VALENCIAN BAT CAPITAL

Discussion of $LB's business model during the recent Horizon Kinetics portfolio update, available here (see from 35:50): vimeo.com/1214356265/e30a96a… "Landbridge embodies just the sort of rare, hard assets and 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, and it's from that land position that its current and future revenues will emanate. Its core business for the time being is leasing its land for water transportation and water treatment and remediation purposes, which largely manifests to them in a royalty-like fee based on volumes of water that are either piped across its acreage or stored in its subsurface pore space. There is an unusual, inherent and rather high level of passive growth and inflation beneficiary element to Landbridge. So the Delaware Basin has something unique, called hydrogeology, because the Delaware Basin is the remains of an ancient inland sea, meaning that as wells age or get deeper, greater volumes of brackish water come up the well with each barrel of oil. And presently, that averages -- although there's lots of variation between the different wells -- but it averages about four barrels of water per barrel of oil. And by 2030, the engineers believe the estimate should be a six to one ratio. So the progression from four to six barrels of water per barrel of oil amounts to about a 9% annualised water volume increase, even without expansion of oil output by the Chevrons and ExxonMobils, which in fact is expanding, and absent any active growth efforts by Landbridge. And moreover, the company's water handling and storage contracts, which typically run for 10 years, contain inflation escalators. Based on typical indexes like the CPI, one can already anticipate 12% or greater revenue growth that requires no capital spending on Landbridge's part. And then, beyond that, as demand for pore space icnreases in future years, new contracts are likely to be priced higher than the current roughly 11 cents a barrel, which would add to the revenue growth further. And beyond that, looking forward, Landbridge was the first company to introduce the concept of what they call powered land as a strategy to facilitate the development of private power generation and transmission and ultimately large-scale data centers. So the company's contiguous land surface area has latent potential to capture developments from the data center itself. Related roads and power lines and wind and solar and carbon capture and water, and all these different elements would contribute recurring high margin, royalty like revenue streams. And it's important to note that because the Landbridge acreage sits above a significant aquifer, it can also supply, and does supply, necessary water to oil and gas drillers. And aquifer-based source water -- it's a different term from the produced water that comes up from the well -- the aquifer-based source water is priced more in the $1 per barrel range, not the 11 cents a barrel range. Though some of that gross revenue is shared with the water handling companies that extract it from Landbridge's acreage. So again, Landbridge takes a royalty-like interest in it."