LandBridge (LB) risk factors, FY2024 10-K

Risks Related to Our Business and Operations

1. 01the impact of energy conservation efforts
2. 02Future land acquisitions would expose us to risks associated with acquisitions and the commercialization of additional acreage
3. 03regulatory, permitting and other similar matters, including condemnation proceedings
4. 04Because a significant portion of our future revenue growth is expected to be derived from WaterBridge and Desert Environmental, any development that materially and adversely affects either of their businesses, operations or financial condition could have a material adverse impact on us
5. 05Our reliance on WaterBridge and its personnel to manage and operate our business exposes us to certain risks
6. 06We rely on a small number of key individuals, certain of whom have responsibilities with affiliated entities, whose absence or loss could adversely affect our business, and difficulty attracting and retaining experienced personnel could reduce our competitiveness and prospects for future success
7. 07Our acreage is located in the Permian Basin, making us vulnerable to risks associated with geographic concentration in a single geographic area
8. 08We have a limited operating history, and an investment in our Class A shares is highly speculative. Because we have a limited operating history, it may be difficult to evaluate our ability to successfully implement our business strategy
9. 09Because of our limited operating history, our business model and the attractiveness of our acreage to our customers, as well as the performance of any other future assets, are not yet proven. As a result, it may be difficult to evaluate our business and results of operations to date and to assess our future prospects
10. 10We may experience difficulty in achieving and managing future growth
11. 11our access to, and cost of, capital in the event we pursue future acquisitions
12. 12We may not be successful in pursuing additional commercial opportunities on our land from non-hydrocarbon based energy production and other users
13. 13The construction by our customers of new infrastructure on our land is subject to regulatory, construction, supply chain and other risks common in the development and operation of facilities and other infrastructure
14. 14Technological advancements in connection with alternatives to hydraulic fracturing could decrease the demand for our brackish water sales and WaterBridge’s produced water transportation and handling operations on our land
15. 15Inadequate brackish water supplies could have a material adverse effect on our revenues
16. 16an increase in operating costs; and
17. 17Our proved undeveloped reserves may not ultimately be developed or produced by the operators of our mineral and royalty interests or may take longer to develop than anticipated
18. 18Sand operations are subject to operating risks that are often beyond the control of the mine operator. These risks can adversely affect production levels and costs, which could adversely affect sand production from our acreage
19. 19facility shutdowns in response to environmental regulatory actions
20. 20Interruption of our customers’ supply chains could negatively impact our business and operations as well as reduce our revenues
21. 21A natural disaster (such as an earthquake, tornado, fire or flood) or an act of terrorism could damage or destroy our customers’ infrastructure on or around our land or result in a disruption of operations on or around our land
22. 22We or our customers may be unable to obtain and renew permits necessary for operations, which could materially and adversely affect our results of operations, cash flows and financial position
23. 23The deterioration of the financial condition of our customers could adversely affect our business, and the termination of activities on or around our land by one or more significant customers could materially and adversely affect our results of operations, cash flows and financial position
24. 24We may experience delays in the payment of royalties and fees and be unable to replace customers or producers that do not make required payments to us, and we may not be able to terminate our agreements with defaulting customers that declare bankruptcy
25. 25Declining general economic, business or industry conditions may have a material adverse effect on our results of operations, cash flows and financial position
26. 26We may be subject to claims for personal injury and property damage, catastrophic events, and those related to contamination resulting from our customers’ operations, which could materially and adversely affect our results of operations, cash flows and financial position
27. 27Our insurance coverage may not fully cover our losses, and we may in the future encounter increased costs related to, and lack of availability of, insurance
28. 28Reserves estimates depend on many assumptions that may turn out to be inaccurate. Any significant inaccuracies in these reserves estimates or underlying assumptions could materially affect the quantities and present value of our reserves
29. 29Our future results following the Recent Acquisitions and other acquisitions will suffer if we do not effectively manage our expanded operations

Risks Related to Environmental and Other Regulations

1. 30Our results of operations, cash flows and financial position are subject to major trends in our industry, such as decarbonization, and may be adversely affected by future developments that are outside of our control
2. 31Our reliance on revenue generated from produced water handling activities exposes us to potential regulatory risks
3. 32The results of operations of our customers, as well as producers on or around our land, may be materially impacted by efforts to transition to a lower-carbon economy
4. 33Climate variability may cause increased volatility in weather and may impact water usage and related revenue
5. 34increased costs to reduce risks associated with the increasing frequency and severity of natural events, including to improve the resiliency and reliability of the infrastructure and systems necessary for customers’ water services
6. 35Increased investor attention to environmental, social, and governance (“ESG”) matters may impact our or our customers’ business

Risks Related to Our Financial Condition

1. 36We may be unable to generate sufficient cash to service all of our indebtedness and financial commitments and any future indebtedness could adversely affect our financial condition
2. 37We are subject to interest rate risk, which may cause our debt service obligations to increase significantly. The weighted average interest rate on borrowings outstanding under our credit facility as of December 31, 2024 was 8.39% in the case of revolving credit borrowings and 8.47% in the case of term loan borrowings
3. 38If we fail to comply with the restrictions and covenants in our credit facility or our future debt agreements, there could be an event of default under the terms of such agreements, which could result in an acceleration of payment
4. 39The amounts borrowed pursuant to the terms of our credit agreement are secured by substantially all of our and our subsidiaries’ present and after-acquired assets. Additionally, our obligations under our credit facility are jointly and severally guaranteed by us and our material subsidiaries
5. 40We do not currently have in place hedging agreements with respect to oil and natural gas production from our acreage, and we will be exposed to the impact of decreases in the price of oil and natural gas

Risks Related to Our Corporate Structure and Our Class A Shares

1. 41involve and retain to a greater degree outside counsel and accountants in the above activities
2. 42Our ability to continue to pay dividends to our shareholders may be limited by our holding company structure, contractual restrictions and regulatory requirements
3. 43LandBridge Holdings, Five Point and WaterBridge, as well as their affiliates, are not limited in their ability to compete with us, and may benefit from opportunities that might otherwise be available to us
4. 44A significant reduction by LandBridge Holdings of its ownership interests in us could adversely affect us
5. 45Prospective investors in our Class A shares are encouraged to consult their tax advisors regarding the tax consequences of receiving dividends on our Class A shares that are not treated as dividends for U.S. federal income tax purposes
6. 46For as long as we are an emerging growth company and/or a smaller reporting company, we will not be required to comply with certain reporting requirements, including those relating to accounting standards and disclosure about our executive compensation, that apply to other public companies
7. 47If securities or industry analysts do not publish research or reports about our business, if they adversely change their recommendations regarding our Class A shares or if our operating results do not meet their expectations, our share price could decline
8. 48The market price of our Class A shares could be adversely affected by sales of substantial amounts of our Class A shares in the public or private markets or the perception in the public markets that these sales may occur, including sales by LandBridge Holdings after the exercise of the Redemption Right
9. 49We may sell additional Class A shares in future offerings. Sales of substantial amounts of our Class A shares (including shares issued in connection with an acquisition), or the perception that such sales could occur, may adversely affect prevailing market prices of our Class A shares
10. 50We are a “controlled company” within the meaning of the NYSE rules and, as a result, qualify for and intend to rely on exemptions from certain corporate governance requirements
11. 51the compensation committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities
12. 52Our Operating Agreement, as well as Delaware law, contains provisions that could discourage acquisition bids or merger proposals, which may adversely affect the market price of our Class A shares and deprive our investors of the opportunity to receive a premium for their shares
13. 53including dividend rights, voting rights, rights and terms of redemption, redemption prices and liquidation preferences of such series. If our board of directors elects to issue preferred shares, it could be more difficult for a third party to acquire us
14. 54providing that a majority of our board of directors is expressly authorized to adopt, or to alter or repeal our Operating Agreement
15. 55We are a holding company. Our sole material asset is our equity interest in OpCo, and accordingly, we will be dependent upon distributions from OpCo to pay taxes and cover our corporate and other overhead expenses
16. 56If OpCo were to become a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes, significant tax inefficiencies might result
17. 57Because we have elected to take advantage of the extended transition period pursuant to Section 107 of the JOBS Act, our financial statements may not be comparable to those of other public companies