What the manager wrote
LandBridge embodies just the sort of rare hard assets, profitability, and business persistence that we seek. It now has over 300,000 acres of strategically assembled surface acres in the Delaware Basin of Texas. Its core business for the time being is leasing its land for water transportation, treatment, and remediation purposes, which largely manifests in a royalty-like fee based on the volumes of water that are either piped across its acreage or stored in its subsurface pore space. The unique hydrogeology of the Delaware Basin means that as wells age or get deeper, greater volumes of brackish water come up the well with each barrel of oil, leading to an estimated 9% annualized water volume increases. Moreover, the company’s water handling and storage contracts contain inflation escalators, anticipating 12% or greater revenue growth without capital spending.