$6.17
$33.34
bear $6.17
base $20.53
bull $33.34
margin of safety $11.00
market price* $81.57
LandBridge owns roughly 300,000 acres of surface land and the pore space beneath it in the Delaware Basin of West Texas and southeastern New Mexico (about 61,000 fee acres in its Northern position, 87,000 in the Southern position, plus its Stateline and recently acquired ranches). It does not drill or run infrastructure. Oil and gas operators and water midstream companies, chiefly WaterBridge, pay it for the use of the land: royalties on each barrel of produced water handled on its acreage, fees for pipelines, roads and drilling sites, sales of brackish water and caliche, and a small stream of oil and gas royalties. Customers bear nearly all operating and capital costs, so almost every dollar of revenue becomes cash. Revenue was $199.1 million in 2025 versus $110.0 million in 2024, helped by about $950 million of acreage bought in 2024 and 2025 (including the 38,000-acre 1918 Ranch purchase in November 2025). In the first half of 2026 revenue rose about 29% and operating cash flow about 55% over the same period a year earlier. How we measured earnings: we start from operating cash flow, remove swings in working capital, and deduct share-based compensation ($45 million in 2025) as a real cost. Maintenance capital spending is tiny (about $2 million). We then add back the cash interest paid (about $27 million) so the business can be valued before its lenders, and subtract the debt afterwards. On that basis 2025 business cash flow was about $119 million, or about $1.55 per share (Class A plus the Class B/OpCo units that share in the same cash flow). We used 2025 only as the starting level because earlier years describe a different, smaller company: 2024 was distorted by a one-time $95 million IPO-related compensation charge and land was still being assembled, and 2023 was a private predecessor. Growth reconciliation: the trailing actual growth is not a clean number because of the 2024 IPO charge, but operating cash flow rose 87% in 2025 and revenue 81%, most of it purchased acreage. The base case assumes 25% growth in 2026, below the 55% operating cash flow growth of the first half of 2026, and the specific reason is dated: the 1918 Ranch deal closed on November 12, 2025, so 2026 carries a full year of it, and its debt is already counted below. Base case (about $20.53 per share): 2026 business cash flow of about $149 million, then 2 percent a year through 2035 (contracts generally include inflation escalators), holding flat for five more years and then fading to zero over about 20 years. The land and its water rights are permanent, and two key agreements (East Stateline Ranch, Wolf Bone Ranch) run for as long as the operator keeps operating, but nothing guarantees demand for that many years, so the value is allowed to fade. The business is worth about $27.4 per share (about $2.1 billion) and owes about $6.9 per share (about $532 million of debt, net of surplus cash and adjusted for the slightly-above-6% cost of the notes), leaving about $20.5. We did not credit further land purchases: the company has made only two large purchases, both funded with debt or equity in the last two years, which is not yet a proven repeating process. We also did not credit rising produced-water volumes beyond the escalators or the roughly 1.4 million barrels per day of extra capacity the company believes its Northern pore space could support, because that depends on operators building it and no volumes are guaranteed. Bear case (about $6.17 per share): the contracts carry no minimum volumes and the top customers are 59% of revenue (WaterBridge alone about a quarter). Texas and New Mexico regulators have already restricted produced-water disposal in seismic response areas, brackish water prices fell about 12% in 2025, and oil and gas royalties fell $3.4 million. The case has cash flow staying at about $119 million in 2026 and then declining 4% a year for a decade and fading to zero over the following 20 years. It also assumes the $500 million of 6.25% notes due December 2030 are refinanced at roughly 2 points more, adding about $55 million of cost. The business is worth about $13.8 per share (about $1.06 billion) and owes about $7.6 per share (about $587 million), leaving about $6.2. Interest of roughly $35 million a year is still well covered in this case. Bull case (about $33.34 per share): cash flow of about $160 million in 2026 (the first-half run rate), then 8% a year through 2030, which is below the pace of the past two years and rests on volumes already growing on the acreage and on capacity already being added by WaterBridge and VTX Energy (about 300,000 barrels per day on Wolf Bone Ranch and 158,000 on the Northern position today), then 3% a year to 2035, flat for ten years, then fading to zero. The business is worth about $40.3 per share (about $3.1 billion) and owes about $6.9, leaving about $33.3. What could make this wrong: a drop in Delaware Basin drilling and water volumes without minimum-volume protection; regulation of produced-water disposal; the loss or renegotiation of WaterBridge or other large customer agreements (some have five- to ten-year initial terms with annual renewals); and the debt, which totals about $545 million against covenants of a 5.0x maximum net leverage ratio and 2.5x minimum interest coverage; the revolver and notes mature in 2030. Accounting notes: the 2024 and 2025 land purchases were treated as discretionary growth spending and excluded from maintenance costs, but the debt used to fund them is deducted in full. Purchase price allocations for 1918 Ranch (between land and surface use intangibles) were an audit-sensitive estimate; this does not change cash flow.