procedures, including reviewing credit ratings, financial statements and payment history. For the nine months ended September 30, 2024, four customers accounted for 25%, 15%, 12% and 10% of our total revenues, respectively. For the year ended December 31, 2023, three customers accounted for 15%, 14%, and 13% of our total revenues, respectively. For the year ended December 31, 2022, we had two customers that accounted for 12% and 12% of our total revenues, respectively. No other customer accounted for more than 10% of total revenues. However, we believe that the credit risk associated with our counter-parties and customers is acceptable.
Interest Rate Risks
Our ability to borrow and the rates offered by lenders can be adversely affected by deterioration in the credit markets and/or deterioration of our credit profile rating. We may elect for outstanding borrowings under our credit facility to accrue interest at a rate based on either the Term SOFR, or the base rate, plus an applicable margin, which exposes us to interest rate risk to the extent we have borrowings outstanding under our credit facility.
As of September 30, 2024, we had $281.3 million of outstanding borrowings consisting of $15.0 million of revolving credit borrowings and $266.3 million of term loan borrowings. The weighted average interest rate on the borrowings outstanding under our Credit Facilities for the nine months ended September 30, 2024 was 8.45% in the case of revolving credit borrowings, and 8.49% in the case of term loan borrowings. Assuming no change in the amount outstanding, the impact on interest expense of a 1.0% increase or decrease in the weighted average interest rate would be $2.8 million per year. We do not currently have or intend to enter into any derivative hedge contracts to protect against fluctuations in interest rates applicable to our outstanding indebtedness. See “—Debt Instruments—Credit Facility.”
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INDUSTRY
Our land holdings are strategically located in and around the Delaware Basin in Texas and New Mexico, the most active oil and natural gas producing region of the prolific Permian Basin. The Permian Basin is among the most economic, liquids-rich hydrocarbon resources in the United States. Activity in the region is dominated by large, generally publicly listed, well-capitalized producers. A significant number of well locations are available to drill on or near our surface acreage at prices of $75 per barrel WTI NYMEX for oil and $3.00 per MMBtu Henry Hub NYMEX for natural gas.
Furthermore, the Northern Delaware Basin is capturing a growing share of production activity in the Permian Basin. This drilling activity and production has required a significant build out of related infrastructure in the region and for a large amount of surface acreage to support operations.
Surface acreage is a critical component of energy development and production. Access to expansive surface acreage is necessary for oil and natural gas development, solar generation, power storage projects and hydrogen development. In addition to the land required for the development and installation of energy producing assets, there is a significant industrial economy that exists to service and support energy development.
Due to the location of our land in and around the Delaware Basin, the majority of our current revenues are generated from the hydrocarbon value chain. The infrastructure that our customers have constructed on our acreage to support the development and production of oil and natural gas, attracts additional infrastructure development and new businesses that can take advantage of that existing infrastructure to pursue additional commercial opportunities. For example, the existence of electrical and telecommunications infrastructure and roads generate revenue for us and allow for other uses of our acreage, which generate additional fees from the use of our land and its resources. Our land also contains critical resources for oil and natural gas development that we sell or lease to our customers, including brackish water, sand and subsurface pore space for produced water injection.
Hydrocarbon Value Chain
Access to surface acreage is critical to all stages of hydrocarbon production, which includes well site preparation, drilling and completion and long-term production. We believe that areas on and around our surface acreage have a deep inventory of economically competitive undrilled well locations that will require long-term access to our surface acreage and its resources by our customers. We believe that as more well locations are identified and developed on and around our surface acreage, activity on our surface acreage has the potential to grow, as each additional well location will potentially generate (i) wellsite preparation revenue streams for locations on our land and (ii) drilling and completion and long-term production revenue streams for locations on and around our land, although there is no guarantee that we will generate additional revenue from a given well location that is not on our surface acreage, as we will compete with other landowners to provide the necessary resources for operations off-site of our land.
We believe that the remaining economic inventory of undrilled wells on our acreage will result in continued oil and natural gas development activity on and near our surface acreage. Produced water naturally exists in underground formations and is brought to the surface during crude oil and natural gas production. Produced water is produced throughout the entire life of the well and is of particular importance to operators in the Permian Basin generally and the Delaware Basin in particular given the amount of produced water significantly exceeds the amount of the related oil and natural gas production. Produced water must be reliably separated, handled and recycled or disposed in order for these wells to be brought online and remain in production, driving continuing demand on our acreage. These growing produced water volumes on and around our surface acreage will require customers to access and use our surface acreage throughout all stages of energy development and production.
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Wellsite Preparation: Prior to drilling a well, the producer will identify the location for a wellsite. In order to prepare the wellsite for the required drilling rig, trucks and equipment, the producer will build roads to access the wellsite and a well pad for the drilling and hydraulic fracturing operations and future wellbores. During the wellsite preparation phase, we generate revenues from the following:
• | Sales of Caliche: Producers use caliche, which is a mineral deposit of gravel, sand and nitrates, to build roads to access the wellsite and a well pad to allow wellbores to be drilled, completed and equipped for oil and natural gas production. Caliche can also be used for the construction of highways and other infrastructure projects. Caliche that is purchased from our land can be used for activities on, or in the general vicinity of, our land. |
• | Surface Use Payments for Utility, Telecommunications, Pipeline, Well Pad and Road Easements: Numerous easements are needed from the surface owner in the preparation of a wellsite, including for electrical and telecommunications infrastructure to provide power and communications to supporting facilities and equipment, pipelines to transport oil, natural gas and produced water, well pads for the equipment and facilities necessary for drilling and completion activities and roads to provide access to the wellsite. |
Drilling and Completion: Once the producer drills a well, it uses hydraulic fracturing to complete that well prior to production. During this process, the producer pumps significant amounts of water and sand into the wellbore under high pressure to fracture the formation and stimulate production. Producers are often obligated to purchase the water, and sometimes the sand, used for hydraulic fracturing from the owner of the surface acreage on which they are operating. During drilling and completion, we generate fees from the following:
• | Fees from Brackish Water Sales: Producers purchase brackish water from us to use in hydraulic fracturing. This water can be used for completions on, or in the general vicinity of, our land. |
• | Fees from Sand Mining: We have leased portions of our land for the development of sand mines. The sand mine operators pay us a fee per ton of sand extracted, which is generally used in hydraulic fracturing. Our sand mine customers are also required to purchase water from us that is used in their mining operations. The sand that is mined on our acreage can be used for completions throughout the Delaware Basin. |
Over the past several years, producers have been consistently increasing the lateral lengths of the wells they are drilling and completing. The longer the lateral, the more sand and water that is needed to hydraulically fracture the well.
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Long-Term Production: Following the completion of a well, water, oil and natural gas are produced and separated into individual streams as they exit the well. This production stream may continue for decades, depending on the characteristics of the specific well. During the production phase, we generate fees from our customers from the following:
• | Fees from Water Handling: Following the separation of the produced water from oil and natural gas into individual streams, the produced water is transported away from the well, primarily through pipelines. Wells in the Delaware Basin produce on average approximately four barrels of water for each barrel of oil, with that ratio often increasing over the lifetime of the well. Additionally, deeper formations that producers have been increasingly targeting, such as the Wolfcamp B and Wolfcamp C, typically have higher water-to-oil production ratios relative to the formation that is currently the most commonly drilled, the Wolfcamp A. WaterBridge and other operators of produced water handling facilities located on our surface acreage pay us a fee for each barrel of water handled and skim oil recovered on our land. Much of the produced water handled on our land originates from wells that are not located on our acreage. Without giving effect to the Recent Acquisitions, we believe our land supports over 3.5 million barrels per day of produced water handling capacity as of December 30, 2024, assuming 25,000 barrels per day produced water handling permits and one-mile spacing between all future produced water handling facilities (permit availability and water injection capacity subject to the applicable government regulatory authority). As of December 30, 2024, WaterBridge and other producers operated approximately 650,000 bpd of existing produced water handling capacity on the western portion of our Stateline Position and 435,000 bpd operating capacity on the eastern portion of our Stateline Position. We believe the geology underlying our land supports additional produced water handling capacity of approximately 2.6 million barrels per day on the western portion of our Stateline Position, approximately 1.5 million barrels per day on the eastern portion of our Stateline Position, and approximately 1.0 million barrels per day on our Northern Position. |
• | Royalties from Oil and Natural Gas Production: We own 4,180 gross mineral acres. When hydrocarbons are produced from wells in which we have leased our mineral interests, we are entitled to receive a royalty payment based on a percentage of the revenue generated from the sales of the hydrocarbons. |
• | Pipeline Right-of-Way Payments: We receive payments from pipeline operators as compensation for providing a right-of-way for a pipeline to cross our land. Given the amount of oil and natural gas activity in the region, we have a significant number of pipelines that cross our land. In addition to one-time up-front payments, midstream operators must also pay fees for a renewal every five to 10 years, depending on the terms of the particular agreement. If a midstream operator elects not to pay the renewal, it is required to remove the pipeline and restore the right-of-way, which, together with any continued need for the pipeline to continue to operate the underlying business, provides a significant incentive to renew the right-of-way. |
• | Lease Fees for Processing Plants: Midstream operators need access to land in order to build plants that process wet gas into residue gas and NGLs. As gas-to-oil ratios have been rising, the amount of gas produced in the Permian Basin has also increased. A processing plant typically requires 20-40 acres of land and also results in the need for related pipeline and other infrastructure. We anticipate that we will lease our land to midstream operators to construct new processing plants, and we are currently in negotiations to lease a portion of our acreage for the construction of a new processing plant on our land. |
Other Land Uses
Certain areas of our surface acreage are adjacent to major highways and transmission lines, and as a result, we believe that there will be significant opportunities to drive additional uses of our land, which may generate additional surface acreage payments over time. Payments from such opportunities will be determined on a case-by-case basis, taking into account the type of activity, size of the activity and resources used, among other
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things. As shown below, we have identified and are currently pursuing opportunities to receive surface use payments for the following existing and potential future uses of our land:
• | Solar Power Generation: Our expansive land position provides an attractive location for solar development, in part, due to the existing electric transmission lines and other infrastructure in the region that have historically served oil and natural gas power needs. The area also has favorable solar irradiance, local power demand from oil and natural gas activity, a favorable regulatory environment and flat arid land that promotes development. We are actively discussing opportunities with solar project developers to develop future solar projects on our surface acreage. Through our subsidiary, DBR Solar, and our consulting partners, we are permitting the construction of one facility with 250-megawatts of solar generation capacity on our Southern Position. We are currently evaluating the potential sale of the project after receiving the facilities portion of the Full Interconnection Study (“FIS”) from American Electric Power Texas and a first draft of the Standard Generation Interconnection Agreement as of April 2024. We expect to close the initial phase of the sale upon the receipt of the remaining portions of the FIS report by the end of the first half of 2025. Once acquired by a solar operator, we expect site design to start immediately, with construction commencement in late 2026 to early 2027 and commercial operations in first quarter 2028. We have identified an additional section of land adjacent to the 250 megawatt project, which we believe could support a second phase with an estimated 100 to 130 megawatt of additional solar power generation. |
We expect to receive an upfront, one-time payment from the sale of these solar projects, as well as fees associated with the use of our land during the construction period and long-term operation of the solar projects.
• | Cryptocurrency Mining and Data Centers: In recent years, cryptocurrency miners and data center operators have established operations in the Permian Basin to take advantage of lower power prices. ERCOT has classified cryptocurrency mining operations and data centers as Large Flexible Loads (“LFLs”), citing recent growing demand from this new industrial load type. Our location is also strategically located to benefit from readily available power supply sources such as natural gas and renewable energy resources including wind and solar. In addition to power supply access, |
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cryptocurrency mining and data centers require contiguous tracks of land, water cooling and fiber optic infrastructure, which we believe our land supports. We have the opportunity to receive surface use royalties and revenues for acreage use needed for business operations of these facilities and related infrastructure on our land. Cryptocurrency mining and data centers can also require significant volumes of water to keep the servers cool. We have the opportunity to receive a fee for water supplied to cryptocurrency mining and data centers for this purpose. |
• | Non-Hazardous Oilfield Reclamation and Solid Waste Facilities: Our affiliate, Desert Environmental, has commenced operations at two non-hazardous oilfield reclamation and solid waste facilities for oilfield waste on our land. We believe that our surface acreage is attractive for the construction of additional remediation facilities, given our proximity to various sources of energy production and related services activity and major roadways in the area, which allow easy access for the transportation of waste products. |
• | Commercial Fueling Stations: We have an existing commercial fueling station on our land and we are currently pursuing opportunities to build commercial fueling stations on our land adjacent to interstates and highways. Given the amount of energy-related vehicle traffic in the region, there is significant demand along major thoroughfares for such fueling stations. |
Other surface acreage uses that we believe present opportunities longer-term include:
• | Power Storage: Due to the intermittent nature of solar and wind energy, production areas reliant on renewable energy generation must have long-duration storage capabilities. Energy storage can provide more effective use of intermittent solar and wind energy resources. Pairing or co-locating an on-grid energy storage system (“ESS”) with wind and solar energy power plants can provide supplemental power supply when direct generation is limited and store excess power when generation exceeds demand or capacity. ESSs also allow for storing and using renewable energy where there is no access to an electric grid. We are currently developing relationships with power storage and battery project developers who are interested in exploring projects on our land. |
• | Water Treatment: Due to the amount of produced water generated in the Delaware Basin and certain initiatives in the oil and natural gas industry to identify alternatives to the handling of produced water, we are currently in discussions with developers of water treatment and desalination facilities that treat and/or desalinate produced water for beneficial reuse, which could include using treated water to irrigate non-food crops. |
• | Hydrogen Production: The Permian Basin is an attractive region for future hydrogen development given the abundance of resources necessary for hydrogen production along with existing infrastructure. Natural gas can be used to produce blue hydrogen when combined with carbon capture, and hydrogen production is water intensive. The Permian Basin has abundant availability of natural gas and water (both produced water and brackish water). Additionally, hydrogen can be blended into existing natural gas streams for transport in existing pipelines, or existing pipes can be converted to transport hydrogen or ammonia. We have been approached by hydrogen project developers that are currently exploring hydrogen hub projects on our land. |
• | H2S Treatment and Storage: Hydrogen sulfide (H2S) is a byproduct generated from oil and gas production and is required to be separated, treated and handled via acid gas injection (“AGI”) wells. We believe our land provides an attractive position for oil and gas producers and midstream operators to develop additional H2S handling facilities and AGI wells in order to support oil and gas development in the Delaware Basin. |
• | Carbon Capture and Sequestration: The IRA provides tax credits for carbon capture, utilization and storage (“CCUS”) to incentivize development of CCUS facilities. Due to the level of industrial activity in the region, there are significant opportunities to develop CCUS projects on or around our land, subject to certain restrictions, including the consent of affected mineral owners. |
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BUSINESS
Company Overview
Land is critical to energy development and production. We own approximately 273,000 surface acres in and around the Delaware sub-basin in the prolific Permian Basin, which is the most active region for oil and natural gas exploration and development in the United States. Access to expansive surface acreage is necessary for oil and natural gas development, solar power generation, power storage, data centers and non-hazardous oilfield reclamation and solid waste facilities. Further, the significant industrial economy that exists to service and support energy development requires access to surface acreage to support those activities. Our strategy is to actively manage our land and resources to support and encourage oil and natural gas development and other land uses that will generate long-term revenue and Free Cash Flow for us and returns to our shareholders.
The Delaware Basin is the most active oil and natural gas development and production region of the prolific Permian Basin due to the abundant remaining oil and natural gas resources and low break-even cost of development. Activity in the Delaware Basin is dominated by large, generally publicly listed, well-capitalized producers. Our land is located predominantly in the heart of the Delaware Basin, along and near the regulatory divide of the Texas-New Mexico state border, which represents some of the most productive acreage in the Delaware Basin with a high concentration of hydrocarbons and prolific drilling and completion activity. We believe that our strategic location positions us to capture additional revenues from the growth in infrastructure required to facilitate the development of these resources.
We share a financial sponsor, Five Point, and our management team with WaterBridge. WaterBridge is one of the largest water midstream companies in the United States and operates a large-scale network of pipelines and other infrastructure in the Delaware Basin that, as of December 30, 2024, handled more than 2.0 million bpd of water associated with oil and natural gas production, with approximately 3.4 million bpd of total handling capacity. These relationships provide our shared management team visibility into key areas of oil and natural gas production and long-term trends, which we leverage to encourage and support the development of critical infrastructure on our land and generate additional revenue for us.
Five Point and our management team formed LandBridge to acquire, manage and expand a strategic land position in the heart of the Delaware Basin to support the development of WaterBridge’s large-scale produced water handling infrastructure and to actively manage our land and resources to support and encourage broader industrial and commercial development. Since our formation, our management and Five Point have successfully started and expanded businesses that generate new and growing revenues for us by capturing and monetizing commercial activity both on and near our land. Examples of the benefits of these relationships include WaterBridge’s strategic partnership with Devon Energy, which supports the development of significant additional infrastructure on and around our land. We believe that WaterBridge’s future growth will continue to underpin increased revenues for us, into which we have significant visibility and that requires minimal investment by us. Additionally, Five Point formed Desert Environmental to develop non-hazardous oilfield reclamation and solid waste facilities on our land.
In addition to our relationships with WaterBridge and Desert Environmental, we have actively grown third-party revenues. We utilize a collaborative commercial approach with a diversified customer base to provide availability, timing and consistent terms for our customers’ development activities on our land. As a landowner, we benefit from these activities by charging fees and royalties based on our customers’ usage of our land and resources. Furthermore, the cost of development on our land is primarily borne by our customers, allowing us to benefit from their growth on our land while deploying minimal capital of our own. In furtherance of our strategy, we and WaterBridge entered into agreements with TPL, one of the largest landowners in Texas, to provide reciprocal crossing rights and produced water royalty and revenue sharing across an area of mutual interest that provides our customers (including WaterBridge) with greater development efficiency and enables them to increase their operations on our land. Please see “—Our Assets—Our Stateline Position” for more information related to our agreements with TPL.
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We generate multiple revenue streams from the use of our surface acreage, the sale of resources from our land and oil and gas royalties.
• | Surface Use Royalties and Revenues: We receive fees from our customers for the use of our surface acreage for their business operations, which currently include oil and natural gas development and production, produced water transportation and handling, pipeline and electrical infrastructure, a commercial fuel distribution facility and other commercial and industrial activities, including non-hazardous oilfield reclamation and solid waste facilities. This revenue stream will also include revenues generated from two solar facilities currently being developed on our land. |
• | Resource Sales and Royalties: We receive fees from the sale of resources from our land, including sales of brackish water utilized in connection with oil and natural gas well completions and royalties from sand extracted from our land for oil and natural gas operations. These resources are used by our customers in their projects on and around our land and elsewhere throughout the Delaware Basin. |
• | Oil and Gas Royalties: We receive a share of recurring revenues from the production of oil and natural gas on our 4,180 gross mineral acres through our ownership of mineral interests, of which approximately 96% underlie our surface acreage. Other than our gross mineral acres, we do not own the mineral interests that underlie our surface acreage. |
A key attribute of our business model is entering into agreements under which our customers bear substantially all of the operating and capital expenditures related to their operations on our land, with minimal capital requirements of our own for both current and future commercial opportunities, resulting in the ability to create significant Free Cash Flow.
Active Land Management
We actively manage the commercial development of our land, seeking to maximize the long-term value of our surface acreage and our resources by identifying and developing, or supporting the development of, new uses and revenues from our land. We communicate frequently with existing and potential customers with respect to new opportunities and revenue streams from our land. Unlike landowners focused primarily on agricultural or livestock operations, we proactively promote our land as a location for commercial and industrial uses, and we offer our customers an efficient contracting process that provides a holistic solution to their operational needs.
Further, we are actively growing revenue streams beyond the hydrocarbon value chain to maximize utilization of our land and resources. As we have continued to attract and support operations on our land, the resulting infrastructure provides the opportunity to attract new businesses that can take advantage of that existing infrastructure to pursue additional commercial opportunities. For example, roads and power and other infrastructure in place on our land reduce development costs for natural gas processing facilities, cryptocurrency mines and data centers. The infrastructure on our land supports the development and production of oil and natural gas, which attracts additional uses of our land near the areas of drilling and production, such as onsite power generation, H2S treatment and storage, pipelines and road construction. While these additional activities generate revenue for us, they are not land intensive and allow for other uses of our land.
We target opportunities that make the most efficient use of our surface acreage, allow the same surface acreage to be used for multiple activities and/or improve the value of the surrounding acreage, and have entered into, or are currently pursuing, primarily long-term commercial relationships with businesses focused on solar power generation, power storage, cryptocurrency mining and data management, as well as other renewable energy production, among other industries and applications. For example, we recently entered into a lease development agreement with a joint venture between a third-party developer and funds affiliated with Five Point for the development of a data center and related facilities on approximately 2,000 of our surface acres in Reeves County, Texas. Similar to the other operations conducted on our land, we expect to enter into surface use or similar agreements with the owners of these projects from which we expect to receive surface use fees and other payments in connection with the utilization of our land, but we do not expect to own or operate such projects or expect to incur significant capital expenditures in connection therewith.
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For the three and nine months ended September 30, 2023, we generated $11.5 million and $40.5 million, respectively, of non-oil and gas royalty revenue, or $159 and $562, respectively, per owned surface acre. For the three and nine months ended September 30, 2024, we increased non-oil and gas royalty revenue to $25.6 million and $61.9 million, respectively, or $116 and $409, respectively, per owned surface acre. The three and nine months ended September 30, 2024 include the effects of the Lea County Acquisition beginning on March 18, 2024 and the Spring 2024 Acquisitions beginning on May 10, 2024. For the year ended December 31, 2023, we generated $52.1 million of non-oil and gas royalty revenue, or $724 per owned surface acre.
Land and Produced Water Relationship
Produced water naturally exists in underground formations and is brought to the surface during crude oil and natural gas production throughout the entire life of an oil or natural gas well. Produced water must be reliably separated and handled in order for these wells to be brought online and remain in production. The gathering, treating, handling and recycling of produced water requires both access to significant surface acreage for operations and subsurface reservoirs that are porous, uniform and stable where produced water can be injected and sequestered.
Access to significant surface acreage and subsurface reservoirs for produced water handling is of particular importance to operators in the Delaware Basin, as the Delaware Basin has experienced significant growth in oil and natural gas production activity over the last three years with a resultant increase in produced water volumes. We believe that this growth in oil and natural gas production activity will require increased produced water handling capacity, as the amount of produced water produced from wells in the Delaware Basin significantly exceeds the amount of the related oil and natural gas production.
Produced water handling facilities and their access to specific geologic zones are regulated at the state level and are required to meet guidelines imposed by the relevant state agencies. Because the Delaware Basin straddles the Texas–New Mexico state border, the planning, permitting and building of produced water infrastructure is dependent upon the laws and regulations of either Texas or New Mexico.
In contrast to New Mexico, Texas generally provides a more favorable regulatory environment for produced water permitting. The combination of favorable geological characteristics and a comparatively less restrictive regulatory environment drives increased demand for produced water handling facilities on the Texas side of the Texas-New Mexico state border. Our Stateline and Northern Positions benefit from the demand for surface acreage and pore space in Texas that is driven by the regulatory divide between Texas and New Mexico and the level of oil and gas activity in the Northern Delaware Basin. New Mexico also presents a more restrictive regulatory and hydrological environment for sourcing brackish water used for oil and natural gas well completion activity. As a result, much of the brackish water supplied to the oil and natural gas industry in New Mexico is sourced from Texas. Our Stateline and Northern Positions contain significant underground brackish water resources from which brackish water can be produced for sale to companies that deliver this water to E&P companies in New Mexico for use in their drilling and completion activities.
We believe that expected future growth of produced water volumes in the Delaware Basin will require incremental pore space to ensure proper handling. We also believe that our large land position strategically located at the intersection of significant producer activity and access to largely underutilized pore space offers critical capacity for produced water disposal, along with our management team’s extensive experience in the produced water industry, uniquely positions us to provide producers and produced water companies with access to our land and pore space to establish large-scale, reliable produced water handling solutions, from which we will generate multiple revenue streams, including the sale of resources from our land and produced water handling royalties.
As of December 30, 2024, WaterBridge operates approximately 767,000 bpd of produced water handling capacity on our land and has approximately 1.7 million bpd of additional permitted capacity available for future
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development on our land. We receive royalties for each barrel of produced water handled on our land as well as surface use payments for infrastructure constructed on our land.
Our Assets
We own approximately 273,000 surface acres in and around the Delaware Basin in Texas and New Mexico, the most active oil and natural gas development and production region of the United States, as of December 30, 2024. Our surface acreage is located across three separate areas, which we refer to as our Stateline, Northern and Southern Positions.
Overview of our Land Position
Our Stateline Position
Our Stateline Position consists of approximately 137,000 surface acres located primarily in Loving, Reeves and Winkler Counties, Texas, and Lea County, New Mexico, near and along the Texas-New Mexico state border, as of December 30, 2024. Our Stateline Position is comprised of a significant and large land position and geological formations that are generally characterized by high permeability and porosity, that we believe will enable reliable water handling. There are substantial hydrocarbon resources under and in close proximity to our Stateline Position, which attracts high-quality, well-capitalized producers, including Devon Energy, EOG Resources, ConocoPhillips, Continental Resources, Admiral Permian and Occidental Petroleum. We believe that our geographic proximity to the operations of large, well-capitalized producers positions us to benefit from anticipated growth in oil and natural gas development on and around our land.
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The western portion of our Stateline Position is semi-contiguous, or checkerboarded, with surface acreage held by TPL, one of the largest landowners in Texas. The nature of the checkerboarded acreage results in E&P companies, midstream companies, service companies and other operators in the area generally needing to access both our and TPL’s surface acreage for rights of way. In order to unlock opportunities for the checkerboarded surface acreage, we, together with WaterBridge, entered into agreements with TPL in the first quarter of 2022 that established the Stateline AMI across much of the western portion of our Stateline Position and the adjacent TPL surface acreage. Under such agreements, TPL grants WaterBridge the right to operate produced water facilities on TPL surface within the Stateline AMI and the exclusive right to market and sell produced water within the Stateline AMI. In exchange, TPL receives a royalty on each barrel of produced water transported by WaterBridge within the Stateline AMI and revenue sharing on produced water sales within the Stateline AMI. We believe these agreements provide WaterBridge with greater water handling opportunities in our Stateline Position, resulting in additional royalty revenue for us.
In addition, TPL receives the exclusive right to market and sell brackish water for drilling and completion operations within the Stateline AMI and access rights across our land within the Stateline AMI for temporary brackish water transportation facilities, subject to revenue sharing with us on brackish water sales within the Stateline AMI. We believe these agreements WaterBridge with greater water handling opportunities across the western portion of our Stateline Position, resulting in additional royalty revenue for us.
As of December 30, 2024, WaterBridge and third party operators operated approximately 1.0 million bpd of existing produced water handling capacity on the western portion of our Stateline Position. We believe that the pore space underlying the western portion and eastern portion of our Stateline Position will be able to support approximately 2.6 million bpd of additional produced water handling capacity, assuming 25,000 bpd produced water handling permits and one-mile spacing between all future produced water handling facilities.
The eastern portion of our Stateline Position includes 104,000 contiguous surface acres in Winkler and Loving Counties, Texas and Lea County, New Mexico. WaterBridge operates produced water handling infrastructure and a brackish water supply system that serves producers active on the East Stateline Ranch, including ConocoPhillips, Continental Resources, Devon Energy, Occidental Petroleum, Admiral and Permian Resources. These producers are subject to SUAs (as defined herein) that govern commercial activities on the East Stateline Ranch. In addition, we believe that the East Stateline Ranch contains substantial sand resources, which we expect to support additional sand mine developments over time and generate surface use revenue for us in connection with the utilization of our land.
As of December 30, 2024, WaterBridge and other producers operated approximately 435,000 bpd of existing produced water handling capacity on the eastern portion of our Stateline Position. We believe that the pore space underlying the eastern portion of our Stateline Position will be able to support approximately 1.5 million bpd of additional produced water handling capacity, assuming 30,000 bpd produced water handling permits and one-mile spacing between all future produced water handling facilities.
Our Stateline Position and the surrounding acreage represent some of the most productive acreage in the Delaware Basin due to the relatively high concentration of hydrocarbons in the area. Further, the oil produced in and around our Stateline Position is accompanied by significant volumes of produced water. This water must be reliably handled in order for these wells to be brought online and remain in production, driving continuing demand for water handling on acreage in close proximity to the operations of producers. We believe that our land is well situated to participate in the growth in strategic infrastructure necessary to handle these large volumes of produced water.
Although oil and natural gas production and related services account for a large majority of the activity in our Stateline Position, Desert Environmental has built two non-hazardous oilfield reclamation and solid waste facilities, which pay royalties to us based on waste handled. In addition, as oil and natural gas activities continue to support the buildout of electric and data infrastructure, there are opportunities with developers seeking to build data centers, cryptocurrency mining facilities, power storage facilities and commercial fueling stations across our Stateline Position.
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Our Northern Position
Our Northern Position, which includes land positions in Eddy and Lea Counties, New Mexico and Andrews County, Texas, consists of approximately 56,000 fee-owned surface acres and 33,285 additional surface acres leased from the BLM and State of New Mexico, as of December 30, 2024. Our BLM and State of New Mexico acreage is leased under customary BLM and State of New Mexico lease terms, respectively, on a year-to-year basis. The northern part of the Delaware Basin currently is experiencing significant growth in oil and natural gas development activity, which will require investments in produced water handling capacity.
Our Northern Position supports much needed water infrastructure development to serve oil and natural gas development in the northern part of the Delaware Basin. We believe that there is a need for produced water systems serving central and northern Lea and Eddy Counties to transport produced water east out of the Delaware Basin. The Speed and Lea County Ranches within our Northern Position provide critical access to pore space that we believe will be able to handle significant produced water volumes.
As of December 30, 2024, WaterBridge and third party operators operated approximately 90,000 bpd of existing produced water handling capacity on our Northern Position. We believe that the pore space underlying our Northern Position will be able to support approximately 1.0 million bpd of additional produced water handling capacity, assuming 25,000 bpd produced water handling permits and one-mile spacing between all future produced water handling facilities.
Our Southern Position
Our Southern Position consists of approximately 80,000 surface acres located in Reeves and Pecos Counties, Texas in the Delaware Basin, as of December 30, 2024. Various producers have operations on or in the vicinity of our Southern Position, including ConocoPhillips, APA Corporation, Permian Resources and Diamondback Energy, and we generate revenues from their use of our Southern Position acreage and its resources.
In December 2024, we completed the Wolf Bone Acquisition, consisting of approximately 46,000 contiguous surface acres in the Southern Delaware Basin. Located adjacent to our existing surface acreage in Reeves County, Texas, the Wolf Bone Ranch is well-positioned at a strategic intersection of oil and natural gas exploration and transportation, with access to the Waha Gas market hub. The land also supports produced water operations, with current volumes of approximately 300 MBbls/d serviced by infrastructure owned and operated by VTX Energy, as well as assets owned and managed by WaterBridge. Pursuant to the Wolf Bone Acquisition, VTX Energy has agreed to a minimum annual revenue commitment to LandBridge of $25 million for the next five years.
On November 6, 2024, we entered into a lease development agreement for the development of a data center and related facilities on approximately 2,000 acres of our land in Reeves County, Texas with PowLan. The lease development agreement includes, among other things, a non-refundable $8.0 million deposit paid in December 2024 for a two-year site selection and pre-development period. PowLan is obligated to meet certain timing milestones to maintain its lease, to include the commencement of site development within a two-year period and construction of the data center within a subsequent four-year period. Upon initiation of construction of a data center, PowLan will make escalating annual lease payments commencing at $2 million per year during the development period and $8 million per year commencing on the first anniversary of the commencement date of construction, subject to annual CPI escalation with a 2% minimum and a 4% maximum. PowLan will also make additional payments based on the net revenue received with respect to the power generation facilities to be located on the leased property. To the extent PowLan does not commence site development within two years of entry into the lease development agreement or commence construction of the data center within a subsequent four-year period, the agreement will automatically terminate. PowLan may also terminate the agreement following the commencement of construction of the data center, subject to a substantial early termination fee. To the extent more than 25% the aggregate acreage subject to the lease development agreement is condemned or taken by a governmental authority, PowLan may proportionately reduce future annual lease payments due by an identical percentage. We can offer no assurance that the counterparty will lease the site, nor can there be any assurance that PowLan will be successful in its efforts to develop the data center or any power generation facilities.
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In addition, we continually seek to identify and pursue opportunities with a broad array of customers, including new, distinct operations on our Southern Position. For example, through our subsidiary, DBR Solar, we are permitting the construction and operation of one facility with 250-megawatts of solar generation capacity on our Southern Position, and we have identified adjacent acreage in our Southern Position that we believe will be an attractive location for an additional 120 megawatts of solar capacity. The facility for which we were previously pursuing permitting through our subsidiary, Pecos Renewables, has been delayed indefinitely due to the construction of an existing project on the relevant acreage. In addition, our Southern Position is adjacent to the I-10 interstate highway corridor, the fourth longest interstate highway system in the country, as well as I-20, which, each individually and collectively, serve as corridors for significant vehicle traffic and for pipeline and electrical infrastructure, representing additional development opportunities for this surface acreage.
Our Mineral Interests
We own 4,180 gross mineral acres in the Delaware Basin with a weighted average royalty interest based on acreage of 23.9% and an average proved developed producing net revenue interest per well of 4.2%, as of December 30, 2024. Our mineral interests are leased to some of the top operators in the Delaware Basin, including APA Corporation, Chevron, ConocoPhillips and Occidental Petroleum. Our leases with these and other E&P companies permit the lessee to explore for and produce oil, natural gas and NGLs from our land and entitle us to receive an upfront cash payment, or lease bonus, and a percentage of the proceeds from the sales of these commodities in the form of an oil and gas royalty interest. Unlike owners of working interests in oil and natural gas properties, we are not obligated to fund drilling and completion costs, plugging and abandonment costs or lease operating expenses associated with oil and natural gas production. As a mineral owner, we incur only our proportionate share of production and ad valorem taxes and, in some cases, gathering, processing and transportation costs. If the lessee does not meet certain requirements, such as drilling and completing wells within the leased mineral acreage by a specified date, the lessee must pay to extend the lease, or the lease will terminate. If terminated, we would seek to re-lease our mineral interests to another E&P company. Of our gross mineral acres, approximately 96% underlie our surface acreage. Other than our gross mineral acres, we do not own the mineral interests that underlie our surface acreage.
Unlike businesses that focus on buying oil and gas royalty interests, which are more directly exposed to commodity prices, our focus is on surface acreage ownership and the associated fee-based revenue. As a result, we expect to acquire additional mineral interests only incidentally in connection with property acquired primarily for other purposes and, consequently, oil and natural gas is expected to become a smaller percentage of our total revenues over time.
Our Business Model
We are focused on actively growing revenue from the use of our surface acreage and the sale of resources from our land, while continuing to maximize value from our current mineral interests. We believe that our largely fee-based contracts, as well as our strong base of revenues from our customers’ oil and natural gas production, help mitigate our direct exposure to commodity price fluctuations and promote cash flow stability through commodity price cycles.
Sources of Revenue
Our sources of revenue currently include:
Surface Use Royalties and Revenues
• | Surface Use Royalties: Under our SURAs which typically provide for five- to 10-year initial terms, we receive a royalty based on a percentage of gross revenues derived from the use of our land and/or |
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volumetric use of infrastructure installed on our land in exchange for rights of use of our land. Royalties we receive from operations under our SURAs include produced water transportation and handling operations, skim oil recovery and produced water throughput and waste reclamation, all of which are required for oil and natural gas production throughout the lifecycle of a well. |
• | Easements and Surface-Related Revenues: Under our SUAs which typically provide for five- to 10-year initial terms, we typically receive a fee when the contract is executed, fixed monthly or annual payments, and often additional fees at the beginning of each renewal period. Such agreements typically include pre-defined terms for fees that we will receive for our customers’ development and use of drilling sites, new and existing roads, pipeline easements and electric transmission easements. Our SUAs generally require our customers to use the resources from our land, such as brackish water and sand, for their operations on our land, for which we receive our customary fees. |
Resource Sales and Royalties
• | Resource Sales: Under our water supply agreements, we sell brackish water to be used primarily in well completions in exchange for a per barrel fee. These fees are negotiated and vary depending on the destination of the brackish water, with brackish water sold for use outside the Stateline AMI typically at wholesale prices and brackish water sold for use in the Stateline AMI sold directly to producers at retail prices. Revenue from brackish water sold for use in the Stateline AMI is shared with TPL (please see “—Our Assets—Our Stateline Position” for more information related to our agreements with TPL). We and TPL have strong relationships with, and contractual commitments from, many of the E&P companies in the Stateline AMI. Additionally, the immediate proximity of our Stateline Position to the Texas-New Mexico state border provides us the ability to deliver brackish water volumes into the otherwise constrained market in New Mexico. Through our relationships, as well as the strategic location of our brackish water resources, we believe that we will benefit from strong demand going forward in both Texas and New Mexico. Similarly, our customers buy caliche from us for the construction of access roads and well pads for which we receive a fixed-fee per cubic yard of caliche extracted from our surface acreage. Businesses operating on our land are generally required to buy all caliche they use on our land from us. |
• | Resource Royalties: Under our sand lease agreements, we lease our surface acreage to customers to construct and operate at their expense sand mines to provide in-basin sand for use in oil and natural gas completion operations. We receive a fixed royalty per ton of sand extracted, as well as a fixed-fee per barrel of brackish water used to support sand mining operations. |
Oil and Gas Royalties
• | Under our oil and natural gas mineral leases, we receive a lease bonus at inception and in connection with any extensions and oil and gas royalties on a per unit produced basis at a market rate, less production taxes and, in some instances, gathering, processing and transportation costs. Our leases, which typically extend for a one- to three-year primary term, permit the lessee to explore for and produce oil, natural gas and NGLs from our land and entitle us to receive a percentage of the proceeds from the sales of these commodities in the form of a royalty. If the lessee does not meet certain requirements, such as drilling and completing wells within the leased mineral acreage by a specified date, the lessee must pay to extend the lease, or the lease will terminate. If terminated, we would seek to re-lease our mineral interests to another E&P company. |
We expect our fee-based revenues to grow over time relative to our revenues generated from oil and gas royalties. While our focus is on fee-based arrangements, our revenues generated from oil and gas royalties fluctuate with market prices for oil and natural gas. For the nine months ended September 30, 2024, 55% of our total revenues were surface use royalties and revenues, 29% were resource sales and royalties and 16% were oil and gas royalties. For the year ended December 31, 2023, 35% of our total revenues were surface use royalties and revenues, 36% were resource sales and royalties and 29% were oil and gas royalties.
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We seek to include inflation escalators in each of our contracts for surface use royalties and revenues and resource sales and royalties, which, when combined with our relatively low operating and capital expenditures, may assist in mitigating our exposure to rising costs. Given the expected long-term nature of production in the Delaware Basin, we expect these contracts to be renewed over an extended period of time. While we expect these revenue streams to be recurring over the long-term, our contracts with our significant customers, which represent a large portion of our revenues, generally do not contain minimum commitment provisions for land use or brackish water volumes to be purchased. As a result, our revenues are dependent on ongoing demand from these customers, which may decrease due to factors beyond our control despite our current expectations regarding long-term activity by our customers on our land. Among other risks to which we are exposed, we are subject to the risk of geographic concentration in the Permian Basin where we compete with other landowners to provide an attractive development site for the limited number of potential customers that seek to develop and/or construct infrastructure or procure resources necessary for their projects and operations.
Financial Performance
Key to our business model is entering into agreements under which our customers bear substantially all of the operating and capital expenditures related to their operations, while requiring only modest capital investment by us. As a result, we are able to grow our revenues, net income and Adjusted EBITDA while maintaining relatively high Free Cash Flow.
Our success in signing new commercial agreements through the active management of our land combined with the strength of our existing contracts and our proactive land acquisition strategy has resulted in significant growth in our business.
Although we believe that we have been successful in growing our business, the Acquisitions required a significant expenditure of capital and, as of December 30, 2024, we had $385.0 million of total debt outstanding. As of November 30, 2024, we had working capital, defined as current assets less current liabilities, of $19.0 million, and cash and cash equivalents of $13.9 million. For more information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”
Our Relationship with WaterBridge
We share a management team and financial sponsor with WaterBridge. WaterBridge owns and operates one of the largest integrated water midstream systems in the United States, providing water sourcing and produced water handling in key oil and natural gas producing basins in Texas, New Mexico and Oklahoma. WaterBridge’s key customers include Chevron, Devon Energy, EOG Resources, ConocoPhillips, Diamondback Energy, Occidental Petroleum, Vital Energy, Permian Resources, Mewbourne Oil Company and APA Corporation. As of December 30, 2024, WaterBridge handled approximately 2.5 million bpd of aggregate produced water and had approximately 4.2 million bpd of aggregate handling capacity, in each case across its aggregate areas of operation. WaterBridge has the right to construct produced water infrastructure on our Stateline and Northern Positions and is one of our largest customers, representing 25% of our revenue for the nine months ended September 30, 2024. These revenues consist of:
• | produced water handling fees; |
• | skim oil royalties; and |
• | fees associated with rights of way for pipelines, equipment and roads and related surface use permits. |
During the nine months ended September 30, 2024, we generated $18.3 million of revenues from WaterBridge. For every 100,000 bpd of incremental produced water that WaterBridge brings onto our surface, we expect to generate royalty fees of $4.0 million to $6.0 million per year, including skim oil revenues. The shared management team between LandBridge and WaterBridge facilitates our common goal of capitalizing on energy production in the Permian Basin through a mutually beneficial relationship. Additionally, our shared management team’s visibility into oil and natural gas production and long-term trends in the Permian Basin as a result of WaterBridge’s platform allows us to facilitate development of infrastructure in certain premier locations, thus capturing additional revenue streams.
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In the Permian Basin, WaterBridge is primarily focused on building and operating integrated water networks to provide operational continuity for its upstream customers. WaterBridge’s integrated systems provide continuous handling capacity for water produced in connection with production operations. WaterBridge’s network provides operational redundancy, customer flow assurance and recycling and redelivery across its entire Permian Basin footprint. Within the Delaware Basin, WaterBridge has approximately 1,675 miles of pipeline with 3.4 million bpd of water handling capacity, as of December 30, 2024. In particular, as of December 30, 2024, WaterBridge operates an integrated water network on our land with approximately 767,000 bpd of existing water handling capacity, primarily on our Stateline Position, and has approximately 1.7 million bpd of additional permitted capacity available for future development on our land.
In addition, the Stateline AMI provides WaterBridge the certainty necessary to develop large-scale water infrastructure assets on our land, which we believe will provide WaterBridge with greater water sourcing and handling opportunities and will generate additional royalty revenue for us.
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Our Relationship with Desert Environmental
We share a financial sponsor with Desert Environmental. Desert Environmental has developed two environmental remediation facilities for non-hazardous oilfield reclamation and solid waste disposal on our land. We will receive a percentage of gross revenue from solid waste disposal and reclamation operations, as well as revenue from providing brackish water for landfill operations. WaterBridge has contracted with Desert Environmental to handle substantially all of its solid waste, which provides the base level of business required to support the two waste facilities on our land.
Our Relationship with Five Point
Five Point is an investment firm focused on building businesses within the environmental water management and sustainable infrastructure sectors. Five Point acquires and develops in-basin assets, provides growth capital and builds industry leading companies with experienced management teams and large E&P partners. As of December 30, 2024, Five Point had approximately $7 billion of assets under management. Five Point indirectly owns a majority of our common shares and owns a majority of the equity interests in WaterBridge and Desert Environmental.
Properties
As of December 30, 2024, we owned approximately 272,000 surface acres in seven counties across Texas and New Mexico. All of our material acreage is encumbered by mortgages that secure our credit facility. Other than such mortgages and our SURAs and SUA easements, there are no material liens or encumbrances on our title to the surface estate on our acreage as of December 30, 2024.
As of December 30, 2024, we also owned 4,180 gross mineral acres in Texas with a weighted average royalty interest of 23.9% and net revenue interest per well of 4.4%. Of our gross mineral acres, approximately 96% underlie our surface acreage. Other than our gross mineral acres, we do not own the mineral interests that underlie our surface acreage. The following table shows by county our surface ownership and royalty ownership as of December 30, 2024:
Number of Acres | ||||||||
Location (by county and position) |
Surface | Gross Mineral Acres |
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Northern Position: |
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Andrews County (TX) |
20,479 | — | ||||||
Lea County (NM) |
35,041 | — | ||||||
Eddy County (NM) |
765 | — | ||||||
|
|
|
|
|||||
Total |
56,285 | — | ||||||
|
|
|
|
|||||
Stateline Position: |
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Loving County (TX) |
82,981 | 636 | ||||||
Winkler County (TX) |
34,480 | — | ||||||
Lea County (NM) |
15,669 | — | ||||||
Reeves County (TX) |
3,663 | 686 | ||||||
|
|
|
|
|||||
Total |
136,793 | 1,322 | ||||||
|
|
|
|
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Southern Position: |
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Reeves County (TX) |
71,572 | 2,858 | ||||||
Pecos County (TX) |
9,074 | — | ||||||
|
|
|
|
|||||
Total |
80,646 | 2,858 | ||||||
|
|
|
|
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Total Acres |
273,724 | 4,180 | ||||||
|
|
|
|
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Customers; Material Contracts and Marketing
Customers
We have a diverse customer base consisting primarily of businesses that develop and produce oil and natural gas or provide services in support of oil and natural gas production. Our customers are generally large, well-capitalized businesses that have strong credit ratings. For the nine months ended September 30, 2024:
• | our five largest customers, which consisted of ConocoPhillips, EOG Resources, WaterBridge, Occidental Petroleum, and Mewbourne Oil Company, comprised 66% of total revenue; |
• | no individual customer, other than WaterBridge, contributed more than 15% of total revenues; |
• | our 10 largest customers comprised 80% of total revenue; and |
• | 51.8% of total revenue was from customers with an investment-grade credit rating. |
During the nine months ended September 30, 2024, 61% of our total revenues came from four significant customers, Occidental Petroleum, ConocoPhillips, EOG Resources, and WaterBridge.
Our revenue-generating agreements with ConocoPhillips include (i) a water purchase and access agreement with an initial term of 10 years and a perpetual term thereafter, subject to termination for non-use for more than six months, pursuant to which ConocoPhillips operates brackish water wells on our lands and we receive customary royalties for each barrel of brackish water produced from such wells, (ii) brackish water supply agreements, typically on a short-term basis, pursuant to which we sell brackish water to ConocoPhillips to be used primarily in well completions, (iii) SUAs with perpetual terms so long as ConocoPhillips conducts operations thereunder, subject to termination for non-use for more than six months, pursuant to which ConocoPhillips operates produced water recycling and treatment facilities on our land and from which we receive customary royalties and fees, (iv) customary term easements, typically for five- to 10-year terms, subject to early termination for non-use over a specified period of time and (v) customary oil and natural gas mineral leases with perpetual terms so long as ConocoPhillips conducts operations thereunder. The terms and conditions of, and pricing for, our agreements with ConocoPhillips are consistent with the descriptions of such agreements set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—How We Generate Revenue.” The majority of our revenues from ConocoPhillips during the nine months ended September 30, 2024 were generated by brackish water sales, produced water handling royalties and oil and gas royalties, with less significant revenues generated by its other land uses. Our agreements with ConocoPhillips do not contain minimum volume commitments, and our revenues from ConocoPhillips can fluctuate based on the nature, timing and scope of ConocoPhillips’ activities on our land.
Our revenue-generating agreements with EOG Resources include (i) a sand mine lease with an initial term of three years and a perpetual term thereafter so long as EOG Resources conducts operations thereunder, subject to early termination rights for non-use over six months, pursuant to which EOG Resources constructed and operates a sand mine on our land and from which we receive a per ton royalty for sand extracted and fees for water used in its mining operations, and (ii) an SUA with an initial term of 10 years and an option for EOG Resources to extend for two additional 10-year terms, pursuant to which we receive customary fees for EOG Resources’ development and use of drilling sites, new and existing roads, pipeline easements and surface and subsurface easements. The terms and conditions of, and pricing for, our agreements with EOG Resources are consistent with the descriptions of such agreements set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—How We Generate Revenues.” The majority of our revenues from EOG Resources during the nine months ended September 30, 2024 were generated by resource royalties and brackish water sales, with resource royalties generated during the nine months ended September 30, 2024 reflecting the first full year of operation of EOG Resources’ sand mining operation on our surface acreage. We generated less significant revenues from EOG Resources’ other land uses during the nine months ended September 30, 2024. Our agreements with EOG Resources do not contain minimum volume commitments,
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although our sand mine lease with EOG Resources contains a nominal minimum yearly royalty payment. Our revenues from EOG Resources can fluctuate based on the nature, timing and scope of EOG Resources’ activities on our land.
Our revenue-generating agreements with Occidental Petroleum include (i) brackish water supply agreements, typically on a short-term basis, pursuant to which we sell brackish water to Occidental Petroleum to be used primarily in well completions, (ii) SUAs with perpetual terms so long as Occidental Petroleum conducts operations thereunder, subject to termination for non-use for more than six months, pursuant to which Occidental Petroleum conducts oil and natural gas exploration, development and production activities, including produced water recycling and treatment, on our land and from which we receive customary royalties and fees, (iii) customary term easements, typically for five- to 10-year terms, subject to early termination for non-use over a specified period of time and (iv) customary oil and natural gas mineral leases with perpetual terms so long as Occidental Petroleum conducts operations thereunder. The terms and conditions of, and pricing for, our agreements with Occidental Petroleum are consistent with the descriptions of such agreements set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—How We Generate Revenue.” The majority of our revenues from Occidental Petroleum during the nine months ended September 30, 2024 were generated by damage payments under SUAs and easement, brackish water sales, produced water handling royalties and oil and gas royalties, with less significant revenues generated by its other land uses. Our agreements with Occidental Petroleum do not contain minimum volume commitments, and our revenues from Occidental Petroleum can fluctuate based on the nature, timing and scope of Occidental Petroleum’s activities on our land.
Our revenue-generating agreements with WaterBridge include water facilities agreements and related SUAs, including easements and rights-of-way, pursuant to which WaterBridge has constructed and operates produced water handling facilities and fresh water facilities on our land. See “Certain Relationships and Related Party Transactions—Historical Transactions with Affiliates—Transactions with WaterBridge NDB and—Transactions with WaterBridge Operating” for further information on our agreements with WaterBridge. The majority of our revenues from WaterBridge during the nine months ended September 30, 2024 were generated by produced water handling royalties, brackish water sales and surface use payments for infrastructure constructed on our lands, with less significant revenues generated by its other land uses. Our agreements with WaterBridge do not contain minimum volume commitments, and our revenues from WaterBridge can fluctuate based on the nature, timing and scope of WaterBridge’s activities on our land. Pricing for our agreements with WaterBridge is consistent with the pricing described under “Management’s Discussion and Analysis of Financial Condition and Results of Operation—How We Generate Revenue.”
Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—How We Generate Revenue” for further information regarding the ranges of our customary royalties and fees, inclusive of our royalties and fees with ConocoPhillips, EOG Resources, and WaterBridge.
While we would expect to be able to replace these customers, it is possible that the loss of any one of these customers could adversely affect our total revenues and have a material adverse effect on our results of operations, cash flows and financial position, whether in the short or long term. Furthermore, the determination by a customer to initiate or maintain activities on or around our land largely depends on the location of our surface acreage relative to the nature and locations of such customer’s operations and such customer’s need for the use of our land and resources. Our customers generally consist of a limited universe of entities operating on and around our acreage in the Delaware Basin.
Material Contracts and Marketing
We enter into various agreements with our customers in the ordinary course relating to the use of our land and resources and the fees, royalty rates, payment structure and other related terms in our contracts are negotiated on a case-by-case basis, taking into account the surface use of our land, the type of resources extracted, and the
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amount of use expected to be made of our land and the amount of resources to be produced and/or extracted, among other things. For a discussion regarding general market rates for similar uses of land and resources in our industry and geographic area, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—How We Generate Revenue” and “Industry—Hydrocarbon Value Chain.”
Although our agreements generally do not contain minimum commitment provisions for activities on or around our land, such as brackish water volumes to be purchased, we may include such provisions on an individual basis based on a potential customer’s proposed use of our land and resources. Under our contracts, our customers generally bear liability for environmental, health and safety risks, through indemnification of the Company, mandated insurance coverage and covenants and representations regarding environmental, health and safety compliance for all such risks, in each case, related to their operations on our land. Further, our contracts include inspection rights such that we may enter and oversee certain activities on our properties to monitor our customers’ compliance with environmental, health and safety requirements, and, following completion of the term of our agreements, our customers typically must remediate our land as close as is reasonably practicable to its state prior to such customers’ activities on the land.
• | For a description of our SURAs, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Surface Use Royalties and Revenues—Surface Use Royalties.” |
• | For a description of our SUAs, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Surface Use Royalties and Revenues—Easements and Other Surface-Related Income.” |
• | For a description of our water supply agreements, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Resource Sales and Royalties—Resource Sales.” |
• | For a description of our sand lease agreements, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Resource Sales and Royalties—Resource Sales.” |
In addition, we are a party to various agreements with affiliates relating to the use of our land and its resources, including:
• | a produced water facilities agreement granting WaterBridge the exclusive right to construct, own and operate new produced water handling infrastructure on the western portion of our Stateline Position, with an initial term of approximately five years and automatic one-year renewals unless terminated by a party prior to renewal. We are paid a royalty for each barrel of produced water transported across our lands subject to the agreement, surface use payments in respect of its infrastructure constructed and operated on our surface acreage subject to the agreement and a percentage of the net proceeds received by WaterBridge for the sale of skim oil recovered on our land subject to the agreement. Surface use payments are based on market rates and subject to annual redetermination by us in our reasonable discretion, taking into account market rates for similar payments in the immediate vicinity of our land. The agreement provides for automatic annual increases in royalties after a specified period of time that are tied to the lesser of CPI and a fixed percentage, and mutual termination rights in the event of a counterparty default and contains standard confidentiality, indemnification, insurance and change of control provisions; |
• | a produced water facilities agreement granting WaterBridge the right to construct, own and operate produced water handling infrastructure on the East Stateline Ranch, the Lea County Ranches, the Speed Ranch and all future land acquired by us in our Stateline and Northern Positions, with (i) a perpetual term on the East Stateline Ranch for so long as WaterBridge conducts operations thereon and (ii) an initial term of approximately ten years and automatic one-year renewals unless terminated by a party prior to renewal for all other lands. Under the agreement, WaterBridge has the exclusive right to construct and operate up to 30 produced water handling facilities at specified locations. WaterBridge also has the exclusive right to handle produced water volumes generated from the East Stateline Ranch, subject to customary exclusions and pre-existing third-party rights. WaterBridge has the non-exclusive |
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right to operate produced water infrastructure on all other lands subject to the agreement. We are paid a royalty for each barrel of produced water transported by WaterBridge across our land subject to the agreement, a royalty for each barrel of produced water treated and sold by WaterBridge from a recycling facility on our land subject to the agreement, surface use payments in respect of WaterBridge’s infrastructure constructed and operated on our surface acreage subject to the agreement and a percentage of the net proceeds received by WaterBridge for the sale of skim oil recovered on our land subject to the agreement. Surface use payments are based on market rates and subject to annual redetermination by us in our reasonable discretion, taking into account market rates for similar payments in the immediate vicinity of our land. The agreement provides for automatic annual increases in royalties after a specified period of time that are tied to the lesser of CPI and a fixed percentage, and mutual termination rights in the event of a counterparty default and contains standard confidentiality, indemnification, insurance and change of control provisions; |
• | a fresh water facilities agreement granting WaterBridge the right to construct, own and operate brackish water infrastructure on the East Stateline Ranch, the Lea County Ranches, the Speed Ranch and all future land acquired by us in our Stateline and Northern Positions, with (i) a perpetual term on the East Stateline Ranch for so long as WaterBridge conducts operations thereon and (ii) an initial term of approximately ten years and automatic one-year renewals unless terminated by a party prior to renewal for all other lands. WaterBridge has the exclusive right to market and sell brackish water produced from the East Stateline Ranch to third parties for use in oil and natural gas operations, subject to customary exclusions and pre-existing third-party rights. WaterBridge has the non-exclusive right to operate brackish water infrastructure on all other lands subject to the agreement for use in oil and natural gas operations. We may grant third parties the right to transport brackish water across the lands subject to the agreement, including the East Stateline Ranch. We are paid a royalty for each barrel of brackish water produced by WaterBridge from, or transported by WaterBridge across, our land subject to the agreement, a percentage of the net proceeds for each barrel of brackish water produced by WaterBridge from our land subject to the agreement and sold for use off of our land and surface use payments in respect of WaterBridge’s infrastructure constructed and operated on our land subject to the agreement. Surface use payments are based on market rates and subject to annual redetermination by us in our reasonable discretion, taking into account market rates for similar payments in the immediate vicinity of our land. The agreement provides for automatic annual increases in royalties after a specified period of time that are tied to the lesser of CPI and a fixed percentage, and mutual termination rights in the event of a counterparty default and contains standard confidentiality, indemnification, insurance and change of control provisions; |
• | a surface lease and use agreement granting WaterBridge the non-exclusive right to construct, own and operate produced water handling infrastructure on the Wolf Bone Ranch in our Southern Position, with an initial term of ten years and the option for WaterBridge to renew for additional 10-year terms in return for one-time renewal payments. We are paid a royalty for each barrel of produced water handled our lands subject to the agreement, surface use payments in respect of produced water handling infrastructure constructed and operated on our surface acreage subject to the agreement. Surface use payments are based on market rates and subject to redetermination by us from time-to-time in our commercially reasonable discretion, taking into account market rates for similar payments in the immediate vicinity of our land. The agreement provides for mutual termination rights in the event of a counterparty default and contains standard confidentiality, indemnification, insurance and change of control provisions; and |
• | surface use agreements with Desert Reclamation LLC and Safefill Pecos, LLC, each a subsidiary of Desert Environmental, each with an initial term of 10 years and automatic one-year renewals unless terminated by either party prior to renewal, pursuant to which we have granted certain exclusive rights to construct, operate and maintain non-hazardous oilfield reclamation and solid waste facilities on our land and we receive a percentage of gross revenue from solid waste disposal and reclamation, as well as additional revenue from providing water for landfill operations and fees for surface damages, which |
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surface damage payments are based on market rates and subject to annual redetermination by us in our reasonable discretion, taking into account market rates for similar payments in the immediate vicinity of our land. Each party is required to purchase all dirt, gravel and similar materials utilized in connection with such facilities on our land, as well as for all brackish water, from us. These agreements contain standard confidentiality, indemnification, insurance and change of control provisions. |
We are also party to lease arrangements with respect to a portion of our oil and natural gas mineral interests. See “—Our Assets—Mineral Interests” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Oil and Gas Royalties.”
In addition to continuing to capitalize on existing agreements and relationships, we intend to pursue and acquire new commercial arrangements in an effort to develop and diversify our revenue streams. As such, we are currently pursuing arrangements, or have agreed to certain arrangements, relating to solar power generation, cryptocurrency mining and data centers, non-hazardous oilfield reclamation and solid waste facilities and commercial fueling stations, among other revenue streams. Similar to the other operations conducted on our land, we expect to enter into surface use or similar agreements with the owners of these projects from which we expect to receive surface use fees and other payments in connection with the utilization of our land, but we would not own or operate such projects or expect to incur significant capital expenditures in connection therewith.
Infrastructure
In order to use our surface acreage to, among other things, support all stages of energy development and production to supply growing global demand, we have entered into various surface use agreements through which our customers have built and own or are developing infrastructure on our land, including oil, natural gas and produced water gathering pipelines, recycled water pipelines, produced water handling facilities, water recycling ponds, a sand mine, non-hazardous oilfield reclamation and solid waste facilities, a data center and a cryptocurrency facility, as of December 30, 2024. We also own brackish water wells and ponds on our land.
In addition to the above infrastructure, improvements with respect to permanent electrical infrastructure, including telecommunication lines, drilling pad sites, roads and landfills, among other things, have been made on our land that improve reliability and lower operating costs for our customers. Although infrastructure with the ability to increase revenue-generating activities is already present on our surface acreage, we believe that our land presents a multitude of additional opportunities for further commercialization and optimization, including coordinating with potential customers to construct infrastructure relating to power storage, water treatment facilities, hydrogen production and carbon capture and sequestration.
Cyclical Nature of Oil and Natural Gas Industry
The oil and natural gas industry is a highly cyclical industry. Demand for the use of our land and its resources depends substantially on activity levels by producers on and around our land. Prevailing commodity prices and future demand for, and price of, oil and natural gas and volatility in oil or natural gas prices (or the perception that oil or natural gas prices will decrease) affects such producers’ capital expenditures and willingness to pursue development activities. As such, the willingness of our producers to engage in drilling activities on and around our land is substantially influenced by the market prices of oil and natural gas. Producers tend to increase capital expenditures in response to increases in oil and natural gas prices, which would generally be expected to result in greater revenues for us. Increased capital expenditures can also lead to greater production, which historically has resulted in increased supplies of oil and natural gas that can, in turn, reduce prices thereby leading to a reduction in activity levels. For these reasons, the results of our operations may be cyclical and may fluctuate from quarter to quarter and from year to year, and these fluctuations may distort comparisons of results across periods.
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Seasonality
While our business is not necessarily seasonal in nature, revenue from the use of our land and its resources may fluctuate over certain reporting periods due to fluctuations in the prices of oil and natural gas. Generally, but not always, the demand for natural gas, as well as associated production, decreases during the summer months and increases during the winter months, thereby affecting the amount we receive in association with natural gas production and related activities on our land.
Seasonal anomalies, such as mild winters or hotter than normal summers, may lessen this fluctuation. Demand for oil has generally not been seasonal. Our other revenue streams, including sales of brackish water, payments from SUAs and other surface related revenue and sales of resources, may also vary from period to period due to seasonal changes in supply and demand, and a variety of additional seasonal factors that are beyond our control and the control of producers on or around our land.
Our results and business are significantly dependent on our customers and their activities on our land, which are beyond our control. Weather conditions in the Permian Basin generally result in higher drilling activity in the spring, summer and fall months, although summer and fall drilling activity can be restricted due to severe weather conditions. In the fourth quarter, due to inclement weather and the exhaustion of annual drilling and completion capital expenditure budgets, drilling activity typically declines in the Permian Basin. As a result, our results of operations, cash flows and financial position may vary year over year, with particular periods of results not necessarily indicative of our future results.
Human Capital Resources
We manage our operations through our Shared Services Agreement (the “Shared Services Agreement”) with certain affiliates of WaterBridge (the “Manager”). Pursuant to the Shared Services Agreement, the Manager provides us with our senior executive management team and certain management services, as well as general, administrative, overhead and operating services to support our business and development activities, including four full-time personnel exclusively providing field services on our surface acreage and three full-time corporate services personnel exclusively providing corporate services to us. Pursuant to the Shared Services Agreement, the Manager provides operational and maintenance services, such as project and construction management, and provides operating materials and equipment. Because our customers construct and operate almost all of the infrastructure installed on our acreage, we have and expect to maintain a minimal number of employees. However, our future success will depend partially on the attraction, retention and motivation of qualified personnel who provide services to us through the Shared Services Agreement. We are not a party to any collective bargaining agreements and have not experienced any strikes or work stoppages. In general, we believe that our personnel relations are satisfactory.
Personnel Health and Safety
Safety is important to us and begins with the protection and safety of our personnel and the communities in which we operate. We value people above all else and remain committed to making safety and health our top priority. We strive to comply with all applicable health and safety laws and regulations and continually seek to maintain and deepen our safety culture by providing a safe working environment that encourages active personnel engagement, including implementing safety programs and continuing education policies to achieve improvements in our safety culture. We intend to continue to develop and administer policies to promote our organizational goals and improve and maintain the safety of our workspace.
Competition
The market in which we operate is competitive due to the location of our land in the Permian Basin in Texas and New Mexico and to the services in which we offer our customers. Given our geographic concentration in the
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Permian Basin, we compete with existing landowners in the area to provide an attractive development site for the limited number of potential customers that seek to develop and/or construct infrastructure in Texas and New Mexico to support their various business activities. We also compete with such landowners over the limited supply of, and demand for, resources, including brackish water, in the area. Furthermore, to the extent any new property owner purchases land located in areas comparable to our surface acreage, such property owner could be a potential competitor. As we continue to grow our business and enter into new business lines, including with respect to renewable energy, non-hazardous oilfield reclamation and solid waste facilities and other revenue streams, we will experience increasing levels of competition. Competition in our current market is based primarily on the geographic location of land, business reputation, pricing arrangements for the use of the land and its resources and legal and regulatory restrictions, among other factors. Although some of our competitors may have a broader geographic scope, longer operating history and greater financial and other resources than we have, we believe that we are competitively well-positioned due to the premier location of our land, which also provides a multitude of resources and uses, the reliability of our assets and our customer relationships, such as our symbiotic relationships with WaterBridge and Desert Environmental.
Insurance
We maintain insurance coverage at levels that we believe are reasonable and prudent; however, as is customary in our industry, we do not insure fully against all risks associated with our business, either because such insurance is not available or because premium costs are considered prohibitive. We may not be able to maintain adequate insurance in the future at rates or on other terms we consider commercially reasonable and our actual coverage may not insure against many types of interruptions or events that might occur. In addition, the proceeds of any such insurance may not be paid in a timely manner and may be insufficient if a loss event were to occur. The occurrence of such an event, the consequences of which are either not covered by insurance or not fully insured, or a significant delay in, or denial of, the payment of a major insurance claim, could have a materially and adverse effect on our results of operations, cash flows and financial position. Our arrangements with our customers operating on our land require the maintenance of certain levels of insurance and such customers’ indemnification of us to protect for such events occurring with respect to their operations.
Near Term Business Plan and Capital Needs
We generate multiple revenue streams from the use of our surface acreage, the sale of resources from our land and oil and gas royalties. During the remainder of 2024 and 2025 and 2026, we intend to continue our active land management strategy of optimizing the current uses of our land and its resources, while also identifying and developing, or supporting the development of, new uses of and revenues from our land. We do not currently anticipate any significant capital requirements during the remainder of 2024 and 2025 and 2026 associated with research and development, an increase in the number of employees or otherwise, although we may pursue any compelling acquisition opportunity that is presented to us.
Under most of our agreements with our customers, our customers bear substantially all of the operating and capital expenditures related to their operations on our land, which minimizes our capital requirements for both current and future commercial opportunities. Management believes that our cash on hand and cash flow from operating activities will provide us with sufficient liquidity to execute such strategy.
Should we seek to grow our land position through acquisitions of additional acreage and additional capital were required in excess of our cash resources, we expect that we would seek to raise such capital through borrowings under our credit facility, offerings of debt and equity securities or other similar means.
Regulation of Environmental and Occupational Safety and Health Matters
Our customers’ business operations are subject to numerous environmental and occupational health and safety laws and regulations that may be imposed at the federal, regional, state and local levels. The activities that
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我們的客戶在石油和天然氣勘探和生產過程中,採出水處理、採砂和其他活動都受到或可能受到嚴格的環境監管。我們的客戶有責任在他們的經營過程中遵守各種環境法律法規。雖然我們通常有權檢查我們的財產及其上的活動,但我們通常對此類活動沒有任何控制。對於我們持有礦產或特許權使用費權益的物業,我們一般不承擔直接的環境責任,因爲我們不擁有、運營或以其他方式控制在此類物業上發生的任何設備、設施或運營。然而,對於我們擁有並出租給客戶的土地,我們可能會對這些物業的任何溢出或污染承擔嚴格的、連帶和連帶的責任,即使我們通常無法控制物業的運營。欲了解更多信息,請參閱“風險因素-與環境和其他法規相關的風險-我們的客戶在我們土地上的運營可能因環境、健康和安全要求而面臨重大延誤、成本和責任,並且我們可能根據這些要求對此類運營造成的污染承擔嚴格的以及連帶責任,即使我們無法控制此類運營。任何此類延誤、成本和債務的發生可能會對我們客戶的業務、運營或財務狀況產生重大和不利的影響,這可能會減少對我們土地及其資源的使用需求,以及我們從土地和資源中獲得的特許權使用費和其他付款,從而對我們的運營結果、現金流和財務狀況產生重大影響。“爲了減少在我們無法控制的物業的運營過程中可能產生的潛在環境責任的風險,我們通常尋求與信譽良好的客戶合作,並要求我們的客戶賠償他們在我們土地上運營所產生的責任,我們維持我們認爲是慣例和合理的保險,以保護我們的業務免受這些潛在損失。我們通常還在合同中包括與遵守環境、健康和安全法規和補救條款有關的契約。此外,我們可以依靠國家資助的項目(如TRRC的孤兒井項目),在我們的任何客戶宣佈破產時,爲某些封堵和放棄責任提供保險。然而,這樣的行爲可能不足以彌補我們的責任,我們也沒有爲所有風險提供充分的保障或保險。我們預計環保合規成本不會對我們的運營業績、現金流和財務狀況產生重大不利影響;然而,我們不能保證此類成本在未來不會產生重大影響,也不能保證此類未來合規成本不會對我們的運營業績、現金流和財務狀況或我們客戶的經營業績、現金流和財務狀況產生重大不利影響。
在這些現有的環境和職業健康與安全法律法規中,更重要的是包括以下美國法律標準,並不時進行修訂:
• | CAA,限制來自多個來源的空氣污染物的排放,並對各種施工前,業務、監測和報告要求,環境保護局依賴這些要求作爲通過與溫室氣體排放有關的氣候變化監管倡議的權威; |
• | 《聯邦水污染控制法案》,也稱爲《清潔水法》(CWA),規定了向州和聯邦水域排放污染物,並確定了水道作爲美國受保護水域受聯邦司法管轄和規則制定的程度; |
• | 1980年的《全面環境反應、補償和責任法》(「CERCLA」),規定已經發生或可能發生危險物質泄漏的地點的危險物質的生產者、交通者和安排者負有責任; |
• | 《資源保護和回收法》(「RCRA」),管理固體廢物的產生、處理、儲存、交通和處置,包括危險廢物; |
• | 1990年《石油污染法》,要求美國水域發生石油泄漏的陸上設施、管道和其他設施的擁有者和經營者以及近海設施所在地區的承租人或被許可人承擔搬運費用和損害賠償責任; |
• | 《安全飲用水法》(《安全飲用水法》),通過採用飲用水標準和控制將廢液注入可能對飲用水水源產生不利影響的地下地層來確保美國公共飲用水的質量; |
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• | 歐空局,通過在受影響地區實施經營限制或臨時、季節性或永久性禁令,限制可能影響聯邦確認的瀕危和受威脅物種或其棲息地的活動; |
• | 《國家環境政策法》,要求聯邦機構評估可能影響環境的主要機構行動,並可能需要準備環境評估和更詳細的環境影響聲明,供公衆審查和評論;以及 |
• | 《職業安全與健康法》(OSHA),該法案爲保護員工的健康和安全建立了工作場所標準,包括實施旨在向員工告知工作場所中的危險物質、這些物質的潛在有害影響以及適當的控制措施的危險通信計劃。 |
德克薩斯州和新墨西哥州在許多方面都有類似的法律法規。這些環境和職業健康與安全法律和法規一般限制作業產生的物質水平,這些物質可能排放到環境空氣中,排放到地表水中,並處置或釋放到地表和地下土壤和地下水中。此外,在我們開展業務的美國有州和地方司法管轄區,也有或正在制定或正在考慮制定類似的環境和職業健康與安全法律和法規,管理許多此類活動。如果我們或我們的客戶未能遵守這些法律和法規,可能會導致評估制裁,包括行政、民事和刑事罰款或處罰;施加調查、補救和糾正措施義務或招致資本支出;在許可、開發或擴建項目時發生限制、延誤或取消;以及發佈禁令限制或禁止特定領域的某些或所有活動。某些環境法還規定了公民訴訟,允許環境組織代替政府採取行動,並起訴那些受法律約束的人,在許多情況下,起訴我們的客戶涉嫌違反環境法。環境法律和條例產生的最終財務影響既不清楚也不能確定,因爲現有標準可能會發生變化,新的標準也在不斷演變。
我們的一些土地已經或現在由第三方或以前的所有者或運營商運營,他們對危險物質、廢物或石油碳氫化合物的處理和處置不在我們的控制之下。根據CERCLA和RCRA等環境法,我們可能會因補救由我們或之前的所有者或運營商處置或排放的碳氫化合物、危險物質或廢物而承擔嚴格的連帶責任。我們還可能產生與清理對於我們向其運送受管制物質進行處置或向其運送設備進行清潔的第三方場地,以及對自然資源的損害或與此類第三方場地或從該第三方場地釋放受管制物質有關的其他索賠,我們不承擔賠償責任。
廢物處理。RCRA和類似的州法規管理危險和非危險廢物的產生、交通、處理、儲存、處置和清理。根據環境保護局發佈的規則,各州管理RCRA的部分或全部條款,有時與它們自己的更嚴格的要求相結合。鑽井液、產出水和與勘探、開發和生產石油或天然氣相關的大多數其他廢物,如果處理得當,目前不受RCRA規定的危險廢物的監管,而是受RCRA不那麼嚴格的非危險廢物條款、州法律或其他聯邦法律的監管。然而,某些石油和天然氣鑽井和生產廢物現在被歸類爲無害廢物,未來可能會被歸類爲危險廢物。RCRA排除鑽井液、產出水和相關廢物的任何損失都可能導致我們和我們的石油和天然氣生產運營商管理和處置產生的廢物的成本增加,這可能對我們和我們客戶的運營業績、現金流和財務狀況產生重大不利影響。德克薩斯州和新墨西哥州除了自己的州法規外,還獲得了環保局的授權,可以在各自的司法管轄區管理RCRA項目。
含有自然產生的放射性物質(「標準」)的廢物也可能在我們客戶的操作中產生。某些用於生產石油和天然氣的工藝可能會提高
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放射性正常,可能存在於油田廢棄物中。NORAME主要受制於個別國家的輻射控制法規。例如,TRRC和新墨西哥州石油保護區通常對各自轄區內石油和天然氣作業的管理和處置進行監管。此外,規範處理和管理活動受OSHA頒佈的條例管轄。這些州和OSHA條例對工人保護、標準廢物的處理、儲存和處置、含有標準廢物的垃圾堆、容器和儲罐的管理以及對標準污染土地的使用提出了某些要求。
CWA和類似的州法律對向州水域和美國水域排放污染物,包括石油和危險物質的泄漏和泄漏施加限制和嚴格控制。禁止向受管制水域排放污染物,除非符合EPA或類似的州機構頒發的許可證的條款。CWA和類似的州法律還要求從某些類型的設施排放雨水徑流的個人許可或一般許可下的覆蓋範圍。
水務調度。CWA還禁止在包括溼地在內的受管制水域排放疏浚和填埋材料,除非獲得許可。根據CWA,聯邦政府對包括溼地在內的美國水域的適用管轄權範圍仍然存在不確定性,因爲自2015年以來,美國環保局和美國陸軍工程兵團(「Corps」)一直在尋求多項規則制定,試圖確定此類管轄權的範圍。2023年1月,環保局和軍團發佈了一項最終規則,該規則建立在2015年前根據最高法院的現有裁決,包括基於區域和地理差異的考慮因素,對最高法院的條例進行了修訂和更新。然而,這一規定受到了法律挑戰,目前在德克薩斯州被禁止。此外,2023年5月,最高法院決定薩克特訴環境保護局案,這起案件涉及用於確定溼地是否應被視爲「美國水域」的法律測試。在……裏面薩克特在這方面,最高法院大大縮小了「美國水域」的範圍,因爲最高法院認爲,根據「公民權利和政治權利國際公約」,「水域」一詞僅指在普通用語中被描述爲「溪流、河流、海洋和湖泊」的地理特徵,以及由於連續的表面連接而與這些水體難以區分的毗鄰溼地。2023年9月發佈了修訂後的WOTUS規則,以根據薩克特這一決定,但目前在多個法院受到質疑。由於該規則在某些州的禁令,2023年9月最終規則的實施因州而異,我們目前所在的兩個州的執行定義也不同。然而,我們無法預測即將上任的特朗普政府可能會對這些規定中的任何一項採取什麼行動,以及採取這些行動的時間。因此,目前在《公約》下的溼地法規方面存在重大不確定性。然而,如果任何規則或法規擴大了CWA的管轄範圍,我們、Water Bridge、Desert Environmental和我們的生產商以及其他客戶在獲得溼地區域疏浚和填埋活動許可證方面可能會面臨增加的成本和延誤。這些法律和任何實施條例規定了對未經許可排放原油和其他物質的行政、民事和刑事處罰,並可能對清除、補救和損害的費用施加重大潛在責任。如果EPA和Corps發佈的任何新的最終規則或規則擴大了CWA在我們或我們的客戶開展業務的地區的管轄權範圍,此類發展可能會增加合規支出或緩解成本,導致項目延遲、限制或停止開發,還會降低與我們有業務關係的生產商的石油和天然氣生產率,進而對我們的運營結果、現金流和財務狀況產生重大不利影響。聯邦和州監管機構可以對不遵守CWA和類似的州法律和法規的排放許可或其他要求的行爲施加行政、民事和刑事處罰。
空氣排放。CAA和類似的州法律通過空氣排放標準、建築和運營許可計劃以及實施其他合規標準來限制來自許多來源的空氣污染物的排放。這些法律和法規可能要求我們或我們的客戶在建設或修改某些預計會產生或大幅增加空氣排放的項目或設施時,必須事先獲得批准,獲得並嚴格遵守嚴格的空氣許可要求,或使用特定的設備或技術來控制某些污染物的排放。獲得許可的需要可能會推遲我們的
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以及我們客戶開發的各種類型的項目。在未來幾年,我們的客戶可能會在空氣污染控制設備或其他與空氣排放相關的問題上產生一定的資本支出,這可能會導致客戶的運營成本增加或客戶收入減少,並限制客戶未來的開發活動,包括Water Bridge和Desert Environmental,從而減少他們對我們土地和資源的使用需求。例如,2015年,環保局根據CAA發佈了一項最終規則,使地面臭氧的國家環境空氣質量標準(NAAQS)更加嚴格。2020年12月,特朗普政府領導下的環保局公佈了一項最終行動,選擇在未來的基礎上保留2015年的臭氧NAAQS,而不進行修訂。然而,幾個團體已經對2020年12月的這一決定提起了訴訟,拜登政府宣佈計劃重新考慮2020年12月的最終行動,支持更嚴格的地面臭氧NAAQS。2023年8月21日,環保局宣佈對臭氧NAAQS進行新的審查,以反映最新的臭氧科學,同時重新考慮2020年12月的決定。然而,審查仍在進行中,預計不會在環保局2025年12月對NAAQS進行審查的五年週期之前完成。此外,2024年10月29日,環保局與環境訴訟當事人達成了一項同意法令,要求環保局在2028年11月10日之前發佈氮氧化物的最終NAAQS。
如果我們土地上的項目的空氣排放量超過適用法律和法規設定的特定門檻,州政府實施修訂後的NAAQS還可能導致通過新墨西哥州環境部或德克薩斯州環境質量委員會頒發的許可證施加更嚴格的要求。遵守NAAQS要求或其他空氣污染控制和許可要求可能會推遲石油和天然氣及其他項目的開發,並增加我們或我們客戶的開發和生產成本,這些成本可能會減少對我們服務的需求,並對我們的運營業績、現金流和財務狀況產生重大不利影響。
近年來,美國環保局做出了相當大的努力來監管石油和天然氣業務的溫室氣體排放,包括規定對某些大型固定污染源的溫室氣體排放進行建設和運營許可審查,要求監測和每年報告某些石油和天然氣系統污染源的溫室氣體排放,實施新的污染源性能標準,指導減少石油和天然氣部門某些新建、改造或重建設施的甲烷。此外,IRA修訂了CAA,對需要向EPA報告其溫室氣體排放的來源的甲烷排放徵收費用,包括那些屬於陸上石油和天然氣生產以及收集和提高來源類別的來源。愛爾蘭共和軍還對通過甲烷排放收費的溫室氣體排放徵收聯邦費用,包括陸上石油和天然氣生產。2024年5月,美國環保局發佈了實施愛爾蘭共和軍甲烷收費的最終規則,從2024年每噸廢物排放900美元開始,2025年增加到每噸1200美元,2026年及以後增加到1500美元,只適用於超過法定規定水平的排放。這些規定和甲烷排放費用可能會增加我們客戶的成本,並間接地對我們的運營結果、現金流和財務狀況產生不利影響。然而,我們無法預測特朗普政府是否、如何或何時可能採取行動,修改或廢除甲烷排放收費或環保局最終敲定的與溫室氣體排放相關的規則。此外,國會可能會採取行動廢除或修訂《愛爾蘭共和軍》,包括在甲烷排放收費方面,這一時間或結果同樣無法預測。
採出水處理設施。通過地下注水進行的水處理是根據SDWA和類似的州和地方法律法規建立的地下注水控制(「UIC」)計劃進行管理的。UIC計劃包括允許、測試、監測、記錄和報告產出水處理活動的要求,以及禁止含有任何污染物的液體遷移到地下飲用水來源的要求。國家法規要求獲得相關監管機構的許可才能經營採出水處理設施。環保局已將地下注水井和處置井的權力分別下放給TRRC和NMOCD。儘管我們的客戶監控其設施的注入過程,但產出水處理設施地下部分的任何泄漏都可能導致地下水資源退化,可能導致我們的客戶被暫停UIC許可證,並被政府機構罰款和處罰。
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發生補救受影響資源的支出以及要求賠償替代供水、財產和人身傷害的第三方的賠償責任。水處理法規的改變或未來無法獲得新的生產水處理許可證可能會影響我們的客戶在我們的土地上處理生產水和其他物質的能力,這可能會對我們的業務、運營結果、現金流和財務狀況產生不利影響。
此外,針對過去幾年在用於注入石油和天然氣活動產生的產出水來處置的產出水處理設施附近發生的地震事件,聯邦和一些州機構正在調查這類設施是否導致地震活動增加,一些州已經在某些地震活動容易增加的地區限制、暫停或關閉這種產出水處理設施的使用。不斷髮展的研究表明,地震活動和廢水處理之間的聯繫可能因地區而異,在數以萬計的污水處理設施中,只有很小一部分被懷疑是或曾經是誘發地震活動的可能原因。2016年,美國地質調查局確定了誘發地震活動危害最嚴重的六個州,包括俄克拉何馬州、堪薩斯州、德克薩斯州、科羅拉多州、新墨西哥州和阿肯色州。由於這些擔憂,一些州的監管機構已經或正在考慮在許可採出水處理設施或以其他方式評估地震活動和使用此類油井之間的任何關係方面提出額外要求。例如,TRRC發佈了關於水處理設施的規則,對故障附近的產出水處理設施施加了某些許可和操作限制,並提出了報告要求。新墨西哥州的一些地區發佈了關於地震活動的監測和報告指南,並要求產出水處理設施之間有明顯的間隔。
各國還可以發佈命令,暫時關閉或減少地震事件附近現有設施的注入深度。在得克薩斯州,由於米德蘭盆地一個地區最近的地震活動,自2021年下半年以來,TRRC一直在推行幾項監管舉措,包括:(I)指示運營商自願減少數十個污水處理設施的污水處理,以應對地震;(Ii)暫停地震響應區內某些深層污水處理許可證;以及(Iii)暫停所有污水處理許可證,將石油和天然氣廢物注入地震響應區邊界內的深層地層。2021年11月,新墨西哥州實施了要求操作員在特定地震活動附近採取各種行動的協議,包括要求在地震事件達到一定震級時限制注入速度。此外,2024年7月11日,新墨西哥州宣佈行政取消75口待處理的UIC二類油井許可申請10英里縣線地震應答區,因爲該地區內的地震活動可能增加。這種地震活動的另一個後果是發生訴訟,指控污水處理作業對附近的財產造成了破壞,或者違反了州和聯邦政府關於廢物處理的規定。通過和實施任何新的法律、法規或指令,限制我們的客戶(包括Water Bridge)通過限制水量、處理率、生產水處理設施位置或其他方式在我們的土地上處理廢水的能力,或要求我們的客戶關閉生產水處理設施,可能會減少對我們土地和資源的使用需求,並限制我們從交通和處理我們土地上的生產水中獲得的費用和特許權使用費,這將對我們的運營結果、現金流和財務狀況產生重大不利影響。
水力壓裂。水力壓裂指的是將水、砂或其他支撐劑和化學添加劑在壓力下注入目標地質地層,以壓裂圍巖並刺激生產。水力壓裂是一種重要而常見的做法,通常由國家石油和天然氣委員會或類似機構監管。然而,這種做法在該國某些地區仍然存在爭議,導致對水力壓裂過程的更嚴格的審查和監管,包括已經聲稱擁有監管權威或對水力壓裂過程的某些方面進行調查的聯邦機構。
此外,一些州和地方政府,包括我們的客戶所在的州,已經通過了法規,其他政府實體正在考慮採用這些法規,這些法規可能會對水力壓裂作業施加更嚴格的許可、披露和建井要求,包括禁止
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hydraulic fracturing. For example, Texas, New Mexico and other states have adopted regulations that impose stringent permitting, disclosure, disposal and well construction requirements on hydraulic fracturing operations. The TRRC in 2014, for instance, issued a “well integrity rule” which updated the requirements for drilling, completing and cementing wells. The rule also included new testing and reporting requirements, such as the requirement to submit cementing reports after well completion or after cessation of drilling (whichever is later) and imposition of additional testing on wells less than 1,000 feet below usable groundwater. States could also elect to place certain prohibitions on hydraulic fracturing. Further, in multiple annual New Mexico legislative sessions, there have been continued efforts to pause hydraulic fracturing and cease state issuance of permits for a four year time period, although none of the bills introduced on this topic have yet passed the New Mexico Legislature.
In the event that new federal, state or local restrictions or bans on the hydraulic fracturing process are adopted in areas where our land is located, our customers may incur additional costs or permitting requirements to comply with such requirements that may be significant in nature and our customers could experience added restrictions, delays or cancellations in their exploration, development, or production activities, which would in turn reduce the demand for use of our land and resources and have a material adverse effect on our results of operations, cash flows and financial position.
Climate Change. The threat of climate change continues to attract considerable attention from the public and policymakers in the U.S. and around the world. As a result, numerous proposals have been made, and more are likely forthcoming at the international, national, regional and state levels of government to monitor and limit existing emissions of GHGs as well as to restrict or eliminate such future emissions. As a result, our operations as well as the operations of our customers are subject to a series of regulatory, political, litigation, and financial risks associated with our and their operations, including those related to the production and processing of fossil fuels and emission of GHGs.
Endangered Species. ESA restricts activities that may affect endangered or threatened species or their habitats. Similar protections are afforded under the MBTA, which prohibits the taking of protected migratory bird species without prior authorization by the FWS. To the degree that species listed under the ESA or similar state laws, or are protected under the MBTA, live in the areas where we or our customers operate, our and our customers’ abilities to conduct or expand operations and construct facilities could be limited or we and our customers could be forced to incur material additional costs. Moreover, our customers’ drilling activities may be delayed, restricted, or cancelled in protected habitat areas or during certain seasons, such as breeding and nesting seasons. Some of our land and the operations of our customers are located in areas that are designated as habitats for protected species. In addition, the FWS may make determinations on the listing of unlisted species as endangered or threatened under the ESA. For example, in November 2022, the FWS listed the northern district population segment of the lesser prairie chicken (encompassing southwest Colorado, southcentral to western Kansas western Oklahoma and the northeast Texas Panhandle) as threatened under the ESA, and the southern district population segment (covering eastern New Mexico and the southwest Texas panhandle) as endangered. The listing decision for the lesser prairie chicken was challenged by the states of Texas, Kansas, and Oklahoma, and various industry groups, and the litigation remains ongoing in the U.S. District Court for the Western District of Texas. Further, the FWS listed the dunes sagebrush lizard as an endangered species under the ESA in a final rule that became effective in June 2024. In September 2024, however, that listing decision was also challenged by the state of Texas in the U.S. District Court for the Western District of Texas. The results of that challenge remain uncertain. Critical habitat for the species has not yet been designated but is expected to occur after a separate rulemaking in the future. The designation of previously unidentified endangered or threatened species could indirectly cause us or our customers to incur additional costs, cause our or our customers’ operations to become subject to operating restrictions or bans and limit future development activity in affected areas. The FWS and similar state agencies may designate critical or suitable habitat areas that they believe are necessary for the survival of threatened or endangered species.
Over time, the trend in environmental and occupational health and safety regulation is to typically place more restrictions and limitations on activities that may adversely affect the environment or expose workers to
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injury and thus, any changes in environmental or occupational health and safety laws and regulations or reinterpretation of enforcement policies that may arise in the future and result in more stringent or costly waste management or disposal, pollution control, remediation or occupational health and safety-related requirements could have a material adverse effect on our business, results of operations, cash flows and financial position. We may not have insurance or be fully covered by insurance against all environmental and occupational health and safety risks, and we may be unable to pass on increased compliance costs arising out of such risks to our customers. We review regulatory and environmental issues as they pertain to us and we consider regulatory and environmental issues as part of our general risk management approach. For more information on environmental and occupational health and safety matters, see “Risk Factors—Risks Related to Environmental and Other Regulations—Legislation or regulatory initiatives intended to address seismic activity, over-pressurization or subsidence could restrict drilling, completion and production activities, as well as WaterBridge’s ability to handle produced water gathered from its customers, which could have a material adverse effect on our results of operations, cash flows and financial position,” “Risk Factors—Risks Related to Environmental and Other Regulations—The results of operations of our customers, as well as producers on or around our land, may be materially impacted by efforts to transition to a lower-carbon economy,” “Risk Factors—Risks Related to Our Business and Operations—We may be subject to claims for personal injury and property damage, or for catastrophic events, which could materially and adversely affect our results of operations, cash flows and financial position,” “Risk Factors—Risks Related to Our Business and Operations—We or our customers may be unable to obtain and renew permits necessary for operations, which could materially and adversely affect our results of operations, cash flows and financial position” and “Risks Related to Our Business and Operations.”
Oil, Natural Gas and NGL Data
Proved Reserves
Evaluation of Proved Reserves. Our proved reserves estimates as of December 31, 2023 and 2022 are based on reserves reports prepared by W.D. Von Gonten & Co. (“Von Gonten”), our independent petroleum engineers. The reports of Von Gonten contain further discussion of the reserves estimates and their preparation procedures.
Von Gonten was founded in 1995 and performs consulting petroleum engineering services under Texas Board of Professional Engineers Registration No. F-1855. Within Von Gonten, the technical persons primarily responsible for preparing the reserves estimates set forth in the reserves reports incorporated herein are William D. Von Gonten, Jr., President, and Travis C. Swanson, Petroleum Engineer. Mr. Von Gonten has served as President of Von Gonten since its founding in November 1995. His experience includes significant projects in both conventional and unconventional resources in every major U.S. producing basin and abroad, including oil and natural gas shale plays, coalbed methane fields, waterfloods and complex, faulted structures. Mr. Von Gonten graduated from Texas A&M University in 1988 with a Bachelor of Science degree in Petroleum Engineering and is a registered Professional Engineer in the State of Texas. He is also a member of the Society of Petroleum Engineers (SPE) and the Society of Petroleum Evaluation Engineers (SPEE). Mr. Swanson has been an employee of, and served as a petroleum engineer for, Von Gonten since June 2011 and has approximately 13 years of prior industry experience. Mr. Swanson graduated from Texas A&M University in 2011 with a Bachelor of Science degree in Petroleum Engineering and is a registered Professional Engineer in the State of Texas. He is also a member of the Society of Petroleum Engineers (SPE) and the Society of Petroleum Evaluation Engineers (SPEE). Both Mr. Von Gonten’s and Mr. Swanson’s responsibilities include reserves and economic evaluations, fair market valuations, field studies, pipeline resource studies and acquisition/divestiture analysis.
Both Messrs, Von Gonten and Swanson meet or exceed the requirements with regard to qualifications, independence, objectivity and confidentiality set forth in the Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information promulgated by the Society of Petroleum Engineers. Both are proficient in judiciously applying industry standard practices to engineering and geoscience evaluations as well as applying SEC and other industry reserves definitions and guidelines. Von Gonten does not have any ownership in any of
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our properties, and no portion of Von Gonten’s compensation is directly dependent on the quantity of reserves booked. A summary of Von Gonten’s reports with respect to our proved reserves estimates as of December 31, 2023 and 2022 are included as exhibits to the registration statement of which this prospectus forms a part.
Our management team works closely with Von Gonten to ensure the integrity, accuracy and timeliness of the data used to estimate our reserves. Members from our management team meet with our independent petroleum engineers periodically during the period covered by the reserves reports to discuss the assumptions and methods used in the reserves estimation process. We provide historical information to Von Gonten for our properties, such as ownership interest, oil and natural gas production and commodity prices. Our Chief Accounting Officer oversees our reserve estimates process, and directly reports to our Chief Executive Officer who is responsible for overseeing the review of our reserve estimates.
The preparation of our reserves estimates were reviewed in accordance with our internal control procedures. These procedures, which are intended to ensure reliability of reserves estimations, include the following:
• | review and verification of historical production data, which data is based on actual production as reported by our operators; |
• | review by our Chief Accounting Officer of all of our reported reserves, including the review of all significant reserves changes and all new PUDs additions; |
• | review and verification of net revenue interests, costs inputs applicable to ownership interests and reasonableness of other cost assumptions impacting the economic life of the reserves; |
• | review of reserves estimates by our Chief Accounting Officer or by personnel under his direct supervision; and |
• | direct reporting responsibilities by our Chief Accounting Officer to our Chief Executive Officer and Chief Operating Officer. |
Estimation of Proved Reserves. In accordance with rules and regulations of the SEC applicable to companies involved in oil and natural gas producing activities, proved reserves are those quantities of oil and natural gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs, and under existing economic conditions, operating methods and government regulations. The term “reasonable certainty” means deterministically, the quantities of oil and/or natural gas are much more likely to be achieved than not, and probabilistically, there should be at least a 90% probability of recovering volumes equal to or exceeding the estimate. All of our proved reserves as of December 31, 2023 and 2022 were estimated using a deterministic method. The estimation of reserves involves two distinct determinations. The first determination results in the estimation of the quantities of recoverable oil and natural gas and the second determination results in the estimation of the uncertainty associated with those estimated quantities in accordance with the definitions established under SEC rules. The process of estimating the quantities of recoverable reserves relies on the use of certain generally accepted analytical procedures. These analytical procedures fall into four broad categories or methods: (i) production performance-based methods; (ii) material balance-based methods; (iii) volumetric-based methods; and (iv) analogy. These methods may be used singularly or in combination by the reserves evaluator in the process of estimating the quantities of reserves. Reserves for proved developed producing wells were estimated using production performance methods for the vast majority of properties. Certain new producing properties with very little production history were forecast using a combination of production performance and analogy to similar production, both of which are considered to provide a reasonably high degree of accuracy. Non-producing reserves estimates, for developed and undeveloped properties, were forecast using analogy methods. This method provides a reasonably high degree of accuracy for predicting proved developed non-producing and PUDs for our properties, due to the abundance of analog data.
To estimate economically recoverable proved reserves and related future net cash flows, we considered many factors and assumptions, including the use of reservoir parameters derived from geological and engineering data that cannot be measured directly, economic criteria based on current costs and the SEC pricing requirements and forecasts of future production rates.
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Under SEC rules, reasonable certainty can be established using techniques that have been proven effective by actual production from projects in the same reservoir or an analogous reservoir or by other evidence using reliable technology that establishes reasonable certainty. Reliable technology is a grouping of one or more technologies (including computational methods) that have been field-tested and have been demonstrated to provide reasonably certain results with consistency and repeatability in the formation being evaluated or in an analogous formation. To establish reasonable certainty with respect to our estimated proved reserves, the technologies and economic data used in the estimation of our proved reserves have been demonstrated to yield results with consistency and repeatability, and include production and well test data, decline curve analysis, geophysical interpretation, log analysis, volumetric calculations, core analysis, reservoir simulation and historical well cost and operating expense data.
Summary of Reserves. The following table presents our estimated net proved reserves as of December 31, 2023 and 2022, based on our proved reserves estimates as of such date, which have been prepared by Von Gonten, our independent petroleum engineers, in accordance with the rules and regulations of the SEC. All of our proved reserves are located in the United States.
December 31, | ||||||||
2023(1) | 2022(1) | |||||||
Estimated proved developed reserves: |
||||||||
Oil (MBbls) |
809 | 622 | ||||||
Natural gas (MMcf) |
2,957 | 1,821 | ||||||
NGLs (MBbls) |
193 | 121 | ||||||
|
|
|
|
|||||
Total (Mboe)(2) |
1,495 | 1,047 | ||||||
Estimated proved undeveloped reserves: |
||||||||
Oil (MBbls) |
887 | 1,154 | ||||||
Natural gas (MMcf) |
2,278 | 3,151 | ||||||
NGLs (MBbls) |
151 | 210 | ||||||
|
|
|
|
|||||
Total (Mboe)(2) |
1,418 | 1,889 | ||||||
Estimated proved reserves: |
||||||||
Oil (MBbls) |
1,696 | 1,776 | ||||||
Natural gas (MMcf) |
5,235 | 4,972 | ||||||
NGLs (MBbls) |
344 | 331 | ||||||
|
|
|
|
|||||
Total (Mboe)(2) |
2,913 | 2,936 | ||||||
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|
|
|
(1) | Our reserves were determined using average first-day-of-the-month prices for the prior 12 months in accordance with SEC guidance. For oil and NGL volumes, the average WTI posted price of $78.22 per barrel and $95.84 per barrel as of December 31, 2023 and 2022 was adjusted for items such as gravity, quality, local conditions, gathering, transportation fees and distance from market. For natural gas volumes, the average Henry Hub Index spot price of $2.64 per MMBtu and $6.77 per MMBtu as of December 31, 2023 and 2022 was similarly adjusted for items such as quality, local conditions, gathering, transportation fees and distance from market. All prices are held constant throughout the lives of the properties. The average realized product prices over the remaining lives of the properties are $76.40 per barrel of oil, $1.67 per MMBtu of natural gas and $24.45 per barrel of NGLs as of December 31, 2023. The average realized product prices over the remaining lives of the properties were $93.67 per barrel of oil, $6.36 per MMBtu of natural gas and $28.10 per barrel of NGLs as of December 31, 2022. |
(2) | We present our total reserves on an Mboe basis, calculated at the rate of one barrel of oil per six Mcf of natural gas based upon the relative energy content. This is an energy content correlation and does not reflect the price or value relationship between oil and natural gas. |
Reserve engineering is a subjective process of estimating volumes of economically recoverable oil and natural gas that cannot be measured in an exact manner. The accuracy of any reserves estimate is a function of
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the quality of available data and of engineering and geological interpretation. As a result, the estimates of different engineers often vary. In addition, the results of drilling, testing and production may justify revisions of such estimates. Accordingly, reserves estimates often differ from the quantities of oil and natural gas that are ultimately recovered. Estimates of economically recoverable oil and natural gas and of future net cash flows are based on a number of variables and assumptions, including geologic interpretation, prices and future production rates and costs, all of which may vary from actual results. Please read “Risk Factors.”
Additional information regarding our proved reserves can be found in the notes to our financial statements included elsewhere in this prospectus and the proved reserves reports as of December 31, 2023 and 2022, which are included as exhibits to the registration statement of which this prospectus forms a part.
PUDs
The following table summarizes our changes in PUDs during the years ended December 31, 2022 and 2023. PUDs will be converted from undeveloped to developed as the applicable wells begin production.
Oil (MBbls) | Natural Gas (MMcf) |
NGL (MBbls) | Proved Undeveloped Reserves (Mboe) |
|||||||||||||
Balance, January 1, 2022 |
1,049 | 3,335 | 222 | 1,827 | ||||||||||||
Acquisitions of reserves |
— | — | — | — | ||||||||||||
Extensions and discoveries |
291 | 560 | 37 | 421 | ||||||||||||
Divestiture of minerals in place |
— | — | — | — | ||||||||||||
Revisions of previous estimates |
(26 | ) | (93 | ) | (6 | ) | (47 | ) | ||||||||
Transfers to estimated proved developed |
(160 | ) | (651 | ) | (43 | ) | (312 | ) | ||||||||
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|
|
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|
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Balance, December 31, 2022 |
1,154 | 3,151 | 210 | 1,889 | ||||||||||||
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|
|
|
|
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Acquisitions of reserves |
— | — | — | — | ||||||||||||
Extensions and discoveries |
— | — | — | — | ||||||||||||
Divestiture of minerals in place |
— | — | — | — | ||||||||||||
Revisions of previous estimates |
(23 | ) | (82 | ) | (6 | ) | (42 | ) | ||||||||
Transfers to estimated proved developed |
(244 | ) | (791 | ) | (53 | ) | (429 | ) | ||||||||
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|
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Balance, December 31, 2023 |
887 | 2,278 | 151 | 1,418 | ||||||||||||
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|
Changes in our PUDs that occurred during the year ended December 31, 2022 were primarily due to:
• | well additions, extensions and discoveries of approximately 421 Mboe primarily due to the addition of five new gross well locations based on increased operator drilling activity; |
• | negative revisions of previous estimates of approximately 47 Mboe. 102 Mboe decrease was due to reclassification of three gross well locations to unproved due to modified operator development, partially offset by 55 Mboe increase was due to changes in commodity prices; and |
• | transfers of approximately 312 Mboe due to three gross well locations that were previously categorized as proved undeveloped but were drilled during the year resulting in the addition of proved developed reserves. |
Changes in our PUDs that occurred during the year ended December 31, 2023 were primarily due to:
• | negative revisions of previous estimates of approximately 42 Mboe. 42 Mboe decrease was due to changes in commodity prices; and |
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• | transfers of approximately 429 Mboe due to five gross well locations that were previously categorized as proved undeveloped but were drilled during the year resulting in the addition of proved developed reserves. |
As a mineral and royalty interests owner, we do not incur any capital expenditures or lease operating expenses in connection with the development of our PUDs, which costs are borne entirely by the working interest owners. As a result, during the year ended December 31, 2023, we did not have any expenditures to convert PUDs to proved developed reserves.
We identify drilling locations based on an assessment of current geologic, engineering and land data. This includes drilling space unit formation and current well spacing information derived from state agencies and the operations of the E&P companies drilling our mineral and royalty interests. We generally do not have evidence of approval of our operators’ development plans, however we use a deterministic approach to define and allocate locations to proved reserves. In preparing our assessment, Von Gonten reviewed publicly available geological information or engineering data that it gathered and historical production data provided by operators, or otherwise publicly available information of or related to the operators of the reserves underlying our acreage, including the number of drilling rigs such operators are operating on and around our land, the drilling permits issued to such operators on or in proximity to our acreage and information disclosed by such operators regarding their drilling and development programs and their announced capital expenditure budgets and availability of liquidity. Von Gonten then compared such information against the historical drilling and development programs and trends of such operators, such as their historical conversion rates and development trends, for consistency and reasonableness relative to past practice and the then existing commodity price environment, as well as other economic conditions. In addition, our personnel confer informally from time to time with such operators to understand whether our expectations regarding their drilling and development activities are consistent with their near-term drilling schedules. Further, in providing its estimates, Von Gonten classifies proved reserves based on locations that are economically producible from a known reservoir at existing economic and operating conditions, the consideration of economic inputs, including commodity prices, contract differentials and prevailing development and operating costs in the region as of the date of the assessment, only including reserves associated with locations that are direct offsets to productive wells or units in accordance with SEC definitions with respect to proved undeveloped locations.
While many of our locations qualify as geologic PUDs, we limit our PUDs to the quantities of oil and natural gas that are reasonably certain to be recovered in the next five years. In accordance with SEC rules, our PUDs are only booked if they relate to wells that we reasonably expect, based on the above described assessment, to be scheduled to be drilled within five years after the date of booking. As of December 31, 2023 and 2022, approximately 49% and 64% of our total proved reserves were classified as PUDs, respectively.
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Oil, Natural Gas and NGLs Production Prices and Costs
Production and Price History
The following table sets forth information regarding net production of oil, natural gas and NGLs, and certain price and cost information for each of the periods indicated:
Year Ended December 31, |
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2023 | 2022 | |||||||
Net royalty production volumes: |
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Oil (MBbls) |
225 | 145 | ||||||
Natural gas (MMcf) |
693 | 438 | ||||||
NGLs (MBbls) |
68 | 24 | ||||||
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|
|
|||||
Equivalents (Mboe) (1)(2) |
409 | 242 | ||||||
Average realized prices: |
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Oil ($/Bbl) |
$ | 76.17 | $ | 95.84 | ||||
Natural gas ($/Mcf) |
2.34 | 6.77 | ||||||
NGLs ($/Bbl) |
19.44 | 38.71 | ||||||
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|
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Equivalents ($/Boe) (2) |
$ | 49.10 | $ | 73.52 | ||||
Average costs ($/Boe): |
||||||||
Severance and ad valorem taxes |
$ | 2.97 | $ | 5.28 | ||||
Transportation, processing and other |
0.15 | 0.01 | ||||||
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|
|
|
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Net realized ($/Boe) |
$ | 46.33 | $ | 68.23 | ||||
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|
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(1) | May not sum or recalculate due to rounding. |
(2) | We present our total production on an Mboe basis, calculated at the rate of one barrel per six Mcf based upon the relative energy content. This is an energy content correlation and does not reflect the price or value relationship between oil and natural gas. |
Productive Wells
Productive wells consist of producing horizontal wells, wells capable of production and exploratory, development or extension wells that are not dry wells. The table below sets forth our productive wells as of December 31, 2023 and 2022. All of our productive wells are gross productive horizontal wells.
December 31, | ||||||||||||||||
2023 | 2022 | |||||||||||||||
Gross | Net | Gross | Net | |||||||||||||
Oil |
43 | 1.7 | 39 | 1.7 | ||||||||||||
Natural gas |
34 | 1.5 | 19 | 1.0 | ||||||||||||
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|
|
|
|
|
|
|
|||||||||
Total |
77 | 3.2 | 58 | 2.7 |
We do not own any working interests in any wells. Accordingly, we do not own any net wells as such term is defined by Item 1208(c)(2) of Regulation S-K.
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Acreage
The table below sets forth historical information about our developed and undeveloped gross mineral acres and net royalty acres as of December 31, 2023 and 2022.
December 31, | ||||||||||||||||||||||||
2023 | 2022 | |||||||||||||||||||||||
Gross Mineral Acres |
Weighted Average Royalty Interest |
Net Royalty Acres |
Gross Mineral Acres |
Weighted Average Royalty Interest |
Net Royalty Acres |
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Developed |
1,775 | 23.9 | % | 423 | 1,423 | 23.9 | % | 339 | ||||||||||||||||
Undeveloped |
2,405 | 23.9 | % | 575 | 2,757 | 23.9 | % | 659 | ||||||||||||||||
Total |
4,180 | 23.9 | % | 998 | 4,180 | 23.9 | % | 998 |
The table below sets forth our leased and unleased gross mineral acres as of December 31, 2023 and 2022.
December 31, | ||||||||||||||||
2023 | 2022 | |||||||||||||||
Gross Mineral Acres | % | Gross Mineral Acres | % | |||||||||||||
Leased |
3,520 | 84 | % | 3,311 | 79 | % | ||||||||||
Unleased |
660 | 16 | % | 869 | 21 | % | ||||||||||
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Total gross mineral acres |
4,180 | 100 | % | 4,180 | 100 | % | ||||||||||
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Drilling Results
The table below sets forth information related to wells drilled on our acreage during the years ended December 31, 2023 and 2022, gross and net wells turned to production. As a holder of mineral and royalty interests, we generally are not provided information as to whether any wells drilled on the properties underlying our acreage are classified as exploratory or as developmental wells. We are not aware of any dry holes drilled on the acreage underlying our mineral interests during the relevant periods.
Year Ended December 31, | ||||||||
2023 | 2022 | |||||||
Productive Gross |
19 | 16 | ||||||
Dry |
— | — | ||||||
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|
|
|
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Total |
19 | 16 | ||||||
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|
|
|
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Productive Net |
0.7 | 0.6 |
Legal Proceedings
We are periodically party to proceedings and claims incidental to our business. While many of these other matters may not be predicted with certainty, we believe that the liability, if any, ultimately incurred with respect to such other proceedings and claims will not have a material adverse effect on our financial position or on our liquidity, capital resources, future results of operations or cash flows. We will continue to evaluate proceedings and claims involving us on a regular basis and will establish and adjust any estimated reserves as appropriate to reflect our assessment of the then current status of the matters.
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MANAGEMENT
Set forth below are the names, ages and titles of our executive officers and director:
Name |
Age | Position with LandBridge Company LLC | ||
Jason Long |
42 | President and Chief Executive Officer; Director | ||
Scott L. McNeely |
40 | Executive Vice President, Chief Financial Officer | ||
Harrison Bolling |
40 | Executive Vice President and General Counsel | ||
Jason Williams |
45 | Executive Vice President, Chief Administrative Officer | ||
David N. Capobianco |
54 | Director | ||
Matthew K. Morrow |
55 | Director | ||
Michael S. Sulton |
47 | Director | ||
Frank Bayouth |
58 | Director | ||
Kara Goodloe Harling |
46 | Director | ||
Ben Moore |
60 | Director | ||
Charles Watson |
74 | Director | ||
Ty Daul |
57 | Director | ||
Valerie P. Chase |
41 | Director | ||
Andrea Nicolás |
57 | Director |
Executive Officers and Directors
The following is a biographical summary of the business experience of our executive officers and directors:
Jason Long—President and Chief Executive Officer; Director. Mr. Long has served as our Chief Executive Officer since January 2024. Mr. Long has also served on our board of directors since the consummation of the IPO. Mr. Long previously served as our Co-Chief Executive Officer and Chief Operating Officer from September 2021 until December 2023. Mr. Long joined DBR Land in September 2021. Mr. Long also currently serves as President and Chief Executive Officer of WaterBridge and has served in such roles since January 2024. Mr. Long previously served as Co-Chief Executive Officer and Chief Operating Officer of WaterBridge from May 2020 to December 2023 and as Co-President and Chief Operating Officer of WaterBridge from September 2018 to May 2020. Prior to joining WaterBridge, Mr. Long founded and served as President of EnWater Solutions, LLC and Pelagic Water Systems, LLC, each a produced water gathering and disposal company in the Delaware Basin, from January 2014 to September 2017. Mr. Long graduated from Texas Christian University with a Bachelor of Science. A native of West Texas, Mr. Long is an oil and natural gas entrepreneur with more than 18 years’ experience founding and operating businesses.
We believe that Mr. Long’s role as our Chief Executive Officer, as well as his substantial experience founding and operating businesses, particularly in an industry in which we target customers, make him well qualified to serve as a member of our board of directors.
Scott L. McNeely—Executive Vice President, Chief Financial Officer. Mr. McNeely has served as our Executive Vice President, Chief Financial Officer since January 2024. Mr. McNeely joined DBR Land in September 2021 as Vice President, Finance. Mr. McNeely also currently serves as Executive Vice President, Chief Financial Officer, of WaterBridge and has served in such role since January 2024. Mr. McNeely previously served as Senior Vice President, Finance of WaterBridge from January 2023 to December 2023, Vice President, Finance of WaterBridge from July 2019 to December 2022, and Director of Finance of WaterBridge, from April 2018 to June 2019. Prior to joining WaterBridge, Mr. McNeely served as an Investment Banking Senior Associate at Citigroup from June 2015 to March 2018. Prior to serving in such role, Mr. McNeely served in various roles within the intelligence community, including for CACI International Inc. (NYSE: CACI) from 2010 to 2012 and Leidos Holdings Inc. (NYSE: LDOS) from 2012 to 2014. Before joining CACI International,
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Mr. McNeely served as an active-duty Air Force intelligence officer from 2005 to 2010. Mr. McNeely graduated from the University of California, Riverside with a Bachelor of Science in Computational Mathematics in 2005, the University of Oklahoma with Master of Arts in International Relations in 2011 and the Kellogg School of Management at Northwestern University with a Master of Business Administration in 2016.
Harrison Bolling—Executive Vice President and General Counsel. Mr. Bolling has served as our Executive Vice President and General Counsel since our formation in September 2023. Mr. Bolling joined DBR Land in September 2021 as its Senior Vice President, General Counsel. Mr. Bolling also currently serves as the Executive Vice President and General Counsel of WaterBridge and has served in such role since March 2018. Prior to joining WaterBridge, Mr. Bolling served as Vice President and General Counsel of Core Midstream from May 2017 to February 2018. Before joining Core Midstream, Mr. Bolling served as Assistant General Counsel of PennTex Midstream Partners, L.P. (Nasdaq: PTXP) from January 2015 to February 2017. Prior to PennTex, Mr. Bolling served as an associate at Bracewell LLP from September 2008 to December 2014. Mr. Bolling received a Bachelor of Science in History and Economics from Vanderbilt University in 2005 and a Juris Doctor from the University of Texas School of Law in 2008.
Jason Williams—Executive Vice President, Chief Administrative Officer. Mr. Williams has served as our Executive Vice President, Chief Administrative Officer since January 2024. Mr. Williams joined DBR Land in September 2021 as its Senior Vice President, Chief Accounting Officer and previously served as Executive Vice President, Chief Accounting Officer and Head of Supply Chain of DBR Land from January 2023 to December 2023. Mr. Williams also currently serves as the Executive Vice President, Chief Administrative Officer of WaterBridge and has served in such role since January 2024. Mr. Williams joined WaterBridge as Vice President, Chief Accounting Officer in September 2019 and previously served as Senior Vice President, Chief Accounting Officer and Head of Supply Chain of WaterBridge from January 2021 to December 2022 and Executive Vice President, Chief Accounting Officer and Head of Supply Chain of WaterBridge from January 2023 to December 2023. Prior to joining WaterBridge, Mr. Williams served in various roles for BHP Groups Limited, a public multinational mining and metals company, including most recently as Acting Vice President, Accounting and Reporting and previously as Finance Manager Permian and Eagle Ford in which he managed 3,000 wells and 600 miles of pipelines. Before BHP, Mr. Williams served in various roles for Willbros Group, Inc., a global engineering and contractor company, including most recently as a controller. Prior to Willbros, Mr. Williams worked as an auditor at Grant Thornton LLP from January 2005 to December 2006. Mr. Williams received a Bachelor of Science in Accounting from the University of Houston, Clear Lake, in 2004.
David N. Capobianco—Director. Mr. Capobianco has served on our board of directors since the consummation of the IPO. Mr. Capobianco has served as the Chief Executive Officer and Managing Partner of Five Point since its founding in 2012. Prior to founding Five Point, Mr. Capobianco was a founder and co-head of the private equity group at Vulcan Capital. Mr. Capobianco also currently serves as a director on the boards of NDB LLC, WaterBridge Holdings LLC, Twin Eagle Resource Management, LLC, Deep Blue Midland Basin LLC, Northwind Midstream Holdings LLC, and San Mateo Midstream, LLC. He previously served as the Chairman of the Board of Vulcan Energy Corporation (formerly Plains Resources), a member of the Board and Chairman of the Compensation Committee of Plains All American (NYSE: PAA), a member of the Board of PAA/Vulcan Gas Storage (formerly Energy Center Investments), and Chairman of the Board of Vulcan Resources (formerly Calumet Florida). Before joining Vulcan, Mr. Capobianco served as senior member of the investment team at Greenhill Capital Partners, a member of the investment team of Harvest Partners and a member of the Energy Corporate Finance Group at Soloman Brothers. Mr. Capobianco received a Master of Business Administration from Harvard Business School and a Bachelor of Arts degree from Duke University.
We believe that Mr. Capobianco’s skills and experience, particularly his approximately 25 years of industry experience investing and building leading infrastructure businesses of the type we target as customers, make him well qualified to serve as a member of our board of directors.
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Matthew K. Morrow—Director. Mr. Morrow has served on our board of directors since the consummation of the IPO. Mr. Morrow has served as the Chief Operating Officer and Managing Partner of Five Point since its founding in 2012. Prior to founding Five Point, Mr. Morrow served as President and Chief Executive Officer of ENSTOR Inc., one of the largest independent natural gas storage franchises in North America, prior to its sale to Iberdrola Energy Holdings, a North American natural gas marketing business. Following the sale of ENSTOR Inc. to Iberdrola Energy Holdings, Mr. Morrow served as the President and Chief Executive Officer of Iberdrola Energy Holdings. Mr. Morrow also served as a senior member at PPM Energy Canada Ltd, which focused on power generation, wind renewable and natural gas marketing and storage businesses. Prior to joining ENSTOR Inc. and PPM Energy Canada Ltd, Mr. Morrow held various senior positions with Texaco Natural Gas, culminating with his position as President. Mr. Morrow also currently serves as a director on the boards of NDB LLC, WaterBridge Holdings LLC, Twin Eagle Resource Management, LLC, Deep Blue Midland Basin LLC, Northwind Midstream Holdings LLC, and San Mateo Midstream, LLC. He also serves on the board of directors on Mission Lazarus, a non-profit organization with operations in Honduras and Haiti. He previously served as a director on the board of ENSTOR Inc., Iberdrola Energy Holdings and PPM Energy Canada Ltd. Mr. Morrow received a Master of Business Administration and a Bachelor of Science degree from Texas A&M University.
We believe that Mr. Morrow’s skills and experience, particularly his approximately experience leading and operating natural gas and renewable energy businesses of the type we target as customers, make him well qualified to serve as a member of our board of directors.
Michael S. Sulton—Director. Mr. Sulton has served on our board of directors since the consummation of the IPO. Mr. Sulton joined Five Point in January 2021 as its Executive Vice President and Partner. Prior to joining Five Point, Mr. Sulton served as a Managing Director of Piper Sandler & Co. (formerly Simmons & Company International), specializing in the energy industry. Throughout his 20-year investment banking career, Mr. Sulton has executed a wide range of transactions including mergers, divestitures and capital raises and participated in over 100 successful transactions. Mr. Sulton also currently serves on the board of Desert Environmental. Mr. Sulton received a Bachelor of Business Administration from Southern Methodist University and a Master of Business Administration from the University of Texas.
We believe that Mr. Sulton’s skills and experience, particularly his approximately 25 years of investing experience over a wide range of transactions, make him well qualified to serve as a member of our board of directors.
Frank Bayouth—Director. Mr. Bayouth has served on our board of directors since the consummation of the IPO. Mr. Bayouth currently serves as Executive Vice President and General Counsel at Five Point and has served in such role since joining Five Point in January 2022. Prior to joining Five Point, Mr. Bayouth served in various roles with Skadden, Arps, Slate, Meagher & Flom LLP for over 30 years, including over 20 years as a Partner, where he specialized in mergers and acquisitions and general corporate and securities law matters. Mr. Bayouth also currently serves on the boards of NDB LLC and WaterBridge Holdings LLC. Mr. Bayouth received a Bachelor of Business Administration in Accounting from Texas Tech University and a Juris Doctor from the University of Texas School of Law.
We believe that Mr. Bayouth’s legal, governance and merger and acquisitions expertise, which enable him to provide guidance in legal affairs, corporate governance and potential acquisitions, make him well qualified to serve as a member of our board of directors.
Kara Goodloe Harling—Director. Ms. Harling has served on our board of directors since the consummation of the IPO. Ms. Harling serves as the as the Chief Financial Officer and Chief Compliance Officer of Five Point. Prior to joining Five Point in February 2024, Ms. Harling served as the Chief Operating Officer and Chief Compliance Officer of Mountain Capital Management, LLC from January 2016 to February 2024. Ms. Harling also previously served as Chief Accounting Officer and Corporate Controller for Ascent Resources
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from January 2015 to January 2016. Prior to joining Ascent Resources, she served in multiple roles with American Energy Partners, LP. Ms. Harling began her career with Arthur Anderson in 2000 and joined Ernst & Young LLP in 2002, where she ultimately served as Partner before joining American Energy Partners, LP. Ms. Harling received a Bachelor of Business Administration in Accounting from Texas A&M University. Mr. Harling is a Certified Public Accountant in the State of Texas.
We believe that Ms. Harling’s skills and experience, particularly her financial experience across a variety of industries, including in the oil and natural gas industry for businesses of the type we target as customers, make her well qualified to serve as a member of our board of directors.
Ben Moore—Director. Mr. Moore has served on our board of directors since the consummation of the IPO. Mr. Moore joined Five Point in 2015, where he served as as Executive Vice President and Partner until November 2024. Mr. Moore serves as Executive Vice President of Subsurface and Sequestration at Northwind Midstream Partners, a wholly-owned portfolio company of Five Point. Prior to Five Point, Mr. Moore served as CEO and President of NorTex Midstream Partners, a gas storage and processing company located in the Fort Worth Basin for two years. Prior to joining Nortex, Mr. Moore served for 12 years with Enstor, the gas midstream subsidiary of Iberdrola, working as the Vice President of Operations and Engineering and formerly as the Vice President of Business Development. Mr. Moore also served in various engineering and marketing roles in the upstream industry for Dominion Energy, Shell Oil, and Tenneco Oil. Mr. Moore earned a Bachelor of Science in Petroleum Engineering from the University of Oklahoma in 1986 and a Master of Business Administration from Duke University in 1994.
We believe that Mr. Moore’s 35 years of upstream and midstream energy industry experience, particularly in operations, engineering, and compliance, make him well qualified to serve as a member of our board of directors.
Charles Watson—Director. Mr. Watson has served on our board of directors since the consummation of the IPO. Mr. Watson was chairman and co-founder of Twin Eagle, a midstream terminal and logistics company, from 2010 until his retirement in 2023, and currently remains on the board. He was chairman of Eagle Energy Partners, which he co-founded in 2003 and sold to Lehman Brothers in 2007. In 2008, Mr. Watson led the purchase of Eagle Energy Partners from Lehman Brothers and sale to Électricité de France (EDF). Mr. Watson was the chairman and CEO of Houston-based Dynegy Inc., a power generator, natural gas liquids producer and a large North American natural gas and power marketer. He established NGC Corp., Dynegy’s predecessor, in 1985 and served as chairman and CEO until his departure in May 2002. Mr. Watson worked at Conoco from 1972 until his departure in 1985.
He is currently on the board of Baylor College of Medicine. Mr. Watson is a past board member of Mainstream Renewable Power, a global developer of wind and solar plants. He was also on the board of Baker Hughes Inc. from 1990 to 2015. He is a member of the Angeleno Group board of advisors and also serves on the advisory council for DocuSign. Mr. Watson co-founded Caldwell Watson Real Estate Group in 1996. Mr. Watson served as governor, trustee and chairman of the Oklahoma State University Foundation and was inducted into the OSU Alumni Hall of Fame in 1997. Mr. Watson earned a bachelor’s degree in economics from Oklahoma State University in 1972.
We believe that Mr. Watson’s skills and experience, particularly as an executive and entrepreneur in the energy industry, make him well qualified to serve as a member of our board of directors.
Ty Daul—Director. Mr. Daul has served on our board of directors since the consummation of the IPO. Mr. Daul has served as Chief Executive Officer and a member of the Board of Directors of Primergy Solar, a developer, owner and operator of both distributed and utility scale solar photovoltaic and energy storage projects across North America, since May 2020. Prior to Primergy, Mr. Daul served as Vice President of Canadian Solar’s energy project development business throughout North and South America from March 2017 to May 2020, and was President of Recurrent Energy Group, a wholly owned subsidiary of Canadian Solar that functions
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as the company’s U.S. project development arm. Prior to Canadian Solar, Mr. Daul served as Senior Vice President, Americas Power Plants of SunPower Corporation from May 2015 to March 2017. In addition, Mr. Daul served on the Board of 8point3 Energy Partners LP, the publicly traded “yieldco” formed by SunPower Corporation and First Solar, Inc., from June 2015 to March 2017. Prior to joining SunPower, he co-founded Element Power in 2009 and oversaw the company’s wind and solar businesses in the Americas for five years. With more than three decades of experience in the power generation industry, Mr. Daul has been involved in more than 11 gigawatts of operating wind, solar and battery energy storage projects representing well over $13 billion of total investment and is currently responsible for a 22 GW portfolio of solar and battery energy storage projects, with over 1.7 GW of solar and 1.5 GW hours of energy storage in under construction or in operations totaling over $2.2 billion of investment. Mr. Daul’s energy industry experience also includes seven years at Iberdrola Renewables Inc. (formerly PPM Energy Inc.), Entergy Corp. and Newport Generation Ventures, LLC. He is currently on the Board of Directors at Shoals Technologies Group, Inc. where he is on the Audit Committee; a member of the Board of Directors of the Solar Energy Industries Association; and on the Board of Directors of Infinigen Renewables, a Puerto Rico based clean energy IPP. Mr. Daul also served on the Wind Solar Alliance Board for more than seven years. He earned a B.S. in mechanical engineering from the University of Washington and an MBA from Texas A&M University.
We believe that Mr. Daul’s skills and experience, particularly his extensive experience serving in leadership roles in the energy and renewables industry, make him well qualified to serve as a member of our board of directors.
Valerie P. Chase—Director. Ms. Chase has served on our board of directors since the consummation of the IPO. Ms. Chase’s experience includes 19 years in the finance and accounting industry. She has broad experience across the finance function including technical accounting and SEC reporting, internal controls implementation and compliance, acquisitions and divestitures, cybersecurity and system implementations. From 2018 to 2021, Ms. Chase served as the Vice President, Chief Accounting Officer and Controller of Magnolia Oil & Gas Corporation. From 2010 to 2018, Ms. Chase served in roles of increasing responsibility with Apache Corporation (now APA Corporation), culminating in her role as the head of accounting policy and financial controls. Ms. Chase began her career with Ernst & Young LLP in 2005. From 2021 to 2024, Ms. Chase served on the board of HF Foods Group Inc. (NASDAQ: HFFG), serving as chair of both the Audit Committee and the Special Transaction Review Committee. Ms. Chase holds a Bachelor of Economics degree and a Master of Accounting degree from the University of Michigan in Ann Arbor and is a Certified Public Accountant in the State of Texas.
We believe Ms. Chase’s qualifications to sit on our board of directors include her experience in finance, accounting and corporate governance, as well as her expertise in accounting procedures, policies and financial controls.
Andrea Nicolás—Director. Ms. Nicolás has served on our board of directors since September 2024. Ms. Nicolás served in various roles with Skadden, Arps, Slate, Meagher & Flom LLP for over 20 years beginning in 1998, including 14 years as a Partner, where she specialized in capital markets financing and general corporate and securities law matters. Ms. Nicolás also currently serves on the board of directors of Ohmium International Inc. Ms. Nicolás received a Bachelor of Science in Microbiology from State University of Maryland at College Park, a Ph.D. in Molecular Microbiology from Columbia University Graduate School of Arts and Sciences and a Juris Doctor from Columbia University School of Law.
We believe that Ms. Nicolás’ legal, governance and capital markets expertise enable her to provide guidance in legal affairs, corporate governance and capital markets transactions and make her well qualified to serve as a member of our board of directors.
Status as a Controlled Company
Because LandBridge Holdings owns 53,227,852 OpCo Units and 53,227,852 Class B shares, representing approximately 70.0% of our combined voting power as of December 30, 2024, we are a controlled company
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under the Sarbanes-Oxley Act and the NYSE rules. A controlled company is not required to have a majority of independent directors on its board of directors or to form an independent compensation or nominating and corporate governance committee. As a controlled company, we remain subject to the Sarbanes-Oxley Act and the rules of the NYSE that require us to have an audit committee composed entirely of independent directors.
If at any time we cease to be a controlled company, we intend to take all action necessary to comply with the Sarbanes-Oxley Act and the NYSE rules, including by appointing a majority of independent directors to our board of directors and establishing a compensation committee and a nominating and corporate governance committee, each composed entirely of independent directors, subject to a permitted “phase-in” period.
Composition of Our Board of Directors
Our Operating Agreement provides that our board of directors shall consist of such number of directors as shall be determined from time to time by our board of directors but shall not consist of less than nine directors. We have a single class of directors, and directors are subject to re-election on an annual basis at each annual meeting of shareholders. After the Trigger Event, our board of directors will be divided into three classes that are as nearly equal in number as is reasonably possible and each director will be assigned to one of the three classes; provided that LandBridge Holdings shall have the right to designate the initial class assigned to each director immediately following the occurrence of the Trigger Event. After the Trigger Event, at each annual meeting of shareholders, a class of directors will be elected for a three-year term to succeed the directors of the same class whose terms are then expiring. The initial terms of the Class I, Class II and Class III directors will expire at the first, second and third, respectively, annual meeting following the Trigger Event.
Our Operating Agreement does not provide for cumulative voting in the election of directors, which means that the holders of a majority of our issued and outstanding common shares can elect all of the directors standing for election, and the holders of the remaining common shares are not be able to elect any directors. LandBridge Holdings’ beneficial ownership of greater than 50% of our common shares means LandBridge Holdings is able to control matters requiring shareholder approval, which includes the election of directors. In addition, LandBridge Holdings maintains certain director designation rights. For more information, see “Certain Relationships and Related Party Transactions—Shareholder’s Agreement.”
Our directors hold office until the earlier of their death, resignation, retirement, disqualification or removal or until their successors have been duly elected and qualified.
Director Independence
Our board of directors has determined that each of Andrea Nicolás, Charles Watson, Ty Daul and Valerie P. Chase are independent within the meaning of the NYSE rules Rule 10A-3 of the Exchange Act.
Director Compensation
For a discussion of our director compensation arrangements, see “Executive Compensation—Director Compensation.”
Committees of the Board of Directors
We have an audit committee of our board of directors. In addition, our board of directors may establish such other committees as it determines necessary or advisable from time to time. Each of the standing committees of the board of directors have the composition and responsibilities described below. We are relying on the exemptions and phase-in provisions of Rule 10A-3 of the Exchange Act and the NYSE transition rules applicable to companies completing an initial listing.
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Audit Committee
We are required to have an audit committee of at least three members, and all of its members are required to meet the independence and experience standards established by each of the Exchange Act and the NYSE rules, subject to certain transitional relief described below. We have established an audit committee compliant with each of the SEC and the NYSE rules. Our audit committee consists of Charles Watson, Ty Daul and Valerie P. Chase who are independent under the applicable rules of each of the SEC and the NYSE. Our board of directors has determined that Valerie P. Chase is an audit committee financial expert as defined by the SEC.
The audit committee oversees, reviews, acts on and reports on various auditing and accounting matters to our board of directors, including the selection of our independent accountants, the scope of our annual audits, fees to be paid to the independent accountants, the performance of our independent accountants and our accounting practices. In addition, the audit committee oversees our compliance programs relating to legal and regulatory requirements and company policies and controls. The audit committee has the sole authority to (1) retain and terminate our independent registered public accounting firm, (2) approve all auditing services and related fees and the terms thereof performed by our independent registered public accounting firm, and (3) pre-approve any non-audit services and tax services to be rendered by our independent registered public accounting firm. The audit committee is also responsible for confirming the independence and objectivity of our independent registered public accounting firm. Our independent registered public accounting firm has been given unrestricted access to the audit committee and our management. We have adopted an audit committee charter defining the committee’s primary duties in a manner consistent with the rules of each of the SEC and the NYSE standards.
Conflicts Committee
In accordance with the terms of our Operating Agreement, our board of directors may from time to time refer specific matters that may involve conflicts of interest to a conflicts committee. The members of any such conflicts committee cannot be officers or employees of LandBridge Holdings or its affiliates, including Five Point or WaterBridge, and must meet the independence and experience standards established by each of the SEC and the NYSE to serve on an audit committee of a board of directors. In addition, the members of any such conflicts committee cannot own any interest in LandBridge Holdings or its affiliates, including Five Point or WaterBridge, or any interest in us or our subsidiaries other than shares or awards, if any, awarded under the LTIP.
Compensation Committee
Because we are a “controlled company” within the meaning of the NYSE rules, we are not required to, and do not currently expect to, have a compensation committee in the present or foreseeable future.
If and when we are no longer a “controlled company” within the meaning of each of the NYSE rules, we will be required to establish a compensation committee compliant with each of each of the SEC and NYSE rules. We anticipate that such a compensation committee would consist of three directors who will be “independent” under the applicable rules of each of the SEC and the NYSE. This committee would establish salaries, incentives and other forms of compensation for officers and other employees. Any compensation committee would also administer our incentive compensation and benefit plans. Upon formation of any compensation committee, we would expect to adopt a compensation committee charter defining the committee’s primary duties in a manner consistent with the rules of each of the SEC and the NYSE.
Nominating and Corporate Governance Committee
Because we are a “controlled company” within the meaning of the NYSE rules, we are not required to, and do not currently expect to, have a nominating and corporate governance committee in the present or foreseeable future.
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If and when we are no longer a “controlled company” within the meaning of the NYSE rules, we will be required to establish a nominating and corporate governance committee compliant with SEC and NYSE Rules. We anticipate that such a nominating and corporate governance committee would consist of three directors who will be “independent” under the applicable rules of the SEC and the NYSE. This committee would identify, evaluate and recommend qualified nominees to serve on our board of directors, develop and oversee our internal corporate governance processes and maintain a management succession plan. Upon formation of any nominating and corporate governance committee, we would expect to adopt a nominating and corporate governance committee charter defining the committee’s primary duties in a manner consistent with the rules of the SEC and the NYSE.
Guidelines for Selecting Director Nominees
In evaluating director candidates we will assess whether a candidate possesses the integrity, judgment, knowledge, experience, skills and expertise that are likely to enhance our board’s ability to manage and direct our affairs and business, including, when applicable, to enhance the ability of a committee of the board to fulfill its duties. In particular, we will assess candidates that:
• | have demonstrated notable or significant achievements in business, education or public service; |
• | possess the requisite intelligence, education and experience to make a significant contribution to the board of directors and bring a range of skills, diverse perspectives and backgrounds to its deliberations; and |
• | have the highest ethical standards, a strong sense of professionalism and intense dedication to serving the interests of our shareholders. |
We will consider a number of additional qualifications in evaluating a person’s candidacy for membership on the board of directors. We may require certain skills or attributes, such as financial or accounting experience, to meet specific board needs that arise from time to time and will also consider the overall experience and makeup of the board’s members to obtain a broad and diverse mix of board members.
Corporate Code of Business Conduct and Ethics
Our board of directors has adopted a code of business conduct and ethics applicable to our employees, directors and officers, in accordance with applicable U.S. federal securities laws and the corporate governance rules of the NYSE. Any waiver of this code may be made only by our board of directors and will be promptly disclosed as required by applicable U.S. federal securities laws and the corporate governance rules of the NYSE.
Corporate Governance Guidelines
Our board of directors has adopted corporate governance guidelines in accordance with the corporate governance rules of the NYSE.
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EXECUTIVE COMPENSATION
We are currently considered an “emerging growth company” within the meaning of the Securities Act and the Exchange Act, for purposes of the SEC’s executive compensation disclosure rules. In accordance with such rules, we are required to provide a Summary Compensation Table and an Outstanding Equity Awards at Fiscal Year End Table, as well as limited narrative disclosures regarding executive compensation for our last completed fiscal year. Further, our reporting obligations generally extend only to each individual who, during the last completed fiscal year, served in the role of our principal executive officer, and to our two most highly compensated executive officers (such individuals referred to herein as “Named Executive Officers”).
This prospectus is expected to be filed during the 2024 year; therefore, our Named Executive Officers during 2024 relate to executive officer status as of the end of the last completed fiscal year of 2023. With respect to the year ended December 31, 2023, our Named Executive Officers were as follows:
Name |
Position | |
Steven R. Jones(1) |
Co-Chief Executive Officer | |
Jason Long(2) |
Co-Chief Executive Officer and Chief Operating Officer | |
Michael Reitz(3) |
Executive Vice President, Operations | |
Harrison Bolling |
Executive Vice President and General Counsel |
(1) | Mr. Jones ceased service as the Company’s Co-Chief Executive Officer effective January 2024. |
(2) | Mr. Long served as our Co-Chief Executive Officer and Chief Operating Officer during 2023 and was appointed as the Company’s President and Chief Executive Officer effective January 2024. |
(3) | Mr. Reitz ceased service as the Company’s Executive Vice President, Operations effective January 2024. |
However, we expect this prospectus to become effective during the 2025 calendar year, which means that the last completed fiscal year will have switched from 2023 to 2024 between our filing and effectiveness. Therefore, we are voluntarily including all necessary information to update this Executive Compensation section with applicable 2024 information. With respect to the year ended December 31, 2024, our Named Executive Officers were as follows:
Name |
Position | |
Jason Long |
President and Chief Executive Officer; Director | |
Scott L. McNeely |
Executive Vice President, Chief Financial Officer | |
Harrison Bolling |
Executive Vice President and General Counsel | |
Jason Williams |
Executive Vice President, Chief Administrative Officer |
Shared Services Agreement
Pursuant to the Shared Services Agreement, the Manager provides us with its senior executive management team which includes each of our Named Executive Officers, as well as general, administrative, overhead and operating services to support our business and development activities. Such general and administrative services include, but are not limited to, legal services, information technology, accounting, financial and tax services and land administrative services. The fee that we pay under the Shared Services Agreement is intended to cover certain allocated compensation and benefits costs for the management team that provides services to us. Such allocations are made by the Manager among us and our affiliates in good faith based upon the time that is devoted by our management team to us and our affiliates party to the Shared Services Agreement, but there is not a specific allocation of value to any one person or any one item of compensation or benefits paid or provided to any specific person. We also do not participate in making decisions regarding the type or amount of compensation or benefits that are provided to the Named Executive Officers for those services.
2023 and 2024 Summary Compensation Table
As described above, the Named Executive Officers are employed and compensated by the Manager. The Summary Compensation Table is intended to summarize the specific compensation awarded to, earned by or paid to our Named Executive Officers for the fiscal years ended December 31, 2024 and 2023 for services to us and
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our subsidiaries, but due to the structure of the Shared Services Agreement, we generally do not allocate a specific percentage or value to the individual elements of our Named Executive Officers’ compensation that would otherwise be shown within specific columns of the Summary Compensation Table, except as noted below.
For the 2023 and 2024 years, there were certain compensatory awards granted to the Named Executive Officers that were not covered by the Shared Services Agreement. NDB LLC granted Management Incentive Units (the “Incentive Units”) to the Named Executive Officers in 2023, and LandBridge Holdings granted Incentive Units to the Named Executive Officers in 2024, in each case, which were not covered by the Shared Services Agreement (see the narrative below under the title “Incentive Unit Awards” for more information on changes made to the Incentive Units in 2024). For the Incentive Units granted to our Named Executive Officers in both years, we have reflected such Incentive Units in the Summary Compensation Table as an option award grant. In 2024, we also granted restricted stock units (“RSUs”) to the Named Executive Officers under the LandBridge Company LLC Long-Term Incentive Plan (the “LTIP”), which also falls outside of the Shared Services Agreement.
For the year ended December 31, 2023, we paid approximately $5 million for shared services and direct cost reimbursements pursuant to the Shared Services Agreement. For the year ended December 31, 2024, we expect to have paid approximately $11 million for shared services and direct cost reimbursements pursuant to the Shared Services Agreement, inclusive of a one-time bonus upon completion of the IPO of approximately $5 million. However, in neither year were there allocable costs specific to the compensation of our Named Executive Officers other than with respect to the exceptions to the Shared Services Agreement described above.
The table below set forth all the compensation awarded to, earned by, or paid to our Named Executive Officers during fiscal years ended December 31, 2024 and 2023 (to the extent that they were also deemed to be Named Executive Officers in that year).
Name and Principal Position |
Year | Bonus ($)(1) |
Stock Awards ($)(2) |
Option Awards ($)(3) |
Total ($) |
|||||||||||||||
2024 Named Executive Officers |
||||||||||||||||||||
Jason Long(4) |
||||||||||||||||||||
President and Chief Executive Officer; Director |
2024 | 1,000,000 | 7,940,409 | 15,666,920 | 24,607,329 | |||||||||||||||
2023 | — | — | 888,523 | 888,523 | ||||||||||||||||
2022 | — | — | — | — | ||||||||||||||||
Scott L. McNeely |
||||||||||||||||||||
Executive Vice President, Chief Financial Officer |
2024 | 850,000 | 2,895,200 | 7,833,460 | 11,578,660 | |||||||||||||||
2023 | N/A | N/A | N/A | N/A | ||||||||||||||||
Harrison Bolling(4) |
||||||||||||||||||||
Executive Vice President, General Counsel |
2024 | 800,000 | 2,317,992 | 7,833,460 | 10,951,452 | |||||||||||||||
2023 | — | — | 519,604 | 519,604 | ||||||||||||||||
2022 | — | — | — | — | ||||||||||||||||
Jason Williams |
||||||||||||||||||||
Executive Vice President, Chief Administrative Officer |
2024 | 800,000 | 2,317,992 | 7,833,460 | 10,951,452 | |||||||||||||||
2023 | N/A | N/A | N/A | N/A | ||||||||||||||||
2023 Named Executive Officers |
||||||||||||||||||||
Steven R. Jones |
||||||||||||||||||||
Co-Chief Executive Officer |
2023 | — | — | 667,691 | 667,691 | |||||||||||||||
2022 | — | — | — | — | ||||||||||||||||
Michael Reitz |
||||||||||||||||||||
Executive Vice President, Operations |
2023 | — | — | 678,083 | 678,083 | |||||||||||||||
2022 | — | — | — | 519,604 |
(1) | The amounts reported in this column for 2024 represent a one-time bonus in recognition of the Named Executive Officers’ efforts in connection with the successful consummation of the IPO. |
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(2) | The amounts reported in this column for 2024 represent the aggregate grant date fair value, determined in accordance with FASB ASC Topic 718, of RSUs granted to the Named Executive Officers in 2024 under the LTIP, disregarding the estimate of forfeitures. Additional details regarding assumptions used to value these RSU awards may be found in Note 8 to our consolidated financial statements included elsewhere in this prospectus. |
(3) | We believe that, despite the fact that the Incentive Units do not require the payment of an exercise price, they are most similar economically to stock option awards, and accordingly should be classified as options under the definition thereof provided in Item 402(m)(5)(i) of Regulation S-K as an instrument with an option-like feature. The amounts reflected for the 2023 and 2024 year within this column show the grant date value of the Incentive Units, in accordance with FASB ASC Topic 718. Pursuant to SEC rules, all amounts shown in this column exclude the effect of estimated forfeitures related to service-based vesting conditions. Additional detail regarding the Incentive Units is included in Note 8 to our consolidated financial statements included elsewhere in this prospectus. |
(4) | Messrs. Long and Bolling were also Named Executive Officers in 2023. |
Outstanding Equity Awards at Fiscal Year-End
Table applicable to 2023 Fiscal Year-End
As noted above, this filing is being made during the 2024 year; therefore, the applicable year-end information relates to information as of 2023. The following table reflects information regarding outstanding equity-based awards held by our then applicable 2023 Named Executive Officers as of December 31, 2023, which consist solely of the Incentive Units granted pursuant to an equity-based incentive unit program managed by NDB LLC.
Option Awards (1) | ||||||||||||||||||||
Name |
Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable (2) |
Number of Securities Underlying Unexercised Options (#) Unexercisable (3) |
Option Exercise Price ($) |
Option Expiration Date |
|||||||||||||||
Steven R. Jones |
July 21, 2023 | 0 | 257 | N/A | N/A | |||||||||||||||
June 9, 2020 | 650 | 0 | N/A | N/A | ||||||||||||||||
Jason Long |
July 21, 2023 | 0 | 342 | N/A | N/A | |||||||||||||||
June 9, 2020 | 650 | 0 | N/A | N/A | ||||||||||||||||
Michael Reitz |
July 21, 2023 | 0 | 261 | N/A | N/A | |||||||||||||||
June 9, 2020 | 500 | 0 | N/A | N/A | ||||||||||||||||
Harrison Bolling |
July 21, 2023 | 0 | 200 | N/A | N/A | |||||||||||||||
June 9, 2020 | 375 | 0 | N/A | N/A |
(1) | We believe that, despite the fact that the Incentive Units do not require the payment of an exercise price, they are most similar economically to stock options, and as such, they are properly classified as “options” under the definition provided in Item 402(m)(5)(i) of Regulation S-K as an instrument with an “option-like feature.” Each Incentive Unit is granted with a specific hurdle amount, or distribution threshold, and will only provide value to the holder based upon our growth above that hurdle amount. Because the Incentive Units are not traditional options, there is no exercise price or expiration date associated with the awards in the table above. A more detailed description of the Incentive Unit program is provided in the narrative below. |
(2) | Incentive Units that are reflected as “exercisable” were vested as of December 31, 2023, although not yet settled. |
(3) | Incentive Units reflected as “unexercisable” were still subject to time-based vesting conditions as of December 31, 2023. Each Incentive Unit vests in three equal annual installments commencing on the first three anniversaries of the date of grant, subject to the Named Executive Officer’s continued service. |
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Table applicable to 2024 Fiscal Year-End
The following table reflects information regarding outstanding equity-based awards held by our applicable 2024 Named Executive Officers as of December 31, 2024, which consist of RSUs granted under the LTIP and the Incentive Units granted pursuant to an incentive unit program of LandBridge Holdings, the terms and conditions of which are contained in the limited liability company agreement of LandBridge Holdings and further discussed below under “—Additional Narrative Disclosure Regarding Executive Compensation Matters.”
Name |
Grant Date | Stock Awards | Option Awards(3) | Option Exercise Price ($) |
Option Expiration Date |
|||||||||||||||||||||||
Number of Shares or Units of Stock That Have Not Vested (#)(1) |
Market Value of Shares or Units of Stock That Have Not Vested ($)(2) |
Number of Securities Underlying Unexercised Options (#) Exercisable(4) |
Number of Securities Underlying Unexercised Options (#) Unexercisable(5) |
|||||||||||||||||||||||||
Jason Long |
7/1/24 | — | 4,000 | (6) | — | — | ||||||||||||||||||||||
7/15/24 | 254,284 | (2 | ) | — | — | |||||||||||||||||||||||
7/1/24 | (7) | 114 | 228 | (8) | — | — | ||||||||||||||||||||||
7/1/24 | (7) | 650 | — | — | — | |||||||||||||||||||||||
— | — | |||||||||||||||||||||||||||
Scott L. McNeely |
7/1/24 | — | 2,000 | (6) | — | — | ||||||||||||||||||||||
7/15/24 | 92,914 | (2 | ) | — | — | |||||||||||||||||||||||
7/1/24 | (7) | 93 | 187 | (8) | — | — | ||||||||||||||||||||||
7/1/24 | (7) | 150 | — | — | — | |||||||||||||||||||||||
— | — | |||||||||||||||||||||||||||
Harrison Bolling |
7/1/24 | — | 2,000 | (6) | — | — | ||||||||||||||||||||||
7/15/24 | 74,390 | (2 | ) | — | — | |||||||||||||||||||||||
7/1/24 | (7) | 67 | 133 | (8) | — | — | ||||||||||||||||||||||
7/1/24 | (7) | 375 | — | — | — | |||||||||||||||||||||||
Jason Williams |
7/1/24 | — | 2,000 | (6) | — | — | ||||||||||||||||||||||
7/15/24 | 74,390 | (2 | ) | — | — | |||||||||||||||||||||||
7/1/24 | (7) | 100 | 200 | (8) | — | — | ||||||||||||||||||||||
7/1/24 | (7) | 150 | — | — | — |
(1) | The amounts in this column reflect outstanding time-based RSU awards granted to Named Executive Officers, each of which vests at to one-third of the total RSUs granted on each of the first three anniversaries of July 1, 2024, generally subject to continued employment through each applicable vesting date. |
(2) | The amounts reflected in this column would represent the market value of the common stock underlying the RSU awards granted to the Named Executive Officers as set forth in the preceding column, computed based on the closing price of our common stock on December 31, 2024, which is unknown at the time of this filing. |
(3) | We believe that, despite the fact that the Incentive Units do not require the payment of an exercise price, they are most similar economically to stock options, and as such, they are properly classified as “options” under the definition provided in Item 402(m)(5)(i) of Regulation S-K as an instrument with an “option-like feature.” Each Incentive Unit is granted with a specific hurdle amount, or distribution threshold, and will only provide value to the holder based upon our growth above that hurdle amount. Because the Incentive Units are not traditional options, there is no exercise price or expiration date associated with the awards in the table above. A more detailed description of the Incentive Unit program is provided in the narrative below. Fractional Incentive Units have been rounded to the nearest whole share for purposes of this table. |
(4) | Incentive Units that are reflected as “exercisable” were vested as of the date of this filing, although not yet settled. |
(5) | Incentive Units reflected as “unexercisable” were still subject to time-based vesting conditions as of the date of this filing. |
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(6) | Each Incentive Unit vests in three equal annual installments commencing on the first three anniversaries of June 27, 2024, subject to the Named Executive Officer’s continued service through the applicable vesting date. |
(7) | The awards in these two rows reflect the grant date of the replicated Incentive Units granted to the Named Executive Officers in connection with the Division. |
(8) | Each Incentive Unit vests in three equal annual installments commencing on the first three anniversaries of July 23, 2023, subject to the Named Executive Officer’s continued service through the applicable vesting date. |
Additional Narrative Disclosure Regarding Executive Compensation Matters
Incentive Unit Awards
Our Named Executive Officers received grants of Incentive Units in 2023 and 2024 from NDB LLC and LandBridge Holdings, respectively. Prior to the IPO, the Incentive Units held by the Named Executive Officers consisted solely of Incentive Units at NDB LLC. In connection with, and as a result of, the Division, the Named Executive Officers who held NDB LLC Incentive Units received an identical number of Incentive Units in LandBridge Holdings, under the terms and conditions of the LandBridge Holdings limited liability company agreement and the individual award agreements governing each grant, including with respect to vesting.
Whether the Incentive Units included in the tables above relate to NDB LLC or LandBridge Holdings, the Company does not have any cash or other obligations to make payments with respect to such Incentive Units. The Incentive Units are reflected within these compensation disclosures solely to show one aspect of the compensation that the applicable Named Executive Officers have received for their services to the Company and its affiliated entities.
Following the Division and as of the date of this filing, the Incentive Units held by the Named Executive Officers at LandBridge Holdings are the only Incentive Units attributable to services that the Named Executive Officers provide to the Company and its subsidiaries.
The Incentive Unit awards are structured as profits interests awards, rather than capital interests, and they do not provide the holder with the rights of an equity holder (such as dividend or voting rights) of LandBridge Holdings. Each Incentive Unit derives a potential value based upon a combination of a threshold value assigned to that award and the total value of the incentive pool at the time of a distribution to equity holders of LandBridge Holdings (generally triggered upon the occurrence of certain liquidity or other events with respect to LandBridge Holdings).
The Incentive Units were granted subject to a three-year service vesting schedule, which is partially met for the Named Executive Officers as shown in the table above. The vesting of an Incentive Unit award can be accelerated upon a change in control event for LandBridge Holdings (as defined within the LandBridge Holdings’ limited liability company agreement).
Potential Payments Upon Termination or a Change of Control
The following disclosures discuss the payments and benefits that each of our applicable Named Executive Officers would have been eligible to receive upon certain termination events, assuming that each such termination occurred on December 31, 2023 or December 31, 2024, as applicable. As a result, the payments and benefits disclosed represent what would have been due and payable to such Named Executive Officers under the applicable agreements and plans in existence between each Named Executive Officer and the Company as of December 31, 2023 or December 31, 2024, as applicable.
Treatment of Incentive Units upon a Termination of Employment
Pursuant to the award agreements governing the outstanding Incentive Units held by each of the Named Executive Officers, if the Named Executive Officer is terminated by the Manager or the applicable affiliate that
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employs the Named Executive Officer (the “Employer”) without cause, or the Named Executive Officer terminates his or her employment with good reason, all unvested Incentive Units that would have vested during the following 12 months will be deemed to automatically vest.
Upon a termination of a Named Executive Officer’s employment due to death or disability, the Named Executive Officer would receive accelerated vesting of the amount that is the greater of (a) unvested Incentive Units that would have vested during the following 12 months or (b) the number of Incentive Units that equal 50% of the original Incentive Unit grant amount.
In the event that a Named Executive Officer is terminated by an Employer for cause, all unvested Incentive Units are immediately forfeited, and one-third of any Incentive Unit that had become vested prior to that termination will also be forfeited without consideration.
All unvested Incentive Units held by a Named Executive Officer upon a termination of employment without good reason, upon the Named Executive Officer’s bankruptcy, or upon the transfer of that Named Executive Officer’s awards by contract (including death, divorce, operation of law or otherwise) will be immediately forfeited.
Treatment of LTIP Awards upon a Termination of Employment (including in connection with a Change in Control)
Pursuant to the award agreements governing outstanding LTIP awards held be each 2024 Named Executive Officers, upon a termination of employment without cause, or by the Named Executive Officer for good reason (such terms as defined in the applicable award agreement), the RSUs will immediately become fully vested.
Upon termination of employment due to death or disability, then the greater of (i) all unvested RSUs that would have vested within the next year following the termination of the Named Executive Officer’s employment, or (ii) the minimum number of unvested RSUs that, if vested, would cause 50% of the total number of RSUs granted to become vested, will immediately become fully vest.
Upon a termination of employment due to a change in control (as defined in the LTIP), the RSUs will immediately become fully vested.
For each 2024 Named Executive Officer, as of December 31, 2024, the accelerated value of their RSUs would be based upon the number of outstanding RSUs reflected in the Outstanding Equity Table above (as well as the vesting schedule set forth in the footnotes to such table with respect to death or disability situations), multiplied by the price of our common stock on December 31, 2024, which is unknown as of the filing date.
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DIRECTOR COMPENSATION
We adopted a director compensation program as of July 15, 2024; therefore we do not have a director compensation program to describe with respect to the 2023 year. Annual compensation for our non-employee directors is currently comprised of cash and equity-based compensation, as set out below. We also reimburse our directors for reasonable out-of-pocket expenses associated with travel to and attendance at our board and committee meetings. We do not pay for meeting attendance or provide any other benefits or perquisites to our non-employee directors.
For the year ended December 31, 2024, the members of our board, other than Messrs. Capobianco, Morrow, Sulton, Bayouth, Moore, and Ms. Harling (collectively, the “Five Point Directors”), received compensation for their service on our board and committees thereof consisting of the items below:
• | an annual retainer of $100,000; |
• | an additional annual retainer of $5,000 for service in the audit committee; and |
• | an additional annual retainer of $5,000 for service as the chair of the audit committee. |
Additionally, for the year ended December 31, 2024, directors of our board, other than the Five Point Directors, received a grant of RSUs under the LTIP with a fair value of approximately $125,000 based on the IPO price.
The Company does not pay any compensation to the Five Point Directors for their service as directors on our board.
The following table summarizes the compensation provided to the members of our board of directors for the year ended December 31, 2024. All compensation provided to Mr. Long with respect to the 2024 year is reflected within the Summary Compensation Table above.
Name |
Fees Earned or Paid in Cash ($)(1) |
Stock Awards ($)(2) |
Total ($) |
|||||||||
David N. Capobianco |
— | — | — | |||||||||
Matthew K. Morrow |
— | — | — | |||||||||
Michael Sulton |
— | — | — | |||||||||
Frank Bayouth |
— | — | — | |||||||||
Ben Moore |
— | — | — | |||||||||
Kara Goodloe Harling |
— | — | — | |||||||||
Charles Watson(3) |
55,000 | 229,119 | 284,119 | |||||||||
Ty Daul(3) |
65,000 | 229,119 | 294,119 | |||||||||
Valerie P. Chase(3) |
70,000 | 229,119 | 299,119 | |||||||||
Andrea L. Nicolas(3)(4) |
44,671 | 279,340 | 324,011 |
(1) | The amounts reflected in this column reflect the annual cash compensation paid to the non-employee directors, prorated based on days of service on our board for the year ended December 31, 2024. |
(2) | The amounts reflected in this column represent the grant date fair value of the 7,353 RSUs granted to the non-employee directors in July 2024 (or in September 2024 for Ms. Nicolas), computed in accordance with FASB ASC Topic 718, excluding the effects of estimated forfeitures. As of the date of this filing and as expected to remain consistent as of December 31, 2024, all of the RSUs granted to our non-employee directors remain outstanding. See Note 8 to our consolidated financial statements included elsewhere in this prospectus for additional detail regarding assumptions underlying the value of these equity awards. |
(3) | The director received an additional annual retainer of $10,000 for service in the ad hoc conflicts committee. |
(4) | The director received an additional retainer of $5,000 for service as the chair of the ad hoc conflicts committee. |
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PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth the beneficial ownership of our common shares outstanding by:
• | each person known to us to be beneficial owners of more than 5% of any class of our outstanding common shares; |
• | each director and named executive officer; |
• | all of our directors and executive officers as a group; and |
• | the Selling Shareholders. |
All information with respect to beneficial ownership has been furnished by the respective Selling Shareholders, more than 5% shareholders, directors and named executive officers, as the case may be. Unless otherwise noted, the mailing address of each listed beneficial owner is c/o 5555 San Felipe Street, Suite 1200, Houston, Texas 77056. The table below does not reflect any shares to be issued pursuant to the LTIP.
The Selling Shareholders and their pledgees, donees, transferees, assignees or other successors-in-interest may offer to sell from time to time in the future up to an aggregate of 59,058,271 Class A shares pursuant to this prospectus. Such sales, if any, may be made through brokerage transactions on NYSE at prevailing market prices. As such, we will have no input if and when any Selling Shareholder may elect to sell its common shares or the prices at which any such sales may occur. See the section titled “Plan of Distribution.”
The Class A shares being registered hereby for resale by LandBridge Holdings are issuable upon the redemption of OpCo Units, together with the cancellation of an equal number of Class B shares. Such Class B shares were acquired by LandBridge Holdings in connection with the Corporate Reorganization and the IPO. The Class A shares being registered hereby for resale by the other Selling Shareholders were acquired by such Selling Shareholders in connection with the December Private Placement.
The issuance of Class A shares to LandBridge Holdings in connection with exercise of the Redemption Right will be, and the issuance of Class B shares (and related OpCo Units) to LandBridge Holdings, and Class A shares, in the case of the other Selling Shareholders, was, exempt from the registration requirements of the Securities Act. We are registering the offering by the Selling Shareholders of the Class A shares described below pursuant to the provisions of the IPO RRA and the PIPE RRA. See “Principal and Selling Shareholders—Registration Rights Agreements.”
Information concerning the Selling Shareholders was provided as of December 13, 2024, but may change from time to time and any changed information will be set forth in supplements to this prospectus, if and when necessary. Because the Selling Shareholders may sell all, some or none of the common shares covered by this prospectus, we cannot determine the number of such common shares that will be sold by the Selling Shareholders, or the amount or percentage of common shares that will be held by the Selling Shareholders upon consummation of any particular sale. In addition, the Selling Shareholders listed in the table below may have sold, transferred, or otherwise disposed of, or may sell, transfer, or otherwise dispose of, at any time and from time to time, common shares in transactions exempt from the registration requirements of the Securities Act, after the date on which they provided the information set forth in the table below. The Selling Shareholders do not have, nor have they within the past three years had, any position, office or other material relationship with us, other than as disclosed in this prospectus. See the sections titled “Management” and “Certain Relationships and Related Party Transactions” for further information regarding the Selling Shareholders.
The amounts and percentages of common shares beneficially owned are reported on the basis of regulations of the SEC governing the determination of beneficial ownership of securities. Under the rules of the SEC, a person is deemed to be a “beneficial owner” of a security if that person has or shares voting power, which includes the power to vote or direct the voting of such security, or investment power, which includes the power to dispose of or to direct the disposition of such security. Securities that can be so acquired are deemed to be outstanding for purposes of computing such person’s ownership percentage, but not for purposes of computing
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any other person’s percentage. Under these rules, more than one person may be deemed beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which such person has no economic interest. Except as otherwise indicated in these footnotes, each of the persons or entities listed below has, to our knowledge, sole voting and investment power with respect to all common shares beneficially owned by them, except to the extent this power may be shared with a spouse.
Shares Owned Before the Offering |
Shares Owned After the Offering |
|||||||||||||||||||||||
Name of Beneficial Owner | Class A Shares |
Class B Shares(1) |
Combined Voting Power(2) |
Class A Shares that may be sold hereby |
Class A Shares |
Voting Power(3) |
||||||||||||||||||
Directors and Named Executive Officers: |
||||||||||||||||||||||||
Jason Long |
254,827 | — | * | — | 254,827 | * | ||||||||||||||||||
Scott L. McNeely |
92,914 | — | * | — | 92,914 | * | ||||||||||||||||||
Harrison Bolling |
74,390 | — | * | — | 74,390 | * | ||||||||||||||||||
Jason Williams |
74,390 | — | * | — | 74,390 | * | ||||||||||||||||||
David N. Capobianco(4) |
— | 53,227,852 | 70.0 | % | 53,227,852 | — | — | |||||||||||||||||
Matthew K. Morrow |
— | — | * | — | — | — | ||||||||||||||||||
Kara Goodloe Harling |
— | — | * | — | — | — | ||||||||||||||||||
Michael S. Sulton |
— | — | * | — | — | — | ||||||||||||||||||
Frank Bayouth |
— | — | * | — | — | — | ||||||||||||||||||
Charles Watson |
124,353 | — | * | — | 124,353 | * | ||||||||||||||||||
Ty Daul |
16,153 | — | * | — | 16,153 | * | ||||||||||||||||||
Ben Moore |
— | — | — | — | — | — | ||||||||||||||||||
Valerie P. Chase |
10,278 | — | * | — | 10,278 | * | ||||||||||||||||||
Andrea Nicolás |
7,353 | — | * | — | 7,353 | * | ||||||||||||||||||
Directors and Executive Officers as a Group (13 Persons) |
654,658 | 53,227,852 | 70.5 | % | 53,227,852 | 654,658 | 70.5 | % | ||||||||||||||||
Selling Shareholders: |
||||||||||||||||||||||||
LandBridge Holdings LLC (5% Shareholder)(4) |
— | 53,227,852 | 70.0 | % | 53,227,852 | — | — | |||||||||||||||||
Entities affiliated with Horizon Kinetics Asset Management LLC (5% Shareholder)(5) |
5,401,647 | — | 7.1 | % | 116,608 | 5,285,039 | 6.9 | % | ||||||||||||||||
Entities advised or subadvised by T. Rowe Price Investment Management, Inc.(6) |
1,166,083 | — | 1.5 | % | 1,166,083 | — | — | |||||||||||||||||
Jane Street Global Trading, LLC (7) |
832,916 | — | 1.1 | % | 832,916 | — | — | |||||||||||||||||
Hill City Capital Master Fund(8) |
670,000 | — | * | 150,000 | 520,000 | * | ||||||||||||||||||
Hood River Capital Management LLC(9) |
641,345 | — | * | 641,345 | — | * | ||||||||||||||||||
Alyeska Master Fund, LP(10) |
583,041 | — | * | 583,041 | — | * | ||||||||||||||||||
Oasis Investments II Master Fund Ltd.(11) |
291,520 | — | * | 291,520 | — | * | ||||||||||||||||||
Entities affiliated with Burkehill Global Management, LP(12) |
249,875 | — | * | 249,875 | — | * | ||||||||||||||||||
Citadel CEMF Investments Ltd. (13) |
283,125 | — | * | 283,125 | — | * | ||||||||||||||||||
Entities affiliated with Yaupon Capital GP LLC (14) |
249,875 | — | * | 249,875 | — | * | ||||||||||||||||||
Ghisallo Master Fund LP(15) |
249,875 | — | * | 249,875 | — | * | ||||||||||||||||||
Blackstone Aqua Master Sub-Fund, a sub-fund of Blackstone Global Master Fund ICAV(16) |
166,583 | — | * | 166,583 | — | * | ||||||||||||||||||
HITE Hedge II LP (17) |
166,583 | — | * | 166,583 | — | * | ||||||||||||||||||
CVI Investments, Inc.(18) |
166,583 | — | * | 166,583 | — | * | ||||||||||||||||||
3i LP(19) |
149,925 | — | * | 149,925 | — | * | ||||||||||||||||||
Entities affiliated with Monashee Investment Management, LLC(20) |
124,937 | — | * | 124,937 | — | * | ||||||||||||||||||
MMF LT, LLC(21) |
124,937 | — | * | 124,937 | — | * | ||||||||||||||||||
R Cap Liquid II, LP(22) |
66,633 | — | * | 66,633 | — | * | ||||||||||||||||||
Alto Opportunity Master Fund, SPC -Segregated Master Portfolio B (23) |
49,975 | — | * | 49,975 | — | * |
* | Less than 1%. |
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(1) | Subject to the terms of the OpCo LLC Agreement, OpCo Unitholders (other than us) have the right to redeem all or a portion of their OpCo Units for Class A shares (or cash, at OpCo’s election) at a redemption ratio of one Class A share for each OpCo Unit redeemed. In connection with any such redemption of OpCo Units, a corresponding number of Class B shares will be cancelled. Please see “Certain Relationships and Related Party Transactions—OpCo LLC Agreement.” Beneficial ownership of OpCo Units is not reflected as beneficial ownership of our Class A shares for which such OpCo Units may be redeemed. |
(2) | Represents percentage of voting power of our Class A shares and Class B shares voting together as a single class. OpCo Unitholders will hold one Class B share for each OpCo Unit that they own. Each Class B share has no economic rights, but entitles the holder thereof to one vote for each OpCo Unit held by such holder. Accordingly, OpCo Unitholders collectively have a number of votes in us equal to the number of OpCo Units that they hold. |
(3) | No Class B shares will be outstanding following the sale of the Class A shares registered hereby. |
(4) | LandBridge Holdings, which directly holds all of our Class B shares, is controlled by a board of managers consisting of four members. Five Point Energy Fund II AIV-VII LP (“Fund II”) and Five Point Energy Fund III AIV-VIII LP (“Fund III”), who collectively own 97.4% of the capital interests of LandBridge Holdings, have the right to appoint a majority of the members of the board of managers of LandBridge Holdings. Five Point Energy GP II LP is the sole general partner of Fund II. Five Point Energy GP II LLC is the sole general partner of Five Point Energy GP II LP. Five Point Energy GP III LP is the sole general partner of Fund III. Five Point Energy GP III LLC is the sole general partner of Five Point Energy GP III LP. Each of Five Point Energy GP II LLC and Five Point Energy GP III LLC is controlled by David N. Capobianco as each respective entity’s sole member. Mr. Capobianco may exercise voting and dispositive power over the Class B shares held by LandBridge Holdings and may be deemed to be the beneficial owner thereof. Mr. Capobianco disclaims beneficial ownership of Class B shares in excess of his pecuniary interest therein. |
(5) | Represents (i) 5,137,168 Class A shares held by Horizon Kinetics Asset Management LLC, (ii) 49,975 Class A shares held by Kinetics Internet Fund, (iii) 33,316 Class A shares held by Concentrated Opportunities Fund LP, (iv) 16,658 Class A shares held by Horizon Multi-Strategy Fund LP, (v) 6,663 Class A shares held by Mary C Ewing Trust, (vi) 4,998 Class A shares held by Kinetics Market Opportunities Fund, (vii) 3,332 Class A shares held by Kinetics Paradigm Fund and (viii) 1,666 Class A shares held by Kinetics Spin-Off & Corporate Restructuring Fund (together, the “HK Accounts”). Horizon Kinetics Asset Management LLC (“HKAM”) acts as a discretionary investment manager on behalf of the HK Accounts. HKAM is a wholly-owned subsidiary of Horizon Kinetics Holding Corporation (“HKHC”) and Murray Stahl is HKHC’s Chief Executive Officer and Chief Investment Officer and Chairman of HKHC’s board of directors. Each of HKAM, HKHC and Mr. Stahl disclaims beneficial ownership of Class A shares in excess of their pecuniary interest therein. |
(6) | Represents (i) 535,044 Class A shares held by T. Rowe Price Small-Cap Stock Fund, Inc., (ii) 266,087 Class A shares held by T. Rowe Price Institutional Small-Cap Stock Fund, (iii) 3,891 Class A shares held by T. Rowe Price Spectrum Conservative Allocation Fund, (iv) 5,786 Class A shares held by T. Rowe Price Spectrum Moderate Allocation Fund, (v) 13,302 Class A shares held by T. Rowe Price Spectrum Moderate Growth Allocation Fund, (vi) 566 Class A shares held by T. Rowe Price Moderate Allocation Portfolio, (vii) 22,811 Class A shares held by U.S. Small-Cap Stock Trust, (viii) 18,322 Class A shares held by TD Mutual Funds - TD U.S. Small-Cap Equity Fund, (ix) 267,121 Class A shares held by T. Rowe Price U.S. Small-Cap Core Equity Trust and (x) 33,153 Class A shares held by Costco 401(k) Retirement Plan (together, the “T. Rowe Accounts”). T. Rowe Price Investment Management, Inc. (“TRPIM”) serves as investment adviser or subadvisor, as applicable, with power to direct investments and/or sole power to vote the Class A shares owned by the T. Rowe Accounts. TRPIM may be deemed to be the beneficial owner of all of the Class A shares listed above but disclaims beneficial ownership of such shares. TRPIM is a wholly owned subsidiary of T. Rowe Price Associates, Inc (“TRPA”). The address of each of the T. Rowe Accounts is T. Rowe Price Investment Management, Inc., 100 East Pratt Street, Baltimore, MD 21202. |
(7) | Michael A. Jenkins and Robert. A. Granieri, the members of the Operating Committee of Jane Street Group, LLC, have voting and investment control over the Class A shares held by Jane Street Global Trading, LLC. The business address of Jane Street Global Trading, LLC, Michael A. Jenkins and Robert. A. Granieri is 250 Vesey Street, New York, NY, 10281. Jane Street Global Trading, LLC is a wholly owned subsidiary of Jane Street Group, LLC. |
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(8) | Hill City Capital Master Fund LP (“HCC Master Fund”) is managed by Hill City Capital GP LLC (“HCC GP”), its general partner. Herbert Frazier is the Managing Member of HCC GP and may exercise voting and dispositive power over the Class A shares held by HCC Master Fund and may be deemed to be the beneficial owner thereof. Mr. Frazier disclaims beneficial ownership of Class A shares in excess of his pecuniary interest therein. The address of HCC Master Fund is 121 Street, FL3, Boston, MA 02110. |
(9) | The Class A shares are directly held by Hood River Capital Management LLC (“Hood River”) and may be deemed to be beneficially owned by Brian Smoluch, as Principal. The address of Hood River is 2373 PGA Boulevard, Suite 200, Palm Beach Gardens, FL 33410. |
(10) | Alyeska Investment Group, L.P., the investment manager of Alyeska Master Fund, L.P. (the “Alyeska Master Fund”), has voting and investment control of the Class A shares held by Alyeska Master Fund. Anand Parekh is the Chief Executive Officer of Alyeska Investment Group, L.P. and may be deemed to be the beneficial owner of such shares. Mr. Parekh, however, disclaims any beneficial ownership of the shares held by the Alyeska Master Fund. The registered address of Alyeska Master Fund, L.P. is at c/o Maples Corporate Services Limited, P.O. Box 309, Ugland House, South Church Street George Town, Grand Cayman, KY1-1104, Cayman Islands. Alyeska Investment Group, L.P. is located at 77 W. Wacker, Suite 700, Chicago IL 60601. |
(11) | Oasis Investments II Master Fund Ltd. (“Oasis Master Fund”) is an investment fund managed by Oasis Management Company Ltd. (“Oasis Management”), which is managed by Seth Fischer. Oasis Management may exercise voting and dispositive power over the Class A shares held by Oasis Master Fund. Each of Oasis Management and Mr. Fischer disclaims beneficial ownership of Class A shares in excess of their pecuniary interest therein. The address of Oasis Master Fund is PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. |
(12) | Represents Class A shares owned by Burkehill Fund Ltd, a Cayman Islands exempted company (“Arleigh Fund”) and Class A shares owned by Burkehill Master Fund LP, a Cayman Island exempted limited partnership (“Admiral Fund” and, together with the Arleigh Fund, the “Burkehill Funds”). Burkehill Global Management, LP (“Burkehill”) serves as investment manager to each of the Burkehill Funds. As such, Burkehill has been granted investment discretion over the Class A shares owned by the Burkehill Funds. Christopher Rich serves as Managing Partner of Burkehill, the Managing Member of Burkehill Global LLC (“Burkehill GP”), the general partner of Burkehill, and the Managing Member of Burkehill Fund GP LLC (“Burkehill Fund GP”), the general partner of the Admiral Fund. Each of Burkehill, Burkehill GP, Burkehill Fund GP and Mr. Rich disclaim beneficial ownership of the Class A shares held by the Burkehill Funds except to the extent of their or its pecuniary interest therein. The address for the Burkehill Funds is c/o Burkehill Global Management, LP, 444 Madison Avenue, New York, New York 10022. |
(13) | Citadel Advisors LLC is the portfolio manager of Citadel CEMF Investments Ltd. Citadel Advisors Holdings LP (“CAH”) is the sole member of Citadel Advisors LLC. Citadel GP LLC (“CGP”) is the general partner of CAH. Kenneth Griffin owns a controlling interest in CGP. Mr. Griffin, as the owner of a controlling interest in CGP, may be deemed to have shared power to vote or direct the vote of, and/or shared power to dispose or to direct the disposition over, the Class A shares. This disclosure is not and shall not be construed as an admission that Mr. Griffin or any of the Citadel-related entities listed above is the beneficial owner of any securities of LandBridge other than the securities actually owned by such person (if any). The address of Citadel CEMF Investments Ltd. is c/o Citadel Enterprise Americas LLC, Southeast Financial Center, 200 S. Biscayne Blvd., Suite 3300, Miami, Florida 33131. |
(14) | Represents 150,675 Class A shares owned by Yaupon Master Fund LP (“Master Fund”) and 99,200 Class A shares owned by Yaupon Enhanced Master Fund LP (“Enhanced Master Fund” and, together with the Master Fund, the “Yaupon Funds”) Yaupon Capital GP LLC (“Yaupon GP”) is the general partner of the Yaupon Funds and may be deemed to have voting and dispositive power with respect to the Class A shares. Steve Pattyn is the managing member of Yaupon GP and, accordingly, may be deemed to have voting and dispositive power with respect to the Class A shares held by the Yaupon Funds. Each of Yaupon GP and Steve Pattyn disclaim beneficial ownership of the Class A shares reported herein except to the extent of its pecuniary interest therein. The mailing address of Yaupon Master Fund LP and Yaupon Enhanced Master Fund LP is 340 Madison Avenue, Suite 300A, New York, NY 10173. |
(15) | Michael Germino is the CIO of Ghisallo Capital Management LLC, which is the discretionary investment manager of Ghisallo Master Fund LP. Ghisallo Master Fund General Partner LP is the general partner of |
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Ghisallo Master Fund LP. The address of Ghisallo Master Fund LP is 190 Elgin Avenue, George Town, Grand Cayman, Cayman Islands KY1-9008. |
(16) | Blackstone Alternative Solutions L.L.C. is the investment manager of Blackstone Aqua Master Sub-Fund, a sub-fund of Blackstone Global Master Fund ICAV (the “Aqua Fund”). Blackstone Holdings I L.P. is the sole member of Blackstone Alternative Solutions L.L.C. Blackstone Holdings I/II GP L.L.C. is the general partner of Blackstone Holdings I L.P. The Blackstone Group Inc. is the sole member of Blackstone Holdings I/II GP L.L.C. Blackstone Group Management L.L.C. is the sole holder of the Series II preferred stock of Blackstone Inc. Blackstone Group Management L.L.C. is wholly owned by its senior managing directors and controlled by its founder, Stephen A. Schwarzman. Each of such Blackstone entities and Mr. Schwarzman may be deemed to beneficially own the securities beneficially owned by the Aqua Fund directly or indirectly controlled by it or him, but each (other than the Aqua Fund to the extent of its direct holdings) disclaims beneficial ownership of such securities. The address of each of the entities listed is c/o Blackstone Inc., 345 Park Avenue, New York, New York 10154. |
(17) | Represents (i) 49,710 shares held directly by HITE Hedge II LP (“HITE II”); (ii) 26,014 shares held directly by HITE Hedge LP (“HITE LP”); and (iii) 90,859 shares held directly by HITE Hedge Offshore, Ltd. (together with HITE II, and HITE LP, the “HITE Funds”). HITE Hedge Asset Management LLC (the “HITE Manager”) serves as investment adviser to the HITE Funds and Howard B. Rubin is the managing officer of the HITE Manager. As such, the HITE Manager may be deemed to indirectly beneficially own the securities directly held by the HITE Funds. The business address of each of the aforementioned parties is 25 Braintree Hill Office Park #310, Braintree, MA 02184. |
(18) | Heights Capital Management, Inc., the authorized agent of CVI Investments, Inc. (“CVI”), has discretionary authority to vote and dispose of the Class A shares held by CVI and may be deemed to be the beneficial owner of these shares. Martin Kobinger, in his capacity as Investment Manager of Heights Capital Management, Inc., may also be deemed to have investment discretion and voting power over the Class A shares held by CVI. Mr. Kobinger disclaims any such beneficial ownership of the Class A shares held by CVI. The principal business address of CVI is c/o Heights Capital Management, Inc., 101 California Street, Suite 3250, San Francisco, California 94111. |
(19) | 3i Management LLC is the general partner of 3i, LP, and Maier Joshua Tarlow is the manager of 3i Management LLC. As such, Mr. Tarlow exercises sole voting and investment discretion over securities beneficially owned directly or indirectly by 3i, LP and 3i Management LLC. Mr. Tarlow disclaims beneficial ownership of the securities beneficially owned directly by 3i, LP and indirectly by 3i Management LLC. The business address of each of the aforementioned parties is 2 Wooster Street, 2nd Floor, New York, NY 10013. We have been advised that none of Mr. Tarlow, 3i Management LLC, or 3i, LP is a member of the Financial Industry Regulatory Authority, or FINRA, or an independent broker-dealer, or an affiliate or associated person of a FINRA member or independent broker-dealer. |
(20) | Represents (i) 44,977 Class A shares held directly by Blackstone CSP-MST FMAP Fund (“FMAP”); (ii) 37,481 Class A shares held directly by BEMAP Master Fund Ltd (“BEMAP”); and (iii) 42,479 Class A shares held directly by Monashee Pure Alpha SPV I LP (“Pure Alpha”). FMAP, BEMAP, and Pure Alpha are managed by Monashee Investment Management, LLC (“Monashee Management”). Jeff Muller is CCO of Monashee Management and has voting and investment control over Monashee Management and, accordingly, may be deemed to have beneficial ownership of the Class A shares held by FMAP, BEMAP, and Pure Alpha. Jeff Muller, however, disclaims any beneficial ownership of the Class A shares held by these entities. The business address of FMAP, BEMAP, and Pure Alpha and Mr. Muller is c/o Monashee Investment Management, LLC, 75 Park Plaza, 4th Floor, Boston, Massachusetts 02116. |
(21) | Moore Capital Management, LP, the investment manager of MMF LT, LLC, has voting and investment control of the Class A shares held by MMF LT, LLC. Mr. Louis M. Bacon controls the general partner of Moore Capital Management, LP and may be deemed the beneficial owner of the Class A shares held by MMF LT, LLC. Mr. Bacon also is the indirect majority owner of MMF LT, LLC. The address of MMF LT, LLC, Moore Capital Management, LP and Mr. Bacon is 11 Times Square, New York, New York 10036. |
(22) | RCap LLC, GP (“RCap GP”) is the general partner of RCap Liquid II, LP. Melanie Jones is the controller of by RCap GP and Michael G. Rubin is the sole member of RCap GP. The address of each of RCap, Melanie Jones and Michael G. Rubin is 225 Washington Street, 3rd Floor, Conshohocken, PA 19428. |
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(23) | Ayrton Capital LLC, the investment manager to Alto Opportunity Master Fund, SPC—Segregated Master Portfolio B, has discretionary authority to vote and dispose of the Class A shares held by Alto Opportunity Master Fund, SPC—Segregated Master Portfolio B and may be deemed to be the beneficial owner of these shares. Waqas Khatri, in his capacity as Managing Member of Ayrton Capital LLC, may also be deemed to have investment discretion and voting power over the Class A shares held by Alto Opportunity Master Fund, SPC—Segregated Master Portfolio B. Ayrton Capital LLC and Mr. Khatri each disclaim any beneficial ownership of these shares. The address of the Selling Shareholder is c/o Ayrton Capital LLC, 55 Post Rd West, 2nd Floor, Westport, CT 06880. |
Registration Rights Agreements
In connection with the closing of the IPO, we entered into a registration rights agreement with LandBridge Holdings (the “IPO RRA”) pursuant to which we agreed to register under the federal securities laws the offer and resale of all Class A shares owned by or underlying the Class B shares and OpCo Units owned by LandBridge Holdings or certain of its affiliates or permitted transferees. These registration rights are subject to certain conditions and limitations, including the right of the underwriters to limit the number of Class A shares to be included in a registration and our right to delay or withdraw a registration statement under certain circumstances. Subject to certain exceptions, if at any time we propose to register an offering of Class A shares or conduct an underwritten offering, regardless of whether for our own account, then we must notify the holders of Registrable Securities (as defined in the IPO RRA) or their permitted transferees of such proposal, to allow them to include a specified number of their Class A shares in that registration statement or underwritten offering, as applicable, including Class A shares issuable upon the redemption of the OpCo Units and the cancellation of a corresponding number of our Class B shares.
In connection with the closing of the December Private Placement, we entered into a registration rights agreement with certain of the Selling Shareholders (the “PIPE RRA”) pursuant to which we agreed to register under the federal securities laws the offer and resale of all Class A shares owned by the holders listed thereunder. These registration rights are subject to certain conditions and limitations, including the right of the underwriters to limit the number of Class A shares to be included in a registration and our right to delay or withdraw a registration statement under certain circumstances.
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
OpCo LLC Agreement
The OpCo LLC Agreement, as amended, is filed as an exhibit to the registration statement of which this prospectus forms a part, and the following description of the OpCo LLC Agreement is qualified in its entirety by reference thereto.
Under the OpCo LLC Agreement, each holder of an OpCo Unit, subject to certain limitations, has a Redemption Right to cause OpCo to acquire all or a portion of its OpCo Units (along with the cancellation of a corresponding number of our Class B shares) for, at OpCo’s election, (i) Class A shares at a redemption ratio of one Class A share for each OpCo Unit redeemed, subject to applicable conversion rate adjustments, or (ii) cash in an amount equal to the Cash Election Amount of such Class A shares, subject to the Equity Offering Condition. OpCo will determine whether to issue Class A shares or pay cash in an amount equal to the Cash Election Amount in lieu of the issuance of Class A shares based on facts in existence at the time of the decision, which we expect would include the relative value of the Class A shares (including the trading price for the Class A shares at the time), the cash purchase price, the availability of other sources of liquidity (such as an issuance of additional common shares) to acquire the OpCo Units and alternative uses for such cash. Alternatively, upon the exercise of the Redemption Right, we (instead of OpCo) will have the Call Right to, for administrative convenience, acquire each tendered OpCo Unit directly from the redeeming OpCo Unitholder for, at our election, (x) one Class A share, subject to applicable conversion rate adjustments, or (y) cash in an amount equal to the Cash Election Amount of such Class A shares, subject to the Equity Offering Condition. We may exercise the Call Right only if an OpCo Unitholder first exercises its Redemption Right, and an OpCo Unitholder may exercise its Redemption Right in its discretion. As the sole managing member of OpCo, our decision to pay the Cash Election Amount upon an exercise of the Redemption Right or Call Right may be made by a conflicts committee consisting solely of independent directors. In connection with any redemption of OpCo Units pursuant to the Redemption Right or acquisition of OpCo Units pursuant to the Call Right, a corresponding number of Class B shares held by the redeeming OpCo Unitholder will be automatically cancelled.
In September 2024, the OpCo LLC Agreement was amended to, among other things, provide that so long as a redeeming holder and its affiliates own at least 40% of the voting power of the Company, (i) OpCo may elect to settle a redemption by such holder in cash only to the extent that, prior to or contemporaneously with making such election, the Company issues a number of Company Equity Securities (as defined in the OpCo LLC Agreement) at least equal to the number of OpCo Units subject to such redemption and contributes to OpCo an amount in cash equal to the net proceeds received by the Company from the issuance of such Company Equity Securities, and (ii) the Company may make a cash election in connection with its exercise of the Call Right with respect to a redemption by such holder only to the extent that, prior to or contemporaneously with making such election, the Company issues a number of Company Equity Securities at least equal to the number of OpCo Units subject to such redemption (in each case, the “Equity Offering Condition”).
Our acquisition (or deemed acquisition for U.S. federal income tax purposes) of OpCo Units pursuant to an exercise of the Redemption Right or the Call Right is expected to result in adjustments to the tax basis of the tangible and intangible assets of OpCo, and such adjustments will be allocated to us. These adjustments would not have been available to us absent such acquisition or deemed acquisition of OpCo Units and, to the extent the adjustments are allocable to assets of OpCo other than its interest in DBR REIT, are expected to produce tax deductions from depletion, depreciation and amortization that reduce the amount of cash tax that we would otherwise be required to pay in the future.
Our Operating Agreement contains provisions effectively linking each OpCo Unit with one of our Class B shares such that Class B shares cannot be transferred without transferring an equal number of OpCo Units and vice versa.
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As the OpCo Unitholders cause their OpCo Units to be redeemed, holding other assumptions constant, our membership interest in OpCo will be correspondingly increased, the number of Class A shares outstanding will be increased, and the number of Class B shares will be decreased.
“Cash Election Amount” means, with respect to the Class A shares to be delivered to the redeeming OpCo Unitholder by OpCo pursuant to the Redemption Right or the Call Right, as applicable, (i) the amount of cash that would be received if the number of Class A shares to which the redeeming OpCo Unitholder would otherwise be entitled were sold at a per share price equal to the trailing 10-day volume weighted average price of a Class A share on such redemption date, net of actual or deemed offering expenses or (ii) if the Class A shares no longer trade on a securities exchange or automated or electronic quotation system, an amount equal to the Fair Market Value (as defined in the OpCo LLC Agreement) of one Class A share that would be obtained in an in an arms’ length transaction for cash between an informed and willing buyer and an informed and willing seller, neither of whom is under any compulsion to buy or sell and without regard to the particular circumstances of the buyer or seller.
Under the OpCo LLC Agreement, subject to the obligation of OpCo to make tax distributions and to reimburse us for our corporate and other overhead expenses, we have the right to determine when dividends will be paid to the OpCo Unitholders and the amount of any such dividends.
If we authorize dividends, such dividends will be paid to the OpCo Unitholders generally on a pro rata basis in accordance with their respective percentage ownership of OpCo Units.
The OpCo Unitholders, including us, are allocated their proportionate share of any taxable income or loss of OpCo pursuant to the OpCo LLC Agreement and will generally incur U.S. federal, state and local income taxes on their proportionate share of any net taxable income of OpCo. Net profits and net losses of OpCo generally will be allocated to OpCo Unitholders on a pro rata basis in accordance with their respective percentage ownership of OpCo Units, except that certain non-pro rata adjustments will be required to be made to reflect built-in gains and losses and tax depletion, depreciation and amortization with respect to such built-in gains and losses. The OpCo LLC Agreement provides, to the extent cash is available and subject to the terms of any current or future debt or other arrangements, for pro rata tax distributions to the OpCo Unitholders in an amount generally intended to allow such holders to satisfy their respective income tax liabilities with respect to their allocable share of the income of OpCo, based on certain assumptions and conventions, provided that the distribution will be sufficient to allow us to satisfy our actual tax liabilities.
The OpCo LLC Agreement provides that, except as otherwise determined by us or in connection with the exercise of the Call Right, at any time we issue a Class A share or any other equity security, the net proceeds received by us with respect to such issuance, if any, shall be concurrently invested in OpCo, and OpCo shall issue to us one OpCo Unit or other economically equivalent equity interest. Conversely, if at any time any Class A shares are redeemed, repurchased or otherwise acquired, OpCo shall redeem, repurchase or otherwise acquire an equal number of OpCo Units held by us, upon the same terms and for the same price, as the Class A shares are redeemed, repurchased or otherwise acquired.
Under the OpCo LLC Agreement, the members have agreed that LandBridge Holdings, Five Point and WaterBridge, as well as their affiliates, will be permitted to engage in business activities or invest in or acquire businesses that may compete with our business or do business with any client of ours.
Registration Rights Agreements
The Selling Shareholders, including LandBridge Holdings, are entitled to registration rights with respect to its common shares, as described in the section titled “Principal and Selling Shareholders—Registration Rights Agreements.”
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Master Reorganization Agreement
General
In connection with the consummation of the IPO, LandBridge Holdings and certain of its affiliates entered into a master reorganization agreement (the “Master Reorganization Agreement”) that governed the consummation of the Corporate Reorganization. Pursuant to the Master Reorganization Agreement, following the formation of LandBridge Holdings and its acquisition of NDB LLC’s interest in OpCo and LandBridge, (i) LandBridge Holdings caused each of LandBridge and OpCo to amend and restate their respective operating agreements to contain the terms described in this prospectus, (iii) LandBridge issued 16,675,000 Class A shares in the IPO, representing 100% of the economic rights in LandBridge, in exchange for the proceeds of the IPO, (iv) LandBridge contributed all of the net proceeds from the IPO (including any net proceeds from the exercise of the underwriter’s option to purchase additional Class A shares) to OpCo in exchange for a number of OpCo Units equal to the number of Class A shares issued in the IPO and (v) LandBridge Holdings received a number of Class B shares equal to the number of OpCo Units held by it immediately following the IPO.
Indemnification
The Master Reorganization Agreement provides that we will indemnify LandBridge Holdings and its affiliates, other than us and our subsidiaries, against losses arising out of third-party claims (including litigation matters and other claims) based on, arising out of or resulting from:
• | the ownership or the operation of our assets or properties, and the operation or conduct of our business, prior to or following the IPO; |
• | the consummation of the transactions contemplated by the Master Reorganization Agreement; and |
• | the failure of OpCo or its subsidiaries to have on the closing date of the IPO any consent, license, permit or approval necessary to allow such person to own or operate its respective assets and businesses, in substantially the same manner consistent with past practices. |
In addition, we will indemnify LandBridge Holdings and its affiliates, not including us and our subsidiaries, against losses, including liabilities under the Securities Act and the Exchange Act, relating to material misstatements in or material omissions from the registration statement of which this prospectus is a part and any other registration statement or report that we file, other than material misstatements or material omissions made in reliance on information relating to and furnished by LandBridge Holdings for use in the preparation of that registration statement or report, against which LandBridge Holdings will agree to indemnify us.
Shareholder’s Agreement
In connection with the closing of the IPO, we entered into the Shareholder’s Agreement with LandBridge Holdings. As discussed further below, the Shareholder’s Agreement provides certain rights to LandBridge Holdings.
Our Shareholder’s Agreement provides that the parties thereto will use their respective reasonable efforts (including voting or causing to be voted all of our common shares beneficially owned by each) so that no amendment is made to our Operating Agreement in effect as of the date of the Shareholder’s Agreement that would add restrictions to the transferability of our common shares by LandBridge Holdings that are beyond those provided for in our Operating Agreement, the Shareholder’s Agreement or applicable securities laws, unless such amendment is approved by LandBridge Holdings.
The Shareholder’s Agreement provides that, subject to compliance with applicable law and NYSE rules, for so long as LandBridge Holdings and certain affiliates beneficially own at least 40% of our outstanding common shares, LandBridge Holdings shall be entitled to designate a number of directors equal to a majority of the board
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of directors, plus one director; and for so long as LandBridge Holdings and such affiliates beneficially own at least 30%, 20% and 10% of our outstanding common shares, LandBridge Holdings shall be entitled to designate at least three directors, two directors and one director, respectively. So long as LandBridge Holdings is entitled to designate one or more nominees to the board and notifies the board of directors of its desire to remove, with or without cause, any director previously designated by it to the board, we are required to take all necessary action to cause such removal. Further, so long as LandBridge Holdings has the right to designate at least one director to our board of directors, it will also have the right to appoint a number of board observers, who will be entitled to attend all meetings of the board in a non-voting, observer capacity, equal to the number of directors LandBridge Holdings is entitled to appoint.
The Shareholder’s Agreement will terminate upon LandBridge Holdings and its affiliates party thereto ceasing to beneficially own at least 10% of our common shares.
Shared Services Agreement
We are party to the Shared Services Agreement with the Manager. Pursuant the Shared Services Agreement, the Manager provides us with our senior executive management team, as well as general, administrative and overhead services to support our business and development activities. The term of the Shared Services Agreement continues until terminated by mutual agreement. As consideration for the services rendered pursuant to the Shared Services Agreement, we reimburse all fees and expenses incurred by the Manager or its affiliates or agents on our behalf. We pay the Manager our proportionate share of its total costs as determined under the Shared Services Agreement. For the nine months ended September 30, 2024, we paid approximately $9 million for shared services and direct cost reimbursements.
Equity Sponsor Services
In addition to the Shared Services Agreement, we reimburse Five Point for our usage of its geographic information services as well as legal services as necessary to support our operations. For the nine months ended September 30, 2024 and 2023, we paid Five Point $0.3 million and $0.1, respectively, million in reimbursements in connection with this arrangement.
Historical Transactions with Affiliates
In the normal course of business, we enter into transactions with related parties in which certain of our affiliates hold financial interests, which are described in more detail below. For more information, please see “Business—Material Contracts and Marketing.”
Transactions with WaterBridge NDB
In the ordinary course of business, we have entered into produced water facilities agreements and a fresh water facilities agreement, together with related SUAs, including easements and rights-of-way, with WaterBridge pursuant to which we have granted certain rights to construct, operate and maintain produced water handling facilities and brackish water facilities on our land. One produced water facilities agreement has an initial term of approximately five years and automatic one-year renewals unless terminated by either party prior to renewal. The other produced water facilities agreement has an initial term of approximately ten years and automatic one-year renewals unless terminated by either party prior to renewal. The fresh water facilities agreement has an initial term of approximately fifteen years and automatic one-year renewals unless terminated by a party prior to renewal. SUAs generally have terms of 10 years, with the option for WaterBridge to renew for additional 10-year terms in return for additional renewal payments, and include a customary fee schedule, with a provision for royalties related to certain specified activities. For the nine months ended September 30, 2024 and 2023, we received $18.3 million and $7.1 million, respectively, in total revenues in fees related to such agreements.
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East Stateline Acquisition
On May 10, 2024, we acquired the East Stateline Ranch, consisting of approximately 103,000 surface acres and associated surface use contracts, from a private third-party seller for aggregate cash consideration of $360.0 million pursuant to the East Stateline Acquisition. In connection with the East Stateline Acquisition, we entered into a partial assignment and assumption agreement with WaterBridge, pursuant to which we assigned our rights to acquire certain produced water and brackish supply water assets to WaterBridge prior to the closing of the East Stateline Acquisition, and in exchange WaterBridge funded purchase consideration of $165.0 million at closing of the transaction. In accordance with the partial assignment, we also acquired the associated surface use contracts.
Transactions with WaterBridge Operating
In the ordinary course of business, we have entered into SUAs, including easements and right-of-way, with WaterBridge Operating pursuant to which we have granted certain rights to construct, operate and maintain water facilities on our land. Pursuant to Wolf Bone Ranch Acquisition, we inhereited a surface lease and use agreement with WaterBridge that grants WaterBridge the non-exclusive right to construct, own and operate produced water handling infrastructure on the Wolf Bone Ranch. Such SUAs typically have terms of 10 years, with the option for WaterBridge Operating to renew for additional 10-year terms in return for one-time renewal payments, and include a customary fee schedule, with a provision for royalties related to certain specified activities. For the nine months ended September 30, 2024 and 2023, we received less than $100,000 and $1.1 million, respectively, in fees related to such agreements, consisting primarily of surface damage payments.
Transactions with Desert Environmental
In the ordinary course of business, we have entered into SUAs with subsidiaries of Desert Environmental pursuant to which we have granted certain rights to construct, operate and maintain non-hazardous oilfield reclamation and solid waste facilities on our land. Such agreements have a minimum term of 10 years and include an industry standard fee schedule, with a provision for royalties based of a percentage of net revenue received by Desert Environmental non-hazardous oilfield reclamation activities. For the nine months ended September 30, 2024 and 2023, we received $0.8 million and $0.5 million, respectively, in fees related to such agreements, consisting primarily of surface damage payments and minimal royalties on non-hazardous oilfield reclamation activities.
In November 2022, we acquired approximately 650 acres of land in Reeves County, Texas from a subsidiary of Desert Environmental for $2.1 million.
Transactions with Powered Land Partners LLC
In the ordinary course of business, we entered into a lease development agreement for the development of a data center and related facilities on approximately 2,000 acres of our land in Reeves County, Texas with PowLan. The lease development agreement includes, among other things, a non-refundable $8.0 million deposit paid in December 2024 for a two-year site selection and pre-development period. PowLan is obligated to meet certain timing milestones to maintain its lease, to include the commencement of site development within a two-year period and construction of the data center within a subsequent four-year period. Upon initiation of construction of a data center, PowLan will make escalating annual lease payments commencing at $2 million per year during the development period and $8 million per year commencing on the first anniversary of the commencement date of construction, subject to annual CPI escalation with a 2% minimum and a 4% maximum. PowLan will also make additional payments based on the net revenue received with respect to the power generation facilities to be located on the leased property. To the extent PowLan does not commence site development within two years of entry into the lease development agreement or commence construction of the data center within a subsequent four-year period, the agreement will automatically terminate. PowLan may also terminate the agreement following the commencement of construction of the data center, subject to a substantial early termination fee. To the extent more than 25% the aggregate acreage subject to the lease development
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agreement is condemned or taken by a governmental authority, PowLan may proportionately reduce future annual lease payments due by an identical percentage. We can offer no assurance that the counterparty will lease the site, nor can there be any assurance that PowLan will be successful in its efforts to develop the data center or any power generation facilities.
Review, Approval or Ratification of Transactions with Related Persons
We have adopted a formal policy for approval of Related Party Transactions. For as long as we are a “smaller reporting company,” a “Related Party Transaction” is defined as any transaction, arrangement or relationship in which we or any of our current or future subsidiaries was, is or will be a participant, the amount of which involved exceeds the lesser of $120,000 or one percent of the average of our total assets at year-end for the last two completed fiscal years, and in which any Related Person had, has or will have a direct or indirect material interest. Once we no longer qualify as a “smaller reporting company,” a “Related Party Transaction” will be defined as a transaction, arrangement or relationship in which we or any of our current or future subsidiaries was, is or will be a participant and the amount of which involved exceeds $120,000, and in which any Related Person had, has or will have a direct or indirect material interest. A “Related Person” means:
• | any person who is, or at any time during the applicable period was, one of our executive officers or one of our directors or a director nominee; |
• | any person who is known by us to be the beneficial owner of more than 5% of our outstanding common shares; and |
• | any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, sibling, mother in law, father in law, son in law, daughter in law, brother in law or sister in law of a director, director nominee, executive officer or a beneficial owner of more than 5% of our common shares, and any person (other than a tenant or employee) sharing the household of such director, executive officer or beneficial owner of more than 5% of our common shares. |
Pursuant to our Related Party Transactions policy, we expect that, subject to certain exceptions, any such transactions, which, for the avoidance of doubt, will include transactions with LandBridge Holdings and its affiliates, including Five Point and WaterBridge, may, at the sole discretion of our board of directors in light of the circumstances, be reviewed and approved or ratified by our Audit Committee or Conflicts Committee pursuant to the procedures included in our Operating Agreement. Not all conflicted transactions are required to be presented to a conflicts committee, and our board of directors expects to adopt a separate conflicts of interest policy for routine matters that may arise on an ongoing basis. In addition, our Operating Agreement provides that in the event a potential conflict of interest exists or arises between any of the Unrestricted Parties, on the one hand, and us, any of our subsidiaries or any of our public shareholders, on the other hand, a resolution or course of action by our board of directors shall be deemed approved by all of our shareholders, and shall not constitute a breach of the fiduciary duties of members of our board of directors to us or our shareholders, if such resolution or course of action (i) is approved by a conflicts committee, which is composed entirely of independent directors, (ii) is approved by shareholders holding a majority of our common shares that are disinterested parties, (iii) is determined by our board of directors to be on terms that, when taken together in their entirety, are no less favorable than those generally provided to or available from unrelated third parties or (iv) is determined by our board of directors to be fair and reasonable to us, taking into account the totality of the relationships between the parties involved (including other transactions that may be particularly favorable or advantageous to us). In determining whether to approve or ratify a Related Party Transaction, we expect that the appropriate parties will consider a variety of factors they deem relevant, such as: the terms of the transaction; the terms available to unrelated third parties; the benefits to us; and the availability of other sources for comparable assets, products or services. The terms of this policy will be reviewed annually by our board of directors, which may, in its sole discretion, choose to amend or replace this policy at any time.
Parents of the Smaller Reporting Company
For a discussion regarding our controlling shareholder, see “Summary—Our Controlling Shareholder.”
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DESCRIPTION OF SHARES
As of December 30, 2024, 23,255,419 Class A shares are issued and outstanding and 53,227,852 Class B shares are issued and outstanding and no preferred shares are issued and outstanding.
The following summary of Class A shares, Class B shares and preferred shares does not purport to be complete and is qualified in its entirety by reference to the provisions of applicable law and to our Operating Agreement and our certificate of formation, which are filed as exhibits to the registration statement of which this prospectus is a part.
Class A shares
Voting Rights. Except as provided by applicable law or in our Operating Agreement, holders of Class A shares are entitled to one vote per share held of record on all matters to be voted upon by our shareholders generally. Holders of our Class A shares and Class B shares vote together as a single class on all matters presented to our shareholders for their vote or approval, except with respect to the amendment of certain provisions of our Operating Agreement that would alter or change the powers, preferences or special rights of the Class B shares so as to affect them adversely, which amendments must be approved by a majority of the votes entitled to be cast by the holders of the Class B shares affected by the amendment, voting as a separate class, or as otherwise required by applicable law. The holders of Class A shares do not have cumulative voting rights in the election of directors.
Dividend Rights. Holders of our Class A shares are entitled to ratably receive, in proportion to the Class A shares held by them, dividends (payable in cash, shares or otherwise) when and if declared by our board of directors, from time to time in its discretion, out of funds legally available for that purpose, subject to any statutory or contractual restrictions on the payment of dividends and to any prior rights and preferences that may be applicable to any outstanding preferred shares. To the extent OpCo makes distributions to us and the OpCo Unitholders, including LandBridge Holdings, we intend to pay dividends in respect of our Class A shares out of some or all of such dividends, if any, remaining after the payment of taxes and other expenses. However, because our board of directors may determine to pay or not pay dividends in respect of our Class A shares based on the factors described above, holders of our Class A shares may not necessarily receive dividends, even if OpCo makes such distributions to us.
Liquidation Rights. Upon our liquidation, dissolution, distribution of assets or other winding up, the holders of Class A shares are entitled to receive ratably the assets available for distribution to the shareholders after payment of liabilities and the liquidation preference of any of our outstanding preferred shares.
Other Matters. Class A shares have no preemptive or conversion rights and are not subject to further calls or assessment by us. There are no sinking fund provisions applicable to the Class A shares. All outstanding Class A shares are fully paid and non-assessable.
Class B shares
Generally. OpCo Unitholders will have a number of votes in us equal to the aggregate number of OpCo Units that they hold. Class B shares cannot be transferred except in connection with a permitted transfer of a corresponding number of OpCo Units and vice versa.
Voting Rights. Except as provided by applicable law or in our Operating Agreement, holders of our Class B shares are entitled to one vote per share held of record on all matters to be voted upon by our shareholders generally. Holders of our Class A shares and Class B shares vote together as a single class on all matters presented to our shareholders for their vote or approval, except with respect to the amendment of certain provisions of our Operating Agreement that would alter or change the powers, preferences or special rights of
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Class B shares so as to affect them adversely, which amendments must be approved by a majority of the votes entitled to be cast by the holders of the shares affected by the amendment, voting as a separate class, or as otherwise required by applicable law. The holders of Class B shares do not have cumulative voting rights in the election of directors.
Dividend Rights. Holders of our Class B shares do not have any right to receive dividends, unless the dividend consists of our Class B shares or of rights, options, warrants or other securities convertible or exercisable into or redeemable for Class B shares paid proportionally with respect to each outstanding Class B share and dividends consisting of Class A shares or of rights, options, warrants or other securities convertible or exercisable into or redeemable or exchangeable for Class A shares on the same terms is simultaneously paid to the holders of Class A shares.
Liquidation Rights. Holders of our Class B shares do not have any right to receive any distribution upon our liquidation, dissolution or other winding up.
Other Matters. Class B shares have no preemptive or conversion rights and are not subject to further calls or assessment by us. There are no redemption or sinking fund provisions applicable to the Class B shares. All currently outstanding Class B shares are fully paid and non-assessable.
Preferred Shares
Pursuant to our Operating Agreement, our board of directors by resolution may establish and issue from time to time one or more classes or series of preferred shares, with such number, powers, preferences, rights, qualifications, limitations, restrictions and designations, which may include distribution rates, relative voting rights, conversion or exchange rights, redemption rights, liquidation rights and other relative participation, optional or other special rights, qualifications, limitations or restrictions as may be fixed by our board of directors without any further shareholder approval, subject to any limitations prescribed by law. The rights with respect to a series of preferred shares may be more favorable to the holder(s) thereof than the rights attached to our common shares. It is not possible to state the actual effect of the issuance of any preferred shares on the rights of holders of our common shares until our board of directors determines the specific rights attached to such preferred shares. Except as provided by law or in a preferred share designation, the holders of preferred shares will not be entitled to vote at or receive notice of any meeting of shareholders. The effect of issuing preferred shares may include, among other things, one or more of the following:
• | restricting any dividends in respect of our Class A shares; |
• | diluting the voting power of our common shares, including our Class A shares, or providing that holders of preferred shares have the right to vote on matters as a separate class; |
• | impairing the liquidation rights of our Class A shares; or |
• | delaying or preventing a change of control of us. |
In addition, if we issue preferred shares, OpCo will concurrently issue to us an equal number of preferred units, corresponding to the preferred shares issued by us, and such preferred units will have substantially the same rights to distributions and other economic rights as those of our preferred shares.
Transfer Agent and Registrar
Continental Stock Transfer & Trust Company serves as the registrar and transfer agent for the Class A shares.
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Transfer of common shares
Upon the transfer of a common share in accordance with our Operating Agreement, the transferee of the common share shall be admitted as a member with respect to the class of common shares transferred when such transfer and admission are reflected in our books and records. Each transferee:
• | automatically becomes bound by the terms and conditions of our Operating Agreement; |
• | represents that the transferee has the capacity, power and authority to enter into our Operating Agreement; and |
• | makes the consents, acknowledgements and waivers contained in our Operating Agreement. |
We will cause any transfers to be recorded on our books and records from time to time (or shall cause the registrar and transfer agent to do so, as applicable).
Upon a shareholder’s election of a broker, dealer or other person to serve as nominee, agent or in some other representative capacity for such beneficial owner, we intend to treat such nominee holder as the absolute owner of the applicable common shares until we are notified of the revocation of such election. In that case, the beneficial holder’s rights are limited solely to those that it has against the nominee holder as a result of any agreement between the beneficial owner and the nominee holder. Such treatment may limit the beneficial owner’s recourse against us with respect to matters taken by the nominee holder pursuant to such agreement. To the extent a shareholder nominates a broker, dealer or other person to act as nominee, agent or in some other representative capacity for such shareholder, such shareholder should coordinate with such representative to communicate its intention with respect to exercising its rights as a shareholder.
Common shares are securities and any transfers are subject to the laws governing the transfer of securities.
Until a common share has been transferred on our books, we and the transfer agent may treat the record holder of the common share as the absolute owner for all purposes, except as otherwise required by law or stock exchange regulations.
Registration Rights
The Selling Shareholders are entitled to registration rights with respect to their common shares, as described in the section titled “Principal and Selling Shareholders—Registration Rights Agreements”.
Listing
Our Class A shares are listed on the NYSE under the symbol “LB.”
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OUR OPERATING AGREEMENT
Organization and Duration
We were formed as a Delaware limited liability company on September 27, 2023 and will remain in existence until dissolved in accordance with our Operating Agreement.
Purpose
Under our Operating Agreement, we are permitted to engage in any business activity that lawfully may be conducted by a limited liability company organized under Delaware law and, in connection therewith, to exercise all of the rights and powers conferred upon us pursuant to the agreements relating to such business activity.
Agreement to be Bound by our Operating Agreement; Power of Attorney
By purchasing our common shares and such transfer being reflected on our transfer agent’s books and records, you will be admitted as a member of our limited liability company and will be deemed to have agreed to be bound by the terms of our Operating Agreement.
Pursuant to our Operating Agreement, each shareholder and each person who acquires a common share from a shareholder grants to certain of our officers (and, if appointed, a liquidator) a power of attorney to, among other things, execute and file documents required for our qualification, continuance or dissolution. The power of attorney also grants certain of our officers and board of directors, as applicable, the authority to make certain amendments to, and to make consents and waivers under and in accordance with, our Operating Agreement.
Amendment of Our Operating Agreement
Amendments to our Operating Agreement may be proposed only by or with the consent of our board of directors. To adopt a proposed amendment, our board of directors is required to call a meeting of our shareholders to consider and vote upon the proposed amendment or, prior to the Trigger Event, may seek written approval of the holders of the number of common shares required to approve the amendment. An amendment must be approved by (i) prior to the Trigger Event, the affirmative vote of the holders of a majority of our then-outstanding common shares and (ii) after the Trigger Event, the affirmative vote of the holders of at least 66 2/3% of our then-outstanding common shares.
Prohibited Amendments. No amendment may be made that would:
• | enlarge the obligations of any shareholder without such shareholder’s consent, unless approved by at least a majority of the type or class of common shares so affected; |
• | provide that we are not dissolved upon an election to dissolve our company by our board of directors that is approved by holders of a majority of outstanding common shares; |
• | change the term of existence of our company; or |
• | give any person the right to dissolve our company other than our board of directors’ right to dissolve our company with the approval of holders of a majority of the total combined voting power of our outstanding common shares. |
No Shareholder Approval. Our board of directors may generally make amendments to our Operating Agreement without the approval of any shareholder or assignee to reflect:
• | a change in our name, the location of our principal place of our business, our registered agent or our registered office; |
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• | the admission, substitution, withdrawal or removal of shareholders in accordance with our Operating Agreement; |
• | the merger of our company or any of its subsidiaries into, or the conveyance of all of our assets to, a newly-formed entity if the sole purpose of that merger or conveyance is to effect a mere change in our legal form into another limited liability entity; |
• | a change that our board of directors determines to be necessary or appropriate for us to qualify or continue our qualification as a company in which our members have limited liability under the laws of any state; |
• | a change in our legal form from a limited liability company to a corporation; |
• | an amendment that our board of directors determines, based upon the advice of counsel, to be necessary or appropriate to prevent us, members of our board of directors or our officers, agents or trustees from in any manner being subjected to the provisions of the Investment Company Act of 1940, the Investment Advisers Act of 1940, or “plan asset” regulations adopted under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) whether or not substantially similar to plan asset regulations currently applied or proposed; |
• | an amendment that our board of directors determines to be necessary or appropriate for the authorization of additional securities; |
• | any amendment expressly permitted in our Operating Agreement to be made by our board of directors acting alone; |
• | an amendment effected, necessitated or contemplated by a merger agreement that has been approved under the terms of our Operating Agreement; |
• | any amendment that our board of directors determines to be necessary or appropriate for the formation by us of, or our investment in, any corporation, partnership or other entity, as otherwise permitted by our Operating Agreement; |
• | a change in our fiscal year or taxable year and related changes; |
• | an amendment that sets forth the designations, rights, preferences, and duties of any class or series of shares; and |
• | any other amendments substantially similar to any of the matters described in the clauses above. |
In addition, our board of directors may make amendments to our Operating Agreement without the approval of any shareholder or assignee if our board of directors determines that those amendments:
• | do not adversely affect the shareholders in any material respect; |
• | are necessary or appropriate to satisfy any requirements, conditions or guidelines contained in any opinion, directive, order, ruling or regulation of any federal or state agency or judicial authority or contained in any federal or state statute; |
• | are necessary or appropriate to facilitate the trading of common shares or to comply with any rule, regulation, guideline or requirement of any securities exchange on which the Class A shares are or will be listed for trading, compliance with any of which our board of directors deems to be in the best interests of us and our shareholders; |
• | are necessary or appropriate for any action taken by our board of directors relating to splits or combinations of common shares under the provisions of our Operating Agreement; or |
• | are required to effect the intent expressed in this prospectus or the intent of the provisions of our Operating Agreement or are otherwise contemplated by our Operating Agreement. |
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Termination and Dissolution
We will continue as a limited liability company until dissolved pursuant to our Operating Agreement. We will dissolve upon: (1) the election of our board of directors to dissolve us, if approved by the holders of a majority of our outstanding common shares; (2) the entry of a decree of judicial dissolution of the Company; or (3) at any time that we no longer have any shareholders, unless our business is continued in accordance with the Delaware LLC Act.
Upon dissolution, our affairs will be wound up and our assets, including the proceeds from any liquidation thereof, will be applied and distributed in the following manner: (i) first, to creditors (including to the extent permitted by law, creditors who are members) in satisfaction of our liabilities, (ii) second, to establish cash reserves for contingent or unforeseen liabilities and (iii) third, to the members in proportion to the number of Class A shares owned by each of them, subject to any preferential rights held by preferred shareholders, if any.
Books and Reports
We are required to keep appropriate books and records of our business at our principal offices, which may be kept electronically. The books and records will be maintained for both tax and financial reporting, as well as general company purposes. For financial reporting and tax purposes, our fiscal year is the calendar year. Our Operating Agreement provides that our shareholders have the right, subject to certain restrictions stated therein, to obtain access to certain of our books and records, including our share ledger and list of shareholders, upon reasonable demand for any purpose reasonably related to such shareholder’s interest as a shareholder. We will use commercially reasonable efforts to furnish to shareholders an annual report containing audited consolidated financial statements and a report on those consolidated financial statements by our independent public accountants. We will be deemed to have made any such report available if we file such report with the SEC on EDGAR or make the report available on a publicly available website that we maintain.
Anti-Takeover Effects of Delaware Law and Our Operating Agreement
The following is a summary of certain provisions of our Operating Agreement that may be deemed to have an anti-takeover effect and may delay, deter or prevent a tender offer or takeover attempt via proxy contest or otherwise, or the removal of our incumbent officers and directors, that a shareholder might consider to be in its best interest, including those attempts that might result in a premium over the market price for the Class A shares. These provisions may also have the effect of preventing changes in our management. These provisions are designed to encourage persons seeking to acquire control of us to first negotiate with us. We believe that the benefits of increased protection and our potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us outweigh the disadvantages of discouraging these proposals because, among other things, negotiation of these proposals could result in an improvement of their terms and the promotion of shareholder interests.
Issuance of Additional Interests
Our Operating Agreement authorizes us to issue an unlimited number of additional limited liability company interests of any type without the approval of our shareholders, subject to the rules of the NYSE. Any issuance of additional Class A shares or other limited liability company interests would result in a corresponding decrease in the proportionate ownership interests in us represented by, and could adversely affect the cash distributions related to and market price of, Class A shares then outstanding. These additional limited liability company interests may be utilized for a variety of corporate purposes, including future offerings to repay debt obligations, raise additional capital and fund corporate acquisitions. The existence of authorized but unissued limited liability company interests could render more difficult or discourage an attempt to obtain control over us by means of a proxy contest, tender offer, merger or otherwise.
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Delaware Business Combination Statute-Section 203
We are a limited liability company organized under Delaware law. Some provisions of Delaware law may delay or prevent a transaction that would cause a change in our control.
Our Operating Agreement does not elect to have Section 203 of the DGCL, which restricts certain business combinations with interest shareholders in certain situations, apply to us. In general, this statute prohibits a publicly held Delaware corporation from engaging in a business combination with an interested shareholder for a period of three years after the date of the transaction by which that person became an interested shareholder, unless the transaction is approved by the board of directors before the date the interested shareholder attained that status;
• | upon consumption of the transaction that resulted in the shareholder becoming an interested shareholder, the interested shareholder owned at least 85% of the voting shares of the corporation outstanding at the time the transaction commenced; or |
• | on or after such time the business combination is approved by the board of directors and authorized at a meeting of shareholders by at least two-thirds of the outstanding shares that is not owned by the interested shareholder. |
For purposes of Section 203 of the DGCL, a business combination includes a merger, asset sale or other transaction resulting in a financial benefit to the interested shareholder, and an interested shareholder is a person who, together with affiliates and associates, owns, or within three years prior, did own, 15% or more of voting shares.
Other Provisions of Our Operating Agreement
Our Operating Agreement provides that our board of directors shall consist of not less than nine directors, as the board of directors may from time to time determine. We have a single class of directors, and directors are subject to re-election on an annual basis at each annual meeting of shareholders.
After the Trigger Event, our board of directors will be divided into three classes that are as nearly equal in number as is reasonably possible and each director will be assigned to one of the three classes; provided that LandBridge Holdings shall have the right to designate the initial class assigned to each director immediately following the occurrence of the Trigger Event. After the Trigger Event, at each annual meeting of shareholders, a class of directors will be elected for a three-year term to succeed the directors of the same class whose terms are then expiring. We believe that classification of our board of directors will help to assure the continuity and stability of our business strategies and policies as determined by our board of directors following the Trigger Event. The classified board provision could increase the likelihood that incumbent directors will retain their positions after the Trigger Event. The staggered terms of directors may delay, defer or prevent a tender offer or an attempt to change control of us, even though a tender offer or change in control might be viewed by our shareholders to be in their best interest.
Our Operating Agreement does not provide for cumulative voting in the election of directors, which means that the holders of a majority of our issued and outstanding common shares can elect all of the directors standing for election, and the holders of the remaining common shares will not be able to elect any directors. LandBridge Holdings’ initial beneficial ownership of greater than 50% of our common shares means LandBridge Holdings will be able to control matters requiring shareholder approval, which includes the election of directors.
In addition, our Operating Agreement provides that after the Trigger Event, the affirmative vote of the holders of not less than two-thirds in voting power of all then-outstanding common shares entitled to vote generally in the election of our board of directors, voting together as a single class, shall be required to remove any director from office, and such removal may only be for “cause” (prior to such time, a director or the entire board of directors may be removed, with or without cause, at any time, by the affirmative vote of the holders of a majority of the total combined voting power of all of our outstanding common shares then entitled to vote at an election of directors).
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After the Trigger Event, all vacancies, including newly created directorships, may, except as otherwise required by law or, if applicable, the rights of holders of a series of preferred shares, only be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum (prior to such time, vacancies may also be filled by shareholders holding a majority of the then-outstanding common shares entitled to vote generally in the election of directors voting together as a single class).
Pursuant to our Operating Agreement, preferred shares may be issued from time to time, and the board of directors is authorized to determine and alter all designations, preferences, rights, powers and duties thereof without limitation. See “Description of Shares—Preferred Shares.”
Consent Rights
Pursuant to our Operating Agreement, for so long as LandBridge Holdings and certain affiliates beneficially own at least 40% of our outstanding common shares, we have agreed not to take, and will take all necessary action to cause our subsidiaries not to take, the following direct or indirect actions (or enter into an agreement to take such actions) without the prior consent of LandBridge Holdings:
• | increasing or decreasing the size of our board of directors, committees of our board of directors or boards and committees of our subsidiaries; |
• | terminating our chief executive officer or removing the Chairman of our board of directors and/or hiring or appointing either of their successors; |
• | agreeing to or entering into any transaction that would result in a change of control of the Company or enter into definitive agreements with respect to a change of control transaction; |
• | incurring debt for borrowed money (or liens securing such debt) in an amount that would result in outstanding debt that exceeds our Adjusted EBITDA for the four quarter period immediately prior to the proposed date of the incurrence of such debt by 4.00 to 1.00. |
• | authorizing, creating (by way of reclassification, merger, consolidation or otherwise) or issuing any equity securities of any kind (other than pursuant to any equity compensation plan approved by our board of directors or a committee of our board of directors or intra-company issuances among the Company and our subsidiaries); |
• | making any voluntary election to liquidate or dissolve or commence bankruptcy or insolvency proceedings or the adoption of a plan with respect to any of the foregoing or any determination not to oppose such an action or proceeding commenced by a third party; |
• | selling, transferring or disposing of assets outside the ordinary course of business in a transaction or series of transactions with a fair market value in excess of 2% of our Consolidated Net Tangible Assets (as defined in the Operating Agreement) determined as of the end of the most recently completed fiscal quarter or year, as applicable, immediately, prior to the proposed date of the consummation of such transaction or such series of transactions; and |
• | any amendment, modification or waiver of the consent rights described in the clauses above. |
Additionally, for so long as LandBridge Holdings and certain affiliates beneficially own at least 10% of our outstanding common shares, we and our subsidiaries may not, without the approval of LandBridge Holdings, make any amendment, modification or waiver of our Operating Agreement or any other of our governing documents that materially and adversely affects LandBridge Holdings.
Ability of Our Shareholders to Act
Prior to the Trigger Event, special shareholder meetings may be called at the request of our shareholders holding a majority of the then-outstanding common shares entitled to vote generally in the election of directors
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voting together as a single class. After the Trigger Event, our Operating Agreement will not permit our shareholders to call special shareholders meetings. Special meetings of shareholders may also be called by a majority of the board of directors or a committee of the board of directors that has been duly designated by the board of directors and whose powers include the authority to call such meetings. Written notice of any special meeting so called shall be given to each shareholder of record entitled to vote at such meeting not less than 10 or more than 60 days before the date of such meeting, unless otherwise required by law.
Prior to the Trigger Event, our Operating Agreement will allow our shareholders to act by written consent in lieu of a meeting of such shareholders, subject to the rights of the holders of any series of our preferred shares with respect to such series. After the Trigger Event, our shareholders may not act by written consent and may only take action at a duly called annual or special meeting of our shareholders.
Our Operating Agreement establishes advance notice procedures with respect to shareholder proposals and nominations of persons for election to our board of directors, other than nominations made by or at the direction of our board of directors or any committee thereof. In addition to any other applicable requirements, our Operating Agreement provides that for business to be properly brought before an annual meeting by a shareholder, including proposals to nominate candidates for election as directors at a meeting of shareholders, such shareholder must have given timely notice thereof in proper written form to our corporate secretary. To be timely, a shareholder’s notice must be delivered to or mailed to and received at our principal executive offices (i) in the case of an annual meeting, not less than 90 days nor more than 120 days prior to the anniversary of the date on which we first made publicly available (whether by mailing, by filing with the SEC or by posting on an internet website) our proxy materials for the immediately preceding annual meeting of shareholders; provided, however, that in the event that no annual meeting of shareholders was held in the previous year, or the annual meeting is called for a date that is not within 30 days before or after such anniversary date, notice by a shareholder in order to be timely must be so received not earlier than the close of business on the 120th day and not later than the close of business on the later of the 90th day prior to such annual meeting or the tenth day following the day on which public disclosure of the date of the annual meeting was made and (ii) in the case of a special meeting, not earlier than the close of business on the 120th day prior to such special meeting and not later than the close of business on the later of the 90th day prior to such special meeting or the tenth day following the day on which public disclosure of the date of the special meeting was made. Pursuant to our Operating Agreement, any shareholder who intends to solicit proxies in support of any director nominees must comply with the content requirements of Rule 14a-19 of the Exchange Act at the time such shareholder complies with the earlier deadlines in the advance notice provisions of the Operating Agreement. For any nominations or any other business to be properly brought before an annual or special meeting by LandBridge Holdings or any other person that becomes party to, or bound by the provisions of, the Shareholder’s Agreement, such person must submit notice thereof not later than the later of the close of business on the 30th day prior to the date the we first file our preliminary or definitive proxy statement related to such meeting pursuant to the Exchange Act or the tenth day following the day on which public announcement is first made of the date of the special meeting, and we and such person shall cooperate reasonably and in good faith with respect to the inclusion of such matters to be considered at such meeting.
Duties of Officers and Directors
Our Operating Agreement provides that our business and affairs shall be managed under the direction of our board of directors, which shall have the power to appoint our officers. Our Operating Agreement further provides that the authority and function of our board of directors and officers shall be identical to the authority and functions of a board of directors and officers of a corporation organized under the DGCL, except as expressly modified by the terms of the Operating Agreement. Finally, our Operating Agreement provides that except as specifically provided therein, the fiduciary duties and obligations owed to our limited liability company and to our members shall be the same as the respective duties and obligations owed by officers and directors of a corporation organized under the DGCL to their corporation and stockholders, respectively, except as expressly modified by the terms of the Operating Agreement.
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There are certain provisions in our Operating Agreement that modify duties and obligations owed by our directors and officers from those required under the DGCL and provide for exculpation and indemnification of our officers and directors that differ from the DGCL. First, our Operating Agreement provides that to the fullest extent permitted by applicable law, our directors or officers will not be liable to us. In contrast, under the DGCL, a director or officer would be liable to us for (i) breach of the duty of loyalty to us or our shareholders, (ii) intentional misconduct or knowing violations of the law that are not done in good faith, (iii) improper redemption of shares or declaration of dividends, or (iv) a transaction from which the director derived an improper personal benefit.
Second, our Operating Agreement provides that we must indemnify our directors and officers for acts or omissions to the fullest extent permitted by law. In contrast, under the DGCL, a corporation can only indemnify directors and officers for acts or omissions if the director or officer acted in good faith, in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, in a criminal action, if the officer or director had no reasonable cause to believe his or her conduct was unlawful.
Third, our Operating Agreement provides that in the event a potential conflict of interest exists or arises between any of our directors, officers, equity owners or their respective affiliates, including LandBridge Holdings, Five Point and WaterBridge, on the one hand, and us, any of our subsidiaries or any of our public shareholders, on the other hand, a resolution or course of action by our board of directors shall be deemed approved by all of our shareholders, and shall not constitute a breach of the fiduciary duties of members of the board to us or our shareholders, if such resolution or course of action is (i) approved by a conflicts committee or other committee of our board of directors, as applicable, which is composed entirely of independent directors, (ii) approved by shareholders holding a majority of our common shares that are disinterested parties, (iii) determined by our board of directors to be on terms that, when taken together in their entirety, are no less favorable than those generally provided to or available from unrelated third parties or (iv) determined by our board of directors to be fair and reasonable to us, taking into account the totality of the relationships between the parties involved (including other transactions that may be particularly favorable or advantageous to us). In contrast, under the DGCL, a corporation is not permitted to automatically exempt board members from claims of breach of fiduciary duty under such circumstances.
Fourth, our Operating Agreement provides that, in our capacity as the managing member of OpCo, our board of directors may approve amendments to the OpCo LLC Agreement relating to the mechanics of a redemption of OpCo Units (together with the cancellation of a corresponding number of Class B shares) for Class A shares without any duty to us.
In addition, our Operating Agreement provides that all conflicts of interest described in the prospectus relating to our IPO have been deemed to have been specifically approved by all of our shareholders.
Election of Members of Our Board of Directors
Prior to the Trigger Event and beginning with our first annual meeting of shareholders following the IPO, members of our board of directors will be elected by the holders of a majority of our issued and outstanding voting common shares entitled to vote generally thereon voting together as a single class. Our board of directors currently consists of 10 directors, serving as a single class and subject to re-election on an annual basis at each annual meeting of shareholders. After the Trigger Event, our board will be divided into three classes that are, as nearly as possible, of equal size. Each class of directors is elected for a three-year term of office, with the terms staggered so that the term of only one class of directors expires at each annual meeting; provided that LandBridge Holdings shall have the right to designate the initial class assigned to each director immediately following the occurrence of the Trigger Event. The initial terms of the Class I, Class II and Class III directors will expire at the first, second and third, respectively, annual meeting following the Trigger Event. After the Trigger Event, any vacancy on the board of directors may be filled by a majority of the directors then in office, even if less than a quorum, subject to the rights of holders of a series of our preferred shares, if applicable.
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Removal of Members of Our Board of Directors
Prior to the Trigger Event, a director or the entire board of directors may be removed, with or without cause, at any time, by holders of a majority of the total combined voting power of all of our outstanding common shares then entitled to vote at an election of directors. After the Trigger Event, the affirmative vote of the holders of not less than two-thirds in voting power of all our then-outstanding common shares entitled to vote generally in the election of directors, voting together as a single class, shall be required to remove any or all of the directors from office, and such removal may only be for “cause.” After the Trigger Event, any vacancy in the board of directors caused by any such removal may only be filled by the affirmative vote of a majority of directors then in office. Prior to the Trigger Event, vacancies may also be filled by shareholders holding a majority of our then-outstanding common shares entitled to vote generally in the election of directors voting together as a single class.
Limited Liability
The Delaware LLC Act provides that a member who receives a distribution from a Delaware limited liability company and knew at the time of the distribution that the distribution was in violation of the Delaware LLC Act shall be liable to the company for the amount of the distribution for three years. Under the Delaware LLC Act, a limited liability company may not make a distribution to a member if, after the distribution, all liabilities of the company, other than liabilities to members on account of their shares and liabilities for which the recourse of creditors is limited to specific property of the company, would exceed the fair value of the assets of the company. For the purpose of determining the fair value of the assets of a company, the Delaware LLC Act provides that the fair value of property subject to liability for which recourse of creditors is limited shall be included in the assets of the company only to the extent that the fair value of that property exceeds the nonrecourse liability.
Our subsidiaries currently conduct business only in the states of Texas and New Mexico. We may decide to conduct business in other states, and maintenance of limited liability for us, as a member of our operating subsidiaries, may require compliance with legal requirements in the jurisdictions in which the operating subsidiaries conduct business, including qualifying our subsidiaries to do business there. Limitations on the liability of shareholders for the obligations of a limited liability company have not been clearly established in certain jurisdictions. We will operate in a manner that our board of directors considers reasonable and necessary or appropriate to preserve the limited liability of our shareholders.
Forum Selection
Our Operating Agreement provides that unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery of the State of Delaware does not have jurisdiction, the Superior Court of the State of Delaware, or, if the Superior Court of the State of Delaware does not have jurisdiction, the United States District Court for the District of Delaware, in each case, subject to that court having personal jurisdiction over the indispensable parties named defendants therein) will, to the fullest extent permitted by applicable law, be the sole and exclusive forum for:
• | any derivative action or proceeding brought on our behalf; |
• | any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, other employees or agents to us or our shareholders; |
• | any action asserting a claim against us or any director or officer or other employee of ours arising pursuant to any provision of the Delaware LLC Act or our Operating Agreement; or |
• | any action asserting a claim against us or any director or officer or other employee of ours that is governed by the internal affairs doctrine. |
Our Operating Agreement provides that, to the fullest extent permitted by applicable law, the United States District Court for the District of Delaware will be the sole and exclusive forum for resolving any complaint
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asserting a cause of action arising under the Securities Act. This provision would not apply to claims brought to enforce a duty or liability created by the Exchange Act, the Securities Act or any other claim for which the federal courts have exclusive jurisdiction. Our Operating Agreement also provides that any person or entity purchasing or otherwise acquiring any interest in our shares will be deemed to have notice of, and to have consented to, these exclusive forum provisions. This choice of forum provision may limit a shareholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, employees or agents, which may discourage such lawsuits against us and such persons. Alternatively, if a court were to find these provisions of our Operating Agreement inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our results of operations, cash flows and financial position.
Limitations on Liability and Indemnification of Directors and Officers
Our Operating Agreement provides that to the fullest extent permitted by applicable law, our directors or officers will not be liable to us. Our Operating Agreement also provides that we must indemnify our directors and officers for acts and omissions to the fullest extent permitted by law. We are also expressly authorized to advance certain expenses (including attorneys’ fees and disbursements and court costs) to our directors and officers and carry directors’ and officers’ insurance providing indemnification for our directors and officers for some liabilities.
We are party to separate indemnification agreements with each of our directors and executive officers. Each indemnification agreement will provide, among other things, for indemnification to the fullest extent permitted by law against liabilities that may arise by reason of such director’s or executive officer’s service to us. The indemnification agreements will provide for the advancement or payment of all expenses to the indemnitee, subject to certain exceptions. We intend to enter into indemnification agreements with our future directors.
We believe that these indemnification provisions, agreements and insurance are useful to attract and retain qualified directors and officers.
Corporate Opportunity
Under our Operating Agreement, to the extent permitted by law:
• | each Unrestricted Party has the right to, and have no duty to abstain from, exercising such right to, engage or invest in the same or similar business as us, do business with any of our clients, customers or vendors or employ or otherwise engage any of our officers, directors or employees; |
• | if any Unrestricted Party acquires knowledge of a potential business opportunity, transaction or other matter, they have no duty to offer or communicate such corporate opportunity to us, our shareholders or our affiliates; |
• | we have renounced any interest or expectancy in, or in being offered an opportunity to participate in, such corporate opportunities; and |
• | in the event that any of our directors and officers who is also a director, officer or employee of LandBridge Holdings or any its affiliates, including Five Point and WaterBridge, acquire knowledge of such a corporate opportunity or is offered such a corporate opportunity, provided that this knowledge was not acquired using confidential information and such person acted in good faith, then such person is deemed to have fully satisfied such person’s fiduciary duty and is not liable to us if LandBridge Holdings or any its affiliates, including Five Point and WaterBridge, pursues or acquires the corporate opportunity or if such person did not present the corporate opportunity to us. |
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Our Operating Agreement further provides that, at any time LandBridge Holdings beneficially owns less than 40% of our common shares, any amendment to or adoption of any provision inconsistent with our Operating Agreement’s provisions governing the renouncement of business opportunities must be approved by the affirmative vote of the holders of at least two-thirds of our then-outstanding common shares.
Shareholder’s Agreement
The foregoing is limited and subject to in all respects, the rights and obligations included in the Shareholder’s Agreement. For a discussion of the Shareholder’s Agreement, see “Certain Relationships and Related Party Transactions—Shareholder’s Agreement.”
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SHARES ELIGIBLE FOR FUTURE SALE
Future sales of our Class A shares in the public market, or the availability of such Class A shares for sale in the public market, could adversely affect the market price of our Class A shares prevailing from time to time. Class A shares held by the public shareholders are generally freely transferable without restriction or further registration under the Securities Act. However, any Class A shares held by an “affiliate” of ours may not be resold publicly except in compliance with the registration requirements of the Securities Act or under an exemption from the registration requirements of the Securities Act pursuant to Rule 144 or Rule 701 under the Securities Act, which rules are summarized below.
Sales of Restricted Class A shares
As of December 30, 2024, we have outstanding an aggregate of 16,675,000 Class A shares that are freely tradable without restriction or further registration under the Securities Act, unless the Class A shares are held or acquired by any of our “affiliates” as such term is defined in Rule 144 under the Securities Act. Subject to the below, all remaining Class A shares held by our existing shareholders are “restricted securities” as such term is defined under Rule 144. The restricted securities were issued and sold by us in private transactions and are eligible for public sale only if registered under the Securities Act or if they qualify for an exemption from registration under Rule 144 or Rule 701 under the Securities Act.
Subject to certain limitations and exceptions, LandBridge Holdings has the right, pursuant to the Redemption Right, to cause OpCo to acquire all or a portion of its 53,227,852 OpCo Units for Class A shares (on a one-for-one basis with the cancellation of a corresponding number of Class B shares, subject to applicable conversion rate adjustments). The Class A shares we issue upon such redemptions would be “restricted securities” as defined in Rule 144 described below. However, pursuant to the IPO RRA with LandBridge Holdings, we are required to register under the Securities Act all such Class A shares issuable to LandBridge Holdings. In addition, pursuant to the PIPE RRA, we are required to register for resale all 5,830,419 Class A shares issued in the December Private Placement. Once the registration statement of which this prospectus forms a part has been declared effective, all 59,058,271 Class A shares registered hereby, representing such Class A shares issuable to LandBridge Holdings and issued in the December Private Placement, may be sold pursuant to such registration statement. See “Principal and Selling Shareholders—Registration Rights Agreements.”
Rule 144
In general, under Rule 144 under the Securities Act as currently in effect, a person (or persons whose Class A shares are aggregated) who is not deemed to have been an affiliate of ours at any time during the three months preceding a sale, and who has beneficially owned restricted securities within the meaning of Rule 144 for at least six months (including any period of consecutive ownership of preceding non-affiliated holders) would be entitled to sell those Class A shares, subject only to the availability of current public information about us. A non-affiliated person (who has been unaffiliated for at least the past three months) who has beneficially owned restricted securities within the meaning of Rule 144 for at least one year would be entitled to sell those Class A shares without regard to the provisions of Rule 144.
A person (or persons whose Class A shares are aggregated) who is deemed to be an affiliate of ours and who has beneficially owned restricted securities within the meaning of Rule 144 for at least six months would be entitled to sell within any three-month period a number of Class A shares that does not exceed the greater of one percent of the then outstanding Class A shares or the average weekly trading volume of our Class A shares reported through the NYSE during the four calendar weeks preceding the filing of notice of the sale. Such sales are also subject to certain manner of sale provisions, notice requirements and the availability of current public information about us.
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Rule 701
In general, under Rule 701 under the Securities Act, any of our employees, directors, officers, consultants or advisors who purchase or otherwise receive Class A shares from us in connection with a compensatory share or option plan or other written agreement before the effective date of this offering is entitled to sell such Class A shares 90 days after the effective date of this offering in reliance on Rule 144, without having to comply with the holding period requirement of Rule 144 and, in the case of non-affiliates, without having to comply with the public information, volume limitation or notice filing provisions of Rule 144. The SEC has indicated that Rule 701 will apply to typical share options granted by an issuer before it becomes subject to the reporting requirements of the Exchange Act, along with the shares acquired upon exercise of such options, including exercises after the date of this prospectus.
Shares Issued Under Employee Plans
We have filed a registration statement on Form S-8 under the Securities Act to register Class A shares issuable under our LTIP, which was effective upon filing. Accordingly, Class A shares registered under such registration statement may be made available for sale in the open market following the effective date of such registration statement, unless such Class A shares are subject to vesting restrictions with us, Rule 144 restrictions applicable to our affiliates or the lock-up restrictions described elsewhere in this prospectus.
Additional Interests
Our Operating Agreement provides that we may issue an unlimited number of limited liability company interests of any type at any time without a vote of the shareholders, subject to the rules of the NYSE. Any issuance of additional Class A shares or other limited liability company interests would result in a corresponding decrease in the proportionate ownership interest in us represented by, and could adversely affect the cash distributions related to and market price of, Class A shares then outstanding. Please see “Our Operating Agreement—Anti-Takeover Effects of Delaware Law and Our Operating Agreement—Issuance of Additional Interests.”
Registration Rights
For a description of certain registration rights with respect to our Class A shares, see the information under the heading “Certain Relationships and Related Party Transactions—Registration Rights Agreements.”
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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS FOR NON-U.S. HOLDERS
The following is a summary of the material U.S. federal income tax considerations related to the purchase, ownership and disposition of our Class A shares by a non-U.S. holder (as defined herein), that holds our Class A shares as a “capital asset” within the meaning of Section 1221 of the U.S. Internal Revenue Code of 1986, as amended from time to time (the “Code”) (generally property held for investment). This summary is based on the provisions of the Code, U.S. Treasury regulations, administrative rulings and judicial decisions, all as in effect on the date hereof, and all of which are subject to change, possibly with retroactive effect. We cannot assure you that a change in law will not significantly alter the tax considerations that we describe in this summary. We have not sought any ruling from the Internal Revenue Services (the “IRS”) with respect to the statements made and the conclusions reached in the following summary, and there can be no assurance that the IRS, your tax advisor or a court will agree with such statements and conclusions.
This summary does not address all aspects of U.S. federal income taxation that may be relevant to non-U.S. holders in light of their personal circumstances. In addition, this summary does not address the Medicare tax on certain investment income, U.S. federal estate or gift tax laws, any state, local or non-U.S. tax laws or any tax treaties or any other tax law other than the U.S. federal income tax law. This summary also does not address tax considerations applicable to investors that may be subject to special treatment under the U.S. federal income tax laws, such as:
• | banks, insurance companies or other financial institutions; |
• | tax-exempt or governmental organizations; |
• | tax-qualified retirement plans; |
• | “qualified foreign pension funds” as defined in Section 897(l)(2) of the Code (or any entities all of the interests of which are held by a qualified foreign pension fund) or any other person that is subject to special rules or exemptions under the Foreign Investment in Real Property Tax Act; |
• | dealers in securities or foreign currencies; |
• | persons whose functional currency is not the U.S. dollar; |
• | “controlled foreign corporations,” “passive foreign investment companies,” and corporations that accumulate earnings to avoid U.S. federal income tax; |
• | traders in securities that use the mark-to-market method of accounting for U.S. federal income tax purposes; |
• | persons subject to the alternative minimum tax; |
• | entities or arrangements treated as partnerships or other pass-through entities for U.S. federal income tax purposes or holders of interests therein; |
• | persons deemed to sell our Class A shares under the constructive sale provisions of the Code; |
• | persons that acquired our Class A shares through the exercise of employee stock options or otherwise as compensation or through a tax-qualified retirement plan; |
• | certain former citizens or long-term residents of the United States; and |
• | persons that hold our Class A shares as part of a straddle, appreciated financial position, synthetic security, hedge, conversion transaction or other integrated investment or risk reduction transaction. |
PROSPECTIVE INVESTORS ARE ENCOURAGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATION, AS WELL AS ANY TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR CLASS A SHARES ARISING UNDER THE U.S. FEDERAL ESTATE OR GIFT TAX LAWS OR UNDER THE LAWS OF ANY STATE, LOCAL, NON-U.S. OR OTHER TAXING JURISDICTION OR UNDER ANY APPLICABLE INCOME TAX TREATY.
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Non-U.S. Holder Defined
For purposes of this discussion, a “non-U.S. holder” is a beneficial owner of our Class A shares that is not for U.S. federal income tax purposes a partnership or any of the following:
• | an individual who is a citizen or resident of the United States; |
• | a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia; |
• | an estate the income of which is subject to U.S. federal income tax regardless of its source; or |
• | a trust (i) whose administration is subject to the primary supervision of a U.S. court and which has one or more “United States persons” (within the meaning of Section 7701(a)(30) of the Code) who have the authority to control all substantial decisions of the trust or (ii) which has made a valid election under applicable U.S. Treasury regulations to be treated as a United States person. |
If a partnership (including an entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds our Class A shares, the tax treatment of a partner in the partnership generally will depend upon the status of the partner, upon the activities of the partnership and upon certain determinations made at the partner level. Accordingly, we urge partners in partnerships (including entities or arrangements treated as partnerships for U.S. federal income tax purposes) considering the purchase of our Class A shares to consult their tax advisors regarding the U.S. federal income tax considerations of the purchase, ownership and disposition of our Class A shares by such partnership.
LandBridge Company LLC U.S. Federal Income Taxation
Although we were formed as a limited liability company, we have elected to be taxed as a corporation for U.S. federal income tax purposes. Thus, we are generally obligated to pay U.S. federal income tax on our worldwide net taxable income.
Dividends and Other Distributions
As described in the section entitled “Dividend Policy,” we expect to make dividends to our Class A shareholders in amounts determined from time to time by our board of directors. In the event we distribute cash or other property to our Class A shareholders, such dividends will constitute “dividends” for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. To the extent such dividends exceed our current and accumulated earnings and profits, the dividends will be treated as a non-taxable return of capital to the extent of the non-U.S. holder’s tax basis in our Class A shares (and will reduce such tax basis, but not below zero) and thereafter as capital gain from the sale or exchange of such Class A shares. See “—Gain on Disposition of Class A Shares.”
Subject to the withholding requirements under FATCA (as defined herein) and with respect to effectively connected dividends, each of which is discussed below, any distribution made to a non-U.S. holder on our Class A shares generally will be subject to U.S. withholding tax at a rate of 30% of the gross amount of the distribution unless an applicable income tax treaty provides for a lower rate. To receive the benefit of a reduced treaty rate, a non-U.S. holder must provide the applicable withholding agent with an IRS Form W-8BEN or IRS Form W-8BEN-E (or other applicable or successor form) certifying qualification for the reduced rate.
Dividends paid to a non-U.S. holder that are effectively connected with a trade or business conducted by the non-U.S. holder in the United States (and, if required by an applicable income tax treaty, are treated as attributable to a permanent establishment maintained by the non-U.S. holder in the United States) generally will be taxed on a net income basis at the rates and in the manner generally applicable to United States persons (as defined under the Code). Such effectively connected dividends will not be subject
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to U.S. withholding tax (including backup withholding described below) if the non-U.S. holder satisfies certain certification requirements by providing the applicable withholding agent with a properly executed IRS Form W-8ECI certifying eligibility for exemption. If the non-U.S. holder is a corporation for U.S. federal income tax purposes, it may also be subject to a branch profits tax (at a 30% rate or such lower rate as specified by an applicable income tax treaty) on its effectively connected earnings and profits (as adjusted for certain items), which will include effectively connected dividends.
Gain on Sale or Other Taxable Disposition of Class A Shares
Subject to the discussion below under “—Backup Withholding and Information Reporting” and “—Additional Withholding Requirements under FATCA,” a non-U.S. holder generally will not be subject to U.S. federal income tax or withholding on any gain realized upon the sale or other disposition of our Class A shares unless:
• | the non-U.S. holder is an individual who is present in the United States for a period or periods aggregating 183 days or more during the calendar year in which the sale or disposition occurs and certain other conditions are met; |
• | the gain is effectively connected with a trade or business conducted by the non-U.S. holder in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment maintained by the non-U.S. holder in the United States); or |
• | our Class A shares constitute a United States real property interest in the event that we are or become a United States real property holding corporation (“USRPHC”) for U.S. federal income tax purposes at any time during the shorter of the five-year period ending on the date of disposition or the non-U.S. holder’s holding period for the Class A shares and as a result such gain is treated as effectively connected with a trade or business conducted by the non-U.S. holder in the United States. |
A non-U.S. holder described in the first bullet point above will be subject to U.S. federal income tax at a rate of 30% (or such lower rate as specified by an applicable income tax treaty) on the amount of such gain, which generally may be offset by U.S. source capital losses provided the non-U.S. holder has timely filed U.S. federal income tax returns with respect to such losses.
A non-U.S. holder whose gain is described in the second bullet point above or, subject to the exceptions described in the next paragraph, the third bullet point above generally will be taxed on a net income basis at the rates and in the manner generally applicable to United States persons (as defined under the Code) unless an applicable income tax treaty provides otherwise. If the non-U.S. holder is a corporation for U.S. federal income tax purposes whose gain is described in the second bullet point above, then such gain would also be included in its effectively connected earnings and profits (as adjusted for certain items), which may be subject to a branch profits tax (at a 30% rate or such lower rate as specified by an applicable income tax treaty).
With respect to the third bullet point above, generally, a corporation is a USRPHC if the fair market value of its United States real property interests equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests and its other assets used or held for use in a trade or business. We believe that we currently are, and expect to remain for the foreseeable future, a USRPHC for U.S. federal income tax purposes. However, provided that our Class A shares are and continue to be “regularly traded on an established securities market” (within the meaning of the U.S. Treasury regulations), only a Non-U.S. Holder that actually or constructively owns, or owned at any time during the shorter of the five year period ending on the date of the disposition or the Non-U.S. Holder’s holding period for the Class A shares, more than 5% of our Class A shares will be treated as disposing of a U.S. real property interest and will be taxable on gain realized on the disposition of our Class A shares a as a result of our status as a USRPHC. If our Class A shares were not considered to be regularly traded on an established securities market, each non-U.S. holder (regardless of the percentage of shares owned) would be treated as disposing of a U.S. real property interest and would be subject to U.S. federal income tax on a taxable disposition of our Class A shares (as described in the preceding paragraph), and a 15% withholding tax would apply to the gross proceeds from such disposition.
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NON-U.S. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE FOREGOING RULES TO THEIR OWNERSHIP AND DISPOSITION OF OUR CLASS A SHARES, INCLUDING REGARDING POTENTIALLY APPLICABLE INCOME TAX TREATIES THAT MAY PROVIDE FOR DIFFERENT RULES.
Backup Withholding and Information Reporting
Any dividends paid to a non-U.S. holder must be reported annually to the IRS and to the non-U.S. holder. Copies of these information returns may be made available to the tax authorities in the country in which the non-U.S. holder resides or is established. Payments of dividends to a non-U.S. holder generally will not be subject to backup withholding if the non-U.S. holder establishes an exemption by properly certifying its non-U.S. status on an IRS Form W-8BEN or IRS Form W-8BEN-E (or other applicable or successor form).
Payments of the proceeds from a sale or other disposition by a non-U.S. holder of our Class A shares effected by or through a U.S. office of a broker generally will be subject to information reporting and backup withholding (at the applicable rate) unless the non-U.S. holder establishes an exemption by properly certifying its non-U.S. status on an IRS Form W-8BEN or IRS Form W-8BEN-E (or other applicable or successor form) and certain other conditions are met. Information reporting and backup withholding generally will not apply to any payment of the proceeds from a sale or other disposition of our Class A shares effected outside the United States by a non-U.S. office of a broker. However, unless such broker has documentary evidence in its records that the non-U.S. holder is not a United States person and certain other conditions are met, or the non-U.S. holder otherwise establishes an exemption, information reporting will apply to a payment of the proceeds of the disposition of our Class A shares effected outside the United States by such a broker if it has certain relationships within the United States.
Backup withholding is not an additional tax. Rather, the U.S. federal income tax liability (if any) of persons subject to backup withholding will be reduced by the amount of tax withheld. If backup withholding results in an overpayment of taxes, a refund may be obtained, provided that the required information is timely furnished to the IRS.
Additional Withholding Requirements under FATCA
The Foreign Account Tax Compliance Act (Sections 1471 through 1474 of the Code), and the U.S. Treasury regulations and administrative guidance issued thereunder (“FATCA”), impose a 30% withholding tax on any dividends paid on our Class A shares and, subject to the U.S. Treasury regulations discussed below, on proceeds from sales or other dispositions of our common shares, if paid to a “foreign financial institution” or a “non-financial foreign entity” (each as defined in the Code) (including, in some cases, when such foreign financial institution or non-financial foreign entity is acting as an intermediary), unless (i) in the case of a foreign financial institution, such institution enters into an agreement with the U.S. government to withhold on certain payments, and to collect and provide to the U.S. tax authorities substantial information regarding U.S. account holders of such institution (which includes certain equity and debt holders of such institution, as well as certain account holders that are non-U.S. entities with U.S. owners); (ii) in the case of a non-financial foreign entity, such entity certifies that it does not have any “substantial United States owners” (as defined in the Code) or provides the applicable withholding agent with a certification identifying the direct and indirect substantial United States owners of the entity (in either case, generally on an IRS Form W-8BEN-E); or (iii) the foreign financial institution or non-financial foreign entity otherwise qualifies for an exemption from these rules and provides appropriate documentation (such as an IRS Form W-8BEN-E). Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing these rules may be subject to different rules. Under certain circumstances, a holder might be eligible for refunds or credits of such taxes. While gross proceeds from a sale or other disposition of our common shares paid after January 1, 2019, would have originally been subject to withholding under FATCA, proposed U.S. Treasury regulations provide that such payments of gross proceeds do not constitute withholdable payments. Taxpayers may generally rely on
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these proposed U.S. Treasury regulations until they are revoked or final U.S. Treasury regulations are issued. Non-U.S. holders are encouraged to consult their own tax advisors regarding the effects of FATCA on an investment in our Class A shares.
INVESTORS CONSIDERING THE PURCHASE OF OUR CLASS A SHARES ARE URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS(INCLUDING ANY POTENTIAL FUTURE CHANGES THERETO) TO THEIR PARTICULAR SITUATIONS AND THE APPLICABILITY AND EFFECT OF ANY OTHER TAX LAWS, INCLUDING U.S. FEDERAL ESTATE AND GIFT TAX LAWS AND ANY STATE, LOCAL OR NON-U.S. TAX LAWS AND TAX TREATIES.
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CERTAIN ERISA CONSIDERATIONS
The following is a summary of certain considerations associated with the acquisition and holding of our Class A shares by employee benefit plans that are subject to Title I of ERISA, plans, individual retirement accounts and other arrangements that are subject to Section 4975 of the Code or employee benefit plans that are governmental plans (as defined in Section 3(32) of ERISA), certain church plans (as defined in Section 3(33) of ERISA), non-U.S. plans (as described in Section 4(b)(4) of ERISA) or other plans that are not subject to the foregoing but may be subject to provisions under any other federal, state, local, non-U.S. or other laws or regulations that are similar to such provisions of ERISA or the Code (collectively, “Similar Laws”), and entities whose underlying assets are considered to include “plan assets” of any such plan, account or arrangement (each, a “Plan”).
This summary is based on the provisions of ERISA and the Code (and related regulations and administrative and judicial interpretations) as of the date of this prospectus. This summary does not purport to be complete, and no assurance can be given that future legislation, court decisions, regulations, rulings or pronouncements will not significantly modify the requirements summarized below. Any of these changes may be retroactive and may thereby apply to transactions entered into prior to the date of their enactment or release. This discussion is general in nature and is not intended to be all inclusive, nor should it be construed as investment or legal advice.
General Fiduciary Matters
ERISA and the Code impose certain duties on persons who are fiduciaries of a Plan subject to Title I of ERISA or Section 4975 of the Code (an “ERISA Plan”) and prohibit certain transactions involving the assets of an ERISA Plan and its fiduciaries or other interested parties. Under ERISA and the Code, any person who exercises any discretionary authority or control over the administration of an ERISA Plan or the management or disposition of the assets of an ERISA Plan, or who renders investment advice for a fee or other compensation to an ERISA Plan, is generally considered to be a fiduciary of the ERISA Plan.
In considering an investment in our Class A shares with a portion of the assets of any Plan, a fiduciary should consider the Plan’s particular circumstances and all of the facts and circumstances of the investment and determine whether the acquisition and holding of such Class A shares is in accordance with the documents and instruments governing the Plan and the applicable provisions of ERISA, the Code, or any Similar Law relating to the fiduciary’s duties to the Plan, including, without limitation:
• | whether the investment is prudent under Section 404(a)(1)(B) of ERISA and any other applicable Similar Laws; |
• | whether, in making the investment, the ERISA Plan will satisfy the diversification requirements of Section 404(a)(1)(C) of ERISA and any other applicable Similar Laws; |
• | whether the investment is permitted under the terms of the applicable documents governing the Plan; |
• | whether in the future there may be no market in which to sell or otherwise dispose of the Class A shares; |
• | whether the acquisition or holding of such Class A shares will constitute a “prohibited transaction” under Section 406 of ERISA or Section 4975 of the Code (please see discussion under “—Prohibited Transaction Issues” below); and |
• | whether the Plan will be considered to hold, as plan assets, (i) only such Class A shares or (ii) an undivided interest in our underlying assets (please see the discussion under “—Plan Asset Issues” below). |
Prohibited Transaction Issues
Section 406 of ERISA and Section 4975 of the Code prohibit ERISA Plans from engaging in specified transactions involving plan assets with persons or entities who are “parties in interest,” within the meaning of
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ERISA, or “disqualified persons,” within the meaning of Section 4975 of the Code, unless an exemption is available. A party in interest or disqualified person who engages in a non-exempt prohibited transaction may be subject to excise taxes and other penalties and liabilities under ERISA and the Code. In addition, the fiduciary of the ERISA Plan that engages in such a non-exempt prohibited transaction may be subject to penalties and liabilities under ERISA and the Code. The acquisition and/or holding of our Class A shares by an ERISA Plan with respect to which the issuer, the initial purchaser, or a guarantor is considered a party in interest or a disqualified person may constitute or result in a direct or indirect prohibited transaction under Section 406 of ERISA and/or Section 4975 of the Code, unless the investment is acquired and is held in accordance with an applicable statutory, class or individual prohibited transaction exemption.
Because of the foregoing, our Class A shares should not be acquired or held by any person investing “plan assets” of any Plan, unless such acquisition and holding will not constitute a non-exempt prohibited transaction under ERISA and the Code or a similar violation of any applicable Similar Laws.
Plan Asset Issues
Additionally, a fiduciary of a Plan should consider whether the Plan will, by investing in our Class A shares, be deemed to own an undivided interest in our assets, with the result that we would become a fiduciary of the Plan and our operations would be subject to the regulatory restrictions of ERISA, including its prohibited transaction rules, as well as the prohibited transaction rules of the Code and any other applicable Similar Laws.
The Department of Labor (the “DOL”) regulations provide guidance with respect to whether the assets of an entity in which ERISA Plans acquire equity interests would be deemed “plan assets” under some circumstances. Under these regulations, an entity’s assets generally would not be considered to be “plan assets” if, among other things:
(a) | the equity interests acquired by ERISA Plans are “publicly offered securities” (as defined in the DOL regulations)-i.e., the equity interests are part of a class of securities that is widely held by 100 or more investors independent of the issuer and each other, are “freely transferable” (as defined in the DOL regulations), and are either registered under certain provisions of the federal securities laws or sold to the ERISA Plan as part of a public offering under certain conditions; |
(b) | the entity is an “operating company” (as defined in the DOL regulations) i.e., it is primarily engaged in the production or sale of a product or service, other than the investment of capital, either directly or through a majority-owned subsidiary or subsidiaries; or |
(c) | there is no significant investment by benefit plan investors, which is defined to mean that immediately after the most recent acquisition by an ERISA Plan of any equity interest in the entity, less than 25% of the total value of each class of equity interest (disregarding certain interests held by persons (other than benefit plan investors) with discretionary authority or control over the assets of the entity or who provide investment advice for a fee (direct or indirect) with respect to such assets, and any affiliates thereof) is held by ERISA Plans, individual retirement accounts and certain other Plans (but not including governmental plans, foreign plans and certain church plans), and entities whose underlying assets are deemed to include plan assets by reason of a Plan’s investment in the entity. |
Due to the complexity of these rules and the excise taxes, penalties and liabilities that may be imposed upon persons involved in non-exempt prohibited transactions, it is particularly important that fiduciaries, or other persons considering acquiring and/or holding our Class A shares on behalf of, or with the assets of, any Plan, consult with their counsel regarding the potential applicability of ERISA, Section 4975 of the Code and any Similar Laws to such investment and whether an exemption would be applicable to the acquisition and holding of such Class A shares. Purchasers of our Class A shares have the exclusive responsibility for ensuring that their acquisition and holding of such Class A shares complies with the fiduciary responsibility rules of ERISA and does not violate the prohibited transaction rules of ERISA, the Code or applicable Similar Laws. The sale of our Class A shares to a Plan is in no respect a representation by us or any of our respective affiliates or representatives that such an investment meets all relevant legal requirements with respect to investments by any such Plan or that such investment is appropriate for any such Plan.
179
PLAN OF DISTRIBUTION
We are registering the resale by each of the Selling Shareholders or their permitted transferees from time to time of up to 59,058,271 Class A shares pursuant to the IPO RRA and PIPE RRA, respectively.
We are required to pay all fees and expenses incident to the registration of the securities to be offered and sold pursuant to this prospectus. The Selling Shareholders will bear all commissions and discounts, if any, attributable to the sale of Class A shares.
We will not receive any of the proceeds from the sale of the Class A shares by the Selling Shareholders. The aggregate proceeds to the Selling Shareholders will be the purchase price of the securities less any discounts and commissions borne by the Selling Shareholders.
The Selling Shareholders and any of their permitted transferees, donees, pledgees, assignees and successors-in-interest may, from time to time, sell, transfer or otherwise dispose of any or all of their securities covered hereby on the principal trading market or any other stock exchange, market or trading facility on which the securities are traded or in private transactions. These sales may be at fixed or negotiated prices. The Selling Shareholders may use any one or more of the following methods when selling securities:
• | on the NYSE or any national securities exchange or quotation service on which the Class A shares may be listed or quoted at the time of sale; |
• | ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; |
• | block trades in which the broker-dealer will attempt to sell the securities as agent but may position and resell a portion of the block as principal to facilitate the transaction; |
• | purchases by a broker-dealer as principal and resale by the broker-dealer for its account; |
• | through the distribution of the securities by any Selling Shareholder to its partners, members or stockholders; |
• | an exchange distribution in accordance with the rules of the applicable exchange; |
• | in privately negotiated transactions; |
• | settlement of short sales; |
• | in transactions through broker-dealers that agree with the Selling Shareholders to sell a specified number of such securities at a stipulated price per security; |
• | through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise; |
• | at the market or through market makers into an existing market for the securities; |
• | a combination of any such methods of sale; or |
• | any other method permitted pursuant to applicable law. |
In addition to the foregoing, LandBridge Holdings may offer and sell securities pursuant to one or more underwritten offerings.
The Selling Shareholders may also sell securities in reliance upon Rule 144 or any other exemption from registration under the Securities Act, if available, rather than under this prospectus provided that such Selling Shareholder meets the criteria and conforms to the requirements of those provisions. Broker-dealers engaged by the Selling Shareholders may arrange for other brokers-dealers to participate in sales.
180
Broker-dealers may receive commissions or discounts from the Selling Shareholders (or, if any broker-dealer acts as agent for the purchaser of securities, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with FINRA Rule 2121; and in the case of a principal transaction a markup or markdown in compliance with FINRA Rule 2121.
In connection with the sale of the securities or interests therein, the Selling Shareholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the securities in the course of hedging the positions they assume. The Selling Shareholders may also sell securities short and deliver these securities to close out their short positions, or loan or pledge the securities to broker-dealers that in turn may sell these securities. The Selling Shareholders may also loan or pledge the securities offered by this prospectus to broker-dealers that in turn may sell such shares, to the extent permitted by applicable law. The Selling Shareholders may also enter into option or other transactions with broker-dealers or other financial institutions or create one or more derivative securities which require the delivery to such broker-dealer or other financial institution of securities offered by this prospectus, which securities such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).
The Selling Shareholders and any broker-dealers or agents that are involved in selling the securities may be deemed to be “underwriters” within the meaning of Section 2(a)(11) of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the securities purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. The Selling Shareholders have informed us that they do not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute the securities.
We are required to pay certain fees and expenses incurred by us incident to the registration of the securities. We have agreed to indemnify the Selling Shareholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.
We agreed to keep this prospectus effective until the earliest of (i) the date on which the securities may be resold by the Selling Shareholders without registration and without regard to any volume or manner-of-sale limitations by reason of Rule 144, without the requirement for us to be in compliance with the current public information under Rule 144 under the Securities Act or any other rule of similar effect or (ii) all of the securities have been sold pursuant to this prospectus or Rule 144 under the Securities Act or any other rule of similar effect. The resale securities will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the resale securities covered hereby may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the resale securities may not simultaneously engage in market making activities with respect to our Class A shares for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the Selling Shareholders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of the Class A shares by the Selling Shareholders or any other person. We will make copies of this prospectus available to the Selling Shareholders and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act). All of the foregoing may affect the marketability of the Class A shares and the ability of any person or entity to engage in market-making activities with respect to the Class A shares.
181
LEGAL MATTERS
The validity of our Class A shares offered by this prospectus will be passed upon for us by Vinson & Elkins L.L.P., Houston, Texas.
EXPERTS
The consolidated financial statements of DBR Land Holdings LLC as of and for the years ended December 31, 2023 and 2022, included in this prospectus, have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report. Such financial statements are included in reliance upon the report of such firm, given their authority as experts in accounting and auditing.
The financial statements of Wolf Bone Ranch Partners LLC as of and for the nine months ended September 30, 2024, have been included herein in reliance upon the report of KPMG LLP, independent registered public accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.
The financial statements of East Stateline Ranch as of and for the years ended December 31, 2023 and 2022, included in this prospectus, have been audited by Weaver and Tidwell, LLP, independent auditors, as stated in their report. Such financial statements are included in reliance upon the report of such firm, given their authority as experts in accounting and auditing.
Estimates of our reserves and related future net revenues related to our properties as of December 31, 2023 and 2022 included herein and elsewhere in the registration statement of which this prospectus forms a part were based upon reserve reports prepared by our independent petroleum engineers, W.D. Von Gonten & Co. We have included these estimates in reliance on the authority of such firm as an expert in such matters.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 (including the exhibits, schedules and amendments thereto) under the Securities Act, with respect to our Class A shares offered hereby. This prospectus does not contain all of the information set forth in the registration statement and the exhibits and schedules thereto. For further information with respect to the Class A shares offered hereby, we refer you to the registration statement and the exhibits and schedules filed therewith. Statements contained in this prospectus as to the contents of any contract, agreement or other document are summaries of the material terms of such contract, agreement or other document and are not necessarily complete. With respect to each of these contracts, agreements or other documents filed as an exhibit to the registration statement, reference is made to the exhibits for a more complete description of the matter involved. The SEC maintains a website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address of the SEC’s website is www.sec.gov. A copy of the registration statement, of which this prospectus forms a part, and the exhibits and schedules thereto may be downloaded from the SEC’s website.
We are subject to full information reporting requirements of the Exchange Act and file with or furnish to the SEC periodic reports and other information. We intend to furnish our shareholders with annual reports containing our audited financial statements prepared in accordance with GAAP and certified by an independent public accounting firm. We also intend to furnish or make available to our shareholders quarterly reports containing our unaudited interim financial information, for the first three fiscal quarters of each fiscal year. Our website is located at www.landbridgeco.com. We make our periodic reports and other information filed with or furnished to the SEC available, free of charge, through our website, as soon as reasonably practicable after those reports and other information are electronically filed with or furnished to the SEC. Information contained on our website or linked therein or otherwise connected thereto does not constitute part of nor is it incorporated by reference into this prospectus or the registration statement of which this prospectus forms a part.
182
GLOSSARY OF CERTAIN INDUSTRY TERMS
Acquisitions. The Wolf Bone Acquisition, the Winkler County Acquisition, the Brininstool Acquisition, and the Spring 2024 Acquisitions, collectively.
Bbl. One barrel of volume used for measuring oil.
BLM. Bureau of Land Management.
Boe. A barrel of oil equivalent, which is used to express crude oil, NGL and natural gas volumes on a comparable crude oil equivalent basis. Gas equivalents are determined under the relative energy content method by using the ratio of 6.0 Mcf of natural gas to 1.0 Bbl of crude oil or NGL.
Bpd. Barrels per calendar day.
Brackish Water. Water with salinity levels between seawater and freshwater.
Caliche. A crust of coarse sediment or weathered soil in calcium carbonate. It forms when lime-rich groundwater rises to the surface by capillary action and evaporates into a crumbly-like powder, forming a tough, indurated sheet called calcrete.
Completion. Installation of permanent equipment for production of natural gas, NGLs or oil or, in the case of a dry well, to reporting to the appropriate authority that the well has been abandoned.
Crude Oil. A mixture of hydrocarbons that exists in liquid phase in natural underground reservoirs and remains liquid at atmospheric pressure after passing through surface separating facilities.
DBR Solar. DBR Solar LLC, a Delaware limited liability company.
Delaware Basin. A geological depositional and structural basin in West Texas and southern New Mexico, which is a part of the Permian Basin.
Desert Environmental. Desert Environmental LLC, a Delaware limited liability company.
Developed Reserves. Reserves that can be expected to be recovered through existing wells with existing equipment or operating methods.
Development Well. A well drilled within the proved area of a crude oil, NGL or natural gas reservoir to the depth of a stratigraphic horizon (rock layer or formation) known to be productive for the purpose of extracting proved crude oil, NGL or natural gas reserves.
E&P. Exploration and production.
E&P companies. Oil and natural gas exploration and production companies, including producers and/or operators.
East Stateline Acquisition. The acquisition of the East Stateline Ranch on May 10, 2024 from a private third-party seller.
East Stateline Ranch. The approximately 103,000 surface acres in Loving and Winkler Counties, Texas and Lea County, New Mexico that were acquired pursuant to the East Stateline Ranch Acquisition.
A-1
EIA. Energy Information Administration, as independent agency withing the United States Department of Energy that develops, surveys, collects energy data and analyzes and models energy issues.
ERISA. The Employee Retirement Income Security Act of 1974, as amended.
ESG. Environmental, social and governance.
Extension Well. A well drilled on the edge of an existing field that may extend the known area of such field.
Five Point. Five Point Energy LLC, a Delaware limited liability company.
GAAP. Accounting principles generally accepted in the United States of America.
GHG. Greenhouse gas.
GW. Gigawatt, or one billion watts of electric capacity.
Henry Hub. A natural gas pipeline located in Erath, Louisiana that serves as the official delivery location for futures contracts on the NYMEX. The settlement prices at the Henry Hub are used as benchmarks for the entire North American natural gas market.
LandBridge. LandBridge Company LLC, a Delaware limited liability company.
LandBridge Holdings. LandBridge Holdings LLC, a Delaware limited liability company.
Lea County Acquisition. The acquisition of the Lee County Ranches on March 18, 2024 from a private third-party seller.
Lea County Ranches. The approximately 11,000 surface acres in Lea County, New Mexico that were acquired pursuant to the Lee County Acquisition.
MBbls. One thousand barrels of crude oil, condensate or NGLs.
MBbl/d. One MBbl per day.
Mboe. One thousand BOE.
Mboe/d. One thousand BOE per day.
Mcf. One thousand cubic feet of natural gas.
Mineral Interest. Real-property interests that grant ownership of oil and natural gas under a tract of land and the rights to explore for, develop, and produce oil and natural gas on that land or to lease those exploration and development rights to a third party.
MMBtu. One million British thermal units.
MMcf. One million cubic feet of natural gas.
NDB LLC. WaterBridge NDB LLC, a Delaware limited liability company.
Gross Mineral Acre. The total gross acres in which an owner owns a Mineral Interest or a royalty. For example, an owner who owns a 25%, or 1/4th, Royalty in 100 acres has 100 Gross Mineral Acres.
A-2
Net Revenue Interest. The net royalty, overriding royalty, production payment and net profits interests in a particular tract or oil and natural gas well.
Net Royalty Acre. Mineral ownership standardized to a 100% royalty based on the actual number of Gross Mineral Acres in which such owner has an interest. For example, an owner who has a 25%, or 1/4th, royalty in 100 Gross Mineral Acres would hypothetically own 25 Net Royalty Acres on an actual or a 100% basis (100 multiplied by 25%).
NGL. Natural gas liquid.
Northern Delaware Basin. Eddy County, New Mexico, Lea County, New Mexico and Loving County, Texas, collectively.
NYMEX. The New York Mercantile Exchange.
OpCo. DBR Land Holdings LLC, a Delaware limited liability company.
Operator. The individual or company responsible for the development and/or production of an oil or natural gas well.
Pecos Renewables. Pecos Renewables LLC, a Delaware limited liability company.
Permian Basin. A large sedimentary basin located in West Texas and southeastern New Mexico.
Plugging. The sealing off of fluids in the strata penetrated by an oil and natural gas well so that the fluids from one strata will not escape into another or to the surface. State regulations require generally plugging abandoned of wells.
PUD. Proved reserves that are expected to be recovered from new wells on undrilled acreage or from existing wells where a relatively major expenditure is required for recompletion. Undrilled locations can be classified as having PUDs only if a development plan has been adopted indicating that such locations are scheduled to be drilled within five years, unless specific circumstances justify a longer time.
Produced Water. Water that comes out of an oil and natural gas well with the crude oil during crude oil production.
Produced Water Handling Facilities. Facilities employed for the treatment, handling and disposal of salt water produced with oil and natural gas into an underground formation.
Proved Reserves. The estimated quantities of crude oil, natural gas, and NGLs which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions, i.e., prices and costs as of the date the estimate is made. Prices include consideration of changes in existing prices provided by contractual arrangements.
Rod. A rod is a unit of measure of 16.5 feet that is measured in linear feet.
Royalty. An interest in an oil and natural gas lease that gives the owner the right to receive a portion of the production from the leased acreage (or of the proceeds from the sale thereof), but does not require the owner to pay any portion of the production or development costs on the leased acreage. Royalties may be either landowner’s royalties, which are reserved by the owner of the leased acreage at the time the lease is granted, or overriding royalties, which are usually reserved by an owner of the leasehold in connection with a transfer to a subsequent owner.
A-3
Sand Mine. An area of land from which sand is being mined.
Sequestration. A technique for the permanent storage of carbon dioxide or other active compounds so they will not be released into the atmosphere.
Speed Acquisition. The acquisition of the Speed Ranch on May 10, 2024 from a private third-party seller.
Speed Ranch. The approximately 34,000 surface acres in Lea County, New Mexico and Andrews County, Texas, that were acquired pursuant to the Speed Ranch Acquisition.
Spot Market Price. The cash market price without reduction for expected quality, transportation and demand adjustments.
Spring 2024 Acquisitions. The East Stateline Acquisition, the Speed Acquisition and the Lea County Acquisition, collectively.
Undeveloped Reserves. Reserves that are expected to be recovered from new wells on undrilled acreage, from deepening existing wells to a different reservoir or where a relatively large expenditure is required to re-complete an existing well. While not using these same terms, all agencies generally recognize that new capital is required to bring undeveloped reserves to developed status.
Unproved Reserves. Reserves that are based on geoscience and/or engineering data similar to that used in estimates of proved reserves, but technical or other uncertainties preclude such reserves being classified as proved reserves. Unproved reserves may be further categorized as probable reserves and possible reserves.
WaterBridge. Collectively, WaterBridge NDB and WaterBridge Operating and their respective subsidiaries.
WaterBridge NDB. WaterBridge NDB Operating LLC, a Delaware limited liability company.
WaterBridge Operating. WaterBridge Operating LLC, a Delaware limited liability company.
Weighted Average Royalty Interest. An expression of our average royalty interest weighted on an acreage basis and calculated by summing the products of Gross Mineral Acres and royalty percentage, divided by the total net royalty acres.
Working Interests. The right granted to the lessee of a property to develop, produce and own natural gas, NGLs, oil or other minerals. The working interest owners bear the exploration, development and operating costs on either a cash, penalty or carried basis.
WTI. West Texas Intermediate.
A-4
INDEX TO FINANCIAL STATEMENTS
F-1
Wolf Bone Ranch Partners LLC |
||||
F-88 | ||||
Financial Statements: |
||||
F-90 | ||||
Income Statement for the Nine Months Ended September 30, 2024 |
F-91 | |||
Statement of Changes in Net Investment for the Nine Months Ended September 30, 2024 |
F-92 | |||
Statement of Cash Flows for the Nine Months Ended September 30, 2024 |
F-93 | |||
F-94 |
F-2
September 30, 2024 |
December 31, 2023 |
|||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | $ | ||||||
Accounts receivable, net |
||||||||
Related party receivable (Note 10) |
||||||||
Prepaid expenses and other current assets |
||||||||
Total current assets |
||||||||
Non-current assets: |
||||||||
Property, plant and equipment, net |
||||||||
Intangible assets, net |
||||||||
Other assets |
||||||||
Total non-current assets |
||||||||
Total assets |
$ | $ | ||||||
Liabilities and equity |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | $ | ||||||
Related party payable (Note 10) |
||||||||
Accrued liabilities |
||||||||
Current portion of long-term debt |
||||||||
Other current liabilities |
||||||||
Total current liabilities |
||||||||
Non-current liabilities: |
||||||||
Long-term debt |
||||||||
Other long-term liabilities |
||||||||
Total non-current liabilities |
||||||||
Total liabilities |
||||||||
Commitments and contingencies (Note 11) |
||||||||
Member’s equity |
— | |||||||
Class A shares, shares authorized and |
— | |||||||
Class B shares, shares authorized and |
— | — | ||||||
Retained earnings |
— | |||||||
Total shareholders’ equity attributable to LandBridge Company LLC |
— | |||||||
Noncontrolling interest |
— | |||||||
Total shareholders’ and member’s equity |
||||||||
Total liabilities and equity |
$ | $ | ||||||
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2024 |
2023 |
2024 |
2023 |
|||||||||||||
Revenues: |
||||||||||||||||
Surface use royalties |
$ | $ | $ | $ | ||||||||||||
Surface use royalties - Related party (Note 10) |
||||||||||||||||
Easements and other surface-related revenues |
||||||||||||||||
Easements and other surface-related revenues - Related party (Note 10) |
||||||||||||||||
Resource sales |
||||||||||||||||
Resource sales - Related party (Note 10) |
||||||||||||||||
Oil and gas royalties |
||||||||||||||||
Resource royalties |
||||||||||||||||
Resource royalties - Related party (Note 10) |
||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total revenues |
||||||||||||||||
Resource sales-related expense |
||||||||||||||||
Other operating and maintenance expense |
||||||||||||||||
General and administrative expense (income) |
( |
) | ( |
) | ||||||||||||
Depreciation, depletion, amortization and accretion |
||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating income (loss) |
( |
) | ||||||||||||||
Interest expense, net |
||||||||||||||||
Other income |
( |
) | ( |
) | ( |
) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
(Loss) income from operations before taxes |
( |
) | ( |
) | ||||||||||||
Income tax (benefit) expense |
( |
) | ( |
) | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net (loss) income |
$ | ( |
) | $ | $ | ( |
) | $ | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net loss prior to Offering |
( |
) | ||||||||||||||
Net loss attributable to noncontrolling interest |
( |
) | ( |
) | ||||||||||||
|
|
|
|
|||||||||||||
Net income attributable to LandBridge Company LLC |
$ | $ | ||||||||||||||
|
|
|
|
|||||||||||||
Net income (loss) per share |
||||||||||||||||
Basic |
$ | |||||||||||||||
Diluted |
$ | ( |
) | |||||||||||||
Weighted average shares outstanding |
||||||||||||||||
Basic |
||||||||||||||||
Diluted |
Member’s Equity |
Class A |
Class B |
Retained Earnings |
Non-controlling Interest |
Total Shareholders’ and Member’s Equity |
|||||||||||||||||||||||||||
Amount |
Shares |
Amount |
Shares |
Amount |
Amount |
Amount |
Amount |
|||||||||||||||||||||||||
Balance at January 1, 2024 |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||
Deemed non-cash capital contributions prior to reorganization |
— | — | — | — | — | — | ||||||||||||||||||||||||||
Net income prior to reorganization |
— | — | — | — | — | — | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Balance at March 31, 2024 |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Contribution from member |
$ | — | $ | — | — | $ | — | $ | — | $ | — | $ | ||||||||||||||||||||
Deemed non-cash capital contributions prior to reorganization |
— | — | — | — | — | — | ||||||||||||||||||||||||||
Net loss prior to reorganization |
( |
) | — | — | — | — | — | — | ( |
) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Balance at June 30, 2024 |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Effect of Corporate Reorganization and Offering |
( |
) | — | — | ||||||||||||||||||||||||||||
Deemed non-cash capital contributions subsequent to reorganization |
— | — | — | — | — | — | ||||||||||||||||||||||||||
Class A share-based compensation expense subsequent to reorganization |
— | — | — | — | — | |||||||||||||||||||||||||||
Net income (loss) subsequent to reorganization |
— | — | — | — | — | ( |
) | ( |
) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Balance at September 30, 2024 |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Member’s Equity |
||||
Balance at January 1, 2023 |
$ | |||
Distribution to member |
( |
) | ||
Deemed non-cash capital contributions |
||||
Net loss |
( |
) | ||
|
|
|||
Balance at March 31, 2023 |
$ | |||
|
|
|||
Distribution to member |
$ | ( |
) | |
Deemed non-cash capital distributions |
( |
) | ||
Net income |
||||
|
|
|||
Balance at June 30, 2023 |
$ | |||
|
|
|||
Distribution to member |
$ | ( |
) | |
Deemed non-cash capital distributions |
( |
) | ||
Net income |
||||
|
|
|||
Balance at September 30, 2023 |
$ | |||
|
|
Nine Months Ended September 30, |
||||||||
2024 |
2023 |
|||||||
Cash flows from operating activities |
||||||||
Net (loss) income |
$ | ( |
) | $ | ||||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: |
||||||||
Depreciation, depletion, amortization and accretion |
||||||||
Amortization of deferred financing fees |
||||||||
Amortization of debt issuance costs |
||||||||
Share-based compensation |
( |
) | ||||||
Deferred income tax benefit |
( |
) | — | |||||
Other |
— | ( |
) | |||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable |
( |
) | ||||||
Related party receivable |
( |
) | ( |
) | ||||
Prepaid expenses and other assets |
( |
) | ||||||
Accounts payable |
( |
) | ||||||
Related party payable |
( |
) | ||||||
Other current liabilities |
( |
) | ( |
) | ||||
Net cash provided by operating activities |
||||||||
Cash flows from investing activities |
||||||||
Acquisitions |
( |
) | — | |||||
Capital expenditures |
( |
) | ( |
) | ||||
Proceeds from disposal of assets |
— | |||||||
Net cash used in investing activities |
( |
) | ( |
) | ||||
Cash flows from financing activities |
||||||||
Proceeds from issuance of Class A shares, net of underwriting discounts and fees |
— | |||||||
Offering costs |
( |
) | ( |
) | ||||
Contributions from member |
— | |||||||
Distributions to member |
( |
) | ( |
) | ||||
Proceeds from term loan |
||||||||
Repayments on term loan |
( |
) | ( |
) | ||||
Proceeds from revolver |
||||||||
Repayments of revolver |
( |
) | — | |||||
Debt issuance costs |
( |
) | ( |
) | ||||
Other financing activities, net |
( |
) | ( |
) | ||||
Net cash provided by (used in) financing activities |
( |
) | ||||||
Net decrease in cash and cash equivalents |
( |
) | ( |
) | ||||
Cash and cash equivalents - beginning of period |
||||||||
Cash and cash equivalents - end of period |
$ | $ | ||||||
1. |
Organization and Nature of Operations |
• |
• |
2. |
Summary of Significant Accounting Policies |
• | Level 1: Quoted market prices in active markets for identical assets or liabilities. |
• | Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. |
• | Level 3: Unobservable inputs that are not corroborated by market data. |
3. |
Asset Acquisitions |
4. |
Property, Plant and Equipment |
September 30, 2024 |
December 31, 2023 |
|||||||
Oil and natural gas properties |
||||||||
Proved |
$ | $ | ||||||
Unproved |
||||||||
Total oil and natural gas properties |
||||||||
Land and land improvements |
||||||||
Water wells, pipelines, facilities, ponds and related equipment |
||||||||
Buildings, vehicles, equipment, furniture and other |
||||||||
Construction in progress |
— | |||||||
Less: accumulated depreciation and depletion |
( |
) | ( |
) | ||||
Total property, plant and equipment, net |
$ | $ | ||||||
5. |
Income Taxes |
6. |
Debt |
September 30, 2024 |
December 31, 2023 |
|||||||
Term loan |
$ | $ | ||||||
Revolving credit facility |
||||||||
Other |
||||||||
Total debt |
||||||||
Current portion of long-term debt |
( |
) | ( |
) | ||||
Unamortized debt issuance costs |
( |
) | ( |
) | ||||
Total long-term debt |
$ | $ | ||||||
7. |
Shareholders’ and Member’s Equity |
8. |
Share-Based Compensation |
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2024 |
2023 |
2024 |
2023 |
|||||||||||||
Incentive Units |
$ | $ | ( |
) | $ | $ | ( |
) | ||||||||
Restricted Share Units |
— | — | ||||||||||||||
Total share-based compensation expense (income) |
$ | $ | ( |
) | $ | $ | ( |
) | ||||||||
Share price at 7/1/2024 |
$ |
|||
Expected life (in years) |
||||
Risk-free interest rate |
||||
Dividend yield |
||||
Volatility |
||||
Marketability discount |
7/1/2024 |
7/18/2024 |
|||||||
Share price |
$ |
$ |
||||||
Expected life (in years) |
||||||||
Risk-free interest rate |
||||||||
Dividend yield |
||||||||
Volatility |
||||||||
Marketability discount |
Incentive Units |
Weighted Average Grant Date Fair Value |
|||||||
Outstanding at December 31, 2023 (1) |
$ | |||||||
Granted |
||||||||
Forfeited |
( |
) | ||||||
Outstanding at September 30, 2024 (2) |
$ | |||||||
(1) | Prior to the Division, incentive units outstanding at December 31, 2023 were the NDB Incentive Units. The per unit amount reflected is the weighted average fair value per unit as of the measurement date as required for liability accounting. |
(2) | The units outstanding as of September 30, 2024 reflect the effects of the Division and only include the Incentive Units. The grant date fair value per unit amount includes the modification date weighted average per unit fair value of $ |
RSUs |
Weighted Average Grant Date Fair Value |
|||||||
Outstanding at December 31, 2023 |
— | $ | — | |||||
Granted |
||||||||
Forfeited |
( |
) | ||||||
Vested |
— | — | ||||||
Outstanding at September 30, 2024 |
$ | |||||||
9. |
Earnings Per Share |
(in thousands, except for share and per share amounts) |
Period of July 1 - September 30, 2024 |
|||
Numerator |
||||
Net loss |
$ | ( |
) | |
Less: Net loss attributable to noncontrolling interest |
( |
) | ||
Net income attributable to LandBridge Company LLC |
||||
Less: Undistributed earnings allocated to participating securities |
||||
Basic net income attributable to LandBridge Company LLC |
$ | |||
(in thousands, except for share and per share amounts) |
Period of July 1 - September 30, 2024 |
|||
Numerator |
||||
Plus: Net loss attributable to noncontrolling interest |
( |
) | ||
Plus: Undistributed earnings allocated to participating securities |
||||
Diluted net loss attributable to shareholders |
$ | ( |
) | |
Denominator |
||||
Basic weighted average shares outstanding |
||||
Dilutive Class B shares |
||||
Diluted weighted average shares outstanding |
||||
Basic net income per share |
$ | |||
Diluted net loss per share |
$ | ( |
) |
10. |
Related Party Transactions |
Financial Statements Location |
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||||
2024 |
2023 |
2024 |
2023 |
|||||||||||||||
Revenues - Related Party |
||||||||||||||||||
Affiliate access agreements |
Surface use royalties | $ | $ | $ | $ | |||||||||||||
Affiliate access agreements |
Easements and other surface-related revenues |
|||||||||||||||||
Affiliate access agreements |
Resource sales | |||||||||||||||||
Affiliate access agreements |
Resource royalties | — | — | |||||||||||||||
$ | $ | $ | $ | |||||||||||||||
Financial Statements Location |
September 30, 2024 |
December 31, 2023 |
||||||||||
Accounts Receivable - Related Party |
||||||||||||
Affiliate access agreements |
Related party receivable | $ | $ | |||||||||
Accounts Payable - Related Party |
||||||||||||
Shared services agreement |
Related party payable | $ | $ |
11. |
Commitments and Contingencies |
12. |
Subsequent Events |
LandBridge Company LLC
Unaudited Pro Forma Condensed Consolidated Financial Statements
Introduction
LandBridge Company LLC (the “Company”) was formed on September 27, 2023 by WaterBridge NDB LLC, and prior to July 1, 2024, did not have historical financial operating results. For purposes of amounts prior to July 1, 2024, our accounting predecessor is DBR Land Holdings LLC, which was formed in September 2021.
The following unaudited pro forma condensed consolidated financial statements reflect the historical consolidated results of DBR Land Holdings LLC, prior to July 1, 2024, on a pro forma basis to give effect to the following transactions (collectively, the “Transactions”), which are described in further detail below, as if they had occurred on September 30, 2024, for purposes of the unaudited pro forma balance sheet, and on January 1, 2023, for purposes of the unaudited pro forma statement of operations:
Pro Forma Balance sheet
• | the acquisition of the Wolf Bone Ranch assets (“Wolf Bone Acquisition”) described under “Summary—Recent Developments—Wolf Bone Acquisition” elsewhere in this prospectus and related private placement described under “Summary—Recent Developments—December Private Placement” elsewhere in this prospectus. |
Pro Forma Statement of Operations
• | the contemplated transactions described under “Summary—Recent Developments—Initial Public Offering and Corporate Reorganization” elsewhere in this prospectus; |
• | the initial public offering of Class A shares representing limited liability company interests (“Class A shares”) and the use of the net proceeds (the “Offering”); |
• | a provision for corporate income taxes at an effective rate of 14.4% for the nine months ended September 30, 2024 and 16.2% for the year ended December 31, 2023, inclusive of all U.S. federal, state and local income taxes; and |
• | the acquisition of the East Stateline Ranch assets (“East Stateline Acquisition”). |
• | the acquisition of the Wolf Bone Ranch assets (“Wolf Bone Acquisition”) described under “Summary—Recent Developments—Wolf Bone Acquisition” elsewhere in this prospectus and related private placement described under “Summary—Recent Developments—December Private Placement” elsewhere in this prospectus. |
The unaudited pro forma consolidated balance sheet of the Company is based on the historical consolidated balance sheet of the Company as of September 30, 2024, and includes pro forma adjustments to give effect to the described Transactions as if they had occurred on September 30, 2024.
The unaudited pro forma consolidated statements of operations of the Company are based on the audited historical consolidated statement of operations of DBR Land Holdings LLC for the year ended December 31, 2023, and the unaudited historical consolidated statement of operations of the Company for the nine months ended September 30, 2024 having been adjusted to give effect to the described Transactions as if they occurred on January 1, 2023.
The unaudited pro forma consolidated financial statements have been prepared on the basis that the Company is taxed as a corporation under the Internal Revenue Code of 1986, as amended.
F-25
The pro forma data presented reflect events directly attributable to the described Transactions and certain assumptions the Company believes are reasonable. The pro forma data are not necessarily indicative of financial results that would have been attained had the described Transactions occurred on the dates indicated above or which could be achieved in the future because they necessarily exclude various operating expenses, such as incremental general and administrative expenses associated with being a public company. The adjustments are based on currently available information and certain estimates and assumptions. Therefore, the actual adjustments may differ from the pro forma adjustments. However, management believes that the assumptions provide a reasonable basis for presenting the significant effects of the transactions as contemplated and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed consolidated financial statements.
Accounting for the Acquisition
The acquisition purchase price allocation and related adjustments reflected in this unaudited pro forma consolidated financial information related to the Wolf Bone Acquisition are preliminary and subject to revision based on final allocation of the fair value of the net assets after the date of this prospectus. See Note 1: Basis of Presentation below for more information.
The acquisition is subject to reclassification and transaction accounting adjustments that have not yet been finalized. Accordingly, the pro forma adjustments are preliminary and have been made solely for the purposes of providing unaudited pro forma consolidated financial information in accordance with SEC rules including Article 11 of Regulation S-X, as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosure about Acquired and Disposed Businesses.” Differences between these preliminary estimates and the final reclassification and transaction accounting adjustments may be material.
F-26
LandBridge Company LLC
Unaudited Pro Forma Condensed Consolidated Balance Sheet
as of September 30, 2024
LandBridge Company LLC |
Historical Wolf Bone Ranch |
Transaction Accounting Adjustments |
Pro Forma | |||||||||||||||
Current assets: |
||||||||||||||||||
Cash and cash equivalents |
$ | 14,417 | $ | 340 | $ | 12,961 | (a) | $ | 27,718 | |||||||||
Accounts receivable, net |
12,757 | 738 | — | 13,495 | ||||||||||||||
Related party receivable |
2,161 | — | — | 2,161 | ||||||||||||||
Prepaid expenses and other current assets |
2,271 | — | — | 2,271 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total current assets |
31,606 | 1,078 | 12,961 | 45,645 | ||||||||||||||
Non-current assets: |
||||||||||||||||||
Property, plant and equipment, net of accumulated depreciation |
628,087 | 88,339 | 156,837 | (b) | 873,263 | |||||||||||||
Intangible assets, net |
27,484 | — | — | 27,484 | ||||||||||||||
Other assets |
2,711 | — | — | 2,711 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total non-current assets |
658,282 | 88,339 | 156,837 | 903,458 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total assets |
$ | 689,888 | $ | 89,417 | $ | 169,798 | $ | 949,103 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Liabilities and stockholders’ equity |
||||||||||||||||||
Current liabilities: |
||||||||||||||||||
Accounts payable |
$ | 182 | $ | — | $ | — | $ | 182 | ||||||||||
Related party payable |
504 | — | — | 504 | ||||||||||||||
Accrued liabilities |
6,199 | 373 | (352 | ) | (c) | 6,220 | ||||||||||||
Current portion of long-term debt |
35,547 | — | — | 35,547 | ||||||||||||||
Other current liabilities |
826 | — | — | 826 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total current liabilities |
43,258 | 373 | (352 | ) | 43,279 | |||||||||||||
Non-current Liabilities: |
||||||||||||||||||
Long-term debt |
242,430 | — | 66,225 | (d) | 308,655 | |||||||||||||
Other long-term liabilities |
183 | 4,724 | (4,724 | ) | (c) | 183 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total non-current liabilities |
242,613 | 4,724 | 61,501 | 308,838 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total liabilities |
285,871 | 5,097 | 61,149 | 352,117 | ||||||||||||||
Commitments and contingencies |
||||||||||||||||||
Member’s equity |
— | 63,917 | (63,917 | ) | (c) | $ | — | |||||||||||
Class A shares, unlimited shares authorized and 23,255,419 shares issued and outstanding as of September 30, 2024. |
94,553 | — | 338,380 | (e) | 432,933 | |||||||||||||
Class B shares, unlimited shares authorized and 53,227,852 shares issued and outstanding as of September 30, 2024. |
— | — | — | — | ||||||||||||||
Retained earnings |
2,656 | 20,403 | (20,403 | ) | (c) | 2,656 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total shareholders’ equity attributable to LandBridge Company LLC |
97,209 | 84,320 | 254,060 | 435,589 | ||||||||||||||
Noncontrolling interest |
306,808 | — | (145,411 | ) | (f) | 161,397 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total shareholders’ and member’s equity |
404,017 | 84,320 | 108,649 | 596,986 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total liabilities and equity |
$ | 689,888 | $ | 89,417 | $ | 169,798 | $ | 949,103 | ||||||||||
|
|
|
|
|
|
|
|
F-27
LandBridge Company LLC
Unaudited Pro Forma Condensed Consolidated Statement of Operations for
the nine months ended September 30, 2024
LandBridge Company LLC |
Historical East Stateline Ranch |
Transaction Accounting Adjustments |
Corporate Reorganization and Offering |
Pro Forma |
Historical Wolf Bone Ranch |
Transaction Accounting Adjustments |
Combined Pro Forma |
|||||||||||||||||||||||||||||||
Revenues: |
||||||||||||||||||||||||||||||||||||||
Oil and gas royalties |
$ | 11,563 | $ | — | $ | — | $ | — | $ | 11,563 | $ | — | $ | — | $ | 11,563 | ||||||||||||||||||||||
Resource sales |
11,908 | 730 | — | — | 12,638 | — | — | 12,638 | ||||||||||||||||||||||||||||||
Resource sales - Related party |
329 | — | — | — | 329 | — | — | 329 | ||||||||||||||||||||||||||||||
Easements and other surface-related revenues |
15,018 | 3,761 | — | — | 18,779 | 1,972 | 124 | (l) | 20,875 | |||||||||||||||||||||||||||||
Easements and other surface-related revenues - Related party |
4,224 | — | — | — | 4,224 | — | — | 4,224 | ||||||||||||||||||||||||||||||
Surface use royalties |
9,129 | 3,298 | — | — | 12,427 | 12,196 | — | 24,623 | ||||||||||||||||||||||||||||||
Surface use royalties - Related party |
11,902 | — | — | — | 11,902 | — | — | 11,902 | ||||||||||||||||||||||||||||||
Resource royalties |
6,803 | 623 | — | — | 7,426 | 10,250 | — | 17,676 | ||||||||||||||||||||||||||||||
Resource royalties - Related party |
2,579 | — | — | — | 2,579 | — | — | 2,579 | ||||||||||||||||||||||||||||||
Other |
— | 66 | — | — | 66 | — | — | 66 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
Total revenues |
73,455 | 8,478 | — | — | 81,933 | 24,418 | 124 | 106,475 | ||||||||||||||||||||||||||||||
Resource sales-related expense |
1,739 | — | — | — | 1,739 | — | — | 1,739 | ||||||||||||||||||||||||||||||
Other operating and maintenance expense |
1,837 | 45 | — | — | 1,882 | 1,700 | (1,700 | ) | (m) | 1,882 | ||||||||||||||||||||||||||||
General and administrative expense |
98,114 | 64 | — | (51,932 | ) | (h) | 46,246 | 429 | — | 46,675 | ||||||||||||||||||||||||||||
Depreciation, depletion, amortization and accretion |
6,294 | 17 | — | — | 6,311 | 1,886 | (1,873 | ) | (m) | 6,324 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
Operating (loss) income |
(34,529 | ) | 8,352 | — | 51,932 | 25,755 | 20,403 | 3,697 | 49,856 | |||||||||||||||||||||||||||||
Interest expense, net |
16,235 | — | 7,788 | (g) | (5,686 | ) | (i) | 18,337 | — | 6,066 | (n) | 24,403 | ||||||||||||||||||||||||||
Other income |
(241 | ) | — | — | — | (241 | ) | — | — | (241 | ) | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
Loss (income) from operations before taxes |
(50,523 | ) | 8,352 | (7,788 | ) | 57,618 | 7,659 | 20,403 | (2,369 | ) | 25,694 | |||||||||||||||||||||||||||
Income tax expense |
(890 | ) | — | — | 3,383 | (j) | 2,493 | — | 1,316 | (o) | 3,809 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
Net loss (income) |
(49,633 | ) | 8,352 | (7,788 | ) | 54,235 | 5,166 | 20,403 | (3,685 | ) | 21,884 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
Net loss (income) attributable to noncontrolling interest |
(60,203 | ) | — | — | 57,644 | (k) | (2,560 | ) | — | 12,551 | (p) | 9,991 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
Net income attributable to LandBridge Company LLC |
$ | 10,570 | $ | 8,352 | $ | (7,788 | ) | $ | (3,408 | ) | $ | 7,726 | $ | 20,403 | $ | (16,236 | ) | $ | 11,893 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
Net income per class A unit |
||||||||||||||||||||||||||||||||||||||
Basic |
(q) | $ | 0.48 | |||||||||||||||||||||||||||||||||||
Diluted |
(q) | $ | 0.28 | |||||||||||||||||||||||||||||||||||
Weighted average class A units outstanding |
||||||||||||||||||||||||||||||||||||||
Basic |
(q) | 23,255,419 | ||||||||||||||||||||||||||||||||||||
Diluted |
(q) | 76,483,271 |
F-28
LandBridge Company LLC
Unaudited Pro Forma Condensed Consolidated Statement of Operations for
the Year Ended December 31, 2023
Historical DBR Land Holdings LLC |
Historical East Stateline Ranch |
Transaction Accounting Adjustments |
Corporate Reorganization and Offering |
Pro Forma |
Historical Wolf Bone Ranch |
Transaction Accounting Adjustments |
Combined Pro Forma |
|||||||||||||||||||||||||||||||
Revenues: |
||||||||||||||||||||||||||||||||||||||
Oil and gas royalties |
$ | 20,743 | $ | — | $ | — | $ | — | $ | 20,743 | $ | — | $ | — | $ | 20,743 | ||||||||||||||||||||||
Resource sales |
18,045 | 2,653 | — | — | 20,698 | — | — | 20,698 | ||||||||||||||||||||||||||||||
Resource sales - Related party |
1,785 | — | — | — | 1,785 | — | — | 1,785 | ||||||||||||||||||||||||||||||
Easements and other surface-related revenues |
8,395 | 7,773 | — | — | 16,168 | 1,416 | 1,988 | (l) | 19,572 | |||||||||||||||||||||||||||||
Easements and other surface-related revenues - Related party |
4,249 | — | — | — | 4,249 | — | — | 4,249 | ||||||||||||||||||||||||||||||
Surface use royalties |
7,780 | 6,463 | — | — | 14,243 | 14,745 | — | 28,988 | ||||||||||||||||||||||||||||||
Surface use royalties - Related party |
5,436 | — | — | — | 5,436 | — | — | 5,436 | ||||||||||||||||||||||||||||||
Resource royalties |
6,432 | 3,116 | — | — | 9,548 | 14,798 | — | 24,346 | ||||||||||||||||||||||||||||||
Other |
— | 32 | — | — | 32 | — | — | 32 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Total revenues |
72,865 | 20,037 | — | — | 92,902 | 30,959 | 1,988 | 125,849 | ||||||||||||||||||||||||||||||
Resource sales-related expense |
3,445 | — | — | — | 3,445 | — | — | 3,445 | ||||||||||||||||||||||||||||||
Other operating and maintenance expense |
2,740 | 231 | — | — | 2,971 | 1,455 | (1,455 | ) | (m) | 2,971 | ||||||||||||||||||||||||||||
General and administrative expense |
(12,091 | ) | 241 | — | 61,417 | (h) | 49,567 | 511 | — | 50,078 | ||||||||||||||||||||||||||||
Depreciation, depletion, amortization and accretion |
8,762 | 63 | — | — | 8,825 | 2,516 | (2,497 | ) | (m) | 8,844 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Operating income |
70,009 | 19,502 | — | (61,417 | ) | 28,094 | 26,477 | 5,940 | 60,511 | |||||||||||||||||||||||||||||
Interest expense, net |
7,016 | — | 28,090 | (g) | (8,042 | ) | (i) | 27,064 | — | 5,053 | (n) | 32,117 | ||||||||||||||||||||||||||
Other income |
(549 | ) | — | — | — | (549 | ) | (37 | ) | — | (586 | ) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Income from operations before taxes |
63,542 | 19,502 | (28,090 | ) | (53,375 | ) | 1,579 | 26,514 | 887 | 28,980 | ||||||||||||||||||||||||||||
Income tax expense |
370 | — | — | 2,443 | (j) | 2,813 | 1,975 | (o) | 4,788 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Net income (loss) |
63,172 | 19,502 | (28,090 | ) | (55,818 | ) | (1,234 | ) | 26,514 | (1,088 | ) | 24,192 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Net income (loss) attributable to noncontrolling interests |
— | — | — | (9,798 | ) | (k) | (9,798 | ) | 19,069 | (p) | 9,272 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Net income (loss) attributable to LandBridge Company LLC |
$ | 63,172 | $ | 19,502 | $ | (28,090 | ) | $ | (46,020 | ) | $ | 8,564 | $ | 26,514 | $ | (20,157 | ) | $ | 14,920 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Net income per class A unit |
||||||||||||||||||||||||||||||||||||||
Basic |
(q) | $ | 0.62 | |||||||||||||||||||||||||||||||||||
Diluted |
(q) | $ | 0.31 | |||||||||||||||||||||||||||||||||||
Weighted average class A units outstanding |
||||||||||||||||||||||||||||||||||||||
Basic |
(q) | 23,255,419 | ||||||||||||||||||||||||||||||||||||
Diluted |
(q) | 76,483,271 |
F-29
LandBridge Company LLC and Subsidiaries
Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements
Note 1: Basis of Presentation
The pro forma consolidated financial information has been prepared by the Company in accordance with Article 11 of Regulation S-X, as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosure about Acquired and Disposed Businesses.” The historical financial information is derived from the financial statements of DBR Land Holdings LLC included elsewhere in this prospectus for periods prior to July 1, 2024. For purposes of the unaudited pro forma balance sheet, it is assumed that the Transactions had taken place on September 30, 2024. For purposes of the unaudited pro forma statements of operations for the nine months ended September 30, 2024 and for the year ended December 31, 2023, it is assumed the Transactions had occurred on January 1, 2023.
The unaudited pro forma consolidated financial information was prepared using the acquisition method of accounting in accordance with Accounting Standards Topic (“ASC”) Topic 805, Business Combinations, with the Company as the accounting acquirer, using the fair value concepts defined in ASC Topic 820, Fair Value Measurement, and based on the historical condensed financial statements of the Company and the historical condensed consolidated financial statements of the East Stateline Acquisition and Wolf Bone Acquisition.
The transaction accounting adjustments represent Company management’s best estimates and are based upon currently available information and certain assumptions that we believe are reasonable under the circumstances.
Our management has not identified any reclassification adjustments given all currently available information related to the East Stateline Acquisition, which would be necessary to conform the presentation of its financial statements or accounting policies to those of the Company.
Our management has identified transaction adjustments related to the Wolf Bone Acquisition to eliminate certain assets and liabilities of the acquiree. These transaction adjustments are primarily to adjust the historical Wolf Bone financial information prepared on a legal entity basis to reflect only those assets and liabilities the Company will acquire. We further performed a preliminary review of Wolf Bone’s accounting policies and identified an adjustment to Easements and other surface-related revenues—see below for more information.
Note 2: Purchase Price
We accounted for the East Stateline Acquisition and will account for the Wolf Bone Acquisition as an asset acquisition as it does not meet the definition of a business under generally accepted accounting principles in the United States of America (“U.S. GAAP”). The assets will be recognized at the fair value of the consideration transferred to the seller, plus direct transaction costs in accordance with ASC 805-50-30-1. The purchase price is allocated to the assets and liabilities acquired based on their relative fair values according to ASC 805-50-30-3.
The determination of fair value used in the transaction adjustments presented herein are preliminary and based on management estimates of the fair value of the assets acquired and have been prepared to illustrate the estimated effect of the Wolf Bone Acquisition. The final determination of the purchase price allocation will depend on a number of factors that cannot be predicted with certainty at this time. Therefore, the actual purchase price allocation may differ from the transaction accounting adjustments presented in these unaudited condensed pro forma statements.
F-30
LandBridge Company LLC and Subsidiaries
Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements
Note 3: Pro Forma Adjustments
The unaudited pro forma consolidated financial information has been prepared to reflect the application of required U.S. GAAP accounting to the East Stateline Acquisition, Wolf Bone Acquisition, and Offering transactions and has been prepared for informational purposes only.
Transaction Accounting Adjustments to Unaudited Pro Forma Consolidated Financial Information
The Company made the following adjustments and assumptions related to the Wolf Bone Acquisition in the preparation of the unaudited pro forma consolidated balance sheet:
a) | Transaction accounting adjustments for cash represent an increase of $13.0 million to reflect cash paid for the Wolf Bone Acquisition and purchase of 2,498,751 OpCo Units (along with the cancellation of a corresponding number of Class B shares) from LandBridge Holdings net of debt proceeds and proceeds from the private placement to fund the acquisition. The transaction accounting adjustment for cash is summarized in the table below: |
Gross proceeds from private placement |
350,000 | |||
Proceeds from term loan and revolver |
67,250 | |||
Less: |
||||
Acquisition purchase price |
(245,000 | ) | ||
Purchase of OpCo Units from LandBridge Holdings, net of expenses |
(145,411 | ) | ||
Private placement costs (issuance expenses and placement fees) |
(11,620 | ) | ||
Acquisition costs |
(893 | ) | ||
Debt issuance costs |
(1,025 | ) | ||
Acquisition adjustments (cash not acquired) |
(340 | ) | ||
|
|
|||
Net cash adjustment |
12,961 |
b) | Represents the fair value of property, plant and equipment acquired in the Wolf Bone Acquisition which we have determined on a preliminary basis to be substantially all attributable to land, a non-depreciating asset. The expected allocation to land, incremental to the acquiree’s historical property, plant and equipment balance we are acquiring, is $156.8 million, inclusive of $0.9 million of transaction expenses. |
c) | Reflects the elimination of the acquiree’s contract liability to align revenue recognition policies and historical equity value. |
d) | Reflects $67.3 million in total proceeds from term loan and revolver, net of $1.0 million of debt issuance costs. |
e) | Represents an adjustment to Class A shares reflecting $350.0 million of proceeds from the issuance of Class A shares through the private placement, net of $11.6 million in placement fees and issuance expenses. |
f) | Reflects a distribution of $145.4 million, net of placement fees, to LandBridge Holdings to redeem or repurchase 2,498,751 OpCo Units, with a cancellation of a corresponding number of Class B shares. |
F-31
LandBridge Company LLC and Subsidiaries
Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements
The Company made the following adjustments and assumptions related to the East Stateline Acquisition in the preparation of the unaudited pro forma condensed consolidated statements of operations:
g) | For the nine months ended September 30, 2024, reflects increased interest expense of $7.8 million, primarily related to an increase of $6.4 million related to the term loan, $0.9 million related to the revolver, and $0.5 million debt issuance cost amortization related to the increase in commitments on the revolver and term loan. The Company obtained a variable interest rate of three-month SOFR plus spread of 3.850% for an interest rate of 8.364%. The effect of a 1/8 of a percent variance in the interest rate on net income attributable to the Company for the nine months ended September 30, 2024 is $0.3 million. For the year ended December 31, 2023, reflects increased interest expense of $28.1 million, primarily related to an increase of $24.0 million related to the term loan, $3.3 million related to the revolver, and $0.8 million debt issuance cost amortization related to the increase in commitments on the revolver and term loan. The Company obtained a variable interest rate of three-month SOFR plus spread of 3.850% for an interest rate of 8.364%. The effect of a 1/8 of a percent variance in the interest rate on net income attributable to the Company for the year ended December 31, 2023 is $0.5 million. |
The Company made the following adjustments and assumptions related to the Corporate Reorganization and Offering in the preparation of the unaudited pro forma condensed consolidated statements of operations:
h) | Reflects the RSU expense based on the assumption that the Company’s RSUs were issued on January 1, 2023. In addition, it reflects an adjustment to share-based compensation expense related to Incentive Units to assume the modification from liability to equity accounting occurred as of January 1, 2023. |
i) | Reflects reduction in interest expense of $5.7 million for the nine months ended September 30, 2024 and $8.0 million for the year ended December 31, 2023 associated with the Company’s historical interest expense associated with the Credit Facility reflecting the repayment of the debt with the use of proceeds from the Offering. |
j) | Reflects estimated incremental income tax expense of $3.4 million for the nine months ended September 30, 2024 associated with the Company’s historical results of operations assuming the Company’s earnings had been subject to federal income tax as a subchapter Corporation using a effective tax rate of approximately 14.4% and based on the Company’s ownership of approximately 30.4%. This rate is inclusive of U.S. federal and state income taxes. Reflects estimated incremental income tax expense of $2.4 million for the year ended December 31, 2023 associated with the Company’s historical results of operations assuming the Company’s earnings had been subject to federal income tax as a subchapter Corporation using a effective tax rate of approximately 16.2% and based on the Company’s ownership of approximately 30.4%. |
k) | Reflects an increase in consolidated net income attributable to non-controlling interest for the Company for the nine months ended September 30, 2024, and a reduction in consolidated net income attributable to non-controlling interest for DBR Land Holdings LLC’s historical results of operations for the year ended December 31, 2023. In conjunction with the December Private Placement and associated cancellation of Class B shares, the non-controlling interest was approximately 69.6%. The Company allocates all expense associated with Incentive Units solely to LandBridge Holdings and not the Company. Conversely, all federal tax expenses are allocated solely to the Company and not LandBridge Holdings. |
F-32
LandBridge Company LLC and Subsidiaries
Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements
The Company made the following adjustments and assumptions related to the Wolf Bone Acquisition in the preparation of the unaudited pro forma condensed consolidated statements of operations:
l) | Reflects an adjustment to align the revenue recognition accounting policies of the Company and Wolf Bone as it relates to easement and other surface-related revenues. |
m) | Reflects the elimination of the acquiree’s expenses and depreciation related to assets we are not acquiring. |
n) | For the nine months ended September 30, 2024, reflects increased interest expense of $6.1 million, primarily related to an increase of $5.1 million related to the term loan, increase of $0.9 million related to the revolver and $0.1 million debt issuance cost amortization related to the increase in proceeds from the term loan. The Company obtained a variable interest rate of three-month SOFR plus spread of 3.850% for an interest rate of 8.364%. The effect of a 1/8 of a percent variance in the interest rate on net income attributable to the Company for the nine months ended September 30, 2024 is $0.7 million. For the year ended December 31, 2023, reflects increased interest expense of $5.1 million, primarily related to an increase of $4.7 million related to the term loan, an increase of $0.2 million related to the revolver, and $0.2 million debt issuance cost amortization related to the increase in proceeds from the term loan. The Company obtained a variable interest rate of three-month SOFR plus spread of 3.850% for an interest rate of 8.364%. The effect of a 1/8 of a percent variance in the interest rate on net income attributable to the Company for the year ended December 31, 2023 is $0.4 million. |
o) | Reflects estimated incremental income tax expense of $1.3 million for the nine months ended September 30, 2024 associated with the Company’s historical results of operations assuming the Company’s earnings had been subject to federal income tax as a subchapter Corporation using a effective tax rate of approximately 14.4% and based on the Company’s ownership of approximately 30.4%. This rate is inclusive of U.S. federal and state income taxes. Reflects estimated incremental income tax expense of $2.0 million for the year ended December 31, 2023 associated with the Company’s historical results of operations assuming the Company’s earnings had been subject to federal income tax as a subchapter Corporation using an effective tax rate of approximately 16.2% and based on the Company’s ownership of approximately 30.4%. |
p) | Reflects an increase in consolidated net income attributable to non-controlling interest for the Company for the nine months ended September 30, 2024, and for DBR Land Holdings LLC’s historical results of operations for the year ended December 31, 2023. In conjunction with the December Private Placement and associated cancellation of Class B shares, the non-controlling interest was approximately 69.6%. The Company allocates all expense associated with Incentive Units solely to LandBridge Holdings and not the Company. Conversely, all federal tax expenses are allocated solely to the Company and not LandBridge Holdings. |
F-33
LandBridge Company LLC and Subsidiaries
Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements
q) | Earnings per share on a pro forma basis is computed as follows: |
Nine Months Ended September 30, 2024 |
Year Ended December 31, 2023 |
|||||||
Numerator |
||||||||
Combined pro forma net income |
$ | 21,884 | $ | 24,192 | ||||
Less: Combined pro forma net income attributable to noncontrolling interests |
9,991 | 9,272 | ||||||
|
|
|
|
|||||
Combined pro forma net income attributable to LandBridge Company LLC |
11,893 | 14,920 | ||||||
Less: Undistributed earnings allocated to participating securities |
827 | 463 | ||||||
|
|
|
|
|||||
Basic net income attributable to LandBridge Company LLC |
$ | 11,067 | $ | 14,457 | ||||
|
|
|
|
|||||
Plus: Combined pro forma net income attributable to noncontrolling interests |
9,991 | 9,272 | ||||||
|
|
|
|
|||||
Diluted net income attributable to LandBridge Company LLC |
$ | 21,058 | $ | 23,729 | ||||
|
|
|
|
|||||
Denominator |
||||||||
Basic pro forma weighted average shares outstanding |
23,255,419 | 23,255,419 | ||||||
|
|
|
|
|||||
Dilutive Class B shares |
53,227,852 | 53,227,852 | ||||||
|
|
|
|
|||||
Diluted pro forma weighted average shares outstanding |
76,483,271 | 76,483,271 | ||||||
|
|
|
|
|||||
Basic pro forma net income per share |
$ | 0.48 | $ | 0.62 | ||||
Diluted pro forma net income per share |
$ | 0.28 | $ | 0.31 |
Note 4: Management Adjustments
Following the completion of the East Stateline Acquisition, the Company recognized additional resource royalties and surface use royalties associated with new commercial agreements entered into concurrently with the East Stateline Acquisition. Contemporaneous with closing, the Company entered into new commercial royalty arrangements with WaterBridge associated with produced water and brackish supply water assets which WaterBridge acquired from the seller of the East Stateline Ranch. In the opinion of management, the management adjustments related to the new commercial arrangements are necessary to present a fair representation of the pro forma financial information presented and indicative of additional revenues expected after the East Stateline Acquisition. The management adjustments are based on historical actual volumes for these production activities for the pro forma statement of operations periods presented and agreed-upon rates per the commercial agreements. The management adjustments are not reflected in the Pro Forma Statement of Operations. Based on the historical volumes and contract rates the management adjustments of approximately $2.8 million and $9.4 million in additional revenues for the period from January 1, 2024 to May 10, 2024 and for the year ended December 31, 2023, respectively, reflect the additional royalties that would have been recognized if these commercial agreements had been in place as of January 1, 2023.
F-34
LandBridge Company LLC and Subsidiaries
Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements
Pursuant to Rule 11-02(a)(7)(ii)(A) of Regulation S-X, this Note includes adjustments that depict additional revenues expected after the East Stateline Acquisition.
The below tables reflect the additional revenues as if the East Stateline Acquisition had occurred on January 1, 2023. The Company believes there exists a reasonable basis for the adjustments. The pro forma financial information reflects all management adjustments that are, in the opinion of management, necessary to present a fair representation of the pro forma financial information presented.
For the Period from January 1, 2024 to May 10, 2024 |
||||||||||||
Net income | Basic and diluted income per share |
Weighted average shares |
||||||||||
(in thousands except share and per share amounts) | ||||||||||||
Pro Forma* |
$ | 21,884 | $ | 0.94 | 23,255,419 | |||||||
Management adjustments |
||||||||||||
Resource royalties |
2,241 | |||||||||||
Surface use royalties |
573 | |||||||||||
|
|
|||||||||||
Total management adjustments |
2,814 | |||||||||||
|
|
|||||||||||
Tax effect |
405 | |||||||||||
|
|
|||||||||||
Pro forma net income after management adjustments |
24,293 | |||||||||||
|
|
|||||||||||
Less: Pro forma net income attributable to noncontrolling interests |
(16,907 | ) | ||||||||||
|
|
|
|
|
|
|||||||
Pro forma net income attributable to LandBridge Company LLC |
$ | 7,387 | $ | 0.32 | 23,255,419 | |||||||
|
|
|
|
|
|
* | As shown in the unaudited pro forma condensed consolidated statement of operations for the nine months ended September 30, 2024 |
For the Year Ended December 31, 2023 | ||||||||||||
Net income | Basic and diluted income per share |
Weighted average shares |
||||||||||
(in thousands except share and per share amounts) | ||||||||||||
Pro Forma* |
$ | 24,192 | $ | 1.04 | 23,255,419 | |||||||
Management adjustments |
||||||||||||
Resource royalties |
8,510 | |||||||||||
Surface use royalties |
880 | |||||||||||
|
|
|||||||||||
Total management adjustments |
9,390 | |||||||||||
|
|
|||||||||||
Tax effect |
1,521 | |||||||||||
|
|
|||||||||||
Pro forma net income after management adjustments |
32,061 | |||||||||||
|
|
|||||||||||
Less: Pro forma net income attributable to noncontrolling interests |
(22,312 | ) | ||||||||||
|
|
|
|
|
|
|||||||
Pro forma net income attributable to LandBridge Company LLC |
$ | 9,748 | $ | 0.42 | 23,255,419 | |||||||
|
|
|
|
|
|
* | As shown in the unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2023 |
F-35
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Managers of DBR Land Holdings LLC
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of DBR Land Holdings LLC and subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations, changes in the member’s equity, and cash flows, for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
Houston, TX
May 6, 2024 (December 30, 2024, as to Note 13)
We have served as the Company’s auditor since 2022.
F-36
DBR Land Holdings LLC and Subsidiaries
Consolidated Balance Sheets
(in thousands)
December 31, 2023 |
December 31, 2022 |
|||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 37,823 | $ | 16,150 | ||||
Restricted cash |
— | 9,201 | ||||||
Accounts receivable, net |
12,383 | 10,903 | ||||||
Related party receivable |
1,037 | 424 | ||||||
Prepaid expenses and other current assets |
1,035 | 630 | ||||||
|
|
|
|
|||||
Total current assets |
52,278 | 37,308 | ||||||
Non-current assets: |
||||||||
Property, plant and equipment, net |
203,018 | 207,313 | ||||||
Intangible assets, net |
28,642 | 30,878 | ||||||
Other assets |
5,011 | 521 | ||||||
|
|
|
|
|||||
Total non-current assets |
236,671 | 238,712 | ||||||
|
|
|
|
|||||
Total assets |
$ | 288,949 | $ | 276,020 | ||||
|
|
|
|
|||||
Liabilities and member’s equity |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 200 | $ | 38 | ||||
Related party payable |
453 | 578 | ||||||
Accrued liabilities |
4,945 | 2,841 | ||||||
Income taxes payable |
385 | 212 | ||||||
Current portion of long-term debt |
20,339 | 11,693 | ||||||
Unearned revenue |
278 | 1,327 | ||||||
Other current liabilities |
500 | 500 | ||||||
|
|
|
|
|||||
Total current liabilities |
27,100 | 17,189 | ||||||
Non-current liabilities: |
||||||||
Long-term debt |
108,343 | 45,917 | ||||||
Other long-term liabilities |
2,759 | 2,955 | ||||||
|
|
|
|
|||||
Total non-current liabilities |
111,102 | 48,872 | ||||||
|
|
|
|
|||||
Total liabilities |
138,202 | 66,061 | ||||||
Commitments and contingencies (Note 12) |
||||||||
Member’s equity |
150,747 | 209,959 | ||||||
|
|
|
|
|||||
Total liabilities and member’s equity |
$ | 288,949 | $ | 276,020 | ||||
|
|
|
|
F-37
DBR Land Holdings LLC and Subsidiaries
Consolidated Statements of Operations
(in thousands)
Year Ended December 31, 2023 |
Year Ended December 31, 2022 |
|||||||
Revenues: |
||||||||
Oil and gas royalties |
$ | 20,743 | $ | 18,286 | ||||
Resource sales |
18,045 | 14,646 | ||||||
Resource sales - Related party (Note 11) |
1,785 | 223 | ||||||
Easements and other surface-related revenues |
8,395 | 7,992 | ||||||
Easements and other surface-related revenues - Related party (Note 11) |
4,249 | 1,752 | ||||||
Surface use royalties |
7,780 | 6,276 | ||||||
Surface use royalties - Related party (Note 11) |
5,436 | 1,396 | ||||||
Resource royalties |
6,432 | 1,206 | ||||||
|
|
|
|
|||||
Total revenues |
72,865 | 51,777 | ||||||
Resource sales-related expense |
3,445 | 3,840 | ||||||
Other operating and maintenance expense |
2,740 | 2,648 | ||||||
General and administrative (income) expense |
(12,091 | ) | 41,801 | |||||
Depreciation, depletion, amortization and accretion |
8,762 | 6,720 | ||||||
|
|
|
|
|||||
Operating income (loss) |
70,009 | (3,232 | ) | |||||
Interest expense, net |
7,016 | 3,108 | ||||||
Other income |
(549 | ) | (143 | ) | ||||
|
|
|
|
|||||
Income (loss) from operations before taxes |
63,542 | (6,197 | ) | |||||
Income tax expense |
370 | 164 | ||||||
|
|
|
|
|||||
Net income (loss) |
$ | 63,172 | $ | (6,361 | ) | |||
|
|
|
|
F-38
DBR Land Holdings LLC and Subsidiaries
Consolidated Statements of Changes in Member’s Equity
(in thousands)
Total Member’s Equity |
||||
Balance at January 1, 2022 |
$ | 169,944 | ||
Contribution from member |
10,976 | |||
Distribution to member |
(1,135 | ) | ||
Deemed non-cash capital contributions |
36,535 | |||
Net loss |
(6,361 | ) | ||
|
|
|||
Balance at December 31, 2022 |
$ | 209,959 | ||
|
|
|||
Distribution to member |
(105,165 | ) | ||
Deemed non-cash capital distributions |
(17,219 | ) | ||
Net income |
63,172 | |||
|
|
|||
Balance at December 31, 2023 |
$ | 150,747 | ||
|
|
F-39
DBR Land Holdings LLC and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
Year Ended December 31, 2023 |
Year Ended December 31, 2022 |
|||||||
Cash flows from operating activities |
||||||||
Net Income (loss) |
$ | 63,172 | $ | (6,361 | ) | |||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
||||||||
Depreciation, depletion, amortization and accretion |
8,762 | 6,720 | ||||||
Amortization of deferred financing fees |
129 | — | ||||||
Amortization of debt issuance costs |
259 | — | ||||||
Share-based compensation |
(17,230 | ) | 36,360 | |||||
Gain on disposal of assets |
(239 | ) | — | |||||
Bad debt expense |
(7 | ) | 38 | |||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable |
(1,474 | ) | (5,942 | ) | ||||
Related party receivable |
(613 | ) | (401 | ) | ||||
Prepaid expenses and other assets |
43 | 440 | ||||||
Accounts payable |
362 | (1,584 | ) | |||||
Related party payable |
(109 | ) | 574 | |||||
Unearned revenue |
(989 | ) | 308 | |||||
Accrued liabilities and other liabilities |
803 | (1,318 | ) | |||||
Income taxes payable |
173 | (8,334 | ) | |||||
|
|
|
|
|||||
Net cash provided by operating activities |
53,042 | 20,500 | ||||||
|
|
|
|
|||||
Cash flows from investing activities |
||||||||
Acquisitions |
— | (8,381 | ) | |||||
Capital expenditures |
(2,783 | ) | (3,291 | ) | ||||
Proceeds from disposal of assets |
11 | — | ||||||
|
|
|
|
|||||
Net cash used in investing activities |
(2,772 | ) | (11,672 | ) | ||||
|
|
|
|
|||||
Cash flows from financing activities |
||||||||
Contributions from member |
— | 10,976 | ||||||
Distributions to member |
(105,165 | ) | (1,135 | ) | ||||
Proceeds from term loan |
100,000 | — | ||||||
Proceeds from revolver |
50,000 | — | ||||||
Repayments on revolver |
(15,000 | ) | — | |||||
Repayments on term loan |
(62,417 | ) | (6,500 | ) | ||||
Other financing activities, net |
(404 | ) | (72 | ) | ||||
Debt issuance costs |
(3,106 | ) | — | |||||
Deferred offering costs |
(1,706 | ) | — | |||||
|
|
|
|
|||||
Net cash (used in) provided by financing activities |
(37,798 | ) | 3,269 | |||||
|
|
|
|
|||||
Net (decrease) increase in cash and cash equivalents and restricted cash |
12,472 | 12,097 | ||||||
Cash and cash equivalents and restricted cash - beginning of period |
25,351 | 13,254 | ||||||
|
|
|
|
|||||
Cash and cash equivalents and restricted cash - end of period |
$ | 37,823 | $ | 25,351 | ||||
|
|
|
|
F-40
DBR Land Holdings LLC and Subsidiaries
Notes to the Consolidated Financial Statements
1. | Organization and Nature of Operations |
DBR Land Holdings LLC (“Holdings” and, together with its subsidiaries, the “Company,” “we,” “our” and “us”) was formed in September 2021. WaterBridge NDB LLC (“WB NDB” or the “Sole Member”) is the sole member of the Company. The Company is governed by a Limited Liability Company Agreement, dated September 20, 2021 (the “LLC Agreement”).
On October 15, 2021, the Company acquired 100% of the outstanding capital stock of Hanging H Ranch, Inc. Immediately following the acquisition, Hanging H Ranch, Inc. merged with one of its wholly-owned subsidiaries and the surviving entity was named Delaware Basin Ranches Inc. (“DBR Inc.”).
On January 1, 2022, DBR REIT LLC (“DBR REIT”), a wholly-owned subsidiary of the Company and the parent company of DBR Inc., elected to be taxed as a real estate investment trust (“REIT”) under federal income tax laws. DBR REIT qualifies as a REIT under the applicable requirements of the Internal Revenue Code of 1986, as amended (“IRC”). A REIT is a pass-through entity. There is no tax imposed at the REIT level as long as the REIT complies with the applicable tax rules and avails itself of the opportunity to reduce its taxable income through distributions. A REIT must comply with a number of organizational and operational requirements, including a requirement that it must pay at least 90% of its taxable income to shareholders.
In addition, under IRC regulations, a REIT’s beneficial ownership must be held by 100 or more persons after the first taxable year that an election to be taxed as a REIT is made. Therefore, pursuant to the regulations, DBR REIT issued preferred shares to 125 persons on January 1, 2023, resulting in net proceeds of $125,000. Each preferred share represents one-one hundred twenty fifth of a 12.0% preferred share. DBR REIT has the option to redeem the preferred shares in whole or in part for cash at a redemption price of 100% of the purchase price plus all accrued and unpaid distributions, plus a redemption premium per unit in an amount based on the date fixed for redemption as follows: $100, if such date is on or before December 31, 2024, and zero (i.e., no redemption premium), if such date is after December 31, 2024. The 12.0% preferred shares pay a 12.0% annual dividend and have a liquidation value of $1,000 per share. The preferred shares were issued at par value.
The Company owns surface acreage and oil and natural gas mineral interests in the Delaware Basin across Loving, Reeves and Pecos Counties in Texas and surface acreage in Eddy County in New Mexico.
The Company generates revenues primarily from use of its surface acreage, the sale of resources from its land and oil and natural gas royalties. The use of surface acreage generally includes easements or leases and various surface use royalties. Sale of resources generally includes sales of brackish water and other surface composite materials. Our assets consist mainly of fee surface acreage, oil and natural gas mineral interest, brackish water wells and ponds and related facilities.
The Company is headquartered in Houston, Texas.
2. | Summary of Significant Accounting Policies |
Basis of Presentation and Consolidation
Our consolidated financial statements (the “Financial Statements”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). All dollar amounts in the Financial Statements and tables in the notes are stated in thousands of dollars unless otherwise indicated.
All of the Company’s subsidiaries are wholly owned, either directly or indirectly through wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. There were no variable interest entities for any periods presented herein.
F-41
DBR Land Holdings LLC and Subsidiaries
Notes to the Consolidated Financial Statements
Basic and diluted net income per common unit holder is not presented since the ownership structure of the Company is not a common unit of ownership.
Comprehensive Income
Other comprehensive income refers to all components (income, expenses, gains and losses) of comprehensive income that are excluded from net income. As of December 31, 2023 and 2022, the Company did not have any components of other comprehensive income.
Segment Information
The Company operates in a single operating and reportable segment. Accounting Standards Codification (“ASC”) Topic 280, Segment Reporting defines characteristics of operating segments as being components of an enterprise in which separate discrete financial information is available for evaluation by the chief operating decision maker in making decisions on how to allocate resources and assess performance. The Company’s chief operating decision makers are the co-chief executive officers, who allocate resources and assess performance based upon financial information at the consolidated level.
Use of Estimates
The preparation of the Financial Statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the amounts reported in the Financial Statements and accompanying notes.
The Company evaluates its estimates and related assumptions regularly, including those related to the fair value measurements of assets acquired and liabilities assumed in a business combination, the collectability of accounts receivable, the assessment of recoverability and useful lives of long-lived assets, including property, plant and equipment, intangible assets, and the valuation of share-based compensation. Changes in facts and circumstances or additional information may result in revised estimates, and actual results may differ from such estimates.
Fair Value Measurements
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Whenever available, fair value is based on or derived from observable market prices or parameters. When observable market prices or inputs are not available, unobservable prices or inputs are used to estimate the fair value. The three levels of the fair value measurement hierarchy are as follows:
• | Level 1: Quoted market prices in active markets for identical assets or liabilities. |
• | Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. |
• | Level 3: Unobservable inputs that are not corroborated by market data. |
The Company’s financial instruments consist primarily of accounts receivable and accounts payable. The carrying value of the Company’s accounts receivable and accounts payable approximate fair value due to their highly liquid nature or short-term maturity.
The Company adjusts the carrying amount of certain non-financial assets, property, plant and equipment and definite-lived intangible assets, to fair value on a non-recurring basis when they are impaired.
F-42
DBR Land Holdings LLC and Subsidiaries
Notes to the Consolidated Financial Statements
The fair value of debt is the estimated amount the Company would have to pay to transfer its debt, including any premium or discount attributable to the difference between the stated interest rate and market rate of interest at the balance sheet date. Refer to “Note 8—Debt” for additional information.
Recurring fair value measurements are performed for management incentive units, as disclosed in “Note 10—Share-Based Compensation.”
During the years ended December 31, 2023 and 2022, there were no transfers between the fair value hierarchy levels.
Cash and Cash Equivalents and Restricted Cash
The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The Company maintains cash balances that may at times exceed federally insured limits.
The Company’s restricted cash balance represents a funds held requirement with its lender equivalent to one year’s worth of principal and interest payments. Refer to Note 8—Debt for additional information.
Accounts Receivable
The Company extends credit to customers and other parties in the normal course of business. Accounts receivable consists of trade receivables recorded at the invoiced amount, plus accrued revenue that is earned but not yet billed, less an estimated allowance for doubtful accounts. Account receivables are generally due within 45 days or less. An allowance for expected credit losses is determined based upon historical write-off experience, aging of accounts receivables, current macroeconomic industry conditions and customer collectability patterns. Accounts receivable are charged against the allowance when determined to be uncollectible. When the Company recovers amounts that were previously written off, those amounts are offset against the allowance and reduce expense in the year of recovery.
As of December 31, 2023 and 2022, the Company had balances of immaterial amounts in allowance for doubtful accounts. There were immaterial amounts of write-offs and no recoveries during the years ended December 31, 2023 and 2022.
As of December 31, 2023, the Company had three customers that accounted for approximately 14%, 13% and 10% of accounts receivable, respectively. As of December 31, 2022, the Company had two customers that accounted for approximately 35% and 12% of accounts receivable, respectively.
The Company accrues oil and gas royalties for amounts not received during the period but produced based on historical production volumes and current market prices. Produced water and other surface use royalties are also accrued for during the period based on historical trends or expected activity and contract prices. These accrued amounts are both included within accounts receivable, net on the consolidated balance sheets.
Property, Plant and Equipment
Property, plant, and equipment is stated at cost or, upon acquisition, at its fair value. Expenditures for construction activities, major improvements and betterments that extend the useful life of an asset are capitalized, while expenditures for maintenance and repairs are expensed as incurred. Costs of abandoned projects are charged to operating expense upon abandonment. The cost of assets sold or disposed of, and the related accumulated depreciation are removed from the accounts in the period of sale or disposal, and the resulting gains or losses are recorded in earnings in the respective period. Refer to Note 5—Property, Plant and Equipment.
F-43
DBR Land Holdings LLC and Subsidiaries
Notes to the Consolidated Financial Statements
Depreciation is computed using the straight-line method over the estimated useful lives for each asset group, as noted below:
Water wells, pipelines, facilities, ponds and related equipment |
3 - 15 years | |||
Buildings |
30 years | |||
Vehicles, equipment, furniture and other |
3 - 5 years |
The Company follows the successful efforts method of accounting for its oil and natural gas properties acquired. Under this method, costs to acquire mineral and royalty interests in oil and natural gas properties are capitalized when incurred. Acquisitions of oil and natural gas properties are recorded at their estimated fair value as of the acquisition date.
Proved properties
Costs of proved oil and natural gas properties are depleted on a basin-wide basis utilizing the units-of-production method using total proved reserves.
Unproved properties
Costs of unproved oil and natural gas properties are not subject to depletion. These costs are transferred into costs subject to depletion on an ongoing basis as wells are completed and as proved reserves are established or confirmed.
Intangible Assets
Our intangible assets with definite useful lives include water rights and surface use agreements. The amounts are presented at the Company’s cost basis. Such intangible assets with definite lives are amortized on a straight-line basis and assume no residual value. Refer to Note 6—Intangible Assets for further information on estimated useful lives for such definite-lived intangibles.
Debt Issuance Costs
Debt issuance costs represent costs associated with long-term financing and are amortized over the term of the related debt using the effective interest method. The Company’s debt issuance costs associated with the Company’s revolving credit facility are deferred and presented within prepaid expenses and other current assets, and other assets on the consolidated balance sheets. Refer to Note 8—Debt for further information.
Deferred Offering Costs
Deferred offering costs consist of initial public offering (“IPO”) costs, related to underwriting, legal, accounting, and other expenses incurred through the balance sheet date that are directly related to the proposed offering. These costs will be offset against proceeds in the periods following the consummation of the proposed offering. As of December 31, 2023 and 2022 The Company had $3.7 million and zero of deferred offering costs recorded as non-current assets on the consolidated balance sheets.
Asset Acquisitions
We record asset acquisitions using the cost accumulation model. Under the cost accumulation model of accounting, the cost of the acquisition, including certain transaction costs, are allocated to the assets acquired using relative fair values.
F-44
DBR Land Holdings LLC and Subsidiaries
Notes to the Consolidated Financial Statements
Business Combinations
We record business combinations using the acquisition method of accounting. Under the acquisition method of accounting, identifiable assets acquired and liabilities assumed are recorded at the acquisition date fair value. The excess of the purchase price over the estimated fair value is recorded as goodwill. Changes in the estimated fair values of acquired assets and liabilities will be made, if determined within one year from the acquisition date, with an offsetting adjustment to the purchase price allocable to goodwill. Measurement period adjustments are reflected in the period in which they occur. Transaction costs associated with business combinations are expensed as incurred.
The fair value of separately identifiable intangible assets are estimated by applying an income approach. That measure is based on significant Level 3 inputs not observable in the market. Key assumptions developed based on the Company’s future projections and comparable market data include future cash flows, long-term growth rates and discount rates.
Impairment of Long-Lived Assets
Management reviews the Company’s long-lived assets, which primarily includes property, plant and equipment and definite-lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying value of the assets might not be recoverable. Assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets for purposes of assessing recoverability. Recoverability is generally determined by comparing the carrying value of the asset to the expected undiscounted future cash flows of the asset. If the carrying value of the asset is not recoverable, the amount of impairment loss is measured as the excess, if any, of the carrying value of the asset over its estimated fair value.
Proved reserves
The Company evaluates its proved oil and natural gas properties for impairment when events or changes in circumstances indicate the related carrying value may not be recoverable. This evaluation is performed on a basin-wide basis. The Company assesses the valuation of its proved oil and natural gas properties for impairment by comparing the carrying value to estimated undiscounted future net cash flows using estimated production and prices at which the Company estimates the commodity will be sold. If the carrying value exceeds undiscounted future net cash flows, the measurement of impairment is based on estimated fair value utilizing a discounted future cash flows analysis. The impairment recorded is the amount by which the carrying value exceeds the fair value. In the impairment assessment, the Company estimates the fair value of proved oil and natural gas properties using valuation techniques that convert future cash flows to a single undiscounted amount. Significant inputs and assumptions to the valuation of proved oil and natural gas properties include estimates of reserves, future production volumes, future operating and development costs, future commodity prices and a market-based weighted average cost of capital rate.
Unproved reserves
Unproved oil and natural gas properties are also evaluated periodically for impairment. Impairment is assessed when events and circumstances indicate the carrying value may not be recoverable, at which an impairment loss is recognized to the extent the carrying value exceeds the estimated recoverable value. Impairment assessment criteria includes, but is not limited to, commodity prices forecasts, macroeconomic conditions and current and future operator activity in the basin.
We did not recognize any impairment for the years ended December 31, 2023 and 2022.
F-45
DBR Land Holdings LLC and Subsidiaries
Notes to the Consolidated Financial Statements
Share-Based Compensation
The Company accounts for share-based compensation expense for incentive units granted in exchange for employee services. Our management and employees currently participate in one equity-based incentive unit plan, managed by WB NDB, the direct parent of the Company. The management incentive units consist of time-based awards of profits interests in WB NDB (the “Incentive Units”), and the Amended and Restated Limited Liability Company Agreement of WB NDB (the “WB NDB LLC Agreement”) authorizes the issuance of 10,000 Incentive Units.
The Incentive Units represent a substantive class of equity of WB NDB and are accounted for under Financial Accounting Standards Board (“FASB”) ASC Topic 718, Compensation—Stock Compensation (“ASC 718”). Features of the Incentive Units include the ability for WB NDB to repurchase Incentive Units during a 180-day option period, whereby the fair value price is determined as of the termination date, not the repurchase date, which temporarily takes away the rights and risks and rewards of ownership from the Incentive Unit holder during the option period. Under ASC 718, a feature for which the employee could bear the risks, but not gain the rewards, normally associated with equity ownership requires liability classification. WB NDB classifies the Incentive Units as liability awards. The liability related to the Incentive Units is recognized at WB NDB as the entity responsible for satisfying the obligation. Share-based compensation income or expense pushed down to the Company is recognized as a deemed non-cash contribution to or distribution from member’s equity on the consolidated balance sheets. The share-based compensation income or expense is recognized consistent with WB NDB’s classification of a liability award resulting in the initial measurement, and subsequent remeasurements, recognized ratably over the vesting period.
The Incentive Units’ value is derived from a combination of its threshold value and the total value of the incentive pool. The value of the incentive pool is determined by taking the total value returned to WB NDB’s Series A unit holders and allocating such value between the Series A unit holders and the incentive pool based on a return-on-investment waterfall included in the WB NDB LLC Agreement. The total value returned constitutes any cash or property distributed by the Company or other WB NDB subsidiary to WB NDB Series A unit holders. The total incentive pool is determined by summing the discrete Incentive Unit burden of each Series A unit holder. Value allocation within the Incentive Unit pool is impacted by Incentive Unit threshold values but the aggregate value of the incentive pool is based solely on the return-on-investment waterfall. The Incentive Unit liability is only applicable to WB NDB Series A unit holders, and subsequently, any future dilutive impact is limited to WB NDB’s indirect ownership of the Company. Any future equity investments made at the Company or other WB NDB subsidiaries are not subject to the dilution from the impact of the incentive unit pool.
Value within each Incentive Unit pool is allocated among Incentive Unit holders via a distribution waterfall. The units with the lowest threshold value within the pool will be allocated value first. Once the value of the units with the lowest threshold value reaches the next lowest threshold value, the lowest threshold value units will cease earning value. The next lowest threshold value Incentive Units then receive value until its value is equal to its own threshold value (the “Catch-Up Mechanics”). At this point, both the lowest and second lowest threshold value units have a value equal to the second lowest threshold value. Both groups of units continue to earn value until this value is equal to the third lowest threshold value, when the Catch-Up Mechanics are applied. When all Incentive Units have earned value up to the highest threshold value, all Incentive Units will earn value pro rata based on the total number of units issued thereafter.
At each reporting period, WB NDB’s Incentive Units is remeasured at their fair value, consistent with liability award accounting, using a Monte Carlo Simulation. The Monte Carlo Simulation requires judgment in developing assumptions, which involve numerous variables. These variables include, but are not limited to, the
F-46
DBR Land Holdings LLC and Subsidiaries
Notes to the Consolidated Financial Statements
expected unit price volatility over the term of the awards, the expected distribution yield and the expected life of Incentive Unit vesting. The vested portion of WB NDB’s Incentive Unit liability is allocated pro rata to the Company, and other WB NDB operating subsidiaries, as share-based compensation income or expense on the consolidated statements of operations. The allocation is based on the Company’s share of the aggregate equity value derived in WB NDB’s business enterprise valuation.
The Company updates its assumptions each reporting period based on new developments and adjusts such amounts to fair value based on revised assumptions, if applicable, over the vesting period. For the years ended December 31, 2023 and 2022, the fair values of the Incentive Units were estimated using various assumptions as discussed in “Note 10—Share-Based Compensation.” The fair value measurement is based on significant inputs not observable in the market, and thus represents Level 3 inputs within the fair value hierarchy.
The risk-free rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of each award and updated at each balance sheet date for the time period approximating the expected term of such award. The expected distribution yield is based on no previously paid distributions and no intention of paying distributions on the Incentive Units for the foreseeable future.
Due to the Company not having sufficient historical volatility, the Company uses the historical volatilities of publicly traded companies that are similar to the Company in size, stage of life cycle and financial leverage. The Company will continue to use this peer group of companies unless a situation arises within the group that would require evaluation of which publicly traded companies are included or once sufficient data is available to use the Company’s own historical volatility. For criteria dependent upon a change in control, the Company will not recognize any incremental expense until the event occurs. Differences between actual results and such estimates could have a material effect on the Financial Statements.
Revenue Recognition
Oil and gas royalties
Oil and gas royalties are received in connection with oil and natural gas mineral interests owned by the Company. Oil and gas royalties are recognized as revenue as oil and gas are produced or severed from the mineral lease. The oil and gas royalties we receive includes variable consideration that is dependent upon market prices for oil and gas, and producer specific location and contractual price differences. As a result, our oil and natural gas royalty revenues are typically constrained at the inception of the contract but will be resolved once volumes are produced and settled. Oil and gas royalty payments are typically received one to three months following the month of production. The Company accrues oil and gas royalties produced but not yet paid based on historical or estimated royalty interest production and current market prices, net of estimated location and contract pricing differentials. The difference between estimated and actual amounts received for oil and gas royalties are recorded in the period the payment is received. As of December 31, 2023 and 2022, the Company had $3.2 million and $4.8 million accrued in the oil and gas royalties line of the consolidated statements of operations, respectively.
Oil and gas royalties also includes mineral lease bonus revenues. The Company receives lease bonus revenue by leasing its mineral interests to exploration and production (“E&P”) companies. When we execute a mineral lease contract, it generally transfers the rights to any oil or gas discovered to the E&P company and grants us the right to a specified royalty interest payable on future production. Mineral lease bonuses are nonrefundable. Mineral lease bonus revenues are recognized when the agreement is executed as control is transferred and the Company has satisfied its performance obligation at that point in time.
F-47
DBR Land Holdings LLC and Subsidiaries
Notes to the Consolidated Financial Statements
Resource sales and royalties
Resource sales generally includes brackish water and other surface, composite material, such as caliche, that the Company sells to E&P companies and other customers. Resource sales revenue is generally recognized upon delivery of the brackish water or other surface material as the Company’s performance obligation has been deemed satisfied at that point in time. In certain instances, a third party other than a customer may be involved in a resource sale transaction, such as a revenue sharing agreement or brokered sale transaction. In these instances, the Company will either act as the principal or the agent in the transaction. If the Company is deemed to be acting as the principal, the revenues are reported on a gross basis in resource sales and corresponding costs reported as resource sales-related expense. If the Company is deemed to be acting as the agent, revenue is recorded net of the corresponding costs and included in the resource sales lines of the consolidated statements of operations.
The Company enters into resource royalty agreements that generate recurring resource royalty revenue. When we execute a resource royalty agreement, it generally transfers all rights to explore and produce a resource as specified in the agreement and grants us the right to a royalty on future production of that resource. Resource royalty agreements include, but are not limited to, sand, brackish water, and other resources that can be extracted from the Company’s surface estate. Resource royalty revenue includes variable consideration that is dependent upon production from those resources, which is typically constrained at the inception of the agreement but is resolved when volumes are produced and settled. Resource royalty payments are typically received one month following the month of production. The Company accrues resource royalties produced but not yet paid based on historical or estimated royalty production and contract prices. The difference between estimated and actual amounts received for royalties are recorded in the period the payment is received. As of December 31, 2023, the Company had $0.8 million accrued in resource sales and resource sales—related party, and $0.6 million accrued in resource royalties lines of the consolidated statements of operations, respectively. As of December 31, 2022, the Company had $0.3 million accrued in resource sales and resource sales—related party, and $0.5 million accrued in resource royalties lines of the consolidated statements of operations, respectively.
In certain instances, resource royalty contracts provide for a bonus payment. These bonus payments are nonrefundable. Resource royalty bonus revenues are recognized when the agreement is executed as control is transferred and the Company has satisfied its performance obligation at that point in time.
Easements and other surface-related income
Easement and other surface use agreement contracts permit operators to install pipelines, roadways, electric lines, and other equipment on land owned by the Company. When the Company executes the contract, receives payment and the contract becomes effective, we make available the respective parcel of land to the grantee. Revenue is recognized upon the execution of the agreement at the effective date as the performance obligation has been satisfied and the customer has right of use. In the event of a renewal of an existing contract, the Company recognizes the revenue upon receipt of the renewal payment and the contract becomes effective. At that point, the Company has satisfied its performance obligation and control has been transferred to the grantee. As of December 31, 2023, the Company had $1.7 million accrued in easements and other surface-related revenues and easements and other surface-related revenues related—party lines of the consolidated statements of operations. As of December 31, 2022, the Company had no accrued amounts in easements and other surface-related revenues and easements and other surface-related revenues related—party lines of the consolidated statements of operations.
Leases of the Company’s surface acreage generally include, but are not limited to, facility and surfaces leases with typical terms of five to ten years, and in some instances include provisions for renewal, and generally
F-48
DBR Land Holdings LLC and Subsidiaries
Notes to the Consolidated Financial Statements
require fixed monthly or annual payments. Advance lease payment, lease deposits and annual payments, if any, are recorded as unearned revenue and amortized over the life of the lease. For the year ended December 31, 2023 and 2022, revenue from contracts with customers accounted for under ASC Topic 842, Leases (“ASC 842”) was $0.6 million and $1.0 million, respectively.
In certain instances, these contracts may include a provision for future royalties. Royalties associated with the use of surface acreage are in included in surface use royalties below.
Surface use royalties
The Company enters into surface use royalty agreements that generate recurring surface use royalty revenue. When we execute a surface use royalty agreement, it generally transfers all rights of use of the surface acreage as specified in the agreement and grants us the right to a royalty calculated on the basis of use, which can include, but are not limited to, gross revenues or volumetric use. Surface use royalty agreements, include but are not limited to, produced water handling and throughput, produced water skim oil, waste reclamation and landfills and other surface uses. Surface use royalty revenue includes variable consideration that is dependent upon volumetric use and is typically constrained at the inception of the agreement but is resolved when volumes are produced and settled. Surface use royalty payments are typically received one month following the month of production. The Company accrues surface use royalties produced but not yet paid based on historical or estimated basis of the royalty and contract prices. The difference between estimated and actual amounts received for royalties are recorded in the period the payment is received. As of December 31, 2023, the Company had $1.5 million accrued in surface use royalties and surface use royalties—related party lines of the consolidated statements of operations. As of December 31, 2022 the Company had $0.8 million accrued in surface use royalties and surface use royalties—related party lines of the consolidated statements of operations.
Contract Liabilities
Contract liabilities primarily relates to revenue sharing arrangements or other surface use agreements where the Company may receive payments from customers in advance of the related performance obligation being satisfied. Contract liabilities are recognized as earned over time or at a point in time based on the provisions set forth in the agreement. Current and non-current contract liabilities are presented in unearned revenue and other long-term liabilities on the consolidated balance sheets, respectively.
Income Taxes
The Company is a limited liability company, and therefore has elected to be treated as a pass-through entity for federal income tax purposes. As a result, the net taxable income of the Company and any related tax credits, for federal income tax purposes, are allocated to the members and are included in their tax returns even though such net taxable income or tax credits may not have actually been distributed.
DBR REIT elected to be treated as a REIT under the IRC. As a REIT, DBR REIT will generally not be subject to corporate level federal income tax on taxable income distributed to shareholders. To be taxed as a REIT, the entity must meet a number of requirements including defined percentage tests concerning the amount of assets and revenues that came from, or are attributable to, real estate operations. As long as 90% of the taxable income of the REIT (without regard to capital gains or the dividends paid deduction) is distributed to the unit holders as dividends, the REIT will not be taxed on the portion of its income distributed as dividends unless there are ineligible transactions.
The Company is subject to Texas margin taxes. We estimate our state tax liability utilizing management estimates related to the deductibility of certain expenses and other factors.
F-49
DBR Land Holdings LLC and Subsidiaries
Notes to the Consolidated Financial Statements
The Company recognizes accrued interest and penalties related to uncertain tax positions in income tax expense in the consolidated statement of operations. As of December 31, 2023 and 2022, we did not recognize any liabilities associated with the payment for interest and penalties. Refer to Note 7—Income Taxes for additional information.
Concentrations of Risk
In the normal course of business, we maintain cash balances in excess of federally insured limits. The Company regularly monitors these institutions’ financial condition. We have not experienced any losses in our accounts and believe we are not exposed to any significant credit risk on cash or cash equivalents.
Significant Customers
In addition to the separately disclosed related parties, refer to Note 11—Related Party Transactions, customers that individually comprised more than 10% of the Company’s consolidated revenues were as follows:
Year Ended December 31, 2023 |
Year Ended December 31, 2022 |
|||||||
Customer A |
— | 12 | % | |||||
Customer B |
15 | % | 12 | % | ||||
Customer C |
14 | % | — | |||||
Customer D |
13 | % | — | |||||
Customer E |
13 | % | — |
Other Contingencies
The Company recognizes liabilities for other contingencies when there is exposure that indicates it is both probable and the amount of loss can be reasonably estimated. These types of liabilities may also arise from acquisition related transactions or other commercial agreements entered into from time to time by the Company. Refer to Note 12—Commitments and Contingencies for additional information on specific contingent liabilities.
Recent Accounting Pronouncements
We adopted ASU 2016-13, Financial Instruments—Credit Losses (Topic 326), on January 1, 2023, which changed how we account for credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The adoption of this update did not have a material impact on our consolidated balance sheets, consolidated statements of operations or consolidated statements of cash flows.
We adopted ASU 2016-02, Leases (Topic 842), and subsequent amendments thereto on January 1, 2022, with no retrospective adjustments to prior periods. The adoption of the standard had no impact on our consolidated balance sheets, consolidated statements of operations or consolidated statements of cash flows. We have elected the practical expedients to (1) carryforward prior conclusions related to lease identification and classification for existing leases, (2) combine lease and non-lease components of an arrangement for all classes of leased assets, (3) omit short-term leases with a term of 12-months or less from recognition on the balance sheet and (4) carryforward our existing accounting for land easements not previously accounted for as leases.
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280). This guidance requires a public entity, including entities with single reportable segment, to disclose significant segment expenses and other segment items on an annual and interim basis and provide in interim periods all disclosures
F-50
DBR Land Holdings LLC and Subsidiaries
Notes to the Consolidated Financial Statements
about a reportable segment’s profit or loss and assets that are currently required annually. We plan to adopt this guidance and conform with the applicable disclosures retrospectively when it becomes mandatorily effective for our annual report for the year ending December 31, 2024.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740). This guidance further enhances income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. We plan to adopt this guidance and conform with the disclosure requirements when it becomes mandatorily effective for our annual report for the year ending December 31, 2025.
3. | Additional Financial Statement Information |
Other Balance Sheet information is as follows:
December 31, 2023 |
December 31, 2022 |
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Accrued liabilities |
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Accrued professional fees |
$ | 2,521 | $ | 266 | ||||
Accrued interest |
1,547 | 251 | ||||||
Accrued operating and capital expenses |
349 | 1,425 | ||||||
Accrued property taxes |
300 | 263 | ||||||
Accrued payroll |
228 | 636 | ||||||
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Total accrued liabilities |
$ | 4,945 | $ | 2,841 | ||||
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Supplemental Cash Flow information is as follows:
Year Ended December 31, 2023 |
Year Ended December 31, 2022 |
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Supplemental cash flow information: |
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Cash paid for income taxes |
$ | 213 | $ | 8,497 | ||||
Cash paid for interest |
$ | 5,914 | $ | 3,202 | ||||
Non-cash operating, investing and financing activities: |
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Deferred offering costs |
$ | 1,997 | $ | — | ||||
Capital expenditures in accounts payable and accrued liabilities |
$ | — | $ | 899 | ||||
Insurance financing |
$ | 350 | $ | 264 | ||||
Asset financing |
$ | 251 | $ | — |
4. | Asset Acquisitions |
During 2022, the Company acquired approximately 1,500 acres of land and buildings in Texas and New Mexico for total purchase consideration of $8.2 million, of which 654 acres was acquired from an affiliate company for total purchase consideration of $2.1 million.
F-51
DBR Land Holdings LLC and Subsidiaries
Notes to the Consolidated Financial Statements
5. | Property, Plant and Equipment |
As of December 31, 2023 and 2022, property, plant and equipment, net consisted of the following:
December 31, 2023 |
December 31, 2022 |
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Oil and natural gas properties |
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Proved |
$ | 36,054 | $ | 35,647 | ||||
Unproved |
3,057 | 3,464 | ||||||
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Total oil and natural gas properties |
39,111 | 39,111 | ||||||
Land and land improvements |
157,737 | 157,490 | ||||||
Water wells, pipelines, facilities, ponds and related equipment |
15,132 | 13,258 | ||||||
Buildings, vehicles, equipment, furniture and other |
2,594 | 2,002 | ||||||
Construction in progress |
— | 626 | ||||||
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214,574 | 212,487 | |||||||
Less: accumulated depreciation and depletion |
(11,556 | ) | (5,174 | ) | ||||
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Total property, plant and equipment, net |
$ | 203,018 | $ | 207,313 | ||||
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Depreciation and depletion expense was $6.4 million and $4.4 million for the years ended December 31, 2023 and 2022, respectively.
6. | Intangible Assets |
As of December 31, 2023 and 2022, intangible assets, net of accumulated amortization consisted of the following:
December 31, 2023 |
December 31, 2022 |
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Surface use agreements |
$ | 18,619 | $ | 18,619 | ||||
Water rights |
14,956 | 14,956 | ||||||
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Subtotal |
33,575 | 33,575 | ||||||
Less: accumulated amortization |
(4,933 | ) | (2,697 | ) | ||||
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Total intangible assets, net |
$ | 28,642 | $ | 30,878 | ||||
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December 31, 2023 |
December 31, 2022 |
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Accumulated amortization |
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Surface use agreements |
$ | 2,739 | $ | 1,498 | ||||
Water rights |
2,193 | 1,199 | ||||||
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Total accumulated amortization |
$ | 4,933 | $ | 2,697 | ||||
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The Company recognized $2.2 million and $2.2 million in amortization expense for the years ended December 31, 2023 and 2022, respectively. The remaining weighted average amortization period for both surface use agreements and water rights was 12.8 years and 13.8 years as of December 31, 2023 and 2022, respectively.
F-52
DBR Land Holdings LLC and Subsidiaries
Notes to the Consolidated Financial Statements
Future amortization expense related to such intangibles for the next five years and thereafter as of December 31, 2023 is as follows:
Amortization Expense |
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2024 |
2,236 | |||
2025 |
2,236 | |||
2026 |
2,236 | |||
2027 |
2,236 | |||
2028 |
2,236 | |||
Thereafter |
17,462 | |||
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Total |
$ | 28,642 | ||
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7. | Income Taxes |
DBR REIT made an election to be taxed as a REIT, effective January 1, 2022. As a REIT, DBR REIT generally will not be subject to U.S. federal income tax to the extent it distributes qualifying dividends to its stockholders. If DBR REIT fails to qualify as a REIT in any taxable year, it will be subject to U.S. federal income tax on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for U.S. federal income tax purposes for the four taxable years following the year during which qualification is lost unless the Internal Revenue Service (“IRS”) grants DBR REIT relief under certain statutory provisions.
Due to the REIT election effective January 1, 2022, DBR REIT had no deferred tax assets and liabilities as of December 31, 2023 and 2022.
As part of its election and to comply with REIT qualifications, during 2021 DBR REIT distributed mineral interests to its parent company which was treated as a sale for federal income tax purposes. The Company paid income tax associated with this distribution during the year ended December 31, 2022, of approximately $8.2 million.
During the year ended December 31, 2022, DBR REIT distributed land to its parent company. For federal income tax purposes, this transaction was treated as a sale of built-in-gain property and the Company recognized an immaterial income tax expense. As of December 31, 2022, this liability is included within income taxes payable on the consolidated balance sheet.
The Company is subject to Texas margin taxes. The Company estimates its state tax liability utilizing management estimates related to the deductibility of certain expenses and other factors. The Company recorded $0.4 million and $0.2 million related to its Texas margin tax liability for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023 and 2022, this liability is included within income taxes payable on the consolidated balance sheets.
The Company has concluded there are no significant uncertain tax positions requiring recognition in its Financial Statements. Further, the Company has no accrued interest or penalties related to uncertain tax positions and no amounts have been recognized as of December 31, 2023 and 2022.
To its knowledge as of the date hereof, the Company is not currently under examination by the IRS or any state or local taxing authority for any tax year.
F-53
DBR Land Holdings LLC and Subsidiaries
Notes to the Consolidated Financial Statements
The open tax years for the federal tax filings are 2020 through 2023. The open tax years for the state franchise tax filings are 2019 through 2023.
8. | Debt |
As of December 31, 2023 and 2022, our debt consisted of the following:
December 31, 2023 |
December 31, 2022 |
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Term loan |
$ | 95,000 | $ | — | ||||
Revolving credit facility |
35,000 | — | ||||||
Ag loan |
— | 57,417 | ||||||
Other |
494 | 193 | ||||||
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Total debt |
130,494 | 57,610 | ||||||
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Current portion of long-term debt |
(20,339 | ) | (11,693 | ) | ||||
Unamortized debt issuance costs |
(1,812 | ) | — | |||||
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Total long-term debt |
$ | 108,343 | $ | 45,917 | ||||
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Credit Facilities
On July 3, 2023, the Company entered into (i) a four-year $100.0 million term loan (the “Term Loan”), and (ii) a four-year $50.0 million revolving credit facility (the “Revolving Credit Facility” and, together with the Term Loan, the “Credit Facilities”). At closing, the Term Loan was fully funded, and the Company borrowed $25.0 million on the Revolving Credit Facility. Proceeds from the Credit Facilities (net of $3.1 million in issuance fees to the lenders), were used to repay the $49.4 million outstanding balance under the Company’s Ag Loan, and to make a distribution of $72.9 million and will be used for future working capital needs. Upon the closing of the Credit Facilities, the Ag Loan was terminated. The Credit Facilities are each secured by a first-priority lien on substantially all assets of the Company and its subsidiaries. The Credit Facilities are also each guaranteed by the Company’s subsidiaries.
The Credit Facilities include certain affirmative and restrictive covenants common in such agreements that apply to the Company, including (i) a maximum leverage ratio as of the last day of each fiscal quarter no greater than 3.50: 1.00 for any period of four consecutive fiscal quarters ending prior to the consummation of a qualified IPO, and 4.00: 1.00 for any period of four consecutive fiscal quarters ending on or after the date of the closing of a qualified IPO (subject, in either case, to a 0.50: 1.00 leverage step-up for any “qualified acquisition” for the fiscal quarter in which such “qualified acquisition” occurs and the immediately following two fiscal quarters, subject to a cap of 0.50: 1.00 on such step-up regardless of the total number of “permitted acquisitions” and certain other limitations set forth therein), (ii) a minimum interest coverage ratio of at least 2.75 to 1.00 as of the last day of each fiscal quarter ending on or after the date of the closing of a qualified IPO, (iii) a minimum debt service coverage ratio of 1.25: 1.00, as of the last day of each fiscal quarter ending prior to the date on which a qualified IPO is consummated, and (iv) certain restrictions on the ability to incur debt, grant liens, make dispositions, make distributions, engage in transactions with affiliates, or make investments. The Company was in compliance with these covenants as of December 31, 2023.
The estimated fair value of our Credit Facilities approximates the principal amount outstanding because the interest rates are variable and reflective of market rates and the debt may be repaid, in full or in part, at any time without penalty.
F-54
DBR Land Holdings LLC and Subsidiaries
Notes to the Consolidated Financial Statements
Term Loan
The principal amount of the Term Loan accrues interest at either the Term Secured Overnight Financing Rate (“Term SOFR”) or the Base Rate, as elected by the Company. Term SOFR Loans bear interest at a rate per annum equal to Term SOFR for the applicable tenor plus 0.10% (“Adjusted Term SOFR”) plus the applicable margin, which such margin is determined by reference to the Company’s leverage ratio. Base Rate Loans bear interest at a rate per annum equal to the highest of (i) the U.S. Prime Rate, as published by the Wall Street Journal, (ii) the Federal Funds Rate plus 0.50%, and (iii) Adjusted Term SOFR for a one-month tenor plus 1.00%, in each case plus the applicable margin. Interest on all outstanding SOFR Loans shall be payable on the last day of each interest period. Interest on all outstanding Base Rate Loans shall be payable on the first day of each calendar quarter.
Debt issuance costs associated with the Term Loan consist of fees incurred to secure the financing and are amortized over the life of the loan using the effective interest method. The amortization of these costs totaled $0.3 million for the year ended December 31, 2023, which are included in interest expense, net in the consolidated statements of operations. Net debt issuance costs of $1.8 million associated with the Term Loan as of December 31, 2023, are reported as a direct deduction from the carrying amount of the related long-term debt.
For the year ended December 31, 2023, the Company incurred $4.2 million of interest expense related to the Term Loan and the related weighted average interest rate was 8.62%. The accrued interest payable related to the Term Loan was $1.2 million as of December 31, 2023.
Revolving Credit Facility
The Revolving Credit Facility provides for incremental borrowings up to the revolving commitment of $50.0 million at closing. It also includes an incremental revolving commitment that permits the Facility, subject to the increasing lenders’ willingness to participate and other customary terms and conditions, by an amount not to exceed the sum of (i) $50.0 million plus (ii) the amount of any prior repayments of the Term Loan Facility (up to $50.0 million). The Revolving Credit Facility provides availability for the issuance of letters of credit on the Company’s behalf in an aggregate amount not to exceed $5.0 million.
Principal amounts borrowed under the Revolving Credit Facility may be repaid from time to time without penalty. Any principal amounts outstanding on the maturity date, July 3, 2027, become due and payable on such date. At the Company’s election, principal amounts under the Revolving Credit Facility may be borrowed as SOFR Loans or Base Rate Loans. SOFR Loans bear interest at a rate per annum equal to Term SOFR for the applicable tenor plus 0.10% (“Adjusted Term SOFR”) plus the applicable margin, which such margin is determined by reference to the Company’s leverage ratio. Base Rate Loans bear interest at a rate per annum equal to the highest of (i) the U.S. Prime Rate, as published by the Wall Street Journal, (ii) the Federal Funds Rate plus 0.50%, and (iii)
Adjusted Term SOFR for a one-month tenor plus 1.00%, in each case plus the applicable margin, which such margin is determined by reference to the Company’s leverage ratio. Interest on all outstanding SOFR Loans shall be payable on the last day of each interest period. Interest on all outstanding Base Rate Loans shall be payable on the first day of each calendar quarter. The Company also pays a commitment fee to each lender quarterly in arrears on the daily average unused amount of the commitment of such lender under the Revolving Credit Facility. Prior to the consummation of a qualified IPO, the commitment fee is 0.5% of the aggregate undrawn commitment amount under the Revolving Credit Facility, payable to each lender in accordance with such lender’s pro rata share of such undrawn commitment amount. After the consummation of a qualified IPO, the commitment fee is at a rate determined by reference to the leverage ratio of the Company on a consolidated basis, of the aggregate undrawn commitment amount under the Revolving Credit Facility, payable to each lender in accordance with such lender’s pro rata share of such undrawn commitment.
F-55
DBR Land Holdings LLC and Subsidiaries
Notes to the Consolidated Financial Statements
Debt issuance costs associated with the Company’s Revolving Credit Facility consist of fees incurred to secure the financing and are amortized over the life of the loan using the effective interest method. The amortization of these costs totaled $0.1 million for the year ended December 31, 2023, which are included in interest expense, net in the consolidated statements of operations. Short-term debt issuance costs of $0.3 million associated with the Revolving Credit Facility as of December 31, 2023, are deferred and presented in prepaid expenses and other current assets on the consolidated balance sheets. Long-term debt issuance costs of $0.6 million associated with the Revolving Credit Facility as of December 31, 2023, are deferred and presented in other assets on the consolidated balance sheets.
For the year ended December 31, 2023, the Company incurred $1.1 million of interest expense and commitment fees related to the Revolving Credit Facility and the related weighted average interest rate was 8.65%. The accrued interest payable related to the Revolving Credit Facility was $0.3 million as of December 31, 2023.
Ag Loan
On October 14, 2021, the Company entered into a seven-year $65.0 million credit agreement (the “Ag Loan”) with Capital Farm Credit, ACA, as agent for a federal land credit association (the “Lender”). The Ag Loan was secured by a perfected first-lien security interest in substantially all assets of DBR Inc. (as successor to Hanging H Ranch, Inc.) and its subsidiaries and DBR Desert LLC, the equity interest in DBR REIT LLC (f/k/a NDB Ranch Holdings LLC) held by DBR Land LLC (f/k/a NDB Land LLC), and the equity interest in DBR Inc. held by DBR REIT LLC. The Ag Loan was also guaranteed by DBR REIT LLC, DBR Land LLC and DBR Desert LLC.
The Company was required to make scheduled monthly payments on the outstanding principal amount for the term of the Ag Loan at an annual interest rate of 5.25%, with all remaining outstanding amounts due and payable on the scheduled maturity date, October 1, 2028.
The Ag Loan included certain affirmative and restrictive covenants common in such agreements that apply to the Company and the guarantors, including a minimum fixed charge coverage ratio of 1.25:1.00 and a maximum debt to tangible net worth ratio of 0.45:1:00, in each case tested as of the end of each fiscal quarter. The Company was in compliance with these covenants as of December 31, 2022. Additionally, the Company was required to maintain a balance equal to one year’s worth of principal and interest payments in an account with Lender, or another financial institution reasonably acceptable to Lender. As of December 31, 2022, $9.2 million of restricted cash was held in an account at Lender in satisfaction of such requirement.
Beginning December 31, 2022, if as of the end of any fiscal year, the outstanding principal balance of the Ag Loan exceeded $40.0 million and the Company had excess cash flow as of the end of such fiscal year, the Company was required to make a principal reduction payment equal to the excess cash flow up to the maximum annual amount of $10.0 million. The Lender reduced such maximum annual amount to $5.0 million for the fiscal year ended December 31, 2022. Excess cash flow is defined as the amount of earnings before interest, depreciation and amortization (“EBITDA”) in excess of the amount of EBITDA required to maintain compliance with the fixed charge coverage ratio. Any amounts of excess cash flow was payable within five days of delivery of the annual financial statements, which are due 120 days after the end of each fiscal year, beginning December 31, 2022. For the fiscal year ended December 31, 2022, the Company included $5.0 million in current portion of long-term debt on the consolidated balance sheet pursuant to the terms described above.
The total amount outstanding on the Ag Loan was $57.4 million as of December 31, 2022. The accrued interest payable was $0.3 million as of December 31, 2022. The Ag Loan was terminated on July 3, 2023 in connection with the closing of the Credit Facilities.
F-56
DBR Land Holdings LLC and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022, the Company incurred $1.5 million and $3.2 million of interest expense related to the Ag Loan, respectively. The related weighted average interest rate was 5.25% for both years ended December 31, 2023 and 2022.
The fair value of the Ag Loan was estimated using quoted prices for similar liabilities in inactive markets, a Level 2 classification in the fair value hierarchy, and was based on the aggregate principal amount outstanding. As of December 31, 2022, the fair value of the Ag Loan was $40.5 million.
The following table summarizes the Company’s debt obligations as of December 31, 2023. Estimated future payments for the debt based on the amount outstanding are shown below:
As of December 31, | ||||||||||||||||||||||||
2024 | 2025 | 2026 | 2027 | 2028 | Total | |||||||||||||||||||
Term loan |
$ | 20,000 | $ | 20,000 | $ | 20,000 | $ | 35,000 | $ | — | $ | 95,000 | ||||||||||||
Revolving credit facility |
— | — | — | 35,000 | — | 35,000 | ||||||||||||||||||
Other |
339 | 84 | 71 | — | — | 494 | ||||||||||||||||||
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Total debt |
$ | 20,339 | $ | 20,084 | $ | 20,071 | $ | 70,000 | $ | — | $ | 130,494 | ||||||||||||
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9. | Member’s Equity |
As provided for in the LLC Agreement, the Sole Member holds 100% of the limited liability company interests of the Company. The Sole Member’s limited liability company interests are generally consistent with ordinary equity ownership interests.
Distributions (including liquidating distributions) are to be made to the Sole Member at a time to be determined by the board of managers of WB NDB. There are no restrictions on distributions, provided the Company is in compliance with its financial covenants as set forth under the Credit Facilities. The Sole Member’s equity account will be adjusted for distributions paid to the member and additional capital contributions that are made by the Sole Member. All revenues, costs and expenses of the Company are allocated to the Sole Member in accordance with the LLC Agreement.
10. | Share-Based Compensation |
The Company accounts for share-based compensation expense for Incentive Units granted in exchange for employee services. Our management and employees currently participate in one equity-based incentive plan, managed by WB NDB. The Incentive Units consist of time-based awards of profits interest in WB NDB, and the WB NDB LLC Agreement authorizes the issuance of 10,000 Incentive Units. As of December 31, 2023 and 2022, there were 9,992 and 5,378 Incentive Units issued and outstanding, respectively.
The Incentive Units represent a substantive class of equity of WB NDB and are accounted for under ASC 718. Features of the Incentive Units include the ability for WB NDB to repurchase Incentive Units during a 180-day option period, whereby the fair value price is determined as of the termination date, not the repurchase date, which temporarily takes away the rights and risks and rewards of ownership from the Incentive Unit holder during the option period. Under ASC 718, a feature for which the employee could bear the risks, but not gain the rewards, normally associated with equity ownership requires liability classification. WB NDB classifies the Incentive Units as liability awards. The liability related to the Incentive Units is recognized at WB NDB as this entity is the party responsible for satisfying the obligation. Share-based compensation income or expense pushed down to the Company is recognized as a deemed non-cash contribution to or distribution from member’s equity
F-57
DBR Land Holdings LLC and Subsidiaries
Notes to the Consolidated Financial Statements
in the consolidated balance sheets. The share-based compensation income or expense is recognized consistent with WB NDB’s classification of a liability award resulting in the initial measurement, and subsequent remeasurements, recognized ratably over the vesting period.
At each reporting period, WB NDB’s Incentive Unit liability is remeasured at fair value, consistent with liability award accounting, using a Monte Carlo Simulation. The Monte Carlo Simulation requires judgment in developing assumptions, which involve numerous variables. These variables include, but are not limited to, the expected unit price volatility over the term of the awards, the expected dividend yield and the expected life of Incentive Unit vesting. The vested portion of WB NDB’s Incentive Unit liability is allocated pro rata to the Company, and other WB NDB operating subsidiaries, as share-based compensation income or expense in the consolidated statements of operations. The allocation is based on the Company’s share of the aggregate equity value derived in WB NDB’s business enterprise valuation. Unvested Incentive Units are subject to accelerated vesting if there is a change in control (as defined in the award agreements). Unvested Incentive Units are also subject to accelerated vesting or forfeiture in certain circumstances as set forth in the award agreements and 1/3 of all vested Incentive Units are subject to forfeiture if an Incentive Unit holder is terminated for cause. Upon termination for any reason, WB NDB has the right to purchase all vested Incentive Units of the terminated Incentive Unit holder for a period of 180 days at the fair market value on the date the Incentive Unit holder’s employment ended. Forfeitures are accounted for upon occurrence. Forfeitures do not return equity value to the Company, rather value is returned to the Incentive Unit pool and allocated among remaining Incentive Unit holders.
All Incentive Units are subject to time-based vesting, and vest to the participant over the course of the vesting period at the fair value of the vested grants at each reporting date.
The weighted average fair value of the Incentive Units is estimated using a Monte Carlo Simulation with the following inputs:
December 31, 2023 |
December 31, 2022 |
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Estimated equity value |
$ | 811,521 | $ | 782,958 | ||||
Expected life (in years) |
2.8 | 0.8 | ||||||
Risk-free interest rate |
4.0% | 4.6% | ||||||
Dividend yield |
0% | 0% | ||||||
Volatility |
42.0% | 28.0% | ||||||
Marketability discount |
24.0% - 26.0% | 15.0% |
The number of Incentive Units granted and forfeited during the years ended December 31, 2023 and 2022 is shown in the following table:
Outstanding at January 1, 2022 |
5,452 | |||
Granted |
— | |||
Forfeited |
(74 | ) | ||
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Outstanding at December 31, 2022 |
5,378 | |||
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Granted |
4,647 | |||
Forfeited |
(33 | ) | ||
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Outstanding at December 31, 2023 |
9,992 | |||
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F-58
DBR Land Holdings LLC and Subsidiaries
Notes to the Consolidated Financial Statements
The grant date fair value of the Incentive Units granted attributable to the Company was $8.6 million as of December 31, 2023. The aggregate fair value of the Incentive Units attributable to the Company as of December 31, 2023 and 2022 was $35.9 million ($3,351 -$3,798 per unit) and $46.8 million ($8,707 per unit), respectively.
Changes in the allocated vested and unvested fair value of the Incentive Units for the years ended December 31, 2023 and 2022 were as follows:
Balance January 1, 2022 |
$ | 7,161 | ||
Remeasurements |
39,666 | |||
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Balance December 31, 2022 |
$ | 46,827 | ||
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Remeasurements |
(10,954 | ) | ||
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Balance December 31, 2023 |
$ | 35,873 | ||
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The cumulative vested value of the Incentive Units allocated to the Company was $22.9 million and $40.1 million as of December 31, 2023 and 2022, respectively. The Company recognized income of $17.2 million and expense of $36.4 million in share-based compensation during the years ended December 31, 2023 and 2022, respectively, on the statements of operations. For the year ended December 31, 2023 the remaining unrecognized compensation expense for the Incentive Units was $13.0 million and the weighted average remaining vesting period was approximately 2.5 years. For the year ended December 31, 2022 the remaining unrecognized compensation expense for the Incentive Units was $6.7 million and the weighted average remaining vesting period was approximately 0.5 years.
There were no departures resulting in accelerated vesting during 2023 or 2022.
Employee Benefit Plan
WaterBridge Management Company LLC, an affiliate of the Company, sponsors a defined contribution plan available to all eligible employees. Qualifying participants receive a matching contribution based on the amount participants contribute to the plan up to 7% of their qualifying compensation. Contributions of an immaterial amount were made during the years ended December 31, 2023 and 2022.
F-59
DBR Land Holdings LLC and Subsidiaries
Notes to the Consolidated Financial Statements
11. | Related Party Transactions |
Financial Statements Location |
December 31, 2023 |
December 31, 2022 |
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Revenues - Related Party |
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Affiliate access agreements |
Easements and other surface-related revenues | $ | 4,249 | $ | 1,752 | |||||
Affiliate access agreements |
Surface use royalties | 5,436 | 1,396 | |||||||
Affiliate access agreements |
Resource sales | 1,785 | 223 | |||||||
Accounts Receivable - Related Party |
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Affiliate access agreements |
Related party receivable | $ | 1,037 | $ | 403 | |||||
Shared services agreement |
Related party receivable | — | 21 | |||||||
Accounts Payable - Related Party |
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Shared services agreement |
Related party payable | $ | 453 | $ | 578 |
Shared Services Agreement
The Company has a services agreement with certain affiliates consisting of WB NDB, WaterBridge Holdings LLC and its subsidiaries, WaterBridge NDB Operating LLC and its subsidiaries, and Desert Environmental LLC and its subsidiaries, pursuant to which it receives common management and general, administrative, overhead, and operating services in support of the Company’s operations and development activities. The Company is required to reimburse all fees incurred by it that are necessary to perform services under the agreement. For shared services, the basis of allocation is an approximation of time spent on activities supporting the Company. For shared costs paid on behalf the Company, the costs are directly allocated to it based on its pro rata share of the expenses. For the years ended December 31, 2023 and 2022, the Company paid approximately $5 million and $5 million for the shared services and direct cost reimbursements, respectively.
Affiliate Facility Access Agreements
The Company is party to facility access and surface use agreements with certain affiliates. Under these agreements, the Company has granted the affiliates with certain rights to construct, operate and maintain water and reclamation facilities in the ordinary course of business. These agreements include a standard fee schedule and provision for specified surface use activities. The agreements also include a provision for royalties related to certain specified activities.
Equity Sponsor Services Agreement
Five Point Energy LLC (“FPE”), an affiliate of Five Point Energy Fund I LP and Five Point Energy Fund II LP and controlling member, invoices the Company, and the Company reimburses FPE in cash, for expenses associated with the Company’s use of geographic information system (“GIS”) and certain legal services provided by FPE. The reimbursement includes allocated FPE personnel costs and third-party software and hardware expenses and is determined based on the Company’s use of FPE’s total services for such period. For the years
F-60
DBR Land Holdings LLC and Subsidiaries
Notes to the Consolidated Financial Statements
ended December 31, 2023 and 2022, the GIS and legal services reimbursement totaled $0.2 million and $0.1 million, respectively. As of December 31, 2023 and 2022, the Company had an immaterial amount due to these entities.
12. | Commitments and Contingencies |
Subordination payments
In connection with the October 2021 business acquisition of Hanging H Ranch, Inc., the Company agreed to pay one of the sellers $5.0 million as additional consideration over the next ten years on each anniversary of closing, beginning with the first payment due on October 14, 2022, and in exchange for the additional consideration, such seller agreed to subordinate its rights under a grazing lease to the rights of the lender under the Ag Loan. In conjunction with the retirement of the Ag Loan, the sellers rights under the grazing lease are no longer subordinated. As of December 31, 2023, $0.5 million and $2.6 million was reflected within other current liabilities and other long-term liabilities, respectively, on the consolidated balance sheet. As of December 31, 2022, $0.5 million and $2.9 million was reflected within other current liabilities and other long-term liabilities, respectively, on the consolidated balance sheet. These amounts represent the present value of the total $5.0 million in additional consideration.
Litigation
The Company records liabilities related to litigation and other legal proceedings when they are either known or considered probable and can be reasonably estimated. Legal proceedings are inherently unpredictable and subject to significant uncertainties, and significant judgment is required to determine both probability and the estimated amount. As a result of these uncertainties, any liabilities recorded are based on the best information available at the time. As any new information becomes available, the Company reassesses the potential liability related to pending litigation. As of December 31, 2023 and 2022, the Company did not record any liabilities related to any legal matters.
13. | Subsequent Events |
The Company has evaluated subsequent events from the date of the balance sheet through December 30, 2024, the date the Financial Statements were available to be issued and determined there are no subsequent events to report outside of the below:
Acquisitions
On February 1, 2024 the Company entered into a purchase agreement to acquire a ranch from a private third-party seller, consisting of approximately 103,000 fee surface acres in the Stateline region of the Delaware Basin, together with associated surface use contracts and certain produced water and brackish water supply assets. The Company and its affiliate, WB NDB, intend to enter into a partial assignment and assumption agreement, pursuant to which the Company will assign its rights to acquire the produced water and brackish supply water assets to WB NDB prior to closing and the Company will fund $360 million upon closing to acquire the fee surface acreage and associated surface use contracts, inclusive of $26.3 million previously deposited by the Company in escrow which will be applied to the Company’s portion of the purchase price upon closing. The deposit is non-refundable as of the date of issuance of these financial statements subject to closing by the seller. The acquisition remains subject to customary closing conditions and is expected to close in the second quarter of 2024.
F-61
DBR Land Holdings LLC and Subsidiaries
Notes to the Consolidated Financial Statements
On February 22, 2024 the Company entered into a purchase agreement to acquire the Speed Ranch from a private third-party seller, consisting of approximately 34,000 fee surface acres in Lea County, New Mexico and Andrews County, Texas, for total consideration of $41.8 million, subject to certain closing adjustments. In accordance with the purchase agreement, the Company deposited approximately $2.1 million in escrow to be applied to the purchase price upon closing. The deposit is non-refundable as of the date of issuance of these financial statements subject to closing by the seller. The acquisition remains subject to customary closing conditions and is expected to close in the second quarter of 2024.
On March 18, 2024 the Company acquired approximately 11,000 acres of land from a private third-party seller in Lea County, New Mexico for total purchase consideration of $26.1 million. The Company funded the total purchase consideration with a $10.1 million draw on our existing revolving credit facility and $16.0 million of cash on hand.
On November 1, 2024, the Company acquired approximately 1,280 surface acres in Winkler County, Texas, and supply water assets and a related commercial contract from a private, third-party seller for total purchase price of $20.0 million.
On November 22, 2024, the Company acquired approximately 5,800 surface acres in Lea County, New Mexico, supply water assets and related surface use agreements from a private, third-party seller for total purchase price of $26.5 million.
On December 19, 2024, the Company acquired approximately 46,000 acres located in Reeves and Pecos Counties, Texas, and related surface use agreements from a private, third-party seller for total purchase price of $245.0 million. The Company funded the acquisition with a portion of the net proceeds from the December Private Placement described below and borrowings under our Credit Facilities.
Initial Public Offering, Private Placement and Corporate Reorganization
On July 1, 2024, LandBridge completed its initial public offering of 14,500,000 Class A shares representing limited liability company interest (“Class A shares”) at a price to the public of $17.00 per share. In addition, LandBridge granted the underwriters a 30-day option to purchase up to an additional 2,175,000 Class A shares at the public offering price, less underwriting discounts and commissions, which was exercised on July 1, 2024. In addition to the Class A shares sold in the Offering, on July 1, 2024, LandBridge sold 750,000 Class A shares at a price of $17.00 per share in the concurrent private placement to an accredited investor. The Offering, including the underwriters’ option, and the private placement closed on July 1, 2024.
The closing of the Offering, including the underwriters’ option, and the private placement resulted in net proceeds of approximately $270.9 million, after deducting underwriting discounts and commissions, placement agent fees, and $7.5 million of offering expenses payable by LandBridge (with any additional offering expenses to be paid by LandBridge out of cash on balance sheet). LandBridge contributed all of the net proceeds of the Offering, including the underwriters’ option, and the private placement in exchange for membership interests in us (“Units”) at a per-unit price equal to the per share price paid by the underwriters for LandBridge’s Class A shares in the Offering. We distributed approximately $170.9 million pro rata to our existing owners and utilized approximately $100.0 million to repay outstanding borrowings under the Credit Facilities.
F-62
DBR Land Holdings LLC and Subsidiaries
Notes to the Consolidated Financial Statements
Amended and Restated LLC Agreement
On July 1, 2024, in connection with the Offering, LandBridge Holdings and LandBridge caused the amendment and restatement of our Limited Liability Company Agreement (the “A&R LLC Agreement”). The A&R LLC Agreement includes, among other things:
(i) the conversion of all Units into a single class of Units, with 73,151,603 outstanding as of July 1, 2024, consisting of 17,425,000 Units owned by LandBridge and 55,726,603 Units owned by LandBridge Holdings and
(ii) admitted LandBridge as the sole managing member of the Company.
In accordance with the terms of the A&R LLC Agreement, the holders of our Units will, subject to certain limitations, have the right to redeem their Units (together with the cancelation of a corresponding number of Class B shares representing limited liability company interests of LandBridge) for Class A shares at an exchange ratio of one Class A share for each Unit (together with the cancelation of a corresponding number of Class B shares) exchanged, subject to conversion rate adjustments for share splits, dividends and reclassifications.
Pursuant to the A&R LLC Agreement and the Amended and Restated Limited Liability Company Agreement of LandBridge, our capital structure and the capital structure of LandBridge will generally replicate one another and will provide for customary anti-dilution mechanisms in order to maintain the one-for-one exchange ratio between the Units and Class A shares.
Management Incentive Units
On July 1, 2024, prior to the Offering, NDB LLC was divided into two Delaware limited liability companies in accordance with the plan of division: (i) NDB LLC and (ii) LandBridge Holdings. As a result of such division, LandBridge Holdings became the sole member of the Company and entered into the A&R LLC Agreement, to facilitate the Offering. As a result of the A&R LLC Agreement, holders of Incentive Units at NDB LLC also hold Incentive Units at LandBridge Holdings. In conjunction with the A&R LLC Agreements at both NDB LLC and LandBridge Holdings, the repurchase feature triggering liability award accounting was amended to require repurchase at fair value as of the repurchase date, thereby eliminating the liability award accounting, including periodic fair value remeasurement. Beginning on July 1, 2024, in accordance with the plan of division, the Incentive Units held at LandBridge Holdings will be the only Incentive Units attributable and allocated to the Company. These Incentive Units are accounted for as a modification and will transition to equity award accounting.
Amendment to Credit Facilities
On November 4, 2024, the Company entered into a credit agreement amendment (“Second Credit Agreement Amendment”) to increase the maximum available amount under our Revolving Credit Facility to $100.0 million, increase the principal amount of the Term Loan to $300.0 million, with an additional $75.0 million uncommitted delayed draw term loan, and eliminate the Company’s obligation to make Term Loan amortization payments.
December Private Placement
In December 2024, we closed the December Private Placement pursuant to which certain persons reasonably believed to be accredited investors or qualified institutional buyers purchased an aggregate 5,830,419 Class A shares from us at $60.03 per share (the “December Private Placement”). We used approximately $200.0 million of the net proceeds from the December Private Placement to partially fund the Wolf Bone Acquisition, and used approximately $150.0 million of such net proceeds, less private placement fees, to purchase 2,498,751 OpCo Units (along with the cancellation of a corresponding number of Class B shares) by LandBridge Holdings.
F-63
DBR Land Holdings LLC and Subsidiaries
Notes to the Consolidated Financial Statements
14. | Supplemental Oil and Gas Information (Unaudited) |
The Company’s oil and natural gas reserves are attributable solely to properties within the United States, specifically in the Permian Basin.
Capitalized Oil and Natural Gas Costs
Aggregate capitalized costs related to oil and natural gas production activities with applicable accumulated depletion are as follows:
December 31, 2023 |
December 31, 2022 |
|||||||
(in thousands) | ||||||||
Oil and natural gas interests: |
||||||||
Proved |
$ | 36,054 | $ | 35,647 | ||||
Unproved |
3,057 | 3,464 | ||||||
|
|
|
|
|||||
Total oil and natural gas interests |
39,111 | 39,111 | ||||||
Accumulated depletion |
(7,157 | ) | (3,107 | ) | ||||
|
|
|
|
|||||
Net oil and natural gas interests capitalized |
$ | 31,954 | $ | 36,004 | ||||
|
|
|
|
Costs Incurred in Oil and Natural Gas Activities
The Company did not incur any oil and natural gas property acquisition, exploration or development activities during the years ended December 31, 2023 and 2022.
Results of Operations from Oil and Natural Gas Producing Activities
The following table sets forth the revenues and expenses related to the production and sale of oil and natural gas activities. It does not include any interest costs or general and administrative costs and therefore, is not necessarily indicative of the net operating results of the Company’s oil and natural gas activities.
December 31, 2023 |
December 31, 2022 |
|||||||
(in thousands) | ||||||||
Oil and gas royalties |
$ | 20,743 | $ | 18,286 | ||||
Severance and ad valorem taxes |
(1,159 | ) | (1,277 | ) | ||||
Transportation, processing and other |
(86 | ) | (3 | ) | ||||
Depletion |
(4,050 | ) | (2,692 | ) | ||||
|
|
|
|
|||||
Results of operations from oil and gas producing activities |
$ | 15,448 | $ | 14,314 | ||||
|
|
|
|
The reserves at December 31, 2023 and 2022 presented below were prepared by W.D. Von Gonten & Co, whose reports as of those dates are filed as exhibits to the registration statement of which these Financial Statements are a part. Estimates of proved reserves are inherently imprecise and are continually subject to revision based on production history, price changes and other factors. The reserves are located in the Delaware Basin across Loving, Reeves and Pecos Counties in Texas.
Guidelines indicated in FASB ASC Topic 932 Extractive Industries—Oil and Gas (“ASC 932”) have been followed for computing a standardized measure of future net cash flows and changes therein related to estimated proved reserves. Future cash inflows and future production costs are determined by applying prices and costs, including quality and basis differentials, to the period-end estimated quantities of oil and natural gas to be produced in the future. The resulting future net cash flows are reduced to present value amounts by applying a ten percent annual discount factor. Future production costs are determined based on estimates of expenditures to
F-64
DBR Land Holdings LLC and Subsidiaries
Notes to the Consolidated Financial Statements
be incurred in producing the proved oil and gas reserves in place at the end of the period using period-end costs and assuming continuation of existing economic conditions.
The assumptions used to compute the standardized measure are those prescribed by the FASB and the Securities and Exchange Commission (“SEC”). These assumptions do not necessarily reflect management’s expectations of actual revenues to be derived from those reserves, nor their present value. The limitations inherent in the reserve quantity estimation process, as discussed previously, are equally applicable to the standardized measure computations since these reserve quantity estimates are the basis for the valuation process. Reserve estimates are inherently imprecise and estimates of new discoveries and undeveloped locations are more imprecise than estimates of established proved producing oil and gas properties. Accordingly, these estimates are expected to change as future information becomes available.
Analysis of Changes in Proved Reserves
The following table sets forth information regarding the Company’s net ownership interest in estimated quantities of proved developed and undeveloped oil and natural gas quantities and the changes therein for the period presented:
Oil (MBbls) |
Natural Gas (MMcf) |
Natural Gas Liquids (MBbls) |
Total (MBOE) |
|||||||||||||
Net Proved Reserves as of January 1, 2022 |
1,482 | 4,463 | 297 | 2,523 | ||||||||||||
Revisions of previous estimates(1) |
(23 | ) | (175 | ) | (14 | ) | (66 | ) | ||||||||
Extensions, discoveries and other additions(2) |
462 | 1,122 | 72 | 721 | ||||||||||||
Production |
(145 | ) | (438 | ) | (24 | ) | (242 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net Proved Reserves as of December 31, 2022 |
1,776 | 4,972 | 331 | 2,936 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Revisions of previous estimates(1) |
(80 | ) | (11 | ) | 10 | (71 | ) | |||||||||
Extensions, discoveries and other additions(2) |
225 | 967 | 71 | 457 | ||||||||||||
Production |
(225 | ) | (693 | ) | (68 | ) | (409 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net Proved Reserves as of December 31, 2023 |
1,696 | 5,235 | 344 | 2,913 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net Proved Developed Reserves |
||||||||||||||||
January 1, 2022 |
433 | 1,128 | 75 | 696 | ||||||||||||
December 31, 2022 |
622 | 1,821 | 121 | 1,047 | ||||||||||||
December 31, 2023 |
809 | 2,957 | 193 | 1,495 | ||||||||||||
Net Proved Undeveloped Reserves |
||||||||||||||||
January 1, 2022 |
1,049 | 3,335 | 222 | 1,827 | ||||||||||||
December 31, 2022 |
1,154 | 3,151 | 210 | 1,889 | ||||||||||||
December 31, 2023 |
887 | 2,278 | 151 | 1,418 |
(1) | Revisions of previous estimates include technical revisions due to changes in commodity prices, historical and projected performance and other factors. |
(2) | Extensions and other additions were from conversions of unproved reserves to proved developed reserves due to additional drilling activity. These extensions include 421 MBOE and zero MBOE that are additions to proved undeveloped reserves for 2022 and 2023, respectively. |
Changes in proved reserves that occurred during the year ended December 31, 2022 were primarily due to:
• | negative revisions of previous estimates of approximately 66 Mboe. 102 MBoe decrease was due to reclassification of three gross well locations to non-proved due to modified operator development and 69 Mboe decrease due to changes in projected performance partially offset by 105 Mboe increase due to changes in commodity prices; and |
F-65
DBR Land Holdings LLC and Subsidiaries
Notes to the Consolidated Financial Statements
• | well additions, extensions and discoveries of approximately 721 Mboe. 721 Mboe was added as proved over twenty-two gross well locations based on increased operator drilling activity. |
Changes in proved reserves that occurred during the year ended December 31, 2023 were primarily due to:
• | negative revisions of approximately 71 Mboe. 97 Mboe decrease due to changes in commodity prices offset by 26 Mboe due to changes in projected well performance; and |
• | well additions, extensions and discoveries of approximately 457 Mboe. 457 Mboe was added as proved over fourteen gross well locations based on increased operator drilling activity. |
Standardized Measure of Discounted Future Net Cash Flows
Future cash inflows represent expected revenues from production of period-end quantities of proved reserves based on the 12-month unweighted first-day-of-the-month commodity prices for the period presented. All prices are adjusted for quality, energy content and regional price differentials. Future cash inflows are computed by applying applicable prices relating to the Company’s proved reserves to the year-end quantities of those reserves.
The following table sets forth the future net cash flows related to proved oil and gas reserves based on the standardized measure prescribed in ASC 932:
December 31, 2023 |
December 31, 2022 |
|||||||
(in thousands) | ||||||||
Future cash inflows |
$ | 146,605 | $ | 197,411 | ||||
Future production costs |
(9,745 | ) | (13,174 | ) | ||||
Future income tax expense |
(1,026 | ) | (1,382 | ) | ||||
|
|
|
|
|||||
Future net cash flows (undiscounted) |
135,834 | 182,855 | ||||||
Annual discount 10% for estimated timing |
(61,055 | ) | (88,709 | ) | ||||
|
|
|
|
|||||
Total |
$ | 74,779 | $ | 94,146 | ||||
|
|
|
|
The primary sources of change in the standardized measure of discounted future net cash flows are as follows:
December 31, 2023 |
December 31, 2022 |
|||||||
(in thousands) | ||||||||
Standardized measure, beginning of period |
$ | 94,146 | $ | 54,160 | ||||
Sales, net of production costs |
(19,498 | ) | (17,006 | ) | ||||
Net changes in prices and production costs related to future production |
(20,475 | ) | 31,403 | |||||
Extensions, discoveries and improved recovery, net of future production costs |
15,419 | 19,627 | ||||||
Revisions of previous quantity estimates, net of related costs |
(1,836 | ) | (1,216 | ) | ||||
Net change in income taxes |
158 | (745 | ) | |||||
Accretion of discount |
7,169 | 5,357 | ||||||
Changes in timing and other |
(304 | ) | 2,566 | |||||
|
|
|
|
|||||
Net (decrease) increase in standardized measures |
(19,367 | ) | 39,986 | |||||
|
|
|
|
|||||
Standardized measure, end of period |
$ | 74,779 | $ | 94,146 | ||||
|
|
|
|
F-66
Weaver and Tidwell, L.L.P.
400 West Illinois Avenue, Suite 1550 | Midland, Texas 79701
Main: 432.683.5226
CPAs AND ADVISORS | WEAVER.COM
Independent Auditor’s Report
To the Owners of the
East Stateline Ranch
Report on the Audit of the Financial Statements
Opinion
We have audited the financial statements of the Land, Improvements, and Surface rights business of D.K. Boyd Land and Cattle Co., (collectively, the “East Stateline Ranch”) which comprise the balance sheets as of December 31, 2023 and 2022, and the related statements of operations, changes in net investment, and cash flows for the years then ended, and the related notes to the financial statements.
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of East Stateline Ranch as of December 31, 2023 and 2022, and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of East Stateline Ranch and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Carve-out Financial Statements
As discussed in Note 1 to the financial statements, the Company’s business is derived from the financial statements and accounting records of the seller to reflect the financial position and results of operations of the East Stateline Ranch. The financial statements of the Company reflect the assets, liabilities and expenses directly attributable to the Company, as well as allocations deemed reasonable by management, to present the financial position, results of operations, and cash flows of the Company on a stand-alone basis and do not necessarily reflect the financial position, results of operations, and cash flows of the Company in the future or what they would have been had the Company been a separate, stand-alone entity during the years presented.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
F-67
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about East Stateline Ranch’s ability to continue as a going concern for one year after the date that the financial statements are issued (or when applicable, one year after the date that the financial statements are available to be issued).
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with GAAS, we:
• | Exercise professional judgment and maintain professional skepticism throughout the audit. |
• | Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. |
• | Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of East Stateline Ranch’s internal control. Accordingly, no such opinion is expressed. |
• | Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. |
• | Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about East Stateline Ranch’s ability to continue as a going concern for a reasonable period of time. |
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
/s/ Weaver and Tidwell L.L.P.
WEAVER AND TIDWELL L.L.P.
Midland, Texas
May 28th, 2024
F-68
East Stateline Ranch
Balance Sheets
As of December 31, 2023 |
As of December 31, 2022 |
|||||||
(in thousands) | ||||||||
Assets |
||||||||
Current assets: |
||||||||
Accounts receivable, net |
$ | 1,288 | $ | 490 | ||||
Affiliate receivable |
394 | 81 | ||||||
|
|
|
|
|||||
Total current assets |
1,682 | 571 | ||||||
Plant, property, and equipment, net |
842 | 903 | ||||||
Land |
10,302 | 10,302 | ||||||
|
|
|
|
|||||
Total assets |
$ | 12,826 | $ | 11,776 | ||||
|
|
|
|
|||||
Liabilities and Net Investment |
||||||||
Current liabilities: |
||||||||
Accounts payable and accrued liabilities |
$ | 7 | $ | 12 | ||||
|
|
|
|
|||||
Total current liabilities |
7 | 12 | ||||||
Commitment and contingencies (Note 5) |
||||||||
Net investment |
12,819 | 11,764 | ||||||
|
|
|
|
|||||
Total liabilities and net investment |
$ | 12,826 | $ | 11,776 | ||||
|
|
|
|
F-69
East Stateline Ranch
Statements of Operations
For the Year Ended December 31, 2023 |
For the Year Ended December 31, 2022 |
|||||||
(in thousands) | ||||||||
Revenues: |
||||||||
Surface use royalties |
$ | 9,504 | $ | 7,451 | ||||
Easements and other surface related income |
7,773 | 9,649 | ||||||
Resource sales |
2,653 | 796 | ||||||
Other |
107 | — | ||||||
|
|
|
|
|||||
Total revenues |
20,037 | 17,896 | ||||||
Operating expenses: |
||||||||
Operating and maintenance |
231 | 175 | ||||||
Depreciation |
63 | 67 | ||||||
General and administrative |
241 | 214 | ||||||
|
|
|
|
|||||
Total operating expenses |
535 | 456 | ||||||
|
|
|
|
|||||
Operating income |
19,502 | 17,440 | ||||||
|
|
|
|
|||||
Net income |
$ | 19,502 | $ | 17,440 | ||||
|
|
|
|
F-70
East Stateline Ranch
Statements of Changes in Net Investment
Net Investment | ||||
(in thousands) | ||||
Balance – January 1, 2022 |
$ | 11,502 | ||
Change in net investment |
(17 178 | ) | ||
Net income |
17,440 | |||
|
|
|||
Balance – December 31, 2022 |
11,764 | |||
Change in net investment |
(18 447 | ) | ||
Net income |
19,502 | |||
|
|
|||
Balance – December 31, 2023 |
$ | 12,819 | ||
|
|
F-71
East Stateline Ranch
Statements of Changes in Cash Flows
For the Year Ended December 31, 2023 |
For the Year Ended December 31, 2022 |
|||||||
(in thousands) | ||||||||
Cash flows from operating activities: |
||||||||
Net income |
$ | 19,502 | $ | 17,440 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Depreciation |
63 | 67 | ||||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable, net |
(798 | ) | 8 | |||||
Affiliate receivable |
(313 | ) | (30 | ) | ||||
Accounts payable and accrued liabilities |
(7 | ) | (1 | ) | ||||
|
|
|
|
|||||
Net cash provided by operating activities |
18,447 | 17,484 | ||||||
|
|
|
|
|||||
Cash flows from investing activities: |
||||||||
Additions to plant, property, and equipment |
— | (306 | ) | |||||
|
|
|
|
|||||
Net cash used in investing activities |
— | (306 | ) | |||||
|
|
|
|
|||||
Cash flows from financing activities: |
||||||||
Change in net investment |
(18,447 | ) | (17,178 | ) | ||||
|
|
|
|
|||||
Net cash used in financing activities |
(18,447 | ) | (17,178 | ) | ||||
|
|
|
|
|||||
Net change in cash |
— | — | ||||||
Cash – Beginning of year |
— | — | ||||||
|
|
|
|
|||||
Cash – End of year |
$ | — | $ | — | ||||
|
|
|
|
F-72
East Stateline Ranch
Notes to Financial Statements
Note 1. Organization
Description of the Company
In February 2024, DBR Land LLC, a Delaware limited liability company, entered into a purchase and sale contract to acquire certain tracts or parcels of land comprising approximately 103,000 acres of land located in Loving and Winkler Counties, Texas and Lea County, New Mexico (“Land”) along with assets located on the Land (collectively, the “East Stateline Ranch”) from an individual (“Seller”) for an aggregate cash consideration of $360.0 million, before customary closing adjustments.
The East Stateline Ranch included certain ranch equipment, ranch permits, service contracts, buildings, structures, underground storage facilities, and surface agreements associated with and located on the Land.
The accompanying financial statements include the assets, liabilities, and revenues and expenses of the East Stateline Ranch.
Basis of Presentation of Financial Statements
The East Stateline Ranch financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The accompanying financial statements were prepared on a carve-out basis and were derived from the financial statements and accounting records of the Seller to reflect the financial position and results of operations of the East Stateline Ranch. The accompanying financial statements represent the financial information of a specific business segment of the Seller and exclude certain assets, liabilities, revenues, and expenses of the Seller’s other business segments. The historical costs and expenses reflected in the financial statements of the East Stateline Ranch include an allocation for certain shared general operating expenses such as repairs and maintenance, salaries, payroll taxes, and other miscellaneous general and administrative. These expenses have been allocated to the East Stateline Ranch financial statements pro-rata based upon revenues, which is considered to be a reasonable reflection of the historical utilization levels of these expenses. For further discussions on these allocations, refer to Note 6- Transactions with Affiliates.
East Stateline Ranch is dependent upon the Seller for all of its working capital as the Seller uses a centralized approach to cash management for its operations. Accordingly, none of the Seller’s cash at the centralized location have been allocated to the East Stateline Ranch’s financial statements. Net investment represents the Seller’s interest in the recorded net assets of the East Stateline Ranch. All significant transactions between the East Stateline Ranch and the Seller have been included in the accompanying financial statements. Transactions with the Seller are reflected in the accompanying Statement of Changes in Net Investment as “change in net investment” and in the accompanying Balance Sheets within “net investment.”
In the opinion of management, the accompanying financial statements include all adjustments (consisting of normal and recurring accruals) considered necessary to present fairly the East Stateline Ranch’s assets, liabilities, and net investment as of December 31, 2023 and 2022, and the reported amounts of revenues and expenses for the years ended December 31, 2023 and 2022.
Subsequent events have been evaluated through the issuance date of these financial statements. Any material subsequent events that occurred prior to such a date have been properly recognized or disclosed in the accompanying financial statements.
F-73
East Stateline Ranch
Notes to Financial Statements
Note 2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of the accompanying financial statements requires management to make estimates and assumptions to determine the reported amounts of assets, liabilities, revenue, and expenses, and in the disclosure of commitments and contingencies. Management has utilized a systematic and rational methodology to allocate certain shared general operating expenses in the accompanying statements of operations. These allocations involve estimates and assumptions regarding the proportionate utilization of shared resources by the East Stateline Ranch relative to the Seller’s historical whole operations. Although management believes these estimates are reasonable, actual results could differ from these estimates.
Accounts Receivable
The East Stateline Ranch has accounts receivable representing amounts due from various counterparties for their surface use royalty and easement payments, and these amounts are generally unsecured. The East Stateline Ranch presents accounts receivable net of an allowance for credit losses to reflect the net amount expected to be collected. Outstanding receivables are reviewed regularly for possible nonpayment indicators, and allowances for credit losses are recorded based upon management’s estimate of collectability, current conditions, and supportable forecasts at each balance sheet date. To date, the East Stateline Ranch has not experienced any pattern of credit losses, and therefore, has no allowance as of December 31, 2023 and 2022. The East Stateline Ranch will continually monitor the creditworthiness of its counterparties by reviewing credit ratings, financial statements, and payment history, as appropriate.
Accounts receivable balance was $1.3 million as of December 31, 2023 and $0.5 million as of December 31, 2022 and 2021.
Fair Value Measurements
The carrying amounts of accounts receivable and accounts payable of the East Stateline Ranch approximate their fair value due to the short-term nature of these instruments. The fair value of accounts receivable and accounts payable is determined based on the present value of expected cash flows, discounted using the applicable market interest rates for similar instruments with similar terms and credit risks.
Plant, Property, and Equipment
The East Stateline Ranch properties are stated at cost and are depreciated using straight-line method over their estimated useful lives. Gains and losses on asset sales are reflected in the year of disposal. Repair and maintenance costs associated with plant, property, and equipment are expensed as incurred if the costs do not extend the useful life of the asset. If such costs extend the useful life of the asset, the costs are capitalized and depreciated over the appropriate remaining useful life. See “Note 3—Plant, Property, and Equipment” for more disclosure.
The East Stateline Ranch properties are assessed for impairment whenever events or changes in circumstances indicate that an asset’s carrying amount may not be recoverable. An impairment is indicated if the carrying amount of a property exceeds the undiscounted future cash flows expected to result from the use and eventual disposition of the property. If an impairment is indicated, management records an impairment loss equal to the difference between the carrying value and the fair value of the property. As of December 31, 2023 and 2022, the East Stateline Ranch has not identified any indicators of impairment, and therefore, has no impairment on its plant, property, and equipment for the respective years.
F-74
East Stateline Ranch
Notes to Financial Statements
Land
Land assets are stated at cost less accumulated impairment, if any. Capitalized costs include purchase price, professional fees, and any directly attributable costs to acquire and bring the land to its intended use. Land assets are not subject to depreciation, as they are considered to have an indefinite useful life. However, the East Stateline Ranch land assets are subject for impairment assessments should there be events or changes in circumstances indicating that the carrying amount may not be recoverable. Impairment losses, if any, are recognized in the statements of operations in the period in which it occurs. As of December 31, 2023 and 2022, there were no indicators of impairment present for the East Stateline Ranch land assets.
Revenue Recognition
The East Stateline Ranch recognizes revenues from easements and surface damages, surface use royalties and resource sales in the period that its performance obligations are satisfied. Performance obligations are satisfied when the customer obtains right to use the Land, when the customer obtains control of the product, it has no further obligations to perform related to the revenue, when the transaction price has been determined, and when collectability is reasonably assured.
The company enters into surface use royalty agreements that generate recurring surface use royalty revenue. When we execute a surface use royalty agreement, it generally transfers all rights of use of the surface acreage as specified in the agreement and grants us the right to a royalty calculated on the basis of use, which can include, but are not limited to, gross revenues or volumetric use. Surface use royalty agreements, include but are not limited to, produced water handling and throughput, produced water skim oil, brackish water use and other surface uses. Surface use royalty revenue includes variable consideration that is dependent upon volumetric use and is typically constrained at the inception of the agreement but is resolved when volumes are produced and settled. Surface use royalty payments are typically received one mouth following the month of production.
Easement and other surface use agreement contracts permit operators to install pipelines, roadways, electric lines, and other equipment on land owned by the company. When the company executes the contract, receives payment and the contract becomes effective, we make available the respective parcel of land to the grantee. Revenue is recognized upon the execution of the agreement at the effective date and consideration can be reasonably measured as the performance obligation has been satisfied and the customer has right of use. The transaction price for these performance obligations is determined based on the consideration expected to be received in exchange for granting right of use. In the event of a renewal of an existing contract, the Company recognizes the revenue upon receipt of the renewal payment and the contract becomes effective. At that point, the Company has satisfied its performance obligation and control has been transferred to the grantee.
Resource sales generally includes sales of caliche, that the company sells to upstream exploration and production (“E&P”) companies and other customers. Resource sales revenue is generally recognized upon transfer of material to the customer as the company’s performance obligation has been deemed satisfied at that point in time. The performance obligations associated with resource sales revenues are identified at the inception of the contract. These obligations involve the delivery of the resources to the customer in accordance with the terms of the resource sale agreement. The consideration received for these obligations is usually a fixed price per unit of resource measurement sold. Resource sales revenues are recognized at a point in time when control of the products is transferred to the customer. Control of the product is transferred upon receipt of the resources into the customers’ loading vehicles, at which point the customer obtains the ability to direct the use and obtain the benefits from the resources obtained.
F-75
East Stateline Ranch
Notes to Financial Statements
Income Taxes
As the Seller is an individual, the East Stateline Ranch does not consolidate the tax position of the Seller within its financial statements. The East Stateline Ranch is not a taxpaying entity for purposes of federal and state income taxes, and accordingly, no income taxes have been recorded in the East Stateline Ranch financial statements.
Commitments and Contingencies
Liabilities for loss contingencies arising from claims, assessments, litigation, or other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Liabilities for environmental remediation or restoration claims resulting from allegations of improper operation of assets are recorded when it is probable that obligations have been incurred and the amounts can be reasonably estimated.
Recent Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). ASU 2016-13 requires that a financial asset measured at amortized cost be presented at the net amount expected to be collected. ASU 2016-13 is intended to provide more timely decision-useful information about the expected credit losses on financial instruments. In November 2019, the FASB ASU 2019-19, “Codification Improvements to Topic 326: Financial Instruments—Credit Losses,” which makes amendments to clarity the scope of the guidance, including clarification that receivables arising from operating leases are not within its scope. The East Stateline Ranch adopted ASU 2016-13 as of January 1, 2023, and the adoption did not have a material impact on the East Stateline Ranch’s financial statements.
Note 3. Plant, Property, and Equipment
The following table reflects the aggregate capitalized costs of the East Stateline Ranch:
December 31, 2023 |
December 31, 2022 |
|||||||
(in thousands) | ||||||||
Plant, property, and equipment: |
||||||||
Buildings and leasehold improvements |
$ | 891 | $ | 891 | ||||
Ranch equipment |
391 | 391 | ||||||
|
|
|
|
|||||
Total plant, property, and equipment |
1,282 | 1,282 | ||||||
Less: Accumulated depreciation |
(440 | ) | (379 | ) | ||||
|
|
|
|
|||||
Plant, property, and equipment, net |
$ | 842 | $ | 903 | ||||
|
|
|
|
Note 4. Supplemental Disclosures to Financial Statements
Accounts payable and accrued liabilities consisted of the following at the dates indicated:
December 31, 2023 |
December 31, 2022 |
|||||||
(in thousands) | ||||||||
Operating and maintenance expenses |
$ | 6 | $ | 11 | ||||
General and administrative accruals |
1 | 1 | ||||||
|
|
|
|
|||||
Accounts payable and accrued liabilities |
$ | 7 | $ | 12 | ||||
|
|
|
|
F-76
East Stateline Ranch
Notes to Financial Statements
Accounts Receivable
Components of accounts receivable include the following:
December 31, 2023 |
December 31, 2022 |
|||||||
(in thousands) | ||||||||
Surface use royalties |
$ | 536 | $ | 461 | ||||
Easement and other surface related income |
672 | 5 | ||||||
Resource sales |
80 | 24 | ||||||
|
|
|
|
|||||
Gross accounts receivable |
1,288 | 490 | ||||||
Allowance for credit losses |
— | — | ||||||
Accounts receivable, net |
$ | 1,288 | $ | 490 | ||||
|
|
|
|
Note 5. Commitments and Contingencies
Environmental Remediation
Various federal, state, and local laws and regulations covering the discharge of materials into the environment, or otherwise relating to the protection of the environment, may affect the operations of East Stateline Ranch. The East Stateline Ranch does not anticipate that it will be required in the near future to expend significant amounts for compliance with such federal, state, and local laws and regulations and therefore no amounts have been accrued for such purposes.
Litigation
From time to time, the East Stateline Ranch can be involved in various legal proceedings including, but not limited to, commercial disputes, property damage claims, personal injury claims, regulatory compliance matters, disputes with tax authorities and other matters. While the outcome of these legal matters cannot be predicted with certainty, in the event that these litigations occur, management does not expect them to have a material effect on the East Stateline Ranch’s financial condition, results of operations or cash flows.
Note 6. Transactions with Affiliates
The East Stateline Ranch has identified certain transactions related to produced water royalty revenues with the Seller during the periods covered by the accompanying financial statements. The aggregate produced water royalty revenues generated from these transactions amounted to $1.4 million and $0.7 million for the years ended December 31, 2023 and 2022, respectively, and are included within “surface use royalties” on the accompanying statements of operations. Amounts due from the Seller were $0.4 million and $0.1 million as of December 31, 2023 and 2022, respectively, and are separately presented on the accompanying balance sheets.
Certain costs for general operating expenses incurred by the Seller that are directly linked to the operations of the East Stateline Ranch have been allocated to the East Stateline Ranch financial statements.
F-77
East Stateline Ranch
Notes to Financial Statements
The following table presents the East Stateline Ranch allocated expenses from the Seller:
For the Year Ended December 31, 2023 |
For the Year Ended December 31, 2022 |
|||||||
(in thousands) | ||||||||
Operating and maintenance expense |
$ | 236 | $ | 344 | ||||
General and administrative |
95 | 81 | ||||||
Salaries and wages |
146 | 133 | ||||||
|
|
|
|
|||||
Total allocated operating expenses from the Seller |
$ | 477 | $ | 558 | ||||
|
|
|
|
Note 7. Concentration of Credit Risk
The East Stateline Ranch is exposed to concentration of credit risk primarily related to its surface use royalty and surface damages revenues, which are derived from various surface use contracts with external counterparties for the use of the East Stateline Ranch land surfaces. For the year ended December 31, 2023, only two counterparties accounted for more than 10% of the East Stateline Ranch total revenue. For the year ended December 31, 2022, only one counterparty accounted for more than 10% of the East Stateline Ranch total revenue. The loss of any of these counterparties could materially and adversely affect revenues in the short term. However, management believes that the loss of any of these counterparties would not have a long-term material adverse effect on the East Stateline Ranch financial statements and results of operations because substantially all of the royalty and surface damages payments are derived from the oil and natural gas activities on the Land with well established presence and markets.
Note 8. Subsequent Events
In preparing the accompanying financial statements of the East Stateline Ranch, management has evaluated all subsequent events and transactions for potential recognition or disclosure through May 28, 2024, the date the financial statements of the East Stateline Ranch were available for issuance and concluded that no such material events have occurred.
The acquisition of the East Stateline Ranch by DBR Land closed on May 10, 2024, and remained subject to customary post-close adjustments and conditions.
There were no other subsequent events that required recognition or disclosure.
F-78
East Stateline Ranch
Unaudited Condensed Balance Sheets
As of March 31, 2024 |
As of December 31, 2023 |
|||||||
(in thousands) | ||||||||
Assets |
||||||||
Current assets: |
||||||||
Accounts receivable, net |
$ | 980 | $ | 1,288 | ||||
Affiliate receivable |
131 | 394 | ||||||
|
|
|
|
|||||
Total current assets |
1,111 | 1,682 | ||||||
Plant, property, and equipment, net |
893 | 842 | ||||||
Land |
10,302 | 10,302 | ||||||
|
|
|
|
|||||
Total assets |
$ | 12,306 | $ | 12,826 | ||||
|
|
|
|
|||||
Liabilities and Net Investment |
||||||||
Current liabilities: |
||||||||
Accounts payable and accrued liabilities |
$ | 5 | $ | 7 | ||||
|
|
|
|
|||||
Total current liabilities |
5 | 7 | ||||||
Commitment and contingencies (Note 3) |
||||||||
Net investment |
12,301 | 12,819 | ||||||
|
|
|
|
|||||
Total liabilities and net investment |
$ | 12,306 | $ | 12,826 | ||||
|
|
|
|
F-79
East Stateline Ranch
Unaudited Condensed Statements of Operations
For the Three Months Ended March 31, 2024 |
For the Three Months Ended March 31, 2023 |
|||||||
(in thousands) | ||||||||
Revenues: |
||||||||
Surface use royalties |
$ | 2,633 | $ | 2,054 | ||||
Easements and other surface related income |
2,624 | 1,910 | ||||||
Resource sales |
638 | 481 | ||||||
Other |
66 | — | ||||||
|
|
|
|
|||||
Total revenues |
5,961 | 4,445 | ||||||
Operating expenses: |
||||||||
Operating and maintenance |
34 | 79 | ||||||
Depreciation |
13 | 16 | ||||||
General and administrative |
48 | 78 | ||||||
|
|
|
|
|||||
Total operating expenses |
95 | 173 | ||||||
|
|
|
|
|||||
Operating income |
5,866 | 4,272 | ||||||
|
|
|
|
|||||
Net income |
$ | 5,866 | $ | 4,272 | ||||
|
|
|
|
F-80
East Stateline Ranch
Unaudited Condensed Statements of Changes in Net Investment
Net Investment | ||||
(in thousands) | ||||
Balance – January 1, 2023 |
$ | 11,764 | ||
Change in net investment |
(4,256 | ) | ||
Net income |
4,272 | |||
|
|
|||
Balance – March 31, 2023 |
$ | 11,780 | ||
|
|
|||
Balance – January 1, 2024 |
$ | 12,819 | ||
Change in net investment |
(6,384 | ) | ||
Net income |
5,866 | |||
|
|
|||
Balance – March 31, 2024 |
$ | 12,301 | ||
|
|
F-81
East Stateline Ranch
Unaudited Condensed Statements of Cash Flows
For the Three Months Ended March 31, 2024 |
For the Three Months Ended March 31, 2023 |
|||||||
(in thousands) | ||||||||
Cash flows from operating activities: |
||||||||
Net income |
$ | 5,866 | $ | 4,272 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Depreciation |
13 | 16 | ||||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable, net |
308 | (53 | ) | |||||
Affiliate receivable |
262 | 17 | ||||||
Accounts payable and accrued liabilities |
(2 | ) | 4 | |||||
|
|
|
|
|||||
Net cash provided by operating activities |
6,447 | 4,256 | ||||||
|
|
|
|
|||||
Cash flows from investing activities: |
||||||||
Additions to plant, property, and equipment |
(63 | ) | — | |||||
|
|
|
|
|||||
Net cash used in investing activities |
(63 | ) | — | |||||
|
|
|
|
|||||
Cash flows from financing activities: |
||||||||
Change in net investment |
(6,384 | ) | (4,256 | ) | ||||
|
|
|
|
|||||
Net cash used in financing activities |
(6,384 | ) | (4,256 | ) | ||||
|
|
|
|
|||||
Net change in cash |
— | — | ||||||
Cash – Beginning of period |
— | — | ||||||
|
|
|
|
|||||
Cash – End of period |
$ | — | $ | — | ||||
|
|
|
|
F-82
East Stateline Ranch
Notes to Unaudited Condensed Financial Statements
Note 1. Organization
Description of the Company
In February 2024, DBR Land LLC (“DBR Land”), a Delaware limited liability company, entered into a purchase and sale contract to acquire certain tracts or parcels of land comprising approximately 103,000 acres of land located in Loving and Winkler Counties, Texas and Lea County, New Mexico (“Land”) along with assets located on the Land (collectively, the “East Stateline Ranch”) from an individual (“Seller”) for an aggregate cash consideration of $360.0 million before customary closing adjustments.
The East Stateline Ranch included certain ranch equipment, ranch permits, service contracts, buildings, structures, underground storage facilities, and surface agreements associated with and located on the Land.
The accompanying unaudited condensed financial statements include the assets, liabilities, and revenues and expenses of the East Stateline Ranch.
Note 2. Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The East Stateline Ranch interim unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The accompanying unaudited condensed financial statements were prepared on a carve-out basis and were derived from the financial statements and accounting records of the Seller to reflect the financial position and results of operations of the East Stateline Ranch. The accompanying unaudited condensed financial statements represent the financial information of a specific business segment of the Seller and exclude certain assets, liabilities, revenues, and expenses of the Seller’s other business segments. The historical costs and expenses reflected in the unaudited condensed financial statements of the East Stateline Ranch include an allocation for certain shared general operating expenses such as repairs and maintenance, salaries, payroll taxes, and other miscellaneous general and administrative. These expenses have been allocated to the East Stateline Ranch unaudited condensed financial statements pro-rata based upon revenues, which is considered to be a reasonable reflection of the historical utilization levels of these expenses. For further discussions on these allocations, refer to Note 4—Transactions with Affiliates.
East Stateline Ranch is dependent upon the Seller for all of its working capital as the Seller uses a centralized approach to cash management for its operations. Accordingly, none of the Seller’s cash at the centralized location have been allocated to the East Stateline Ranch’s unaudited condensed financial statements. Net investment represents the Seller’s interest in the recorded net assets of the East Stateline Ranch. All significant transactions between the East Stateline Ranch and the Seller have been included in the accompanying unaudited condensed financial statements. Transactions with the Seller are reflected in the accompanying Unaudited Statement of Changes in Net Investment as “change in net investment” and in the accompanying Unaudited Condensed Balance Sheets within “net investment.”
In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments (consisting of normal and recurring accruals) considered necessary to present fairly the East Stateline Ranch’s assets, liabilities, and net investment as of March 31, 2024 and December 31 2023, and the reported amounts of revenues and expenses for the three months ended March 31, 2024 and 2023. The results for condensed periods are not necessarily indicative of annual results. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). These unaudited condensed financial statements should be read in conjunction with the Company’s annual financial statements for the year ended December 31, 2023.
F-83
East Stateline Ranch
Notes to Unaudited Condensed Financial Statements
Revenue Recognition
The East Stateline Ranch recognizes revenues from easements and surfaces damages, surface use royalties and resource sales in the period that its performance obligations are satisfied. Performance obligations are satisfied when the customer obtains right to use the Land, when the customer obtains control of the product, it has no further obligations to perform related to the revenue, when the transaction price has been determined, and when collectability is reasonably assured.
The company enters into surface use royalty agreements that generate recurring surface use royalty revenue. When we execute a surface use royalty agreement, it generally transfers all rights of use of the surface acreage as specified in the agreement and grants us the right to a royalty calculated on the basis of use, which can include, but are not limited to, gross revenues or volumetric use. Surface use royalty agreements, include but are not limited to, produced water handling and throughput, produced water skim oil, brackish water use and other surface uses. Surface use royalty revenue includes variable consideration that is dependent upon volumetric use and is typically constrained at the inception of the agreement but is resolved when volumes are produced and settled. Surface use royalty payments are typically received one month following the month of production.
Easement and other surface use agreement contracts permit operators to install pipelines, roadways, electric lines, and other equipment on land owned by the company. When the company executes the contract, receives payment and the contract becomes effective, we make available the respective parcel of land to the grantee. Revenue is recognized upon the execution of the agreement at the effective date and consideration can be reasonably measured as the performance obligation has been satisfied and the customer has right of use. The transaction price for these performance obligations is determined based on the consideration expected to be received in exchange for granting right of use. In the event of a renewal of an existing contract, the Company recognizes the revenue upon receipt of the renewal payment and the contract becomes effective. At that point, the Company has satisfied its performance obligation and control has been transferred to the grantee.
Resource sales generally includes sales of caliche, that the company sells to upstream exploration and production (“E&P”) companies and other customers. Resource sales revenue is generally recognized upon transfer of material to the customer as the company’s performance obligation has been deemed satisfied at that point in time. The performance obligations associated with resource sales revenues are identified at the inception of the contract. These obligations involve the delivery of the resources to the customer in accordance with the terms of the resource sale agreement. The consideration received for these obligations is usually a fixed price per unit of resource measurement sold. Resource sales revenues are recognized at a point in time when control of the products is transferred to the customer. Control of the product is transferred upon receipt of the resources into the customers’ loading vehicles, at which point the customer obtains the ability to direct the use and obtain the benefits from the resources obtained.
Accounts Receivable
The East Stateline Ranch has accounts receivable representing amounts due from various counterparties for their surface use royalty and easement payments, and these amounts are generally unsecured. The East Stateline Ranch presents accounts receivable net of an allowance for credit losses to reflect the net amount expected to be collected. Outstanding receivables are reviewed regularly for possible nonpayment indicators, and allowances for credit losses are recorded based upon management’s estimate of collectability, current conditions, and supportable forecasts at each balance sheet date. To date, the East Stateline Ranch has not experienced any pattern of credit losses, and therefore, has no allowance as of March 31, 2024 and December 31, 2023. The East Stateline Ranch will continually monitor the creditworthiness of its counterparties by reviewing credit ratings, financial statements, and payment history, as appropriate.
F-84
East Stateline Ranch
Notes to Unaudited Condensed Financial Statements
Components of accounts receivable include the following:
March 31, 2024 |
December 31, 2023 |
|||||||
(in thousands) | ||||||||
Surface use royalties |
$ | 583 | $ | 536 | ||||
Easement and other surface related income |
397 | 672 | ||||||
Resource sales |
— | 80 | ||||||
|
|
|
|
|||||
Gross accounts receivable |
980 | 1,288 | ||||||
Allowance for credit losses |
— | — | ||||||
|
|
|
|
|||||
Accounts receivable, net |
$ | 980 | $ | 1,288 | ||||
|
|
|
|
Accounts Payable
Accounts payable and accrued liabilities consisted of the following at the dates indicated:
March 31, 2024 |
December 31, 2023 |
|||||||
(in thousands) | ||||||||
Operating and maintenance expenses |
$ | 2 | $ | 6 | ||||
General and administrative accruals |
3 | 1 | ||||||
|
|
|
|
|||||
Accounts payable and accrued liabilities |
$ | 5 | $ | 7 | ||||
|
|
|
|
Plant, Property, and Equipment
The East Stateline Ranch properties are stated at cost and are depreciated using straight-line method over their estimated useful lives. Gains and losses on asset sales are reflected in the year of disposal. Repair and maintenance costs associated with plant, property, and equipment are expensed as incurred if the costs do not extend the useful life of the asset. If such costs extend the useful life of the asset, the costs are capitalized and depreciated over the appropriate remaining useful life.
The East Stateline Ranch properties are assessed for impairment whenever events or changes in circumstances indicate that an asset’s carrying amount may not be recoverable. An impairment is indicated if the carrying amount of a property exceeds the undiscounted future cash flows expected to result from the use and eventual disposition of the property. If an impairment is indicated, management records an impairment loss equal to the difference between the carrying value and the fair value of the property. As of March 31, 2024 and 2023, the East Stateline Ranch has not identified any indicators of impairment, and therefore, has no impairment on its plant, property, and equipment for the respective years.
The following table reflects the aggregate capitalized costs of the East Stateline Ranch:
March 31, 2024 |
December 31, 2023 |
|||||||
(in thousands) | ||||||||
Plant, property, and equipment: |
||||||||
Buildings and leasehold improvements |
$ | 955 | $ | 891 | ||||
Ranch equipment |
391 | 391 | ||||||
|
|
|
|
|||||
Total plant, property, and equipment |
1,346 | 1,282 | ||||||
Less: Accumulated depreciation |
(453 | ) | (440 | ) | ||||
|
|
|
|
|||||
Plant, property, and equipment, net |
$ | 893 | $ | 842 | ||||
|
|
|
|
F-85
East Stateline Ranch
Notes to Unaudited Condensed Financial Statements
Note 3. Commitments and Contingencies
Environmental Remediation
Various federal, state, and local laws and regulations covering the discharge of materials into the environment, or otherwise relating to the protection of the environment, may affect the operations of East Stateline Ranch. The East Stateline Ranch does not anticipate that it will be required in the near future to expend significant amounts for compliance with such federal, state, and local laws and regulations and therefore no amounts have been accrued for such purposes.
Litigation
From time to time, the East Stateline Ranch can be involved in various legal proceedings including, but not limited to, commercial disputes, property damage claims, personal injury claims, regulatory compliance matters, disputes with tax authorities and other matters. While the outcome of these legal matters cannot be predicted with certainty, in the event that these litigations occur, management does not expect them to have a material effect on the East Stateline Ranch’s financial condition, results of operations or cash flows.
Note 4. Transactions with Affiliates
The East Stateline Ranch has identified certain transactions related to produced water royalty revenues with the Seller during the periods covered by the accompanying unaudited condensed financial statements. The aggregate produced water royalty revenues generated from these transactions amounted to $0.7 million and $0.2 million for the three months ended March 31, 2024 and 2023, respectively, and are included within “surface use royalties” on the accompanying statements of operations. Amounts due from the Seller were $0.1 million and $0.4 million as of March 31, 2024 and December 31, 2023, respectively, and are separately presented on the accompanying Unaudited Condensed Balance Sheets.
Certain costs for general operating expenses incurred by the Seller that are directly linked to the operations of the East Stateline Ranch have been allocated to the East Stateline Ranch unaudited condensed financial statements.
The following table presents the East Stateline Ranch allocated expenses from the Seller:
For the Three Months Ended March 31, 2024 |
For the Three Months Ended March 31, 2023 |
|||||||
(in thousands) | ||||||||
Operating and maintenance expense |
$ | 102 | $ | 76 | ||||
General and administrative |
9 | 42 | ||||||
Salaries and wages |
37 | 36 | ||||||
|
|
|
|
|||||
Total allocated operating expenses from the Seller |
$ | 148 | $ | 154 | ||||
|
|
|
|
Note 5. Concentration of Credit Risk
The East Stateline Ranch is exposed to concentration of credit risk primarily related to its surface use royalty and surface damages revenues, which are derived from various surface use contracts with external counterparties for the use of the East Stateline Ranch land surfaces. For the three months ended March 31, 2024 and 2023, only 3 counterparties accounted for more than 10% of the East Stateline Ranch total revenue,
F-86
East Stateline Ranch
Notes to Unaudited Condensed Financial Statements
respectively. The loss of any of these counterparties could materially and adversely affect revenues in the short term. However, management believes that the loss of any of these counterparties would not have a long-term material adverse effect on the East Stateline Ranch unaudited condensed financial statements and results of operations because substantially all of the royalty and surface damages payments are derived from the oil and natural gas activities on the Land with well established presence and markets.
Note 6. Subsequent Events
In preparing the accompanying unaudited condensed financial statements of the East Stateline Ranch, management has evaluated all subsequent events and transactions for potential recognition or disclosure through May 28, 2024, the date the unaudited condensed financial statements of the East Stateline Ranch were available for issuance.
The acquisition of the East Stateline Ranch by DBR Land closed on May 10, 2024, and remained subject to customary post-close adjustments and conditions. There were no other subsequent events that required recognition or disclosure.
F-87
KPMG LLP
811 Main Street
Houston, TX 77002
Independent Auditors’ Report
The Owners of
Wolf Bone Ranch Partners LLC:
Opinion
We have audited the financial statements of Wolf Bone Ranch Partners LLC (the Company), which comprise the balance sheet as of September 30, 2024, and the related statements of income, changes in net investment, and cash flows for the nine-months then ended, and the related notes to the financial statements.
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2024, and the results of its operations and its cash flows for the nine-months then ended in accordance with U.S. generally accepted accounting principles.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Emphasis of Matter
As discussed in Note 2 to the financial statements, the Company’s business is derived from the financial statements and accounting records of VTX Energy Partners, LLC to reflect the financial position and results of operations of the Company. The financial statements of the Company reflect the assets, liabilities and expenses directly attributable to the Company, as well as allocations deemed reasonable by management, to present the financial position, results of operations, and cash flows of the Company on a stand-alone basis and do not necessarily reflect the financial position, results of operations, and cash flows of the Company in the future or what they would have been had the Company been a separate, stand-alone entity during the period presented. Our opinion is not modified with respect to this matter.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with U.S. generally accepted accounting principles, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date that the financial statements are issued.
KPMG LLP, a Delaware limited liability partnership and a member firm of
the KPMG global organization of independent member firms affiliated with
KPMG International Limited, a private English company limited by guarantee.
F-88
Auditors’ Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with GAAS, we:
• | Exercise professional judgment and maintain professional skepticism throughout the audit. |
• | Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. |
• | Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, no such opinion is expressed. |
• | Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. |
• | Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time. |
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.
/s/ KPMG LLP |
Houston, Texas |
December 11, 2024 |
F-89
WOLF BONE RANCH PARTNERS, LLC
Balance Sheet
September 30, 2024
(In thousands)
Current assets: |
||||
Cash and cash equivalents |
$ | 340 | ||
Accounts receivable: |
||||
Trade accounts receivable |
738 | |||
Due from affiliates |
— | |||
|
|
|||
Total current assets |
1,078 | |||
|
|
|||
Field and other property and equipment, at cost |
92,317 | |||
Less: accumulated depreciation, depletion, and amortization |
(3,978 | ) | ||
|
|
|||
Property and equipment, net |
88,339 | |||
|
|
|||
Total assets |
$ | 89,417 | ||
|
|
|||
Current liabilities: |
||||
Accrued expenses and other current liabilities |
$ | 372 | ||
Due to affiliates |
— | |||
|
|
|||
Total current liabilities |
372 | |||
Contract liabilities |
4,675 | |||
Asset retirement obligation |
49 | |||
|
|
|||
Total liabilities |
5,097 | |||
|
|
|||
Members’ equity |
— | |||
Net investment |
84,320 | |||
Retained earnings |
— | |||
|
|
|||
Total members’ equity |
84,320 | |||
|
|
|||
Total liabilities and net investment |
$ | 89,417 | ||
|
|
See accompanying notes to financial statements.
F-90
WOLF BONE RANCH PARTNERS, LLC
Income Statement
Nine months ended September 30, 2024
(In thousands)
Revenues: |
||||
Saltwater disposal royalties |
$ | 12,196 | ||
Right of way |
1,972 | |||
Sale of freshwater |
10,250 | |||
|
|
|||
Total revenues |
24,418 | |||
|
|
|||
Costs and expenses: |
||||
Lease operating expenses |
1,325 | |||
Workover expenses |
375 | |||
Depreciation, depletion, and amortization |
1,884 | |||
Accretion of asset retirement obligations |
2 | |||
General and administrative expenses |
404 | |||
Taxes other than on earnings |
25 | |||
|
|
|||
Total costs and expenses |
4,016 | |||
|
|
|||
Net income |
$ | 20,402 | ||
|
|
See accompanying notes to financial statements.
F-91
WOLF BONE RANCH PARTNERS, LLC
Statement of Changes in Net Investment
September 30, 2024
(In thousands)
Net Investment | ||||
Balance – December 31, 2023 |
$ | 89,071 | ||
Change in net investment |
(25,153 | ) | ||
Net income |
20,402 | |||
|
|
|||
Balance – September 30, 2024 |
$ | 84,320 | ||
|
|
See accompanying notes to financial statements.
F-92
WOLF BONE RANCH PARTNERS, LLC
Statement of Cash Flows
Nine months ended September 30, 2024
(In thousands)
Operating activities: |
||||
Net income |
$ | 20,402 | ||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||
Depletion, depreciation, and amortization |
1,884 | |||
Accretion of asset retirement obligations |
2 | |||
Changes in operating assets and liabilities: |
||||
Accounts receivable |
(107 | ) | ||
Accounts payable |
9 | |||
Accrued liabilities |
346 | |||
Other liabilities |
(356 | ) | ||
|
|
|||
Net cash used provided by operating activities |
22,181 | |||
|
|
|||
Investing activities: |
||||
Purchases of equipment |
(68 | ) | ||
|
|
|||
Net cash used in investing activities |
(68 | ) | ||
|
|
|||
Financing activities: |
||||
Change in net investment |
(25,153 | ) | ||
|
|
|||
Net cash used in financing activities |
(25,153 | ) | ||
|
|
|||
Net decrease in cash and cash equivalents |
(3,040 | ) | ||
Cash and cash equivalents at beginning of period |
3,380 | |||
|
|
|||
Cash and cash equivalents at end of period |
$ | 340 | ||
|
|
|||
Supplemental disclosure of noncash activity: |
||||
Cash paid for interest |
— | |||
Accrued capital expenditures |
— |
See accompanying notes to financial statements.
F-93
WOLF BONE RANCH PARTNERS LLC
Notes to Financial Statements
September 30, 2024
(In thousands)
(1) | Organization and Business |
Wolf Bone Ranch Partners LLC (WBR or the Company) was incorporated in the State of Texas on September 14, 2010, to produce fresh water for sale to entities engaged in the development of onshore domestic oil and natural gas properties, primarily within the Permian Basin. WBR also earns revenue from royalties from produced water volumes transported on WBR’s surface locations and from other surface use activities related to oil and gas operations conducted on properties owned by the Company.
WBR is a wholly owned subsidiary of WBRP Holdings Sub Parent, LLC which is wholly owned by Delaware Basin Investment Group Intermediate, LLC (DBIG). VTX Energy Partners, LLC (VTX) entered into a Membership Interest Purchase Agreement with DBIG on January 13, 2023, to acquire 100% of the membership interests of DBIG, which also wholly owns a number of affiliated oil and gas companies. The transaction closed on March 14, 2023.
(2) | Summary of Significant Accounting Policies and Basis of Presentation |
Accounting policies used by WBR reflect industry practices and conform to accounting principles generally accepted in the U.S. (GAAP). The accompanying financial statements were prepared on a carve-out basis and were derived from the financial statements and accounting records of VTX to reflect the financial position and results of operations of WBR. The accompanying financial statements represent the financial information of a specific entity of VTX and exclude certain assets, liabilities, revenues and expenses of VTX’s other businesses. The historical costs and expenses reflected in the financial statements of WBR include an allocation for certain shared general and administrative expenses. These expenses have been allocated to the WBR financial statements pro-rata based upon revenues, which is considered to be a reasonable reflection of the historical utilization levels of these expenses. For further discussion on these allocations, refer to Note 6, Related Party Transactions. Results of operations presented are for the nine-month period ended September 30, 2024, and are not necessarily indicative of the results of operations for the year ending December 31, 2024.
WBR is dependent upon VTX for all of its working capital as VTX uses a centralized approach to cash management for its operations. Accordingly, none of VTX’s cash at the centralized location has been allocated to the WBR financial statements. Net investment represents VTX’s interest in the recorded net assets of WBR. All significant transactions between WBR and VTX have been included in the accompanying financial statements. Transactions with VTX are reflected in the accompanying Statement of Changes in Net Investment as “change in net investment” and in the accompanying Balance Sheet within “net investment”. Significant accounting policies are discussed below.
(a) Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make use of estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We use historical experience and various other assumptions and information that are believed to be reasonable under the circumstances in developing our estimates and judgments. Estimates and assumptions about future events and their effects cannot be predicted with certainty and, accordingly, these estimates may change as new events occur, as more experience is acquired, as additional information is obtained and as our operating environment changes. While we believe that the estimates and assumptions used in the preparation of the financial statements are appropriate, actual results may differ from these estimates. Changes in estimates are recorded prospectively. Significant assumptions are required in the estimation of asset retirement
F-94
WOLF BONE RANCH PARTNERS LLC
Notes to Financial Statements (Continued)
obligations (AROs) and in the allocation of certain shared general and administrative expenses. It is possible these estimates could be revised at future dates and these revisions could be material.
(b) Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The Company maintains bank accounts at a financial institution in the United States.
(c) Accounts Receivable
Receivables consist of receivables from the sale of fresh water, surface royalties from the disposal of produced saltwater and surface use contracts.
(d) Concentration of Credit Risk and Significant Customers
Financial instruments which potentially subject the Company to concentrations of credit risk consist of cash and accounts receivable. Cash and cash equivalents are maintained in bank deposit accounts which, at times, may exceed the federally insured limits. Management periodically reviews and assesses the financial conditions of the banks to mitigate the risk of loss.
Accounts receivable is concentrated among operators and purchasers engaged in the energy industry within the United States. WBR periodically assesses the financial condition of these entities and institutions and considers any possible credit risk to be minimal. Management does not believe that the loss of any customer would have a long-term material adverse effect on the Company’s financial position or the results of operations due to the remaining useful life of the oil and gas fields adjacent to WBR’s assets. No reserve for credit losses was recorded at September 30, 2024.
(e) Property and Equipment
The Company has property and equipment that consists principally of land, freshwater wells, water mineral rights, and buildings. Land is recorded at cost and not depreciated. Fresh water wells are recorded at cost and depreciated on a straight-line basis over the estimated useful lives of approximately five years. Water minerals are recorded at their reserve value and depleted using the units of production method. The building is recorded at cost and depreciated on a straight-line basis over the estimated useful life of thirty years. The cost of maintenance and repairs are expensed in the period incurred. Expenditures that extend the life or improve existing property and equipment are capitalized.
Property and equipment are reviewed for impairment when events and circumstances indicate a possible decline in the recoverability of the carrying amount of such property. When a triggering event is identified, we compare the carrying amount of the property to the estimated undiscounted cash flows our property and equipment will generate to determine if the carrying amount is recoverable. We perform this analysis on the aggregate value of all assets of a similar type. If the carrying amount exceeds the estimated undiscounted cash flows, we will write down the carrying amount of the asset to fair value. The factors used to determine fair value include, but are not limited to, estimates of future revenues, future production estimates, and discount rates commensurate with the risk associated with realizing the projected cash flows.
As a result of our annual impairment test, we determined that there were no triggering events requiring the evaluation of the recoverability of property and equipment. We did not incur any impairment expense during the nine-month period ended September 30, 2024.
F-95
WOLF BONE RANCH PARTNERS LLC
Notes to Financial Statements (Continued)
(f) Leases
We record a net operating lease right-of-use (ROU) asset and operating lease liability on the balance sheet for all operating leases with a lease term in excess of 12 months. No ROU assets were recorded as of September 30, 2024.
(g) Income Taxes
The Company is organized as a Texas Limited Liability Company which is disregarded for federal income tax purposes. As a result, the net taxable income of the Company and any related tax credits are reported by the members and are included in their tax returns even though such net taxable income or tax credits may not have actually been distributed. Accordingly, no federal tax provision has been recorded in the Company’s financial statements. The Company is subject to Texas margin tax based on revenue generated from operations within the state. The Company did not record a deferred tax asset or liability related to the Texas margin tax as of September 30, 2024, as the amount was immaterial.
(h) Asset Retirement Obligation
The Company applies the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 410-20, Asset Retirement and Environmental Obligations—Asset Retirement Obligations, to account for estimated future abandonment costs. ASC 410-20 requires legal obligations associated with the retirement of long-lived assets to be recognized at their estimated fair value at the time that the obligations are incurred. Upon initial recognition of a liability, that cost is capitalized as part of the related long-lived asset and allocated to expense over the useful life of the asset. WBR’s asset retirement obligations primarily represent the present value of the estimated amount the Company will incur to abandon and remediate a water pipeline at the end of its productive life, in accordance with applicable state laws.
(i) Revenue Recognition
Operating Revenues
We hold operated working interests in freshwater assets and in land. We are responsible for the day-to-day management of these assets and the operation as well as negotiations required for transportation and gathering.
We sell fresh water from various centralized facilities and collect revenues based on contractual prices with related parties as well as third parties. We collect saltwater disposal royalties from the saltwater volumes that are transported on our surface for disposal by third parties and by one of our affiliates. We collect revenues from surface use agreements for various utilization of our surface by affiliates and by third parties based on contractual prices.
Performance Obligations
Under product sales contracts and contracts for saltwater disposal royalties, each unit of production generally represents a separate performance obligation. We record revenue for our product sales contracts at the point-in-time control of a product is transferred to the customer. We record revenue for our saltwater disposal royalties at the point-in-time the disposal of saltwater volumes are completed.
Under surface use contracts, payments are received by WBR from third parties at the inception of the contractual period. We record revenue ratably over the period of time agreed upon in the respective surface use contracts. Revenue recognized is included in the Income Statement in revenues from Right of Way. Future revenues to be recognized are shown on the balance sheet as contract liabilities.
F-96
WOLF BONE RANCH PARTNERS LLC
Notes to Financial Statements (Continued)
At the end of the reporting period, we did not have any unsatisfied performance obligations. Our contracts with customers do not typically include variable consideration and thus our contracts with customers do not require us to constrain variable consideration for accounting purposes.
Revenue is recognized to the extent it is determined that it is probable that a significant reversal will not occur. We record the differences between our revenue estimates and the actual amounts received in the month that payment is received.
(j) Contingencies
Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. Recoveries of environmental remediation costs from third parties that are probable of realization are separately recorded as assets and are not offset against the related environmental liability.
Accruals for estimated losses from environmental remediation obligations generally are recognized no later than completion of the remedial feasibility study. Such accruals are adjusted as further information develops or circumstances change. Costs of expected future expenditures for environment remediation obligations are not discounted to their present value.
(k) Recently Issued Accounting Standards
There are no recently issued accounting standards that the Company has not adopted yet and would be applicable to us.
(3) | Property and Equipment |
The following table summarizes facilities, infrastructure and other property, plant, and equipment as of September 30, 2024:
As of September 30, 2024 |
||||||||
(years) | (in thousands) | |||||||
Freshwater wells |
5 | 12,446 | ||||||
Land |
— | 37,336 | ||||||
Water mineral rights |
— | 41,684 | ||||||
Office Buildings |
30 | 851 | ||||||
|
|
|||||||
Field and other property and equipment, at cost |
92,317 | |||||||
|
|
|||||||
Less: accumulated depreciation, amortization and impairment |
(3,978 | ) | ||||||
|
|
|||||||
Field and other property and equipment, net |
$ | 88,339 | ||||||
|
|
(4) | Asset Retirement Obligations |
The Company records the fair value of a liability for an asset retirement obligation in the period in which it is incurred, along with a corresponding increase in the carrying amount of the related long-lived asset. The
F-97
WOLF BONE RANCH PARTNERS LLC
Notes to Financial Statements (Continued)
following table summarizes the activities of the Company’s asset retirement obligations for the period ended September 30, 2024:
As of September 30, 2024 |
||||
(in thousands) | ||||
Balance at beginning of period |
$ | 47 | ||
Additions |
— | |||
Acquisitions |
— | |||
Retirements |
— | |||
Accretion expense |
2 | |||
Revisions |
— | |||
|
|
|||
Balance at end of period |
49 | |||
Less: current portion |
— | |||
|
|
|||
Balance at end of period, noncurrent portion |
$ | 49 | ||
|
|
No settlements of asset retirement obligations occurred during the period ended September 30, 2024.
(5) | Commitments and Contingencies |
The Company may, from time to time, be a party to certain lawsuits and claims arising in the ordinary course of business. The outcome of such lawsuits and claims cannot be estimated with certainty and management may not be able to estimate the range of possible losses. The Company records reserves for contingencies when information available indicates that a loss is probable, and the amount of the loss can be reasonably estimated. The Company was not involved in any litigation, claims, or other legal proceedings at September 30, 2024, and as such, there are no liabilities recorded at September 30, 2024 related to loss contingencies.
(6) | Related-Party Transactions |
The Company has related party transactions with affiliated entities. These transactions are for revenues from the sale of freshwater, royalties related to disposal of produced water and surface use agreement revenues. The value of these related party revenues are summarized below for the nine-month period ended September 30, 2024.
For the nine-month period ended September 30, 2024 |
||||
(in thousands) | ||||
Saltwater disposal royalties |
$ | 11,562 | ||
Right of way |
674 | |||
Sale of freshwater |
8,776 | |||
|
|
|||
$ | 21,012 | |||
|
|
The Company is party to a management services agreement with VTX Energy Operating, LLC, a related party, and other affiliates. Pursuant to the agreement, as of March 14, 2023, the Company receives common management in addition to general and administrative services to support of the Company’s operations. The Company does not pay a fee for services provided to the Company under the agreement. However, general and
F-98
WOLF BONE RANCH PARTNERS LLC
Notes to Financial Statements (Continued)
administrative costs are allocated to the Company based on its pro-rata share of consolidated revenues. For the nine-month period ended September 30, 2024, the Company was allocated $404 thousand of general and administrative expenses.
(7) | Subsequent Events |
In preparing the accompanying financial statements, management has evaluated all subsequent events and transactions for potential recognition or disclosure through December 11, 2024, the date the financial statements were available for issuance.
On November 18, 2024, the Company entered into a purchase and sale agreement with DBR Land LLC for the sale of certain tracts or parcels of land consisting of approximately 46,000 acres, and associated surface use agreements, located in Reeves and Pecos Counties, Texas for an aggregate purchase price of $245.0 million, subject to customary closing conditions. The sale excludes certain assets and liabilities primarily consisting of cash, buildings and the freshwater wells and infrastructure and associated liabilities.
There were no other subsequent events that required recognition or disclosure.
F-99
PROSPECTUS
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. | Other Expenses of Issuance and Distribution. |
The following table sets forth an itemized statement of the amounts of all expenses expected to be incurred by us in connection with the registration of the Class A shares offered and registered hereby. With the exception of the SEC registration fee, the amounts set forth below are estimates.
SEC registration fee |
$ | 516,830.51 | ||
Accounting fees and expenses |
$ | 70,000.00 | ||
Legal fees and expenses |
$ | 300,000.00 | ||
Miscellaneous |
$ | 150,000.00 | ||
|
|
|||
Total |
$ | 1,036,830.51 | ||
|
|
Item 14. | Indemnification of Directors and Officers. |
Our Operating Agreement provides that to the fullest extent permitted by applicable law, our directors or officers will not be liable to us. Our Operating Agreement also provides that we must indemnify our directors and officers for acts and omissions to the fullest extent permitted by law. We are also expressly authorized to advance certain expenses (including attorneys’ fees and disbursements and court costs) to our directors and officers and carry directors’ and officers’ insurance providing indemnification for our directors and officers for some liabilities.
We have entered into separate indemnification agreements with each of our directors and executive officers. Each indemnification agreement provides, among other things, for indemnification to the fullest extent permitted by law against liabilities, that may arise by reason of such director’s or executive officer’s service to us. The indemnification agreements provide for the advancement or payment of all expenses to the indemnitee, subject to certain exceptions. We intend to enter into indemnification agreements with our future directors and/or executive officers.
We have purchased, and will maintain, customary insurance covering our officers and directors against various liabilities asserted, including certain liabilities arising under the Securities Act and the Exchange Act, and expenses incurred in connection with their activities and capacity as our officers and directors or any of our direct or indirect subsidiaries.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
Item 15. | Recent Sales of Unregistered Securities. |
Initial Public Offering and Corporate Reorganization
On September 27, 2023, in connection with the formation of LandBridge Company LLC, we issued a 100.0% limited liability company interest in us to NDB LLC. The issuance was exempt from registration under Section 4(a)(2) of the Securities Act. These shares were cancelled in connection with the Corporate Reorganization. There have been no other sales of unregistered securities within the past three years.
In connection with the Corporate Reorganization that was completed in connection with the IPO, we issued 57,500,000 Class B shares, representing, at such time, an aggregate 79.9% non-economic limited liability
II-1
company interest in us, to LandBridge Holdings. Such issuance did not involve any underwriters, underwriting discounts or commissions or a public offering, and such issuance was exempt from registration requirements pursuant to Section 4(a)(2) of the Securities Act.
IPO Concurrent Private Placement
On June 27, 2024, we entered into a common share purchase agreement with an accredited investor pursuant to which such investor purchased 750,000 Class A shares at price of $17.00 per Class A share in a private placement that closed concurrently with the IPO resulting in net proceeds of approximately $12.5 million after deducting fees to the placement agent and other expenses payable by the Company in connection with the IPO Concurrent Private Placement. Goldman Sachs & Co. LLC served as placement agent in connection with the IPO Concurrent Private Placement. After deducting underwriting discounts and commissions, we received net proceeds of approximately $270.9 million from the IPO and the IPO Concurrent Private Placement. We contributed all of the net proceeds from the IPO Concurrent Private Placement to OpCo in exchange for OpCo Units, and OpCo used such net proceeds, together with net proceeds from the IPO and the exercise of the underwriters’ over-allotment option, to repay outstanding indebtedness and make a distribution to existing unitholders. The Class A shares issued in connection with the IPO Concurrent Private Placement were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act. The accredited investor is an accredited investor for purposes of Rule 501 of Regulation D.
December Private Placement
On November 18, 2024, we entered into common share purchase agreements with certain accredited investors pursuant to which such investors purchased an aggregate 5,830,419 Class A shares from us at $60.03 per share in a private placement that closed on December 19, 2024, resulting in net proceeds of approximately $338.4 million after deducting fees to the placement agent and other expenses payable by the Company in connection with the December Private Placement. We used approximately $200.0 million of the net proceeds from the December Private Placement to partially fund the Wolf Bone Acquisition, and used approximately $150.0 million of such net proceeds, less private placement fees, to purchase 2,498,751 OpCo Units (along with the cancellation of a corresponding number of Class B shares) from by LandBridge Holdings. The Class A shares issued in connection with the December Private Placement were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act. Each accredited investor is an accredited investor for purposes of Rule 501 of Regulation D.
Item 16. | Exhibits and Financial Statement Schedules. |
(a) | Exhibits |
The following documents are filed as exhibits to this registration statement:
Exhibit Number | Description | |
2.1# | Purchase and Sale Agreement, dated as of November 18, 2024, by and between Wolf Bone Ranch Partners LLC, as seller, and DBR Land LLC, as purchaser (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K (File No. 001-42150) filed with the SEC on November 22, 2024). | |
3.1 | Certificate of Formation of LandBridge Company LLC (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1 (File No. 333-279893) filed with the SEC on May 31, 2024). | |
3.2 | First Amended and Restated Limited Liability Company Agreement of LandBridge Company LLC (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K (File No. 001-42150) filed with the SEC on July 3, 2024). |
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Exhibit Number | Description | |
4.1 | Registration Rights Agreement, dated as of July 1, 2024, by and among LandBridge Company LLC and LandBridge Holdings LLC (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K (File No. 001-42150) filed with the SEC on July 3, 2024). | |
4.2 | Registration Rights Agreement, dated as of December 19, 2024, by and among LandBridge Company LLC and each of the other signatories thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 001-42150) filed with the SEC on December 23, 2024). | |
*5.1 | Opinion of Vinson & Elkins L.L.P. as to the legality of the securities being registered. | |
10.1† | LandBridge Company LLC Long Term Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 001-42150) filed with the SEC on July 3, 2024). | |
10.2† | Form of Restricted Share Unit Award Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 001-42150) filed with the SEC on July 16, 2024). | |
10.3 | DBR Land Holdings LLC Amended and Restated Limited Liability Company Agreement (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K (File No. 001-42150) filed with the SEC on July 3, 2024). | |
10.4 | Amendment No. 1 to Amended and Restated Limited Liability Company Agreement of DBR Land Holdings LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 001-42150) filed with the SEC on October 4, 2024). | |
10.5† | Form of Indemnification Agreement (incorporated by reference to Exhibit 10.3 to the Company’s Registration Statement on Form S-1 (File No. 333-279893) filed with the SEC on June 7, 2024. | |
10.6 | Shareholder’s Agreement (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K (File No. 001-42150), as amended, filed with the SEC on July 3, 2024). | |
10.7 | Master Reorganization Agreement (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K (File No. 001-42150), as amended, filed with the SEC on July 3, 2024). | |
10.8 | Amended and Restated Services Agreement, dated effective February 27, 2019, by and among WaterBridge Resources LLC, WaterBridge Management Company LLC, WaterBridge Co-invest LLC, WaterBridge Holdings LLC, each of the entities listed on Schedule I thereto, each of the entities listed on Schedule II thereto and each of the entities listed on Schedule III thereto (incorporated by reference to Exhibit 10.6 to the Company’s Registration Statement on Form S-1 (File No. 333-279893) filed with the SEC on May 31, 2024). | |
10.9 | Credit Agreement, dated as of July 3, 2023, by and between DBR Land LLC, as borrower, the guarantors from time to time party thereto, Texas Capital Bank, as administrative agent and letter of credit issuer, and the lenders from time to time party thereto (incorporated by reference to Exhibit 10.7 to the Company’s Registration Statement on Form S-1 (File No. 333-279893) filed with the SEC on May 31, 2024). | |
10.10 | First Amendment to Credit Agreement, dated as of May 10, 2024, by and between DBR Land LLC, as borrower, the guarantors listed therein, Texas Capital Bank, as administrative agent and letter of credit issuer, and the lenders party thereto (incorporated by reference to Exhibit 10.8 to the Company’s Registration Statement on Form S-1 (File No. 333-279893) filed with the SEC on May 31, 2024). | |
10.11 | Second Amendment to Credit Agreement, dated as of November 4, 2024, among DBR Land LLC, as borrower, the guarantors party thereto, Texas Capital Bank, as administrative agent and letter of credit issuer, and the lenders party thereto (incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 10-Q (File No. 001-42150) filed with the SEC on November 7, 2024). |
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Exhibit Number | Description | |
10.12# | Water Facility and Access Agreement, by and between DBR Land LLC and WaterBridge Stateline LLC, dated as of October 15, 2021 (incorporated by reference to Exhibit 10.9 to the Company’s Registration Statement on Form S-1 (File No. 333-279893) filed with the SEC on June 26, 2024). | |
10.13# | Produced Water Facilities and Access Agreement, by and between DBR Land LLC, Delaware Basin Ranches Inc., WaterBridge Stateline LLC and Texas Pacific Resources LLC, dated as of March 8, 2022 (incorporated by reference to Exhibit 10.10 to the Company’s Registration Statement on Form S-1 (File No. 333-279893) filed with the SEC on June 26, 2024). | |
10.14# | Produced Water Facilities and Access Agreement (East Ranch), by and between DBR Land LLC and WaterBridge Stateline LLC, dated as of May 10, 2024 (incorporated by reference to Exhibit 10.11 to the Company’s Registration Statement on Form S-1 (File No. 333-279893) filed with the SEC on June 26, 2024). | |
10.15# | Fresh Water Facilities and Access Agreement (East Ranch), by and between DBR Land LLC and WaterBridge Stateline LLC, dated as of May 10, 2024 (incorporated by reference to Exhibit 10.12 to the Company’s Registration Statement on Form S-1 (File No. 333-279893) filed with the SEC on June 26, 2024). | |
10.16# | Form of Common Shares Purchase Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 001-42150) filed with the SEC on November 22, 2024). | |
*21.1 | List of subsidiaries of LandBridge Company LLC. | |
*23.1 | Consent of Deloitte & Touche LLP, independent registered public accounting firm to DBR Land Holdings LLC. | |
*23.2 | Consent of Weaver and Tidwell, L.L.P., independent auditors to East Stateline Ranch. | |
*23.3 | Consent of KPMG LLP, independent auditors to Wolf Bone Ranch Partners LLC. | |
*23.4 | Consent of W.D. Von Gonten & Company. | |
*23.5 | Consent of Vinson & Elkins L.L.P. (included as part of Exhibit 5.1 hereto). | |
*24.1 | Power of Attorney (included on the signature page of this registration statement). | |
99.1 | Report of W.D. Von Gonten & Company, independent reserve engineer, as of December 31, 2022 (incorporated by reference to Exhibit 99.1 to the Company’s Registration Statement on Form S-1 (File No. 333-279893) filed with the SEC on June 26, 2024). | |
99.2 | Report of W.D. Von Gonten & Company, independent reserve engineer, as of December 31, 2023 (incorporated by reference to Exhibit 99.2 to the Company’s Registration Statement on Form S-1 (File No. 333-279893) filed with the SEC on June 26, 2024). | |
101.INS | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |
101.SCH | Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents. | |
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). | |
*107 | Calculation of Filing Fee Table. |
* | Filed herewith. |
† | Management contract or compensatory plan or arrangement. |
# | Certain confidential information contained in this agreement has been omitted because it is both (i) not material and (ii) the type of information that the Company treats as private or confidential. |
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(b) | Financial Statement Schedules |
See the index to the financial statements included on page F-1 for a list of the financial statements included in this registration statement.
Item 17. | Undertakings. |
a) | The undersigned registrant hereby undertakes: |
(1) | To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: |
(i) | To include any prospectus required by Section 10(a)(3) of the Securities Act; |
(ii) | To reflect in the prospectus any facts or events arising after the effective date of this registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) of the Securities Act if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and |
(iii) | To include any material information with respect to the plan of distribution not previously disclosed in this registration statement or any material change to such information in this registration statement; |
Provided, however, that paragraphs (1)(i), (1)(ii) and (1)(iii) above do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the SEC by the registrant pursuant to Section 13 or Section 15(d) of the Exchange Act that are incorporated by reference in the registration statement, or, as to a registration statement on Form S-3, is contained in a form of prospectus filed pursuant to Rule 424(b) of the Securities Act that is a part of the registration statement.
(2) | That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; |
(3) | To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering; |
(4) | That, for the purpose of determining liability under the Securities Act to any purchaser: |
(i) | if the registrant is relying on Rule 430B of the Securities Act: |
(A) Each prospectus filed by the registrant pursuant to Rule 424(b)(3) of the Securities Act shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and
(B) Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) of the Securities Act as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) of the Securities Act for the purpose of providing the information required by Section 10(a) of the Securities Act shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of
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securities in the offering described in the prospectus. As provided in Rule 430B of the Securities Act, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date.
(5) | That, for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser: |
(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424 of the Securities Act;
(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
b) | The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
c) | Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. |
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Houston, State of Texas, on December 30, 2024.
LandBridge Company LLC | ||
By: | /s/ Jason Long | |
Name: | Jason Long | |
Title: | President and Chief Executive Officer |
POWER OF ATTORNEY
Each person whose signature appears below appoints Scott L. McNeely and Harrison Bolling, and each of them, any of whom may act without the joinder of the other, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement and any registration statement (including any amendment thereto) for this offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the U.S. Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he or she might or would do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed below by the following persons in the capacities indicated below on December 30, 2024.
Name |
Title | |
/s/ Jason Long |
President and Chief Executive Officer (Principal Executive Officer); Director | |
Jason Long | ||
/s/ Scott L. McNeely |
Executive Vice President, Chief Financial Officer | |
Scott L. McNeely | (Principal Financial Officer) | |
/s/ Jason Williams |
Executive Vice President, Chief Administrative Officer | |
Jason Williams | (Principal Accounting Officer) | |
/s/ David Capobianco |
Director, Chairman of the Board | |
David Capobianco | ||
/s/ Matthew Morrow |
Director | |
Matthew Morrow | ||
/s/ Frank Bayouth |
Director | |
Frank Bayouth | ||
/s/ Ben Moore |
Director | |
Ben Moore |
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Name |
Title | |
/s/ Kara Goodloe Harling |
Director | |
Kara Goodloe Harling | ||
/s/ Charles Watson |
Director | |
Charles Watson | ||
/s/ Ty Daul |
Director | |
Ty Daul | ||
/s/ Valerie P. Chase |
Director | |
Valerie P. Chase | ||
/s/ Andrea Nicolás |
Director | |
Andrea Nicolás |
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