I didn't have us one minute early, but. Take two. Welcome everybody. We're excited for our inaugural analyst day. We hope this will be informative, and we'll take you through a pretty full agenda. We wanna make sure it's interactive, so if you have questions, by all means raise your hand, speak up, shake your head, do something like that and we'll find you. With that, the first thing we're gonna do is run a video to start. Cue the video.
Really, we have achieved something great. It's a first step for us, but it's a great step.
Since our IPO, our story has been one of growth. We continue to look for opportunities to add high-quality land when the right opportunities emerge, and to unlock more value across the position we already control.
Ultimately, LandBridge is a land story. Today, a lot of that story is oil and gas. As that story continues to evolve, LandBridge will be there to evolve alongside it. We have solar development, we're in discussions for wind development. There are a number of discussions on digital infrastructure.
Our partnerships with Samsung, ONEOK, and NRG show how LandBridge is enabling both energy and digital infrastructure development in West Texas. Our priority is acquiring high-quality, strategically located land for energy, power, digital infrastructure, and industrial development, then maximizing its value through our sophisticated commercial team.
You're really gonna hear a lot about how the Permian Basin will change writ large because of the data center development program.
Our conviction in West Texas for data centers and the potential significant industrial impact to the region and for LandBridge has never been stronger.
You have in West Texas the best dynamics in the world for data centers. You have very inexpensive gas. We have unlimited water through our WaterBridge platform, and we have vast amounts of surface throughout the whole basin. It's really the best place to develop and the lowest cost.
It's always a little funny to see yourself on screen. Anyway, we are excited. I'm gonna introduce our speakers today. To my right, I have Jason Long, the CEO of LandBridge. To his right, we have Scott McNeely, the CFO of LandBridge. I have Isaac Ramirez, who's gonna take us through a lot of the digital infrastructure play that's associated with LandBridge, and we have Alex Hernandez, who is the CEO of PowerBridge. Prior to PowerBridge, he was CEO of Talen and the Founder and CEO of Cumulus.
Cumulus is today the only 1.1 GW behind the meter data center complex ever built and completed, and it was completed in Berwick, Pennsylvania. It was effectively step one of what Berwick, Pennsylvania, has become today, which is the largest data center market in the world, and we're gonna hear a lot in at least North America. We're gonna hear a lot about why West Texas has a lot of the same attributes Alex saw in Berwick, Pennsylvania, and is why he's with us today. Me, I'm David Capobianco, if you hadn't put that together yet. I am the Chairman of the board of LandBridge and the CEO and Founder of Five Point Infrastructure.
I'll take you through a little bit of who Five Point is, how our ecosystem creates value throughout the value chain with LandBridge as the vortex of that value creation, and then we'll talk a little more about some of the direct value drivers for LandBridge over the next decade. First of all, for Five Point, I founded it in 2012 based in Houston, Texas, with the idea that we would build strategically important businesses, and for us, that meant leaders in our target areas. Today, we have over $7 billion under management, and we focus on four core themes. Those include environmental water management. WaterBridge is the poster child for that. Sustainable infrastructure. We'll talk a little bit about a business we built and sold, Northwind, and how it has an analogy to the things we'll do in the future. Surface management.
Poster child is LandBridge, and that's what we're here to talk about today. Digital infrastructure. PowerBridge and other parts of our portfolio will capitalize on all of the value of the ecosystem to create and drive additional value to LandBridge. As always, it's sort of like a crutch. As always, for me, I'm gonna take you through a GIS platform demonstration, which will enable you to better understand exactly how our ecosystem works, what it is, and how it drives value across the portfolio. I'm actually gonna stand next to it so I can see the screen, and I can look at my man, Matt Bailey. When I was introducing people, I should have introduced Matt. Matt's the head of IT and GIS at Five Point. He's the one who created this system.
Today, this system, Matt, has 30 billion data points and 500,000 lines of code. It is the brain center of Five Point. We utilize it throughout all of our portfolio companies in the whole ecosystem, and it gives us superior knowledge to our competitors. The first thing I'll do is I'll get into a little bit of the ecosystem. What you see here on the map, for those just to situate, this is the Texas-New Mexico border. You see, in green, we have the Delaware Basin, and that also encompasses the pink landing strip there. In the blue in the middle, we have the Central Basin Platform, and on the right, we have the Midland Basin. Today we're gonna focus on our Five Point ecosystem in the Delaware Basin.
The first thing you'll notice in the charcoal boxes is LandBridge's acreage, 317,000 highly strategic acreage that hugs the Texas-New Mexico border and also has some southern acreage and some acreage in New Mexico that's really valuable. Obviously, the first piece in the vortex of the ecosystem. The next piece is WaterBridge. Our WaterBridge water infrastructure, you can see, goes throughout the basin and obviously drives value to land by the water we manage, the damages we pay, and the water that gets drawn from LandBridge to customers as well. The next piece of the ecosystem that's interesting, and by the way, part of WaterBridge, is Desert Environmental.
Desert Environmental, to give you a sense for how the ecosystem works, is. Here we are with the land and the surface, and we recognize that we have a waste product that needs to find a home. We realized that we ourselves could create a business to manage that waste and get an acceptable return, but that we also knew all of our customers would wanna use that as well. We started this business, this incredible little piece of WaterBridge, but it's a waste management business that initially started with WaterBridge. WaterBridge's waste on LandBridge areas and pays LandBridge a per ton fee and a fee for a lease and a fee for the damages that created. Then it also manages that same waste for our customers. Again, another piece of the puzzle.
To keep showing you how this ecosystem works, we built a business called Northwind Midstream in the sour gas window. This business didn't actually have an opportunity to put infrastructure yet on LandBridge because we sold it before we got to that point, but ultimately, we will put sour gas infrastructure on LandBridge as well. What this did is it unlocked development in the sour gas window of the northern Delaware. Bailey, show them the development inside and outside the window. It was about 3 to 1, and the trends extend directly. The only difference is when you produce the oil in the sour gas window, you end up with high CO2 and high sulfur, and that high CO2 and sulfur have to be managed.
We created a solution here because we wanted our customers, who are in the middle of our ecosystem of water and land, we wanted our customers to exploit their resource, bring more water to our surface, and enable WaterBridge to manage that water. That's how Northwind fit in. We were fortunate to have sold that business to MPLX, who's developing it and continuing to deploy capital in it, and that will serve our ecosystem very well. The next piece of the ecosystem that you'll hear a lot about today is PowerBridge. PowerBridge is Alex's business that's focused on creating gigawatt scale campuses on LandBridge acreage in the Delaware. Bailey, put up our locations.
We've identified eight locations, really five initial targeted locations, and in these locations, we have phase 1 and phase 2 in the locations where we'll be able to get to 2 GW, and each one of them is easily expandable to 3 GW . How will this work? Well, first of all, it'll drive water management revenues because we have both water needs from that LandBridge and WaterBridge we'll both meet. It will create a great opportunity for LandBridge's from a lease perspective and a royalty perspective. We'll ultimately need some carbon sequestration for the CO2 that comes off the power plants, and we'll build a network to do that, and we'll utilize LandBridge surface for that. Two additional portfolio companies for the future, and these companies will also contribute to the ecosystem in a really exciting way.
Next business, the next two businesses that are in various stages of development and will be built out over time, the first is a fiber ring. Bailey, queue up all the estimated fiber locations. Throughout Texas, you have fiber connectivity that's sufficient for internet capacity needs, but it's really like running on country roads, driving on a country road to get from one place to another. There are no super highways. We're going to build the first super highway for connectivity in a fiber ring around our surface. Where we are today, we've identified and achieved a significant portion of the rights of way, and we'll begin laying conduit, and ultimately, we'll sell the ability to pull fiber to hyperscalers.
What this will do is it will create a network hub with super highway connectivity to important end markets. Going to Odessa, Midland, and ultimately on to Dallas. Albuquerque is an important one, and then ultimately up into Denver and El Paso, which will give you connectivity to California and New Mexico. A fiber ring where the center ring circulates our target areas for our data centers, our first five targets. The next portfolio company we've already begun working with is a gas gathering header system with a massive storage complex, much of which will be on LandBridge acreage, but some of which will also be off. We envision being able to build up to 100 billion cubic feet of storage in the center of the Delaware Basin.
You might say, "Okay, that's pretty interesting, but what would you use it for?" Well, a couple cool facts is the star that Bailey put up, he likes to lead me if I get distracted, the star he just put up is the Waha Hub. At Waha, in the last month or two, we've seen negative $20 gas. We get negative gas prices frequently, and on average, it's a very meaningful discount to Henry Hub. What we will do is we will create a gas gathering and storage facility on the cheap side of Waha. Once you're after Waha, you're already on a long-haul pipe, and you're already getting priced off your end market. Before, we've got constraints. We've got constraints that lead to flaring, shut-in, and paying people to take your gas.
This facility will effectively create an opportunity to give additional five nines reliability to data centers. It'll enable data centers to be able to say, "Okay, well, I'm gonna need 250 million cubic feet a day for our power plant." We're gonna be able to lock up 100 days of gas storage volumes. In the event there's some sort of breakdown in the transportation network, we can still run for the next 100 days. Security and that volatility will create an incredibly valuable opportunity for my investors who participate in it, and we will put some of our facilities and a lot of our pipe on our surface at LandBridge, where you pay damages and you pay royalties.
That's the exciting ecosystem of value drivers that we envision for LandBridge acreage. You can see LandBridge is at the core of all that. All of these businesses drive value to LandBridge. Okay, let's take the fiber off, and you can remove the fiber. Remove everything actually except our data centers, our water, and our surface. The next thing I wanted to point out is what the ecosystem can mean, 'cause that's all theoretical. What can the ecosystem mean for LandBridge? I'm gonna go back through something we did in the roadshow, where we talked about the pore space capacity, how that capacity could get utilized, and what that meant for LandBridge. Let's go around the horn, Bailey. We have about 5 MMbpd of excess pore space capacity.
If you include Hanging H, we've got about, we've got over 1 million of excess. If you go to Frying Pan, we've got 2.2 million, and then about 1.5 million up at Speedway, and we're always adding additional acreage that has more pore space. What this is based on a long-term sustainable strategy of putting a well in a square mile or a well per section in acreage that's already been vetted for issues like vertical wells and faulting. We have the ability to add 5 million additional barrels a day of management capacity on LandBridge. At $0.15 a barrel, that implies plus some skim that you get credit for that implies, $300 million of free cash flow for LandBridge.
Over the next five years, as we exploit that pore space, you'll have another $300 million of free cash flow. Well, how does it get exploited? First of all, I'm gonna take you through how the state line is losing about 2 MMbpd over the next decade of capacity. Bailey, let's start in 2017 with the pore pressure, and then let's go from 2017 all the way to 2025, and let's show how the state line got pressured up from a pore space perspective. 2017, you can see some hotspots coming out where it's actually you're starting to see pressure. Go to 2018, 2019, 2020, you can see the hotspots growing and deepening in their redness.
If you go all the way to 2025, you can see how we have a situation where we have over-pressured hotspots at the state line. Now, Bailey, quickly put up the ownership of the state line to show why that happened, because this is really instructive, and this is one of the reasons our acreage is more strategic. The acreage is all blocked up between about five owners across the state line. If you're a water management company, when you cross the state line, you basically move your water to the first location and try to put as many of your facilities as you can right there in that location, because if you cross two landowners, the economics are destroyed. I know this group knows this, but just to remind you, managing water in New Mexico is challenging from a regulatory regime.
It's volatile, and long-term E&Ps don't view that as a long-term solution. If you want to win long-term business, you need to demonstrate a solution that takes water out of New Mexico to Texas. Remove the ownership and you can see the state line will lose approximately 2 MMbpd over the next decade. We've got from B3 a really basic analysis of how much water they anticipate needing at a pretty modest oil growth rate in New Mexico. We just use their estimates. We could show you our own, but it's just as good to use theirs. They assume you'll need another 6 MMbpd of pore space capacity.
6 million from the growth of water, and again, the growth goes because you have higher water-oil ratios over time, and the new benches that are being exploited have higher water-oil ratios as well. You'll lose 2 million barrels here, which effectively leaves you with a need for 8 MMbpd of storage. There's a high probability of success rate for us with the most strategically located option to manage some of that 8 million, and we're excited about that. In your mind, you can think of as a $300 million free cash flow opportunity. Let's talk about the data centers.
If that pore space utilization is a next five-year configuration, the data center opportunity is over the next three to 10 years, which is cool because it gives you a whole another cascade of opportunities on the other side of this. What it is is if you look at. Why don't you pull up our Alpha Digital Campus, Bailey? In Alpha Digital, effectively, and I should caveat it that our contracts are not fully negotiated, so I'm gonna use broad ranges to be instructive. In Alpha Digital Campus, we have phase 1 and phase 2, and it will enable us to put 2 GW of data centers and associated power here in. This is a zoom-in of what we're planning.
There is a phase 3, which enables you to get to three, and all of our targets have that. Basically, for a 1,500-acre lease for 1 GW, let's just use rough numbers like 3,000 to 4,000 a day. We'll take the low end, $4.5 million a year lease. Then the expected royalty rate will get you another $10 million-$15 million or so on that lease. You're talking roughly, and I'm not trying to make news with these numbers because we obviously haven't negotiated final deals, but you can assume per gigawatt before water, $10 million-$20 million of free cash flow to LandBridge.
Our 5 target campuses, go back to the campuses, Bailey, will get to approximately 3 GW each, which will enable you to have 15 GW, and you're talking about $150 million-$300 million of free cash flow before water. Water is a very big part. You're gonna hear a lot about water. Damages will be a very big part. You're gonna hear a lot about damages. You're gonna have all other sorts of infrastructure built around these things. I'm just literally talking about the very specific power land campus and the revenue stream.
If you think about, all right, if we have $300 million of upside on the pore space growing all the time every time we do an acquisition, $150 million-$200 million more on the data center program just with our ecosystem. By the way, you're gonna hear a lot about what LandBridge is doing outside of PowerBridge. You can look at it and say, "Those are two real revenue drivers for the next decade," and it's exciting, and it's something we're really looking forward to exploiting for you. After each section, we'll pause for questions. I don't know if anyone has a question on that presentation, but if you do, by all means, raise your hand, roll it out. Otherwise, I will.
We got one down here.
Yes.
Sorry. Bryan Engler, Fenimore Asset. When you think about that $300 million of free cash flow off the water capacity, are you thinking that on pricing today?
Yes.
Pricing that you're thinking. That's not inclusive of what you're thinking through the pricing you're getting off Speedway or.
There's two.
As the market gets tighter.
It's a great question. There's two pieces of pricing growth. There's one, which is just the inflation adjustment that's in the contracts. But there's another, which I probably should have mentioned, and I appreciate you bringing up, which is scarce goods never go to zero. They just get priced higher and higher and higher, and that's what you'll see. No, those numbers are literally based on $0.15 on current skim. Yes, you can absolutely expect price over time. Yes.
I don't wanna jump the gun, but.
Go ahead. Jump the gun.
What's the water opportunity per gigawatt for data centers?
I'm sorry.
What's the water opportunity per gigawatt?
All right. Great question. We'll get into it. It can be up to 300,000 bbl a day, which is an enormous opportunity from a returns perspective.
These are not like closed loop? Is it you continuously need 300 K barrels a day or is it-
Not in closed loop. That would be open loop. Again, I love stealing the thunder of my guys, but the punchline on water cooling is there are very, very few places in the whole country where you can even contemplate open loop cooling. So most places look at closed loop, which is a fraction of that, 10%-15% of that number, and air cooling, which is less still. The catch is you need a lot more power to do that. You know, site your data center outside of Dallas and tell them use the palate you're gonna take 300,000 bbl a day and see what answer you get. That's why West Texas is such a great location. We have that water.
We have that water from WaterBridge to desalinate and deliver, and we have an enormous resource of water at LandBridge. Yes.
Hi. Question for you as you build this out and just coming from a real estate perspective, do you need everything to happen in a certain timeline or 'cause these large scale developments always have ups and downs, things that don't end up getting built. Like, you can do parts of that. I'm just trying to figure out how much of this is upfront cost that has to be built out before you can generate any positive cash flow versus you can segment this out into pieces so that it's sort of tranch-able projects.
Well, let's talk about that. First of all, WaterBridge is already driving value plus other of WaterBridge's competitors are driving value to utilize that pore space. That pore space is on a collision course to be utilized, and that's why we're already very focused on acquiring more pore space. That's the pore space piece. Think about the fiber piece. If all we did were the fiber, it makes the whole area that much more valuable. That's the only thing we did. If all we did was create a header system and a giant storage facility, again, it makes everything more valuable. If you did neither of those, it's fine because the opportunity is coming either way.
Your point is not a lot of upfront infrastructure costs that's gonna require a ton of capital upfront with no revenue. Basically, what you're talking about is each thing that you're contemplating building has revenue immediately tied with it.
That's right. That stuff has. You know, that stuff is staggered over the next decade, but we're trying to give you a view of the excitement around what the long-term picture can be. By the way, I took you through our ecosystem and really two revenue streams. We're gonna talk today about multiple more revenue streams and why those are just the two that are controllable by me at Five Point and our investable capital.
Since we're broadcasting this to a wider audience, I think one point of clarification is probably helpful. When we think through the capital that's being spent for this, none of this is being spent by LandBridge. The capital for water infrastructure is being built by water operators. The capital for the fiber ring David walked through is being spent by PowerBridge. On the LandBridge side, we are certainly the beneficiaries, though, of all of that activity and when those assets come online. From the fiber ring perspective, all we're doing is further bolstering LandBridge's competitive positioning to win those data center opportunities.
That's exactly right, Scott, and the gas gathering and storage is a Five Point project, and we'll spend the capital. That's the power of the ecosystem where the capital doesn't get spent by LandBridge, but as the vortex of that ecosystem, the value does accrue to LandBridge.
The only thing I would add to that is I think this is part of your question, but a lot of this is we're stepping into these revenues as projects start, right? So the lease payments start immediately. All the damages as it relates to the construction start immediately. So you start to see that revenue come in. Even though these are huge, long capital projects, we'll start to see the revenue come in sooner than that.
Great point. Where's Bernie? He's got to have a question.
He lost his voice.
Oh, he lost his voice. Today's gonna be a lot shorter. Bernie.
Maybe I'm jumping ahead. Scott, Jason, I'm using the fisherman's.
Yeah.
I was asked to describe your business in a single sentence, and I said you're basically arbitraging seismic activity. Could you elaborate on that? As you're going back through the map, just give the audience.
Oh, my God. We don't like to think of it as arbitraging seismic activity. We like to think of it as enabling infrastructure development, enabling energy infrastructure, enabling water infrastructure, renewable and digital. If you look at how we do it and what we do, it's exactly that. Are there some arbitrages in there? Like, is it a good thing for us that New Mexico is as difficult as they are? Yes. Is it good that they've been volatile because nobody will ever trust New Mexico to give a long-term stable regime to manage water there. There are some dynamics that work very well for us, but the big picture is we enable infrastructure development across the board. Jack.
Can you just talk about the timing on when the construction for the fiber ring and the gas storage will be complete?
Sure. We have spent the last year getting right of way. We will begin laying conduit, and then we'll get contracted customers to pull their own fiber. Effectively, you split the conduit into kind of four separate areas, and you sell off quadrants and you enable people to pull their own fiber and to own that quadrant. I mean, it's not on the critical path for our development. We would expect it to be done over the next couple of years unless it gets delayed. Then for gas storage, I don't wanna get too much into this because I love this business, and it's very exciting and easy to go down a rabbit hole on it. There are enormous amounts of depleted reservoir opportunities, as you can imagine.
The way you build a gas storage facility is you buy gas and inject it into depleted reservoirs to the point where it pressures up to enable you to deliver or extract that gas at the pace you want to. Normally, that's the highest cost of the biggest large chunk of depleted reservoir storage is that base gas that you have to inject in, not so when people pay you to take it. The second kind of gas storage is underlying our surface at LandBridge. We have a really unique structure of bedded salt. Bedded salt, there's two types of salt, and I'm for sure getting outside of my geophysical capabilities. There's basically two types of salt. There's a salt seam, and then there's domes that get created.
There are salt seams underlying our acreage at Wolf bone, that 50,000 acreage. Basically, you can create little hot dog shaped salt storage facilities, and they're small. There may be 1 BCF, but you can make a lot of them, and those can be super high turn and again capitalize on really attractive gas to start. Basically, what we have the ability to do is create an in-basin need to hold that gas and deploy it when it becomes optimal. The natural question is always, "Okay, but it's not always gonna be free," and it won't always be free. It's not always free now, but it will always be at a discount to the other side of Waha because you don't have to put it on a long haul pipe to get to an end market.
We'll be in-basin, and it'll always be cheaper than outside markets, for as long as you can envision. There are scenarios where in-basin demand exceeds out-of-basin demand, but by that point, to impact 20 BCF of gas, we're way down the road, and we don't have to worry about it. Two types of storage facilities, and those storage facilities will pay damages, will pay lease rates, and will pay royalties to LandBridge.
Appreciate it. I'll follow up, for sure, on that, David. Are there any other storage facility using those depleted reservoirs in this area? Or are you kind of-
All right, Bailey, pull up the chart. This is the greatest chart. Historically, there's been very, very little storage added, and so much so that, you know the chart I'm looking for, Bailey. So much so that as gas production has grown, it actually so that's the volatility. There you go. On the top, you can see gas production growth, and on the bottom, you can see days of storage. This is the only basin in North America that has this little storage relative to the gas production. At Five Point, we have three executives who've built very substantial gas storage businesses, and we've looked at gas storage for the last decade. We couldn't make sense of it. It wouldn't meet our return hurdles until now.
This is an extraordinary opportunity, and this can ultimately be a game changer for the way gas is utilized in basin.
Right. Is that all depleted reservoir stuff?
Yes.
Yeah. That's like a turn once a year kind of thing or maybe a couple times a year?
Well.
That's the big question.
Typically, it's a one turn. Typically, you run depleted reservoir facilities at one turn.
Right.
The reason you do is you wanna minimize the amount of base gas you use. If you pressure them up, you can get more turns. Imagine instead of using 25%-30% base gas, use 50%-60% base gas. You can get up to 3 or 4 turns, and it's been done in California, where they really needed a high turn facility, but there are no salt structures. We can achieve whatever we want there. If you're doing it at a time when they're paying you to take your gas.
Take your gas. Okay. About six months effect.
Yeah, I think that the cool part, just to reemphasize what David said, is that the geological structures that exist at Waha for storage exist on our surface and have not been exploited.
Got it. Yeah.
If there's nothing else, I'll turn it over to Scott, and we'll start rocking and rolling through the presentation.
Yeah. Thanks. Thanks, Dave. Thanks for everyone joining us today. For what it's worth, when we put this on the calendar, we thought it'd be a slow period in the market, so joke's on us. You know, we'll work through the slide here, the slides here and the presentation here. I hope, you know, there's a lot that y'all can take away. I mean, ultimately, what we're trying to convey here, just kind of three key points, right? We wanna talk through our asset base, really why it is so special. You know, and ultimately, how do we take that asset base, how do we apply our active land management strategy, and how do we really drive the kind of activity and commercial results that you would wanna see? Then ultimately, from your seats, how does that result in shareholder returns?
Just a few slides before we get into macro. You know, we try to be thoughtful about how to ultimately capture the development activity in West Texas and New Mexico. We looked at rigs. We looked at drilling. We thought that only captured pieces of the puzzle and, you know, I think kudos to the team here as well as to Matt Bailey on the GIS side. Just a really creative way to show, you know, what's really been transpiring over the last decade. What we're showing you here is kind of a unique view of how to measure activity, and this is using light levels measured from space. You know, what we see here over the last decade is that this activity, this industrial activity in West Texas and
West Texas and New Mexico, it isn't coming. It's already been happening. You know, you can kind of see just how robust it's been and how much it's grown over the last decade. With the point we're at now, this is accelerating rapidly, which is incredibly exciting for us. You know, if you kind of ask yourself how we capitalize on the growth to date, and you flip to the next slide, you know, we walk through briefly just what is the history of LandBridge been. If you recall, you know, we've made just kind of a few big bets kind of through the lifetime of our company here, and the first actually predated LandBridge. It was with WaterBridge. You know, we made a bet, we made a call that water was gonna transition from a services company to an infrastructure company.
This had to happen if the growth in the Delaware Basin was going to occur like everyone thought and everyone said it was going to. You know, that ultimately led to us building out WaterBridge, and that went very well. 2017, 2018, 2019, you know, a massive growth ramp. Then we made the next identification and the next call, which is surface and subsurface is going to be a critical enabler, not just for WaterBridge, but again for the oil and gas activity, to continue to ramp in the Delaware Basin. When we came out and we talked through pore space initially, even up to our IPO, we were met with glassy eyes, a lot of folks thinking we were trying to sell them snake oil, 'cause it just wasn't really a mainstream narrative yet at that point.
I think to the benefit or to the kudos to our operations team, our engineering team, and our geology team, they recognized that folks were doing this wrong. If we were going to scale WaterBridge, we had to be thoughtful and do it differently. That was ultimately the catalyzing observation that led to us starting LandBridge in late 2021. We wanted to give WaterBridge the runway it needed to build its infrastructure, have access to the pore space, and do it in a way that provides the flow assurance, the longevity, that not just our shareholders are looking for but our customers are looking for. We made that call. Clearly, that's been validated. It's a mainstream narrative. David walked through all of the details of where we sit with that today.
What that really left us with was a great land position, an option value that comes with that surface in addition to pore space. We started to reap those benefits very quickly. We started to see the demand on the pore space itself from third parties such as Devon. We also started to see the demand from other kind of industrial infrastructure, whether that was sand mines, whether that was solar. It became very obvious to us that this was going to be high demand outside of this initial surface position and that this was scalable so long as we can continue to find the right surface in the right areas that have been underutilized historically and that we felt we could apply our active land management strategy and grow value.
It's kind of through that effort that we identify what we call as our third call, which is data center inevitability in West Texas is absolutely a fact. We made this call in 2023, similar to the pore space call. The first time we stepped out to say it, we were met with glassy eyes, folks saying, "There's no way that this is going to be true." Here we are three years later. It is again a mainstream narrative that everyone is talking about. There are a number of counterparties looking at it. Again, I think we put ourselves in pole position to be one of the first, if not the first, to get it across the finish line here. If we go to 12, you know, how do we look? We have all of this business, all this activity.
What does this look like relative to the rest of the market, the rest of the peers? I think we acknowledge there are no perfect comps out there, no perfect peers out there. That is one of the things that gives us this massive advantage in terms of the market is we were thought leaders. We were one of the first people to step out and do this intentionally, and it's put us in a great position commercially. It does require, I think, a little bit more effort on our side to continue to communicate what it is we're doing and how to think about it. When you look at just the closest comp sets we have here, I would really just point to three main facts to keep in mind as you work through the list.
The first, the de minimis capital program of our business, 'cause again, we're not deploying capital, we're not doing operating, we're only acquiring and commercializing surface, leads to incredibly high free cash flow margins. We'll go into more detail on that in later slides. You know, the second is once you own that surface, if it is under-commercialized, there is a massive growth potential that we're able to exploit, and it's that option value that comes with owning surface that again we'll go into more detail with. Being able to drive that growth is incredibly unique, particularly on a capital light or free basis relative to a lot of the comps or the peers here.
You know, finally, being able to achieve this kind of growth with that direct commodity price exposure is incredibly unique, not just within oil and gas, but if you zoom out and look at a lot of these other kind of similar comps here. You know, where does all this shake out in the actual performance basis? We try to capture that in the next slide here. You've seen a similar version of this in material before. We've reworked it here. Ultimately, what we're trying to demonstrate here is the true growth, the true compounding nature of this business model over time.
We've worked through from 2022, the first full year of LandBridge, through last year, 2025, what does our EBITDA growth and our free cash flow growth look like relative to all of those comps, all of those REITs, all of those land management companies, some of our core peers within the oil and gas space. I think this tells just such a powerful story. You look at 63% Adjusted EBITDA growth. You look at free cash flow growth touching 100% on a CAGR basis from 2022 to 2025, while maintaining free cash flow margins between 60% and 70%. That is something that is very tough, if not impossible, to find outside of businesses like ours, and there are not many of us out there. Where does all this cash flow come from?
How is it that we're ultimately actioning this growth? This is just a really helpful snapshot of just some of the activity we see on our surface or we're pursuing on our surface today. We're gonna get into more detail on this, so I'm not gonna go into this slide in much depth here. But ultimately, there is a lot for us to do, and again, there is more just beyond that. Wrapping up, a couple other slides here. You know, this concept of surface use economic efficiency, we continue to emphasize this at the end of every year. A question we get quite frequently is, "How are you actually driving value? Are you just buying cash flow, or does this active land management strategy actually work?
Does it mean something?" This is the metric that we use to show that it absolutely works and is a very, very powerful. What we're doing is we're saying each acquisition, each land purchase, let's look at it on a vintage basis by year, and let's just measure how much non-mineral revenue we can generate on a per acre basis and the progression of that year-over-year. What we're showing you here is 2024 to 2025, and you can see, you know, the acquisitions that we worked through in 2024, versus 2025 saw, you know, nearly a 150% increase year-over-year from when we bought it to the first year that we managed it. I think that's just a great reflection, again, of the active land management strategy and the results of that.
We're gonna break that down into more detail later in the deck, but it's this concept that I want you to keep in mind as we talk through the macro backdrop and the commercial opportunity set. You know, another question we get, and this is partially a technical point, but partially, I think, a really critical point from the seat of investors is, you know, how is management compensated? You know, how do your interests align with ours? The point I'll make first is, you know, we as management own over 13% of the combined company. We are incredibly incentivized for this to continue to go well. Now some folks always ask, "It doesn't show up on Bloomberg. How is that the case?"
We try to break that up in a bit more detail here because there is direct and indirect ownership. While we're making efforts to clarify that and be very transparent on that, the point I make is our economic interest today is greater than 13%, very critical. Now, the technical point I'd flag, and this comes up a lot, is, you know, "Hey, Scott, I look at your financials. Stock-based compensation is ridiculously high. You guys are way overpaid." The point I would make is more than 80% of that stock compensation expense that are in our financials are a result of the technical recognition of those incentive units that exist at the private company.
Said differently, all of that 80%+ of stock comp can never be a cash burden to public investors, nor can it ever be diluted to the ownership of public investors. The RSU piece, very, very vanilla. We call that out in the financials. The bulk of the ownership of that 13% comes from that private company side. Again, what you're seeing in the financials is GAAP necessitating us show that, but again, can never be a cash burden to investors, can never be diluted to investors. Quickly wrapping up on 17. David touched on this quite a bit, but as you know, we also manage a company called WaterBridge. There are enormous synergies that exist between the two. You know, we try to capture that here.
We've spoken to this in a lot of detail, so I won't belabor the point. But we do think that ultimately, you know, LandBridge is the enabler for WaterBridge growth, and in turn, LandBridge gets the benefit of those royalty streams from WaterBridge. Moving on to macro, just before I hand it over to Jason here, you know, we've outlined this on calls before, but what we're gonna try to do during the presentation is to break down in a bit more detail the different growth drivers, how we think about that, the macro tailwinds we have, and ultimately, how does that translate into cash flow streams for the business. Now, I've said it before, you know, there are a few ways to think about growth here. There are the short-term growth drivers, and that is gonna be oil and gas-driven activity.
That is going to be water. That is going to be all of the activities associated with that. Those are quick to action, quick recognizable cash flow streams, and very impactful, and we've seen the benefit of that accrue to us over the last several years, and we expect that to hold here going forward. Now, you know, taking a step into kind of more of the medium term, four-ish years out or so, those are a lot of these announcements that we've had coming to fruition. That's gonna be solar, that's gonna be power, that's gonna be a lot of these projects that just by nature of the project have a longer runway, but have been contracted today and we expect to come online over the next several years.
It's important that we continue to work on those commercial efforts now so we have that compounding growth, and we're not chasing ourselves in the future. You know, finally, long-term growth drivers, that's digital infrastructure. That's these larger power projects. That's a lot of these just longer lead time items that again, as we think through the goal of creating year-over-year compounding growth, we need to action those commercial opportunities today, get them in the pipeline, get them going, so in five to 10 years from now, all of these projects are coming online and adding to the cash flow streams that we're getting here over the near to medium term. With that, I will hand it over to Jason.
Yeah, thanks. Next couple slides, we're just gonna talk through the Delaware Basin, why we're in the Delaware Basin. The obvious points out there that why the Delaware Basin is the best place to be. Oh, sorry about that. Perfect. Thank you. I was wondering why the light wasn't on. On this slide, like, just a reminder that the Delaware Basin's got the lowest breakevens in the lower 48. Obviously also has the lowest, I mean, the highest inventory in the lower 48 as well. We feel really comfortable about where we're at. As we move through that, we're gonna talk through water and oil ratios on this next slide.
This is a good slide because if you think about this with a modest oil growth, you're gonna see it at a minimum 11% increase in water growth. There's a couple drivers behind that, and we'll go into a little more detail, but when we talk about the water oil ratios and deeper benches. If you look at this graph on the right, what also is happening is just with existing wells, with PDP, old wells, the water growth is growing while the oil growth is declining. You constantly see that in formations with water-driven formations. It's a dynamic that a lot of people don't really think about, but we're constantly growing just at a PDP level.
Flipping to this, the next slide here, this is a great graph showing shallow formations to the deeper formations. You know, we continue to see inventory grow as operators test new benches. A majority of those are gonna have higher water to oil ratios. As more and more of these things are tested and trued up, we're gonna continue to see that grow. David talked about that growth we're gonna see of 8 to 10 MMbpd . We're in a really good spot to take that. Slide 24 I think is extremely important. Basically what we're showing here is that there's four times more water produced than there is an actual demand for completions.
There's other companies that talk about recycling and reuse as a means of disposal, and that's just not true. This graph shows that very clearly. That's. We'll allude and I mean go into the fact that why having access to all this pore space is so important because of those numbers themselves. This is the chart, right? David went through this, but you can see produced water volumes growing as the access to capacity is declining. Having access and that's, and where this graph is concentrated is on state line in and around those areas that we talked about. We'll walk through a little bit more detail of the dynamics that David walked through on the surface ownership, but this graph is very important.
Just as a reminder, you know, this 5 million barrels in the $300 million of cash flow is super important and an opportunity we're really excited about. All right, the concentration. David pulled up the map of the surface ownership. Bailey, if you wanna do that, we could do that as well. He hit on it pretty well. Historically, all of this water was coming out of New Mexico. The Central Basin Platform really wasn't an option at the time, so a lot of the water that came in, it hit the first couple of sections that were owned right in the Texas state line because of all the regulatory issues in New Mexico. Not us. We've had WaterBridge, I'm gonna put a WaterBridge hat on.
Historically, have always had the view that this injection needs to be spread out, and it's super important if you think about that and think about the pore space as a commodity. But because of that landowner issue, you had 4-6 wells in a section, and that caused that pressure. We talk about, Bernie, you're talking about seismicity. Like, that constant injection pressure that's very concentrated is what's causing some of that seismicity outside the deep set stuff. We're really in a unique situation in a basin that is so high water to oil, water oil cuts, that we have an actual formation in the Delaware Mountain Group that can take all this water if it's handled correctly.
This is super important why LandBridge is set to take advantage of this opportunity. I think more importantly, as we think through our geological teams and engineering teams that we're able to leverage off of WaterBridge, the ability to go buy new surface that has access to that pore space is super important and puts us in a better spot than most of our peers. Moving on to the next one. We talk a lot about these three large projects and really, you know, this is a testament to the pore space and the way we think about geology. It's really enabled WaterBridge and other third parties to have access to these long-haul solutions. With LandBridge's surface, we're able to offer a long-haul out-of-basin solution as well as an in-basin solution.
A piece of that on the long-haul side is Devon reserving the 300,000 bbl a day of future capacity, which is super important. That's never been done in our industry. That really is a testament to them to know that this pore space is super important in the future, and recycling is not a means to support that. The bpx Kraken deal, that's more of an in-basin situation. Again, it was our first acquisition with Hanging H. Bpx saw that they were in an area that had high concentration of disposal wells.
We were able to show them a solution, a higher price solution than the alternatives, but a solution that could move the water away from their core area of drilling and give them some more certainty around not having issues on that. That was a large project. I'm excited, and that will continue to grow with 400,000 bbl a day capacity. The next one we'll talk about is Speedway. Speedway worked out really well from WaterBridge standpoint, it was first brought on to take water from Eddy County to the Central Basin Platform. As we've announced, phase one was oversubscribed, and we've now got phase two in an open season.
I think Chop talked about, maybe Scott talked about potentials for phase three already, but really providing this long-haul out-of-basin solution is super important, and we think that we'll be able to continue to expand upon the land position there to add more pore space going forward. This slide, we thought it'd just be helpful just to show you on a map where a lot of these projects are happening. We don't have to go into detail on that. But really as wrapping up in summary, we've intentionally positioned ourselves to be the solution for growing demand on surface and subsurface, not just for WaterBridge, but for the broader Industrial Group as well. Isaac?
Any questions before we turn it over to Isaac? John?
Yeah. You guys touched on this a little bit earlier, but I'd be curious to hear a little bit more. When you're talking about this 6 MMbpd water growth and then 2 million of declines on capacity elsewhere, can you just talk a little bit more about what the underlying oil growth is there, trying to frame it up against some of the water oil ratios.
Okay. Great question. First of all of this is in the context of a United States that stays flat. You can also think of it as the context of the Delaware itself might not be growing at the same pace, but New Mexico will grow the fastest. Effectively, what we're showing you is a 6%-8% oil growth rate in New Mexico, which doesn't imply oil production growth in the United States, and doesn't even imply more than a 3%-4%, maybe 5% oil growth in the Delaware Basin in total. At an 8% in New Mexico, you get over 11% or 12% of water growth.
That's helpful.
Yeah.
How do you think about how much of that incremental 6 million barrels you guys will capture? Because you have about-
All of it.
All of it. Perfect.
We showed at the roadshow. There are a few other options. We feel like our locations are highly strategic in nature, but I can just go around the horn, just show you a couple other options. In the middle of our Frying Pan Ranch, Bailey, circle the area up, there's probably ultimately gonna be 500,000 or 800,000 bbl a day of disposal there. Wouldn't you say, Jay?
Yeah.
NGL has the ability to move 500,000 bbl across our north-south acreage into a ranch that TPL has on the other side, and that also has the ability for a little bit of expansion. To our north, the old Aris, now Western, has the McNeil Ranch, which there's probably 500,000 or 800,000 bbl a day of capacity there. We're starting to show areas that are more costly to get to. Even if you take away the additional cost, 'cause you go to the lowest cost, best locations first, you still didn't get enough. We still didn't take you through 8 million barrels right there. There's a very high probability that in a reasonable world.
By the way, if you look at the last 40 years of oil demand, there's been 5 x that oil price, that oil demand didn't grow. Four recessions and one pandemic. Other than that, we're between 0.5% and 1.5% of demand growth. It is an incredibly stable line, and it has not bent. It's amazing. If you think about it in that context, you think that it's inevitable that it gets utilized. It's just a matter of what time and what the question that was asked earlier, at what price? Because obviously when scarce commodity gets scarcer and scarcer, price moves.
Yeah, I mean, the only I'd add to that is that those numbers that you're talking about really don't even play into the fact that once this sour gas infrastructure gets put in, I mean, the amount of water that's gonna be generated in and around that area, which is like directly adjacent to not only our Speedway pipeline but also our Speed Ranch, it's gonna open up a ton of opportunity there.
Well, if you just circle that area, Bailey, that is. No, the area below between Speedway and Frying Pan, that is the core of the sour gas window, and in that core, that has been unexploited. I showed you earlier it's been 3x outside of that and there's areas, there's benches in that part of the basin that haven't been exploited at all.
That's where I was gonna go with that, yeah.
Like the Avalon, for instance, incredibly prolific, has not been exploited at all because the solution wasn't sufficient. We feel great about MPLX and their ability to continue to deploy capital to build out additional infrastructure. We're also gonna be part of building out additional infrastructure to unlock that area, and that will have a secular growth trajectory irrespective of the overall basin, the overall country. It's literally just some of the tier one acreage that hasn't been exploited, and it will get exploited at a faster pace.
Good. You're talking about the Frying Pan to the east?
Yeah.
Yeah, virgin pressure. The landowner that we bought that from also owned the minerals, and he was really paying attention to make sure that nothing was gonna happen to pressure up his minerals and cause any issues. The only disposal wells that were out there were originally Concho's, now ConocoPhillips.
He actually required the same spacing that we internally feel like is the right way to do it and also what the Railroad Commission has taken in as part of the rules now, and that's that mile and a half spacing. So as we looked at it was really virgin pressure in a virgin area where we could really exploit the disposal wells in the way that we feel like is the right way to do it. That was the same with Hanging H, right? When we bought Hanging H, on that 75,000 acres, there was only three disposal wells, and that was primarily due to the fact that the landowner is so difficult to deal with. Yep.
When you're talking about a $0.15 per barrel price on the water, how does that change, and how often does that change? How is that priced?
It was an easy number for us to look at when we bought the Frying Pan Ranch because a $0.15 royalty was already in place. That's what he was charging ConocoPhillips at the time, and that was an easy benchmark for us. As we think about it, and you've probably heard people say that, you know, prices could be lower than that. I mean, there are certain areas that where they want to exploit and put, you know, massive concentration disposal wells, which they can't do anymore, where you see more in the $0.10-$0.12 range. We have a view that this, the price, the royalty price, the commodity price of this pore space is going up over time, for sure. It's just, it's not a matter of if, but when.
How does that happen, Jason? Basically, we have some contracted volume at price with an inflation adjuster for WaterBridge already, but the stuff that's not contracted, when it gets constructed, a new price will be determined.
That's right. Yeah. The market is going to allow that. As solutions continue to be scarce, you're just gonna consistently see that price increase.
Thank you. Hey, thanks. I'll do a second one. Maybe just on that point, when you're thinking about $0.15 right now and it going up over time, is that potentially up over time on the same or on your current acreage, or do you need to buy more acreage to reprice higher with incremental WaterBridge volume? Said differently, is WaterBridge kinda set on that $0.15 right now for this incremental 5 MMbpd and then.
No.
No.
No. We did our arm's length transaction with WaterBridge, we gave them access to a certain amount of sites at that set royalty. If WaterBridge comes back to LandBridge and says, "Hey, we need more access to more pore space," it'll be all dependent upon what those contracts look like. If WaterBridge is willing to give some sort of a minimum volume commitment to LandBridge, then maybe we look at a $0.15 rate. If it's just on spec, we'll see what the market is and can adjust that accordingly. To answer your question, the 5 million barrels is not locked in at the $0.15. As we think through other third parties, we'll see that continue to increase as well.
Does that hold for Speedway phase 2 if we're thinking about those incremental barrels coming in?
Yeah. I mean, again, WaterBridge only has access to a certain amount of locations. To expand upon that, there'll be a negotiation then.
That predefined access as well, that's not indefinite.
That's right.
There's a limited runway in which that current pricing scheme holds in terms of WaterBridge's option to execute on that, you know, to the extent.
Remind me, Scott. It's like 2.5 MMbpd of pore space.
It's-
We can get back to you.
We can get back. Yeah, I don't wanna misspeak on the exact figure and term.
Okay.
Yeah, I mean, typically, when we go through acquiring surface to the extent part of that underwriting was done, assuming WaterBridge activity, which is a good thing, you know, we will give them a subset of the pore space, call it preferential rights on that, and that's typically good for about five years at a set price. To the extent it's not actioned, it's use or lose. It goes to the market. Then the rest of the pore space as well is market price day one. Yeah, I think there's a lot of room in there for us to react to the market and react to kind of the scarcity continuing to drive these prices up.
Yeah. The only thing I'd add to that, people talk about the $0.10 being market or $0.15 being market. Historically, there are landowners that have charged operators when they were operator on systems $0.25 a barrel. I mean, that was the rate until these water midstream companies came in and started adding scale to it. It's not out of line to see things increasing to a number like that.
Thank you.
Just curious to get your perspective on New Mexico's stance towards water disposal. I mean, is it something that is potentially possible down the line? Or if that occurs, operators wouldn't even be willing to consider injecting in New Mexico because it seems like the value of the pore space is very contingent upon regulations staying where they are. I know you guys.
Well, it's not contingent on regulations staying where they are. It's contingent on really the history that's got us to where we are.
Yeah.
New Mexico is making it harder and harder to get your permits and has increased their volatility with which they regulate rather than decreased it and stabilized it. Effectively, if you want a long-term solution, even if politicians came in and said, "Now you can do it and we're going to enable it," you still wouldn't do it because you'd be afraid that the next administration, the next state administration is going to change it all around on you. If you think about it, for these guys, the value of your resource is massively outstrips the cost of managing your water. What does that mean for you? You basically want to make sure your resource gets exploited and doesn't get shut in. If you don't have a solution, that's a problem. You look for a long-term solution.
Thank you.
You don't have to just trust what we say. All you have to do is look at the price in the market we talked about on the WaterBridge Roadshow. Our average price per barrel for gathering and managing water, $0.65. Our bpx deal was at $0.90, and Speedway was $1-$1.25. It's going in that direction already, and people are paying for that long-term sustainable solution.
Great.
Yep.
We'll be talking about digital infrastructure now, and how Texas, and specifically West Texas, has hit an inflection point. We'll start off with the macro-level overview of why we've gotten to this point. Critical timeline is 2022 when artificial intelligence inferencing and training hit a substantial inflection point where we saw substantial deployment of capacity. This existential need for power became so intense. Complementing this is AI inferencing training use cases have some degree of sensitivity to latency, but not as much as commercial cloud. That forces kind of the ability to look at new markets, new geographies. This intense computing demand complemented with more flexibility on location and you know, just the deployment and power. You have this convergence of power and digital infrastructure. Texas is a very ripe market for digital infrastructure.
You know, we see the amount of CapEx that's being deployed, you know, forecast by 2027, 2026 is in excess of $600 billion, which essentially surpasses that of a lot of the oil and gas operators. Again, the macro-level landscape is creating a ripe environment for us to really benefit from this. As basically digital infrastructure begins to be deployed or where it's been deployed in historic markets, it's become such an eyesore and a contentious issue that drives a lot of opposition to these projects. This opposition to projects stems from competition for finite resources, grid capacity, electricity, water resources. The battleground for creating delays is these permits that are long lead.
Long lead permits become even longer lead drivers, creating more risk to deploying capacity in these traditional markets. Next slide, please. When you're looking at just the market, you see the finite ability to deploy capital in these traditional markets complemented by these permit deployment issues. West Texas becomes a more favorable landscape. You have boundless access to grid and power generation. I think one thing to emphasize here from a grid connectivity perspective from West Texas, for instance, is the Permian Basin Reliability Plan, which is adding additional interconnection capacity and the rich landscape of renewable energy generation. We'll talk about this later, but our ability to have access to water resources is also a part of enabling that data center infrastructure ecosystem.
I think something that most of us in this room may not appreciate is that West Texas is a very favorable landscape with respect to land use, environmental, and permitting regulations, which accelerate your ability to deploy capacity much faster than any other market in the U.S. When we go to the next slide, I think it's important to view the national landscape. The blue dots represent the traditional markets, which again, have been adjacent to very traditional cloud computing use cases, so latency was a key consideration. With the emergence of artificial intelligence, inferencing and training, you see new markets emerge where there's a substantial amount of infill development, drawing emphasis to Texas, specifically. That historical concentration is shifting. New geographies emerge. LandBridge is well-positioned, and we have not an incidental positioning.
It's a very deliberate structural advantage that has been created not just through the LandBridge position but through the Five Point ecosystem. Digging deeper into Texas, this is not speculation. This is not a science project. You can see the number of notable gigawatt plus scale campuses that have been announced, not just in Texas, but more specifically West Texas. Abilene I think is the most relevant or appropriate example to highlight relative to OpenAI, Crusoe, and the amount of capacity there is frankly staggering. Those differentiated offerings that we can bring to bear from a LandBridge perspective include a vast contiguous acreage. These gigawatt scale campuses, large scale, we offer large assemblages of developable acreage. Attractive natural gas positioning by proximity to the Waha Hub.
The amount of water availability that we can bring to bear in any one of our positions is substantial, and we've quantified that, and we'll talk about that shortly. Favorable grid outlook by virtue of the Permian Basin Reliability Plan. Great permitting landscape and business-friendly legislation. Again, when you look at this map, you see existing markets in major cities shifting to the West Texas geography at scale and at large capacity. Taking it one step further, there's about 36 million plus acres in West Texas or in the Permian Basin. Of that acreage, not all of it is suitable or right for data center or digital infrastructure development. Some of the core enablers for digital infrastructure development are proximity to grid infrastructure or natural gas pipelines.
This map on the right shows just the proximity to some of those most critical enablers to get access to power. Complementing that, again, I'll mention the access to water. The human capital dynamic I think is also underappreciated in West Texas. The oil and gas landscape offers a rich supply of labor, human capital. Then more importantly on LandBridge specifically, we've done the homework to identify, characterize, and almost pre-de-risk sites to understand what sites are most attractive for a variety of hyperscale or digital infrastructure developers.
This includes identifying resource blockers, land use compatibility issues, and understanding the local regulatory landscape such that when we engage with counterparties, we have conviction on which sites are most attractive and drive the highest and best economic use for these uses on our acreage. I think one of the points of conversation around digital infrastructure, especially when you talk about competition for scarce resources, is water access and the need for water access. A good way to validate the water use intensity or this metric in the broader landscape is the water use effectiveness ratio. For every kilowatt of power that you generate, compute, you have an associated water need.
Using a very conservative estimate of 100,000 bbl per day for a gigawatt-scale data center, we have in excess of 2,500 years of available supply. The estimated groundwater that we have on our acreage is. This is not conjecture. This is something that we have third-party verification validation from one of the leaders in the space where we have the confidence to supply these volumes. This creates a complementary element where our ecosystem or our landscape, our offering, is attractive, especially for water-cooled solutions. I think part of the conversations I was having before this conversation was, what about, you know, less water intense uses? I think David called out earlier that there's a significant trade-off when you're using closed loop cooling.
It's a substantial 10%-30% increase in power demand while driving down your water consumption. I think the takeaway here is that we can accommodate those very intense water use scenarios.
Yeah. One thing I'd add is the water and the reason why we've accessed this is because we've got such large contiguous blocks, and the way this is calculated is on a per acre foot, and then that's how they give you your allocations. One thing that's super important and interesting about this area is that prior to oil and gas activity, this area was home for the largest, like, melon farming cantaloupes in the United States. Cantaloupes take a ton of water. There's no cantaloupes out there anymore because of all the oil and gas activity, but the underlying water resource is there. The one reason why the cantaloupes were farmed there is because the mass amounts of water in the soil and also because of the recharge rate.
When it rains there, the ability for this reservoir to recharge is huge. That goes into this calculation that we had a third party do the study on.
Yeah. That's exactly it. We've quantified and understand the magnitude of that recharge potential and have also engaged and understood what the regulatory landscape is for withdrawing those water volumes from these positions throughout our acreage. Next slide, please. I think what you take away from the digital infrastructure revenue streams is that we have a quite comprehensive approach to generating revenue. As David laid out, it's not just a lease or damages payment. There's a power royalty, water royalty component by which we have next slide, a series of just revenue streams being brought to bear. Next, Bailey. There you go. Thank you. So this timeline shows a notional representation of basically a data center, a gigawatt-scale data center development project.
You see kind of the time horizon one to six years. Before this timeline actually begins, it's important to acknowledge that there's a substantial amount of de-risking and understanding from a developer, a hyperscaler, an end user. There's permitting, design and engineering. Before any work takes place, there's a phenomenal amount of just work that has to take place. Once that option converts into development, these hyperscale data center sites are thousands of acres, so there's a substantial amount of earth moving that has to take place. There's grid interconnections. There's placements of turbines. The time to revenue, or the time to bring the revenue, is a couple of years components, but these provide full streams.
I hope what you also take from this is that the enablement of a gigawatt of capacity is not immediate. It's a phased development that also happens concurrently with the building of the vertical digital infrastructure components. This slide I think gives you kind of a key overview or a cheat sheet, if you will, of what we think are our structural advantages to enabling digital infrastructure, our acreage, proximity to gas, the contiguous acreage, the access to water that we can bring to bear, and the existing and future access to grid, not just at the transmission level, but also at the distribution level.
When we talk about digital infrastructure, it's not just hyperscalers, it's also these smaller edge compute use cases or distributed computing sites or Bitcoin miners that can also benefit from that available capacity on our acreage. Fiber infrastructure, the proximity that we have is suitable for a lot of these use cases. With the eventual deployment of gigawatt-scale campuses, that latency consideration will substantially improve. One thing that I also want to emphasize is that we don't just have access to natural gas and grid. The West Texas landscape is also very rich, and our acreage specifically has commercially viable solar generation potential throughout our acreage, along with wind generation potential, which is complemented by the existing and proposed generation or transmission infrastructure.
What I hope you take from this conversation is that there are a number of existential problems or headwinds that the hyperscale data center industry is facing in existing markets, and we are uniquely positioned to offer solutions to those core blockers. There are a number of proof points in the broader space. It's not just the increase in capacity, it's also the increasing adoption of co-located and behind the meter gas generation. There are a number of studies that show that increasing adoption, not just from wholesalers, but hyperscalers. The emergence of Texas becoming a key data center market, and then our just commercial track record that we're beginning to enable throughout our acreage. We'll stop there.
Any questions?
I know we had at least one. Alex?
Thank you, Scott. Just a question on the data center. Obviously, Texas benefiting huge from, you know, pro-growth and cheap energy. But data centers, is it like electricity where you have to have boosters along the way to the end, you know, the end market, or you can literally put a data center any place in the world and, you know, the end user here in New York, they don't care whether it's in West Texas, in Northern Virginia, or wherever. Just trying to understand if there's any competitive reason that data centers in West Texas would have a harder competitive set versus anywhere else versus, no, the data travels just as quickly, it doesn't matter.
Well, haven't you been following Elon? He's gonna put data centers on the moon.
Yeah, there's a lot of stuff that.
I joke, but yeah.
We also have self-driving, you know, cars that crash.
Yeah, exactly.
We'll go there.
What I would say, I'm gonna give you the non-technical answer, and then I'm gonna let Alex dig in a little bit. Basically, if you think about what latency means, latency is time to the end user, effectively. In the early phase of development of a new market like West Texas, people talk about latency. Your solution is optimal for training, large language model training. Your latency you're talking about is really 5 milliseconds between West Texas and Dallas. You're not talking about massive latency, but at first, your application is gonna be for training. As you get more data centers in the same area, the data center talk to each other, and latency is no longer an issue because you are the hub. That's what we have in Loudoun.
You don't hear people talk about latency between the data centers in Langley with California, 'cause it's not an issue 'cause they talk to each other, and they make it happen. That's what will happen here, and then and that's when you have inference opportunities and cloud opportunities as well with the preponderance of them there.
Yeah, we'll cover this in detail to Alex from PowerBridge. You'll see that what's occurring is a tectonic shift of where load for compute is being located. The principal reason for that is that latency is not as significant, and what wins the day is the convergence of all the factors that we'll talk about, which is energy, water, compute, power, and the fiber really acts as a connective tissue. Think about it as an export pipeline of all of those attributes. There was a point in time where location mattered. It no longer matters, particularly with the fiber conduits that we're constructing, which we'll get into in the PowerBridge presentation.
I'll do another one. Going back to the water side. You guys are framing up effectively the kinda groundwater and aquifer potentials here. On the kind of water sales side, would you expect any of the produced water to go into this market? Then if you could just talk about potential kind of water pricing. If we even got water sales here, is it a very different market, very different ability to purchase, but just from a dollar per barrel, does it look similar to what we see sold into the completions market?
I'll let Jason handle the price, but the technologies and the utilization of produced water are absolutely coming. We have desalination opportunities where it's more expensive than using an RO process on groundwater, but it's also there's big motivation to be able to make that happen and make it happen scale. We are also working on technologies, and I'll explain who we is there, that will enable the utilization of actual produced water for cooling. One of the cool things I get to do in my business at Five Point is I have a group that focuses exclusively on water management technologies. We canvas the whole landscape because you can imagine we manage 6 MMbpd of water, probably more than anyone else in North America, maybe the world.
When you manage that much water, every scientist who has a solution comes to you. We seek them out as well. We test it in the lab. If it passes our lab tests, we'll pilot it in the field, and if it passes the pilot, we'll institute it. These technologies are improving to the extent that they will start to get utilized throughout the basin. We feel like we will forever be on the cutting edge of that because of all the water we manage and because it's our focus.
Sorry, Jason, on the pricing maybe.
On pricing for the different types of water.
Yeah. We talk about this, our groundwater, right? We've got a fresh source and more of a briny type source. The briny can be treated very, very easily with like a small RO system. That water is probably gonna more be in line at the $0.40-$0.50 a barrel, depending on the amount of volume they need and how much they're willing to commit to. As you think about produced water, WaterBridge is in an interesting spot, as well as LandBridge. You know, WaterBridge gets paid to take that produced water no matter what. What we do with it downstream doesn't matter.
The price when you start talking about these technologies and the cost to treat this water and the equipment is gonna be necessary for the equipment, that's gonna continually evolve, right? I mean, we're already talking about some of these systems potentially could take produced water raw, getting out the hydrocarbons and then some of the heavy metals. Yet to be determined. I mean, Isaac, you've had more conversations in and around the produced water pricing because we've looked at some supply-side opportunities there.
We've looked at a number of produced water being treated to meet a technology or facility cooling specification. I think that pricing is a critical component, and I think we have a commercial structure or approach that's thoughtful and addresses that concern from the offtaker. What's another point of education with them is the opportunity to have them understand the regulatory pathway for using that water. Like Jason mentioned, the education and just the acceptance of that integration of that water into the cooling technology itself. It's been conceptually well-received, especially recognizing that tension that exists between water consumption and the competition for resources with data centers and the story, the narrative that using produced water in data centers in West Texas can create.
Yeah.
I guess like the quick follow-up then. I guess the thought process for groundwater sales, that is certainly a LB revenue stream.
Right.
If you start using produced water, that sits at WaterBridge. Is that kind of a fair way to think about that?
Yeah, because WaterBridge would already been paid the royalty on it. Then, as we talked about, those royalties will potentially continue to increase, but that would be a WaterBridge opportunity.
Thank you.
My question was basically a follow-up to that is, so does WaterBridge basically own that water? Like, does the operator have any right to it? Does LandBridge have any right to it?
They don't. Contractually, when WaterBridge takes the water, they take custody of it.
They can decide to put it into whatever uses. Data center, beneficial reuse, injection.
That's exactly right. We can do whatever we want with it.
I'll say, maybe for Isaac. In terms of working with the data centers, how important is it for them to be using water outside of the hydrologic cycle?
I think when you look at using water outside of the hydrologic cycle, you see these trade-offs being made where they're sacrificing power capacity to use air cooling at a substantial cost of that power. The optics of it creates such a long lead driver in other core markets where they've learned from those lessons, and they want to avoid the reputational black eye. Just like the hyperscaler digital infrastructure industry has made substantial commitments to decarbonize some years ago, you're now seeing a lot of these hyperscalers now make these commitments to undertake water replenishment ecosystem restoration projects to address some of those intense water uses.
Last thing I'll highlight is that it's not a surprise to anyone that these numbers of water consumption are not broadcast broadly. When you get a sense or try to get a sense of the magnitude of the water being consumed, it's hard to know, and that just is an indicator of the severity of the reputational risk that they're trying to avoid.
Yeah. You can probably just add to the, you know, the municipality situation. I mean, I'm from Abilene, and it's caused a massive issue with the Stargate Project because, you know, it was never broadcast to the city how much the actual water needs were gonna be. The pushback that they'll continue to get when these large-
Yeah, it's very.
All right. Scott?
Yeah. We'll briefly walk through just some of the other industrial uses that we're seeing today and what we're pursuing here on a go-forward basis. If we go to 42, perfect. We show you just a mix of customers at the top there. You can see obviously a lot of oil and gas, you know, industrial folks, but also a handful of others that are a bit more on the periphery. You know, today we see some mining, we see some waste management. You know, we have
We have man camps to support kind of the broader activity in the region. You know, on a go-forward basis, we certainly expect these to continue to grow. You know, actively working through municipal water supplies, obviously talking with both current and future, potential future partners on man camps and housing, particularly related to data centers. You know, some of you may have caught a recent article where there was discussions around the man camps and housing needed for the staff coming in, and you know, they need like golf simulators and things like that it spoke to. Didn't realize that was on the agenda, but maybe we have to look into that as well.
Fuel stops and just a number of other kind of enabling, call it customers, enabling revenue streams that are ultimately a byproduct or potentially could be, you know, a predecessor or a precursor to just a lot of the growth that we expect to see.
Yeah. I mean, just like the thought of that you're building cities to support this.
That's exactly right.
Yeah.
Yeah. That's exactly right. We go to the next slide. We touched on water quite a bit. I mean, and Jason, is there anything you'd add on this here?
No, I think we went into it pretty in-depth. I know we'll talk more about it on the fireside chat as well. The one other thing I would talk about real quick on that last slide was the caliche. We talk about caliche as being something that we sell to the oil and gas producers, the gas plants, et cetera. Scott likes to phrase it as cement, right?
That's right.
He says, "Jason said it wasn't cement, it's just rock, but when you add water, it gets hard.
Not hard cement. Anyways, it's a very valuable resource that as you think about when one of these things is constructed, any of it, I mean, the mass, the vast amounts of caliche is gonna be required, and we are sitting on a huge reserve. If you scratch the surface in West Texas, you enter into these caliche deposits that are throughout. It'll be a really big opportunity.
Yep. Good. Yeah. You know, similar to the other sub-sector exposures here, we try to just highlight on the map, you know, where we expect to see, you know, some of this activity, and we've talked through quite a bit of this. I mean, I think, you know, the main takeaway from this slide, from this section is kind of something I've spoken to before. There's obviously a lot of activity we're pursuing directly on our surface, and that's very obvious to point to, you know, accruing to our benefit over time.
You know, as other development occurs off of our surface, as other folks bring other kind of infrastructure online adjacent to us, you know, ultimately, it's a lot of this ancillary and supporting kind of infrastructure, businesses, operations that are gonna be needed just to keep that going. You know, what we expect to see is just the ongoing compounding of just the industrial ecosystem in West Texas. As a large landowner, particularly a large contiguous landowner, we would expect to reap the benefit of that. Wrapping up on 45, you know, we very much by design package our surface together to really be the optimal solution for a number of different use cases here. You know, we've talked through all these, so I won't go through them in detail.
Again, these are all items that we're very thoughtful about, particularly as we continue to scale, which we'll talk through here in a bit. With that, I think we've got a quick 10-minute break before we kick off the more detailed PowerBridge and data center discussions.
Thanks everybody for coming back in and sitting down. I'm gonna introduce Alex Hernandez. We did talk about his prior roles at Cumulus, as a founder of Cumulus and the CEO of Talen. We're really excited to have him as a part of the Five Point family and you'll understand from his presentation where and how he fits into the whole ecosystem and drives value to LandBridge.
Thank you, David, and delighted to be with you today. I'm gonna focus my comments on how do we make all of this a reality. You know, I had the benefit of being in your seats a year ago, before my partnership with David and had the benefit after our sale of Cumulus to Amazon, and after running Talen, which owns 15 GW for seven years, to think about where the next largest both power and data center market would emerge in the world. The conclusion I came to was that that market would be in West Texas. That beginning with a set of assets that had a certain level of attributes together with a team to prosecute that thesis was the optimal place to be of all the other places in the world that one could be.
You know, how do we think about the world? Let me just start there. You know, we observe the fundamentals. We take those fundamentals to develop a thesis. We execute that thesis relentlessly and ultimately drive value for PowerBridge and drive cash flow for LandBridge. Where are we in this thesis? We founded Cumulus, which is the first direct connect business, which I'll take you through, under the basis and the view that the world of energy was converging and colliding with the world of digital infrastructure and compute at a rate that few in the world understood. We did that in October 2019, began work in the spring of 2020, right in the middle of COVID, and during the course of three and a half years, developed the largest campus that Amazon has today globally, in Berwick, Pennsylvania.
That convergence in the last five years, it's our point of view, has only accelerated and also gotten larger in size. What's the trick to this convergence? The trick is execution, right? The trick is how do you connect these concepts that we've heard so far, the macro, the assets that the Five Point ecosystem has, LandBridge, WaterBridge, and now the new entrant to the family, PowerBridge, to drive this value both for ourselves and for the ecosystem in its entirety. The way we're gonna do that is through a powered campus strategy that I'll take you through. How do we fit within the ecosystem that you've heard of? PowerBridge's mission is to develop power campuses. That is developing the electrical infrastructure that interconnects the surface to a data center campus, to the electric grid, and to new power generation.
There is a system of wires and substations and engineering that make the energization of the LandBridge surface possible, and that is our mission. There are other important elements of this value chain, which is the fiber conduit that David mentioned. In addition to electricity, an overlooked part of the value chain is fiber. Fiber eventually serves as the export pipeline of the natural gas and the water that are converted to information and that can be sold at a much more attractive price under long-term contracts. Fiber and conduit is the key connective tissue that connects us to the end markets around the U.S. and around the world more broadly, beginning in West Texas. Then you've heard about WaterBridge and some of the other Five Point family companies.
Let me just spend a moment on a small town named Berwick, Pennsylvania, that many of you probably have never heard of. Berwick is a town of 6,000 people. You have probably heard of a town named Pecos, Texas, a town of 16,000 people, really at the center of the LandBridge ecosystem. Berwick in 2020 and Pennsylvania in 2020 had 0 data centers. At the time I was CEO of Talen, we owned Susquehanna Nuclear, which is the largest nuclear power plant in the United States. We were surrounded by Marcellus gas. We were surrounded by gigawatts and gigawatts of natural gas power plants that had been overbuilt in a prior crisis or prior cycle.
We were facing a situation where we had an abundance of electrons that were trapped in eastern Pennsylvania and could not get to end markets, right? Does that sound familiar? In West Texas, we find ourselves in a situation where, as Jason described, we have trapped water that can't get out. We have trapped gas that can't get out. There's been enormous value demonstrated already in creating businesses that fix those industrial problems and also take advantage of the value differential that exists from solving that problem. You can think about our power campus strategy as one and the same, but for power and for data centers. Cumulus, very briefly, what happened to Cumulus?
We connected two of the largest nuclear power plants in the United States with a fancy extension cord and a substation system that was larger than the electrical system built by Dominion Energy in Virginia, the country's largest data center market. We did that in three and a half years with a team of 15 people. While we were moving, the utility monopolies around the country were staying still, were not investing in electrical infrastructure. As a consequence, when the market grew to such a degree, we're unable to satisfy the large need for digital infrastructure and compute that came into the grid. Cumulus was there to satisfy that demand. If you ask the question back in 2023, when the business was sold to Amazon, where in the world can one connect one gigawatt of power and compute today?
The only answer was in Berwick, Pennsylvania. We endeavor to do that five times over, as David said, by building five campuses within PowerBridge, five Cumulus, each of 2 GW in size, 10 in total, expandable to 15 across the LandBridge acreage, taking advantage of the ecosystem. Let me next spend a moment talking about the path that we traveled in Pennsylvania and that now Pennsylvania continues to travel, and how my belief is that West Texas, that Pecos, and that LandBridge will play out much in the same way, but in my opinion, at much, much larger scale. If you go back to just the last two years, I'm not even gonna go back to 2020, there was the sale of Cumulus to AWS. AWS now is investing $20 billion into the campus that we developed for them.
In short sequence, immediately adjacent to our campus. Again, this goes to the value of acreage, to the value of ecosystem, to the value of clustering. QTS and Blackstone earlier this week announced the purchase of 2,100 acres for $250,000 per acre immediately adjacent to our Cumulus campus. Why did they do that? Because all of the infrastructure that we constructed was present to facilitate the deployment of digital infrastructure at very, very large scale. All of the electrical was completed, the fiber was completed, and so adding to the ecosystem is much easier than developing it. Today, we estimate that from a starting point of zero, Pennsylvania is now a 7.5 GW market. That roughly translates to just $100 billion of investment.
Roughly half of that is in a town of 6,000 people in the middle of the Marcellus Shale. My contention to you is that Pecos, Texas, when we come back and see each other in five years or every year, is heading in this direction. Let me just briefly talk about, and I'll get to execution, but what are the fundamental principles that we rely on as we observe the macro and use the tools and partnerships in the Five Point ecosystem at our disposal? The exponential growth of data is driving the convergence to energy because 50% of the operating costs and roughly 40% of the capital costs related to data centers are power and energy-specific.
The greater the growth, the bigger the problem and the more difficult to satisfy it quickly by the grid and by people that do not respond to market signals. Utilities, for the most part, with a few exceptions, are ill-suited to make that demand. They were five years late in getting started and are now trying to catch up. Our belief is because of that, data centers will be connected directly to generation. You'll see that part of the PowerBridge plan is to bring and design our own power generation solutions, not to simply rely on others, not to just rely on the grid, but to contribute new generation into the grid, which is important to execution, but also important politically and regulatorily in the current environment. Particularly if we continue to see the growth rate over the next decade, bringing generation will be important.
How is the data center world changing? You know, five years ago, 1 MW, which is a unit of capacity of power or data, was a very large transaction, right? Then 100 MW was a large transaction. We're in a world today where if you speak to the five largest market cap companies in the world, their feedback is, "We need at minimum 250 MW to even start, a gigawatt to make it significant, 2 GW or more to ramp, and what we actually need is a multi-gigawatt clustered solution that can solve a decade of growth with certainty." Because the greatest growth and the latest risk that they face, our customers, is to not have the physical infrastructure that allows them to meet the compute and high margin profile of their cloud businesses or their AI businesses.
All of those things do not happen without this physical layer that we're developing. What connects all of that? Fiber, I'll come to that in a moment. People focus on power. They focus on the other elements. They don't focus on fiber conduits. Fiber conduit is a key part of this ecosystem that connects everything together. David talked about the ranch ring and the other routes. We'll talk about that in a moment. And finally, you know, our belief is that the next large data center platform will emerge through the lens of energy. You can think of us as one of the early anchor customers for LandBridge and for WaterBridge that will help drive value for them, for the ecosystem more broadly, in addition to any direct relationships that I anticipate LandBridge and WaterBridge may have with technology customers.
Moving to what are we doing specifically? This is a map you're well familiar with of the LandBridge acreage. I've highlighted for you five, what I'll call target campus developments that we're hard at work on. We've been hard at work for the last year without being public about our work. I will say that we're advanced at developing these five campuses across the LandBridge acreage, and the selection of these locations is not coincidental. These are places that have land abundance, where the surface conditions lend themselves to large infrastructure deployments that have ample water, that have access to the fiber that we're developing, that are in important places of the grid electrically. The confluence of all those factors plus execution equals optimal places to deploy digital megawatts at very large scale. What do we envision the business model to be?
On the left you'll see, as I mentioned, we will build and I'll show you a 360 model of our campuses that David flashed up briefly. We will develop with Five Point new natural gas generation. The market's tightening. Notwithstanding the fact that equipment costs are high, we believe the economics are attractive and that the value of this generation, if used for digital infrastructure applications and to satisfy the requirements of the grid, is very high. That generation will be connected to what we call our digital campuses. This is the powered campus strategy. That is effectively an electrical network developed by us. Think about it as a mini utility, although we are not a utility, that provides all of the electrical infrastructure to connect the grid, the power plant, and the data center.
To the right you'll see the customers that we ultimately think will occupy our campuses. I wanna clarify that our strategy is to provide the entire base layer until the pad and to provide pad-ready infrastructure for the customers themselves to go vertical, which we think is the most attractive part of the value chain. Effectively we're providing to them a neighborhood where they can simply move in and to begin deploying their megawatts at scale. I just wanna touch briefly on the noise. You can't, you know, swat a fly without reading an article about a data center or a project or powered land or AI. There is so much noise in this market that it's difficult to differentiate noise from reality. Our approach has been to be quiet, to develop, to work, to provide an executable plan.
A key competitive advantage of this market is to go to an end customer with a real solution that is actionable, and that is our plan. We can say we have a relationship with LandBridge. In the case of one of our campuses, which we call Alpha Digital, that I'll take to, we have a relationship with LandBridge that allows us to access that surface. We have on order our electrical equipment for the digital campus and are advanced in finalizing the generation solution. When you go to a customer with a packaged plan and a full dinner menu, that in our opinion, is the way to win in this market, as opposed to peddling land, peddling turbines, peddling sites, doing things that don't provide a full value chain solution. That is a losing recipe, in our opinion.
The way to get through that noise is to provide a full solution that is executable. What does that solution look like? David showed you this previously. This is not an artist rendering. It is an actual 3D model of our first campus of the five that I described called Alpha Digital. This campus, as you can see, is 2 GW in aggregate. It encompasses roughly 3,000 acres near the Pecos area, near Wolfbone. If you look at the bottom part of this diagram, this is a 1 GW deployment that includes a few key pieces of infrastructure. You'll see first that in the center of the page, there's what's called a private use network. This private use network is the electrical brains of the campus that connects everything together as I described, the grid, the power, and the data centers.
All of this equipment is on order, and we are in the process of finalizing the construction contracts to begin construction of this private use network at the Alpha Digital Campus. Next to it, you'll see island mode generation. What does that mean? That means a collection of smaller power turbines that in a certain set of configuration can run on a standalone basis without the electric grid because of the constraints that everyone around the country is facing interconnecting to the electric grid. Before, you know, my partnership with David on PowerBridge, I served on the ERCOT board, came off the ERCOT board when PowerBridge was formed. Notwithstanding the fact that Texas is the most nimble jurisdiction currently in the country, the backlog that the queue is facing is still very high, and having an interim power solution is important.
Finally, you'll see that there's a permanent power solution that allows the campus to grow to a gigawatt in size, and we would replicate that in the other side of the campus to grow to 2 GW in size. As you can see, the data center deployment would follow that power ramp over a multiyear period, right? This is the product that PowerBridge is offering an end user. In doing so, you can see we're using LandBridge surface. We would anticipate using WaterBridge water for cooling the power plant. Ultimately, even if the customer were to choose starting with air-cooled products for their data centers, as chip density increases, our belief is that over time, given the advantaged water situation in this area, we have the ability as well to sell water for chip cooling at this data center campus.
We talked a lot about some of the energy and water attributes of the LandBridge acreage. One attribute that we haven't discussed is how strategically located that acreage is with respect to the electric grid. These green lines are the highest voltage transmission lines that traverse the state of Texas. There are three lines in particular that are dotted darker green here that are 765 KV lines that have been newly approved by ERCOT, the Public Utility Commission of Texas, and the governor to construct the largest transmission project in the history of Texas. These three lines will cost $30 billion and will import and export power from parts of Texas to the Permian Basin, to the Delaware Basin, and specifically to places within or proximate to the LandBridge acreage.
The Alpha Digital campus that I just showed you a picture of is depicted here with a little blue star that's hard to see. It's not a coincidence that campus number one is on an existing 345 kV line, but in between the two largest transmission projects that will be constructed in the history of ERCOT. That allows us the ability to both import power when we need to and export power when we need to. It is another factor, in our opinion, that will make that surface position even more strategic. Finally, let me just touch on fiber. David mentioned this a little bit at the outset.
Power is nice, land is nice, water is nice, our campus is nice, but none of this works at the scale that we're discussing without adding further infrastructure related to fiber conduit. This is the first time we've discussed it publicly, but what is our plan? Our plan is to construct approximately 1,200 miles of new routes that are underground routes. We haven't showed the routes here exactly, but we've shown you to where we're going. Each of those routes will have six conduits inside of them that can be purchased or leased to the ultimate data center customers. We will go west to El Paso, as David said, and on to LATAM, on to Los Angeles and Seattle and the Western markets. We are going to Albuquerque and onward to Denver. That is a path that does not exist today in telecom.
We are going to Midland and onward to Abilene and Stargate and Dallas and beyond. The significance of all of this is that by the time we are done with our fiber conduit project, Pecos will have, in my opinion, the strongest connectivity story in the country over time. We will have eight redundant underground fiber routes that will support the level of compute that we anticipate will occur within this basin. We began doing this one year ago. We've been heads down on execution. There was a question about groundbreaking. We anticipate breaking ground in the second half of this year and have the fiber conduit completed concurrent with the completion of our campus and the power to offer the customer an integrated offering.
In totality, what I expect you'll see is us in the future being a hopefully good customer of Jason's, a good customer of Isaac's, driving value, of course, for our own business, but being an anchor to the economic activity that we anticipate will develop. I also anticipate beyond you know our efforts, just us, but I anticipate David and team will attract a lot of interest from the largest companies in the world. If the clustering effect that we saw in Berwick, Pennsylvania plays out in this region, you can anticipate, in my opinion, an enormous amount of activity. I wanna emphasize we are early innings here, right? At the moment, there are zero data centers in Pecos today. There were zero data centers in Berwick in 2020.
I think, just one man's opinion, we're at the same inflection point, and all signs of commercial activity, of growth, you know, point to acceleration and to deployment given the attributes that this ecosystem has. I'll finish just very briefly with some people that you may know. You know, Jobs briefly said, "Don't be trapped by dogma. Don't be trapped by the fact that people say that West Texas won't work." David, two years ago, said West Texas was going to work. It is working now. Another friend of yours, Mr. Gates, suggested that we tend to underestimate the change over the medium term. Think about what the city of Pecos will become in five years, in 10 years, and hopefully, we'll be a productive part of driving that change. Thank you.
Thanks. Any questions for Alex? Yeah. James.
All right. I guess there's a lot of confusion around the different types of water. You guys have aquifer, both fresh and brackish, then you have the produced water. In terms of end uses, you have the water that can go into cooling towers for power gen. You can have heat rejection in the data centers, and then I guess there's also a component where you could do liquid immersion or direct cooling for the chips. Can you kinda walk through all of those different areas and I guess where the value capture is and what you're most excited about on the water front?
Yeah, happy to take that. I think when you think about water, the water that we have access to, let's focus on fresh and semi-fresh or brackish. All that water can be applied to the facility or technology cooling use cases. The punchline is that it's incremental amounts of treatment for a higher spec or you know more clean. That would be basically supplied and by LandBridge and then potentially treated by WaterBridge through RO systems and filtration processes.
Yeah. I would get back to what we were talking about earlier, just the vast amount of water that we control will really give us a leading edge here as we think through Alex's conversations with the data centers and the hyperscalers that they need access to this water. This goes back to what I said about the municipalities, right? I mean, the proximity to non-municipalities is really a good thing. The access to water, because of our contiguous nature of our surface position, there's not another surface provider that could offer that same solution.
That's exactly it. I think the other part of the conversation is the magnitude of volumes that would potentially also require recycling-
Yep
disposal. I think that there's an adjacency to the WaterBridge business for which we're engaged in some conversations with a number of known counterparties, where we're delivering or iterating on how to deliver a solution that's cost effective, for their data center facility.
Can treated produced water ever be treated to a standard that can be used in a data center?
Yes.
Like, at what cost?
Obviously it's a higher cost to treat produced water to meet a facility or technology cooling spec. The manner in which we're approaching it is that the end user of that water wouldn't be the sole bearer of that cost. Obviously there are commercial knobs and levers that have to be calibrated. The model, I think we have a pretty high degree of confidence on a model that works. The critical element is ensuring that that water is one, supplied at an economic rate that is the same if not marginally better or not worse than the available water. Two, having the certainty that the regulatory bodies, TCEQ Railroad Commission, that interface is resolved.
Three, that we give them the confidence that this isn't a pilot and that it's been fully integrated without introducing operational risk to the cooling or facility infrastructure that's interacting with that water. Does that...
No, that makes sense. Do you expect kinda like initially more fresh water, more-
Definitely
brackish water and then.
Yeah
over time.
I think that's definitely the reality, that you go with something that's known and proven. I think that part of our messaging to the market has been as the optics or just the availability and abundance of this produced water is proven, we can introduce that in a meaningful level where your water supply, your water use story is building upon something that's core to the Permian Basin.
Can you maybe expand a little bit more on that closed loop versus open loop and why? I think you mentioned in Texas you would see more open loop than otherwise you might than the rest of the country.
I think the key takeaway there is that obviously open loop requires a phenomenal amount of water, whereas closed loop you're able to use a substantially less amount of water, but the trade-off is that you're trading between 10%-30% of capacity to apply to this cooling. So
That power has to come from somewhere. I would argue that you're just shifting the water use burden to a different party, and ultimately that need for water is still there. Alex...
Yeah, I think the key is to build a data center solution in a powered shell that can accommodate a variety of water solutions. A customer may decide in the first instance to start with air cooling. In the data centers that we've constructed before, you put in a raised floor that allows water infrastructure to be constructed underneath the data center in the 3 ft there and then piped up through the servers over time. That flexibility as chip density evolves, as heat requirement and cooling requirements evolve is really, really important and is likely to support, you know, very significant water usage, but without any of the potential community concerns that exist in other parts of the country.
Thank you. David, earlier you quoted $10 million-$20 million of free cash flow per gigawatt. That's a number that's moved a little bit. I guess if you guys could talk about how you've thought about that over time. Second, part of that's a power royalty, but I guess on this setup we're talking about, I guess, eventually tying into the grid. Maybe your on-site power gen is lower over time. Maybe just think about kind of LandBridge's exposure on that piece.
Sure. The 10-20 million was illustrative and by design conservative and didn't include water. Didn't include water because you have water options that can span air cooling to open loop. If you add a full open loop system, it can be a $20 million-$40 million a location. What I wanted to do rather than show you the exact amount I would think you'd get out of a gigawatt campus, is I wanna just show you the magnitude of the opportunity. If you want to think about it from a open loop cooling perspective, you can think about the numbers Scott's used in the past, the 20-40, and multiply that by the gigawatts that you expect to be there.
If you wanna be super conservative, since we don't have contracts to show you in place right now, you can think about it in the 10-20. The bottom line is, it's about the same magnitude of the opportunity as the pore space is, long term.
On the power royalty, just how that could change over time?
Yeah. It all depends. It's like a balloon. If the owner of the power does not wanna pay a power royalty, the lease will be much higher. If the owner of the power, if the hyperscaler in campus one wants to buy the acreage, we won't be excited about it, but to get the first campus done, we might consider it. You'll do some different things, but the reality is there's a market for this, and that market is in the range as we've discussed.
One last one from me. Just in terms of timing, kind of milestones you talked about, kind of ideally starting construction later this year. What should we be watching for? Is it commercializing with a kind of anchor tenant? Is it something on the air permit side? I guess just what do you kind of want us to watch from here?
Well, we'll announce LOIs, we'll announce PPAs, and we'll announce commencing construction of the private use network, the PUN, and announce construction timing of the power plants too.
For reference on the permitting, NRG has already filed for their air permit.
They've already filed an air permit and their connection to ERCOT.
Yep. I'm sure, Alex, you're, you'll be right behind that, right?
We also have island solutions that can get going before you get connected.
Great.
Thanks. I had a couple questions. Just kinda looking at this footprint and putting something like this in an active oil field, thinking about infrastructure that's already there, well heads, things like that. Just what are the challenges with that come with that?
That's a great question. I was actually just pointing out this schematic here really shows the efficiency that we can create with our land, right? I mean, what you've seen here is they've overlaid this in conjunction with existing pad sites, existing roads, existing rights of way, existing pipelines, et cetera. The one good thing about pipelines that they can always be moved if they needed to be. I think, and Alex, correct me if I'm wrong, but you guys can be very flexible in how you think about the construction of the campus to really fit in here. This is a really good depiction of that.
Yeah. That's right, Jason, completely. We've designed this in consideration of all the existing infrastructure that is there. We've picked locations within LandBridge acreage where these types of campuses are possible without any incremental infrastructure work. This is a real depiction that contemplates the existing site conditions, earthwork conditions, the existing infrastructure, and to the extent that, you know, this campus continues to grow, as Jason said, the infrastructure can be moved or adjusted. This contemplates all of the existing infrastructure that exists today within the acreage.
Just another one. You know, you talk about Pecos becoming a population center. There's been a lot of stuff going on out here for a while, and it's not. Wanna maybe understand, you know, the competitive advantage of doing it here.
Have you been?
versus like Midland-Odessa. Have I been? I've been to Midland-Odessa.
Yeah. No,
These are questions I get, so I wanna.
No, you're 100% right.
Hear you talk about it.
You're 100% right. The difference between Midland and Odessa and Pecos is what side of the bottleneck are you on? The moment people look at a hundred-mile difference in location on the other side of Waha. Well, you're pulling gas off a long-haul pipe that's already got it priced for the end market. You're not pulling stranded gas off our header system. It's a very important distinction. Pecos is on the favorable side of the bottleneck, effectively. It's unfavorable if historically you're trying to sell your gas, but very favorable if you're trying to buy gas. That's the point.
Everything we're talking about is to come, and what you've seen from Pecos in the past is the oil field operate in really a 15-day on, 15-day off, 20-day on, 20-day off mode, where people come into man camps, they work, they leave, they come in, work and leave. That's been fine. That's not gonna work in this scenario. There's just going to be too much. Alex can actually comment on what's happening in that 5,000-person town of Berwick and how he thinks that's gonna play out over time. It may be that Pecos looks the same for three years.
Over five, seven and 10 years, this is going to look like a Midland, Odessa, Abilene kind of location.
Yeah, the Pecos Economic Development Corporation has got a lot of tax dollars for obvious reasons. You know, they have been frustrated historically with oil field personnel as they do come in and wreck the roads in town and then leave, right? They are very concentrated on being on the front line with the data center developers to make sure that the right hospitals and schools and infrastructure go into place in the city. I think we're working in conjunction with the city to grow all this. You know, we've got land surveying all around it. Again, that'll be another great opportunity for LandBridge as the city expands.
Yeah, over here.
This is for Alex. Alex, if you think about comparing West Texas, specifically dry, arid conditions versus what you have in PA when you were building that out, how much of a difference do you expect to see in your data center PUE between those two regions?
It's a great question. In extreme heat, power generation is slightly less efficient. That efficiency differential is not meaningful enough given the low cost of energy to make a difference. The other important difference is that the Marcellus is great, Pennsylvania is great. Pennsylvania is a difficult state to develop in. It's got a number of environmental rules, a number of land use rules. By contrast, just from a development point of view, is far easier, right? I would say the economic impact of both PUE and power generation is negligible, and well more compensated by the cost of gas.
One more question. Alex, maybe this is looking too much into it, but the fiber ring that David showed us earlier looked to me like it just had Pecos at the. Exactly. Your data centers are not. Your first one's gonna be inside that ring, it looks like. What's the interaction there? What are the considerations with siting those, you know, those other centers outside that ring and more along the route?
Yes. Great question. The fiber ring, the purpose of the fiber ring is to connect more than one campus, and it's approximately 133 mi around the Pecos area. We have a ring that will likely be a southern ring and are working on a ring that will be a northern ring. That will encompass it will look like a figure eight roughly over time, and it'll encompass all of our campuses and importantly third-party campuses. That ring has been designed strategically to both enable our campuses, but more broadly to enable the region. It will connect the existing fiber providers to the region. There are three of them. We'll interconnect to our fiber ring, and then we also, those rings, will be interconnected to four new long-haul routes.
That drives data gravity so that you become a hub, just like an airport.
I understand, right, there are other rings. They're just not on this. Other rings planned, they're just not on this.
Yes. This is an illustration. The first ring, which is the one that we'll break ground on this year, surrounds our Alpha Digital Campus that I've described, and we will have a small lateral from Alpha Digital to the ring, and it'll be the brains of the entire connectivity system.
Awesome. If there are no other questions, I think we'll take a quick break and then we-
Well, I think we're gonna move straight into the fireside chat.
Can we take a two-minute break?
Two and a half for you, David.
That was like my third bottle of water.
Refining analyst here at Barclays. Thank you all for being here today.
Of course.
Much to unpack and marinate on just in the past, couple hours. We're gonna go through lightning round fireside chat Q&A.
Okay. I like lightning round.
Okay. Here we go. You've talked a lot about the benefits, the core competitive advantages of West Texas as a powered land market relative to established hubs. Surface use availability, the tract resource, the regulatory environment, et cetera. Why do you think it takes so much convincing? In your opinion, what is the biggest source of market misconception, and is there anything else you would like to highlight?
Yeah, go Alex.
I would reframe the question. I don't think it takes convincing, I think it takes execution. The reality is, in order to have blinking lights in a data center cabinet requires an unbelievable amount of execution. So all of those attributes exist. There are people that will be naysayers, but to actually execute on it and give a product that can be turned on, to me, that's the most difficult part. Right? In Pennsylvania, it was a great idea, but until it was built, it didn't work. It wasn't real. It wasn't feasible. Along the way, maybe 150 people told us it would not work until it was actually constructed. I don't think it needs convincing, it needs execution.
Alex, once it was constructed, what did that process look like? Did you have Amazon or are there others as well?
Yeah, great question, David. For 2.5 years, there were 150 people saying, "This is never gonna work. No one's ever gonna build in the Marcellus. No one is ever gonna build in the middle of nowhere. No one's ever gonna build next to a nuke." On and on and on. When it was constructed, to David's point, four of the largest market cap companies in the world were vying to buy the campus. Amazon was the winner, and four of the largest public and private data center operators in the world were there to buy it because the capacity was available, ready, where they could deploy.
Got it. It's a proof of concept. That's what we're waiting for. Okay. On the water side of things, question for Isaac. Can you talk about the evolution of air-cooled versus water-cooled data center solutions? Why is this important?
Yeah, I think this is encapsulating a lot of the previous talking points where data centers are a relatively nascent industry, and people are only just becoming aware of the intense water resource demands that these facilities have. I think part of that shift to less water-intense cooling usage or approaches is being responsive or cognizant of, one, the resource competition. Two, the broad awareness that water scarcity is also an operational risk. If I'm relying on a water-intense source that I can no longer access, I can no longer operate my facility. I think that existential and reputational risk is driving that shift and that embracing of it. But again, there's a significant trade-off to be had with consuming more power for the cooling.
This highlights the exceptional demands for water supply in general. What about disposal needs? Is there an opportunity for recycling treatment and volumes that leverages the WaterBridge value chain?
Yeah, for sure. I mean, Isaac can answer this in more detail just with your experience on the potential disposal needs. If we are talking about the reuse and recycling, there is gonna be a discharge or a byproduct that is gonna have to be taken care of. I don't think that the hyperscalers understand that 100% yet, and we're trying to explain that to them, that that is another part of the value chain that we can offer, which is very unique in other landowners.
I had a question posed by not a hyperscaler, but an AI computing company, and it's like, "Well, we can just connect to the sewer to dispose of our water," right? It's like the nearest sewer is 50 mi.
Yeah. I think that, you know, as Alex pointed out, there's kind of a proof of concept and part of it is de-risking these value chain components and educating them on how we can bring to bear a solution that is not known to them because it's a new geography for them. Regardless of whether it's air cooling, there's still volumes that are generated, blowdown volumes and in any type of cooling configuration, there will still be a need for disposal of volumes, albeit at a lower volume, so.
Yeah, the only thing and this goes back to kind of the first question is, like, how do you check all these boxes and de-risk the situation? I think with Alex's history and also with Isaac, I mean, we didn't talk about this, but Isaac spent many years at Microsoft, doing just this in South America, right? They both have a very good view of what each individual hyperscaler is looking for and our ability to de-risk that for them, I think, is. It'll take time, but the proof of concept, once it's there, it's gonna be really good.
Okay. In addition to education, and helping your customers understand the de-risk value proposition, on the power side of the equation, what is West Texas and LandBridge specifically doing to attract power providers for BTM and co-located solutions?
There's a lot of work in terms of characterizing our existing access to infrastructure and grid, and I think that part of the talking point that's important to acknowledge is that beyond transmission infrastructure, there's a lot of distribution infrastructure. In fact, WaterBridge is a large consumer of power, and so we have access to power that we can bring to bear on sub-75 MW tranches. And so that's an incremental opportunity for us to have, you know, smaller digital infrastructure use cases, and we're characterizing that. We're characterizing the access to that capacity. There's a premium to be had by providing quick access to anything over 10 MW, and we're recognizing that and are exploiting that.
Within your commercial development process, how do your conversations with hyperscalers differ from conversations with power providers? Are these discussions one and the same, or are they typically involved in multi-party negotiations?
Alex, as we talked, we have one partner in NRG. At PowerBridge, we've signed a LOI to build out a 1 GW campus with NRG. We've got NRG, we're well along the way in signing another one with a very large IPP. Those conversations are a recognition by these big power companies that they need Alex with his team and what the attributes of our campuses bring. They have the power, but they know they need a location, they need the cheap gas, the attractive water, and they need a team who can build out a private use network and manage it all and package it up with a bow and sell it. Those conversations with the power guys are really interesting in that regard.
We've had multiple conversations with IPPs who wanted to do this with us. Can't do it with everybody, but we'll have two here in the next 30 days, and both of them have awesome attributes that can bring the game to the finish line. The difference with the hyperscalers is they know specifically what they wanna do, but they don't necessarily know how to do it. I'll give you a funny anecdote that my gas marketing company experienced in Ohio.
They were working with a hyperscaler who wanted to get gas from an interstate pipeline that was going by, and they were being shown the constraints and the issues associated with getting gas off the pipe, and their answer was, "Oh, let's just buy the pipe." I mean, if you're not an energy guy, you don't know how silly that thought is. It's just silly, and it shows a level of understanding that is nowhere near what's necessary to ultimately develop what they're trying to develop.
I'm sure at the right price. For an interstate pipe. Okay. Is the focus for LandBridge only on hyperscalers and giga scale campuses, or is LandBridge pursuing wholesalers and smaller developers as well, deploying sub-gigawatt tranches of capacity?
Yeah. I mean, I'll start with that. I mean, I'm sorry, Isaac, finish because he's having majority of these conversations. We have been hyper-focused on exploring all options, right? To Isaac's point earlier, we have access to surface near and around facilities that these smaller guys are needing. You're talking about anywhere from 10 MW all the way up to 300 , right? These could start off with coin mining, Bitcoin mining, and then evolve into more of a data center type situation. Alex, I mean, Isaac, what would you add to that or anything?
Yeah, I think that's precisely the point is that the existing infrastructure there can enable quick deployment of capacity, like
Access to substations, et cetera.
Yeah. That's exactly it.
Yeah.
Okay. What is the difference between a powered campus strategy versus the traditional powered land terminology?
Yeah, maybe I'll take that one. You know, powered land can mean a lot of things depending on the context. It can mean that there's land in Virginia that's connected to a utility. In many cases, it's become a commodity where anyone in any part of the country that has binoculars and can see a power line on their land calls their land powered land, and it's really not. The greatest challenge for the customer is sorting through what in fact is energized and what is not. The power campus solution is effectively one that provides the customer an energized neighborhood that they can simply move into.
The powered land implies the customer often has to deal with the complexities of power and the grid and regulatory, and in general, that is not their preference, that is not their skill set, it is slow to do, and they will do it if they have to, but they would prefer to just have the packaged solution if that's available to them.
Going back to the earlier comments about execution proof of concept, who is executing the actual physical construction of data centers at this point? Is that a challenge?
I guess you gotta go hyperscaler by hyperscaler. Some hyperscalers like to do it themselves. Like Microsoft likes to use Vantage. There are very substantial businesses that like to do that vertical construction and again, some of the hyperscalers like to do it themselves. We think that's maybe the least in-interesting part of the whole framework, but one that we would do to the extent someone asks us to do. We'll hire someone else to do it and we'll make it happen. Typically, that's a vendor approved by a hyperscaler who's either the hyperscaler or the vendor, and they're gonna rock and roll with it.
Right. The key thing is that if you think about the campus that we showed you and that base level of infrastructure, that infrastructure is needed in all cases. We think it gives us maximum optionality. We also think the capital to return ratio is most attractive at that part of the value chain. Once you have a pad-ready site, if a customer asks us to go vertical, we can go vertical. That we built a power shell in Pennsylvania, Amazon built the next 20, right? That gives you a lot of optionality 'cause that base layer of infrastructure is needed in all cases. Depending on the customer, depending on the commercial relationship or partnership, in most cases, they will go vertical. In some cases, we can do it for them or participate alongside.
Looking at your own commercial backlog as well as the broader industry, how do you see the timeline for data center developments or deployments rather in West Texas evolving given the need for power infrastructure build-out?
Yeah, you saw Isaac's timeline and Gantt chart. These are long-dated capital projects, but you need to make progress quickly along the way, and there are important milestones in that long development cycle, right? There's the selection of the site. There are the filing of grid interconnects. There are the filing of permits. There are commencements of construction. There are prepayments on a PPA. There's the execution of the PPA. Although, you know, these projects take a long time to execute, in the case, you know, of Pennsylvania, we've seen a five-year execution cycle, there are important markers along the way that give you a trajectory to growth that's really important.
With all this in flight, Jason, what is the general feedback you've gotten from end users?
I'm gonna have to turn this over to Isaac. Again, this is his expertise, and he's dealing with a lot of the hyperscalers and the power providers.
Yeah. A lot of the feedback that we had at the early stages is that it's not a matter of if, but when. I think that as those conversations have evolved, particularly last year with the Permian Basin Reliability Plan being announced, there was more confidence, complemented by more behind the meter and co-located solutions. There was also kind of more of an interest or inflection point even a couple of weeks ago from just conference presentations, whereby, you know, PowerBridge and others were highlighting the value proposition of West Texas. The feedback thus far has not been outright rejection or denial. It's been, "It works." I think the playbook will be written, and I think that'll unlock a lot of.
Confident conversations we've had.
Yeah, definitely.
More recently than-
Yeah. Without betraying those counterparties, I think that the modalities by which they want to engage on our acreage spans from greenfield development on large contiguous tracts of acreage, all the way to kind of an assembled offering, where they're relying on a lot of the ecosystem. Interestingly enough, even independent of our land position, the access to the water resources for off-site water supply has also been quite compelling. We're engaging in different parts of the data center value chain that LandBridge can enable.
Great. This might be a question for Isaac as well, but in other markets, we see data centers being delayed or outright canceled, due to permitting resource competition, lack of support, et cetera. What is the sentiment you've received thus far from local government and elected officials? Are there regulatory or local stakeholder risks that could materially delay execution?
From our vantage point, I think one point to emphasize is that the WaterBridge-LandBridge presence in the basin is pretty substantial from a good corporate entity and strong employer in the basin. Our reputational standing there is quite strong. With some of these conversations, there's been a phenomenal amount of support, but the emphasis being on tax base and water stewardship and replenishment. There's a phenomenal undeniable appetite and willingness to work with us to make these projects happen because they stand to be transformative for the community and West Texas in general. Alex?
Sure. Yeah. I would just say more broadly that, you know, if you, if you rewind five years, the largest data center market in the United States was in Ashburn, Virginia, right? Close to Dulles Airport. Many of you may have been to Wolf Trap. It's a really nice outdoor concert venue. You know, five or 10 years ago, that was all farmland. Today, you can't throw a baseball without hitting a data center, or you can't go out your back porch if you live there without looking at a data center. Virginia is out of land, they're out of power, and the residents are out of patience.
As a consequence, our strong view is that given the size of the infrastructure build-out, this will be done in communities like Pecos that welcome that development, that can provide the infrastructure for the development, that do not have the constraints of being behind an interstate pipeline as Virginia does, and will be developing places like Pecos and in other places across America that have been forgotten. Old coal towns, old steel towns, places that those communities, those city councils are hungry to welcome new development. I think Pecos is gonna be exhibit A, but we would also anticipate cities across America with similar characteristics being redeveloped.
Great. Last question from me. Are there any lessons from traditional energy infrastructure development in the Permian that you're applying to the digital infrastructure projects? What, in your opinion, David, maybe this is for you, would constitute as specific milestones over the next year or so that would translate to you as validation of the West Texas digital infrastructure thesis?
Sure. Having constructed many projects, you have to understand how to lock up long lead time items early. When Alex and I started talking about how we're gonna get Alpha Digital rolling, it became obvious, all right, let's lay out the critical path. What's on the critical path? Okay. Transformers and substations, critical path. Well, if you don't lock them up, you don't know where they're gonna fit. Had we not contracted to put our down payments and begin paying for these things to have our slot, we wouldn't know when they'd be ready. We're in the same position on other long lead items like power, like PowerBridge solution that you'll utilize your island mode until you get to your long-term solution where you're connected to the grid.
Really it's about those long lead time items and getting control of those. I look back to when we started Northwind, one of the biggest things we had to do is we didn't have an asset, we didn't have an acid gas injection well, we didn't have a contract, but we found we had a slot for the kind of pipe that you need to manage high CO2, high sulfur gas. That slot was the only one. Had we not taken it would have been six months delayed and maybe we lose the whole opportunity. We put $80 million up with the idea that if we have to sell $80 million of very specialized pipe, maybe you lose $20 million.
You have to see those long lead time items and knock them down because if things play out the way we expect, those bottlenecks become real and painful. I guess that's my answer to sort of learning we've had. That's not just the Permian, that's everywhere. That's everywhere as things get busy. When things get busy and active, you have to be all over the long lead time items. I think if you are as an LP as an investor or a potential investor in LandBridge wanting to see where those milestones are, I think we might have mentioned some of it earlier, but watch for the announcement of letters of intent.
Watch for the beginning of construction of the private use network, the beginning of the construction of the power, the power purchase agreement and also the air quality permits. The interconnection is a little misleading because it's not on the critical path. It's helpful, and when you see that, you know long-term, that project's rolling. We can do a very substantial part of the business in island mode, i.e. not connected to the grid. Don't get too caught up in the interconnection piece. Those are the milestones you should watch for, and we won't be shy about sharing them. We have a good high level of confidence in ourselves and our capabilities and the probability of success here.
Great. Well, thank you all very much. I'm going to give Scott back his seat to take some Q&A.
Yeah, a few more closing comments, and then I think we can move to Q&A.
Please.
Okay. Yeah, so just a few slides to wrap up here before we open to questions. You know, starting on 48, this is intended to be more than just a victory lap, but I think it's impressive the growth that we've been able to execute on to date and the platform we've been able to build and continue to scale, not just from a financial perspective, but also from an asset perspective. It really sets the stage stepping into 2026 and going forward to capitalize on so many of the opportunity sets that we've walked through today. Now, if you go to the next slide, historically, you see we've been able to continue to execute on this growth plan despite what has been, you know, a very challenging commodity price environment.
That was a question we got quite frequently through the IPO is: How will this business perform if we see oil fall off? If you recall, we were kind of in the mid-80s in the middle of 2024, and obviously ended the year in a much less constructive environment from an oil perspective. Despite that, we've been able to action our growth strategy effectively, and have been able to continue to reflect the positive nature of the business model and its ability to perform, and remain fairly insulated from commodity prices. Now, how do we continue to grow going forward? If you go to the next slide, we've talked a lot about the surface use economic efficiency figure.
You know, I've mentioned this $2,500-$3,500 an acre goal, with 3,000 being the midpoint. The punchline is there's just a lot of ways that we can go about actioning that. You know, we're showing you four examples here. There could be multiple slides of different permutations of the activity we're showing here.
You know, you look at just the very obvious example, which is, you know, 1 sq mi or 640 acres with the produced water handling facility, with some of the blank space or white space around it being backfilled, you know, with low economic density activity such as solar, and you easily clear that $3,000 per acre mark over a 1 sq mi or one 640-acre section. Now, there are obviously some activities that are gonna be higher than that. You know, we have sand mines in place today that do $8,000-$10,000 per acre. You know, the data center projects we're talking about, with Alex and team, you know, could easily eclipse $20,000 per acre.
You know, additionally, we do see areas with just mixed industrial use, and we're showing you on the top right here just what one of those sections may look like in a decade here. You know, not all of them are going to be $3,750 an acre. You know, we could see, you know, much less than that. We could see much higher than that. The takeaway is there's a lot of intentional planning that goes into exploiting and really driving the value on the surface here. With that proper planning, you know, you can really do a lot in a fairly dense way. I actually, I'm gonna flip back to a slide that Alex shows. I think it's a really good example of this on 14, you know, where he's walking through what that campus could look like.
What's not readily apparent but surrounding it is just a number of roads, access points, drilling pads, and so on. All of those are ways that we can continue to extract value from the surface in addition to the data center that is immediately adjacent to it. You know, it takes some thoughtfulness. It takes some planning. There were some questions on whether or not these are viable because of the activity in this area. As Alex pointed out, absolutely, it just takes a little bit of thoughtfulness. You know, when we go through and we action our plan, we're able to ensure these projects can be put in place without hampering or hindering the economic potential of the surrounding area. Now, how successful have we been on that?
Again, on the surface use economic efficiency, I think this is a really good metric of the effectiveness of our active land management strategy. You know, a question I get quite a bit is, you know, what does that mean? How effective is it? How do I know you're not just buying your way into more cash flow? While we're certainly continuing to look to do accretive M&A, which I'll speak to. The punchline here is if we look at the acreage, the revenue per acre over time on a particular footprint, you can see the growth of that, and you can really see the byproduct of us going out there and intentionally commercializing surface that has not been actively managed previously. What we're showing you on the bottom here is just the growth of our original position we bought in late 2021.
As you can see, in the first full year, 2022 is doing roughly $465 an acre. It was much less than that when we bought it in 2021. Just through the growth over the last several years, we've been able to drive that to $1,159 an acre with a lot more growth expected going forward. You know, we expect this, kind of growth to continue, on a go-forward basis, not just on that legacy acreage, but also as we work through and acquire new surface that has an equal opportunity for growth. Now, what do we look for on M&A being another critical piece of the growth formula? You know, we look to leverage the relationships we have in West Texas.
Jason and his original team from the WaterBridge predecessor company have been very intentional about developing those relationships for a decade plus at this point. That really allows us to get our foot in the door with a lot of these landowners who would otherwise not be interested in selling. I think the second piece, though, and one that's really critical is when you think through what are the landowners getting out of selling to us, oftentimes it's not just the upfront check, but it's some kind of enduring or residual economic interest. That's come in different ways. You could look at sellers taking back equity, which they did recently in that 1918 acquisition transaction.
You could also look at the 1918 acquisition owners as well as some previous sellers who retained the mineral rights, because as we've discussed, we're not looking to really grow the minerals estate primarily. Why that matters is they're ultimately beholden to the level of activity on that surface going forward. As a mineral estate owner, you want to ensure whoever owns that surface is able to drive development on that surface, so that's gonna generate more cash flow from the minerals estate. They have a vested interest in ultimately who they hand the keys over to. You know, I think we've proven that we can be very thoughtful, that we can drive development, that we can drive value. We can enable oftentimes development that wouldn't occur, certainly not at that same pace otherwise.
That's really incentivized a lot of these landowners to introduce themselves to us and look to potentially sell their acres to us, where others would not be able to step in to that kind of discussion. Now, I mentioned 1918 acquisition on 53. We go into a little bit more detail here. You know, again, this was a seller that we've had, you know, I have not had, but Jason and others on the team have had relationships with for a decade plus at this point. So it made for a very easy discussion. They retained the minerals estate. We took the surface, which again creates some alignment going forward. They also took some equity back, and that was by choice.
That was not needed necessarily to fund the deal, but they were very eager to continue to participate in the growth going forward. From our perspective, it's great to have, you know, an influential family in West Texas, you know, be part of the ride. I think that's something that tends to accrue to your benefit over time. Now, wrapping up with capital allocation on a go-forward basis, M&A will continue to be the go-forward priority for deploying free cash flow. You know, we have shown our ability to acquire surface between 8-12 times and blend that down very, very quickly. As a reminder, the surface that we bought in 2024, you know, we were able to 1.5x, rather grow EBITDA 150% year-over-year, roughly.
Ultimately, we're really not focused or looking at just that entry multiple, although the value proposition includes that. We wanna know where can we get this and where can we get this quickly, and does it create, or does it have that same kind of long-term option or growth potential that our base asset has. Again, that 2024 vintage acreage, I think is a great reflection of how we're able to derive or extract value out of this surface in a very quick time period. Now, in terms of returning capital to shareholders, we have a modest dividend today. We are not looking to ramp that up beyond a modest dividend going forward. For the reasons discussed, we feel there's much more value to be created through M&A than there is through dividends. You know, we did recently approve a share buyback program.
We will look to execute on that, opportunistically. We still believe that M&A is going to be the best way to create value. Should we see our stock trade to levels where it is competitive with M&A, that would be an avenue we would be willing to explore. From a balance sheet perspective, again, looking to stay kind of in the mid-twos, comfortable flexing into the low threes, for the right growth. We think the business can certainly support much more than that, but not looking to overly stress the balance sheet. Now, we've talked about a lot today. You know, ultimately, what can this lead to? I guess I preface this slide by saying we're not intending to provide decade-out guidance, nor would I really even classify this as a goal.
The reason being is I think we have a lot of conviction on our side that we can outperform this over the long run. We did wanna illustrate what the impact could be of our business model, with even a conservative growth assumption over the next decade. If you look at just a 15% organic growth rate, which is very conservative relative to what we've been able to execute on historically, which we show at the bottom there, you know, you can see EBITDA growing from roughly the $200 million run rate we're at today to $750 million. The immediate question we get asked is, what is comprised in that 750 ? We've talked through a lot of it today.
You know, David spoke to the 5+ MMbpd of pore space capacity we have that we expect to be utilized here over the course of the next decade. That's $300 million of free cash flow to the business before taking into account CPI escalators, before taking into account what we expect to see in terms of rate hikes as that scarcity value continues to play out. You know, in addition to that, with what we have executed today and what is under discussion today, a minimum of $50 million of additional clean energy and related ancillary projects that we expect to come online over the next five to 10 years. You know, you're looking at $350 million of free cash flow potential. That's not including cost hikes. That's not including CPI escalators.
That's not including the oil and gas activity needed to generate that water. That's not including any of the other opportunities that are currently being worked through on the clean energy, and certainly the digital infra side. That's an incredible growth ramp in and of itself, fully insulated from the data center thematics. Now, you introduce the digital infra piece, you introduce the power piece at scale for data centers, as David's mentioned, several hundred million dollars of free cash flow potential. You could see even if we land, one or two of these, campuses upscale over the next decade, we would easily eclipse that $750 million number. Now, what does that imply from a surface use economic efficiency standpoint? You can see to the right, we clear the low end of that spectrum at $2,500 an acre.
Again, we think that we'll be able to outperform that both from a surface use economic efficiency standpoint as well as just a broader, EBITDA growth standpoint. Now, on the right-hand side, we're just referencing what can this look like with M&A. Conservatively saying $25 million of EBITDA acquired per year, funded with debt, never stresses the balance sheet, just given the cash flow heavy nature of the business. You could see the growth could meaningfully eclipse what is even showing on an organic basis. Ultimately, like, what I would leave you all with here, and it's in response to a question I get frequently, is when you think through valuation, this is not a business where you can just slap a multiple on it.
This is not a business where you can say, "This is the yield today." That's the wrong way to think about it. I would encourage everyone to do the work, think through the fundamentals, think through what's happening in West Texas, think through all of the pieces, and then look at our business, look at what we're enabling, look at the financial model that we have in place, and the free cash flow that's generated as a result of all of these macro tailwinds, and look at the DCF. Do the work, 'cause what you'll see, I think, over the next decade is substantial growth. With that little bit of work, I think you'll find that LandBridge is an incredibly unique, albeit very compelling investment opportunity. That's all I've got. I don't know, David.
Thanks. Any other questions? That was a great way to wrap it up. We'll go to a Q&A session to wrap.
Thank you, David. I think the original data center option that you guys signed a year and a half ago is still in the due diligence phase. Given all this opportunity, given how well you know everything, can you just help us understand, like, why it's taking this long? I think the shot clock ends this December. Would've thought with all this stuff, you guys would've had it locked up, but just sort of curious, you know, what's going on that's taking it so long to get this initial data center signed.
That's our joint venture with a Silver Lake portfolio company, Commonwealth Asset Management, and they have a portfolio of data center locations they're marketing, and our Zaragoza site's one of them. We have, from our active perspective, we're marketing our 100% sites, not our 50% sites. For their part of that to be successful, they will bring it to the fore, and that's why we focused our attention on PowerBridge and moving to achieve a greater build-out and a greater creation of that powered campus strategy with PowerBridge.
That one, the original JV one, doesn't sound likely then?
I don't know if it's not likely. It is still in the inventory that they market. The Silver Lake portfolio company continues to market that inventory. My expectation is that they won't be the driver of bringing activity to West Texas, but as we start bringing activity to West Texas, they have a solution, and they will be able to offer that to the.
From a financial standpoint, Scott, if that falls out of bed, I can't remember, are you guys clipping a lease from them, a coupon or-
No.
If it falls out of bed, there's no negative impact to you guys.
That, that's exactly right. There was a one-time two-year option payment that was made in Q4 of 2024 that's already been paid, and so there's nothing else on a go-forward basis that's been contemplated from that in terms of what we've included in guidance or what we're showing here.
Okay. Just one final thing on the data centers. Everyone's hunting for them, everyone wants them, but presumably, when you guys announce something, you announce it once you already have an end user locked up who's committed to it. It almost sounds like more the issue now is locking up the end user, the hyperscaler to use that versus everything else involved. That end user seems to be the key to these projects being announced versus anything else.
I actually think if you look at the way Alex described the Berwick, Pennsylvania model, it's closer to that. We are creating the opportunity in advance of the signed-up hyperscaler power purchase agreement. We may be well down the road in construction of both the electrical private use network plus the power, the onsite power at the time that the actual PPA is signed. We have enough conviction to move forward without it, is the answer. If you listen to Alex, it was subtle, but an important point where he had zero interest in his facility until it was done, and when it was done, you heard it was a feeding frenzy. We expect the same dynamic here, but with likely more milestones that will enable us to see higher and higher probabilities of success.
I'd love to just hear a little bit more about how the M&A market is progressing. You guys have been buying land out there for five or six years now. You're also talking about, you know, pretty sizable kind of revenue per acre targets. I'd just be curious if that's changed kind of the conversation now that, you know, your sellers have an idea of the opportunity set in front of them in front of you.
Not necessarily. I mean, I think there are still a number of sellers out there who are just candidly not looking to pursue this type of business actively. I mean, I would argue, a lot of the surface we bought in 2024 is a great example of that. I mean, they were in hands of folks who are not unsophisticated by any means. There was one sophisticated E&P. There was another gentleman who owned a big surface position as well as the minerals. You know, when you're making $100 million a year of passive income, like, your incentive to get up every day and try to get more starts to taper off, at least so I'm told.
When you think through, like, the dynamic that leaves, especially to the extent folks own the minerals, that's fantastic. Let them keep the minerals, let them keep that passive income stream. Sell to us, we can accelerate the development of the minerals. We can write them a check. It helps with their estate planning oftentimes. They don't have to go boots on the ground and try to win business and compete with us. It's just a foreign dynamic for a group of people who are, like, used to being like, "How much more can I get out of something?" It's a real dynamic. I mean, I think there's that, and then these also aren't dumb people.
I mean, they see what we're doing, and they're asking themselves like, "Oh, maybe I can get a little more." There's still very much that valuation arbitrage that exists in terms of how people think through, you know, dollar per acre versus free cash flow. Oftentimes there's a disconnect there that works in our favor.
On top of that, you know, if sellers think that they are, you know, getting one over on us by having us overpay, like, it's kind of what I was saying earlier, we almost say we don't care, but it's almost immaterial what an asset is doing from a cash flow perspective when we buy it, because we're asking ourselves, "What does it look like in two years?" As long as it makes sense in two years and we have high conviction that we get there, it's a great win for us, and it's a great win for the seller. I mean, it keeps our reputation very positive in West Texas, which is critical, but it also allows us to continue to execute on these type of very accretive deals. It's just, you know.
Ecosystem creates much more value.
Value for us than others. There's others that will try to compete, and large hedge funds will go race around and bother these ranchers, and that'll be even better for us because some of them might get their feet shot and, you know. You know, they may have even more colorful outcomes. But what we found is it's very hard for a New York hedge fund to justify paying 14x a piece of land. What does that even mean, 14x a piece of land? Okay, I can see LandBridge trades at a higher number than that and TPL higher still, but what return am I gonna get as the hedge fund? I mean, it's pretty low, unless you know what you're gonna do with it.
We come in and we say, "Okay, 14x may be too expensive and something we'd never pay." 14x may look to us like 5-6 in two years, and at 5-6, that's pretty attractive, and we can envision ourselves doing that all day long for every piece of land that we can do that with.
I mean, our ability to commercialize the surface goes beyond just the relationship, goes just beyond the WaterBridge synergies. I mean, this is a very thoughtful, intentional process. I mean, I think David's demonstration with GIS today is a fantastic example of that. I mean, we step in with an enormous amount of intelligence before we do an acquisition. We are able to leverage all that intelligence as we work through the commercial effort. Like, you can't expect a West Texas landowner to have those kinds of resources to be able to go out there and outcompete us.
Absolutely. Quick follow-up is, you know, I think at the time of the IPO, the focus was entirely, largely entirely on the state line, given the pore space issues, New Mexico movements, et cetera. The digital infrastructure piece, letting you guys kinda showcase more of the Southern Delaware piece at this point, how is that changing kinda where you are thinking about looking at expanding the acreage footprint?
Yeah, I think we think about it on multiple fronts, right? I mean, you've got the digital infrastructure side, and there's certain land for certain reasons that makes sense to continue making acquisitions. The pore space is something we're highly focused on, and we're really able to leverage, as I said earlier, the WaterBridge geological and engineering team to find new areas of pore space that because of the growth we know WaterBridge is gonna have, and other third parties really expand upon that footprint where nobody's really paying attention. I don't wanna put my cards out there, but, you know, we've identified some really good areas that we think that we can be highly successful in.
Do you think it continues just to be Delaware at this point?
You know, I think again, I don't wanna say too much, but we will continue to.
We find opportunities outside of the Delaware.
That's right.
We'll absolutely exploit them.
Yeah.
It'll create a whole new growth trajectory. There's the opportunities today that exist in the Delaware are robust.
Ali.
I'm looking at your slide 15, and then you guys have a great slide 51, where you walk through how, unlike the legacy acreage, you've grown the revenue per acre. If you guys could maybe just qualitatively talk about on the 2024 and 2025 acquisitions, where you've organically grown, you know, those vintages. Like, where was the lowest hanging fruit? Where was the biggest opportunity and kind of that allowed you guys to scale the revenue per acre so quickly?
You talking Frying Pan and VTX, we'll call them?
Yeah. I mean, you know, both of those acquisitions, Frying Pan and VTX, we, you know.
Again, it was large landowners who, one of them, the Wolfbone deal with VTX being a producer-owned. The E&P company owned the actual surface when they bought the assets. They had no reason to bring in third parties to drive more value. Of course, us taking that over, whether that's adding water infrastructure, adding additional gas plants, pipelines, et cetera, we were able to be very successful on that front. As you look at Frying Pan, as Scott talked to you, this is.
I talked to you at State Line Ranch.
This is a landowner that I've been dealing with for 12 years. We've been trying to buy and Scott made some really valid points on why it made sense for him to sell at that point. We looked at that from where it sits as a relation to the state line, but also the roads and highways that run through from New Mexico to Texas were very important as we think about other uses. Then geologically, right? We did a very in-depth study of both the Delaware Basin. What you're showing right there is the sour gas window. You've got an area where you've got Capitan Reef. The disposal's not an option for others, it is for us.
As you move up in the Central Basin Platform, that offered up another solution that was out of basin. Those were really good case studies on how we can expand on that. What you'll see going forward with the Speedway pipeline is this massive water volume growth as those phases come online.
Chad?
It was mentioned earlier that it's possible to realize $300 million of free cash flow in the next five years from the pore space business. I'm not trying to get you to set long-term guidance, but if you achieve that's like a 28% CAGR over 2025's free cash flow. A durable growing free cash flow stream like that has a lot of value. I look at the data center business, which is still proof of concept, that seems more like a call option. I look at how you trade, it looks like the stock price trades based on sentiment of when the data center business goes from proof of concept to execution phase. How do you think long-term investors should balance between the valuations of those two businesses?
No, I think you hit the nail on the head, right? I think there's so much value to be had before you even start talking data centers. When we talk through those 5 million plus barrels a day of pore space, I don't think it'll take us 10 years to utilize those. When I think through that 15% CAGR, I think that's easy to say that's front-weighted based on what we have lined up slide two today, but I would caveat that with it doesn't mean it's gonna slow down on the back end.
It's just what we have lined up slide and so the point I was trying to make on that final slide is, encouraging folks to do the work and see how that looks, 'cause the financial impact of compounding free cash flows over time with that kind of growth profile is enormously powerful, and unlike what I think most folks, particularly folks with an energy slant in the past, have ever seen. I think you'll see that, there is tremendous amount of value that we deliver shareholders before you even start talking data centers. If you wanna layer in data centers on top of that, it's very easy to see.
I think, too, also to your point, that you could almost view that as a cheap, if not free, option relative to what the value of the business is before you start having that discussion.
Exactly. If I were doing the valuation myself today, first and foremost, I would look at what happens before the data centers. As soon as we do the first one, you can extrapolate that a long, long way.
Yeah.
You'll have plenty of time to do that work. If you look at it prior to that, I mean, you've talked about doubling and tripling the size of our company by utilizing everything outside of data centers, and I think that's something that can get missed if you focus on the shiny object. That's our business, and we are in the best position in the whole of the Delaware and the whole of the Permian Basin to exploit that opportunity.
Yeah. I mean, we grew from $97 million of EBITDA in 2024 to $177 million of EBITDA in 2025 without a dime from data center payments. That's powerful. I mean, look through the dynamics, look through the tailwinds that we have right now working to our advantage. This is a fantastic business before you even layer on all of the upside that comes with digital and from the power associated with it.
Alex.
Just circling back. Dave, if you're doing sort of build it and they will come on the data centers, the mindset of
You make it sound so risky.
I've seen a lot of real estate proposals that, you know, are still proposals, so forgive me. Scar tissue. From a LandBridge perspective, Scott, the mantra is, whether it's a Five Point-led deal or a true independent deal, if someone wants to build something on your land, they gotta pay cash up front. There's no hope notes, there's no hope certificates. It's whatever it is, whether it's a related party transaction or a third party, they pay you cash up front before they even drive their trucks onto the land to start doing w hatever they're doing.
We have a very robust conflicts committee process that enables the protection of LandBridge in favor of WaterBridge, you know, LandBridge vis-à-vis WaterBridge and LandBridge vis-à-vis PowerBridge. There's an absolute market for what we're doing, and LandBridge will get every bit of that market value. Now, it wouldn't shock me if some accommodations may have to be made on the very first one. Wouldn't shock me, but maybe not. We'll see. I would say things get more profitable over time, not less.
Yeah, the lawyers are begging me to flag that we're wrapping up that conflicts committee process with PowerBridge at the moment, but that's not across the finish line just yet. To David's point, it will be arm's length. There's no freebies, no gimmes. It is very much treated as.
Like, where we saw that upfront payment with the initial deal with Silver, is that a sort of template for a another one? Or no, that's not a template, we shouldn't expect that on future?
I can't really speak to the exact structure of our latest one between PowerBridge and LandBridge, but there will be both pre-construction payments, post-construction payments.
Okay.
Fully up-and-running payments.
Awesome. Thank you.
Just a matter of how it all plays out. Yeah.
Thank you.
Sure.