LandBridge Co LLC Annual Report: A Comprehensive Investor Overview

Welcome to an in-depth look at LandBridge Co LLC's performance and outlook, designed to give you a clear understanding of our operations and investment potential.

Business Overview

LandBridge Co LLC is a leading land and resource management company focusing on strategically located assets in the Permian Basin. We generate revenue from diverse sources: selling aggregates and other surface resources, granting easements for infrastructure like pipelines, and collecting oil and gas royalties from our extensive landholdings.

For LandBridge, 2024 was a transformative year. We successfully completed our Initial Public Offering (IPO) in June 2024, transitioning from a private entity to a publicly traded company on the New York Stock Exchange. This milestone significantly enhanced our access to capital and market visibility. At the same time, we pursued an aggressive growth strategy, completing several key acquisitions that substantially expanded our asset base in core operating areas.

Financial Performance

We delivered robust financial results for the fiscal year ended December 31, 2024.

• Revenue: Total revenue surged to $215 million, a 28% increase over the previous year. This growth primarily came from increased resource sales and new easement agreements on acquired properties.
• Net Income: We achieved a net income of $65 million, or $1.10 per diluted share. This demonstrates strong profitability despite IPO-related expenses and acquisition integration costs.
• Adjusted EBITDA: Adjusted EBITDA, a key metric for resource companies, reached $130 million, reflecting healthy 35% year-over-year growth.
• Revenue Breakdown: Resource sales contributed approximately 45% of total revenue, followed by oil and gas royalties at 30%, and easements and other land-use fees at 25%. This diversified revenue base helps us withstand fluctuations in any single commodity market.

Risk Factors

Investing in LandBridge Co LLC involves various risks, including but not limited to the following:

• Customer Concentration: A few key customers account for a significant portion of our revenue and accounts receivable. In 2024, three customers accounted for approximately 40% of total revenue. While these are established relationships, a downturn or reduced activity from any of these major clients could significantly impact our financial performance.
• Commodity Price Volatility: As a resource-dependent company, our financial results are inherently exposed to fluctuating commodity prices, especially for aggregates, water, oil, and natural gas. While diversification helps, sustained low prices could affect royalty income and demand for surface resources.
• Integration Risk: Our aggressive acquisition strategy carries inherent risks related to efficiently integrating new assets, personnel, and operational processes. If we fail to successfully integrate acquired businesses, it could negatively affect our financial results and operational performance.
• Operational Risks: Our operations face various risks inherent in land and resource management. These include equipment failures, accidents, natural disasters, and other unforeseen events that could disrupt operations, increase costs, or result in liabilities.
• Environmental and Regulatory Risks: We operate under extensive and complex environmental laws and regulations. Changes in these laws, stricter enforcement, or the discovery of environmental liabilities could lead to significant compliance costs, penalties, or operational restrictions. Permitting delays or denials could also hinder growth initiatives.
• Dependence on Third-Party Operators: A portion of our revenue, especially from oil and gas royalties, depends on the drilling and production activities of third-party operators on our land. Factors affecting these operators – such as their capital expenditure plans, operational efficiency, or financial health – are beyond our direct control and could impact our royalty income.
• Access to Capital: While we maintain a strong financial position, our ability to fund future growth, including significant acquisitions, depends on accessing capital markets on favorable terms. Adverse changes in economic conditions or capital market sentiment could limit this access.
• Cybersecurity Risks: We rely on information technology systems for our operations. A cybersecurity breach or system failure could lead to data loss, operational disruptions, financial losses, and reputational damage.
• Litigation and Legal Proceedings: We may face various legal proceedings and claims in the ordinary course of business. Adverse outcomes in these matters could significantly impact our financial condition and results of operations.

Management's Discussion and Analysis Highlights

For LandBridge, 2024 was a pivotal year, marked by significant strategic achievements and a clear articulation of our future direction.

Major Achievements:

• Successful IPO: Our IPO in June 2024 raised $350 million in gross proceeds, significantly strengthening our balance sheet and providing capital for future growth initiatives. This transition to a public company has enhanced market visibility and access to broader capital pools.
• Strategic Acquisitions: We executed multiple strategic acquisitions throughout 2024, adding over 75,000 net surface acres in high-demand areas like Lea & Andrews County, Winkler County (including critical water supply assets), and the WolfBone area. These acquisitions immediately add to our earnings and expand our resource reserves, aligning with our strategy to consolidate fragmented land ownership.
• Private Placement: In December 2024, we secured an additional $100 million through a private placement of equity. This further bolstered our liquidity for ongoing expansion without incurring additional debt.
• Operational Efficiency: We smoothly integrated newly acquired assets, which contributed to overall operational efficiency and cost management. This demonstrates our capability to effectively execute our growth strategy.

Leadership and Strategic Direction: Our 2024 IPO fundamentally shifted our strategic direction, opening new avenues for capital and growth. We also strengthened our board of directors with independent members, enhancing governance and oversight. Our core strategy focuses on disciplined acquisitions of high-quality land assets, optimizing existing operations, and maximizing value from our diverse resource portfolio. Management commits to leveraging our strategic landholdings in the Permian Basin to capitalize on ongoing infrastructure development and resource demand.

Financial Health

We maintain a solid financial position to support our growth strategy.

• Cash and Equivalents: As of December 31, 2024, we held $185 million in cash and cash equivalents.
• Debt Structure:
  • 2023 Credit Agreement: We had $120 million drawn on our existing credit facility, with an additional $80 million available.
  • Fixed Rate Senior Unsecured Notes: We issued $400 million in fixed-rate senior unsecured notes due 2030, providing long-term capital at a competitive interest rate.
• Liquidity: Our strong cash position, combined with available credit, provides ample liquidity to fund ongoing operations, capital expenditures, and future acquisitions. Establishing a new 2025 Revolving Credit Facility with an initial commitment of $300 million further enhances our financial flexibility.
• Debt-to-EBITDA: Our net debt-to-Adjusted EBITDA ratio stood at a healthy 2.4x at year-end 2024, indicating manageable leverage and a strong capacity to service our debt obligations.

Future Outlook and Growth Initiatives

We are poised for continued growth and shareholder returns in 2025 and beyond.

• Planned Acquisitions: We have identified and are actively pursuing additional acquisitions in 2025, including the "Nineteen Eighteen Ranch" and further assets in Reeves and Lea Counties. These are expected to add another 50,000-60,000 net acres and contribute to revenue growth.
• Shareholder Returns: Demonstrating our commitment to shareholder value, we plan to pay quarterly dividends throughout 2025 for both Class A common stock and OpCo unitholders. We target an annualized dividend of $1.00 per share, representing an attractive yield based on current stock prices.
• Operational Optimization: We will also focus on enhancing the productivity of existing assets. This includes expanding water infrastructure and developing new aggregate mining sites to meet growing regional demand.
• New Credit Facility: We expect to finalize the 2025 Revolving Credit Facility in Q1 2025. This facility will provide flexible and cost-effective funding for future growth initiatives and working capital needs.

Competitive Position

Our competitive advantage stems from our extensive and strategically located landholdings within the Permian Basin, a critical energy and resource hub. Our diversified revenue streams, encompassing surface resources, water, and oil & gas royalties, provide a unique and resilient business model. Our proactive acquisition strategy aims to consolidate fragmented land ownership. This enhances our market share and control over valuable resources, thereby strengthening our long-term competitive standing. The strategic location of our assets provides a natural barrier to entry for competitors seeking to establish similar large-scale land and resource management operations in the region.

Market Trends and Regulatory Environment

We operate within a dynamic market influenced by several key trends and regulatory factors:

• Permian Basin Activity: Continued strong demand for oil and gas, coupled with robust infrastructure development in the Permian Basin, drives demand for our easements, water, and aggregates.
• Energy Transition: While oil and gas royalties are a revenue stream, our focus on surface resources like aggregates and water positions us well to support broader infrastructure development and population growth. These are less susceptible to long-term energy transition risks.
• Environmental Regulations: Evolving environmental regulations related to water usage, land reclamation, and emissions could impact operational costs and permitting processes. We actively monitor these developments and invest in sustainable practices to ensure compliance.
• Interest Rate Environment: Changes in interest rates could affect the cost of future borrowings and the valuation of long-duration assets.

LandBridge Co LLC presents a compelling investment case. We combine a diversified resource portfolio, a strong financial position, and a clear growth strategy in a high-demand region.