WaterBridge Infrastructure (WBI) risk factors, FY2025 10-K

Risks Related to Our Business and Operations

1. 01Our revenues are substantially dependent on ongoing oil and natural gas exploration, development and production activity in our areas of operation
2. 02governmental regulations, including environmental restrictions
3. 03The willingness of E&P companies to engage in drilling, completion and production activities in our areas of operation is substantially influenced by the market prices of oil and natural gas, which are highly volatile
4. 04the impact of energy conservation efforts
5. 05Our business is dependent upon the willingness of E&P companies to outsource their water management requirements, and we compete with other water management providers to meet these needs
6. 06We cannot predict the rate at which our customers will develop acreage that is dedicated to us or the areas they will decide to develop
7. 07We generally do not own in fee the land on which our pipelines and water handling facilities are located. Our inability to acquire or retain necessary access to land on commercially reasonable terms in order to provide services for our customers or obtain new business could result in disruptions to our operations
8. 08Our operations depend upon access to available pore space in subsurface geologic formations by which we can dispose of produced water. Our inability to acquire new pore space or our loss of existing pore space may negatively impact our ability to service new and existing customers
9. 09the diversion of management’s and employees’ attention from other business concerns
10. 10We may experience difficulty in achieving and managing future growth
11. 11our access to, and cost of, capital
12. 12We may not be successful in pursuing additional commercial opportunities to serve customers outside the oil and natural gas sector
13. 13Technological advancements in connection with alternatives to hydraulic fracturing could decrease the demand for our services or require us to implement or acquire new technologies at a significant cost
14. 14Our customer contracts are subject to renewal risks
15. 15Declining general economic, business or industry conditions may have a material adverse effect on our results of operations, cash flows and financial position
16. 16The fees charged to customers under our agreements for the gathering, transportation or handling of produced water may not escalate sufficiently to cover increases in costs
17. 17Operational disruptions in our areas of operation from weather, natural disasters, terrorism or other similar causes could impact our results of operations, cash flows and financial position
18. 18other hazards that could also result in personal injury and loss of life, property damage, pollution and suspension of operations
19. 19repair and remediation costs
20. 20We and our customers may be subject to catastrophic events, which could have a material adverse effect on our results of operations, cash flows and financial position
21. 21We operate in a highly competitive industry, and competition may intensify as our competitors expand their operations or our existing and potential customers develop their own water infrastructure systems, which may cause us to lose market share and could negatively affect our ability to expand our operations
22. 22Growing or adapting our business by constructing new infrastructure subjects us to construction risks and risks that supplies for such infrastructure will not be available upon completion thereof
23. 23We engage in transactions with related parties and such transactions present possible conflicts of interest that could have an adverse effect on us
24. 24A loss of one or more significant customers could have a material adverse effect on our results of operations, cash flows and financial position

Risks Related to Environmental and Other Regulations

1. 25We or our customers may be unable to obtain and renew permits necessary for operations, which could have a material adverse effect on our results of operations, cash flows and financial position
2. 26Our produced water handling operations expose us to potential regulatory risks
3. 27Restrictions on the ability to procure brackish water or changes in brackish water sourcing requirements could decrease demand for our water-sourcing solutions
4. 28Federal and state legislation and regulatory initiatives relating to produced water handling facilities could result in increased costs and additional operating restrictions or delays and could harm our business
5. 29We and our customers are subject to environmental and occupational health and safety laws and regulations that may expose us to significant liabilities for penalties, damages or costs of remediation or compliance
6. 30Unsatisfactory safety performance may negatively affect our customer relationships and, to the extent we fail to retain existing customers or attract new customers, adversely impact our revenues
7. 31We may face increased obligations relating to the future closure of our water handling facilities and may be required to provide an increased level of financial assurance to guarantee that the appropriate closure activities will occur for a water handling facility
8. 32Increased regulation of hydraulic fracturing could result in reductions or delays in oil and natural gas production by our customers, which could reduce the volumes of produced water through our water infrastructure systems, which could adversely impact our revenues
9. 33We are subject to a series of risks related to climate change
10. 34The results of operations of our customers may be materially impacted by efforts to transition to a lower-carbon economy, which could have a material adverse effect on our business, results of operation, cash flows and financial position
11. 35Increasing stakeholder attention to sustainability matters may impact our or our customers’ business
12. 36The ESA and MBTA govern our and our E&P customers’ operations and additional restrictions may be imposed in the future, which could have an adverse impact on our ability to expand some of our existing operations or limit our customers’ ability to develop new infrastructure on our land

Risks Related to Our Financial Condition

1. 37We 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. 38Finally, the agreements governing our outstanding indebtedness limit our ability to incur additional debt, but such agreements do not prohibit us from doing so
3. 39We are subject to interest rate risk, which may cause our debt service obligations to increase significantly
4. 40tax effects of share-based compensation
5. 41We are subject to counterparty credit risk. Nonpayment or nonperformance by our customers could have an adverse effect on our results of operations, cash flows and financial position
6. 42If we fail to comply with the restrictions and covenants in our 2025 Revolving Credit Facility, Indentures or future debt agreements, there could be an event of default under the terms of such agreements, which could result in an acceleration of maturity
7. 43Our obligations under our 2025 Revolving Credit Facility are secured by first priority security interests in substantially all of our assets and various guarantees

Risks Related to Our Corporate Structure and Our Class A Shares

1. 44involve and retain to a greater degree outside counsel and accountants in the above activities
2. 45We may in the future issue additional securities. The potential issuance of such additional shares may result in the dilution of the ownership interests of the holders of our Class A shares and may create downward pressure on the trading price of our Class A shares
3. 46We are a holding company. Our principal asset is our equity interest in OpCo and accordingly, we are dependent upon distributions from OpCo to pay taxes, make payments under the Tax Receivable Agreement and cover our corporate and other expenses
4. 47Our ability to continue to pay dividends to our shareholders may be limited by our holding company structure, contractual restrictions and regulatory requirements
5. 48selling, transferring or disposing of assets outside the ordinary course of business in a transaction or series of transactions with a fair market value in excess of $10.0 million
6. 49The Five Point Members and other Legacy Owners, 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
7. 50A significant reduction by Five Point of its ownership interests in us could adversely affect us
8. 51The underwriters from the IPO may waive or release parties to the lock-up agreements entered into in connection with the IPO, which could adversely affect the price of our Class A shares
9. 52If 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
10. 53The 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 our Legacy Owners after the exercise of their Redemption Rights
11. 54We 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
12. 55We are a “controlled company” within the meaning of the NYSE and NYSE Texas rules and, as a result, qualify for and intend to rely on exemptions from certain corporate governance requirements
13. 56the compensation committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities
14. 57We currently utilize all of these exemptions. Accordingly, you may not have the same protections afforded to shareholders of companies that are subject to all of the rules of the NYSE and NYSE Texas
15. 58Our 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
16. 59providing that a majority of our board of directors is expressly authorized to adopt, or to alter or repeal our Operating Agreement
17. 60Accordingly, our Operating Agreement may be less protective of the interests of our public shareholders, when compared to the DGCL, insofar as it relates to the exculpation and indemnification of our officers and directors
18. 61The Tax Receivable Agreement with the TRA Holders requires us to make cash payments to them in respect of certain tax benefits to which we may become entitled, and we expect that the payments we are required to make will be substantial
19. 62In certain cases, payments under the Tax Receivable Agreement to the TRA Holders may be accelerated and/or significantly exceed any actual benefits we realize in respect of the tax attributes subject to the Tax Receivable Agreement
20. 63If our payment obligations under the Tax Receivable Agreement are accelerated upon certain mergers, other forms of business combinations or other changes of control, the consideration payable to holders of our common stock could be substantially reduced
21. 64We will not be reimbursed for any payments made to the TRA Holders under the Tax Receivable Agreement in the event that any tax benefits are disallowed